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WHEN TRADE STOPS, WAR BEGINS

Few stories speak the power of technological disruption and its miraculous ability to create paradigm shift, more than the astronomical rise of the Chinese business magnet Ma Yun, better known as Jack Ma. The founder and executive chairman of Alibaba Group, Mr Ma is currently the richest person in the whole of Asia and the 14th richest man in the world, according to Bloomberg figures.

The 52 years old business mogul is known for his articulate speaking and expressing his frank perspectives on different issues. On January this year Jack Ma sat for an interview with New York Time’s Editor-at-Large Andrew R. Sorkin, at the annual meeting of World Economic Forum. In the fascinating interview Jack Ma talked about his meeting with the then President-elect Donald Trump, his views about the US economy, fintech disruption, among various other intriguing subjects. We are producing a transcript of the interview and the audience Q&A for Fintech readers.

ARS: It is my privilege to be here this evening with Jack Ma, one of the great entrepreneurs of our time, of course, the founder of Alibaba and we have so many things to talk about over the next half an hour. And of course, we also want to try to get to your questions as well. We’re going to talk about Alibaba, of course, but also China, the Trump world that we all live in, globalization trade and so many other issues. But, first of all, thank you for joining us.

JM: Thank you so much.

ARS: Let me start with this, which is to say that you just spent some time inside Trump Tower, and went to go visit with Donald —

JM: Yeah.

ARS: Our president-elect in the United States. Tell us about that meeting.

JM: Well, it’s a very productive meeting, much better than I thought, than I expected.

ARS: What did you expect?

Jack Ma: Well, I heard a lot and I watched like everybody, I watched all the news and heard a lot about him. So when I go inside, I saw, um, anything that — but he’s pretty sort of open minded, listened what I talked. So I think I’m very happy about the results, and finally, when he said, he offered, he said, ‘Jack, let me walk you down’. It seemed he’s very happy about the results we had.

ARS: Can I ask? How does a meeting like that happen? Do you call him? Does he call you? Well, how does this take place?

JM: Well, that’s the question I’m asking myself, because some day I got some requests from people say, ‘Jack, do you want a meeting with the president-elect?’ I’d say, ‘Is that true enough?’ Because I’m not ready for that, because I don’t know what to talk about. And then a few days later I got another request, I got several requests and then I saw one email which was from a friend, it’s very sort of specific, I thought about it. I think yes, maybe I should go and I have to talk. And at least, I think president elect on the Trump would be happy to hear what I want to talk about. So I went.

ARS: And what did you tell him?

JM: Talk about the small business, talk about agricultural products, talk about the trade between China and the USA. Special focus on telling about how can we bring the small business in America sell them to China, to Asia, through our network, which can create a lot of jobs for them.

ARS: And you committed to create, what you say is, one million jobs in the United States over the next five years. Now that’s not a million jobs that Alibaba itself but you’re not hiring a million people.

JM: No, no, we, all totally Alibaba employee put together is like 45,000 people, we cannot hire 1 million. I cannot imagine I can manage 1 million people.

ARS: Explain to us how you think about the US-China relationship, given some of the comments that Donald Trump has made about China being a currency manipulator? Did that come up during your meeting?

JM: Well, I think, first, in America there is a freedom of speech, right? So he can say whatever he want and I respect and I understand. But, of course, I have my views. We did not debate about the China-US trade or manipulation, we did not debate. We did not talk. Actually we agreed on something: small business, developing the Midwest America, helping the farmers there, small business there to export into China. So we all agreed. But something that we did not discuss about the American job losing to China or Mexico, and this — can I share with you my ideas?

ARS: Please.

JM: First, I think 30 years ago, when I just graduated from university, I heard American wonderful strategy. They outsourced the manufacturing job, service jobs. They outsourced the manufacturing to Mexico and China, outsourced the service jobs to India.

There’s a book called The World Is Flat.

ARS: Tom Friedman, colleague at the New York Times.

JM: And I think it’s a perfect strategy. You know that the American said, ‘We just want to control the IP, we just want the technology, we just want the brand and leave the lower end jobs for the world. Great strategy. And the second is that the American international companies made millions and millions of dollars from globalization, the top 10, top 100 companies in America; amazing. I remember when I graduate from university, I tried to buy a beeper, the Motorola beeper cost me $250. My pay at that time was $10 a month as a teacher. And the cost of making that beeper is only $8 for a chip.

