Today's number, 219. That's how many hours it takes on average for adults to go from friends to best friends. Today's other number is 1,000. That's how many hours I've spent with Scott Galloway. However, I still haven't made it out of the acquaintance zone.
Welcome to Prof G Markets. I'm Ed Elson. It is February 19th. Let's check in on yesterday's market vitals. The major indices pared gains after the Federal Reserve minutes were released. The official record of their last meeting revealed rising concerns over inflation. It also showed several officials may want to raise rates if inflation persists. That news sent Treasury yields climbing. Meanwhile, Bitcoin fell to roughly $66,000.
Okay, what else is happening?
Anthropic and OpenAI have grabbed most of the headlines recently, but Chinese companies have been busy releasing very powerful AI models of their own. It seems that Lunar New Year, which began on Tuesday, has become China's unofficial launch season. Alibaba kicked things off with Renbrain, a model designed to help robots understand the physical world. They also unveiled Qwen 3.5, a coding and agent-focused model that is up to five times faster than its predecessor. Meanwhile, ByteDance dropped Seance 2.0, a video generation tool, as well as Doubao 2.0, its deep reasoning model. And then Zhipu released GLM5, which is engineered for agentic intelligence. The through line behind all of these announcements: all of these models are reportedly matching and even beating US competitors on multiple key benchmarks.
Okay, here to break down this season of launches, we're speaking with Prof G Media's very own Alice Han, co-host of the China Decode podcast. Alice, good to see you.
Hi, Ed. Happy New Year. Happy Year of the Firehorse.
Happy Year of the Firehorse. That seems to be part of the story here, which is right as the Lunar New Year shows up, we see tons of new models coming out from these Chinese companies, these new AI models. Seance, Doubao, GLM5, I mean a lot of these names are kind of dominating the headlines at least in China. What do you make of these new AI models that have come out of China? How important are they? What do they mean for consumers and investors?
Well, Ed, it's definitely true that Chinese AI has bolted from the stables, to borrow a horse metaphor. And as you rightly say, we've got a couple of models that have just come out, GLM. We've also got Qwen, the new Qwen 5 Max model that's come out. We've also got new AI video generation models that have taken Hollywood, I think, by huge surprise and shock and consternation. But generally when I look at the models and I've been using them in the last few days, what's clear to me is that they have improved. They are faster. They are more cost-effective if you obviously compare them to the closed proprietary models offered by OpenAI as well as by Claude, for instance. But really my frustration with this debate is that it's apples to oranges. People are going to use the Chinese models differently. I think the fact that Brian Chesky, the Airbnb CEO, says outright a couple of months ago that a lot of his engineers are using this for agentic chatbots because it's cheaper and faster seems to suggest that the use cases for this are very different, the Chinese models that is, than the American closed models. Firstly, a lot of engineers and just everyday people are using and experimenting with the Chinese models. Qwen, for instance, they're downloading them locally, fine-tuning them, and using them for their particular use cases, any kind of projects that they may be involved in. It's got improved privacy because they're downloading it locally. It's cheaper, often 10 to 20 times cheaper than what's offered by OpenAI and Claude. So really, they're using this very differently from say potentially you and me, Ed. I use Claude a lot at the enterprise level because the reasoning is exceptionally good when it comes to the geopolitical analysis, the financial analysis that I'm involved in. So the way that I think about it is that the American models are really focusing on precision, on reasoning at the highest level as a really quest for AGI. The Chinese models are really figuring out how to create a market in which everyday people, engineers, corporates even, downloading them locally, experimenting, fine-tuning, and just capturing the benefits of cheaper, faster models. So I don't think there's a direct comparison and I think that a market exists for both these models, so to speak, to coexist.
