Jack Ma, founder and executive chairman of Alibaba Group, participated in the World Economic Forum Annual Meeting held on January 17-20 at Davos, Switzerland where he shared his insights on the future of online trade and globalization.
Key Topics Discussed with Moderator Andrew Ross Sorkin:
- Theory on where the US economy might have gone wrong
- Difference in Amazon and Alibaba’s business model
- Measures being taken against counterfeit products
- Sesame Credit System
- Potential US – China trade war
Right off the bat, Sorkin asked Ma about his meeting with Donald Trump earlier this month. Ma said it was productive and much better than he thought.
“We spoke about how we can help small American businesses sell their products in China and Asia through our network, which can create a lot of jobs for them,” said Ma in regards to his commitment to create ten million American jobs over the next five years.
Note: Minor edits have been made to the transcription for better clarity.
Jack Ma’s Views on Globalization
Jack Ma: First, I think thirty years ago when I was just a graduate from university, I heard America had a wonderful strategy. They outsource manufacturing jobs to Mexico and China and service jobs to India. There is a book called The World Is Flat by Thomas Friedman and I think it’s a perfect strategy. You know the Americans said – we just want to control the IP, the technology, the brand and leave the lower end jobs to the rest of the world. Great strategy!
Second, the American international companies made millions and millions of dollars from globalization and then the top one hundred companies in America.
I remember when I graduated from university, I tried to buy the Motorola beeper that cost me 250 USD. My pay at that time was 10 USD a month as a teacher and the cost of making that beeper was only 8 USD per chip. So for the past thirty years, IBM, Cisco and Microsoft made tons of money and the total profit they made is much more than the four largest banks in China put together.
Their market cap grew 100X in the past thirty years but where did the money go? This is what I’m curious about because as a businessman,
I have always cared about the balance sheet – where the money is coming from and where the money is going.
Over the past thirty years, the Americans had 13 wars and spent 40.2 trillion USD. What if they spent a part of that money on building up the infrastructure, helping the white-collar and the blue-collar workers? No matter how strategically good it is, you’re supposed to spend money on your own people. Not everybody can pass Harvard so we should spend money on those people who are not good at schooling.
When I was young, all I heard about America was Ford, Boeing and those big manufacturing companies. The last 10-20 years, all I heard about is Silicon Valley and Wall Street. And what happened? The 2008 financial crisis wiped out 19.2 trillion USD in the US alone and destroyed 34 million jobs globally. So what if the money spent on Wall Street and the Middle East was spent in the Mid-West of the US, developing the industry there? That could have changed a lot of things. So it’s not that the other countries stole jobs from you guys, it was your strategy and you did not distribute the money and things in a proper way.
Moderator: Now we’re having backlash as a rebuke of globalization that is happening in the United States. President Xi was here yesterday and quoting Abraham Lincoln. What did you make of that?
Jack Ma: I would say that globalization is great stuff. It’s the US and the developed countries that taught us how to do it. I remember in 2002 before China joined the WTO, everybody in China was worried including me! What if all the international products came to China and destroyed our industry resulting in the loss of jobs?
I believe globalization is good but it needs to be improved. I believe it should be inclusive. Why? Because in the past thirty years, it was controlled by sixty thousand big companies and a hundred years ago, it was controlled by several kings and emperors. What if in the next thirty years we can support millions of small businesses to get into cross-border?
Moderator: Do you think 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?
Jack Ma: Yes, I think the world needs new leadership but in my understanding, leadership should be about working together. It is not necessary to have one leader specifically teach us what to do but it is more about forming partnerships. As a businessman, I feel very proud about President Xi’s statement calling for joint efforts globally to share prosperity. As a Chinese, I am happy about his commitment to the world’s second largest economy.
This is the first time I have heard a Chinese leader make a number commitment stating that in ten years we are going to import 8 trillion USD. This is exciting because China is transforming from exporting to importing. If this concrete number can be fulfilled, it will be a huge change to China and the world.
Moderator: Don’t you think 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, compared to countries that are ‘developed’?
Jack Ma: Well, firstly, the WTO rule is not made by China. That is something I want to change because some rules are designed for big companies only. China definitely benefits a lot from opening up its market, which has contributed to its growth over the last 10 years.
Moderator: The Chinese market did not open fully. American businesses that want to effectively go into business in China have a very difficult time and need to partner actively with a company that’s there already.
Jack Ma: This is why I said that China has problems just like the world does. I feel confident after President Xi’s talk that he is ready to open up the Chinese market more to the world. I suggest that we should solve the problem through a business community and negotiation. China joined WTO for over twenty years, however, as a business, a country and the world, certain things need to be reviewed and stopped.
Moderator: You’ve been calling for something called EWTP. What is that?
