by Olaf Groth
An EU report released in April 2018 set out a “European approach to artificial intelligence and robotics.”§ The plans included a sharp expansion of annual investments in AI by 70 percent under a framework program called Horizon 2020. The commission said it would increase its own funding to $1.8 billion (EUR 1.5 billion) between 2018 and 2020. If member states and the European private sector make similar efforts, the report says, the Commission believes this number ought to grow to $24 billion (EUR 20 billion) by the end of 2020. The EU countries and private-sector entities should then aim to invest that same $24 billion amount each year in the decade after that, the report says.
The report also set out plans to create 500 digital R&D centers and connect existing research centers around Europe, all of which would support AI development and prepare for the socioeconomic changes it will bring. This will be flanked by an ethical and legal framework to provide more clarity on EU member countries’ expectations for AI use. However, nothing in the directive hinted at a seedbed from which a new Digital Baron would grow to accelerate AI development in the private sector. Instead, the strategy lays out what might become an alternative to the Digital Baron model that helps drive the AI economy in the United States and China.
With what looks more like an “AI On-Demand” strategy, the proposed EU approach would treat AI like a basic infrastructure investment for the digital economy, in a vein similar to power lines or fiber-optic cables. It goes further, however, adding two additional steps that look more like green energy initiatives. First, the plan includes efforts to democratize access to new AI models and a large depository of data. That would give individuals and organizations of all sizes access to the two primary ingredients for development of new AI applications, not unlike the Element AI initiative in Canada (mentioned in Chapter 4). Second, the EU plan contemplates the formation of a couple new funding mechanisms: a $605 million (EUR 500 million) “European Fund for Strategic Investments” to support development and uptake of AI; and a $2.5 billion (EUR 2.1 billion) pan-European venture capital fund-of-funds program. That money could prove especially vital in the global AI race. According to McKinsey data referenced in the April 2018 EU report on AI strategy, Europe lagged other regions’ private investments in the field, with around $3 billion to $4 billion in 2016. During the same year in North America, private investment in AI totaled $15 billion to $23 billion. Asia’s investments ranged from $8 billion to $12 billion.¶
These proposals would mark a clear step forward for the EU and send a strong signal of conscientious development and harnessing of AI for social and economic growth. But Europe is clearly still a step behind the kind of spending it sees when it gazes east and west. It also needs to prove out that its digital single market, safety, and cybersecurity frameworks will succeed in creating one contiguous market of 500 million people for AI innovation. That has been a historical challenge in a region that is tremendously diverse. While that variety could become a potential strength from a data perspective, in many ways the region remains economically, politically, and culturally fragmented. That makes it hard for entrepreneurial businesses to expand. Size still matters in markets and economics.
Ironically, though, the existence of the EU’s digitized welfare state might also open the door for more AI development in Europe. For instance, Maja Hojer Bruun, a professor and techno-anthropologist at Aalborg University ran an experiment to gauge Danish residents’ reaction to drones. Bruun and her colleagues flew drones over people’s homes and then interviewed them while the drones were overhead. Almost all assumed the government would have proper regulations in place, and operators would follow those rules. Not all European countries and people would share such a relaxed attitude, which appears to stem in part from Denmark’s legacy of broadly digital government services, Bruun says. But this is an example of the fact that many Europeans trust government stewardship of disruptive technologies.
Denmark is ahead of the pack. The Danish government has a positive track record when it comes to building digital trust with its citizens. Years ago, it put in place reasonably far-reaching digital platforms, such as Citizen.dk and citizens’ electronic mailboxes (“Ebox”), which let people submit taxes and consult other government services online. Denmark also requires schools to teach computer science and discuss digital culture, which builds digital competencies in its children. So, while Bruun still has concerns about the interpretation and reduction of individuals when they’re being digitized, she has little doubt that most Danes will trust AI innovations that are regulated by the government. “There’s a high degree of trust in the authorities,” she says, “but it is very important to maintain this trust and not to jeopardize the relationships of trust by selling people’s data for commercial purposes. People are willing to improve, for instance, public health and infrastructure with their data, but they always want to see a meaningful purpose for themselves as users and citizens or for society, and not just participate for the benefit of companies.”
And indeed, some European countries, especially Sweden, post high digital trust ratings, according to a report by Bhaskar Chakravorti, a senior associate dean at the Fletcher School at Tufts University.# Chakravorti and his colleagues researched digital attitudes, behaviors, environments, and experiences across 42 countries, scoring the nations with a trust rating in each of those four categories. Looking at attitudes, or “how users feel about the digital environment,” France and Norway (each at 2.41) and the United States (2.45) posted lower digital trust ratings than Pakistan (2.66). Germany was only marginally higher (2.73). Compare those with China, at 3.04. Having broad access to digital services doesn’t translate into trust in those technologies. And while there’s no empirical evidence that low trust translates into low national power in the global digital economy, it stands to reason that it doesn’t help. Clearly, China’s ability to generate prosperity based on technology development, despite all party interference, creates a more supportive populous for digital policy.
