Is China Beating America to AI Supremacy?

Is China Beating America to AI Supremacy?

Beijing is not just trying to master artificial intelligence—it is succeeding. AI will have as transformative an impact on commerce and national security over the next two decades as semiconductors, computers and the web have had over the past quarter century.

To the extent that the next decade is an era of implementation, the advantage lies with China. In implementation, the overwhelming competitive advantage is quantity of quality data. Both in collection and in having a cadre of grunts to clean the data, China wins. In contrast, though, if the most significant advances in AI in the next decade come from breakthrough leaps, like the development of deep learning, the advantage lies with the United States. Both the fact that half the world’s AI superstars work for American companies and that the United States can recruit from all the world’s people—while inherent insularity restricts China to its own population—provide advantages Beijing cannot match.

IT HAS long been an article of faith in the West that innovation, especially in information technologies, can only be advanced by free individuals operating in open societies, and that these advances inevitably enlarge individual freedoms. But as we are now seeing in social media, corporations and governments can employ these technologies to manipulate minds and abuse freedoms. China is demonstrating what is possible with a powerful positive feedback loop between its Party-led authoritarian operating system on one hand and advances in AI that strengthen central authority on the other. The brute fact is that AI is a powerful tool for autocratic control. Thus, from the perspective of all who believe that human beings are endowed with unalienable rights of “life, liberty, and the pursuit of happiness,” and that democracy is the best way to ensure those rights, China’s embrace of AI represents a marriage made in hell.

The United States will compete with China in applying AI across all domains, including the economy, military and society. But in governance, because of systemic differences between the two countries, the Party is running a leg of the AI race in which the United States has rightly chosen not to compete.

AI strengthens what the business historian Alfred D. Chandler, Jr. called the “visible hand.” Chandler was writing about corporations that, in the absence of legal constraints on predatory behavior and antitrust enforcement, create monopolies and oligopolies that dominate markets. Without the constraints Western constitutions place on government, the Party can use AI to control and dominate China in a way Americans would find unimaginable—and Soviet leaders only dreamed of.

The Chinese people have embraced their president’s ambition to make China great again—in Xi’s words, “the great rejuvenation of the Chinese people.” Xi believes that this requires revitalizing and revalidating the Party as the Leninist-Mandarin vanguard of the people. As he said in setting specific targets for 2021, 2035 and 2049 (the last being the one-hundredth anniversary of the People’s Republic of China): “Government, the military, society, education; north, south, east, west—the Party leads everything.” Advanced information technologies and AI are key components of this program.


Many of the same factors that have propelled the FAANGs to trillion-dollar valuations in the American market are similarly strengthening the dominance of the Party in Chinese society. The basic principles of digitization and network theory that have driven the success of “hub firms” like the FAANGs and BATs are summarized by Professors Marco Iansiti and Karim R. Lakhani in their 2017 Harvard Business Review article, “Managing our Hub Economy.” First, Moore’s Law (according to which computer processing power doubles every two years) leads to exponential productivity growth in activity in which computers are a key pillar. Compare the capabilities of the first iPhone, introduced just a decade ago, with what today’s models can do. Second, Metcalfe's Law, according to which the value of a network expands with the number of users, means that each additional user of Facebook or WeChat increases their value at no additional cost. Third, Barabási’s Laws identify a positive feedback loop that produces highly-connected hubs: the more transactions that occur over a digital network, the greater the economic power of network hubs. In Iansiti’s and Lakhani’s summary: “Once a hub is highly connected (and enjoying increasing returns to scale) in one sector of the economy (such as mobile telecommunications), it will enjoy a crucial advantage as it begins to connect in a new sector.” Financial payments provide an instructive example.

Consider Facebook’s business strategy. By creating a user-friendly platform in which 2.4 billion individuals freely share their lives with family and friends, Facebook collects intimate data that allows it to understand who its users are, what they care about, what they believe deserves to be shared with someone else, and what turns them on and off. This allows them to charge premium prices for micro-targeted ads seeking to persuade specific viewers to buy a product, idea or even a candidate. In Mark Zuckerberg’s succinct summary: “Because we understand what you’re interested in, we can show you more relevant ads.”


