Notes From: Rose George. “The Big Necessity.” iBooks. (1/10)

August 23, 2016 

“Though the men accompanying me have worked in the sewers for decades, they cannot know every inch of a vast network nor what is likely to be discharged into it. Some sewers haven’t been visited in fifteen years. It’s best to be prepared. And indemnified: a paper-suited man thrusts a form at me as I struggle with my crotch-high waders (items of clothing that would make members of the online Yahoo! sewer-boots fetish group—which does exist—speechless with one emotion or another). He says, “Sign this,” and gives me no time to read it. “Don’t worry,” he says, with no smile. “It just means if you collapse, I get all your money.” This humor helps in a hard job, and there will be more of it.”

August 23, 2016 

“My escorts include one consultant, one senior engineer, and several wastewater operatives. Their names are Dave and Keith and Rob and Happy, but in the language of those who work in the city’s sewers, they’re all flushers. The name is no longer used officially, because it describes the job in times past when men waded into the silt of a sewer and dislodged blockages with brooms and rakes, and opened inlets to flush river water into the tunnels to nudge the flow down into the Thames. They’re wastewater operatives now, but they do what the flushers did: they keep the flow flowing.”

August 23, 2016 

“The number of flushers is a less slippery figure. At the time of my visit, it was 39. Thames Water claims more efficient equipment has reduced manpower needs. The flushers see it differently, muttering about outside contractors doing the job that only they know how to do best, and about asset-stripping in the boardroom.”

August 23, 2016 

“All the flushers know is that they’re heading toward retirement, that the sewer knowledge they carry in their heads is irreplaceable (and unwritten), and that they could use some more staff, though only men like themselves. Sewers have always been a man’s world. In London, they’re a white, working-class man’s world. There are few jobs left that are as monochrome and monosexual. There are female engineers who do sewer surveys, sometimes. But no one can remember a woman applying to be a flusher. Even black London cab drivers—who share the banter, skin color, and accents of the flushers—have reluctantly welcomed some women”

August 23, 2016 

“Smith is now a senior engineer, a few rungs on the wastewater ladder above a flusher, and he doesn’t need to go into the sewers anymore. But, he says, “I can’t be responsible for the safety of my men without knowing the environment.” So down he goes, regularly enough, sometimes with a journalist or prince in tow. Thames Water runs open days at its Abbey Mills pumping station where visitors are served sandwiches and tea then led into the trunk sewer below. (It is considered sensible to serve food before seeing the sewers, not the other way around.) Smith has seen all sorts. “Prince Charles came once, down the sewers. We’ve had lords and ladies. They’re all the same once they get down there. If anything happens and someone needs to be pulled out, nobody gets priority. A sewer is a great leveler.”

August 23, 2016 

“They get down, take a sniff, say, ‘Is that poo?’ I say yes. They say, ‘It doesn’t smell much, does it?’ They think that because when they go to the toilet, it smells, that this will, too. They think it’ll smell like three million toilets.” This is not a bad odor. It’s musty, cloying, and damp, but it doesn’t stink. It’s diluted, after all. Without water, the average human produces 77 pounds of excrement and 132 gallons of urine a year. Add toilet flushes, and the total jumps to 4,000 gallons. Thanks to the WC, the flow is 98 percent water.”

August 23, 2016 

“In olden days, sewers had hunters called “toshers.” They moved into the sewers from the banks of the river, in search of discarded riches. Sometimes they found gold; sometimes they lost their lives. There are still sewer hunters today, and there is cause: the flushers find all sorts of things in the flow. Bits of motorbikes (easily shoved down a two-foot-wide manhole), baby strollers, goldfish. Coins, sometimes, and jewelry. Cell phones by the hundred (one recent survey concluded that 850,000 handsets a year are inadvertently flushed down British toilets). That’s all due to haplessness, but there’s also ignorance.”

August 23, 2016 

“Bras are also unwanted: in June 2007, a lingerie set flushed down a toilet clogged sewers in County Durham, collapsed a road, and caused £15,000 in repairs. “Throwaway society,” says Smith. “My goldfish has died? Throw it down the toilet. My hand grenade doesn’t work? Throw it down the toilet.”

August 23, 2016 

“Humor helps because the work is hard. The pay isn’t great, there are shampoo bills, and then there are the daily grievances, like Q-tips. “They are the bane of our lives,” says Smith. “If someone had searched for something that could clean your ear and also stick perfectly in the six-millimeter holes of a sieve [filter], they couldn’t have done better.” He shines his light on a pipe mouth to one side, encased with something I can’t recognize, dripped solid like stalactites. “Concrete. Unbelievable. Someone’s just poured liquid concrete down a drain.” The liquid has now hardened, embracing and defeating the black pipe it arrived down, a sign of shortsighted selfishness.”

August 23, 2016 

“Since its beginnings as a trading center on a useful river, London dealt with its excrement as other settlements did, with what is known today as “on-site sanitation.” In short, this meant that its citizens generally did their business in a designated, confined place. It was a private matter unregulated by any authority and done mostly in a privy,”

August 23, 2016 

“The private matter of excretion spilled into public life in many ways. There were unemptied, overflowing cesspools, like the one into which Samuel Pepys trod in 1660, when he ventured into his cellar to find it filled with the contents of his neighbor’s privy. There was the common practice of slopping out, when chamber pot contents were flung from windows in the early morning, which made for unpleasant streets, especially since pavements were not common. There is a theory that the popularity of high heels dates from this time,”

August 23, 2016 

“By modern standards of smell and hygiene, London was disgusting. So was everywhere else. Over the Channel in Paris, contemporary accounts tell of grand aristocrats regularly soiling the corridors at Versailles and the Palais Royal. At Versailles, the garden designer Le Nôtre deliberately planted tall hedges to serve as de facto stall partitions. The eighteenth-century writer Turneau de la Morandière described the Versailles of Louis XV as “the receptacle of all of humanity’s horrors—the passageways, corridors, and courtyards are filled with urine and fecal matter.” Waste matters in the Kremlin were no better, and toilet facilities only improved because it was feared all that excreta would corrode the gold.”

August 23, 2016 

“There was too much waste to dispose of and inflation didn’t help: the cesspool emptying fee was by now a shilling, twice the average laborer’s daily wage. Also, the gradual introduction of the flush toilet increased the amount of water to be dealt with. Faced with expense and hassle, people did what people still do, and illegally dumped their cesspool contents into the nearest pond, river, or sewer.

”

August 23, 2016 

“But most ancient societies did not think of using water to transport waste because they didn’t need to. The volume of waste and of people could be satisfied with on-site containment and removal services. Even after toilets became popular, it remained illegal for London’s citizens to connect their waste pipes to the sewers. It had to go somewhere. By 1840, as the Victorian builder Thomas Cubitt testified before the Parliamentary Select Committee into the Health of Towns, “The Thames is now made a great cesspool instead of each person having one of his own.”

August 23, 2016 

“The Victorian century gave us many wondrous things, but one of my favorites is the now-lapsed vocation of sanitarian, a word taken by men who occupied themselves with the new discipline of “public health.” The most famous was Edwin Chadwick, a difficult character who left a legacy of reforms that were magnificent—the 1848 Public Health Act, for one—but also mistaken and deadly.”

August 23, 2016 

“Chadwick decided the solution was to organize and expand the sewer system, but to use it for sewage—a word newly invented—and to discharge the sewage into the Thames. It might hurt the river, he reasoned, but it would save people’s health. Sewers were built and did as he said they would. And the Thames ran browner and thicker, and people drank it, and cholera loved it. There were fulminations against filth in newspapers and Parliament, but nothing was done. The medical establishment, in these pre-Pasteur times, was still convinced that disease was spread by contagion via miasmas, or bad air.”