Of course, for all its ability to reflect critically on these new digital trends and build protective moats around its citizens, Europe lacks critical mass when it comes to digital global players. It does not have a viable alternative model to techno-economic development that the world could latch onto. Berlin, Hamburg, London, and perhaps soon Paris have vibrant tech scenes, but they have not yet scaled out to regional, much less global mass markets, aside from a bit of digital penetration in manufacturing. Will European countries and the EU seek to build out this AI economy, or just circle the wagons, and can they influence the United States, China, and the global market if they only do the latter? “I worry about Europe’s economic development,” says Ambassador Kramer, who lived in Europe for many years before receiving his political appointment in the United States. “If you can’t bring scalable digital assets to the global competitive environment, how will you grow? How will you be able to negotiate and have influence in the manner you’d like to?”
RUSSIA: RATTLING THE SABER, BUT WHAT’S REALLY THERE?
While Western Europe grapples with the balance between AI innovation and individual agency, their towering neighbors to the east appear to have few such concerns. The rhetoric out of Russia suggests a singular focus on the role of AI in asserting geopolitical power. Yet, beyond President Putin’s pronouncement that the country that leads in AI “will become ruler of the world,” the underlying ecosystem for development appears to lack some of the key assets necessary for broader AI leadership, at least on the commercial side.** Russia still flexes plenty of muscle in the realm of security. “Don’t underestimate the deep Russian science and technology expertise,” says Horst Teltschik, former national security adviser to German Chancellor Helmut Kohl and a long-standing expert on Russian affairs. Teltschik points back to 2004–2005, when he and I (Olaf) worked together at Boeing International’s German operation, where he was president. At the time, our Russian colleagues could boast the creative power of 2,000 engineers in Moscow, a tremendously important,
cost-effective asset for the American company. “It is true that around 100,000 young Russians leave their country every year to seek brighter career horizons elsewhere,” Teltschik says now, “but those that want jobs in the space or defense industries have very good prospects. After all, America is using Russian rockets to carry payload to the joint space station.”
Indeed, state-sponsored technology development is alive and well, in no small part because Putin’s primary interest lies in the maintenance of autocratic power, explains Evelyn Farkas, former US deputy assistant secretary of defense for Russia and Eastern Europe. Putin rode to heightened power on the wave of oil and gas production, but those commodities were volatile and couldn’t reliably secure citizens’ allegiance. So, officials started to close the “tricky but open” environment, forcing the departure of NGOs and companies such as LinkedIn, Farkas explains, and the government began to demand back doors into servers. Yet, compared with China, the environment remained fairly open to Western Internet companies—so the idea of iPavlov receiving government funding to create an open-source database for language processing, as noted earlier in this chapter, made sense.
Yet, despite the rise of “Novo Rossiya” and its renewed emphasis on empire and a reinvestment in the pride of the past, Russia’s science and technology capability has deteriorated, Farkas says. The country no longer enjoys the breadth and depth of research as it did during Soviet days. While this could shift with Putin’s emphasis on artificial intelligence, Russia has displayed little interest in research and development, leading to a brain drain as young professionals head to more supportive environments, such as Israel. One of the reasons for those departures is the difficulty scientists have transitioning between academia and science, explains Mike Kuznetsov, a consultant for Aspera, an IBM-owned company, and a Russia strategist at Cambrian.ai.
One of the few ways to get recognition among the glitterati of AI development in China and the West is to publish findings openly and participate in open-source development. But to the extent that researchers in Russia can participate in commercial projects, they typically have to partner with the large, government-owned entities such as Sberbank or Gazprom. “Scarcer entrepreneurial opportunities leave many scientists choosing between research projects that benefit one of the government corporations, staying in academia and basic research, or just making less money from grant funding,” Kuznestov says. That limits the possibilities for bringing cutting edge new insights and technologies to disruptive new ventures.
CHINA: THE DIGITAL DRAGON STARTS TO ROAM
Like most world leaders, Putin seeks to extend his country’s geopolitical influence, in some cases by disrupting the political and societal cohesion of other countries (Exhibit A: the 2016 US presidential election). China seeks to do all that and more under the leadership of Xi Jinping. To Xi, the Party, and most Chinese residents, artificial intelligence represents a vital engine that will drive the country back to its historical status as the greatest society on the planet. The spreading influence will ride on the “Belt and Road Initiative” (BRI), an ambitious plan to extend China’s reach through billions of dollars of infrastructure investments in developing countries. With this bold emergence from its past isolationism, China aims to reassert itself as a dominant force on global power and culture. AI plays a vital role in that, riding on top of the infrastructure China builds out on land and in seaports across much of Asia. The BRI aims to recast the old Silk Road trading route to Europe and a chain of seaports that secure China’s access to trading hubs and energy exploration throughout Asia, Africa, the Middle East, and Europe.
