eyes on the U.S.

Why The Chinese Will Never Understand Silicon Valley

Next exit: Palo Alto
Next exit: Palo Alto
Wu Xiaobo

PALO ALTO — Tucked away on Waverley Street in Palo Alto, California, the house where Steve Jobs used to live is an inconspicuous brick Tudor with rambling roses climbing all over. As one of the residential areas favored by Silicon Valley software engineers, a big house here usually costs well above $10 million.

Over the past two years, some of China’s ambitious technology entrepreneurs have rushed here to live where the Apple founder once did. In his former home's big garden, a lone red poppy blooms among the colorful wildflowers. It looks as if the business genius hasn't departed.

These "Chinese neighbors" aspire to be near not just his former home but also his creative soul. But that's despite the starkly different approach Chinese companies have compared to their American counterparts.

"Why do my classmates say, "You Chinese are all C2C?"" the 11-year-old daughter of Liang Haiyan asked her one day. The elder Liang, who as founder of a company that makes wearable devices has been here a decade, tried with difficulty to explain this.

C2C is shorthand for "Copy to China." Says Liang, "In my heart, I feel very vexed too."

Every year she hears from multitudes of Chinese entrepreneurs. "Their most pressing, and sometimes their only, question, is always, "What is most popular in Silicon Valley now?" In other words, whether it involves software, hardware or a business model, rarely do Chinese business people ask, "Why is Silicon Valley so unique?"" she says.

Steve Job's House in Palo Alto, California — Photo: Roman Boed

James, a former Apple senior executive who helped current Apple CEO Tim Cook converge Apple"s mobile phone business with the electronics manufacturer Foxconn, says that Chinese companies are all trying to replicate the iPhone at a fraction of the cost. "Yet none of them has a clue what Apple's concept of what a smartphone is," he says.

In her book club, Liang recently shared Zero to One, a bestseller in China among business books that was written by U.S. venture capitalist Peter Thiel. One of her club's mobile account followers asked her a question after reading the book: "Americans think about how to change the world. The Chinese, rather, think even more about how to adapt themselves to the ever-changing world. Is this because of their value differences?"

In the Silicon Valley, especially, the differences between how Chinese and American entrepreneurs approach innovation is stark, not just in terms of values but also institutionally.

Being technology-driven is almost like a religious obsession for Americans. They also very strictly protect innovative ideas. Inventions are protected by patent laws so that competitors can't unfairly steal processes or ideas.

Where copycats aren't rewarded

Another important factor is that, in America, venture capital investors don't reward counterfeiting. In their view, not only is it shameful, but it's also dangerous. It's under such legal and ethical conditions that small startups are protected and can flourish.

But since the budding of China's Internet industry, the country has no groundbreaking invention to show for itself. Almost all business models and technical prototypes come from the United States. And to safeguard their own enterprises, Chinese authorities have always sided with local businesses with regard to patent law, which makes it extremely hard for foreign companies to obtain Chinese patents.

The differences in approach manifest themselves in two primary ways.

One is that everybody imitates their American counterparts, and the primary index of their “innovation” is how fast they can replicate. Even venture capitalists regard this as the primary way to evaluate their investments. The "Chinese equivalent of Yahoo," the "Chinese equivalent of Google," the "Chinese equivalent of Snapchat." These are the ways Chinese startups characterize their companies to attract investments or be listed on the NASDAQ stock exchange.

Second is that Chinese businesses copy each other so shamelessly that they wind up with homogeneous products. Those who point the finger at others as copycats started off as imitators themselves.

In their national character, Chinese people have always held to pragmatic tradition. Success is the only criterion for creativity. As the Chinese say, "Legitimacy belongs to the victor. Losers are always in the wrong." Or, “I exist, therefore I'm legitimate."

Innovation is the starting point of all industrial progress. The least bit of difference can lead to a huge deviation, which is why the two countries have such divergent competitive environments.

Just a few years ago, the Chinese entrepreneurs or investors who came to the Silicon Valley were focused entirely on the Internet application industry. But today, medical, big data and intelligent hardware share the limelight.

"Each day there are always a few Chinese investors strolling around in the place like talent scouts," Stanford postdoctoral researcher Wang Feng jokes. "What people in this building are doing is the work from zero to one. But our Chinese companies are going to complete the 1 to N mission."

Perhaps in a few years, another Steve Jobs in a new field will produce another world-changing startup and live among wildflowers on another quiet street. In which case, it won't take long for the Chinese to follow.

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A check operation in Indian-administered Kashmir, following a spate of targeted attacks on the region's Hindu minority

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Здраво!*

Welcome to Friday, where Joe Biden vows to protect Taiwan from China, Alec Baldwin accidentally kills a cinematographer, and can you guess what day it is TODAY? We also have a report from a researcher in San Diego, USA on the sociological dark side of food trucks.

