Douglas Nicol is a partner at Sydney creative agency The Works and is presently neck-deep in all things new and techy at SXSW. However, judging by this cranky column, he’s not particularly loving what he’s seeing over their in Texas…

On the surface things look just fine, the tech industry gathers for its annual SXSW shindig here in Austin, Texas. The coders, ad execs and social media hipsters happily queue together to get into the convention center, amazing speakers preach the tech gospel, and everyone has an invite to a boozy party.

But dig beneath the surface and there are significant global changes that will send shockwaves through the industry because the future of tech may not be owned by the USA

There are four forces at play that could mean that future tech leadership could well come from China.

1.     Trump is an AI denier

While Donald Trump tries in vain to revive the manufacturing sector in the US, there is a lack of government leadership in the US on new tech and AI. While America is distracted China is winning on AI development. Former WPP China boss Bessie Lee spoke on this at SXSW. They have more AI patents filed than the US, more skilled workers to fuel the tech sector (4.7 million STEM graduates per annum), more freely available data for machine learning in AI. The Chinese government has a national AI development policy that sets KPIs for AI business growth in every city and district in the whole country. Meanwhile, the US President tweets nonsense.

2.     Tech giants in the US are under threat in 2020

One of the leading Democrat candidates for the 2020 presidential election, Elizabeth Warren made an astonishing policy statement at SXSW. She intends to break up the cozy monopoly of the big tech companies like Facebook and Google. She thinks they exhibit monopolistic behaviours and need to be pulled apart. This would mean, for example, that Facebook might have to be split up from Instagram. Certainly, it’s true that there are very few US startups in sectors the big tech companies play in, as VC money does not like the risk of their start up being squeezed out by the big guys. If this break up happens we will witness years of distraction in the US tech industry as the tech titans split into smaller enterprises.

3.     Privacy – Facebook has lost trust in the US

Guess how many paid ads the average WeChat user in China sees in 24 hours? Precisely two ads. Really. They are well targeted, highly personalised and infrequent. Compare that with your Facebook newsfeed. China has no privacy policies and a culture that is accepting of personal data being shared by everyone including government. Yes, it is a totalitarian regime with a questionable track record, but the fact is that in the marketing tech space China is stealing leadership in future thinking in areas from research groups moderated by AI chatbots, through to AI programmatic media deployment and voice-based customer service. Meanwhile in the US, the California parliament is about to enact legislation that allows individuals to sue companies like Facebook in the event of a data breach (previously prevented under Facebook T&Cs when you sign up). US law firms are licking their lips in anticipation of years of legal complexity and class actions in the tech space.

4.     Social media finds a new home

The biggest global hit in social media in the last six months is without doubt the TikTok app, with over 80 million US downloads and 3.8 million US downloads in October 2018 alone. Globally the app, which showcases user generated 15 second short form videos of a user’s lip synching or athletic feats, has had over 1 billion downloads. And the owner of this app? Not a geeky Silicon Valley man-child but a Chinese company called Bytedance. The TikTok user data gathered is used to fuel sophisticated AI media targeting on and off the platform. Don’t be deceived by the fun exterior ByteDance is only three years old and is turning into a social media giant.

This all has the potential to be a time bomb for the US tech industry. For us in Australia it means we need to stop the cultural cringe of always looking to the US and UK for our tech thought leadership and inspiration and instead start looking north to The Peoples Republic. The reality of the China threat to the US is starting to sink in with the 75,000 who have made the trip to Austin this week.