Wednesday, April 1, 2015

Critique: “China is getting ahead. Can the rest of the world keep up?”

Any time an industry in China is mentioned, the phrase “China is X years behind the U.S. in this industry, but it is rapidly catching up.” usually appears somewhere in the article.  Linda Bernardi, the Chief Information Officer at IBM, recently wrote an article that appeared in the Washington Post titled “China is getting ahead.  Can the rest of the world keep up?”  China seems to have only taken 15 years to create its own tech bubble, modeled after the one the developed world experienced at the turn of the millennium.

The praise for China’s tech industry and criticism of Silicon Valley seem to be contradictory.  The author’s main criticism of Silicon Valley can be summed up by the sentence:  “I worry that American entrepreneurs feel good based on how much they’ve raised rather than what they’re actually producing.

The key, though, is that the author is actually able to list the accomplishments of American entrepreneurs:  Google, Amazon, Apple, and Facebook.  These companies changed the world.  The Chinese companies listed in the article, such as Alibaba, have only managed to import existing technologies from the outside world and then put up barriers to foreign competition.

Ironically, the only accomplishments of the Chinese technology sector that the author is able to quantify are the amount of money these companies have raised and their valuations.  The author mentions the $167.6 billion IPO made by Alibaba in 2014, which made it “the biggest IPO in U.S. history as well as the world’s most valuable online retailer.”  On the domestic side, the author mentions “a handful of Chinese companies in multiple cities have raised more than $100 million in funding and are valued in billions.”  Should we feel good about these companies based on how much they have raised, or rather what they are actually producing?

The author lists the five ingredients for success that China possess.  One of them is: “A sense of hunger, enthusiasm and confidence[.]  This is the feeling we had in Silicon Valley maybe 10 or 15 years ago.”  Yes, that sense of hunger, enthusiasm, and confidence were driven by the tech bubble.  Congratulations on getting ahead, China.