There are 1000 Chinese labs. They are involuting, they cannot coordinate and the state won't let them coordinate because the state wants domination, not actual profits for anybody. So the market forces are allowed to dominate.
Because of the basic huge recession going on in China, you can't actually make money in China doing China things. So they gotta gird up their export stuff and try to export. That entails strong relations with American companies, American PR, English stuff, etc.
If you want an essay about this from a VC, read this one
What a strange way to put it. Market forces are a good thing in a market economy. Only someone who secretly wants or hopes for monopolies would you say something to the contrary (a VC).
The party has done something about enormous involution in solar panels, for example (<a href="https://www.csis.org/analysis/chinas-solar-industry-upheaval-effects-will-be-global" rel="nofollow">https://www.csis.org/analysis/chinas-solar-industry-upheaval...) and previously steel. They're planning something for cars. They don't on LLM because of the newness and the wish for preeminence.
China has a different perspective on it, they believe that there is such a thing as harmful competition and they are willing to step in to stop it.
Enshittification and related problems can be a result of market forces just as much as they can be a result of monopoly/duopoly or a small cartel. Excess competition sometimes results in all firms scraping the barrel to squeeze out pennies, especially with technology (such as large online marketplaces) making pricing more transparent.
Marx actually predicted that ever-intensifying competition would destroy markets through overproduction, although he did not use the term involution.
Price wars are good even if they lead to more bad products on the market. If quality is important people will pay more for it and ignore the bad ones, if not then everybody saves some money.
The reason it doesn't work like that IRL is centralized marketplaces. If the winning strategy on Alibaba is low prices, bad quality and botted reviews to compensate then every seller has to do it to survive, because they can't get buyers outside the platform. That's not excess competition. It's a lack of competition just on a different level.
> The reason it doesn't work like that IRL is centralized marketplaces.
Well yes, that’s why I mentioned those specifically. But even if the marketplaces were split up, someone could create an aggregator to comparison shop and the same effects would apply. The problem for producers is that the Internet erases information asymmetry.
It’s also not just affecting low end goods, it’s a constant pressure on everyone, which is why many formerly upscale brands are seeing the same problems. It’s also a general problem with public companies, as large shareholders demand constant growth, as well as many private companies owned by PE where brands are stripped for short-term profits.
My experience is that the best low cost mid-tier products right now are coming from fronts like Vevor and Fanttik who do sourcing from noname factories in China. I’m not sure if their position is sustainable; it’s not like they have much of a moat. (I guess Fanttik has a team that adds some slick design to their otherwise utilitarian items.) If that model holds up then maybe that’s the future, but I suspect that they just have a temporary advantage thanks to a dual presence and connections in both the US and China.
Pouring 100% of your tech optimism, and probably portfolio, into a product that some say is about to get Wile E Coyote flattened by market dynamics would probably inspire serious market skepticism.
I'd call it overcapacity instead. A lot of investment without capital discipline making sure there is actually return of investment leading to too much supply.
Not that OpenAI, Anthropic or SpaceX aren't doing the same.
At the 1000 foot level, this is just another part of the Chinese master plan that's been playing out for decades now. The master plan seems to be: train far more engineering and stem graduates than anyone else, let them loose in a dog eat dog capitalist garden and fertilise the garden with sprinkling government money. Hoped for outcome: their innovation will let China eat the world.
For comparison around 50% of China's graduates are in STEM, vs 20% in the USA. With China has a larger population the final outcome is: USA feeds their innovation pipeline with 800k new STEM graduates per year compared to China feeding its pipeline with 4M to 5M per year. In addition the Chinese government outspends the USA government on subsiding innovation in STEM by about 2 to 1 and the USA's subsidy rate has been shrinking since the Regan era. However, there is a caveat: USA private investment brings the total spend in both countries back to parity.
It seems the Chinese plan is working. The STEM garden is overstaffed. It produces far more than China can absorb internally, so they are forced to export their ideas and wares to the world. After decades of persistence China has become the worlds manufacturing powerhouse and now drives the development of 5G/6G, batteries, cars, and solar. China builds about 1000 large ships a year. The USA builds 5 to 8.