[*Zdravo - Macedonian]

💡  SPOTLIGHT

Iran-Saudi Arabia rivalry may be set to ease, or get much worse

The Saudis may be awaiting the outcome of Iran's nuclear talks with the West, to see whether Tehran will moderate its regional policies, or lash out like never before, writes Persian-language media Kayhan-London:

The Iranian Foreign Ministry spokesman Saeed Khatibzadeh said earlier this month that Iranian and Saudi negotiators had so far had four rounds of "continuous" talks, though both sides had agreed to keep them private. The talks are to ease fraught relations between Iran's radical Shia regime and the Saudi kingdom, a key Western ally in the Middle East.

Iran's Foreign Minister Hossein Amirabdollahian has said that the talks were going in the right direction, while an Iranian trade official was recently hopeful these might even allow trade opportunities for Iranian businessmen in Saudi Arabia. As the broadcaster France 24 observed separately, it will take more than positive signals to heal a five-year-rift and decades of mutual suspicions.

Agence France-Presse news agency, meanwhile, has cited an unnamed French diplomat as saying that Saudi Arabia wants to end its costly discord with Tehran. The sides may already have agreed to reopen consular offices. For Saudi Arabia, the costs include its war on Iran-backed Houthis rebels fighting an UN-recognized government in next-door Yemen.

Bilateral relations were severed in January 2016, after regime militiamen stormed the Saudi embassy in Tehran. Amirabdollahian was then the deputy foreign minister for Arab affairs. In 2019, he told the website Iranian Diplomacy that Saudi Arabia had taken measures vis-a-vis Iran's nuclear pact with the world powers.

He said "the Saudis' insane conduct toward [the pact] led them to conclude that they must prevent [its implementation] in a peaceful environment ... I think the Saudis are quite deluded, and their delusion consists in thinking that Trump is an opportunity for them to place themselves on the path of conflict with the Islamic Republic while relying on Trump." He meant the administration led by the U.S. President Donald J.Trump, which was hostile to Iran's regime. This, he said, "is not how we view Saudi Arabia. I think Yemen should have been a big lesson for the Saudis."

The minister was effectively admitting the Houthis were the Islamic Republic's tool for getting back at Saudi Arabia.

Yet in the past two years, both sides have taken steps to improve relations, without firm results as yet. Nor is the situation likely to change this time.

Iran's former ambassador in Lebanon, Ahmad Dastmalchian, told the ILNA news agency in Tehran that Saudi Arabia is doing Israel's bidding in the region, and has "entrusted its national security, and life and death to Tel Aviv." Riyadh, he said, had been financing a good many "security and political projects in the region," or acting as a "logistical supplier."

The United States, said Dastmalchian, has "in turn tried to provide intelligence and security backing, while Israel has simply followed its own interests in all this."

Furthermore, it seems unlikely Iran's Supreme Leader Ali Khamenei will tolerate, even in this weak period of his leadership, the kingdom's rising power in the region and beyond, and especially its financial clout. He is usually disparaging when he speaks of Riyadh's princely rulers. In 2017, he compared them to "dairy cows," saying, "the idiots think that by giving money and aid, they can attract the goodwill of Islam's enemies."

Iranian regime officials are hopeful of moving toward better diplomatic ties and a reopening of embassies. Yet the balance of power between the sides began to change in Riyadh's favor years ago. For the kingdom's power has shifted from relying mostly on arms, to economic and political clout. The countries might have had peaceful relations before in considerably quieter, and more equitable, conditions than today's acute clash of interests.

Beyond this, the Abraham Accord or reconciliation of Arab states and Israel has been possible thanks to the green light that the Saudis gave their regional partners, and it is a considerable political and ideological defeat for the Islamic Republic.

Assuming all Houthis follow Tehran's instructions — and they may not — improved ties may curb attacks on Saudi interests and aid its economy. Tehran will also benefit from no longer having to support them. Unlike Iran's regime, the Saudis are not pressed for cash or resources and could even offer the Houthis a better deal. Presently, they may consider it more convenient to keep the softer approach toward Tehran.

For if nuclear talks with the West break down, Iran's regime may become more aggressive, and as experience has shown, tensions often prompt a renewal of missile or drone attacks on the Saudis, on tankers and on foreign shipping. Riyadh must have a way of keeping the Tehran regime quiet, in a distinctly unquiet time.

Kayhan-London

🌎  7 THINGS TO KNOW RIGHT NOW

• Biden vows to defend Taiwan: U.S. President Joe Biden said the United States would come to Taiwan's defense if it were attacked and had a commitment to defend the island nation that China claims as its own. The White House clarified for the second time in three months that U.S. policy on the subject has not changed, and declined further comment when asked if Biden had misspoken.

• Call on China to respect Uyghurs: A statement from 43 countries denounced China's human rights record at the United Nations over the reported torture and repression of the mostly Muslim Uyghurs, as well as the existence of "re-education camps" in Xinjiang. The declaration calls on Beijing to allow independent observers immediate access. In response, Cuba issued a rival statement shortly afterwards on behalf of 62 other countries claiming "disinformation".

• Alec Baldwin fires prop gun, kills cinematographer: U.S. actor Alec Baldwin fatally shot cinematographer Halyna Hutchins and injured director Joel Souza after discharging a prop gun on the set of his new movie, near Santa Fe. The accident is being investigated.