August 23, 2016 

“It took a long dry summer to force change, and because of the foulness of the air, not of the water. In 1858, the weather and the sewage-filled Thames came together disastrously to form the “Great Stink,” when the river reeked so awfully that the drapes on the waterfront windows of the Houses of Parliament were doused with chloride to mask the smell. ”

August 23, 2016 

“Fat! It costs millions to clean up. Restaurants pour it down the drains, it solidifies and it blocks the sewers.” They used to use road drills to remove it, he says—“big RD-9 jobs!”—until new health and safety regulations came into force, and jobs that had been done for years were judged now to be too dangerous.”

August 23, 2016 

“Not shit. Fat gets into your pores. You get out and you have a shower at the depot and you smell fine, then you get home and you smell again.” They grimace. “Disgusting stuff.” It is also expensive stuff. Half of the 100,000 blockages every year in London are caused by it. It costs at least £6 million a year to remove. “Contractors do it now,” says a flusher, before muttering “or they don’t, more like.” High-pressure hoses flush out some blockages. Thames Water has been trying out robot fat removers and already uses remotely operated cameras to see what’s what, but for now the best weapons against an unceasing and superior enemy are water, force, and curses.”

August 23, 2016 

“Sewer workers are firefighters: they respond to crisis. In most areas of the UK, only 20 percent of sewers are inspected regularly, and by the end of this century, many of the UK’s 186,000 miles of sewers will be 250 years old.”

August 23, 2016 

“ “If Bazalgette hadn’t built his sewers when he did,” Rob Smith tells me, “we would—literally—be in the shit today.” If Bazalgette’s sewers aren’t maintained, we will be again.”

August 23, 2016 

“. In the nineteenth century, each of the five New York boroughs had autonomy and a president. Each president got around to sewer construction when he felt like it. It wasn’t considered urgent. There was no Great Stink to focus priorities. Drinking water was a different matter.”

August 23, 2016 

“ The water system was built for the ages. The sewer system, on the other hand? ‘Only do what we have to.’”

August 23, 2016 

“A combined sewer system (CSS) puts water from all sources—street, bathroom, and anywhere else—into the same pipes. It is cheaper and easier to construct, which is why New York’s sewer designers probably chose it. But it has one powerfully weak spot: rain.”

August 23, 2016 

“Look,” says Kevin Buckley. “It’s either discharge or it comes up in people’s basements.” Buckley, the happy Irishman who has organized the traffic-stopping exercise in Queens, has taken me over the road to see the nearby outfall into Jamaica Bay.”

August 23, 2016 

“In its report Swimming in Sewage, the Natural Resources Defense Council expressed exasperation that “the nation at the forefront of the information age has about as clear a view of the quantity of sewage that leaks, spills, and backs up each year as we do of the sewage pipes buried beneath our feet.” When a catastrophic overflow happened in London in 2004, and 600,000 tons of raw sewage poured into the Thames, people did notice.”

August 24, 2016 

“I don’t have breathing equipment, because this is a regulator chamber—a sort of sewer intersection—with a viewing platform, and we aren’t going deep. Anyway, when I asked for a turtle, I got strange looks. (Later, I discovered that “turtle” is American sewer worker vernacular for excrement.) No helmet is offered because the chamber doesn’t warrant one, though the roaches might. I don’t mind rats, but I hate roaches. ”

August 24, 2016 

“What are waterbugs?

“Roaches on steroids.”

The day before, Steve had entered a sewer he’d never been into before—not unusual, when there are six thousand miles of network—and the walls were moving. “You shine your light and they move, but if you leave them in peace, they’ll leave you alone, too.” (He always tucks his ponytail into his shirt collar in case.) The same respect goes for rats, in the main. “You’re going into their home, so you treat it with respect.” Precaution doesn’t mean indulgence, not if they’re even half the size that flushers say they are, or if they’re anything like the rats described 160 years ago to Henry Mayhew by a man from a Bermondsey granary: “Great black fellows as would frighten a lady into asterisks to see of a sudden.”

August 24, 2016 

“Sewer-worker pride is also fed by the Operators’ Challenge, a nationwide annual competition set up by the Water Environment Federation, an industry body. Wastewater workers compete in several events, such as rescuing from a sewer a mannequin in danger; fixing machinery; and answering technical questions in “Wastewater Jeopardy.” (Question: The minimum design velocity in sewers to prevent solids from settling in the collections system. Answer: What is 2 feet per second? Question: The mixture of microorganisms and treated wastewater. Answer: What is “mixed liquor”?)”

August 24, 2016 

“We’re New York’s stinkiest.” Sometimes New York’s bravest can’t do without New York’s stinkiest: Douglas Greeley remembers the police asking for his men’s help in retrieving a dead mafioso who had been thrown down a manhole. Another time, the item being retrieved was a broomstick discarded by certain police officers who had used it to sodomize a Haitian immigrant named Abner Louima. “It was very humid, and the police department internal affairs division had spread canvas sheets out on the street. They closed the street and we scooped every catch basin, and we were pulling out all kinds of broomsticks. We had to lay them down on the canvas and then they would categorize them, measure them and do samples. In 95-degree weather.” They found it. Louima was eventually awarded $5.3 million in damages against the city, the largest police brutality settlement in its history. The contribution of sewer workers to the investigation went unnoticed.”

Notes From: Rose George. “The Big Necessity.” iBooks. 

Notes From: Rose George. “The Big Necessity.” iBooks. (0/10)

August 23, 2016 

“I need the bathroom. I assume there is one, though I’m at a spartan restaurant in the Ivory Coast, in a small town filled with refugees from next-door Liberia, where water comes in buckets and you can buy towels secondhand. The waiter, a young Liberian man, only nods when I ask. He takes me off into the darkness to a one-room building, switches on the light, and leaves. There’s a white tiled floor, white tiled walls and that’s it. No toilet, no hole, no clue.”

August 23, 2016 

“This is why the Liberian waiter laughed at me. He thought that I thought a toilet was my right, when he knew it was a privilege.”

August 23, 2016 

“It must be, when 2.6 billion people don’t have sanitation. I don’t mean that they have no toilet in their house and must use a public one with queues and fees.”

August 23, 2016 

“The disease toll of this is stunning. A gram of feces can contain 10 million viruses, 1 million bacteria, 1,000 parasite cysts, and 100 worm eggs. Bacteria can be beneficial: the human body needs bacteria to function, and only 10 percent of cells in our body are actually human. But plenty are malign. Small fecal particles can contaminate water, food, cutlery, and shoes, and be ingested, drunk, or unwittingly eaten.”

August 23, 2016 

“Children suffer most. Diarrhea—nearly 90 percent of which is caused by fecally contaminated food or water—kills a child every fifteen seconds. ”

August 23, 2016 

“Diarrhea, says the UN children’s agency UNICEF, is the largest hurdle a small child in a developing country has to overcome.”

August 23, 2016 

“Modern sanitation has added twenty years to the average human life. Good sanitation is also economically sensible. A government that provides adequate sanitation saves money on hospital visits avoided, and does not lose labor days to dysentery or workers to cholera. Where good sanitation exists, people are wealthier, healthier, and cleaner.”

August 23, 2016 

“Rich toileted people; poor toiletless masses. Life, luxury, and health for the privileged. Disease and death and business as usual for the poor. This is the assumption the Liberian waiter relied on to make me feel embarrassed. He was entitled to it, because he was a refugee, and diarrhea probably kills more refugees—in camps, on the run—than soldiers or guerillas. But he was mistaken.”

August 23, 2016 

“A fifth of Ireland’s towns are at high risk of cryptosporidium infection, according to the national environmental protection authority. Nearly half the country treats its sewage only to primary levels, which involves nothing more taxing than screening out the lumps and discharging the rest. And Ireland is not the only rich country with an infrastructure more suited to a poor one.”

August 23, 2016 

“Brussels, the wealthy and powerful city that serves as the EU’s administrative seat, only began to build a treatment plant for its own sewage in 2003.”

August 23, 2016 

“ In the United States—where, by the way, 1.7 million people have no sanitation—cryptosporidium in Milwaukee’s drinking water made 400,000 people sick and killed more than 100.”

