Philosophy of Digital Man and Digital Society - 2024

Global Trends Towards Sustainable Development Based on Digital Technologies (Case Studies of China and the USA)

The Emergence and Development of Concepts in Digital Economy and Digital Management Amidst Global Transformation

In the contemporary context, the study of global trends transitioning to sustainable development through digital technologies plays a significant role in highly developed societies, particularly considering the unprecedented advancements in breakthrough technologies that demonstrate efficiency, competitiveness, and the creation of new values. Indeed, as the competition between the United States and China intensifies, both nations must embrace the commitments outlined by technological advancements regarding their vision for the future to promote successful economic growth "in the interest of all."

The examination of global trends towards sustainable development based on digital technologies in advanced societies is of paramount importance, as it illustrates the formation of a collective set of digital values. At the core of these values lie the technical challenges associated with the triumph of machines over humanity, which are founded on deep learning technologies and innovative methods in the field of artificial intelligence that enable the enhancement of cognitive capabilities in machines. Policymakers, scholars, and government officials have outlined specific objectives to be met by 2025 and 2030, with the primary goal of positioning China as a global center for innovation in artificial intelligence by 2030, playing a leading role in theoretical developments, technologies, and their applications. By 2017, Chinese venture capitalists had already responded to this call, investing record sums in startups, accounting for 48% of all venture funding for artificial intelligence worldwide, thereby surpassing the United States for the first time.

The study of the essence and characteristics of machine (deep) learning—a technology capable of influencing the course of history—must encompass progressive and stabilizing algorithms that ensure sustainable development, contributing to societal advancement while countering destructive social trends. With the advent of artificial intelligence, an unprecedented rise in productivity emerged, alongside significant market upheavals that resulted, on one hand, in psychological repercussions for individuals, and, on the other, in efficiency, competitiveness, and the creation of new values through machine learning.

Machine learning serves as a comprehensive term for a domain that includes deep learning, a technology poised to affect historical trajectories. Since its inception, artificial intelligence has experienced numerous highs and lows. Periods of great promise have alternated with periods of disappointment—often referred to as "AI winters"—when the lack of practical results led to a decline in interest and funding. A pivotal moment arrived in 2012, when a network built by Hinton's team achieved a decisive victory in an international computer vision competition. Following decades of research, neural networks suddenly surged to the forefront as deep learning.

Researchers, futurists, and specialists in technical sciences began to speak of the enormous potential of neural networks. Deep learning, often referred to as "narrow artificial intelligence," constitutes an intellect that draws data from a specific domain to optimize particular outcomes, such as efficient production. Today, deep learning impresses humanity by unveiling vast prospects. Historically, deep learning was predominantly developed in the United States, Canada, and the United Kingdom; however, Chinese entrepreneurs and venture capital funds have since begun to invest in this area. During the age of discovery, progress was propelled by the efforts of a select group of top scientists, the majority of whom worked in the United States and Canada. Their research and technological innovations led to a rapid and significant enhancement of computer capabilities.

Currently, the creation of effective artificial intelligence algorithms necessitates three components: 1) substantial data; 2) computational power; and 3) the labor of specific algorithm developers who achieve certain results, where the volume of data becomes decisive, determining the overall capability and accuracy of the algorithm. Consequently, due to the monumental improvement in computer capabilities, China has already surpassed the United States, emerging as the leading nation in data production.

At present, China's alternative digital universe generates and captures vast new oceans of data about the real world, and due to impressive developments in artificial intelligence, the balance has shifted decidedly towards China. Its ambitious plan to transform the country into a superpower in artificial intelligence has garnered broad support and funding for research in this field, while attractive incentives and generous subsidies have drawn investments to Chinese regions. The implementation of artificial intelligence has resulted in productivity growth on a scale not witnessed since the Industrial Revolution. The ensuing concentration of profit is inevitable, as an economy based on artificial intelligence strives for a "winner-takes-all" model. The more data available, the better the products, which, in turn, attract consumers, generating even more data to further improve the products.

