I’ve been doing a little miniseries on AI this past week. In one of those pieces, I emphasized that one big issue for these companies pouring billions of dollars into data centers and AI expansion is that they don’t have a monopoly on what they are offering — so they are really unlikely to earn their investments back. This is the key to the expected AI bubble popping. And, hey, maybe one or two companies do come out of it with a monopoly, but right now it looks like they’re all heading for a financial crisis. One commentator on that article, Leo Breevoort, offered up a really interesting take on this and how the AI industry in the USA compares to the AI industry in China and how it’s being developed. The comment is broader than the AI industry, touching on how businesses and industries are developed in general. I found it to be a fascinating series of thoughts, especially reflecting on how the solar and EV industries have been developed in China. Here’s the full comment: “There isn’t a monopoly yet, but I guess the US AI startups are now battling out who will be the one (or two) coming out on top. The Anglo-Saxon business model always seems to prefer a situation where two large companies share the market. Like GM vs Ford, Android vs iOS, etc. They are supposed to be in competition, but in reality do the same things all the time. There is the illusion of competition and choice, but in reality the two companies share a monopoly. “When China develops a new business sector, it encourages new entrants. And it tries to grow by competition and scaling. But when the sector is maturing, it hardly ever allows for a major consolidation phase. So, they end up with multiple providers that stay in competition, and large manufacturing scale. “The difference between the two is the money stream. They require a different kind of investor and the benefits end up elsewhere. “The Anglo-Saxon system needs an investor focused on profits and creating a high margin business. When the sector is mature, development and operating costs can be brought down, and prices can be raised. This results in a high return on investment for investors. The consumer/general public, however, pays higher prices than in a competitive market. “The China systems requires an investor focused on job creation, business development and long-term engagement. When their system matures, competition remains. Development must stay up and prices can’t be raised. Public preference can change any day. So, they’re creating a lower-margin business. The benefits end up with the general public, who pay lower prices. Investors do not become trillionaires though. “It’s interesting what happens when those systems collide in the global market. Western countries are putting up trade barriers to protect its investors. The general public is, however, denied access to the benefits of the Chinese system. China slowly opens up its economy further, while trying to preserve their system, and Western companies find it increasingly difficult to compete on price and cater to public preference. “Don’t we see that in the AI space? While OpenAI, Anthropic and Grok compete over dominance and investor money, Chinese AI startups compete over customer approval and loyalty in a market where a new competitor can appear at any time.” What do you think? Is this a fair representation? What does it mean for the future of the AI industry in these markets and beyond?
+62 others
