蔡崇信访谈：阿里巴巴、中国经济与全球化挑战

hi everyone today we have a special guest visiting uh called Joe Sai chair co-founder of one of the world largest companies with more than 1 billion consumers called Alibaba a giant in e-commerce digital payments cloud computing entertainment and much more.

Alibaba a giant in e-commerce digital payments cloud computing entertainment and much more.

we own almost 2% of the company and you know what Joe is also a huge sports fan and you even own a basketball team Brooklyn Nets.

so great to have you here Joe and lots to talk about.

thanks for having me Nikolai wonderful.

now let's start with the beginning just to get to know you a bit you were born in Taiwan but when you were 13 you moved to the US.

so how was that transition.

it was an extraordinary transition I uh came from a very different culture uh.

I grew up in a chi very Chinese environment and went to a Chinese school so I barely spoke English when I landed uh in New Jersey in the United States when at age 13.

so I went to a boarding school uh.

I thought the best way for me to inte great and be friends with everyone was to play a lot of sports uh.

I tried out for a lot of teams I got cut from the baseball team.

were you any good.

uh I wasn't good skill-wise in baseball but I was fairly athletic and had some speed right I was fast uh.

so I tried out for football American football I played American football U on the varsity team and uh uh also played lacrosse in high school and then went on to play lacrosse in college.

okay who were the formative people in your upbringing.

my father.

uh he is one of the most brilliant uh one of the most sharp-minded people I know but he's very tough um.

I feared my father um.

you you still fear Him.

I still well he's no longer is he still kind of a bit of bit of ghost in your life still bit of a ghost.

but I I think over the years I felt that I could now if he were alive I could talk to him and say hey you know I've accomplished something in my life as well and probably could rival your accomplish accomplishments.

but I'm still not as smart as he is you know.

I just love to to see these drivers we all have something we want to prove for somebody um.

now before um I mean you you went to Yale you studied law but before you joined Alibaba you also worked for the Swedish wenberg family the investor AB MH um.

what was that like.

it was one of the best experience I've had uh.

I transition from being a lawyer uh to being an investor uh.

I work for inv in Hong Kong in their office and focus on private Equity Investments and it was really where I learned the fundamentals of investing.

I still remember they gave everybody a book the McKenzie uh Corporate Finance book on valuation right.

and that's when you learn how to do a DCF model yeah.

and and the discipline uh the uh work ethic uh was incredible and I love that environment um.

I still stay in touch with him.

in fact before I came in here earlier this week I was was in Stockholm and had dinner with uh Marcus and uh Jacob both both of them actually at the same time which was rare um.

I I really enjoy that uh uh time uh just catching up with them.

yeah they are for sure um are long-term thinkers.

now how did you end up at Alibaba.

I was at investor AB uh I think it was my fourth year uh going into it um.

I started working at invest AB in 1995 uh and then in 1999 a friend of mine um who I knew from Hong uh from Taiwan uh our parents are friends as well he came to me and said you have to go to Hanzo to meet this man Jack ma.

he is special he is kind of crazy but uh you should meet him.

so I got on a flight uh to Hanzo.

back then there were only two flights a week between Hong Kong and Hanzo Tuesdays and Thursdays.

I got on a flight and I went to Hanzo to see him uh.

when I went into this uh apartment he had a second floor apartment in uh uh the city of Hanzo and it's called laide Gardens it's in this complex uh I saw multiple pairs of shoes outside uh.

so there were quite a few people inside working there were engineers there were customer service people.

and back then uh Jack had uh created a website to have small mediumsized companies from China that are exporters uh that want to sell around the world.

and our first website believe it or not at Alibaba was in English language because it was customer facing to the West uh.

and uh there were engineers working away customer service people doing things.

I still remember they had a notebook of uh they wrote down every single registered user on the site and there were 28,000 register users at the time.

and and then after about an hour I chatted with Jack I said Jack I have to uh use the restroom can I uh use go to the bathroom.

and I went in there uh there were like 10 toothbrushes uh next to the sink.

I thought oh my God these people are 24/7 living breathing in this room uh working away.

that was the star of culture that's the the equivalent of a garage right.

so did you join that toothbrush Club.