So, the past 30 years, IBM, Cisco, Microsoft, they made a tons of them and the money, the profit they made are much more than the four largest banks in China put together — China Mobile, China Unicom and whatever you name it, put together, still these multinational companies made more money. So, their market cap grew more than 100 times in the past 30 years. But where did the money go? This is what I’m curious, because, as a business people I always care about the balance sheet: where is the money coming, where does the money go?

Past 30 years, America had 13 wars, spending $14.2 trillion, the money going there. What if they spent a part of their money on building of the infrastructure, helping the white collars and blue collars? No matter how strategy good it is, you’re supposed to spend money on your own people, right? Not everybody can pass Harvard… like me, not good at education, right? We should spend money on those people who are not good at schooling.

And the other money which I am curious about is that when I was young, I heard America is about Ford, Boeing, those big manufacturing companies. The last 10, 20 years what I heard about is Silicon Valley and Wall Street. The money go to the Wall Street. And what happened year 2008? The financial crisis wiped out $19.2 trillion USA alone. They wiped out all of the white collars and destroyed 34 million jobs globally. So what if the money… it’s not on Wall Street. What if the money spent on the middle east, mid-west of the United States? Developing the industry there, that could be changed a lot. So it’s not the other countries steal jobs from you guys. It is your strategy.

ARS: OK, but…

JM: But you do not distribute the money and things in a proper way.

ARS: This is what I… and now we are having a backlash. And that backlash is a rebuke of globalization in so much of the conversation frankly that we have here. And that backlash is happening in the United States but I will say President Xi was here yesterday, you had lunch with him. And he was quoting Abraham Lincoln. What did you make of that?

JM: Well, I would say that the globalization is a great stuff. It’s the USA, it’s developed countries that teach us how to do globalization. I remember 2002 when China joined the WTO, everybody in China was so worried. Me? I was worried because what if all the international products come to China, destroy our industry and we lose our job. So, convinced China, after 20 years, then you guys are telling, say, this is a terrible thing. I believe globalization is good but globalization need to be improved. This is Donald Trump, president elect want to solve the problems, that globalization I think should be inclusive globalization.

In the past 30 years, the globalization was controlled by 60,000 big companies. A hundred years ago, globalization was controlled by several kings and emperors. What if the next 30 years we can support 6 million businesses doing business across the board? What if the next 30 years we can help support 20 million small businesses, can do business across the board. So this is something which I believe globalization should be inclusive.

ARS: And do you think that the words of President Xi will happen in reality, which is to say that China has largely acted on its own behalf for many many years and now is effectively saying that the US needs to continue acting on everybody else’s behalf?

JM: Yeah, I think the world needs some… it’s such a… Mr Xi yesterday said it’s a wonderful time, it’s the best time or the worst time. The world needs a new leadership but the new leadership is about working together. This is what I understand. We do not necessarily need one specific leader to teach us what to do, what not to do. But the world have to partner together. This is what I think. And I think I like as a Chinese, as a business people I like, I feel proud for what President Xi said yesterday. As a business person I want the world to share the prosperity together, to join the force together. As a Chinese, I’m happy about what he committed. Yesterday he said… he speaks like us take the responsibility of the second largest economy. As the China, second largest economy, he has to take some responsibility. This is the first time I heard a Chinese leader make number commitment. He said next 10 years we are going to import $8 trillion. This makes me feel excited, because China is transforming from exporting to importing. If there is a concrete number, if we keep fuel it, this is going to be a huge change to China and to the world.

ARS: Do you think that it’s easier today for China to be interested in globalization because of the benefits that can accrue to China because you’re continuing to develop than it is for countries that are “developed”?

JM: Well, first, the WTO rule is not decided by China. It’s not made by China. I will say there’s something that I want to change WTO is design… lot of the rules designed for big companies in the past 30 years… and only big companies can do it. And China definitely benefits a lot from opening. I think China should learn one thing: that we grew in the past 30 years, it’s because we opened to the world. If we continue to open…

ARS: Well, not fully. Not fully. American business that wants to effectively go into business in China has a very difficult time, has to partner effectively with a company that’s there already.

JM: This is why I said China has problems too. The world has problems and China definitely has a lot of problems. China should open… should have been more confidence. This is what I feel yesterday, I feel the confidence of Mr. Xi that he is ready to open more to the world. This is what I suggest that we should solve the problem by business community, by negotiation. The China joined WTO for like, 20 years or 70 years, I don’t know the number. But the past years that I think we as a business, we as a country, we as the world, we have to review something. But not because unbalance the things, we stop it.

