Thursday, May 26, 2016

Alibaba: Arab myth for Chinese translation of American dream

Alibaba's World: How a Remarkable Chinese Company is Changing the Face of Global BusinessAlibaba's World: How a Remarkable Chinese Company is Changing the Face of Global Business by Porter Erisman

The slogans of most internet tycoons suggest the clean lines and aggressive culture of Silicon Valley: “move fast and break things”, says Zuckerberg; “organise the world’s information” say Page and Brin. But “run as fast as a rabbit but be as patient as a turtle” is different. It’s the advice of an entrepreneur who is indisputably in the same league as the founders of Facebook and Google, though not as well known as them outside of China.

Jack Ma, an English teacher, failed his college entrance exams twice because of his poor maths, but was good at English thanks to having chatted up British and American tourists visiting his native Hangzhou when he was a boy.

He wasn’t a Bill Gates, fascinated by computers from childhood. When he first tried one, he was afraid to touch it because it was “such an expensive thing”. His friends encouraged him and he searched for “beer”. He noticed the search engine results didn’t include Chinese beer. That set him off on a journey that led to the building of Alibaba, a company that had the biggest IPO in history two years ago, being valued at $220 billion – worth more than Amazon and eBay combined.

For some of this extraordinary journey, from 2000 to 2008, a young American, Porter Erisman, was within earshot of Ma, taking notes and shooting video – 200 hours of it, which he later turned into a documentary called Crocodile in the Yangtze. In book form, Erisman’s account is satisfyingly intimate and excuseably affectionate. It doesn’t gloss over the traumas of building Alibaba, but more often than not, turns them into character studies of the formidably determined entrepreneur.

Ma’s epiphany about Chinese opportunities on the internet turned into a startup called China Pages. Free enterprise was hardly a key part of local culture, and Ma soon got sucked into a kind of official version of his idea within a trade ministry. But, as he put it afterwards, while the ministry hoped to control small businesses, he wanted to empower them.

So he started again, this time outside government, with Alibaba – the name suggesting the internet could be an “open sesame” to new business opportunities. Working in China as an entrepreneur, relations with government can never be ignored. Ma’s goal, he says, is staying “in love with the government but not marrying it”.

Before joining Alibaba in 2000, Erisman was working for a US ad agency in Beijing. He was recruited by Ma, on the promise of stock options that Ma said would be worth a million dollars when the company went public three months hence.

That didn’t happen, and the path to the eventual IPO in 2014 was strewn with booby traps and elephant holes, many of which Ma failed to negotiate. There was the small matter of Alibaba’s failure to earn any money, resulting in painful layoffs. There was the fight to the death with eBay in China (ultimately successful). And there was the strange deal with Yahoo! that saw Alibaba turned into a Google lookalike search engine, until it quickly changed back to its original Chinese look, having lost a lot of its audience in the process.

Both Ma and Erisman shrug off the mistakes: “Jack used to joke that if he ever wrote a book about his experience, he would call it Alibaba and the 1,001 Mistakes. From watching Jack in action, I realized that two great traits every entrepreneur should possess are resilience and amnesia.”

Part of the interest of Erisman’s story is in the puzzling out by Ma and his colleagues of which aspects of Silicon Valley business models are internet universals and which are simply expressions of American culture. So, for instance, after that disastrous switch to a Google-style search page, new Alibaba sites, such as the retailer Taoboa, did not to imitate American minimalism. As Erisman puts it:

“Compared to the home pages of Western websites, Taobao’s looks busy, with flashing icons and animated cartoon characters promoting special deals. If clicking through eBay is like a walk down Main Street, USA, clicking through Taobao is like a walk down Shanghai’s busy Nanjing Lu, where sights and sounds bombard the shopper. To Western eyes Taobao’s home page might seem too cute or flashy, even distracting, but it is what Chinese users prefer and expect.”

It is Ma’s ability to learn from the Western internet without compromising his instinct for what will work in the Chinese market that’s key to his success. Today Alibaba is a complex web of interlocking businesses including Tmall, through which overseas brands sell in China, AliExpress, through which Chinese manufacturers sell overseas, AliPay, an online payment and financial services business and even Alibaba Pictures, a movie production company.

Today the Alibaba group has annual revenues of almost $16 billion, with net income of $11 billion. There’s still a way to go before those numbers rival Silicon Valley’s biggest, but the profitability is impressive and Ma is still in a fast-growing market, one that Facebook would dearly love to enter. Erisman says that more than half the packages shipped in China are from deals that originated on Alibaba’s websites. Amazon isn’t close to that in its best markets.

One quality that Ma shares with Western entrepreneurs is persistence. Erisman tells us that one of Ma’s favourite sayings is: “Today is tough, tomorrow is tougher, and the day after tomorrow is beautiful. But most companies die tomorrow evening and can’t see the sunshine on the day after tomorrow.” For a man who has come so far so fast, the day after tomorrow is dawning.

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