August 23, 2016 

“Milwaukee discharges treated sewage effluent—treated to remove some things, but not pharmaceuticals or all pathogens—into Lake Michigan, which also supplies its drinking water.”

August 23, 2016 

“Since 1994, 935 million gallons of “full-strength, untreated sewage” have been poured into the lake’s waters. This is not illegal. In fact, it’s what the system is designed to do, if too much storm water overloads storage capacity at treatment works.”

August 23, 2016 

“Despite the technology, the engineers and the ingenuity of modern sanitary systems, despite the shine of progress and flush toilets, even the richest, best-equipped humans still don’t know what to do with sewage except move it somewhere else and hope no one notices when it’s poured untreated into drinking water sources. And they don’t.”

August 23, 2016 

“The average human being spends three years of life going to the toilet, though the average human being with no physical toilet to go to probably does his or her best to spend less. It is a human behavior as revealing as any other about human nature, but only if it can be released from the social straitjacket of denial. Rules governing defecation, hygiene, and pollution exist in every culture at every period in history.”

August 23, 2016 

“fecal transplant is becoming an increasingly common procedure in modern medicine, used to treat severe bacterial infections such as Clostridium difficile, known by tabloids as a “superbug” because of its resistance to many antibiotic remedies. For the worst-suffering cases, doctors can now prescribe an enema—mixed with milk or saline solution—of a close relative’s disease-free feces, whose bacterial fauna somehow defeat the superbug with dramatic effect. ”

August 23, 2016 

“ Newspapers are fond of anointing last taboos, but in modern civilized times the defecatory practice of humans is undeniably a candidate. Sex can be talked about, probably because it usually requires company. Death has once again become conversational, enough to be given starring roles in smart, prime-time TV dramas. Yet defecation remains closed behind the words, all chosen for their clean association, that we now use to keep the most animal aspect of our bodies in the backyards of our discourse, where modernity has decided it belongs.”

August 23, 2016 

“They also borrowed gardez l’eau, commonly shouted before throwing the contents of chamber pots into the streets, and turned it into “loo.”) The French, in return, began by calling their places of defecation “English places” ”

August 23, 2016 

“The easiest modern shorthand for the disposal of the disposal of human excreta—sanitation—is a euphemism for defecation which is a euphemism for excretion which is a euphemism for shitting.”

August 23, 2016 

“Once I start noticing, I can’t stop. And once I start meeting the people who work in this world—who flush its sewers and build its pit latrines, who invent and engineer around our essential essence, in silence and disregard—I don’t want to. I’d rather follow Sigmund Freud, who wrote that humanity’s “wiser course would undoubtedly have been to admit [shit’s] existence and dignify it as much as nature will allow.” So here goes.”

Notes From: Rose George. “The Big Necessity.” iBooks. 

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” (11/12)

August 17, 2016 

“Taobao was wildly popular with consumers, but a commitment to free listings ensured that the business was still loss-making. So, instead, Alibaba decided to list only its original B2B business: Alibaba.com.”

August 17, 2016 

“The former Alibaba.com CEO added that the 2007 IPO gave him two insights into Jack’s approach. The first was something that Jack had often told him: “Raise money when we don’t need it. When you need it don’t go out to raise money, it’s too late.” The second was that the IPO allowed Alibaba to take care of its employees: “Jack understands people more than any business. He knows business well, but if you ask me the three skills Jack has amongst people, business, or IT? IT is the worst. Business second. First is people.” ”

August 17, 2016 

“ But Jack was emphatic: “We are a B2B marketplace. Nobody comes to trade every day. We are more important a community than our marketplace. The same for Taobao; nobody comes to shop every day. If you downgrade this forum you are focusing too much on profits. Switch it back to a non-revenue-generating entry point to the business community.”

August 17, 2016 

“But there was a method to Jack’s madness. Jack was serious about putting the customer first, but David emphasized Jack was not espousing “an ideology of ‘let’s give everything for free.’” Instead, Jack was “always trying to understand how to get the money back later. He’s just not greedy about getting the money first.” Looking back on the price cut, David concluded that the move was well timed”

August 20, 2016 

“Jack’s defenders argue that he was simply first to see which way the regulatory wind was blowing. Parking the Alipay asset into a domestic company that he controlled could insulate Alibaba from the risk that new licenses expected to be issued by PBOC would be denied to foreign-invested companies. In an effort to clear up the matter in 2014 ahead of its IPO, Alibaba justified the transfer by explaining that the “action enabled Alipay to obtain a payment business license in May 2011 without delay and without any detrimental impact to our China retail marketplaces or to Alipay.”

Indeed, on May 26, 2011, Alipay, now entirely domestically owned, was the first of twenty-seven companies to be issued licenses22 and was awarded license number 001. ”

August 20, 2016 

“ Alipay already had such a dominant share of the market that it could not have expected such leniency. There were thousands of companies active in the third-party payment market, but with the first batch of licenses issued in May, PBOC also issued a deadline—September 1, 2011—for all companies to either obtain their own licenses or merge with an existing license holder. Inevitably this generated a lot of tension. Companies that had operated in a gray area now found themselves being divided into black and white, based on whether they had foreign investment and had obtained a license. Those that had not yet received licenses faced the risk of going out of business, and those that had received licenses but were foreign-invested were concerned that Alipay’s move threatened their own ability to have IPOs in the future, ”

August 20, 2016 

“A number of Alipay’s rivals described to me a meeting hosted by PBOC soon after the licenses were issued, at which Jack was present. Many vented their unhappiness at Alibaba, but Jack remained silent. Yet even without the licensing issue, the reality was that too many companies were chasing after the oasis of fortunes to be made in payment riches. This turned out to be a mirage: With fees as low as 1 percent of transactions, if licensing hadn’t thinned out the field, then competition would have done the job anyway. In this light, the Alipay incident—and the PBOC licensing regime it triggered—merely accelerated the inevitable: Many payment companies found themselves stranded in the desert, soon to run out of funding. One executive summed it up for me: “There were more ‘payment solution’ companies out there than consumer e-commerce companies. It was like being in a kitchen where there were more chefs than diners in the restaurant.”

August 20, 2016 

“Jack said that “today’s situation is not designed [by us], but [we are] compelled to do it. The complexity of decision making of shareholders and the board is also a problem of corporate governance in the future.” He added, “I have three principles of doing things: first, one hundred percent legal; second, one hundred percent transparent; third, I must let the company develop sustainably and healthily.”

August 20, 2016 

“Jack revealed that his disagreement with Son was long-standing, that they had been “fighting over it regularly in the past few years.” Jack also contrasted his approach to equity ownership. “Seventeen thousand employees at Alibaba all have shares,” he said. “You see that from the day that Alibaba was established until today, my share has been getting smaller and smaller.” Jack argued that Son, by contrast, had a stake in Alibaba of “thirty percent from day one, and now it is over thirty percent.” In a sign of the tension that had erupted between the two men, he invited journalists to look at Son’s approach to his own employees at SoftBank:”

August 20, 2016 

“If he [Son] is asked to take out one percent [of his stake], it’s like pulling out a tooth from a live tiger.”

August 20, 2016 

“Finally, on July 29, an agreement was reached. The transfer of the assets would stand. But Yahoo, benefiting through its continued stake, would receive compensation of $2 to $6 billion from the proceeds of any future IPO of Alipay. Alibaba, Yahoo, and SoftBank were ready to put the dispute behind them. But investors in Yahoo were underwhelmed, particularly by the cap of $6 billion,26 and its shares fell 2.6 percent on the news. But in a call explaining the agreement to investors Joe Tsai pushed back vigorously, saying that the transfer was made to stay in line with government regulations: “If you own a hundred percent of the business that cannot operate, you own a hundred percent of zero.”

August 20, 2016 

“ On May 21, 2012, the terms were made public: Alibaba would pay Yahoo $7.1 billion ($6.3 billion in cash and up to $800 million in preferred stock) to buy back half of Yahoo’s stake, or 20 percent of Alibaba, netting Yahoo some badly needed cash: $4.2 billion after tax. Alibaba also made a commitment to buy back a quarter of Yahoo’s remaining stake by 2015, or let Yahoo sell the stake in a future IPO27 of Alibaba Group.”

