The tale of how a poor boy from China became the richest man in the country through building a multinational e-commerce empire.
I have to admit — my knowledge of China before this book was very limited. Although I know deep inside that Asia is the future, I was always too consumed with the western ways to truly learn what is happening on that side of the world. This book was a great way to understand the mentality and the truly amazing growth options available in China and Asia as a whole.
Who is Jack Ma?
Jack Ma was born as Yun Ma in Hangzhou, a relatively small city in the Zhejiang region, to a fairly middle-class family. In those 1960’s times, the majority of industry in China was owned and operated by the central government. While Jack was still a kid, the ruling of the country transferred from the Chinese Nationalist Party (CNP) to the Communist Party of China (CPC) lead by leader Mao Zedong. Jack suffered social tension as a young kid due to his father having been employed by the previous CNP government, which was trying to “clean house”.
Jack was fascinated by the language of English and strived to learn it fearlessly. In the late 1970s, China started opening up to tourists and Jack saw this as an opportunity to learn. “Every morning from five o’clock I would read English in front of the Hangzhou hotel. A lot of foreign visitors came from the USA and Europe. I’d give them a free tour of West Lake and they taught me English.”
Jack Ma and David Morely — July 1st, 1980
My favorite story — a group of Australia tourists visited the hotel in 1980. Jack befriended their son David. That friendship lasted 40 years through Jack’s rise to fame through letters and visits. Little did these two kids know that one of them would soon be the richest man in China.
The start of Alibaba — China Pages
Similar to other founders that discovered the Internet in 1995 such as the founders of Yahoo, Amazon, eBay, and Google, Jack Ma was of China’s first Internet pioneers. He launched ChinaPages, which would be an online index in English of businesses in China seeking customers overseas (as known today as Alibaba’s B2B service).
Although it was a slow start, due to limited Internet-access to the general public in China, the business eventually turned positive. Jack Ma built his empire throughout the years, adding new products or sister-companies that needed to happen.
Venture funding in those years in China was very difficult. Between the centralized government who wanted to control private business, to foreigners general lack of awareness and sticky legal structures, investing in China was hard. In the 1970s as China rolled out plans to “open up to the world” China found a method to allow foreign companies to invest. From 1983 to 1991, foreign direct investment (FDI) in China went from 920 million U.S. dollars to 4.37 billion dollars. This allowed companies like Alibaba to get access to the same funding their US counterparts had.
Playing well with others— Yahoo, eBay, and Softback
In 2000 Jack Ma met with Masayoshi Son, the CEO of Japanese Softbank. The two men quickly found common ground and Softbank committed to investing $20M USD in the Alibaba Group. This was joined by an additional $5M USD from Goldman Sachs. This investment would quickly be Masayoshi’s most successful investment, turning $20 million into $60 billion when Alibaba went public in September 2014.
eBay announced they would enter the Chinese market in 2003 with an acquisition of a local B2C e-commerce company called EachNet. This action provoked Jack to stealthily launch a rival company, later named Taobao. This was the start of one of eBay’s biggest failures as the San Jose based company tried to manage the Chinese subsidiary from afar. eBay eventually admitted defeat in 2006 and pulled their operations — which left the entire market ready for Taobao’s picking.
Yahoo in the early 2000s was the success story. Founded by Taiwanese-born Jerry Yang, it had shown the power of its first-to-market generalist Internet portal. Jerry had always wanted to bring his baby to his homeland and open Yahoo China. The company, under the management of Marissa Mayer, led a majority investment into Alibaba in 2005. Yahoo purchased a 40% stake in Alibaba for $1 billion plus the assets of Yahoo! China, valued at $700 million. The business relationship would prove difficult full of lack of communication and cultural issues and Yahoo later sold the equity back to Alibaba.
The Iron Triangle of Alibaba Group
In 2019, Alibaba reeled in $56 billion in revenue from its combined activities. This makes the company the 4th largest e-commerce business in the world, earning a respectable position between Facebook and Google. This e-commerce powerhouse is possible through three areas of joint areas of activity, named the “Iron Triangle”.
Unlike large competitors Amazon and JD, Alibaba’s consumer websites Taobao and Tmall carry no inventory. They serve as platforms for other merchants to sell their wares (similar to the eBay marketplace model). Sellers are attracted to the merchants because of the large userbase and zero cost to signup — Alibaba charges sellers no fees. They make money from selling ads to merchants who want to stand out. Between the three main websites, the company has over 10 million merchants and one billion distinct items for sale
An e-commerce business is only as good as it’s the ability to move products from point A to point B. In China by average, every person receives one package per month. Alibaba, through its dedicated logistics subsidiary Cainiao, has re-invented modern delivery. The company indirectly employs between and 2 to 3 million human couriers through a network of partner companies. Only with this scale, can the company be ready for any marketing event, such as the Singles Day 2015, which resulted in 467 million orders needing to be sent. The decoupled but organized fashion in which Alibaba controls this part of the supply chain is critical for it’s positioning.
Another necessity for rapid-growth e-commerce is smooth payments, especially in China, where traditional banks are not always to be trusted. Alibaba’s answer to this was Alipay, introduced in 2004. This payment company would allow China’s consumers to make safe payments to any merchant in the country. Similar to PayPal, the service doubles as an Escrow service, only transferring the funds to the seller after the buyer approved he has received the merchandise. In 2014, Alipay processed $778 billion in sales, three times more than eBay-backed PayPal. Today, the Chinese consumer payment market is an effective duopoly of Alibaba’s AliPay and Tencent’s WeChat.
The book is focused on Jack’s unique charisma, nicknamed “Jack Magic” — the way he enlists trust and empathy and has a tendency to get out of sticky situations. The same magic used to get the world’s most successful executives and investors to bet big on him. The book provides insightful nuggets of wisdom from the founder as well as many mini-stories that can each be converted into a Netflix thriller.
Sidenote — while the content of the book and story is compelling, many of the negative reviews it receives is due to being written by a business consultant and not a published author. The style of writing is bland with some sentences very poorly constructed. Still easily readable and enjoyable.