Analysis has shown that China and the United States have outpaced all other countries, paving the way for the emergence of a new type of bipolar world order. A few other nations, including the United Kingdom, France, and Canada, possess reputable research laboratories and talented specialists in artificial intelligence; however, they lack the venture funding ecosystem and user base necessary to generate data in sufficient volumes for implementation. Currently, China and the United States are nurturing AI giants destined to dominate global markets, profiting from consumers worldwide, showcasing a swift transition to everyday activities and socio-economic services that employ creative thinking within the digital realm.

Simultaneously, automation, along with elements of artificial intelligence in factories, heightens the significance of one of the main economic advantages of developing countries: inexpensive labor. Factories operated by robots are likely to be more profitable for clients operating in large markets. The chasm between the wealthy and the poor will continue to widen, and no answers are forthcoming as to how to address this issue; rather, it seems that monumental social upheavals and the collapse of political systems due to mass unemployment and inequality are on the rise.

The destabilization of labor markets and social unrest will occur against the backdrop of a far more acute personal and human crisis, manifested in a loss of meaning in life, as many cultural values rooted in human existence and related to labor will diminish. The development of artificial intelligence will challenge the values of work and threaten to erode this sense of life. Therefore, technological progress associated with the implementation of artificial intelligence must evolve in a manner that enables individuals not only to coexist alongside artificial intelligence but to thrive because of it.

The Creation of New Values in China Based on National Mentality
In the coming decade, Chinese entrepreneurs will target hundreds of industries, applying deep learning to solve a multitude of tasks. Their capacity for incessant improvement of business models and financial sourcing has spawned an incredible array of practical applications, some capable of transforming our lives. Initially, these entrepreneurs will develop their enterprises domestically, followed by expansion abroad, potentially capturing a majority of markets worldwide. At the heart of their success lies a naïve techno-optimism, a belief that every individual and company can change the world through innovative thinking, as evidenced by nations in the Asian region.

From an ideological standpoint, the approach to launching startups in China has been termed a philosophical concept known as "yin," whereas in the United States, it is referred to as "yang." Rather than focusing on mission, Chinese companies concentrate on market needs. Their ultimate objective is primarily to generate profit, and they are willing to take any measures necessary to achieve this goal. The ideal quintessence of addressing these challenges is embodied in the concept of the "lean startup," where the crucial aspect is not who conceived the idea, but rather whether it can be implemented and what the potential profit will be. Accurate replication of concepts has long been regarded, since the time of Confucius, as the path to true mastery and the impact of information and communication technologies on the formation of values in the Fourth Industrial Revolution.

Such a cultural propensity for imitation reflects the deeply ingrained deficit mentality of China in the 20th century. When we combine three factors— a culture where imitation has long been accepted as a norm, a mentality of scarcity, and a willingness to embrace any promising field— we can discern the psychological foundations of China's internet ecosystem. In Beijing, entrepreneurs often joke that Facebook is the "largest Chinese company in Silicon Valley," as it eagerly replicates the achievements of other startups and employs fierce competition tactics.

Chinese imitators have begun to adapt their products and business models to cater to the needs of local consumers, positioning themselves between Chinese internet users and Silicon Valley, resulting in progress favoring Chinese entrepreneurs. As American giants like eBay, Google, Uber, Airbnb, LinkedIn, and Amazon attempted one by one to conquer the Chinese market but ultimately failed, Western analysts quickly attributed their setbacks to state control. They suggested that only state protectionism had saved Chinese companies, serving as a barrier to American competitors. Meanwhile, Americans were not investing resources, lacking patience, and failing to grant their Chinese teams sufficient freedom to compete with world-class Chinese entrepreneurs.

Consequently, Silicon Valley companies have similarly drained top talent. While foreign analysts pondered the reasons behind American companies' lack of success in China, Chinese firms were busy enhancing their products. The spread of artificial intelligence in China is poised to bring about a revolution akin to the advent of electricity, which transformed every sphere of human activity. If artificial intelligence represents a new form of electricity, then big data serves as the fuel powering this energy, culminating in the creation of an indigenous internet ecosystem in China.

A new era in the development of Chinese internet is upon us. Over time, China's ecosystem has become independent and self-sustaining, allowing Chinese founders to build their startups without the influence of foreign venture investors. Now, they could create Chinese products to address China's challenges. This shift has transformed urban life and marked the dawn of a new era in the development of Chinese internet, leading to an extraordinary surge in the extraction of the primary "natural resource" of the artificial intelligence era.

