The War of a Thousand Groupons
2010. You’ve heard about this cool company from the States that gives discounts for group buying and is taking the world by the storm. You are based in China, and you spot an opportunity in adapting this business model to the local market. You assemble a team, develop an MVP, and start getting traction. Then, all of a sudden, one thousand other companies spring up, copying your product pixel by pixel. How does this make you feel?
Business competition amongst Chinese startups is brutal. A competitor can launch a pixel-perfect copy of your website, fill it with dodgy ads and then accuse you of selling quack medicine on TV, as happened to Google China. They can also report you to authorities for some trumped-up charge, forcing you to flee the country. The rewards of capturing the market are just too big to indulge in chivalry. But it’s this no holds barred attitude to launching copycat businesses that makes Chinese market so interesting to observe.
In the west, you will often see an unhealthy deification of founders and their big ideas. They have a vision to change the world, a clarity that dawned on them in a single moment of brilliant insight. The idea is so intense that mere act of formulating it changes everything. Really, enlightened New Age gurus bland in comparison.
In China, founders are businessmen and their job is to make money. If it makes money, they will change the world, too. But that’s secondary to the main objective.
This is obviously a gross oversimplification, but I feel like it captures the mood. If I were to launch a pixel-perfect copy of Groupon in the States, I’d get sued for copyright infringement. In China, a thousand clones happily sprung up, with a varying level of customisation.
We used to take a patronising view on such developments, at best. This was a display of unoriginality, a dearth of creative talent. Such reductionism missed the point. In 2010, for most founders of copycat Groupons, the copying was just a stepping stone. The business model captured the zeitgeist and it worked, at least to attract investment. With the money they raised, they proceeded to modify their businesses, innovating as necessary.
Think for a moment, what it’s like to operate in an environment where you have dead certainty that all your innovations will be copied? You really heed Peter Thiel’s advice and invest all your efforts into building a moat around your business. For many Chinese companies, this moat came in shape of doubling down on online-to-offline business models. They had to build up offline infrastructure that was just too expensive to copy.
A decade on, Groupon is still largely a global offer website with a valuation of $2 billion. Meituan-Dianping, the company that survived the war of 1000 Groupons, is a complex conglomerate of businesses, offering group buying, reviews, and one of the world’s largest on-demand delivery platforms. It is traded at the valuation of $40 billion. It did not come up with the original idea, but once the dust settled, Meituan-Dianping proved to be the more innovative of the two.
The hustle is real in China. It is as if the whole country is coached by Gary Vee. And this attitude matters now more than ever, as AI revolution approaches.
Andrew Ng likened AI to electricity, and I find it a very helpful comparison. Electricity was mysticised once, just remember galvanism and its influence on 19th century popular culture (e.g. Mary Shelley’s “Frankenstein”). But ultimately, it’s just a tool for improving productivity. Lawn mower + electricity = electric land mower. Coffee maker + electricity = electric coffee maker.
Same with AI. “Intelligence” in the term is misleading: it’s just a more capable tool for automation. Just like we raised the dead with galvanic currents, we now bring immortality with mind uploading. But in the end, it’s those simple equations that matter. Electric lawn mower + AI = self-directed electric lawn mower. Electric coffee maker + AI = electric coffee maker that knows what you like better than you do.
Here, in the west, we tend to sleep on our laurels a lot. We basically invented AI and we still have the best researchers. But in the long run, this doesn’t matter. Execution is everything. To be on top, you need to apply AI to every thing in sight, and that does not require the world’s best researchers. An army of competent engineers is enough.
As we lead our comfortable western lives, we are that metaphorical frog in a boiling pan. Remember the industrial revolution. Before it, Europe was poor. China was rich, with an amazing collection of inventions behind its back: paper, printed books, gunpowder, time pieces, unified measures. When Europe ascended, China did not magically become poorer in absolute terms. It became poorer in relation. And as China’s humiliation in the 19th century showed, this relative poverty mattered.
This was largely inspired by “AI Superpowers” by Kai-Fu Lee. The book’s cheesy name doesn’t do it service: to me, the book’s value is in the insight it provides into the inner workings of China’s startup kitchen.