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” iBooks. 

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” (10/12)

August 14, 2016 

“ahoo’s early success in the United States and Jerry Yang’s ethnicity set up high expectations for the company in China. ”

August 14, 2016 

“Born in Taiwan in 1968, Yang took the name Jerry after he moved to the United States in 1978 with his mother, Lily, and younger brother, Ken.”

August 14, 2016 

“Jerry came to the United States with just one word of English—“shoe”: “We got made fun of a lot at first. I didn’t even know who the faces were on the paper money.”

August 14, 2016 

“Yahoo began as a list of other sites that Jerry and David had bookmarked using Marc Andreessen’s recently launched Mosaic browser.”

August 14, 2016 

“Registered as Yahoo.com in January 1995, the company was incorporated in March 1995, and the following month, Sequoia invested $2 million, taking a 25 percent share of the company. The two engineers never finished their Ph.D.s. Jerry recalled, “When I first told my mom what we were doing, the best way I could talk about it was like a librarian. And she said you know you went through nine years of school to become a librarian. She was kind of shocked to say the least.”

August 14, 2016 

“The image of Jerry sitting on the Great Wall is an appropriate metaphor for Yahoo’s China dilemma. The market was growing rapidly, now home to millions and soon tens of millions of Internet users. Yahoo had already managed to become a dominant player in Japan, so why not in China, too? But China presented a quandary: how to deal with a government intent on control at all costs.

In 1996, speaking in Singapore, Jerry had shared his views: “Why the Internet has grown so fast is because it is not regulated.” There were limits to how much Jerry’s Chinese ethnicity would translate into an inside track for Yahoo in China: “The First Amendment safeguards freedom of speech. I’m more American in terms of my upbringing now.”

August 14, 2016 

“Could Yahoo go it alone in China? Or would it be better to pick a local partner, perhaps buying out one of the portal pioneers, such as Charles Zhang’s Sohu, the original name of which, Sohoo, left no doubt as to its plans to become the “Yahoo of China”?

Build or buy? Either course had its complications. There were simply no precedents for Yahoo to look to. AOL opted in the summer of 1999 to invest in Hong Kong–based China.com.”

August 14, 2016 

“Yahoo China’s content was boring, and Chinese Internet users noticed, being drawn instead to the more compelling offerings of Sina, NetEase, and Sohu. Yahoo was losing the battle to stay relevant in China just as the country’s Internet population was taking off.”

August 14, 2016 

“Tencent harnessed two trends that would transform the Chinese Internet sector: content delivered to cell phones, and online games played on PCs. Founded a few months before Alibaba, Tencent (tengxun in Chinese) was launched in late 1998 by two twenty-seven-year-old computer scientists who had met at Shenzhen University. Pony Ma (Ma Huateng) later became chairman and CEO of the company and is today one of China’s richest men. Although no relation to Jack, Pony’s last name, Ma, is the same as Jack’s, his English name chosen as a joke since “Ma” means horse in Chinese.”

August 14, 2016 

“Tencent’s breakthrough product was its OICQ instant messaging client, installed on desktop computers, which was essentially a clone of the ICQ (“I seek you”) product developed by Israeli company Mirabilis.7 Facing the threat of a lawsuit, Tencent rebranded its service as “QQ,” the letters chosen to approximate “cute” in Chinese. With a cuddly penguin in a red scarf for a mascot, the service became a big hit with young Chinese Internet users, initially on PCs, then on cell phones.”

August 14, 2016 

“Baidu was founded in Beijing in 2000 by Robin Li (Li Yanhong) and his friend Dr. Eric Xu (Xu Yong). Born in November 1968, Robin was one of five children of factory workers in Shanxi, a gritty province in central China. His smarts won him entry to Peking University to study information science. After June 4, 1989, he was keen to head overseas: “China was a depressing place. . . . I thought there was no hope.”

August 14, 2016 

“Robin then moved to California to work for the search company Infoseek, before raising $1.2 million in start-up funding and returning to China in January 2000 to found Baidu. ”

August 14, 2016 

“Looking back, Li said, “Once you find out what you should do, then you need to stay focused. That’s what we did during the difficult times back in year 2000, 2001, 2002. Many people think search was a done deal. It’s boring. Everyone has figured that out in terms of technology and product, but we thought we could do a better job. ”

August 14, 2016 

“Becoming increasingly desperate for a fix for its China business, in November 2003, Yahoo announced a deal it hoped would transform its fortunes, buying a company called 3721 Network Software.”

August 14, 2016 

“The company 3721 allowed the millions of new users coming online in China to search using Chinese characters thanks to a special toolbar that would then link the Chinese characters input to the corresponding website. The software was downloaded, although not always with the user’s knowledge, and was hard to remove.”

August 14, 2016 

“He relished the publicity of the lawsuits or public spats he engaged in with Jack, Robin Li, Pony Ma, William Ding, and Lei Jun (Kingsoft and Xiaomi), among others.”

August 14, 2016 

“China was the least of Yahoo’s worries. In the United States, the company was being eclipsed by Google, whose algorithmic search engine was outgunning Yahoo’s directory-based design. Yahoo was slow to recognize the threat posed by Google, a company like Yahoo founded by two Stanford Ph.D. candidates. Yahoo had missed an opportunity in 1997 to buy Google from Larry Page and Sergey Brin, but its biggest mistake of all was the June 2000 decision to make Google its search partner. With Google’s logo featured on its home page, millions of customers discovered a superior search product and gateway to the broader Internet that made Yahoo increasingly irrelevant.14”

August 14, 2016 

“It wasn’t long before Zhou took to the media to criticize Yahoo, telling journalists that selling 3721 to Yahoo was his biggest regret, that Yahoo’s corporate culture stifled innovation, and that the firm was poorly managed: “Yahoo’s leaders have unshakable responsibility for its decline. Whether it is spiritual leader Jerry Yang or former CEO [Terry] Semel, they are good people, but [they] are not geniuses. They lack true leadership qualities. When facing competition from Google and Microsoft, they didn’t know what to do, and had no sense of direction.”

August 14, 2016 

“Yahoo had struck out twice in China: first Founder, then 3721. After years of frustration, Jerry Yang made a bold decision. He handed Jack $1 billion, and the keys to Yahoo China’s business, in exchange for a 40 percent stake in Alibaba.”

August 14, 2016 

“The deal originated in a May 2005 meeting17 between Jack and Jerry at the Pebble Beach golf course in California. Before a steak-and-seafood dinner with other tech luminaries from the United States and China, the two founders, who had a common shareholder in Masayoshi Son, took a stroll18 outside. Jack recalled, “It was extremely cold that day, and after ten minutes I couldn’t bear it anymore. I ran back indoors. [But] in those ten minutes we exchanged some ideas. I told him clearly that I wanted to enter the search business, and my opinion was that search engines would play a very important role in e-commerce in the future.”

August 14, 2016 

“Yet the logic of the combination was not immediately obvious. Yahoo, a consumer content company, was to hand over its China assets to a company that was essentially a B2B business information company with two newer businesses, Taobao and Alipay, tacked on”

August 14, 2016 

“Jack’s charisma and vision for Alibaba also played an important role, as Jerry recalled, “It was probably in retrospect a big bet, but if you met Jack, and having got to know him and seeing what his vision was, you certainly thought it was worth it. And he really had an inside track on being a very dominant commerce platform in China, so that really gave us a lot of comfort.” ”

August 14, 2016 

“Jack later emphasized that the impact of the transaction went beyond the funding and market recognition provided by Yahoo. Although Alibaba had demonstrated its ability to build start-ups—Alibaba.com, Taobao, and Alipay—the deal brought much-needed experience in mergers and acquisitions, something that would become increasingly important in the future.”

