Porter Erisman - Alibabas World: How a Remarkable Chinese Company is Changing the Face of Global Business

For Mom and Dad

M Y GOAL WITH Alibabas World is both to educate and inspire. I hope that entrepreneurs and others chasing a dream can read the book to learn from Alibabas successes and mistakes. And I hope that others can learn from Alibabas story to better understand what it was like on the ground during a transformative time when the Internet brought China face-to-face with the West. In pursuit of this goal Ive made every effort to present an accurate and authentic reflection of my experiences.

Fortunately much of Alibabas history was captured in the 200 hours of video archives that I gathered in preparing my documentary, Crocodile in the Yangtze. This, and detailed notes I took during my time at Alibaba, provided a valuable reference for this book.

All the dialogue is based on actual conversations, but at times I combine two separate conversations with one person into one conversation. The same is true of some of Jack Mas early speeches where I have sometimes combined public comments he made separately at the time into one speech. I also paraphrase Jack Mas English occasionally to account for the fact that it is not his native language and sometimes includes small grammatical errors. In all cases I have made every effort to preserve the accuracy and authenticity of what was said by all parties.

In a few instances, when discussing confrontations or conflicts with former colleagues, I have left some minor characters unnamed. In a fast-growing start-up, there are always bumps and bruises, internal disagreements. However, my goal here is to use issues or conflicts as illustrations from which others may learn, not settle scores with individual colleagues. In the spirit of fairness, I also do my best to point out the times when I myself made mistakes or held the wrong assumptions.

This book was written independent of Alibaba, with no involvement by the company. Whether readers agree or disagree with my take on events, the opinions are entirely my own. Its my hope that sharing the story, in the most candid way possible, of how a schoolteacher rose from obscurity to build the worlds largest e-commerce company can serve as a great case study for students, entrepreneurs, and anyone else setting out on a journey of their own.

N OVEMBER 7, 2006 , was the day I realized that Alibaba had finally arrived. As I stood at the back of a packed auditorium at the Web 2.0 conference in San Francisco, my boss, Jack Ma, took the stage. With a typically entertaining speech he captivated the high-level audience, a whos who of the Internet world.

Im 100 percent made in China. I learned English myself, and I know nothing about technology, Jack explained. One of the reasons why Alibaba survived is because I know nothing about computers. Im like a blind man riding on the back of a blind tiger.

As the audience laughed, I noticed someone crouched down in the back of the auditorium, scribbling down every word Jack said. Curious, I leaned over to see who was so intent on transcribing Jacks speech. I was shocked to find it was Jeff Bezos, the founder and CEO of Amazon.

Bezosthe father of e-commerceeager to learn from Alibaba? This was the man who had pioneered e-commerce and grown Amazon.com into an Internet behemoth. This was the entrepreneur named Time magazines Person of the Year back in 1999 when Alibaba was still an obscure start-up in Jack Mas apartment. Bezos was a business leader we had always looked up to and admirednot to mention borrowed ideas from. And now he was borrowing ours!

Jeff continued taking notes as Jack spoke to the rapt group.

Believe in your dreams, find good people, and make sure the customer is happy. I see a lot of US companies sending professional managers to China. They are making their boss in the US happy but not the Chinese customer.

Jack had always wanted to meet Jeff Bezos, so I leaned over, introduced myself, and gave Jeff my card. Jeff said hed love to meet Jack as well. After Jacks speech the two of us met with Jeff in the convention center lobby. With his trademark laugh and infectious enthusiasm, Jeff commended Jack on his speech: You made some great points up there, Jack! Id love for you to visit us in Seattle someday. As Jeff walked away, Jack and I beamed like two starstruck groupies in a garage band whod just been validated by their favorite rock star.

Seven months later I picked up the Wall Street Journal to find an interview with Jeff, who was announcing an expansion in China. He described how he was determined to avoid the problems other foreign Internet companies had encountered in China, explaining that the reason they struggled was because the Chinese management team is busy trying to keep their American bosses happy, instead of trying to keep their Chinese customers happy. And thats a mistake we will not make. Yesit seemed Jeff had learned something from Jack.

Little did Jack and I know that in just a few years, Alibabas sales volume would surpass those of both our idolsAmazon and eBay. Combined. Not just in China. Everywhere.

When Alibaba got started in Jack Mas apartment, it seemed far-fetched to think that Western Internet companies would someday be learning from Chinas e-commerce founders. With only two million Internet users in China, less than 1 percent of the countrys population was online. And of that 1 percent, even fewer would consider purchasing something online. The barriers were simply too great. Consumer purchasing power was too low. Credit card penetration was negligible. Logistics infrastructure was primitive. It was unclear whether the government would embrace or reject the Internet. And e-commerce seemed impossible in the context of Chinas Wild West capitalism, where scammers were all too common and where buyers and sellers who had never met in person simply didnt trust each other enough to do transactions online.

Fast-forward 15 years, and the difference in the numbers is astounding. Alibaba now has approximately 300 million customers and executes about 80 percent of Chinas e-commerce transactions. More than half of all packages shipped in China are from deals that originated on Alibabas websites. And during its 2014 Singles Day promotiona shopping holiday that Alibaba inventedAlibabas consumer shopping websites handled $9.3 billion in transactions on just one daymore than the total US online sales on Black Friday and Cyber Monday combined. All this in a country where the per capita income is just $6,800 per year and only about 25 percent of the population has ever shopped online. Compared to the United States, Chinas e-commerce boom is just beginning.

Alibabas experience has shown that, although e-commerce was slower to take off in China than in the West, when it did take root, it was far more important to the overall economy. In just 15 years Chinas e-commerce infrastructure has leapfrogged its Western counterparts and is introducing entirely new ways of doing business. China has become a dynamic laboratory for e-commerce innovations, with important lessons for businesses everywhere.

Alibaba is also branching out into a number of entirely new frontiers, well beyond traditional e-commerce. Within a year of launching its first money market fund, Alibabas finance unit was operating one of Chinas top funds, with over $90 billion under management. It has started a movie studio to produce original content. Will Alibaba someday realize its goal of becoming Chinas largest bank? Will it give Fox and Disney a run for their money in film production?