Welcome to our combined July and August issue of Global Corporate Venturing, a time of the year when most thoughts are turned to vacations and how to extend them perhaps a little further. It seems appropriate to be looking at the IT sector as a result, with its promise of greater productivity and efficiency boosting development. But it is also a reflective period when smart minds try to look ahead and forecast the future shaped by this IT industry.
And if, practically speaking, every corporation has become a tech company regardless of sector of focus, then companies coming from a purer tech background could be perceived as having a competitive advantage when trying to expand into other industries where incumbents are attempting to develop tech skills to bolt on to established businesses.
Certainly, this confidence can be seen in the ambitions expressed by the main consumer internet companies, Google, Facebook, Microsoft, Amazon, Apple, Baidu, Alibaba and Tencent.
These companies seem notable for how they are trying to expand ever more deeply into ever more people’s lives and use the resulting data to improve their services and hence attractiveness.
And it just so happens that all of them are based either in the US or China. As it stands, therefore, these eight US and Chinese firms seem to be leading in a host of deep tech areas that offer seemingly limitless potential for expansion and economic reward.
As Kai-Fu Lee, chairman and chief executive of venture capital firm Sinovation Ventures, wrote in an editorial for the New York Times last month: “Most of the money being made from artificial intelligence (AI) will go to the US and China. AI is an industry in which strength begets strength – the more data you have, the better your product; the better your product, the more data you can collect; the more data you can collect, the more talent you can attract; the more talent you can attract, the better your product. It is a virtuous circle, and the US and China have already amassed the talent, market share and data to set it in motion. It seems American businesses will dominate in developed markets and some developing markets, while Chinese companies will win in most developing markets.”
Lee foresaw a future when jobs would be disrupted and future ones created around “services of love”, currently mainly pursued by unpaid volunteers. Tax could redistribute money from these successful companies to provide a safety net – sometimes called a universal basic income (UBI) – and countries without these rich corporations to tax would be economic dependants and could try to ask for “welfare subsidies in exchange for letting the “parent” nation’s AI companies continue to profit from the dependent country’s users”.
This is an unenviable future for many people. People on UBI in the US or China face the risk of benefit cuts or lower status decided for them, and communism was hardly a panacea for most people in the 20th century. Equally, being economically dependent is unsatisfactory even if feasible. Last month, a UK hospital failed to do enough to protect the privacy of patients when it shared data with Google – for free. And most people seem more than happy to give up any level of privacy or to furnish information about themselves in return for nothing bar playing a game or using an application.
Few people seem aware of these issues or are prepared to think through the consequences – most senior political leaders seem to be in their late middle age or older and lack either any personal engagement with the topic or interest in listening to those who might.
Perhaps only early corporate venturing investors in these US and Chinese companies, backers from outside these countries, such as Naspers and SoftBank, seem keen to join them in the top rank, along with perhaps some more forward-thinking sovereign funds, such as Singapore’s GIC and Temasek, and maybe some universities using their resources a different way. Other governments, such as Germany, France, Brazil, Canada, Japan and the UK, are trying their best but it is often painfully inadequate with the handful of smart, dedicated people in their agencies outnumbered by traditionalists fighting a previous economic challenge.
One challenge many face in setting a suitable strategy is that the aims are unclear – what do people want in the future? If it is a return to the 1950s or 1970s then good luck. If it is letting a small coterie of kleptomaniacs gather all the wealth and set up a feudal system then good luck to everyone else. If it is third way offering the most hope to most people, then start by recognising, as Yuval Harari said in his latest book, Homo Deus, that algorithms will know us better than we know ourselves. So what do we want to happen after the summer is over?