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What Silicon Valley Can Learn from China

The world’s second-largest economy is learning more quickly from the Valley than the other way around.

On October 17, 1989, a brutal 6.9 magnitude earthquake hit San Francisco, causing severe damage to the Bay Bridge. While the bridge reopened about one month afterward thanks to a short-term fix, the entire bridge required considerable seismic retrofitting. In 1996, the California Department of Transportation decided to replace, rather than retrofit, the eastern span of the 4.5-mile bridge. Construction began on that project in 2002 and was completed in 2013 with an estimated price tag of $6.4 billion. Ultimately, the project took ten years longer and cost $5 billion more than expected.

Compare that with the 26.4-mile-long Jiaozhou Bay Bridge in China. The world’s longest sea bridge was constructed in four years, opening in 2011. While the price of that bridge is uncertain, the fact remains: China is incredibly efficient at making just about anything.

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In in the vaunted innovation hubs of San Francisco and greater Silicon Valley, however, the mere act of building things is often excruciatingly slow and expensive. “San Francisco is so much slower than New York, and China makes New York City seem like it is standing still,” says Bay McLaughlin, co-founder of the Hong Kong–based IoT incubator “What the West can learn from the East is speed, period. People in China work at a speed for longer and harder than any culture I have ever been in,” says McLaughlin, who is delivering a talk on the subject titled “Don’t Get Left Behind: Why China Matters Now” at SXSW on March 13. There's data to back up that assertion. Chinese workers average 2000 to 2200 working hours each year—substantially more than in the United States (1790 hours per year), Germany (1371), and even the famed workaholic nation of Japan (1,719), according to the Organisation for Economic Co-operation and Development.

A Giant, Awakened

The speed at which Chinese factories can churn out products is all the more impressive considering that, a couple of decades ago, the country was a fringe manufacturing player. In 1990, the country produced less than 3% of global manufacturing output by value. 20 years later, that sum was close to a quarter. Just as impressive, China doubled its GDP per capita from 2001 to 2011. By contrast, it took the United Kingdom 150 years to achieve that same feat.

Related: Lessons from China: Internet of Things

Some critics like to point out that, to fuel China’s manufacturing growth, the country has acquired some of the worst air quality in the world, or that the quality of Chinese goods is questionable. But China has ambitious plans to address those problems. The country’s “Made in China 2025” manufacturing program, for instance, aspires to make its goods among the best in the world.

The fact is, China has established itself as a force to be reckoned with. “You don’t have to necessarily manufacture in China,” says Bay McLaughlin. “But your supplies are probably going to come from China and you are certainly are going to be competing with them from a pace of innovation standpoint — and from the supply chain and output side.”

China Could Pop Silicon Valley' Bubble

The word “bubble” tends to pop up often in conversations related to Silicon Valley—either to describe its stardust-fueled culture, its housing prices, or the boom-bust potential of its economy. Sure, the Valley’s predilection for seeing the world through rose-colored glasses can result in incredible innovation. But for every story of a success story like Uber or Airbnb, there are tales of dramatic crashes of once-hyped startups like Solyndra, Lily Robotics, or Theranos.

Meanwhile, China’s tech industry has adopted the Valley's startup innovation formula, complete with incubators, accelerators, and VCs. In some cases, Chinese tech field ahead of Silicon Valley’s. Last year, The New York Times declared that China’s mobile tech was more advanced. The Chinese are asserting a leadership position in AI as well. China also leads the world in terms of IoT adoption

Back in the Bay Area, many people in the tech field still act like they are impervious to globalization, McLaughlin says. “Some people in the West have this incredible hubris, and it may not even be conscious,” McLaughlin says. “San Francisco sees itself as the top of the tech field. If you are there, you think you have no reason to leave; everyone seems to come to you.”

This state of affairs is remarkable given the exorbitant cost of living in Silicon Valley and the difficulty for early startups to get off the ground there. “If you come to the Valley, come prepared,” warns Harvard Business Review columnist Sramana Mitra. “And know this, that, you can also succeed elsewhere just fine.”

In any event, Silicon Valley’s once red-hot tech economy seems to be cooling. Smartphone growth rates in the United States are close to static, while smartphone adoption is surging in China—a country with roughly four times the population. China’s manufacturing sector continues to mature as well. Ultimately, it’s hard to appreciate just how competitive China has become without physically going and seeing for yourself. “It is important for companies to come here and get a taste of what things are like here,” McLaughlin says. “The world is so much smaller than it used to be.”

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