Local technology companies did not adhere to Silicon Valley's rules; instead, they transformed the Chinese internet into an "alternative universe" with its own resources, galaxies, and laws of physics. Smartphones became akin to credit cards, while cities morphed into grand laboratories where digital and real life intertwined. Chinese technology firms, which governed this new integrated reality, no longer needed to emphasize their connections with Silicon Valley. Labels like "Chinese Amazon" or "Chinese Facebook" became commonplace. All these changes occurred due to the presence of several building blocks of mobile internet:

1. WeChat applications— the primary social network in China;
2. Mobile payment systems that turned every smartphone into a digital wallet.

New online and offline services have penetrated the fabric of China's economy, transforming its cities into cashless environments reminiscent of barter economies. State support for innovation increasingly inspired entrepreneurs, prioritizing technological entrepreneurship, where the experiences of strategic management geniuses, exemplified by figures like Bill Gates (Microsoft), Steve Jobs (Apple), and Andy Grove (Intel), played a significant role.

Under the banner of "support for mass innovation and entrepreneurship," mayors across China actively engaged in creating new innovation clusters, incubators, and state venture funds to develop their own models, thus evolving China's "alternative internet universe." American startups were inclined to maintain their specializations, crafting purely digital platforms that facilitated data exchange between clients and suppliers.

Chinese entrepreneurs were prepared to replicate their products through reverse engineering to make their business models function. China has emerged as the world's largest producer of digital data, far surpassing the United States, and continues to pull ahead daily. We are witnessing artificial intelligence beginning to "electrify" new domains, with data volumes optimizing the fabric of our everyday lives. Following the debut of the iPhone in 2007, website owners and internet service providers in China gradually adapted their platforms for smartphones. This adaptation necessitated at least the creation of mobile versions of websites that functioned well and appeared appealing on the small screens of smartphones. Simultaneously, new tools began to emerge, such as app stores, photo editing applications, and antivirus software for mobile operating systems.

For the Chinese populace, the internet has become an instrument of daily activity. Chinese giants Baidu, Alibaba, and Tencent, collectively known as BAT, utilized startups to accelerate their capture of the mobile internet service market. Today, Tencent owns two leading social networks in China— its messaging service QQ and social platform Q-Zone, which millions use. A new application for smartphones even lacked an English name and was known by the Chinese title Weixin, or "micro-messaging," as noted by Kai-Fu Lee in his work "AI Superpowers: China, Silicon Valley, and the New World Order."

However, the latest features of WeChat are continuously refined, as evidenced by the "app within an app" model, allowing for the creation of a nearly complete analog of an autonomous application without the costs associated with its development. These accounts soon became sources of social media content, leading many companies to abandon their own app development and instead thrive within WeChat. It took WeChat two years to evolve from an unknown application into a true empire encompassing communication, media, marketing, and gaming.

Over the next five years, Tencent diligently worked on modifying WeChat into the first super app. As a result, the application captured all areas of users' lives, both digital and real, becoming a genuine control panel for managing life. It enabled payments in restaurants and taxis, bicycle rentals, bill monitoring, medical appointments, and medication orders.

The rise of mass entrepreneurship and the model of the "online service revolution for offline" modernization of China reflect technological innovations fostering growth and modernization within the Chinese economy. The new slogan— "mass entrepreneurship and mass innovation"— signifies the state's readiness to support startup ecosystems and technological innovations, heralding the rapid development and achievement of a new "economic miracle" in China.

Go Hong's proactive approach to this support began to permeate the entire Chinese economy, which now ranks second in the world, consequently presenting a formidable competitor to Silicon Valley. The state not only financed Chinese technological innovations but also sought to influence the country's cultural landscape. This call to action involved the establishment of thousands of technological incubators, business parks, and state-supported "managed funds" to attract substantial private venture capital.

For technological companies, tax incentives were introduced, and the procedure for obtaining government permits, necessary to commence business operations, was simplified. The vast scale of subsidies facilitated the creation of 6,600 new incubators for startups across the nation, as noted by Richard Karlgaard in his work, The Human Factor: The Secrets of Lasting Success for Extraordinary Companies.