One of the things that we're also seeing is just the benchmarking. I can't tell how seriously I'm supposed to take these benchmarking leaderboards. It seems that things are constantly shifting. But when you look at the leaderboards, when you look at the stats on which is the best model, which is the best performing, the fastest, however you define best, I'm not sure how they define it, the Chinese models tend to be the best or at least they tend to be at the top of the rankings. What do you make of that? Does that mean that the Chinese models are better? Does that mean they're going to overtake the American models or again is this perhaps maybe apples to oranges and these benchmarks maybe don't make sense?
Well, I love that you asked that question. I think often that the benchmarks can be red herrings. There's a good principle in computer science that is applied to this which suggests that even although they may meet those benchmark goals and exceed the other models, there are certain unquantifiable goals and performance outcomes that they may still be inferior in certain respects to the Claudes and the OpenAIs of the world. So again, back to my previous point, I really think that if you care about privacy and cheapness and speed, maybe you go for Qwen, you go for Kimi, but if you care about frontier cutting-edge reasoning, precision, then you are still going to favor the Claudes and the OpenAIs. So it's really different universes that they inhabit. And I think benchmarks can often be red herrings even although there's an incentive for these models to come out and say that we're exceeding the benchmarks of other rivals and competitors. But again, you know, cost is something that is directly comparable. It's no surprise that the Chinese models are 10, 20 times cheaper. And I think that with cost deflation, inertia will continue to favor the Chinese.
At what point will the cost really change and shift the way the market works here? I mean, consumers, I think they know about OpenAI. They're beginning to know about Anthropic and learning about Claude. So there's maybe some brand loyalty there. But I feel like at a certain point if you're presented with an option that is 10 or 20 times cheaper, you go with that option. So I guess what I'm a little confused about is when is that going to happen? Is that not going to happen? Is that not a giant concern for a company like OpenAI or Anthropic or even Google with Gemini?
Yeah. But I do think when we look at technology diffusion and value creation, the way that the software economy really came out of the US and US dominated that and the value created by software, it's really I think going to be the Claudes and the OpenAIs that benefit from the enterprise part of the value chain. The enterprise can pay for it and you know they tend to be stickier in terms of the subscription. So I think that we'll end up in a world in which maybe the majority of the value is captured by Anthropic, by OpenAI, but that doesn't mean that there won't be anything left on the table for Alibaba, for ByteDance, for Kimi. It's just a different market that they're inhabiting. And we haven't even talked about some of the other use cases. There's now Chinese AI chatbot toys that is going to be a big market, I think. And certainly it marries well with China's manufacturing and hardware capabilities. So...
Toys. Yeah. There are these toys that are being sold that can speak directly to children and teach them and interact with them. I don't know if you've ever read Neal Stephenson's Diamond Age, but it's this kind of AI primma that is part of this story. We're already living in that Diamond Age, so to speak, in this sci-fi realm. That is one area. And then another area in which I would say OpenAI and Anthropic have not been as competitive is in multilingual. If you look at the models coming out of China, it makes sense because they've been trained a lot on multilingual English, Chinese and other language data sets. They tend to be better at other languages. And so if you're a global company where you care about a Chinese, Asian-speaking market, that could also be quite an important distinction.
One name we haven't mentioned which was very popular about a year ago seems to be less popular today is DeepSeek. Where does DeepSeek sit in all of this?
Well, I think DeepSeek is still a leader. They still have a lot of the high-level AI talent and that counts a lot when you think about the AI competition domestically and globally. I do know for a fact although I'm not sure if I should say this that DeepSeek is working a lot with local governments, with government bodies in China to integrate AI into local public governance. And I think this is coming at a time where, you know, Ed, we'll be watching with bated breath in the next two weeks or so because the 15th Five-Year Plan is going to come out and it's very, very clear now that AI plus is going to be a huge cornerstone of the policy for the next five years. So AI in every realm including in public governance and public service and utilities. So DeepSeek is still a player. But I think the latest models coming out of Alibaba, even Kimi, show us that in China at least the AI race is hyper-competitive. It's not just a duopoly or even centered around three players which is increasingly what's happening it seems in the US. It's many different players and I think they can capture different parts of the market.
