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Duncan Clark

Alibaba: The House That Jack Ma Built

Summary

Duncan Clark describes the history of Jack Ma, his personality, how and why he founded Alibaba (after a couple failed start-up attempts), his vision for the future and more

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Key Takeaways
  1. Jack founded Aibaba in Hangzhou in 1999
  2. Alibaba looks to exploit the inefficiencies created by a government who exerts as much control as China does without pissing them off
  3. Alibaba's strengths lie in ecommerce, logistics and finance
  4. Consumer discretionary spending is only about one third of GDP versus close to two thirds of GDP in the US. Latent spending power and high savings rates and lack of things to spend money on are the main causes for this discrepancy
  5. Alibaba is even China's largest retailer
  6. Taobao is like a bazaar with 9m merchants and alibaba has no inventory and TMall is like a glitzy shopping mall. Major brands like Amazon Costco apple Zara and Moore are all on T-Mall
  7. About 10% of retail spending in China is done online compared to 7% in the US. China has been able to leap frog the brick-and-mortar retail business model which is much less efficient and expensive than e-commerce
  8. Nature abhors a vacuum and in China the Internet is filling in for eight created by an official state owned enterprises and government regulations
  9. Alibaba accounts for 40% of grocery sales in China and even does next day delivery of refrigerated items. It stands at only 10% in the US
  10. The rate of e-commerce packages is growing like crazy and has years of high-growth ahead with less than one package per customer per month being delivered on average today
  11.  JD.com it's taking a different approach than Alibaba in that it is investing directly in logistics and becoming acid heavy versus acid light. JD wants to control the process from order to delivery end to end and I think a good analogy is Apple and other closed and companies that want to control quality throughout
  12. Alibaba's finance edge comes from Ali pay which is Alibaba is equivalent of PayPal  Ali pay handles more than $750 billion every year. Always pay is no longer own by Alibaba but is controlled by jack and has become the defect of method of transactions for an increasingly digital China. Alibaba can also serve as a savings account and often gives better rates than the banks. Because Alibaba had so much data on its customers it can better underwrite the credit risk of people who invest and pay through their platforms
  13. Jack is it your typical corporate titan and is quite humble and talks his intellect and ability down often. He said that the most influential role model in his life was Forrest Gump
  14. Jack's presentation and oratorical skills are superb mainly because he focuses on messages he is deeply fluid in and suddenly changes his emphasis or message depending on the crowd and their expectations. Jack is quite funny and empathetic and the nature of his speeches tend to reach a broader audience due to his fluent English and Mandarin
  15. Jack's mantra his customers first employee second and shareholders third. Another popular "often heard from Jack is 102 years with the point of trying to survive through out three different centuries
  16. Corruption and counterfeit goods are some of Alibaba's major obstacles but they are taking certain precautions to begin limiting the amount
  17. When Jack was a boy he would relish the opportunity to practice his English often waking up before dawn riding his bike for 40 minutes to the nearest big hotel just to talk to English speaking tourists. Jack for friended on Australian family who he visited one day and on this visit he saw that what he had been taught that China was the richest country on earth was in fact falls and this taught him that he had to think for himself make his own decisions and use his brain to truly determine what was true and what he believed in
  18. Jack twice failed the college entrance exam and eventually on his third time got a good enough score to go to a fourth grade university in his hometown. Today he speaks of these failures as a badge of honor
  19. After university Jack became an English teacher but soon started his first company called hope which helped local companies find foreign customers. Jack has the uncanny ability to sell his vision and get people excited and to buy in completely
  20. Wong Joe were Alibaba is headquartered has been a prime an important trading hub for over 1000 years connecting the northern and southern China
  21. Jack was first exposed to computers and the Internet in the mid 90s when he travel to the US. From this exposure he started china pages which was the Chinese equivalent of yellow pages. China pages failed after a couple years and from the adventure Jack went on to work for the government for sometime before founding Alibaba
  22. Alibaba was chosen as the name of his company because it is a universal name that everyone can pronounce and most people know the story behind Ali Baba and the 40 thieves. This has saved a lot of money on marketing and advertising as the image of open Sesame and everything else that comes with the name is tied in to most people's memories already
  23. Jack decided to distance himself from other Chinese portals such as Sina so who and that is by focusing on shrimp or small businesses
  24. Alibaba got first major investment from Goldman Sachs - $5m for 50%. A few weeks later soft bank invested $20m for 30%
  25. Jack decided to start hiring people who were a notch below the top of the class because he found they were better at handling adversity than the people at the very top of the class
  26. Today is brutal. Tomorrow is more brutal. But the day after that is beautiful. However, most people die tomorrow night
  27. The bursting of the Internet bubble was actually good for alibaba as this meant their competitors would not be receiving money and they had a lot in the bank from soft bank
  28. Author makes an interesting connection between the 2002 SARS outbreak and a massive ramp up in broadband usage, texting and increased investor appetite in china tech
  29. Taobao was alibaba's response to eBay and was able to fend off the global powerhouse by better understanding the local market - free registration, busier home pages, free listings, ability to negotiate, online payment with Alipay, complacency and arrogance
  30. If you simply use money to solve problems, there'd be no need for businessmen. Businessmen are able to solve problems with few resources and leverage them to great benefit. eBay simply tried throwing money at china to regain their dominance and at this point Jack knew he had them. They first didn't treat them like a rival at all and then took them too seriously. They showed their hand and didn't change strategies at all
  31. There is a lot of controversy over the transfer of and financial to Jack's personal account where he had total control of the company. Defenders say that without doing this day would never have gained financial approval from the Chinese government but other say this is not the case
  32. Shortly after the IPO Alibaba I got into some controversy what the government over baked goods which still is lingering over the company today
  33. Alibaba is beginning to expand into cloud computing, healthcare, entertainment and other markets where retail is inefficient and ecommerce under-penetrated
What I got out of it
  1. Does an excellent job providing some history of Jack and the company as well as some of the cultural differences between Chinese and American entrepreneurs and their relationship with their respective governments. Jack's vision, persistence and charm were all really interesting and inspiring to read about

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