Despite the successes, Alibaba remains a ‘crocodile’
Founded by Jack Ma and 17 friends in 1999, Alibaba is not only the world’s largest e-commerce company but also the source of China’s chuangke syndrome, which literally translates to “innovative startup.”
Last year, the company made its debut in the West’s capital market by setting the record for the biggest initial public offering (IPO) in New York Stock Exchange history.
The JoongAng Ilbo met with Ma on Sept. 2 at the company’s headquarters in Hangzhou, China. It was the first time that Chairman Ma opened his office to a member of the Korean press.
“One hundred years ago [in the 1930s], the market economy championed by the United States won and the one championed by Russian lost,” Ma said. “But today, the situation is different. In 2030, the planned economy will be a better system.”
He said the reason was simple: data.
“In the 1930s, people believed that there was an ‘invisible hand’ in the market, and for that reason, the market economy won,” Ma said. “But today, where we now have access to data, we can see the hands that were once invisible.”
Ma has come up with a new concept of a planned economy based on data technology (DT) that collects and analyzes big data generated in real time. He says that resources can now be manufactured and distributed according to a plan because today, due to DT, it is possible to understand how the market works.
Ma argues that the era of information and technology (IT) is fading away, while a new age of DT is dawning. He foresees a future where competition in securing the upper hand in DT will be fierce.
Ma also said that the other key word for the next 50 years is China.
“Until now, the Chinese economy has been rough, like a weed that grows recklessly everywhere,” Ma said. “But from now on, we will become innovators that will change China in securing sustainable growth.”
He showed confidence that the current anti-corruption policies by the Chinese government will help strengthen the country’s economic fundamentals.
On his desk in his office lies a pair of yellow binoculars, which he uses to look at every corner of his company, with a campus spread over 300,000 square meters (74 acres). In his eyes, there are no worries about past failures, current wealth or even the future.
There is only the stare of the crocodile of the Yangtze River, who sees not the present but the future, in which Alibaba is the global standard.
During a celebration of the 10th anniversary of Alibaba Group in 2009, the 51-year-old chairman announced his ambition: to turn the company into a business that survives at least through the year 2101.
By then, Alibaba Group will be 102 years old and will have lived through three different centuries.
At his office in Hangzhou, he told the JoongAng Ilbo his plan.
“If we could do it, there’s no reason others can’t as well,” Ma said. “This is the Alibaba legacy that I would like to leave behind in this world.”
Q. What kind of company do you wish Alibaba to become?
A. Are you asking Alibaba’s value? Simply put, it is a small business in the era of the Internet and China.
I want to make Alibaba an engine for small businesses around the world. In the past 20 years, the companies that succeeded from globalization were big businesses. Big companies with large resources and money did everything. It was the same in global trade. But in the 20 years to come, we will be in an era where globalization will help small companies. That role is taken up by the Internet, and Alibaba will help in realizing it. And I will join the Internet generation. The Internet generation that was born in 1980 now stands at roughly 1.3 billion people. That figure will expand to three to four billion in the next 20 to 30 years. Our plan is to create a technology revolution with the Internet generation helping humanity step up to the next stage.
It seems you have a lot of things you want to do with China.
In 20 to 30 years time, there will be many global Chinese companies. But I don’t trust companies that are currently enjoying annual growth of 10 to 20 percent as they can’t last long. And that’s why companies like Alibaba need to help China. We do not try to have a high growth rate to meet the expectations of shareholders. Instead, we will become a global standard through healthy growth. As we have shown China the power of the start-up, where only 18 people with nothing are able to create a large company, we will now show that such a company can last for a very long time.
There are a lot of Chinese start-ups.
Yes, it’s good that there are many start-ups popping up. However, while it is easy to start a company and to survive the first five years, making the start-ups long-lasting is really difficult. Only through continuous innovation and creativity can one last for years. There should be more companies that think about battling in the long-term rather than winning one big fight.
Xiaomi seems a threat.
A lot of people compare Xiaomi to Samsung. I’ve always respected Samsung. The company has never stopped fighting for so many years. That’s not easy. When Nokia was gone, everyone said, “Oh, my god.” But they came back again, and so did Samsung. Korean people are so unique because they are so determined. If there is a door, Korean people either break the door or break the wall. Chinese? We are changeable, we like to change a lot, which I think is good.
In 2010 the Alibaba Group created a partnership committee, part of a system to take away power from shareholders that want to chase short-term profits, and instead give power to people invested in the company’s future. The committee includes Ma and 30 core management officials, and has the right to appoint board executives. As a result, the partners can have more influence than the majority shareholder. This system collides with the one-share, one-vote shareholders democracy. It is also different from Facebook and Google, where there are different classes of shares that determine the voting rights.
What is a partnership system?