But as the article says, this comes at a cost. The intense competition makes life in China's dog eat dog STEM garden brutal. I guess that's the price a nation has gotta pay for world domination.
This looks like a speed run of the history of analytics DBMS’s.
Once upon a time, everyone had a secret sauce in network or data encoding or query optimization, but in the last ~10 years computational physics and economics have basically decided the “correct” architecture and everyone (including OSS) has converged.
My immediate midwit take is: doesn't matter if it helps Anthropic/OpenAI if it helps DeepSeek more, relatively. Making open-weights models even cheaper and easier to run expands that "market" and increases competitive pressure on the Big Two, who still have to charge money.
My guess would be that if they "help" western labs becoming better, then any break-throughs they (western labs) make after that, is also a benefit to the Chinese labs - if they can distill the models.
Basically, western labs are in it for the money / commercial monopoly. Chinese labs are in it for the tech? As long as they can keep distilling models, and get access to research other ways, they benefit. And if they can push western labs forward, they'll benefit from that themselves.
"A week in Beijing and Shanghai with the people building AI in China": <a href="https://earnedintuition.substack.com/p/involution-without-export-is-wasted" rel="nofollow">https://earnedintuition.substack.com/p/involution-without-ex... does a decent job of exploring some possible reasons
I tried to read this but it's just claude after a certain point.
It's unreadable.
I can't understand any serious writer essentially expecting other people to read stuff that they didn't write. Or if claude was actually good at formulating ideas and conducting information, fine. But the truth is that I'm just reading 80% empty prose that are forced in there by claude.
AI fundamentally insecure. Vulnerable to forcing hallucinations via search results. Vulnerable to invocation of commands in data stream. More AI means more vulnerabilities.
I can't even fathom the trend these days of "we don't review the code" from security team perspective.
Unpopular, maybe, but what about the normal reasons? The researchers are looking to make a name for themselves, and/or they genuinely care about AI advancement.
It's just their usual national strategy like what they did to solar panel and EV. The solar panel industry is mostly dominated by China and their profit rate is basically ... negative. The EV industry in China is in similar condition, where the average profit rate is only 1.5%. Their upstream suppliers are also hold as hostages that most of them won't get their money back within 6 months.
The weird ideology here is to dominate the market at ANY COST, even it benefits the opponents.
Idk, but it's doing a lot for my view of China. Maybe that's a point? Maybe they just want their own innovation to go as fast as possible and they don't care that other countries also benefit? A rising tide lifts all boats? They are already known for the best manufacturing, they're just adding software dev to the list? Maybe they just want to undermine the US in a non-aggressive way?
Why did we (the west) ever start open sourcing anything? Maybe we just like sharing? Maybe humanity only grows on pre-competitive layers like Linux and clean water. Maybe, the chinese government is closer to their people, and does not let large companies influence them and just doesn't like closed private hyperscalers with a lot of power?
(Some points assume the government has a role in the openness, which I think is likely)
Yes - the Chinese labs serve a market that rely on open-weight models and managed deployments, and the labs gain competitive relevance by releasing those models. The cache optimization feature they came up with required new software to utilize on the inference-end, meaning that open source software would need to be specifically updated to work with these models. It wasn't the type of advancement that they could even theoretically keep secret.
Because it's entirely possible that Western labs already did this optimization but didn't publish it, and then the Chinese figured it out and decided to brag about it.
We don't know either way, so I find the whole thing silly to speculate on.
The chinese don't view AI as metaphysical, they view it as an engineering challenge they consider good for their state and want to dominate the global market like they do with batteries/EVs/photovoltaics. They want to proliferate them as much as possible and traditionally they don't care much for IP. They also want hardware makers to make optimized chips specifically for these models.
I think it’s fairly simple: they’re forced into this situation by being late and worse in terms of capabilities. They’re not far behind, but as long as they’re behind they’ve needed to give people some reason to try and use their models. Cost is one factor. But it probably wasn’t enough. Being open has given them a lot of attention. Free marketing. Good will.
Put another way: if they were not cheaper and open, they would simply not be competitive. They would already be dead.