August 14, 2016 

“Jack said he would do the Yahoo deal again but “in a better, smarter way,” adding, “Nobody knows the future. You can only create the future.”

The deal left Jack and Joe in charge of Alibaba, although the agreement also included a little-noticed clause that gave Yahoo the right, in October 2010, to appoint an additional board member. If that board member aligned with SoftBank, then Yahoo could then enjoy a majority and the ability, in theory, to take control of Alibaba.”

August 16, 2016 

“Yet under Alibaba’s management the Yahoo brand would rapidly fade and indeed eventually disappear entirely from China. Within a year of the deal, local media started to refer to Yahoo China as the unwanted “orphaned child,” with Alibaba more focused on nurturing its own baby, Taobao. In May 2007, Alibaba changed the name of the business from Yahoo China to China Yahoo, an apt reflection of who was in charge.”

August 16, 2016 

“The pressure was so great that in 2006 Jack made the decision to remodel Yahoo’s home page in the uncluttered, clean style popularized by Google, which Baidu had already mimicked. But Jerry Yang was very unhappy with the move and asked Jack to change the China Yahoo site back to its original portal look and feel, which he did. Not surprisingly, Yahoo’s users were confused by the changes, and the company’s market share slid further. ”

August 16, 2016 

“On September 10, 2005, I attended Alibaba’s Alifest in Hangzhou. The partylike atmosphere was heightened that year by the newly minted $1 billion deal with Yahoo and the growing sense that Taobao would prevail over eBay. Jerry Yang was to appear onstage with Jack as part of the celebrations. The icing on the cake was Jack’s invited keynote speaker that year: former U.S. president Bill Clinton.”

August 17, 2016 

“In March 2010, Google stopped censoring search results in China, rerouting traffic to its site in Hong Kong—the other side of the “Great Firewall of China”—and signaling its exit from the market.35

eBay, Yahoo, and Google had all recognized that China’s Internet market would become massive.”

August 17, 2016 

“Western Internet companies trying to crack the China market came to experience firsthand the old adage that in China “it is better to be a merchant than a missionary.” And the biggest merchant of all was Alibaba.”

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” iBooks. 

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” (9/12)

August 13, 2016 

“In the United States, eBay served an online population of more than 100 million and could count on a well-developed credit card market and reliable nationwide courier services. In China, the much-vaunted online consumer market of 10 million was a mirage. ”

August 13, 2016 

“Few people could pay online or access reliable delivery services. More fundamentally there was a complete absence of trust in online shopping. Banking regulations restricted the development of credit cards, which were only allowed in 1999, their use restricted to customers who kept money on deposit in their banks. Debit cards were beginning to gain popularity but each bank issued its own card and there was no central processing network for merchants”

August 13, 2016 

“In response, EachNet limited its initial auction offerings to the city of Shanghai, where it had set up physical trading booths for customers to meet.”

August 13, 2016 

“Product quality issues were also tricky to overcome. In the States, eBay had pioneered a system that allowed consumers to rate vendors, but in China unscrupulous vendors quickly figured out they could game the system by using masses of fake accounts to drive up their positive ratings, or dilute their negatives. ”

August 13, 2016 

“EachNet clearly was in for a long haul, not projecting any profits until 2005. EachNet’s prospects of raising new venture capital investment dimmed further. Bo and his investors realized that their best shot at making EachNet the eBay of China was to sell out to eBay itself.”

August 13, 2016 

“Where next? eBay had more success in South Korea12 and Taiwan,13 but only China could really move the needle. By 2002, China’s Internet population had grown to over 27 million, the world’s fifth largest.14 Whitman was earlier than many in Silicon Valley to recognize the importance of China: “With the demographics and incredible changes in China, our hypothesis is this could be one of the largest e-commerce markets in the world,” she told the media, projecting $16 billion in e-commerce revenue by 2006.”

August 13, 2016 

“eBay didn’t just want to back EachNet; it wanted to buy it. The initial deal15 gave eBay one-third of the company but also an option to take full control, which it did just fifteen months later, taking its total outlay to $180 million. Rebranded eBay EachNet, the company became a vessel for eBay’s China aspirations. The decision to own EachNet outright set the stage for Alibaba’s triumph, and eBay’s humiliation.”

August 13, 2016 

“Why did things go so wrong so fast? Even though Whitman had granted Bo a generous allocation of options, making EachNet a subsidiary inevitably changed the dynamics with managers at eBay. Soon after the acquisition, for family reasons Bo had to move to California, which Meg Whitman was very generous in facilitating, as Bo had recounted to me in 2015. He stayed involved in the business, but the long distance between San Jose and Shanghai started to show. With Bo no longer in Shanghai, the head of marketing in the United States began to tell marketing in China what to do, and the head of technology did the same.”

August 13, 2016 

“With the acquisition, eBay had dented EachNet’s entrepreneurial culture. The damage was revealed when another entrepreneurial company arrived on the scene: Alibaba. Worse still, Alibaba had the backing of SoftBank, the author of eBay’s defeat at the hands of Yahoo Japan.”

August 13, 2016 

“Alibaba launched its preparations to enter China’s consumer e-commerce market in 2002, initially as a defensive move sparked by eBay’s entry. As Jack later explained, “I needed to stop eBay to protect Alibaba.” Although EachNet was targeting consumers, not the businesses served by Alibaba, Jack was concerned that some of the larger merchants active on EachNet could encroach on Alibaba’s turf: “At that time, there were only two companies in China that understood online marketplaces, eBay and Alibaba.”

August 13, 2016 

“Jack’s plans to target consumers encountered resistance within Alibaba. The B2B business wasn’t yet profitable, and the VC market was closed for the time being. Could the company really afford to open a new front when they were still fighting the B2B battle? Was Jack just being paranoid?”

August 13, 2016 

“CTO John Wu adamantly opposed the idea, visiting Jack the night before the new project was kicked off. John warned Jack that the move would harm Alibaba: “How on earth could you fight against eBay?” Jack replied that the market was still open: “There are one hundred million Internet users today, but only five million people are doing online shopping.” Jack’s ambitious plans for Alibaba also gave him a different perspective: “eBay wants to buy the Chinese market, but we want to create China’s Internet trading market.”

August 13, 2016 

“ Jack also understood the temptation for eBay, later reflecting, “We launched Taobao not to make money, but because in the U.S. eBay gets a lot of its revenue from small businesses. We knew that someday eBay would come in our direction.”

August 13, 2016 

“The new business was to be named19 “hunting for treasure,” or taobao in Chinese. Taobao.com’s tagline was “There is no treasure that cannot be hunted out, and there is no treasure that cannot be sold.”

August 13, 2016 

“The SARS (severe acute respiratory syndrome) virus outbreak started in southern China in 2002, spreading to create clusters of infection around the world that caused eight thousand people to fall sick as well as almost eight hundred deaths.”

August 13, 2016 

“In Hangzhou, four hundred employees in Alibaba’s head office underwent voluntary isolation at home after one of their colleagues, Kitty Song (Song Jie), fell ill with a suspected case of SARS. ”

August 13, 2016 

“ In a letter to employees distributed that day, Jack’s ability to inspire the troops, and to keep them focused on the company’s goals, was on full display: “We care for each other and we support each other. We never forget the mission and obligation of Alibaba, in face of the challenge from SARS. Tragedy will pass, but life will continue. Fighting with catastrophe cannot prevent us from fighting for the enterprise we love.”

August 13, 2016 

“The virus gave a major boost to texting, which increased business for cellular companies like China Mobile. However, SARS also boosted the three Chinese Internet portals thanks to revenue-sharing agreements with the telecom company. As the shares in Sina, Sohu, and NetEase began to climb, investor interest in Chinese technology companies was suddenly reignited. ”

August 13, 2016 

“The suspected case of SARS within the company turned out not to be infected by the virus after all, and so for Alibaba, SARS ended up a blessing in disguise. Because the Taobao stealth team had relocated to work in the Lakeside apartment, they were not affected by the quarantine of the main office. Jack was still confined at home and unable to join the Taobao team for the May 10 launch, as he later recalled, “A few of us agreed to talk on the phone at eight P.M. and raised our glasses in the air and said ‘Wishing Taobao a safe journey.’ The day that Taobao was launched there was a line on the website that declared, ‘Remembering those who worked hard during SARS.’”

