China let its AI industry run wild to build the best models. Now, it wants control

For the last twenty years, um, the Chinese tech competition environment has been viewed by people outside of China and a lot of external pundits as being very over-regulated by the state, right? That the state has very heavy-handed regulation, treats the tech sector, uh, keeps the tech sector on a very short leash.

Um, and that's absolutely true.

But the Chinese tech competition environment, and now increasingly the AI competition environment, also invites over-regulation in a very unique way, and there's a sort of pattern to the way that Chinese tech companies behave in the market, right? First, a new field opens up in the technology sector, and pre-AI, we saw this happen plenty of times, online grocery, ride hailing, shared bikes, whatever it is.

And then, you know, more tech firms than the market can support pile into it and start competing with each other in a gladiatorial fashion with the goal being to dominate the largest percentage of market share as fast as possible by hook or by crook and drive your competitors out of that particular marketplace as fast as possible, and then you'll figure out, you'll figure out profitability later.

And some of the tactics that are used in the Chinese market environment are very extreme.

They include things like selling below cost as long as possible so that your competitors are forced to sell below cost, and they just run out of money, right? That's a very common tactic.

Um, competing on delivery speed and then sort of pushing that burden onto your delivery drivers, for example, if you're competing in ride hailing or you're competing in sort of restaurant delivery.

Unfairly manipulating prices via algorithm, right? And so there's this cycle where a new, a new field opens up, companies pile in, they use a lot of unfair tactics to both compete with each other, but also to, to, you know, sort of eke out a profit as, as they can.

The state comes in, and they say, "You cannot do that.

There's a safety issue with that.

Um, uh, you know, it's a market competition issue." And then they release a new set of regulations to try to control that, and it takes them...

You know, Chinese regulators move really fast, but it still takes them six months, a year to put out a regulation to address a very specific topic.

But before regulators are done talking, companies have found another regulatory loophole, another market has opened up, and they've all piled into that one, and the cycle continues and continues.

So that's the regulatory environment in which, you know, tech companies operate and in which regulators are trying to control AI.

And then here comes this brand-new technology that has risks that go well beyond Market competition, although that is a problem, there are risks that go well beyond things like labor law or consumer protections.

Right now, we have, um, by some accounts, existential cybersecurity risks to national infrastructure and all of this other very scary stuff.

And so now regulators are kind of, you know, trying to deal with, right, trying to deal with that as this very vibrant, very rapid, very brutal competition is kind of going on between tech companies.

So that's the background scene.

That's a, that's a little scene setter for you.

I actually have a follow-up right there.