ARS: You’ve been calling for something called eWTP. What is that?

JM: This is what I would talk about, is that the WTO was great but they’re mainly designed for developed countries’ big companies. There’s no opportunity for small businesses. We want to build up an Electronic World Trade Platform (eWTP) to support young people, small business, through mobile phones, internet they can sell, buy, across the board. And the other thing is that WTO is a very interesting organization, when you put door around… when you put 200 government officers in one room, ask them to agree on something: it’s impossible. I can never imagine that they can agree on something together. Business should be decided by business people. So we believe eWTP should be something that the business people sit down together, agree on something, negotiate on something and get endorsement from the government.

ARS: Let’s talk a little bit about Alibaba and the model itself, because I think for many in the West, if you will, they don’t necessarily understand it. And to the extent that… to the extent that I could try to compare it to Amazon, which I know you think is an unfair comparison. One of the things that’s so fascinating to me is that Amazon and Jeff Bezos have pursued what might be described as a very asset heavy business model. They’re buying airplanes, they want to own the entire supply chain from beginning to end. And Alibaba has effectively an asset like business, it is very much in terms of the retail piece of this, the opposite. You don’t want to own the warehouses, you don’t want to own the logistics companies. How do you think about that? Is Jeff Bezos right or are you right? And is there going to be a meeting in the middle?

JM: I hope both are right. And because the world can never have a one model. If the world has only one correct model, the world is too boring. We need to have all kinds of models. And the people who do the model should believe in the model and I believe what I do, right? The difference between Amazon and us, Amazon is more like an empire; everything they should control themselves… buy and sell. And our philosophy is that we want to be an ecosystem. Our philosophy is to empower others to sell, empower others to service, empower… make sure the other people are more powerful than us, making sure with our technology, our innovation, our partners, our 10 million small business sellers, they can compete with Microsoft, IBM. Our philosophy is that we think using Internet technology we can make every company become Amazon.

Remember one thing, today for ourselves, our GMP last year is more than $550 billion US. To hire people deliver for us we need 5 million people. So how can we hire 5 million people deliver things for us, to deliver the things we sold? The only way we do is empower the service companies, logistics companies, making sure they’re efficient, making sure that they make the money, and making sure that they can hire more people.

ARS: Without owning the whole chain, can you do it as effectively —the idea that you’re having — watching Amazon being able to deliver things now within hours literally?

JM: We made 125 cities deliver within one-day last year. Imagine ten years ago, deliver one thing from Beijing to Hangzhou takes about 8 days. Now you could deliver things from Beijing to Inner Mongolia or some city within 12 hours. It’s improving. You can never expect these things happen within 24 hours, we have patience. So, I think, can you imagine that within the 11/11 Singles’ Day we sold $17 billion and by delivering more than 600 million packages within 3 days. This is happening. And this is what we feel proud of, it’s not how much money we make, it’s not how powerful we are. We think because of the technology we can make the technology very inclusive, that every small companies can use it. This is my dream. Because I started my first business in 1992 in China as a small business. In order to borrow money $5000 from bank took me three months to acquire, still failed. So difficult to be a small business. Today with the technology we can empower them. This is something I want to do.

ARS: One of the critiques as you know and it continues to linger around Alibaba is the piracy issue. There’s an IP issue and it’s an issue all over China but you take the brunt of a lot of it. How much progress have you made in your mind and how do you think about some of the regulatory bodies in other countries, including the U.S. that continue to criticize Alibaba for these issues?

JM: First, when we start doing this business, as a business like this size, you have to take all the criticism. You have to listen what is right, what is wrong. And second, as an e-commerce when you put 10 million small businesses, empower them to sell, we do not like Amazon buy. We cannot check — even you buy, when you buy $55 trillion or $550 billion you cannot check every product. So, the model itself and the e-commerce itself may have a lot of these frauds. And third, I would say in the past 17 years, we are the leader of these anti-privacy issues… protect IP.

But the second, we are Internet companies, we do not have the law enforcement. We find this guy is selling product, cheap fake products, we delete them, we cannot arrest them. But with a huge progress, last year alone, we put 400 people into jails. We deleted 370 million fake products listing on our site. I would say we are the leaders and we are using the big data to check out who’s buying, who’s manufacturing, who’s selling, what is the address. So now I’m happy about the whole world, especially China, all the government organizations, start to realize the issues. So I would tell you good thing is that today when you go to those criminal groups, which I call them criminals, those fake products manufacturers, sellers.