Jack Ma: This is what I was talking about. The WTO was great but it was mainly designed for developed countries and big companies. There’s no opportunity for small business. We want to build up an EWTP – an Electronic World Trade Platform – to support young people, small businesses. Through mobile phones and the internet, they can sell and buy across the border.
The other thing is that the WTO is a very interesting organization where two hundred government officials are put together in one room and asked to agree on something. It’s hard to imagine that they can all agree on something together.
We believe business should be decided by business people so the EWTP should be something where business people sit down together, agree and negotiate on things then get an endorsement from the government.
The Key Difference in Alibaba and Amazon
Moderator: Let’s talk a little bit about Alibaba and the model itself because many in the West don’t necessarily understand it. I could try to compare it to Amazon, which I know you think is an unfair comparison. One of the things that is so fascinating to me is that Amazon and Jeff Bezos have pursued what might be described as a very asset heavy business model.
They are buying airplanes, they want to hire supply chain from beginning to end and Alibaba is the opposite of Amazon where you don’t want to own the warehouses and logistics companies. What do you think about that? Is Jeff Bezos right or you and is there is there going to be a meeting in the middle?
Jack Ma: I hope both are right because the world can never have just one correct model. That’s too boring.
Amazon is more like an empire where they want to control everything by themselves. Alibaba’s philosophy is to be an ecosystem.
The goal is to empower others to sell, serve and make them more powerful than us. With Alibaba’s technology, innovation, partners and ten million small business sellers, they can compete with the likes of Microsoft and IBM. Our philosophy is that by using internet technology, we can make every company become Amazon.
Remember that our GMV last year was more than 550 billion USD. We needed five million people to deliver the sold goods for us. So how can we do that? The only way we do that is by empowering service companies and logistics companies to make sure they are efficient and they are making money to be able to hire people.
Jack Ma’s Dream
Moderator: But without owning the whole chain, can you do it as effectively? The idea that you are watching Amazon being able to deliver things within hours literally.
Jack Ma: We made deliveries to 125 cities within a day last year. Imagine, just ten years ago, a delivery from Beijing to Hangzhou took eight days. Now it can be done within 12 hours. It is improving. You cannot expect these things to happen within 24 hours. We have patience. Do you know that on 11.11 single’s day, we sold 17 billion USD and delivered more than 600 million packages within three days? This is happening and we are proud not because of the amount of money made and how powerful we are but because of the inclusive technology that every small company can use. That is my dream.
I started my first small business in 1992 in China and it took me three months in order to borrow 5000 USD from the bank. It is so difficult to be a small business. We can empower the SME’s with technology. It is something I want to do.
Measures Against Counterfeit Products
Moderator: One of the critiques which continue to linger around Alibaba is the piracy issue. There’s an IP issue and it’s an issue all over China but it is you who takes 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 US that continues to criticize?
Jack Ma: First, when we start a business of this size you have to take all the criticism. You have to listen to what is right and wrong.
Second, in ecommerce, when you put 10 million small businesses and empower them to sell 550 billion USD, every product cannot be checked. We do not buy like Amazon does. The ecommerce model has its own flaws.
Third, I would say that in the past 17 years, Alibaba has been the leader of this anti piracy issue protecting IP but we are internet companies and do not have law enforcement on piracy. If we find that someone is selling fake products, their account is deleted but we cannot arrest them. However, there is a huge process involved where we are working with the police to get them arrested.
Last year alone, we put 400 people in jail. There are 370 million fake products listed on our website. I would say we are the leaders using data to find out who is buying, selling and manufacturing fake products. I call these people criminals. They can sell anywhere but not on Taobao or Tmall because using our data we would trace who and where they are then deliver their contact details to the police. I’m happy that the world, especially China, and all the government organizations have begun to realize the issue.
On the Quality of Counterfeit Products
Jack Ma: It’s not that I’m praising the fake products. I’m stating that the quality of fake products in getting better. When people say something is fake, we have to reach out to a third party institution to check whether the quality is fake and sometimes it turns out it is even better than the branded quality. The scary thing is that there is one branded company that told us they are selling fake products because they found nothing wrong with the quality. So we bought something from their flagship store but when we returned it, they did not accept the goods saying its fake.
So it is all confusing. The war against counterfeit goods and greedy humans is not easy but you have to continue to fight. We have put 2000 people and one billion RMB fighting against it. The war cannot finish in two years but we are happy with the progress we have made despite the criticism. Some people praise me saying I’m great but we are not great. Some people say we are doing nothing but we are doing a lot of things.
We do not always have to argue and debate about what people are saying. Just keep doing what you believe in.
Sesame Credit System
Moderator: One of the things you mentioned was using big data on the piracy side but the other thing that you used a lot of the big data to do is to provide credit and banking the unbanked. How are you able to use big data effectively to figure out who deserves credit and who doesn’t? And in a marketplace where some of these people had no credit history before?