August 13, 2016 

“Taobao’s association with Alibaba was kept so well hidden that a number of Alibaba employees even voiced concerns to management about a potential new rival on the scene. Jack recalled, “We have a very active intranet. In late June, someone posted a message asking the company’s senior management to pay attention to one website, which might become our competitor in the future.” Soon the Alibaba intranet was alive with discussions about who was behind Taobao, and employees commenting on the disappearance of some of their colleagues. Finally, on July 10, 2003, Alibaba announced that Taobao was part of the company. “There was a resounding cheer within the company,” Jack recalled.”

August 13, 2016 

“With the backing of SoftBank, Jack took a move from Yahoo Japan’s playbook. In 1999, when it launched its e-commerce business, CEO Masahiro Inoue asked his 120 employees to list items for sale on his new site to make it look active and popular. Four years later in China, Jack did the same: “We had all together seven, eight people [in the Taobao team]. . . . Everyone had to find four items. I rummaged through my chests and cupboards. I barely had anything at home. . . . We pooled about thirty items, and I bought yours and you bought mine, that’s how it started. . . . I even listed my watch online.”

August 13, 2016 

“This transaction also was the end of the road for Goldman Sachs. Shirley Lin had left the bank in May 2003. With no one to oversee the stake, Goldman had written down the value of its stake to zero. The following year, just before the new investment led by SoftBank, Goldman sold off its entire 33 percent stake. The bank had paid $3.3 million for it in 1999 and sold it for more than seven times that amount five years later.”

August 13, 2016 

“Jack reveled in being ignored. “During the first year, eBay didn’t consider us their rival. They didn’t even think that we could be their rival. They thought, We haven’t even heard about Alibaba. Such a strange name. Chinese all know what tao bao means, foreigners don’t.”

August 13, 2016 

“China was considered so important that managers, keen to present a positive story to Whitman and other senior executives, made sure that everything looked great on PowerPoint and sounded smooth on conference calls. But thanks to its own missteps as well as Alibaba’s competitive moves, this was increasingly at odds with the facts on the ground.”

August 13, 2016 

“eBay’s biggest mistake was in getting the culture wrong. A “leave it to the experts” attitude demoralized the original EachNet team in Shanghai, as eBay executives were parachuted in from headquarters in San Jose or other parts of the eBay empire. No matter how skilled the new arrivals, most spoke no Chinese. They faced a steep learning curve to understand the local market.”

August 13, 2016 

“In website design, culture matters. In the West, websites like Google had become popular for their clean lines and uncluttered “negative space.” But to the mass market of Chinese Web users, accustomed to pop-ups and floating banner ads, they seemed static and dull. As you can see for yourself by opening taobao.com, successful Chinese websites are typically packed with information and multimedia graphics, requiring many scroll-downs to see the whole page. From its outset Taobao has been a website built by Chinese for Chinese. And it worked.”

August 14, 2016 

“For companies like eBay and Amazon, their experience in the United States and other Western markets proved to be of little use. “E-commerce in China is very strange,” the rival e-commerce founder continued. “It started with C2C (consumer-to-consumer) and with nonstandardized products. This was unlike Amazon, unlike the conventional wisdom where you need to start with standardized products, like books.”

August 14, 2016 

“The more standardized the supply chain, the higher the barriers for e-tailers. All the smaller, mom-and-pop stores selling nonstandardized products are more accommodating, more flexible in supplying goods. That’s unique to China. The lack of national supply chains removed the barriers to entry that exist in the West, making it possible for individuals to make money.22 By starting with C2C, it made the price factor very appealing.”

August 14, 2016 

“Meanwhile, Taobao’s decision to forgo charging fees was not without risk, since it forced it to look to other ways of generating revenues, especially if the site became popular and drove up operating costs. But making the site free for both shoppers and merchants turned out to be the key factor in ensuring Taobao’s triumph over eBay. A research paper25 that analyzed more than a decade’s worth of transaction data on Taobao concludes26 that in the early phase of the company’s history, attracting merchants, who in China are especially allergic to paying fees, was more important than attracting shoppers. Taobao’s popularity was fueled by a “virtuous circle”: More merchants and product listings meant more shoppers were attracted to the site, which meant more merchants and products, etc.”

August 14, 2016 

“As Taobao charged no fees, they had no incentive to police this behavior. On the contrary, Taobao actively encouraged communications between the transacting parties by setting up bulletin boards and, beginning in June 2004, launching an embedded, proprietary chat window with the unfortunately in English named AliWangwang.27 Buyers on the site use the service to haggle with sellers, which resonates well with the vibrant marketplace culture in China. Communication is a key underpinning of commerce, but eBay users struggled to communicate with vendors.”

August 14, 2016 

“government’s long-standing efforts to build and extend the “Great Firewall of China” often means websites hosted overseas are much slower to load than those hosted in China itself. All Web traffic accessing sites hosted outside the mainland has to go through a series of chokepoints where the request is screened. This is to ensure that a foreign website does not display material the Chinese government deems “sensitive,” including the “three T’s” (Tibet, Taiwan, and Tiananmen Square).”

August 14, 2016 

“eBay had its reasons for the migration. As the business grew in China, the engineers in San Jose worried whether the platform built by a Shanghai-based start-up could cope. It turned out that EachNet had built robust technology, capable of scaling up by even a hundred times. But after a series of site outages that had damaged its reputation at home, eBay had become obsessed with the stability of its platform.”

August 14, 2016 

“As predicted, as soon as the China site was migrated ”

August 14, 2016 

“and integrated into the global site, the impact on EachNet’s traffic was disastrous: It dropped off precipitously. Customers in China started to experience long delays and time-outs on the site. Why would they bother to wait for eBay in China—a site that charged fees—when Taobao was available instantly and for free?”

August 14, 2016 

“ Changing one word on the site would take nine weeks. Changing one feature would take one year.

How could eBay be so inefficient? There are two explanations. First, eBay had an effective monopoly in the States, and this bred complacency. Second, despite its Silicon Valley aura, eBay was never very strong at technology. One eBay executive famously once said, in public, “Even a monkey could run this business.” After the embarrassing site outages, stability and process trumped technology.”

August 14, 2016 

“Looking back on the fiasco eight years later in her new role as CEO of Hewlett-Packard, Meg Whitman was contrite about eBay’s missteps in China. “You’ve got to have a set of products uniquely designed for this market by Chinese. It is not a market where you can take a product or a system that works in Europe or the United States and export to China.”

August 14, 2016 

“From the moment he conceived of Taobao, Jack maintained a relentless focus on the company. In a much-quoted analogy, Jack commented to Forbes magazine in 2005, “eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose, but if we fight in the river, we win.”

August 14, 2016 

“eBay just wouldn’t take Alibaba seriously, questioning the reliability of mounting data that showed Taobao was selling more goods than eBay in China. Taobao now had more listings, but eBay convinced itself that because those listings were free they must be inferior. Jack vigorously rejected that thesis: “The survival and growth of Taobao are not because of free service. 1Pai [the joint venture of Yahoo and Sina] is also free but it is nowhere close to Taobao. Taobao is more eBay than eBay China [because] Taobao pays more attention to user experiences.”

August 14, 2016 

“Whitman had reached the same conclusion and secretly began to look for a way out of the China morass. The most obvious route was to make an offer to buy Alibaba, and so she sent three senior executives28 from San Jose to Hangzhou, where they met Jack and Joe. The meeting got off to a bad start when eBay senior vice president Bill Cobb talked down Taobao’s achievements and CFO Rajiv Dutta offered a lowball number of $150 million to buy the company. After Jack told the eBay delegation that he was just getting started with Taobao, Joe countered with a sales price of $900 million, at which point the two sides parted company.”