ARS: You praise the quality, though, of some of these?

JM: I would talk about later, right? Those criminals said they can go anywhere but not on [incomprehensible], because using our data would trace where they are, who they are, what’s the address, what the amount. And we’ll deliver this to the police station and are working with them to arrest them. The quality issue is something I want to share with people. It’s not by praising the fake products. I want to say that for so many years, those branded companies you have to be very careful because the fake products, their quality improving is scary. That is the difference between us, because when you find the guys, the thing the people said this is fake and you have to find people — you have to find a third party institution to check if it is a fake or not. We find, sometimes, the quality is better.

And I tell you another thing is even scarier, a lot of… there is a one branded company. He said we are selling fake products, we check everything. It’s nothing wrong. So we said, what is wrong, so we buy the products from his fake shop and deliver to them. This is a fake. You know what I am saying. We buy, shop… buy things from the fake shop of this brand and deliver back. It’s the fake products they say. So, it’s a big confusing. This is fighting against the fake products, it’s the war against the greedy, human greediness It’s not easy. You cannot finish it. But you have to continue to fight. And I want to say we put 2 thousand people, 1 billion RMB every year fighting again that, we can never finish the work within two years. But I’m happy where the people criticize me, criticize us, the most important is that we are happy about the progress we’ve made.

But if people praise me, so you know, when people say, ‘Jack, you are wonderful’, I know I am not wonderful, right? Alibaba is great, we’re not great. We’re just a 17-year old company. But when people say ‘you’re doing nothing’… no, we’re doing a lot of things but you don’t have to argue, you don’t have to debate. You do what you believe.

ARS: One of the things you mentioned was using big data on the piracy side, but the other thing that you’re using a lot of that big data to do is provide credit and effectively banking the unbanked. And what’s so fascinating to me and I hope you’ll share it, as we’ve talked about the Sesame credit, how you are able to use big data effectively to figure out who deserves credit and who doesn’t in a marketplace where some of these people had no credit history before?

JM: OK. Well, before we do that, we had a system called teach computers to learn how to anti-fake products, teach the computers learn how to… because we have Alipay, a lot of people try to use all the ways to cheating. So we teach the computer how to do that, the cheating things. So we’ve been doing that for 10 years, until now there is called artificial intelligence, because we’ve been doing that. We are a data company. Eight years ago we said to ourselves: Alibaba should not be an e-commerce company, we should be a data company, because we have the data from consumers, we have data from the manufacturers, we have data from the logistic companies and transactions. But we think how we can make the data really beneficial to the society.

What China need is that we have a lot of great people, all the small business, they have a very… they’re very credible but we don’t have a credit system for that. So how can we use a credit rating system based on the data we have to giving everybody a Sesame rating system? That is so powerful in the past four years, because every individual, every small business, if they have been using our services, we’ve given a rating system. So we’re giving loans. In the past five years we’ve given 5 million business loans. They only borrow $5000. Three minutes, we can decide whether we should give you money, how much we want to give. Within one second, the money will be in account and zero people touch. So we call it three-one-zero. And even today the Sesame rating system becomes people dating. The mother-in-law wants to say, ‘Hey, you want to date with my daughter? Show me your rating system of the Sesame card?’

So it’s so funny. We go to the… people want to rent a car, people want to rent a bicycle, they will say, ‘Show me your Sesame card? Umm, good’, because if they do not pay back, if they do not fulfill, the rating system is going to low down and they can never rent a house. This is what we want to build up the system, that if you sell or buy fake products, the Sesame cards will show.

ARS: I am going to open up to questions but a final one for me. There’s been a lot of speculation that you’re going to get into the business of Hollywood. Your name has appeared Alibaba Group at the beginning of a couple of big films recently. What is the ambition for Alibaba in the entertainment world?

JM: The beginning like this several years, every five years we have a review for our strategy. Now our strategy is always look at the 30 years and 10 years. Every strategic decision we make, we have to ask one question: Does this decision we make solve society problem? Because we believe the bigger social problem you solve, the more successful you are. So if we do… this cannot solve any social problems, we don’t do it.