I don’t think this ends well for the Chinese labs. This is going pretty much like I thought. Western labs is just copying their improvements (I don’t think publishing the techniques matter here.. they’d just hire to gain the knowledge or figure it out themselves), and they have access to more GPUs and have better branding, so in the end where can the Chinese labs compete? Even lower cost? Open weights? I’m not sure open is a sustainable way to compete either. Eventually there will be some fully open source AI models that cuts out that avenue of competition as well.
The post makes an assumption that US labs did not already possess similar optimization. It's also very possible that they did, but are simply not telling anyone in order to maintain obscene margins on cached read, similar to AWS' absurd pricing on bandwidth.
They get to make US labs look dumb and provide an open alternative that anyone can host themselves.
They're building bridges over the moats that companies with far too much US investment are trying to build, and if they do it continually it can help destabilize the US economy.
Yeah, would have been nice if the author put a bit more thought into this article to come up with something rather than to just give up once they've reached the point of their article lol
All the comments here are very US/Western-centric. Maybe they are a different culture, having a completely different economic model. Maybe they are not Capitalists and not thinking in pure Capitalistic terms, such as winning, growth, market domination, IPO, market value or competition. Maybe they are not obsessed with US labs. Maybe they are ideologically different than you. Maybe they have different priorities. Maybe they have a different playbook. Maybe they never thought of it as throwing a lifeline to American labs. Maybe they don't care. Maybe they're just different people.
amelius · · focus · HN ↗
Any ideas?
[deleted] · · focus · HN ↗
[deleted]
curuinor · · focus · HN ↗
Because of the basic huge recession going on in China, you can't actually make money in China doing China things. So they gotta gird up their export stuff and try to export. That entails strong relations with American companies, American PR, English stuff, etc.
If you want an essay about this from a VC, read this one
<a href="https://earnedintuition.substack.com/p/involution-without-export-is-wasted" rel="nofollow">https://earnedintuition.substack.com/p/involution-without-ex...
dabedee · · focus · HN ↗
curuinor · · focus · HN ↗
ajkjk · · focus · HN ↗
iamnothere · · focus · HN ↗
Enshittification and related problems can be a result of market forces just as much as they can be a result of monopoly/duopoly or a small cartel. Excess competition sometimes results in all firms scraping the barrel to squeeze out pennies, especially with technology (such as large online marketplaces) making pricing more transparent.
Marx actually predicted that ever-intensifying competition would destroy markets through overproduction, although he did not use the term involution.
tancop · · focus · HN ↗
The reason it doesn't work like that IRL is centralized marketplaces. If the winning strategy on Alibaba is low prices, bad quality and botted reviews to compensate then every seller has to do it to survive, because they can't get buyers outside the platform. That's not excess competition. It's a lack of competition just on a different level.
iamnothere · · focus · HN ↗
Well yes, that’s why I mentioned those specifically. But even if the marketplaces were split up, someone could create an aggregator to comparison shop and the same effects would apply. The problem for producers is that the Internet erases information asymmetry.
It’s also not just affecting low end goods, it’s a constant pressure on everyone, which is why many formerly upscale brands are seeing the same problems. It’s also a general problem with public companies, as large shareholders demand constant growth, as well as many private companies owned by PE where brands are stripped for short-term profits.
My experience is that the best low cost mid-tier products right now are coming from fronts like Vevor and Fanttik who do sourcing from noname factories in China. I’m not sure if their position is sustainable; it’s not like they have much of a moat. (I guess Fanttik has a team that adds some slick design to their otherwise utilitarian items.) If that model holds up then maybe that’s the future, but I suspect that they just have a temporary advantage thanks to a dual presence and connections in both the US and China.
DrewADesign · · focus · HN ↗
thrawa8387336 · · focus · HN ↗
curuinor · · focus · HN ↗
3371 · · focus · HN ↗
luke5441 · · focus · HN ↗
Not that OpenAI, Anthropic or SpaceX aren't doing the same.
googaar · · focus · HN ↗
bilbo0s · · focus · HN ↗
Do you do business in China?
I'm curious what you mean by this? Because in my experience, you can only do business in China by doing "China" things.