Amazon also offers telling clues to ways Xi could use AI to address his most existential threat—opposition from within—by tightening his grip on the Party. Despite their differences, Xi and Amazon CEO Jeff Bezos have one key challenge in common: how to recruit, retain and manage members for organizations of unparalleled scale. For Xi, it’s the Party’s ninety million members. For Bezos, it’s the one hundred million-plus members of Amazon Prime. In both cases, members are scattered across a vast geography, pay annual dues and can leave if they want—so they need a return on their investment. For both leaders, maintaining loyal membership while crushing competition are vital to their organization’s long-term success. To the frustration of those who confidently and repeatedly predict that each will fail, we note that, so far, both seem to be thriving.

AI is Amazon’s secret sauce. As Bezos says candidly: “Machine learning and artificial intelligence are behind almost everything we do...” The company’s algorithms give Prime members more of what they want (via suggestions), help Amazon learn actionable details about members (via detection of browsing and purchase patterns), streamline logistics to deliver on promises across all geographies and catch rule-breakers. And if Bezos is not already, he will soon be using AI to crawl the web for traces of dangerous upstarts that might disrupt his organization—and act to prevent them from succeeding.

Which of these tools will Xi’s China not be using? While AI will boost venture capital returns and military capabilities on both sides of the Pacific, it profoundly strengthens the governance system in only one country.

DURING THE Cold War, the stakes in the nuclear arms race with the Soviet Union were obvious. In today’s Thucydidean rivalry between a meteorically rising China and a colossal ruling United States, what are the risks of an escalating AI arms race?

Like it or not, future war will be AI-driven. As Secretary of Defense Mark Esper recently noted at the conference of the National Security Commission on AI, “Advances in AI have the potential to change the character of warfare for generations to come. Whichever nation harnesses AI first will have a decisive advantage on the battlefield for many, many years.” AI's ability to accelerate decision cycles in conflict will compel militaries to adopt it. In air-to-air combat, pilots begin with an OODA loop: observe, orient, decide, act. If “A” can “get inside ‘B’s’ OODA loop,” A wins—since he can maneuver to escape B’s fire and attack where he calculates B’s path will leave him when A’s missile arrives. Because AI can observe, orient, decide and act at multiples of human ability, it will become irresponsible to send a human pilot into battle without an AI co-pilot. As former Chairman of the Joint Chiefs of Staff Joseph Dunford put it last year: “Whoever has the competitive advantage in artificial intelligence and can field systems informed by artificial intelligence, could very well have an overall competitive advantage.”

The demonstrated success of AlphaGo, and more recently, AlphaStar, in defeating all competitors in one of the world’s most complex real-time strategy video games suggests that in any structured contest between offense and defense, AI will dominate humans. The company, country or team with the best AI will win. As an example, consider American football. In what commentators often discuss as a “chess match,” the offense and defense coordinators know that if the defense guesses correctly whether the next play will be a pass or a run, most nfl teams’ defenses can successfully stop most opponents’ offense. Reading all the variables in a situation, AI should be able to tilt the scales on the field—or in analogous military competitions on land and sea, and in the air and space.

The domain’s leader will also be the first to know which of today’s military mainstays AI will upend. Germany discovered the power of submarines before World War I because it led in their development. British admirals did not wake up to their deadly efficiency until a lone German U-boat in 1914 sank three armored cruisers on a single morning. By then, it was too late—the British had already invested their treasure in building a battle fleet that had become largely obsolete. The coordination of drones and cruise missiles that successfully attacked Saudi Arabia’s most valuable infrastructure and cut its oil exports by half is suggestive. Will AI-empowered drone swarms make aircraft carriers equally obsolete, all for one one-thousandth of the cost? Will AI analysis of data from all sources pierce the invisibility of stealthy systems like the F-35 in which the United States has invested so substantially? The first country to know will be the one driving the research and development frontier.