I I joined I joined the tooth I didn't bring my toothbrush but uh I went away very inspired uh.

not just by Jack's vision and Charisma but also the fact that there were a lot of people that are willing to follow him.

it was very early he didn't have any money um uh and the people that worked there were his students.

why do they want to follow him what what what are the characteristics of a leader who people want to follow.

I I think the most important thing is to give people uh a sight of what the future looks like and what kind of.

and what kind of sight did he give you at the time of what Alibaba could be.

well at the time our business is a B2B Marketplace.

and he said on the cuss of China joining the WTO uh all these small mediumsized companies want to do business around the world.

and alibaba's Mission back then was and still is to make it easy to do business anywhere.

and our DNA our culture is to help small businesses uh to to go as far abroad as possible.

and uh that was kind of the vision.

and uh obviously we developed into a big uh domestic consumer company uh as well as cloud computing now.

when did you understand that this was going to be really big.

I didn't appreciate uh the scale until around 2005 when uh that was you know six seven years into our founding uh.

when Yahoo came knocking on the door and they said they we want to invest.

and uh at the same time eBay was also looking at investing in the company and we were even thinking about selling our little baby called Tau which today is the largest e-commerce Marketplace in China for uh consumer e-commerce.

which today is the largest e-commerce Marketplace in China for uh consumer e-commerce.

and uh uh uh eventually we negotiated with Yahoo and it's just the size of their investment.

they invested $1.25 billion into the uh the uh not not just into the company but they also bought out a number of VCS uh in a secondary transaction.

1.25 billion that value the company at over4 billion.

and I I I what I still remember it was the summer um and then I saw my parents in the summer I would you know talking about my dad that was a proud moment when I said to my dad I think I've uh made it sort of um.

but when did you see the real potential scale of the business when did you really feel that it was taking off.

it's a good question um.

the scale of the business didn't take off until when tbal started to monetize mhm.

uh we we knew we had a good thing going with tabal with buyers and sellers in the marketplace but we were having trouble monetizing.

and there were several efforts in 2006 and 2007 that sort of didn't work out that well uh.

but then we we got onto something we basically monetized the marketplace using search advertising.

and uh so you can imagine you you have a Google way of monetizing the marketplace on an eBay type Marketplace.

and that was unique that was a actually new Pioneer by Alibaba.

and uh in I just remember in 2008 our cash flow started to uh uh go uh grew exponentially.

and uh that's when we realized we had a really good thing going.

now there is um of course uh you're not the only one who have seen the opportunities here and so you have now competition in several of your businesses um.

tell me about the most serious competition you all facing.

I think the competition we I can name a number of competitors yeah uh and you know them too you probably invest in some of them uh.

and I think our our uh when we look internally and uh kind of self-reflect over the last several years we have fallen behind because we forgot about who our real customers are.

our customers are the users that use our apps that are shopping and uh.

we did not give them the best experience uh.

so in a way we kind of you know stepped on our own foot and didn't really uh focus on where the value is where where we could provide value.

and uh so as part of the reorganization our new CEO comes in.

I'm the chairman but I work with a CEO who's 12 years younger than I am and uh uh.

he's very very user focused focused on the uh product and the interface and the user experience and that's the most important thing for us.

and that's the most important thing for us.

and how are you rectifying it what are what kind of steps are you taking.

the the first thing we did was to acknowledge mistakes um.

we've acknowledged that in the past we might have not focused on our user experience uh.

the second thing is to reorganize our Personnel change the organizational structure that fits the strategy.

I think this is a a very common problem of big companies.

big companies are set in their organizational structures and then they don't change because people don't like to change they don't want to uh uh change job they are afraid to be fired and things like that uh.

and then you start to fit the company's Direction into your or structure it which should be it shouldn't be that be that way.

it should be the other way around you should Define what the direction is and then set the company's organization.

so we actually reorganize ourselves within tbal uh.

the our our the our group CEO who's also directly uh the CEO of the tal t-all Marketplace uh if you look at his direct reports today uh they're drastically different from who his direct reports were uh three months ago.

but was there like bureaucracy building up or what happened what what made you not uh kind of see the change in the in the marketplace.

