Book Review — AliBaba by Duncan Clark

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This morning, I finished reading Duncan Clark’s “Alibaba: The House that Jack Ma Built”. As an insider, Duncan details how Jack Ma founded Alibaba as a response to seeing more and more Chinese coming online, and then building it into a global conglomerate.

One of the first things that first jumps at you in the book is the sheer volume of daily delivery on Alibaba sites. While Amazon ships 3 million packages a day, Alibaba ships 12 million; almost two-thirds of all parcel deliveries in China. Over 400 million people, more than the population of the United States, make purchases on Alibaba’s websites each year. During the period of its IPO, Alibaba became the most valuable Internet company in the world after Google, its shares worth more than Amazon and eBay combined.

Do You Know: On Alibaba, the superrich can browse lists of entire islands for sale in Canada, Fiji, or Greece.

How did Jack pull this off? Whatever he did to become a business magnate, it’s to be noted that he failed in his first two businesses. In his first business, he started peddling flowers on the street to support his venture. In fact, after failing in his second business, he sought the comfort of a government job. Talk about tucking one’s tail between one’s legs.

Apparently, these were not the first times Jack Ma would fail. He failed gaokao, China’s national higher education entrance exam — JAMB’s equivalent, twice. In his first attempt, he failed badly, scoring 1/120 in maths. In his hustle to raise funds for his next exams, Jack likes to tell the story of how even KFC turned him away, the only one of twenty-four candidates they didn’t like. Eventually, he got admitted into Hangzhou Teachers College, a school he called “the third or fourth class of my city”. He would forever speak of his twice failing the gaokao as a badge of honor.

It goes without saying that his third venture is a runaway success. And he would credit a Australian family who he became acquainted with when they visited China for changing his perspective on possibilities. Jack, who had been taught China was the richest country in the world was stunned to discover how wrong he was when he was invited to New South Wales by the Australian family in 1985. The experience also taught him that there’s nothing better than using one’s own mind to judge.

Perhaps it’s the helping hands of this family that has motivated the culture he’s developed in his companies. In Alibaba’s files, the first 18 employees are co-founders. People are surprised to hear that Jack owns very little of Alibaba, at least before the IPO. The culture of Alibaba endures even in the employees who have left the company. Given the long history and rapid growth of the company, they number over twenty-five thousand. Many have banded together in a nonprofit organization called the Former Orange Club to help its members share investment opportunities and career advice.

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When building up his team Jack preferred hiring people a notch or two below the top performers in their schools. The college elite, Jack explained, would easily get frustrated when they encountered the difficulties of the real world. For those who come aboard, working for Alibaba would be no picnic. They are required to work long hours, but they are also richly rewarded for their efforts. From the outset, Alibaba has been driven by a Silicon Valley–style work ethic, with every employee issued share options in the company, vesting over a four-year period. This is still a rarity in China, where the traditional setup in private companies was an emperor-like boss who treated employees as disposable and salaries as discretionary.

A lot of Alibaba’s employees became millionaires when the company had its IPO. Jack even says that one of the things that drove the company to list on the exchange is so the employees can profit from their hardwork. Jack greets new recruits with a sobering message, and a promise: “Today is brutal, tomorrow is more brutal, but the day after tomorrow is beautiful. However, the majority of people will die tomorrow night. They won’t be able to see the sunshine the day after tomorrow. Aliren (Ali people) must see the sunshine the day after tomorrow.”

For Jack, while employees are important his commitment to great customer experience supercedes all. To buttress this, David Wei, former CEO of Alibaba recalls the only time he incurred Jack’s wrath. They had downgraded the much-valued long-standing discussion forum set up for traders to chat with one another in other to make focus on transactions. David prioritized transactions over discussions. Jack was empathetic: “Nobody comes to trade every day. We are more important a community than our marketplace. If you downgrade this forum you are focusing too much on profits. Switch it back to a non-revenue-generating entry point to the business community.”

For such a big platform, incidents of fakes are rampant. Alibaba employs as many as 450 people, including a team of “secret shoppers” to root out fakes. Alibaba operates a “three strikes you’re out” system to sanction vendors. Selling the same fake good on three occasions gets a merchant kicked off the platform. To weed out merchants who later resurface with another name — the “whack a mole” problem — Alibaba has adopted some creative countermeasures. Similar to the “proof of life” tactics used by hostage negotiators, the company asks merchants to prove their identities by taking a photo of themselves with their ID card and today’s newspaper. They may even ask them to adopt a particular “pose of the day” in the photo as an extra security measure.

Yet as it solves some problems, others prop up. A more difficult problem to solve are fake trades. Also known as “brushing,” fake trades involve merchants shipping empty boxes to ghost customers to boost their rankings. Rather than carrying out the fake trades themselves, these merchants typically hire “click farming” companies to generate the fake purchases for them. They can also hire the same click farms to generate fake, positive product reviews to influence real purchasers. It remains to be seen how this will be resolved.

As someone who reads every book with Nigeria mind, it was impressionable that when China decided to open and become accommodating to the market, the first entrepreneurs, the getihu, were mostly agricultural labourers with nothing to lose. Most of them left the hard life of agriculture, and moved into trading. As they grew richer they were resented and mocked for their success and lack of class. One early getihu even papered the walls of his home with banknotes. Sounds familiar? Some of the richest businesspeople in China today started out as lowly getihu, many in Zhejiang Province. The need to trade and the distance from the country’s political rulers have helped make Zhejiang the cradle of private enterprise in China. Today many of the province’s entrepreneurs sit atop China’s rich list. Most, like Jack, started out living hardscrabble lives. China creates genuine rag-to-riches stories.

Once the State allows individual citizens to explore entrepreneurship, great things can happen. In Wenzhou, facing a huge demand for new roads and bridges, the entrepreneurs didn’t wait for the government, they simply built their own. They constructed the city’s airport, the city’s railroad, and opened up business frontiers which in turn made the city become synonymous with wealth.

But success always attracts the government, and Chinese businessmen, including Jack, have started to talk about the stiffling powers of the State, even if it’s only in private to prevent its attendant repercussions.

But Alibaba and Jack Ma have done well for themselves, with the myriad of game-changing moves against the likes of EBay, Google, Yahoo, Baidu and Tencent in the Chinese market. With multi-billion dollar investments in other sectors like Cloud computing, Entertainment, and Artificial Intelligence, it is poised to consolidating its position.

As Jack knows all too well, give people the opportunity to succeed and a great deal of them will do so. Jack recognizes that’s the difference between Mao’s China and today’s China. In his words, “I don’t have a rich or powerful father, not even a powerful uncle.”

There are lessons individuals and entire countries can learn from how a ‘common’ English teacher came to be among the most successful and most influential business leaders of the internet era.

This book supplies them in loads.

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