Two hundred years ago during the industrial revolution in the United Kingdom, the owner of a business was the business itself. In the 20th century, the shareholder democracy, which was led by U.S. industries, emerged. Here, the values of the company meant the values of the shareholders. But the 21st century will be a time where the value of partners becomes important. No one believes me today. There are arguments that partners want to take away the interest of the shareholders but those are from people who really don’t know. Today our partnership is very tiny, it’s a seed buried inside. But in 10 years or 20 years, people will be surprised, like 100 years ago when people were excited about the progress made in corporate culture when it shifted from an owner-oriented culture to a shareholder culture. Now, the culture of partnership will be a big jump from the culture of shareholders.
How do you see China’s future?
I see the world differently. I look at it with a unique perspective, but not stupidly. That’s the mindset that I desire. It is the same with China. There are four top global economies today - the United States, China, Europe and Japan. Among these, how many countries have an annual growth of more than 4 percent? China is the only one. China is the world’s second-largest economy and yet it is growing 6 to 7 percent every year. Even achieving a 4 percent growth is amazing. Furthermore the Chinese economy is shifting to the new economy [the internet economy], which has huge potential. China’s anti-corruption measures - they call it rule by the law - will pave a solid foundation for the market economy.
In the future, there will be more internet companies and high-tech companies coming out of China than Europe or Japan. There’s nothing to be worried about regarding the Chinese economy. We are just at the starting line. It is good when not many people have high expectations about you.
What I want to do in this company is to change China. And this is possible with data. Before data and the internet there were many things we couldn’t do because we didn’t now how to. But now we have a weapon. With data and the internet, there are a lot of things we can do.
During the interview Chairman Ma frequently mentioned the “Alibaba ecosystem.” He didn’t simply mean expanding Alibaba’s businesses from e-commerce to other areas like finance, cloud computing, media, entertainment and healthcare. Instead, Ma says it refers to the dream of spreading Alibaba’s vision and values not only in China, but also to the rest of the world.
“Already in 2005, I said I would consider us successful when, out of the top 500 Chinese companies, 200 are run by CEOs from Alibaba’s ecosystem,” Ma said. “To help others is to help Alibaba.”
Why is it important to have so many businessmen with an Alibaba background?
That way Alibaba’s ideas, philosophies and businesses could spread properly. That is my standard in determining whether a company is successful or not. If China has changed because of us in the last 16 years, it is now time to change small businesses and young people around the world. And for that, I plan to send employees who have worked at Alibaba for more than 10 years to start-ups. The employees could be old people, who worked at the company for a long time, but at a start-up, they are equipped with experience that could be a huge benefit.
[The average Alibaba employee’s age is 27].
The former employees could turn the start-up into a threat to Alibaba.
I don’t get mad when the employees leave the company. They don’t compete with us face-to-face. Instead, they are people who make good use of Alibaba’s resources. And for that reason, I plan to send off employees in next 10 months. It will soon be a rule, that employees will be sent off every three to four years. Our employees joining start-ups will help other people, and that in return will help us.
Alibaba’s nickname is the crocodile of Yangtze River. It’s a nickname earned when Alibaba’s Taobao and eBay were competing fiercely over China’s e-commerce market in the early 2000s. Ma said at the time that eBay is a shark while Alibaba is a crocodile of Yangtze River. He said that in the ocean the shark defeats the crocodile, but in the river, it’s the crocodile that emerges as the victor.
You’ve succeeded in getting an IPO in New York. Do you still consider yourself as the Yangtze River crocodile?
In our heart Alibaba is still the Yangtze River crocodile. The only difference is today we are raising other crocodiles in other rivers around the world, including Africa and Europe.
In any river there is always a crocodile. More crocodiles in the rivers and economy will be better. Sharks? I have no interest of becoming a shark. The ocean is just too wide. It’s terrible. It is more important for me to help other crocodiles than become a shark. Also, sharks are endangered and a protected species while crocodiles are everywhere.
You must have many concerns still, even after the IPO.
An IPO is like filling up the tank at a gas station while driving on the road. It is like a marriage. Before marriage, I would only have to be concerned about myself and my wife. But after I tie the knot, I have to take care of both of our families, as well as our children. Nothing goes the way I want. I don’t see an IPO as the symbol of success. The IPO was only needed for the company and the shareholders. On the day we went public, the most touching thing I saw was 80 young Chinese outside of the New York Stock Exchange that morning to congratulate us on the IPO. I felt proud that I could help them. But other than that, the rest was unbearable. Our stock price doubled more than the publicly offered price. I said, “Are you crazy?” Our company was only 15 years old. I wanted to take it easy.
What is wealth to you?
When looking at all of my social statuses including history, family status and my education background, I am at somewhere between zero and minus three. I’m not that smart and my family is not much to boast about. Yet I could raise my number to two or three out of 10 because of my efforts. Although my wealth is at a six or a seven, the money I have past the level of two or three doesn’t actually belong to me. It is money that’s tied to the expectations of others. When a person has much, he needs to spent it right and well.
By PARK SU-RYON [firstname.lastname@example.org]
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