The race to lead in artificial intelligence both supports and illustrates those ambitions. The idea of China reclaiming its rightful place in the world after what many Chinese people regard as centuries of exploitation by foreign powers has become a matter of great national pride. The Communist Party has fomented a powerful narrative about the rejuvenation of the great Chinese people, and those people—especially the educated and elite, but increasingly the general population—are seizing on artificial intelligence as a primary tool to see that through.
As such, AI-powered technologies play multiple roles, which explains some of the country’s mindset, including its views on privacy that differ from the United States and Europe. “That’s not a Chinese leadership thing, but a Chinese cultural thing,” says Amy Celico, a principal at Albright Stonebridge Group, a global strategic advisory firm that helps clients navigate the complexities of international markets. That doesn’t mean that the government or the citizens don’t care about privacy—quite the opposite. China passed data privacy laws in 2017 that ruffled feathers in the United States because they required storage of data within the country, but the regulations were intended in part to help limit the sorts of commercial intrusions that are bothersome but common in America, Celico explains. From a US perspective, it looks like the Party controls data so they can track it. However, through a Chinese lens, the party is preserving the safety of that data. “The government cracking down on privacy is not to stop dissidents, but to get more control over society,” she says.
That stability is paramount. A 2013 study led by Harvard University social sciences Professor Gary King found that Chinese censors are worried about social order, not criticism of the party or government. He and his colleagues scraped posts on almost 1,400 social media services before censors could remove objectionable material. “Contrary to previous understandings, posts with negative, even vitriolic, criticism of the state, its leaders, and its policies are not more likely to be censored,” they wrote in their paper. “Instead, we show that the censorship program is aimed at curtailing collective action by silencing comments that represent, reinforce, or spur social mobilization, regardless of content.”†† China’s burgeoning advantages in AI help preserve that stability, feeding a national pride and preserving support for the Party.
The country still has mundane and structural challenges that could slow its progression, as Celico notes. AI might help address some of those issues, but in itself it’s not sufficient to solve them. For example, the government continues to struggle to provide basic health care across such a massive population, so it must balance its spending on AI and advanced technologies with initiatives to improve its comparatively low levels of basic medical care. The country also continues to cope with the wave of rural migrants moving to urban centers in search of economic opportunity. Many public services, including health care and childhood education, are tied to the country’s Hukou system of household registration, which identifies residents’ hometowns and other personal information. The government bases many of its benefits on rural or urban residency status and, for a rural migrant, establishing a Hukou status in an urban area can be difficult, especially in the largest cities. Without an urban Hukou, parents who move to the city have to pay to send their kids to schools that are free for urban residents. While the government has made some changes to the program, which essentially creates an informal caste system, it still could leave millions of Chinese with less access to key government services.
China has the necessary resources and tools to address these issues, and to accelerate its push into artificial intelligence, robotics, semiconductors and life sciences at the same time. Going back thirty years, only the United States had the capital, market, people, and technology innovation to lead the world. “China now has all of those as well,” says Ya-Qin Zhang, president at Baidu and former head of Microsoft Research Asia. “The talent is here. The technology is still behind the US, but the gap is narrowing. The market and the capital here are as good as the US and could be an advantage given the population scale.” But the country also has a significant advantage, what Zhang calls “the China speed.” Chinese people are very open, even in traditional industries, to new ideas. Stores already are eager to use AI, even if they don’t know what it is. Almost every type of consumer transaction has switched to electronic payment methods, rather than cash or credit cards. And surveys
suggest some 90 percent of the population supports driverless cars, compared with 52 percent in the United States, he says. No doubt some of this sentiment derives from the extraordinary traffic congestion and population density in China’s megacities, not to mention the pollution in most of those urban centers, but the Chinese populace also expresses a greater willingness to embrace a range of new technologies.
The speed comes in part from the government’s ability to mandate and often implement sweeping initiatives and from its eagerness to enlist the country’s large corporations in those plans, such as the use of renewable energy to lessen pollution or the social credit system to increase trust and commerce. That happens at levels the US government would never broach with Microsoft, Amazon, or other private-sector titans. Yet, Zhang says, the wellspring of that speed advantage still flows from the Chinese people themselves. They’ve witnessed the emergence of China as a high-tech power in recent decades, and they revel in the success of the country’s leading-edge global brands. But perhaps even more importantly, Zhang says, they see a consistent direction from the Chinese government and believe they can tap into some of that tech-fueled prosperity, too.
Jack Ma exemplifies this as much as any Chinese citizen can. Ma failed his primary and middle school exams multiple times, did the same with his college entrance exams, and then struggled to find a job after finally graduating. He was the only one of twenty-four applicants to be rejected for a job as a KFC manager. As he tells it in multiple interviews, he applied to Harvard ten times and never got in. He struggled to get venture capital funding for his new company, which he founded in 1999.‡‡ By 2018 that sad little start-up, called Alibaba, had grown into one of the largest digital companies in the world. As of April that year, Ma was worth an estimated $38.5 billion.§§