America is Run by Lawyers, China by Engineers, Says Expert. Who Will Win?

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00:00So just the primary of the book is America has always been ambitious.

00:03It does feel like China is now building the future at greater speed.

00:07What's the most common misconception we have about China today?

00:10I think that China is much more competitive than we give it credit,

00:14that this is not some sort of only centrally planned economy

00:17in which everything happens at the diktat of Xi Jinping.

00:20I think that there are these super competitive Chinese firms out there,

00:24companies like DeepSeek, which we just talked about,

00:26companies like Xiaomi, which are fighting for their lives in a very fiercely dynamic environment.

00:31So, I mean, do they have actually a lot more support from the government?

00:34And is that a hindrance or is that good?

00:35It is both a hindrance and it is good.

00:38It is always a yes question when it comes to China.

00:40It is full of these contradictions.

00:42Often these industrial subsidies could give a lot of benefits to Chinese firms,

00:46especially when they're looking for new land, especially when they're looking for new financing.

00:50Often it is a big hindrance because, as we know,

00:52Beijing is really able to smack around a lot of tech founders,

00:55especially ones as big as Jack Ma.

00:58You're one of the people that understand technology in China the most.

01:03Where are we right now?

01:04So there's these two superpowers wanting to become number one.

01:08When does it get decided?

01:09Is it winner takes all or can they compete for 15, 20 years?

01:14It will be competitive for a very long time.

01:16There is no race at the very end of it.

01:18There is no gold medal.

01:19There's no bronze.

01:20We don't know when someone will have won

01:22because this is a multidimensional race on many, many fronts,

01:26even on something like artificial intelligence.

01:28The U.S. right now has an absolute lead in the reasoning models.

01:32But as we can tell from all of these benchmarks,

01:33the Chinese are catching up in all sorts of ways.

01:36In addition, they're building out so much more power capacity in order to power all the AI.

01:41If AI is going to be all around us, it's going to be in our roads,

01:44it's going to be in my coffee, then we're going to need a lot more power.

01:46And so when the U.S. is not building enough power as much as the Chinese,

01:51it might be really at a disadvantage here.

01:53Dan, what you argue in the book, which is very striking,

01:56is that America is run by lawyers.

01:57China is run by engineers.

01:59Does that automatically put the U.S. at a disadvantage?

02:03No, because the lawyers have advantages themselves.

02:06I'm coming to you from the U.S. West Coast,

02:08which is the only region of the world which has created not only one company worth over a trillion dollars,

02:13but this has created a half dozen companies worth over several trillions of dollars.

02:17That is absolutely an advantage.

02:18The lawyers are able to protect intellectual property.

02:21They're able to protect wealth.

02:22The rich feel comfortable with creating businesses in America.

02:25They're not necessarily so comfortable building big businesses in China.

02:28So given all of the geopolitics and the uncertainty with fragmentation,

02:32could you see a world where actually technology,

02:35at the moment we have this idea that actually the World Wide Web is global,

02:38that everything will be global.

02:40So again, if you have a good AI model, it will be adopted globally.

02:43Could we see the reverse?

02:45Could we see two blocks with each having their own technology?

02:48We're already seeing fragmenting.

02:50So what we're seeing is that Beijing has been uninterested in the global Internet.

02:53They don't want Facebook or Twitter or any of these pesky platforms from Silicon Valley over there.

02:59The Americans are trying to de-wean themselves away from Chinese rare earth magnets.

03:03They're really trying to create their own supply chains.

03:05I think the future is going to look much more protectionist and more fragmented than the past.

03:10I mean, it was almost like 11 months ago, right, in Davos, the week after Davos,

03:15where people heard about deep-seeks.

03:16Right.

03:16No one had heard of them, and suddenly they came out of nowhere and really did incredible things.

03:23Yes.

03:24Are we going to hear more from them, or are there other companies like them in China?

03:27There's many companies like them in China.

03:28And I think what is special about the deep-seek moment was that the prediction,

03:32what was really interesting was the reaction to deep-seek.

03:34I think that the financial markets had not priced in the extent of Chinese competitive firms,

03:39Chinese entrepreneurial firms that are doing really well.

03:42There are many Chinese entrepreneurial firms like Xiaomi out there.

03:45Huawei is not listed, but still a very dynamic firm.

03:50There's all sorts of firms in industrial robotics and all sorts of firms that we're not hearing about.

03:54Maybe we're going to hear about a lot more of these.

03:56Because of the tariffs and trade complexity for China,

04:00are they doubling down on actually trying to make sure that AI is theirs?

04:04I think that they're trying to double down not just on AI, but on absolutely everything.

04:08And this is going to be the great challenge for the West,

04:10that China wants not only artificial intelligence as well as every big technology of the future,

04:15they also want electric vehicles as well as their batteries, as well as the magnets.

04:19So they really want to dominate everything.

04:21And it becomes really critical for the U.S., the U.K., other countries to figure out what sort of niches can they still,

04:27can these countries still really dominate in?

04:29Because I think it would be bad for the world if China actually makes absolutely everything that we use and consume every day.

04:35Because what, it displaces U.S. companies?

04:38Or because there's always the foreign affairs politics going into this?

04:42There is still a fair share of politics coming in, but they have the ability to displace a lot of American companies.

04:50What we're seeing is that Germany is already being pretty substantially de-industrialized by the Chinese companies,

04:56and I'm fearful that many more of these will come to the U.S. as well.

05:00I mean, there's something that struck me.

05:01I think it was like 15 days ago, Sam Altman, in an interview,

05:04and then he did walk back these comments saying,

05:06look, a lot of these AI companies are too big to fail, so they could have government support or something like that.

05:10What do you make of a comment like that?

05:13Yeah, well, I think that it is definitely a double-edged sword to ask for government support.

05:18And I think that open AI should be careful for what it wishes for.

05:22If the U.S. government decides to nationalize open AI, that's not necessarily going to be very good for open AI.

05:28And so what we're seeing is that Donald Trump has already turned Intel into a state-owned enterprise with American characteristics.

05:35I'm not sure that's going to be great for Intel over the longer term.

05:37When we talk on this show day in, day out about valuations, through your research, through your book,

05:43through your teaching at Stanford, and, of course, what you've been understanding,

05:49should we worry about valuation because of simply the competition from China?

05:53I think we should worry about valuation.

05:54The very valuations of especially AI is kind of eye-watering even before China.

06:00And as we saw with DeepSeq, China can shed valuations pretty substantially all at once.

06:04And so I think that is always something to be very concerned about, especially with AI.

06:09Dan, thank you so much for joining us.

06:10Dan Wang, author of Breaknext, Stanford University, Hoover Institution, Research Fellow.

06:15And, of course, you're up for an award this week.

06:17So good.

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