I I I think it's human nature that people uh don't like to acknowledge mistakes uh.

and true leaders and true good managers uh have that sense that have that ability to self-reflect and say I might not not have done something right uh I did this wrong I need to change they need to change themselves uh.

but it is human nature that they uh don't do that and uh I think we we we fell into that trap.

and uh it you know you you have to eat a little bit of Humble Pie uh.

I think part of leadership is humility you got to be able to admit your mistakes and say all right let's correct course uh.

but here's the New Vision because employees are looking for that direction it's very very important.

what what is it due to morale in a company which has been growing so fast and where the share priz went through the roof when these kind of things reverse.

the morale has not been good good in the past 3 years uh.

I mean through a multiple factors first we had Co yeah.

and then uh the economy the Chinese economy uh sort of bounced back after Co but then it sort of flattened out.

and uh uh uh competition was another issue uh and also another issue was regulatory uh scrutiny.

we paid big fines uh but that's all behind us.

but all those things combined was was quite uh devastating to the morale um.

but I as I said the most important thing though is employees are looking for a direction.

if you can clearly communicate what the direction is uh then they will get rejuvenated.

changing um t a bit uh of course your business depend on a strong consumer um.

how do you see the Chinese consumer just now.

if if you look at the whole Chinese economy um China is about 31% of uh Global Production but uh the consumers only consume 14% uh Global consumption uh.

so obviously there's an imbalance.

China is a net export country makes a lot of things but at some point Chinese consumers should come uh come into uh more significance and rival that of the western developed markets uh.

in China overall consumption is slightly over 50% uh whereas the developed markets uh consumption is over 70% of the total economy uh.

so so there's a lot of potential uh.

but the way I see the consumers today is there's a couple of factors that kind of temper their uh confidence and willingness to spend.

number one there's a wealth effect from the property downturn uh.

I think on average property prices have come down 30% and uh uh When people's assets a lot of their wealth is tied up in uh real estate they don't and this sort of downturn happens they don't feel as wealthy and they don't they want to save they want to uh propensity to spend uh is is diminished.

uh the second thing is I think young people today are uh still worried about uh being able to get a job uh.

just look at ourselves in the last several quarters we've had headcount reductions just through attrition it's not like we were laying off people but just through attrition we're not hiring.

I think it's important that businesses especially private businesses are given uh incentives and the signal uh and the confidence to invest and hire people.

so when people don't feel very certain about the future about their job stability then their propensity to spend is also uh uh affected.

the ability to spend though is there uh China has very high savings rate and people uh household cash is still very strong yeah.

we had expected the uh the upturn after covid in China to be stronger than what actually happened but it sounds the same it sounds like the same you had the same opinion.

well just I I just said uh consumer confidence is quite low right now because of the wealth effect and uh uncertainty about employment in the future.

you mentioned um reg increased regulation are you still seeing um increased regulatory pressure.

I don't think it's increasing I think regulatory framework is now more clear uh.

we know uh what are the lines uh how to keep within the boundaries and not to overstep the boundaries.

so uh having that Clarity is uh very good for business um.

now China has been the factory of the world for many years now how do you see this development going forward.

oh I still think China will continue to be uh a manufacturing Powerhouse uh in the world.

despite declining population uh on a relative basis China's population is still very large uh.

you're looking at 800 million productive workers in in the economy and uh even if that reduces to 6 600 million 650 million that is still a very SCA size sizable and at uh production Force at scale uh.

uh the Chinese people are industrious and uh the education system has been very good uh so you have a well educated labor force and skilled labor force and uh.

just relative I mean you know you see a lot of uh reshoring or offshoring to people uh diversifying their supply chains to Vietnam Mexico.

but look at the population I mean the population of Vietnam is about 100 million the working population the workforce is 60 million.