August 14, 2016 

“Having failed to buy its rival, Meg Whitman announced29 an infusion of an additional $100 million into its China operations.”

August 14, 2016 

“This was music to Jack’s ears. He joked to Forbes magazine that eBay had “deep pockets, but we will cut a hole in their pocket.” Talking to Chinese media, he ridiculed the new investment: “When I heard that eBay would spend one hundred million dollars to break into this market, I didn’t think they had any technical skills. If you use money to solve problems, why on earth would the world need businessmen anymore. Businessmen understand how to use the smallest resources to expand.” Even with SoftBank’s backing, Jack didn’t have the resources that eBay could bring to China if it wanted. Dismissing eBay’s approach, he added, “Some say that the power of capital is enormous. Capital does have its power. But the real power is the power of people controlling the capital. People’s power is enormous. Businessmen’s power is inexhaustible.”

August 14, 2016 

“Instead of picking AFT or PayPal, eBay had decided to go with both—meaning customers in China would have to navigate not one but two websites when buying online.

Not surprisingly, running two payment systems in parallel in China proved to be a disaster.”

August 14, 2016 

“One customer even complained that his PayPal check was impounded by the Bank of China in Nanjing under a law to “prevent overseas criminals from money laundering through this method.” By the middle of 2005, Taobao had facilitated online payments for 80 percent of the products on its sites, but eBay barely 20 percent.”

August 14, 2016 

“eBay had lost China. But in Jack, China had gained a folk hero. When asked today about the experience, Whitman can only tip her hat to Jack’s achievements.

“If you look at Japan and China, two important markets, it’s where we didn’t strategically, actually do the right thing. But it was not obvious at the time, honestly. So more power to Jack Ma, what a powerful franchise he has built—and it is really in some ways the combination . . . of eBay, PayPal, and Amazon. He’s done a remarkable, remarkable job.”

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” iBooks. 

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” (8/12)

August 13, 2016 

“Faced with increasing competition, and flush with cash, Alibaba accelerated its expansion. In the months following SoftBank’s investment, the company went on a hiring spree in mainland China, Hong Kong, and Fremont, California, where incoming CTO John Wu set up their U.S. outpost.”

August 13, 2016 

“China’s own venture capital market was in its infancy, and its stock markets were dominated by SOEs. In any case, the Shanghai and Shenzhen exchanges required ”

August 13, 2016 

“companies to have been in business for at least three years, and to be profitable. All of China’s Internet companies were new, and operating unashamedly at a loss”

August 13, 2016 

“China wanted a Silicon Valley, but one that it could control, built on its terms. Yet the distributed, bottom-up nature of the Internet was inimical to China’s traditions, both imperial and Leninist, of top-down control of information. For those coming online, this was the Internet’s central appeal.”

August 13, 2016 

“On his first trips to Europe, though, he experienced some culture shock. I advised Alibaba on its expansion strategy there, recommending a Swiss friend of mine, Abir Oreibi, who would oversee the company’s European operations for the next eight years. On his first visit to London, Jack was booked into the city’s prestigious Connaught Hotel but couldn’t understand why he had to stay in such an old building. In Zurich, Jack and Cathy were perplexed by the fact that all the shops were closed. Abir explained that it was a Sunday, prompting Cathy to exclaim, “Oh, I see, they’re all working second jobs today.” Coming from the nonstop business culture of China, the concept of shopkeepers taking a whole day off to rest was unimaginable.”

August 13, 2016 

“an R&D center under John Wu’s leadership were running into problems. In an effort to overhaul the company’s disparate software platforms, Alibaba had hired more than thirty engineers in its new Fremont office, but coordinating with their colleagues in China across a fifteen-hour time difference was proving a headache. Forced to use English for the benefit of non-Chinese-speaking colleagues in California, Chinese engineers in both offices struggled to communicate among themselves. The team started to fracture and tempers frayed as Hangzhou pushed to develop one product and Fremont another. After an infrastructure upgrade, the whole Alibaba.com site went down. Jack was visiting Fremont at the time and had to step in personally to force better cooperation between the two teams so that the problem could be fixed. It was clear that splitting the technology team across the Pacific had failed. Alibaba started to move core functions back to Hangzhou. Alibaba was about to embark on a new, defensive strategy: “B2C,” or “Back to China.”

August 13, 2016 

“ Merle Hinrichs’s office declined to comment on the spat, but the rivalry is something that Jack, the philosopher CEO, invested with a deeper meaning: “If you can’t tolerate your opponents, you will be definitely beaten by your opponent. . . . If you treat your opponents as enemies, you have already lost at the beginning of the game. If you hang your opponent as a target, and practice throwing darts at him every day, you are only able to fight this one enemy, not others. . . . Competition is the greatest joy. When you compete with others, and find that it brings you more and more agony, there must be something wrong with your competition strategy.”

August 13, 2016 

“As the tech downturn continued into 2001, Jack and Joe recognized that things needed to change. In January 2001 they brought on board as chief operating officer Savio Kwan, a fifty-two-year-old veteran of GE,7 who gave a frank assessment of the company: “We need to ground [Alibaba] in reality and make it into a business.”

August 13, 2016 

“Kwan slashed monthly expenses by as much as half, stepping up the “Back to China” retrenchment. A joint venture in South Korea was scrapped and Alibaba’s Silicon Valley presence drastically scaled back. Many of the higher-paid foreign employees were let go. Expensive advertising campaigns were abandoned and replaced with word-of-mouth marketing. Reducing expenses overseas allowed Alibaba to increase its hiring at home, leveraging Hangzhou’s deep pool of lower-cost talent.”

August 13, 2016 

“In the years that followed the dot-com crash, Alibaba slashed costs and found a way to steadily increase its revenues. Even though the venture capital market had dried up completely, Alibaba was able to stand on its own two feet. And thanks to a new business launched in the spring of 2003, it was about to succeed on a scale that even Jack could never have imagined.”

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” iBooks. 

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” (7/12)

August 13, 2016 

“On August 31, 1999, an article written by my colleague Ted Dean appeared in Hong Kong’s leading English-language daily, the South China Morning Post.1 Ted had first met Jack a year or so earlier when Jack was still working for the government. In the article, Ted predicted that Alibaba “may turn out to be a global powerhouse” in B2B e-commerce. Jack laid out his ambition: “We don’t want to be number one in China. We want to be number one in the world.”

August 13, 2016 

“In his article, Ted had quoted Jack saying, “If you plan, you lose. If you don’t plan, you win.” After working in Beijing, the land of the five-year plan, I found Jack’s spontaneity refreshing. ”

August 13, 2016 

“Meanwhile, in Hong Kong, shortly after their unsuccessful fund-raising trip to Silicon Valley, Joe had started negotiations with Transpac, a Singapore-based fund, about investing in Alibaba. Soon they had agreed to a term sheet that would value Alibaba at $7 million.4 But Transpac insisted on an onerous provision5 and Joe wanted to walk away.”

August 13, 2016 

“He then called up a friend at Goldman Sachs. Like Joe, Shirley Lin was born in Taiwan and educated in the United States.”

August 13, 2016 

“ Shirley had left after a few years for Goldman Sachs to start making investments in technology and Internet companies across Asia.”

August 13, 2016 

“Goldman had given Shirley and her team a lot of leeway, provided she kept the investments below $5 million. This was peanuts to Goldman, whose Principal Investment Area (PIA) unit would make $1 billion in investments in tech companies from 1995 to 2000, one-quarter in companies based in Asia.

With so few funds already on the ground in Asia, Shirley was bombarded with requests for investment from her Harvard classmates and other friends pursuing the new wave of dot-com riches.”

August 13, 2016 

“But scouring through China start-ups had its drawbacks. Traveling on unpaved roads in provincial cities, Shirley felt more like a loan officer with the Asian Development Bank than an investment banker. She also had a hard time being taken seriously: “Even though we were at Goldman, people in China didn’t know who we were. They asked, ‘Are you Mrs. Goldman? Are you married to the owner of this business?’ They thought Goldman and Sachs were two people who owned the company, and I must be married to one of them.”