I'd be interested in picking your brain as to how you get around those issues?
curuinor · · focus · HN ↗
I'm talking like, getting 100x, VC sized returns. Of course you can sell widgets in China, it's a major world economy.
watwut · · focus · HN ↗
That is how actual capitalist market should work and what anti-monopoly legislation should ensure.
rstuart4133 · · focus · HN ↗
For comparison around 50% of China's graduates are in STEM, vs 20% in the USA. With China has a larger population the final outcome is: USA feeds their innovation pipeline with 800k new STEM graduates per year compared to China feeding its pipeline with 4M to 5M per year. In addition the Chinese government outspends the USA government on subsiding innovation in STEM by about 2 to 1 and the USA's subsidy rate has been shrinking since the Regan era. However, there is a caveat: USA private investment brings the total spend in both countries back to parity.
It seems the Chinese plan is working. The STEM garden is overstaffed. It produces far more than China can absorb internally, so they are forced to export their ideas and wares to the world. After decades of persistence China has become the worlds manufacturing powerhouse and now drives the development of 5G/6G, batteries, cars, and solar. China builds about 1000 large ships a year. The USA builds 5 to 8.
But as the article says, this comes at a cost. The intense competition makes life in China's dog eat dog STEM garden brutal. I guess that's the price a nation has gotta pay for world domination.
foul · · focus · HN ↗
pj_mukh · · focus · HN ↗
twoodfin · · focus · HN ↗
Once upon a time, everyone had a secret sauce in network or data encoding or query optimization, but in the last ~10 years computational physics and economics have basically decided the “correct” architecture and everyone (including OSS) has converged.
carbonguy · · focus · HN ↗
mpalmer · · focus · HN ↗
TrackerFF · · focus · HN ↗
Basically, western labs are in it for the money / commercial monopoly. Chinese labs are in it for the tech? As long as they can keep distilling models, and get access to research other ways, they benefit. And if they can push western labs forward, they'll benefit from that themselves.
amelius · · focus · HN ↗
jollyllama · · focus · HN ↗
corford · · focus · HN ↗
Aperocky · · focus · HN ↗
It's unreadable.
I can't understand any serious writer essentially expecting other people to read stuff that they didn't write. Or if claude was actually good at formulating ideas and conducting information, fine. But the truth is that I'm just reading 80% empty prose that are forced in there by claude.
corford · · focus · HN ↗
transdev12 · · focus · HN ↗
[dead]
chrismarlow9 · · focus · HN ↗
I can't even fathom the trend these days of "we don't review the code" from security team perspective.
Just my guess though.
[deleted] · · focus · HN ↗
[deleted]
Windchaser · · focus · HN ↗
Unpopular, maybe, but what about the normal reasons? The researchers are looking to make a name for themselves, and/or they genuinely care about AI advancement.
feverzsj · · focus · HN ↗
The weird ideology here is to dominate the market at ANY COST, even it benefits the opponents.
teekert · · focus · HN ↗
Why did we (the west) ever start open sourcing anything? Maybe we just like sharing? Maybe humanity only grows on pre-competitive layers like Linux and clean water. Maybe, the chinese government is closer to their people, and does not let large companies influence them and just doesn't like closed private hyperscalers with a lot of power?
(Some points assume the government has a role in the openness, which I think is likely)
Catloafdev · · focus · HN ↗
thefourthchime · · focus · HN ↗
We don't know either way, so I find the whole thing silly to speculate on.
seydor · · focus · HN ↗
audunw · · focus · HN ↗
Put another way: if they were not cheaper and open, they would simply not be competitive. They would already be dead.
I don’t think this ends well for the Chinese labs. This is going pretty much like I thought. Western labs is just copying their improvements (I don’t think publishing the techniques matter here.. they’d just hire to gain the knowledge or figure it out themselves), and they have access to more GPUs and have better branding, so in the end where can the Chinese labs compete? Even lower cost? Open weights? I’m not sure open is a sustainable way to compete either. Eventually there will be some fully open source AI models that cuts out that avenue of competition as well.
[deleted] · · focus · HN ↗
[deleted]
HeavenFox · · focus · HN ↗
micromacrofoot · · focus · HN ↗
They're building bridges over the moats that companies with far too much US investment are trying to build, and if they do it continually it can help destabilize the US economy.
nater5000 · · focus · HN ↗
ozgung · · focus · HN ↗
[deleted] · · focus · HN ↗
[deleted]