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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.

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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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