There is a tendency to see artificial intelligence as the latest technology fad, either a buzzword that canny entrepreneurs exploit or the starting point for dystopian nightmares. Both are potentially accurate descriptions of much of the discussion surrounding AI, but both miss the most important point: AI is almost certain to become the most critical feature of the digital economy, assuming a role akin to electricity in the industrial revolution. If that prediction is correct — and few disagree — then mastery of AI and leadership in the field could determine the future economic and military balance of power.

AI is shorthand for an amalgam of computer processes that permit machines to evaluate and learn about their environment on their own. It includes automated intelligence, assisted intelligence, augmented intelligence and autonomous intelligence. AI depends on huge amounts of data and fast processors that allow real-time analysis to identify patterns. AI will “learn” exponentially as capabilities develop. That means that the occasional stunning feats of AI that we now encounter — victories by machines over chess or go masters — are trivial in comparison to what is coming. One study estimates that AI could contribute up to $15.7 trillion to the global economy by 2030, a boost of 14 percent that will come from productivity gains and shifts in consumer behavior. Another analysis anticipates that AI will boost Japan’s annual growth rate by 1.9 percentage points by 2035.

Russian President Vladimir Putin spoke for many world leaders and AI experts when he told students last year that “artificial intelligence is the future, not only for Russia, but for all humankind,” adding that “whoever becomes the leader in this sphere will become the ruler of the world.”

The Chinese government has adopted that logic and is striving to position itself as the world leader in AI. It has developed a comprehensive plan for AI development that seeks to reach parity with the United States in this field by 2020, achieve major breakthroughs by 2025 and become “the world’s primary AI innovation center” by 2030. It is already making considerable progress toward those goals. China-based AI startups received 48 percent of all dollars going into such ventures around the world last year, surpassing the U.S. In addition, Chinese scientists sought 641 AI-related patents last year, nearly five times the number of their U.S. counterparts.

Some experts scoff at Chinese ambitions, arguing that limits on inquiry and discussion that the central government is increasingly ready to impose will prevent Chinese researchers from achieving those goals. There is little evidence that such constraints are meaningful. More important are the billions of dollars that governments, both central and local, provide to Chinese researchers, the push by Chinese technology powerhouses like Tencent and Alibaba to exploit this field (and make Beijing happy) and the vast databases that China has accumulated that allow algorithms to learn.

That many of these databases are used for state surveillance and the control of citizens is, sadly, beside the point. The research that is required to build successful products in this area — collecting, sorting and reading data to permit the real-time identification of individuals in large metropolitan areas — can be spun off into many other software systems with less nefarious purposes.

China is making progress, but it has not surpassed the U.S. in this field. The private sector in the U.S. is estimated to invest more than $70 billion in AI annually, which is more than 10 times Chinese private investment (and is also the amount that Japan’s private sector spends on AI, about ¥600 billion).

The U.S. also continues to outpace China when it comes to government spending. In 2015, the U.S. government allocated about $1.1 billion to AI research and development; total AI outlays in 2017 are reported to be more than twice that amount. It is not clear if the budget under President Donald Trump will continue the trend. The Trump administration is cutting outlays for basic research, aiming for example, to trim the National Science Foundation’s AI budget by 10 percent.

Japan risks missing out. The government launched the Artificial Intelligence Technology Strategy Council in April 2016 to develop a road map for the development and commercialization of AI. It prioritized productivity, mobility and health. But money matters, and the Japanese government’s 2018 AI budget of ¥77.04 billion — while a 30 percent jump from 2017 — will still be significantly less than the amount that the U.S. and China plan to spend. Money alone will not determine the winner in the race for AI supremacy, but it will matter — a lot. Japan must step up its efforts, alone and in partnership, to ensure that it remains in the first tier of countries working on in this area.

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