Should the startups in which the fund invested—referred to as "portfolio companies"—fail, all partners, including the state, lose their investments. However, if the portfolio companies thrive, for instance, doubling in value over five years, then 90% of the profit from state investments is distributed among private investors whose contributions have also doubled. Thus, private investors gain an incentive to emulate the state by investing in funds and sectors that local governments are interested in developing. During the surge of innovation in China, the volume of investments from management funds rose nearly fourfold, from $7 billion in 2013 to $27 billion in 2015.

Analysis reveals that the extensive campaign for mass entrepreneurship and innovation initiated by the Chinese government extended beyond mere investments and office development. This campaign profoundly impacted ordinary people's perceptions of internet entrepreneurship, genuinely transforming the culture. The alternative internet universe of China encompasses high technology, financing, resources, talent, and an environment that is innovative, valuable, and unique. To achieve all this, the Chinese internet had to become beneficial for everyday individuals eager to engage in the minutiae of daily life. Analysts referred to the rapid development of internet services in Chinese cities as a "revolution of online services for offline" to bridge the gap between the internet and real-world services.

The service revolution consisted of leveraging the advantages of e-commerce for purchasing tangible services and goods. Chinese cities became real laboratories for experimentation. By 2016, there were 20 million internet orders placed daily in China, ten times more than in the United States or the European Union. Subsequently, the models of the "online services for offline" revolution became increasingly creative, simplifying urban life. WeChat emerged as a super app, consolidating functions that other ecosystems distributed among dozens of different applications and capable of performing most essential functions of each. The WeChat super app model proved remarkably successful, playing a crucial role in the emergence of an alternative universe of internet services, fostering technological innovations that contributed to the growth and modernization of China's economy.

In China, the internet penetrated the economy of ordinary people far more deeply than in the West, resulting in applications compelling individuals to spend more on food, transportation, and other services. This monetary flow rapidly stimulated the Chinese economy and elevated the market value of companies. Customers gained the ability to transfer funds instantly between bank accounts without fees or other inconveniences associated with wallets. Cash vanished from Chinese cities so swiftly that even the crime rate declined. In 2017, the research firm iResearch calculated that the spending of Chinese citizens on mobile payments exceeded similar expenditures in the United States by fifty times.

Thus, the construction of an artificial intelligence superpower requires four essential components:

1. Significant data scale;
2. Tenacious entrepreneurs;
3. Highly skilled researchers in artificial intelligence;
4. A favorable political situation.

China's startup ecosystem has nurtured a generation of the most experienced entrepreneurs, and the alternative internet universe of China has created the richest data ecosystem in the world. In the era of artificial intelligence revival, Silicon Valley's level may indeed be surpassed, albeit not easily.

Leveraging the full force of state support through a pragmatic approach, China is forging its path towards the swift implementation of technologies that change market rules. Artificial intelligence is increasingly infiltrating the economy, with a growing number of engineers working in the field.

China will require an army of brilliantly trained engineers collaborating with entrepreneurs to implement these research findings in companies that will reshape market dynamics. This community of specialists is quickly narrowing the gap with their counterparts in the United States. A young generation of enthusiastic Chinese researchers is already contributing to science today.

This allows Chinese startups to utilize the best open-source algorithms in creating practical applications of artificial intelligence, such as autonomous drones, facial recognition payment systems, and smart home appliances.

Corporate giants are working to establish an "energy system" for the artificial intelligence era—private computing networks to disseminate machine learning across all sectors of the economy, striving to become the "foundational infrastructure." However, this development requires a favorable political environment and can be accelerated through direct government support.

Today, ambitious mayors are exerting every effort to transform their cities into platforms for realizing opportunities in artificial intelligence, developing networks for an artificial intelligence "urban brain." In contrast to the United States, China's utilitarian approach rewards generous investments and participation in the adoption of new technologies. In the era of artificial intelligence implementation, the Chinese approach is significantly more effective, and generating greater data volumes will help create prospects for further growth.

In the current context, China is undergoing rapid development as the foundation for achieving a new "economic miracle," with the Chinese Communist Party (CCP) guiding a balanced approach to economic management. This leadership elevates the market and the digital economy while implementing technological and innovative advancements, alongside digital strategies for both the present and the future, thus establishing the groundwork for an innovative information society through the utilization of foreign experiences.