Second, is this project going to be successful in 10 years? If this is going to be successful in 10 years, let’s do it. If it’s going to be successful in one year or one month, then I will say forget about it. Because why you can be successful in one year or one month. So we all have to fulfill it and five years ago we had a big debate about ten years later, twenty years what are the things the China society, the world want. So we say happiness and health. 2H strategy: happiness and health. We believe Hollywood, the movie industry bring people happy, because today nobody is happy. Rich people are not happy, poor people not happy. At least when I watch a movie, I feel happy, right? So I think we should partner with the Hollywood, especially like a lot of… we have a different way of living and in China, the movie, we have a lot of heroes. But China movies, heroes always dead, the American movie, hero never die. If all the heroes die, who want to be the hero? So, my movie, I want to make the hero live.

So this is… this is I think we should learn a lot and it’s only about two years. So we have another eight years to go. I want to make our company that it’s not e-commerce. It’s something that’s giving people inspirations, giving people… because I learned a lot. For example, we will see that my favorite movie Forrest Gump. You know life is tough. This is I learned and that inspired me. That is why when people call me crazy, stupid in the past 17 years, you’re crazy, you’re doing something that will never work, you are stupid. How can you do that model? Amazon, this model; eBay this model; why Alibaba, this model? I told myself ‘Forrest Gump said, go ahead, never care about what the other people’. And the other thing, Forrest Gump said nobody makes money out of catching whales, people make money by catching shrimps. So we serve small business.

ARS: Fair enough. Jack Ma, we should probably end it there. Because we’re going to run out of time. But I thank you.

JM: Thank you.

ARS: Thank you so much for the conversation. I promised we’d sneak in a question or two, but we literally have two minutes, so they’re going to get upset with me. And if you have a question and we’re going to have… I’ve got to beg you to do it within literally a second to go for it right there.

Audience question: Ok, I’m not going to say that China and USA is going to have a trade war. But the Trump administration can trouble China in term of trade agreement [incomprehensible]?

JM: Well I don’t think so. I think China and the U.S. should never have a trade war, we’ll never have a trade war. And I think we should give President-elect Donald Trump some time and he’s open minded. He’s listening. And I think the war… it’s so easy to launch a war. But it’s so difficult, almost impossible sometimes to terminate a war: Iraq war, Afghanistan war. Is that finished? No. Trade war, I believe one thing, when trade stops, the war starts. Trade is something that people start to communicate. Trade is something people exchange culture and value. And I would be happy, if China-USA agree on something and Alibaba business model destroyed, I would destroy Alibaba model by stopping the war beating, because how can you imagine the first largest economy of the world, second largest economy of the world have a trade war? It’s going to be a disaster for two countries and for the world. If we can — anybody can do something to stop it, do anything to stop it.

ARS: Did you have a reaction to Trump and the situation with Taiwan and how he’s thinking about that?

JM: Well, Taiwan, I think this is not something about government. This is not something about business, it’s something about the people. If Taiwan issue is the population, if you do Taiwan issue, it’s like against 1.4 billion people. So this is another issue. So we’re talking about trade. We’re not talking about Taiwan.

ARS: Very politic. Let’s take one final question if we can. I think we can steal one more in. Yes sir, right there.

JM: I’m not a politician.

Audience question: How do you assure you are not messing up people’s life and you’re not dictating the whole credit kingdom or the system, because now you are the decision makers, you are the rule maker?

JM: OK. First, I’m not sure, people say oh, this is uncertain world. Every day is uncertain. The only certain day was yesterday. I’m not sure about that in the future, I think I would dictate, I would be stupid. That’s why I should retire early when I’m young. That is why I have a lot of things that I dream, I want to do, I want to be a philanthropist, I want to be a teacher, I want to go back to school. I want to build the environment. And the world is so wonderful, why should be the CEO of Alibaba all the time? I’ve come into this world, not to work. I want to come to this world to enjoy my life. I don’t want to die in my office. I want to die on the beaches.

ARS: It’s a wonderful message. Jack Ma, thank you for the conversations.

JM: Well, can I say one last message?

ARS: Yes, please, please!

JM: I just want to give my last advice to any people here that every government should pay attention to: the next 30 years are critical for the world. Every revolution, technology revolution takes about 50 years. The first 20 years, technology company; next 30 years, the implication of the technology. Focus on the next 30 years. The first 20 years, eBay, Amazon, Facebook, Alibaba, Google. Good. The most important is that make the technology inclusive, make the world change. This is 30 years. Next, pay attention to those people who are 30 years old, because those are Internet generation, they would change the world, they are the builder of the world.

Third, that let’s pay attention to the companies who have fewer than 30 employees. So 30 years, and 30 years old and 30 employees, that we can make the world much better.

ARS: Jack Ma, thank you very very much.

JM: Thank you. ■

 

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