TheMarketForIdeas

Ali Baba is an Arabian folktale hero, conjured up by Scheherazade in one of her 1001 tales, “Ali Baba and the Forty Thieves”. But how do you get from this fairy tale character to naming a company after him? Perhaps it has something to do with an entrepreneur’s knack for knowing how to say “Open, Sesame!” when it comes to discovering a company’s hidden treasures and “Close, Sesame!” to keep them safe. By the way, staying out of sight is Jack Ma’s current ruling concern. The Chinese capitalist-entrepreneur has been living in Tokyo for the past six months, after communist authorities in Beijing tightened their grip on what was becoming a much too liberal domestic high-tech sector.

Meanwhile, the “Singles Day” shopping event this year generated more than $56 billion, making Alibaba one of the largest online retailers in China. The highest order rate was approximately 583,000 per second. All those sells amount to an impressive personal fortune that perquisites looking for and then looking after. Dangerously enough a large treasure trove also attracts unwanted attention. Now the Almighty Party is looking into Mr. Ma’s affairs.

Jack Ma’s story can also be looked at from another angle. Instead of complaining about Chinese goods and services taking over the global market, we should do something much more useful: taking stock in the lessons people like Ma offer.

“On the road to success, you will not find people who complain”

Ma Yun, also known as Jack Ma, was born in Hangzhou, in the People’s Republic of China, on 10 September 1964. Jack Ma’s family had a hard time making ends meet. He graduated from college in the town where he grew up in. Since a young age, he studied English, planning to become a teacher. While still a teenager, Ma started working as a tour guide in Hangzhou, ferrying around foreigners.

Ma tried to enter Hangzhou Teachers College twice. Each time he was rejected due to his poor mathematical skills, but the third time it was a charm. After having two applications turned down in 1980 and 1984, he finally got his Bachelor of Arts in English in 1988. He taught English at what is now called the Institute of Electronics and Engineering at Hangzhou Dianzi University from 1988 to 1993. In 1994, he started his first business, Haibo Translation Agency, which offered interpreting and translating services.

“Giving up is the worst idea”

Once Ma recounted the first time he connected to the Internet (using a slow dial-up connection). He had his friends came over to his house for the occasion. They drank, played cards, and watched television for three and a half hours while half the page was loaded. But Ma was proud because he had shown them that the Internet is real. Maybe this is where the idea came from that “giving up is the worst thing you can do” or that “the real opportunities are the ones no one can see”.

This early contact with the world wide web was not for naught. Ma became a household name in information technology and making money through the Internet. His name is linked to the platform called Alibaba Group, which he helped build and still runs. And he is the first businessman from mainland China to be on the cover of Forbes.

Ma is, without a doubt, one of the wealthiest people in all of China. Bloomberg estimated his net worth at $50.5 billion in the first month of 2018. In 2017, Fortune magazine named him the second most powerful person in the world, while Forbes ranked him 36th on the list of the world’s richest people. But, eventually, these are only numbers, big numbers, yet volatile numbers, especially in the epoch of high-speed capital flows and quantum-driven stock exchanges.

“People will not remember what you say, but they will definitely remember what you did”

In 1995, he went to the United States to work as a translator for a group of Chinese tourists who were visiting the country. There, he got a chance to meet people who used the Internet and learned about how this environment will change in the future. He also started China Pages, one of the first websites in China and one of the first companies in China to offer Internet services. He continued working for the company for two years before leaving due to competition coming from Chinesepage, which was started by Hangzhou Telecom, a telecommunications services company.

In 1998, Ma established an online business, headquartered in Beijing, with the help of the Ministry of Commerce and Economic Cooperation. Meanwhile, he became concerned that if he continued to work for the government, he would not be able to benefit from the expanding commercial prospects made available by the Internet. Ma was able to convince people who worked for the Ministry to go back home with him to Hangzhou.

He then started Alibaba Group, an online marketplace for small businesses. Ma said that the Internet market for business to business relations showed much more growth potential than the Internet market for corporations that sell to individual customers. “We need to change the system”, said Ma. “We need to make a new one for the youth and the next generation. We need to change the way things are done now”.

