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Alibaba: The House That Jack Ma Built Hardcover – April 12, 2016
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“Anybody who thinks the Chinese just copy or steal technology from the West should read this book and think again. Jack Ma is part Bill Gates, part Steve Jobs, part Larry Page, part Sergei Brin, and part Mark Zuckerberg all rolled into one.” (Sir Martin Sorrell, CEO of WPP)
“Useful, business-minded reporting on an unconventional corporate magnate, containing both corporate and human-interest perspectives.” (Kirkus)
“This absorbing and well-written portrayal of Ma’s character, and his role in Alibaba’s development will appeal to a wide range of readers.” (Library Journal)
“A clean and compelling narrative…[Clark] tells the story with flair.” (Wall Street Journal)
“A fascinating new book.” (The Economist)
“A must-read for anyone hoping to navigate China’s new economy”. (Financial Times)
From the Back Cover
An engrossing, insider’s account of how a teacher built one of the world’s most valuable companies—rivaling Walmart and Amazon—and forever reshaped the global economy
In just a decade and a half, Jack Ma, a man from modest beginnings who started out as an English teacher, founded Alibaba and built it into one of the world’s largest companies, an e-commerce empire on which hundreds of millions of Chinese consumers depend. In 2014, Alibaba’s $25 billion IPO was the largest global IPO in history. A Rockefeller of his time, who is courted by CEOs and presidents around the world, Jack is an icon for China’s booming private sector and the gatekeeper to hundreds of millions of middle-class consumers.
Duncan Clark first met Jack in 1999 in the small apartment where Jack founded Alibaba. Granted unprecedented access to a wealth of new material, including exclusive interviews, Clark draws on his own experience as an early adviser to Alibaba as well as his two decades in China chronicling the Internet’s impact on the country to create an authoritative, compelling narrative account of Alibaba’s rise.
How did Jack overcome his humble origins and early failures to achieve massive success with Alibaba? How did he outsmart rival entrepreneurs from both China and Silicon Valley? Can Alibaba maintain its 80 percent market share? As it forges ahead into finance and entertainment, are there limits to Alibaba’s ambitions? How does the Chinese government view its rise? Will Alibaba expand farther overseas, including into the United States?
Clark tells Alibaba’s tale in the context of China’s momentous economic and social changes, illuminating an unlikely corporate titan as never before.
Advance Praise For Alibaba
“Anybody who thinks the Chinese just copy or steal technology from the West should read this book and think again. Jack Ma is part Bill Gates, part Steve Jobs, part Larry Page, part Sergey Brin, and part Mark Zuckerberg, all rolled into one.”—Sir Martin Sorrell, CEO of WPP
“Duncan Clark gets into the heart and soul of Alibaba and its founder, Jack Ma, who deftly maneuvered through the discontinuities and barriers in China to create one of the greatest companies in the world. China has thrived under the leadership of Jack Ma. This book is a must-read for anyone who wants to understand the present China and the heartbeat of a great entrepreneur.”—Tim Draper, founder of Draper Associates, DFJ, and Draper University
“This book provides excellent insight into the world of Jack Ma, perhaps the most famous of the leaders of the new economy in China. Duncan Clark is a real China ‘Old Hand,’ unique in his knowledge of the Jack Ma generation. This book is definitely on the short list for those who wish to understand the Chinese economy today.”—Ken Wilcox, Chairman Emeritus, Silicon Valley Bank
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A key factor in the success of e-commerce in China is the burden of real estate on traditional retailers. Land is expensive because it is a crucial source of income (25% of total for the national government, one-third at the local level) for the government. China's retail market is highly fragmented and inefficient - the top three grocery chains in the U.S. account for 37% of all sales, vs. 7% in China. The largest department stores in the US. represent 44% of total sales in that segment, 6% in China. For every person in China there are only six square feet of retail space, less than one-quarter that in the U.S.
Already more than 40% of Chinese consumers buy their groceries online, vs. just 10% in the U.S. Tmall offers grocery items in more than 250 cities in all but six of China's 32 mainland provinces - typically at cheaper prices. Alibaba offers next-day delivery of refrigerated items in more than 60 cities, along with a wide range of imported foods. Working with the Washington State Apple Commission, Alibaba secured over 84 thousand individual orders for apples that were picked and freighted to customers in China within 72 hours - about 167 metric tons!
Alibaba sells cars online also. Real estate is another category. Customers can also buy services such as artists and musicians, fake girlfriends to attend social events, surrogates to visit their parents. An estimated 42% of skin-care products in China are sold online. Fake goods are both a problem and opportunity (profits exceed that in the drug trade, per some estimates). Often they are made by 'extra shift' runs in the same plant as the real items using leftover materials.
More than 10% of retail purchases in China are made online, higher than the 7% in the U.S. Jack Ma, former English teacher, is one of China's richest men, with a fortune of nearly $30 billion - thanks to Alibaba Group and its market value of $264 billion and 450 million customers. Ma started Alibaba 18 years ago. Alibaba raised $25 billion at its IPO 9/14 on the NYSE, and its value rose to almost $300 billion afterwards (more than Amazon and eBay combined). At a meeting with President Trump a few weeks prior to the Inauguration, Ma promised Alibaba would help create 1 million jobs in the U.S. over five years. specifically, Alibaba will sign up 1 million U.S. small businesses to its e-commerce platforms, primarily Taobao (plagued with counterfeits), its mass selling site for individuals, and Tmall, its higher-end site for established consumer companies. In China, Alibaba hosts 10 million merchants and estimates those businesses account for 30 million jobs. Alibaba estimates each U.S. business selling on Alibaba's platforms will typically hire one employee as a result. Alibaba holds no inventory, but has a 47% stake in a logistics network - rather than owning trucks and warehouses directly.