China is more than 10 times the size of that.

they will never be able to replace China as the manufacturing center of the world.

now we are know in the second year in the AI Revolution how do you approach AI as a firm.

we're one of the largest cloud players in China so AI is it essential uh.

having a a good large language model that is proprietarily developed inhouse is very very important because it helps our Cloud business.

if we have a great lln and other people other developers are developing on top of it they're using our Computing Services right.

so so we see AI as very much uh the left hand and right hand for our Cloud business uh.

and the other aspect is the e-commerce um business is one of the uh places where you can have the most the richest use cases for AI uh.

so you can develop a lot of uh really cool really cool products on top of uh our our own model or even someone else's open open source model.

we have multiple development efforts going on.

and in those scenarios for example you can try something on using virtual uh dressing rooms uh uh.

the our Merchants uh doing business on our Marketplace will be able to use AI to self-generate uh photos product descriptions and things like that.

is that because you is that because you have less gdpr and more personalized data.

I don't think it's less GDP I don't think regulation you know we collect a lot of data we get have a lot of data of our consumers and we also have uh uh.

there's a lot of Open Source data uh because the whole sort of premise of a large language model is you can crawl the web and be able to get open source data to train your model.

and uh uh it's the same thing in in the US it's the same thing in China right.

and uh uh uh but we are able to use further use AI to develop vertical applications given our own data uh what we know about the consumers and the merchants.

so it's it's uh it's it's a beautiful uh combination uh using AI to improve our user experience.

where do you think uh China is in the AI development compared to the US companies now.

I think China is today uh behind uh.

it's clear that the American companies like open AI have uh you know really leaped ahead of everybody else uh.

but China is trying to play catchup.

how far behind do you think it is.

I think uh uh it China could have a a lag that will last for a long time you know it's not like you know because everybody else is running very fast as well.

but do you think it's one year five years three years what do you think.

I think today we're probably two years behind uh the the the top uh models m.

now um what is your situation when it comes to chips and semiconductors uh.

so last October uh the US put in very stringent restrictions on uh the ability of uh companies like Nvidia to export high-end chips yeah uh to every company in China uh.

so they've sort of abandoned The Entity list approach and they put the entire China you know uh on on their list and uh uh.

I uh think we're definitely affected by that.

in fact we've actually publicly communicated it did affect our Cloud business and our ability to offer uh high-end Computing Services to our customers yeah.

so uh it is it is an issue uh in the short run and probably the medium run uh.

but in the long run China will develop its own uh ability to make uh these high-end gpus.

and you are doing that yourself as well.

we we have some uh effort of doing that uh but we also are looking at other players uh to Source chips from other players.

so how big um an issue is this lack of chips.

it's a big issue it's something uh that everybody is trying to Grapple with uh.

in the short run though uh I I think prior to the restrictions coming down uh people have stocked up inventory uh.

So currently you know I think in the next next year or 18 months the training of large language models can still go ahead given the the inventory that people have uh uh.

I think there's more High Computing uh that's required for training as opposed to the applications what people call inference uh.

so on the inference side uh there are multiple options uh you don't need to have as high power and high-end chips uh as the Nvidia uh you know the the latest model.

so if you had had limited supply of Nvidia top models and everything else you wanted how would your business have look differently.

I think we will have a more robust cloud computing business and we will be able to have customers that want to rent computing power from us.

so this leads us to the geopolitical aspects of running a company like Alibaba.

now what kind of um um geopolitical considerations do you need to take when you run a company like this.

I I think the first thing is to understand all the regulations uh.

we need to make sure that we are compliant with law and with the policies everywhere we operate uh so you don't run a foul of regulators uh and then catch the attention of uh uh the politicians um.

and that's very very important to us.

I think in terms of compliance structure uh we are one of the most robust companies around the world not just one of the robust Chinese companies were one of the most robust companies around the world.

I think that's very very important uh.

now you know speaking of us China specifically if you look at Alibaba we do so much business uh on behalf of us companies um.

we sold over $60 billion of American Products to Chinese consumers annually and uh uh that trade is two-way right.

and uh in in Europe uh uh you know about 14 billion euros uh of French products to Chinese consumers 7 billion German products to Chinese consumers.

the these are all really great uh stories that people really don't understand uh.

so Alibaba is good for the world good for global trade and uh uh uh.

so set in that context people can understand Alibaba better uh and and really not say oh you're just a Chinese company that is trying to flood the market with your cheap Chinese products uh.

