MCLC: unlikely ascent of Jack Ma

[Denton, Kirk]

MCLC LIST
From: kirk (denton.2 at osu.edu)
Subject: unlikely ascent of Jack Ma
***********************************************************

Source: NYT 
(5/7/14):http://www.nytimes.com/2014/05/08/technology/the-unlikely-ascent-o
f-jack-ma-alibabas-founder.html

The Unlikely Ascent of Jack Ma, Alibaba’s Founder
By NEIL GOUGH and ALEXANDRA STEVENSON

HONG KONG — The first time Jack Ma used the Internet, in 1995, he searched
for “beer” and “China” but found no results. Intrigued, he created a basic
web page for a Chinese translation service with a friend. Within hours, he
received a handful of emails from around the world requesting information.

It was an introduction to the power of the web that would drive Mr. Ma to
create the Alibaba Group four years later.

Today, Alibaba is China’s largest online retailer, with merchandise
volumes that lag only Walmart, worldwide. The e-commerce giant is also
moving forward with plans for a stock sale that is expected to rival
Facebook’s $16 billion offering two years ago. If successful, the deal
would help vault Alibaba and Mr. Ma, who owns 8.9 percent of the company,
to the highest ranks of technology industry titans.

Mr. Ma’s ascent to dot-com billionaire is remarkable for not following the
traditional script. Unlike Facebook’s Mark Zuckerberg, Apple’s Steven P.
Jobs or Microsoft’s Bill Gates, Mr. Ma, 49, has no background in computing
and professes not to understand technology. Raised during China’s Cultural
Revolution, Mr. Ma began his career as an English teacher.

Instead, his role at Alibaba has always been as the company’s main
strategist, a flamboyant motivator in chief to his staff and a relentless
opponent to those who have competed against him. Alibaba’s two main
websites, Taobao Marketplace and Tmall.com, now account for 60 percent of
the packages shipped through the Chinese postal system.

“He effectively represents millions of people who now depend on Alibaba
for their livelihood,” said Duncan Clark, who has known Mr. Ma since the
late 1990s and is the chairman of BDA China, a consulting firm in Beijing
that focuses on the digital and consumer sectors. “That’s a constituency.
He’s a politician with a small ‘p."’

He has also proved to be a serial disrupter — an outsider with a knack for
creating new markets by reimagining old industries like retailing or
finance. Alibaba and Mr. Ma are shaking up some of China’s most staid,
state-dominated industries, starting ventures in banking and finance and
mobile phone communications. He is even moving into the department store
business and film production.

“Innovation in many industries has been triggered by outsiders,” Mr. Ma
wrote last June in an opinion article in The People’s Daily, the official
newspaper of the Communist Party — an unusual move for a private sector
entrepreneur.

He was putting the country’s state banks on notice. Publication of the
article coincided with the start of Yu’e Bao, a high-interest money market
product that Alibaba initiated to attract investment from its customers’
online payment accounts. As of February, 81 million people had signed up
for the product, which had $40 billion in assets under management.

“The finance industry needs a disrupter, it needs an outsider to come in
and carry out a transformation,” Mr. Ma wrote in the article.

He brings his own flair to the role.

At a 2009 stadium rally to celebrate the anniversary of Alibaba, he
emerged on stage wearing a waist-length blond wig, a black leather jacket
with red flame and metal stud accents, sunglasses and lipstick. Raising a
microphone, he ripped into a stilted rendition of “Can You Feel the Love
Tonight?,” eliciting cheers from the crowd of 16,000 employees.
Since the beginning, Mr. Ma has shown a knack for thinking differently.

At a time when few Chinese households had their own computers, Mr. Ma in
1995 made the decision to leave teaching to set up an online business. In
his hometown, Hangzhou, an eastern city about 100 miles from Shanghai, Mr.
Ma established one of the country’s first officially registered Internet
companies, a business index site called China Pages. Cui Luhai, who was
then running a computer animation business, met with Mr. Ma at the China
Pages office to learn more about his plans for the website.

“I can still remember the first scene I saw when I walked into his
office,” said Mr. Cui, today a lecturer in new media at the China Academy
of Art. “It was a pretty empty space with only one desk set up in the
middle of the room. There was only one very old PC desktop surrounded by a
lot of people,” he said. Mr. Ma, it turned out, had spent much of his
money on registering the business and appeared to have little money left
for hardware.

Mr. Ma struggled in his early efforts to get government support for his
new venture.

In a memoir-style documentary about Alibaba and Mr. Ma called “Crocodile
in the Yangtze,” Porter Erisman, a Mandarin-speaking American who worked
at Alibaba from 2000 to 2008, presents footage of one of many visits Mr.
Ma paid to officials in Beijing in the mid-1990s. Mr. Ma appears in a
button-down blue denim shirt, sitting over a boxy old laptop computer in a
smoky government office and explaining his business to a bespectacled
official in jacket and tie.

