From Matt Sheehan’s new book The Transpacific Experiment: How China and California Collaborate and Compete for Our Future:
After the early frenzy of Chinese venture capital investment in AI faded, some sobering realities set in: many of China’s “AI startups” use hardly any AI in their products, and they have no sustainable business model beyond raising more money.
This could be said of Ed Tech. But I’m not sure if the sobering reality has set in.
I still see many founders who have internalized this lesson: tell VCs “key words” like AI or Machine Learning or Big Data because then you can claim a large value to your company which, as yet, has zero or near zero sales. So your company, which mostly does traditional tutoring, is really “AI-powered.”
Just like WeWork, which is mostly a real estate rental company, claims to be a technology company. The WeWork story is unraveling. The sobering reality is setting in.
And while government subsidies and procurement can help gin up demand for the AI products of today, it remains unclear if they can plant the seeds for the AI breakthroughs of tomorrow.
China and the United States enter the age of AI like a study in contrasts. While the U.S. leads in game-changing research, China shows strength in practical applications. Where American companies draw data from diverse users around the globe, China’s AI giants have a wealth of relatively homogenous data at home. And while Silicon Valley sometimes actively rejects entanglements with the U.S. government, Chinese companies often work with local officials to bring large-scale AI projects to life.
In Ed Tech, it’s the opposite. Both American and Chinese companies sell mostly to governments. So that stunts the creation of Ed Tech that would actually help individual teachers (like individual consumers or small business users) solve their problems. Neither country is making much progress there.
But Chinese Ed Tech has 2 advantages from a sales point of view. Lower (but not zero) privacy concerns within schools. And they can also sell directly to a large market of parents (which buy a ton of K-12 services for out-of-school-time), while the Americans cannot (American parents, on average, let their kids play Fortnite for free after school. Although my 11-year-old tells me that Fortnite is so last year).