I think it's very very important for the world to know uh Alibaba is here to do business globally.

now in addition to the to the chip act um are there any other geopolitical tensions that impact the way you do business.

uh just generally uh being a comp Chinese company uh in the US we have to be very careful uh.

so for example we don't have much of a consumer facing uh business in the United States uh and that's because concerns about data privacy cyber security and things like that uh.

and and these are some of the issues that we will have to navigate in the future.

what are some of the misconceptions that you see that people in the west have when it comes to the current situation in China um.

I I think people tend to be categorical about China whereas a lot of the truth is somewhere in between uh.

I find this talk about whether China is investable or not quite ridiculous uh.

you're talking about the second largest economy in the world uh the a very industrious labor force as I refer to before um.

800 million people uh that are working very hard um.

so it I don't think it's constructive to talk about whether to pull out from China or investable in China uh.

I think people have to recognize that you can't bet against the Chinese people uh.

this is an economy that'll be around for a long time and uh that'll actually be good for the world.

you mentioned that um one can't bet against um China which kind of brings me to to corporate culture and and work ethics.

so what um what is strong corporate culture to you.

uh a strong cor corporate culture means that you identify with the mission of the company you see the company's Direction very clearly and you love working with your colleagues yeah.

you love your boss you love your colleagues.

I think that has always been the Alibaba culture uh.

we are uh we have a saying work happily live seriously uh.

people always talk about work life B balance but at Alibaba we say well why does it need to be a you know a dialectic of work versus life uh.

when you come to work you should be happy because you're among friends and uh.

do you work all the time.

no I don't work all the time um.

I have to admit um I have actually found uh ways to become more efficient so I don't have to uh work.

I used to you know work a lot more a lot harder.

you used to have the toothbrush in the office.

I used to have the toothbrush in the office.

but here's the thing and what what what do you do to make yourself more efficient.

uh I apply some uh some of the things I learned in sports and Athletics uh.

you know like what like what.

like training high-intensity training for a few minutes and then you rest right.

so on a given day I don't want to go 10 hours a day uh the whole day working really really hard.

I would go two or three hours very intense work uh I'll be very efficient and get something done and then I'll take a rest uh.

I'll read the newspaper or take a nap or go out for a workout uh.

so this uh interval training is the concept that I I take from Sports and apply that to work.

what does it look like when you do high intensitivity work in your office what do you tell me.

uh people are very afraid of me.

I'll make a lot of phone calls and you know ask tough questions um.

but I also like the fact I'm I'm trained as a lawyer uh so I like and and as well of the training and investor AB I you know they taught me how to work a spreadsheet.

I do a lot of things by hand myself um.

if I'm working on a deal for example an investment project um I'll write my own term sheet.

you you close the door and have no interruptions and I mean how does it look like in your office what do what do you how do you operate.

nobody likes interruptions uh.

but some I I seldom work in the office um.

I'm always traveling I'm in a hotel room um I'm on the plane uh.

I uh you know in uh sometimes I I just say call in and say I'm going to stay at home uh and uh in the next five hours I'm just going to focus on doing something so nobody should call me.

so it's um it's never in one place it's always uh finding finding that chunks of time where I can I can be uh not bothered.

do you see yourself as a nice boss.

I would like to uh.

I think uh being a good boss I think nice is not um because if you're too nice to people uh you are misleading them uh.

I think the most important thing about a good boss is you give him immediate feedback.

feedback can't be a quarterly review thing or a yearend review thing feedback back has to be immediate.

and people need to know uh whether they did something that wasn't quite right uh or they didn't apply the full effort they need to know right away.

what are some of the other leadership principles that you adhere to.

I I think humility I talked about humility.

you have to be able to admit to your own mistakes.

the other thing is you can't pretend to be the smartest person in the room always.

sometimes you you want people are looking for that leadership you want to come up with a good idea whatever but that can be all the time uh.

because you got to let your people the people that report to you be empowered to come up with your own ideas uh otherwise you kill Innovation.

you mentioned sport tell me about your love for sport and why you bought uh a basketball team.