• Berlusconi acquitted: Former Italian Prime Minister Silvio Berlusconi was acquitted of judicial corruption charges. The 85-year-old media mogul had been accused of seeking to bribe guests present at his infamous "Bunga Bunga" parties to lie about the evenings as part of an underage prostitution case.

• COVID health workers death toll: A new WHO working report estimates that between 80,000 and 180,000 health and care workers may have died from COVID-19 between January 2020 and May 2021. The same report also noted that fewer than 1 in 10 healthcare workers were fully vaccinated in Africa, compared with 9 in 10 in high-income countries, and less than 5% of Africa's population have been vaccinated.

• Seven killed in Russian gunpowder factory blast: An explosion at the Elastik gunpowder and chemicals plant southeast of Moscow killed at least seven people, while nine are still missing.

• Aye aye, CAP'n: HAPPY CAPS LOCK DAY, FOLKS!

🗞️  FRONT PAGE

Dutch daily De Volkskrant pays tribute to "sound master" and renowned classical conductor Bernard Haitink, who died at 92. Born in Amsterdam, Haitink made more than 450 records and led some of the world's top orchestras in the span of his 65-year career.

📰  STORY OF THE DAY

The food truck, a sign that the white and wealthy are moving in

In San Diego, California, researcher Pascale Joassart-Marcelli tracked how in the city's low-income neighborhoods that have traditionally lacked dining options, when interesting eateries arrive the gentrification of white, affluent and college-educated people has begun. In The Conversation she writes:

🥡 In 2016 in City Heights, a large multi-ethnic San Diego neighborhood, a dusty vacant lot on the busiest boulevard was converted into an outdoor international marketplace called Fair@44. There, food vendors gather in semi-permanent stalls to sell pupusas, lechon (roasted pig), single-sourced cold-brewed coffee, cupcakes and tamarind raspado (crushed ice). Just a few blocks outside the gates, informal street vendors — who have long sold goods such as fruit, tamales and ice cream to residents who can't easily access supermarkets — now face heightened harassment.

🤑 Cities and neighborhoods have long sought to attract educated and affluent residents – people whom sociologist Richard Florida dubbed "the creative class." The thinking goes that these newcomers will spend their dollars and presumably contribute to economic growth and job creation. Food, it seems, has become the perfect lure. It's uncontroversial and has broad appeal. It taps into the American Dream and appeals to the multicultural values of many educated, wealthy foodies.

🏙️ My analysis of real estate ads for properties listed in City Heights and other gentrifying San Diego neighborhoods found that access to restaurants, cafés, farmers markets and outdoor dining is a common selling point. San Diego Magazine's home buyer guide for the same year identified City Heights as an "up-and-coming neighborhood," attributing its appeal to its diverse population and eclectic "culinary landscape," including several restaurants and Fair@44. When I see that City Heights' home prices rose 58% over the past three years, I'm not surprised.

➡️ Read more on Worldcrunch.com

#️⃣  BY THE NUMBERS

€6.65 million

The remains of "Big John," the world's largest triceratops skeleton ever found, were sold at auction for a European record price of 6.65 millions euros in Paris to a private anonymous collector from the U.S. The 200 pieces of the skeleton were unearthed in 2014 in South Dakota and reassembled by specialists in Italy.

👮🎮  IN OTHER NEWS

Police bust Mexican drug gang recruiting boys via online video games

Police in Mexico have intervened to rescue three minors, aged 11 to 14, from recruitment into a drug gang that had enticed them through online gaming.

A top Mexican police agency official Ricardo Mejía Berdeja, said the gang had contacted the youths in the south-central city of Oaxaca, chatting through a free-to-download game called Free Fire, which involves shooting at rivals with virtual firearms.

Calling himself "Rafael," another player of the same age, the suspected gang member offered one of the youths work "checking radio frequencies and watching out for police presence" in Monterrey, northern Mexico, reported national daily El Heraldo de México. The pay was unusually good — 8,000 pesos (almost $400) every two weeks — and the youth called two friends who also wanted to get in.

The three boys were set to take the bait, but an anonymous Mexican intelligence agent following the exchange while also posing as youth playing Free Fire, ultimately led police to a safe house in Santa Lucía del Camino, outside Oaxaca.

➡️ Read more on Worldcrunch.com

📣 VERBATIM

"I just want to make China understand that we are not going to step back."

— U.S. President Joe Biden vowed to defend Taiwan if it came under attack from China, an assertion that seems to move away from the U.S. stated policy of "strategic ambiguity." His administration is now facing calls to clarify this stance on the island.

📸  PHOTO DU JOUR

Paramilitary soldiers are conducting a check operation in Indian-administered Kashmir, following a spate of targeted attacks on the region's Hindu minority that have left at least 33 dead since early October. The region, claimed in full by both India and Pakistan, has been the site of a bloody armed rebellion against India since the 1990s — Photo: Adil Abbas/ZUMA

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

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