The key components of China's swift development into an "economic miracle" include:

1. Agricultural policy;
2. Industrial production;
3. Digital strategy;
4. Distribution of financing;

Three critically significant forms of intervention are employed by the government to expedite economic growth, facilitating a rapid transition from poverty to wealth:

1. Restructuring agriculture based on labor-intensive practices, which leverage available manpower, resulting in significant increases in agricultural output;
2. Directing investments and entrepreneurs towards manufacturing, as the mass production industry most efficiently utilizes the skills of the workforce within a developing economy;
3. Intervening in the financial sector to concentrate capital on intensive, small-scale agriculture and to foster production, thereby creating a third path to rapid economic modernization.

The essence of China's new "economic miracle" lies in consistently allocating resources to a development strategy that emphasizes the swiftest possible technological learning, thereby ensuring a future of high income rather than short-term returns and individual consumption, as noted by D. Stadwell in his work "Why Asia Succeeded: The Achievements and Failures of the World's Most Dynamic Region."

The pursuit of development commenced when the Chinese government radically restructured agriculture post-World War II, adopting strategies that ensured success—agricultural, manufacturing, and financial—that laid the groundwork for decades of progress. Each strategic choice led to disparities in the development of the Asian region, which facilitated swift and progressive advancement. Financial deregulation resulted in the rise of banks controlled by family businesses. This indicates that the government recognized the necessity for change; failing to adapt would lead to permanent lagging behind, thus the imperative to modernize the economy and achieve technological advancement became a natural means of economic transformation and a catalyst for global development.

Contemporary discussions regarding the expectations of a new "economic miracle" in China are characterized by two opposing camps:

1. Optimists, who advocate for "total elevation," extrapolating past trends into an infinite future;
2. Pessimists, who focus on "downward trends" and emphasize the remarkable irrationality present.

Perhaps the truth lies somewhere in between, and it is likely that China will follow a trajectory akin to Japan in the early 1970s, where, after achieving post-war economic expansion, average annual growth declined from 9% to a more modest 5% and remained at that level for nearly two decades—an entirely natural trajectory for an economic miracle reaching maturity.

The mania surrounding new economies in anticipation of a new "economic miracle" originated with China, which has experienced rapid yet uneven growth over the past two decades—ranging from 4% to 12%, and since 1998, sustaining an annual growth rate of 8%, as if the auspicious number 8 had become an iron law of the Chinese economy. This resulted in a fundamental shift in dynamics that has characterized the ascent of new economies over recent decades, including that of China. Like many other economies (though not all), China has realized nearly double-digit growth rates; failing to maintain such figures would result in exclusion from the market. The Chinese growth model is now transitioning to a new stage, where costs and public response are of paramount importance, indicating a lack of room for costly experiments.

The rapid increase in wages raises serious doubts about the future of the Chinese economy, which has relied on cheap labor and exports. Productivity growth has enabled rapid economic expansion with low inflation, but this era is drawing to a close. Rising wages compel owners to relocate production to countries with cheaper labor, such as Indonesia and Bangladesh, suggesting that the boom in export production in China has likely reached its limit. The most concerning situation is evident in the real estate market, where the recent housing mania in America appears rational compared to the speculative fervor in China's property sector.

To maintain growth rates during the global financial crisis of 2008, the government instructed banks to lower lending thresholds, resulting in property prices in China doubling over the following two years, with a further 40% increase by 2010. Consequently, housing is becoming increasingly unaffordable for the vast majority of Chinese citizens. Although Deng Xiaoping proclaimed that "being rich is honorable," his successors appear determined to ensure that no one becomes excessively wealthy (no individual Chinese billionaire possesses wealth exceeding $10 billion). When comparing unattainable goals, all of this significantly diminishes the likelihood of a catastrophic scenario. New economies are often described as "80-20 reversed": according to this rule, 20% of clients generate 80% of profits.

Many Asian countries continue to rely on exports to the West, whereas the economic development of numerous Eastern European nations is more dependent on Western investments. Rural and urban income disparities are threefold. The growth of inequality has only been halted, while a higher political tolerance for inequality persists. Chinese farmers do not own land, as they are prohibited from selling it; it can only revert to state ownership, and the basic reality is that land belongs to collective farms, which has certain implications. Conversely, local authorities may sell land that has transitioned to state ownership.