Jack Ma: Well before we did that, we had a system called ‘Teach Computers’. We had Alipay and lot of people tried to cheat with that so the system taught computers how to catch that. We’ve been doing what is called artificial intelligence for ten years now.
We are a data company.
Eight years ago we said to ourselves, Alibaba should not be an ecommerce company but a data company. That’s because we have data from the consumers, manufacturers, logistics companies, and transactions. But to make all this data beneficial to the society, China needed a credit system for the many credible small businesses.
Creating a rating system based on the data we have has been so powerful in the last four years. Every individual and every small business that used our services were given a rating system so in the last five years, we’ve given five million business loans. They only borrow 5000 USD and within three minutes we can decide whether we can give the money and how much.
The sesame rating system has even become useful for other aspects such as dating where the mother in law says if you want to date my daughter, show me your rating system of the sesame card. (Laughs) It is so funny that even to rent a car or house now you are asked to show your sesame card because if you do not pay back, your rating will go down and you may never be able to rent a house for example. We want to build the system in such a way that the card will also show if you are selling fake products.
Moderator: There’s been a lot of speculation that you’re going to get into the business of Hollywood. Your name Alibaba Group has appeared at the beginning of a couple of big films recently. What is the ambition for Alibaba in the entertainment world?
Jack Ma: In the beginning, we reviewed our strategy every five years. Now our strategy is to look ahead ten to thirty years. With every strategic decision we make, we ask the follwoing questions:
- What society problem will this decision solve? This is because we believe that the bigger social problem you solve, the more successful you are. If it does not solve any social problems, we don’t do it.
- Is this project going to succeed? If this is going to be successful in ten years, we’ll do it. If it will take one year or one month to succeed, we won’t do it.
Five years ago we had a big debate in China about what the Chinese people and the world will want in the next ten years- Happiness and Health – Two H Strategy. We believe the movie industry brings people happiness. Today neither the rich nor the poor are happy but at least when I watch a movie, I feel happy.
So I think we should partner with Hollywood. You know in China we have a different way of living. The heroes always die at the end of the movies here but in American movies, your heroes never die. So in my movie, I want to make the heroes live as well. It has just been two years for this so we still have eight years to see how it goes. I want to make our company one that inspires people.
I learned a lot from my favorite Hollywood movie Forrest Gump. Life is tough and it inspired me to be hard working. That is why when people call me a crazy and stupid questioning if Alibaba will work, why it has a different model from Amazon and eBay, I just go ahead anyway. I told myself Forrest Gump said to never care about what other people say and just went ahead.
He also said no one makes money by catching whales. They make money by catching shrimps. So we go after the small businesses.
Potential US-China Trade War
I think China and the US should never have a trade war. I think we should give the President-elect some time as he’s open minded. He’s listening. I think it is not so easy to launch a war but it is so difficult, almost impossible sometimes to terminate a war. Iraq and Afghanistan war, is that finished? No! I believe one thing that trade stops the war starts. Trade is something that makes people communicate, exchange culture and values. I would be happy if China and USA agreed on war.
I would destroy the Alibaba business model if that could stop the war. Because how can you imagine the world’s first and second-largest economy having a trade war.
It’s going to be a disaster for both the countries and for the world. If anybody can do something to stop it, they should.
Moderator: Did you have a reaction to Trump and the situation with Taiwan and how he’s thinking about that? (This question is in relation to the complaints in Beijing)
Jack Ma: I think this is not the something about the government. This is not something about a business either but it is something about the people. The Taiwan issue is about going against 1.4 billion of the population. So this is another issue. We’re talking about trade not about Taiwan.
Audience: With the Sesame Credit score, how do you assure you are not messing up peoples’ lives and you are not dictating the whole credit system?
Jack Ma: I’m not sure. People say this is a very uncertain world. The only certain day was yesterday. I’m not sure what I will be like in the future. That is why I want to retire early when I am young. I have a lot of things I want to do – be a philanthropist, a teacher, go back to school. The world is so wonderful, why should I be the CEO of Alibaba all the time?
I have not come into this world to work. I want to enjoy my life and not die in my office. I want to die on the beaches.
Moderator: Thank you Jack Ma for the wonderful message.
Final Advice from Jack Ma at the World Economic Forum
Every government should pay attention to the next thirty years, which are critical for the world. Every technology revolution takes about fifty years. The first twenty years technology companies and the next thirty years, the implication of the technology. My advice is to focus on the next thirty years.
- The first 20 years, eBay, Facebook, Google, Alibaba are good. The most important thing here is to make technology inclusive and make the world change.
- For the next 30 years, pay attention to those that are 30 years old because they are the internet generation. They will change the world as they are the builders of the world.
- Third, pay attention to companies that have fewer than 30 employees.
30 years, 30 year olds and 30 employees – that will make the world much better.
Editing by Ruchipha Thakral
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