Household spending in the U.S. accounts for two-thirds of the economy, barely one-third in China. November 11 in China is Singles' Day. In the first eight minutes of 11/11/15, shoppers spent over $1 billion on Alibaba's sites and by the end of day had spent over $14 billion - 4X U.S. Cyber Monday. 'Double Eleven Day' for Alibaba started with 27 merchants in 2009, rising to over 40,000 in 2015. Its most popular website is Taobao.com, China's third most visited website - with 9 million storefronts run by small traders or individuals. Taobao charges its nine million small traders/individuals no fees, making its money selling advertising space. Thousands of client service managers mediate disputes between customers and merchants. They can shut down a merchant, or offer the ability to participate in marketing campaigns. Customers can use Alibaba's chat application to haggle over prices and free shipping. When customers post a negative comment about a merchant or product, they can expect a message and offers of refunds/replacements within minutes. Large retailers and luxury brands sell their goods on Tmall. Merchants pay commissions, ranging from 3 - 6%. Alibaba earns almost $10 billion/year from these sites - nearly 80% of total sales.
Orders placed on Singles' Day 2015 on Alibaba's websites generated 467 million packages, requiring over 1.7 million couriers and 400,000 vehicles. In Shanghai, couriers shuttle back and forth on the subway, passing packages over the barriers to one another to avoid buying multiple tickets. Most are delivered by 8,000 private courier companies (20 stand out), China Post handles the rest - mostly in the countryside.
Alibaba has invested with these largest firms and others in 'Cainiao' (owning 48%) - handling more than 30 million packages/day employing over 1.5 million across 600 cities. Cainiao neither owns the physical infrastructure of the networks nor employs the personnel making deliveries. Both Alibaba and JD.com (infrastructure owner) are working to ensure deliveries in as little as 2 - 3 hours in a number of cities. Alibaba expects it will generate over 100 million package orders/day by 2020.
Juhuasuan.com is a Groupon-style site. with more than 200 million users and over 10 million merchants offering over a billion individual items for sale.
Tmall hosts three types of stores - flagship stores run by a brand itself, authorized stores set up by a merchant licensed to do so by the brand, and specialty stores carrying the goods of more than one brand. The specialty stores account for 90% of Tmall vendors. Tmall generates $136 billion in gross volume, nearing the $258 billion of Taobao.
In financial services, Alibaba's most important asset is Alipay, its answer to PayPal and valued at $45 billion by one source. Alipay is the most popular online payment tool in China, handling over three-quarters of a trillion dollars/year in online transactions. Customers buying on Alibaba's consumer sites can return goods up to 7 days after purchase, provided they are not damaged. People also use Alipay to make money transfers top up cell phone accounts, make cashless purchases using bar codes at retailers and restaurants, pay for utilities, buy train tickets, etc. It is now used by over 830 million in China and expected to generate almost $5 billion/year in revenues by 2018. Rates offered savers are as much as two percentage points higher than Chinese banks; by February 2014 it had attracted over $93 billion from 80 million investors.
Employees can obtain an interest-free loan of up to $50,000 to finance the down-payment on a new apartment; thousands of employees have taken advantage of the offer. Commitment to the Six Vein Spirit Sword (customer-first, teamwork (eg. regular group games), embracing change (regularly switched between various new products and/or regions), integrity, passion, and commitment) accounts for half of employee appraisals.
1001 mistakes to success. 1993 Golden Bridge, 1'300'000'000 to cross. Aliyun. Chief People Officer. Constrain to innovate. Crocodile in the Yangtze, not shark in the ocean (to start with). David strategy, Goliath returns. Decide and be rigorous, also with CEO and COO. Digital Yiwu. Edge ain’t built on a paved highway. ET is precioussssss. Fertilize and cultivate, don’t only harvest. Focus on shrimps. From selling in China to selling to China. Google, cocoos Yahoo. GS, tststs. INtensiv or EXcompany. Jack magic. Jack, marshmallow test uberlord. Know how not know who. Knowledge economy not information society. Local savvy vs international on fits it all “convenience”. Long march or the highway. More Morleys, please. Multiple perspectives to iron Triangle. O2O consolidation. Of sleek and shrill websites. Of wallets and portals. Partners, not employees. Periphery or burn in fixed cost hell. PerseVERYance. Profit, Philosophy and Philanthropy. SARS glue. Six Veins DNA and remuneration. SoftBank, HardHead. Swiss towards CCP. Taobao undercover. Variable Interest Entity and its “rich, fee-producing complexity”. Warrior philosopher. WeHongBao effectiveness. Witts, Wit, Whitman – de nuevo. Work happily, live seriously. Xia Hai dear Haiguis.
Telling the story of the founder, Jack Ma, illustrating Ma’s philosophy and praxeology, the “Jack Magic”, and illuminating the role it played in Alibaba’s runaway success is where Clark shines. Clark’s discussion of the business environment, competitor strategies, and the later maturity of the internet industry indicates a lack of knowledge and insight, with various actors coming across as dry and two-dimensional. It feels tedious to read.
While the narration leaves much to be wanted in several departments, the story itself inspires, and the zeitgeist of a few key moments are well preserved. As a Stanford graduate student and Silicon Valley resident, I found a window into an entirely different world - a different dogma - of entrepreneurship; refreshing in a scene where a multitude of playbooks and listicles have converged a set of what seemed to be immutable rules.