The divide between rural and urban China is socially destructive; however, from the perspective of economic development, it is not ruinous. China must evolve not only into a technologically powerful nation but also into one with an institutionally systematic framework. Only the combination of these two factors can propel the country to the forefront of the global stage, allowing its citizens to take genuine pride in their heritage. As it stands, its still-developing institutions have not significantly impeded China's economic growth. In the coming years, the developed nations of the world, as they advance their political and humanitarian principles, will have to contend with a fairly self-assured China.

We will also trace the mechanisms of flexible management in enterprises amid digitalization, exemplified by the success of Toyota in the automotive sector, founded on the principles and methods of lean manufacturing that were implemented over two decades following World War II. These methods now permeate every corner of the globe. The employees at Toyota have embraced the flexibility of their roles and actively promote the company’s interests by initiating improvements rather than merely reacting to problems. In the long term, the workforce incurs constant costs, as old equipment can be discarded as scrap, whereas human resources must be maximized over a potential span of forty years of labor.

Consequently, it has been advantageous for the company to continuously enhance the qualifications of its employees to extract the utmost not only from their physical strength but also from their knowledge and experience. At the Toyota factory, workers had the authority to halt the production line immediately upon detecting a problem, and once the line was stopped, the entire team would engage in resolving the error. Workers were systematically trained to trace each mistake back to its root cause—requiring them to ask "why?" at each level where a problem was identified—and then to devise solutions to prevent such errors from recurring.

As the working teams gained more experience in identifying and tracking problems back to their origins, the frequency of stoppages on the conveyor belt diminished. In the modern Toyota factories, where every worker had the right to stop the line, productivity reached up to 100%, a hallmark of effective factory management. The best testament to the validity of sound management principles is the quality of Toyota vehicles. Each supplier was required to produce high-quality parts to meet the demands of the subsequent production stage and remain responsive to shifts in market demand. The development of a product is inextricably linked to both the organization of processes and the technologies of production.

Thus, Toyota’s new production system was particularly well-suited to capitalize on the ever-changing demands of consumers for vehicles and advancements in automotive technologies in general. Thanks to lean methods and principles, the productivity, product quality, and responsiveness to changes in consumer environments significantly improved. An era of lean manufacturing, lean methods, and lean technologies has taken hold worldwide. The principles of lean production at Toyota were fully formulated by the 1960s. The questions surrounding lean production represent one of the most critical issues in contemporary economics, its competitiveness, and production quality.

1. In the context of globalization, China’s slowdown will not hinder its further progress. In anticipation of a new "economic miracle," attention must be paid to the prevailing regime within the country and the current interplay of economic and political factors that drive economic growth, and with what purpose and speed. Meanwhile, the economic outcomes of new economies have remained unreliable for decades. They have failed to sustain the momentum of sustainable development and are beginning to lose that momentum. Nevertheless, the global society and economy stand on the brink of significant systemic changes. China is on the verge of a natural slowdown.
2. Today, China is too large for explosive growth; a process of reevaluation is already underway that will alter the global balance of power—both economic and political—and strip many economies of their dynamism. Signs of future deceleration are already evident. They will likely become undeniable in the next two to three years, as the growth rates of the Chinese economy are expected to decrease from 10% to 6-7%. Ultimately, millions of investors and companies that bet on nearly double-digit growth figures for China will find themselves sidelined. In East Asia, every successful government has been the first to seek avenues for accelerated technological modernization of production through subsidies relative to export performance.
3. To some extent, most observers have still underestimated the numerous critical factors: rising debt levels, an aging population, inertia that has thwarted economic reforms, and an increasing threat of chronic inflation. Successful countries in East Asia, including China, have demonstrated that the best approach to achieving success lies in restructuring agriculture based on labor-intensive family farming, which represents a more extensive version of horticulture. The success of this approach has been that it employs all available labor in a poor country, leading to maximized profitability and production output, while investments are directed toward manufacturing, as the industry of current mass production most effectively utilizes the limited skills of the labor force in an emerging economy.