By 1999, he had set up the Alibaba.com website, with the goal of connecting Chinese manufacturers with buyers from other countries. Over time, Alibaba grew into a group containing several Internet-related businesses. In 2012, two of the group’s portals (Alibaba and Taobao) sold goods worth $170 billion, more than Amazon and eBay, its main competitors, combined. 

“Opportunities that no one can see are the real opportunities”

Alipay is another milestone in Ma’s path. It opened up in 2003 as a service provider for processing payments. The goal was to make online shopping a better experience all over the world. In the last few years of the company’s history, it has grown at a very fast rate. In 2005, the popular American website Yahoo! showed a strong desire to buy a 40% stake in the company. A few years later, its stake in Alibaba was, paradoxically, worth more than Yahoo! itself. In 2007, Alibaba was able to raise $1.7 billion by going public in Hong Kong (IPO).

Ma’s other business was Taobao, started in 2003, which literally translates as “looking for money”, an online marketplace where people can buy and sell a wide range of products. At the time, eBay and EachNet, both of which were based in China, controlled 80% of the market. Ma thought that how eBay and EachNet handled transaction fees was of the utmost importance. Although it does not claim transaction fees, Taobao has been able to keep its website running and offer premium upgrades and advertising.

By 2007, Taobao had 67% of the Chinese market and eBay sold its Chinese business to TOM Group, a big media company that mostly serves Chinese speakers. After that, TOM Group set up EachNet as a separate business. In 2011, Jack Ma said that the company would be split into three: Taobao Marketplace, Taobao Mall, and eTao. Taobao Marketplace is a place to buy and sell goods online, while Taobao Mall is a place to shop online (a shopping search engine).

Alibaba Group went literally global and was listed on the New York Stock Exchange in September 2014 and raised $21.8 billion. Following the completion of the IPO, the company had a market value of $168 billion, greater than the valuation of any other Internet firm previously listed. In September 2018, Ma said that he was leaving Alibaba to work for charity, children’s development, and protecting the environment.

“Today, if you want to be a great company, think about the social problems you could solve”

The Ant Group came into being in 2014, as an affiliate of Alibaba that owned Alipay. It provides a wide range of other financial products and services. Ant had planned to start trading on the stock market in 2020. But this did not happen because the Chinese government put pressure on the company to make some changes to comply with antitrust laws. By no means coincidentally, the chicanes happened right after Ma attacked the country’s watchdog in a dispute over his finances.

The Financial Times said that Ma has not been seen in public since the Chinese government stepped in to regulate Ant Financial. Fearing that he would be forced to go away, he showed up in public for the first time since the fight in a video for a charity event in January 2021. He was seen a few times after that but has generally kept a low profile. Most recently, he made news when he sold his share of Paytm E-Commerce, the parent company of Paytm Mall, an online shopping mall.

Businessmen running afoul of government entities is not something new, especially in a country like China, where the government seeks to exert greater political control over national champions than the western norm. Regardless of his eventual fate and the arrangement he might make with the government, Jack Ma’s example of entrepreneurship is an inspiration to others. He is a good illustration of the catchphrase that communism, even (or maybe especially) in China, is nothing more but the longer (as well as painful and wasteful) route from capitalism to… capitalism.

Photo source: Wikimedia Commons.

References

Clark, D. (2018). Alibaba: The House That Jack Ma Built. Ecco Publishing House.

Forbes Profile (2022). Jack Ma. Forbes.com. Available at: https://www.forbes.com/profile/jack-ma/.

Gregersen, E. (2022, September 6). Jack Ma. Encyclopedia Britannica. Available at: https://www.britannica.com/biography/Jack-Ma.

Melinte, P. (2014). 25 de citate geniale de la Jack Ma – cel mai bogat chinez. Paulmelinte.com. Available at: https://paulmelinte.com/citate-jack-ma/#comments.

Savov, V. (2002, November 30). Alibaba Founder Jack Ma Living in Tokyo for Half a Year, FT Says. Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2022-11-30/alibaba-founder-jack-ma-living-in-tokyo-for-half-a-year-ft-says