“Nowadays, foreigners can use computers from any desktop to find products
from around the world,” Mr. Ma explains to the official. “They can order
directly from Hong Kong, Taiwan, Singapore, but they can’t order anything
from China because right now there’s nothing from China on the Internet,”
he says. “I hope the various departments will support us.”

But Mr. Ma’s pitches were rebuffed. He soon left China Pages in 1997 to
work at a unit of China’s Commerce Ministry helping to create websites. In
early 1999, he struck out on his own again, to start Alibaba.

The company’s first site, Alibaba.com, was a business-to-business
marketplace that connected Chinese exporters with overseas buyers. Unlike
most Chinese websites of the day, it was not a clone of Western companies.

In 1999, the company lured Joseph C. Tsai, a Taiwan-born former lawyer who
had been educated at Yale and was working in a private equity business in
Hong Kong. Together, Mr. Ma and Mr. Tsai brought in Goldman Sachs and
SoftBank as investors.

Early on, Mr. Ma honed his skills as a strategist. He began Taobao, the
company’s consumer-to-consumer platform, in 2003, at a time when eBay’s
Chinese unit dominated the business. Fighting for market share, Mr. Ma
decided to keep Taobao free, although it was hemorrhaging money.

“With eBay, he liked looking foolish and stupid,” says Mr. Erisman, the
filmmaker. “From a Wall Street investors’ perspective, he was willing to
run Alibaba into the ground to defeat eBay — the only thing worse than a
smart competitor is a crazy one who is willing to just spend all their
money with no hope of making profit.”

It worked. At a news conference in October 2005, Mr. Ma told reporters
that Taobao had gained nearly 70 percent of the market share for online
shopping in China. “Pretty soon we’ll be the only one left. EBay’s days
are numbered,” he said. In 2006, eBay announced it was effectively leaving
the China market and folding its operations into an Internet company
controlled by Li Ka-shing, the Hong Kong billionaire.

“I had always wished that I was born in a period of war. I could have been
a general,” Mr. Ma once said of his youth. “I thought about what I could
have achieved in war.”

Mr. Ma has had his share of boardroom battles. In 2011, an initial
partnership with Yahoo formed in 2005 was briefly derailed. Mr. Ma
transferred one of Alibaba’s most profitable businesses, the online
payments unit Alipay, into a separate business under his control without
formal approval from Alibaba’s board, where SoftBank and Yahoo had seats.
When news of the transfer broke in May 2011, it brought an angry response
from outside investors in Alibaba and Yahoo.

Mr. Ma argued that it was necessary to get a government license for
Alipay, because Beijing didn’t want foreign investors controlling online
payment businesses in China. “If Alipay were illegal or didn’t get the
license, Taobao would be paralyzed,” Mr. Ma said at the time. “If Taobao
were paralyzed, how could Alibaba reform and develop?”

Alibaba, Yahoo and SoftBank settled their differences over the issue, but
not all shareholders were pleased. The hedge fund manager David Einhorn
pulled his investment in Yahoo, saying the spat “wasn’t what we signed up
for.”

Mr. Ma displays few regrets for his aggressive approach. In regard to the
2011 episode, he compared his decisions with those made by Deng Xiaoping,
China’s paramount leader during the government’s deadly crackdown on
Tiananmen Square protesters on June 4, 1989, which is widely referred to
in China as the “6/4 incident.”

“As a company C.E.O., no matter if it’s the Alibaba incident, no matter if
it’s splitting off Alipay, at that point, it’s just like Deng Xiaoping
during 6/4,” Mr. Ma was quoted as saying in Hong Kong’s South China
Morning Post in July. “As the country’s highest decision maker, he
demanded stability. He needed to make this kind of cruel decision.”

As the company moves toward an initial public offering, Mr. Ma seems
focused on his legacy.

He remains a hands-on executive chairman and oversees strategy at Alibaba,
but in May 2013 he stepped down from his role as chief executive. The next
day, he announced that he had been appointed the chairman of the Nature
Conservancy’s board of directors for China. He has grown increasingly
concerned over rampant pollution of the soil and water in China, something
he has partly blamed for his father-in-law’s recent death from cancer.

In late April, Mr. Ma and Mr. Tsai, a co-founder, announced that they
would donate shares representing 2 percent of Alibaba’s stock — a grant
worth several billion dollars — to charitable trusts that would finance
initiatives in the environment, medicine and education. Such a large
donation is seldom seen in China, and the move was cheered by other
prominent philanthropists, including Mr. Gates of Microsoft, Warren E.
Buffett and Michael Bloomberg, the former mayor of New York.

Mr. Ma “wasn’t the type of person who starts a business keeping 90 percent
of the equity for himself and really hoarding all of the wealth and
riches,” said one Western executive who has known him for over a decade,
declining to be named because of his company’s policy against speaking
publicly about business contacts.

“In the earliest days, when Alibaba.com was first forming, he was giving
equity to all of the high school students who were working with him,” said
the executive. “He was bringing everyone along.”

Shanshan Wang contributed research from Beijing. Neil Gough reported from
 Hong Kong, and Alexandra Stevenson from New York.