I I've always uh been fairly athletic myself um and uh just having participated in sports um both in high school and in University uh.

both in high school and in University uh yeah.

but Joe there are lot of people who like sport who don't who don't buy sport clubs.

you're right you're right um.

but first about sports I think Sports teaches you not only the discipline and hard work but also sport teaches you how to how to fail.

if you fall down if you lose a game you got to bounce back.

I think that's really really important a lot of those principles apply to business.

so why I bought a sports team it's actually Serendipity um.

it's actually Serendipity um.

when the BR Nets were up for sale uh this is in 2017 I really had no idea what it's like to invest and be an owner of a sports team uh.

but then I looked at the characteristics of the league uh how the league shares economics uh.

one of the great things about the NBA is they have a very good collective bargaining agreement that splits the economics between the teams the owners and the players.

the players are really providing value right so they should get their fair share of the economics and that's set out in the collective bargaining agreement uh.

and then the other thing about the NBA is among the 30 teams uh it doesn't matter if you're competitively successful or not there is a mechanism for all teams to be even the small Market teams to be competitive and to also make money uh.

so there's a pretty fair sharing e economics among the teams.

for example the TV rights uh the NBA today gets something like $2.7 billion of national TV revenues every year that gets split among the 30 teams evenly.

that's very very different from the eepl for example.

so um uh I thought those characteristics are um almost like a little bit socialist uh but it ensures that everybody that invests in the league uh will not lose a lot of money.

and the other thing is Brooklyn right we're in New York City uh.

where else and how else can you get an opportunity to own an asset uh that is kind of like a crown jewel in a big city um in a big country and with one of the most popular sports in the world.

is it fun.

it's absolutely fun.

I love I love going to games.

I can I can see you having fun with it.

what are the other ways you're having fun.

I I spend time with my kids uh.

I uh you know one of the most rewarding things is to see my 17-year-old son play a basketball game just a high school game.

he's uh the starting point guard on the basketball team and uh it just gives me so much pleasure to see him do well um on on the court.

do you read.

yeah.

what do you read.

well I like to read uh spy novels I'm a big John l Cary fan okay.

and um I still remember when I was a um teenager one of the first books I read was Tinker Taylor Soldier Spy yeah.

and uh I got hooked on it uh right away and so all that uh.

I I think I think ler the author is has been able to uh take some of his real life and turn it into this experience for the readers uh.

it's almost aspirational like you want to be one of the characters in the book and uh uh.

so I I I enjoy that very much.

and other than that I I try to read as much um sort of current affairs I love The Economist um you know but that's uh probably not reading books um.

but that's uh probably not reading books um.

what would be your advice to young people.

my my advice is um learn one or two very fundamental skill sets that you're you're going to be on the top 10% of everybody else uh.

like you know if you want to learn how to code if you want to learn uh a particular subject area uh I think you have to develop some specialty.

my specialty uh professionally was actually tax law.

I was a tax lawyer for three years and I knew I can go into a room and be at least somewhat smart when people talk about tax structuring.

and it still actually is helpful to me today um.

we're looking at some things internationally where uh uh structuring the right corporate entities and uh tax structures and Licensing structures are important.

so I get very involved in that uh.

so someone you can't just be a walking into a room and just be a generalist in all areas.

someone some you have to be able to tell somebody I'm an expert in one thing this particular thing and that's how you get respect.

the other thing uh that I would say to young people is um you know learn multiple things uh.

in particular I think in the future data science is important uh.

take a class in data science.

it used to be called statistics but data science is the more fancy way of naming it uh.

and also take a class in Psychology.

I think there is something that's fascinating about the human mind and how the mind works and uh that's very different from machines and uh uh.

so if you are equipped with some ability to code like young people nowadays they all learn how to code on python or Java or whatever it is uh have a uh understand data science and understand a little bit of psychology I think you're equipped with uh all the tools that you need to be successful in life.

sounds like a good plan that you for sure have been very successful and it's been really great having you on.

thank you so much Nikolai thank you very much I appreciate it.