August 13, 2016 

“Jack, she recalled, was “as local as it gets.”

“I went up to the apartment, where they were all working twenty-four/seven. . . . The whole place stank. ”

August 13, 2016 

“Jack’s ideas were not entirely original—they had been tried in other countries. But he was completely dedicated to making them work in China. I was moved by what I saw.”

August 13, 2016 

“ Shirley was less impressed by the business itself than by the team, the real reason she would decide to invest: Who were they? What was their history? Knowing Joe checked one box. Seeing Jack and the team in action checked another. “Really, it was all about Jack and his people.” Shirley remembers being impressed by how hard Jack’s wife, Cathy, was working. She and Jack toiled away, she recalled, like “revolutionary comrades.”

August 13, 2016 

“If Goldman took a controlling stake in his company, he explained, he couldn’t feel like a true entrepreneur. Jack told her how he’d put everything into the venture. “This is my life,” he said. Shirley replied, “What do you mean this is your life, you’ve only just started?” Jack explained, “But this is my third venture already.” Jack finally convinced her. The term sheet for the investment had been drawn up, but there were brackets around the numbers so it would be an easy change. Goldman would invest the $5 million for 500,000 shares, half the company, while retaining veto rights over key decisions.”

August 13, 2016 

“having already given out a lot of equity to his cofounders and now 50 percent to investors, he ended up with a much lower share of his company than many of his peers. Jack would later joke, only half-kidding, that it was the “worst deal I ever made.”

August 13, 2016 

“If Goldman invested the full $5 million, the fund would need to gain the approval of their investors. “Please get rid of some,” they told her. So, Shirley reduced Goldman’s stake to 33 percent. Now she quickly had to find investors for the other 17 percent.”

August 13, 2016 

“Some of the investors, including Venture TDF and Fidelity, held on to their stakes all the way through Alibaba’s 2014 IPO, generating returns of billions of dollars.”

August 13, 2016 

“When the Goldman-led round was finalized on October 27, 1999, the investment cemented Joe’s authority as Jack’s right-hand man.”

August 13, 2016 

“Caught up in the excitement of Hong Kong, Alibaba also announced that it would move its headquarters there from Hangzhou. Jack had been spending most of his time in Hong Kong, working with Joe and some new recruits out of a conference room in Goldman’s office. The contrast couldn’t have been greater between Alibaba’s humble, second-floor Lakeside Gardens apartment in Hangzhou and its new perch atop the gleaming Citibank Plaza skyscraper with breathtaking views over Victoria Harbor.”

August 13, 2016 

“By October 1999, Alibaba had signed up more than forty thousand users. Now it had to go for a much higher quantity of users, while maintaining the quality of the messages tacked ”

August 13, 2016 

“Having grown up among them and served them as clients of Hope Translation and China Pages, Jack had a keen sense of what these small firms needed: “Most SMEs [small and medium enterprises] have a very changeable dynamic. Today they might sell T-shirts, tomorrow it could be chemicals.”

August 13, 2016 

“To attract buyers, Alibaba needed to ensure vendors’ listings were translated accurately into English. Drawing on the talent pool of university graduates in Hangzhou, Alibaba started to hire English-speaking editors to ensure that the posts on the bulletin board were complete, intelligible, and properly categorized.”

August 13, 2016 

“Posting on the site, for buyers and sellers, was free—a central tenet of Jack’s approach throughout his career. His “if you build it, they will come” approach helped him pull clear of any rivals. If visitors to Alibaba.com were able to make new trade leads, he figured, they would demonstrate increasing loyalty, or “stickiness” to the website.”

August 13, 2016 

“But while free was great for users, it was a tough business model. Alibaba was vulnerable to any downtime in the Internet funding frenzy. Also, as traffic grew dramatically on Alibaba’s website, maintaining the quality of postings was a big job. If Alibaba wasn’t careful it could be overwhelmed.”

August 13, 2016 

“As a “second tier” city real estate was cheaper in Hangzhou, too. Even after Alibaba moved into a 200,000-square-foot office in early 2000, its total rental bill was just $80,000 a year, a fraction of what it would have been in Beijing or Shanghai. Jack liked the distance from Beijing: “Even though the infrastructure is not as good as in Shanghai, it’s better to be as far away from the central government as possible.”

August 13, 2016 

“When building up his team Jack preferred hiring people a notch or two below the top performers in their schools. The college elite, Jack explained, would easily get frustrated when they encountered the difficulties of the real world. For those who came aboard, working for Alibaba would be no picnic. The pay was low: The earliest hires earned barely $50 per month. They worked seven days a week, often sixteen hours a day. ”

August 13, 2016 

“From the outset, Alibaba has been driven by a Silicon Valley–style work ethic, with every employee issued share options in the company, vesting over a four-year period. This is still a rarity in China, where the traditional setup in private companies was an emperor-like boss who treated employees as disposable and salaries as discretionary.”

August 13, 2016 

“But wedded to its “customer first” tenet, Alibaba resolved to respond to every email within two hours.”

August 13, 2016 

“Today is brutal, tomorrow is more brutal, but the day after tomorrow is beautiful. However, the majority of people will die tomorrow night. They won’t be able to see the sunshine the day after tomorrow. Aliren11 must see the sunshine the day after tomorrow.”

August 13, 2016 

“Buyers overseas were concerned about fake or defective goods, or shipments that never arrived.

Alibaba couldn’t wave a magic wand to make these risks go away, as Jack emphasized to the media: “We are just a platform for businesspeople to meet, but we do not take legal responsibility.” Alibaba kept its focus as a bulletin board for businesses.”

August 13, 2016 

“n January 2000 we were both invited to speak at a student-organized event13 at Harvard. I met up with Jack before the conference. As we walked along an icy pathway on the banks of the Charles River I noticed one of his entourage was filming the scene, something I later discovered she had been doing for years already.”

August 13, 2016 

“But Jack quickly emerged as the star of the show, ”

August 13, 2016 

“especially when he confessed to the audience that he really had no idea what Alibaba’s business model was, adding “and yet I got investment from Goldman Sachs!”

August 13, 2016 

“Jack has always been dismissive of business schools: “It is not necessary to study an MBA. Most MBA graduates are not useful. . . . Unless they come back from their MBA studies and forget what they’ve learned at school, then they will be useful. Because schools teach knowledge, while starting businesses requires wisdom. Wisdom is acquired through experience. Knowledge can be acquired through hard work.”

August 13, 2016 

“n October 1999, Jack was one of several entrepreneurs invited to meet Masayoshi Son in one of a series of “speed dating” sessions between the Chinese start-ups and the Japanese billionaire arranged by Chauncey Shey, president of SoftBank China Venture Capital. The two men met at the wedding cake–styled Fuhua Mansion in Beijing. The venue turned out to be a fitting one, their meeting the start of an enduring partnership that would eventually make Son the richest man in Japan. ”

August 13, 2016 

“Masayoshi Son, known to his friends as “Masa,” shares some similarities with Jack. Both are short in stature and known for their outsize ambitions.”

August 13, 2016 

“At the age of sixteen, Son moved to Northern California in search of a brighter future. Staying with friends and family, he attended Serramonte High School in Daly City, just south of San Francisco, before gaining acceptance to the University of California, Berkeley, where he started his entrepreneurial career. His most successful venture was building a voice-operated translation device to be sold at airport kiosks.”

August 13, 2016 

“After moving back to Japan in the early 1980s, Son started a software distribution company. At the launch of the venture, in a scene echoing Jack’s own irrepressible optimism, he famously climbed on top of a shipping box in front of his employees—just two at the time, both working part-time—and vowed that their new venture would make 50 billion yen ($3 billion) in revenues within ten years.

By the time he first met Jack, Son had become a billionaire many times over. ”

August 13, 2016 

“Meeting Son, Jack knew he had found a kindred spirit. “We didn’t talk about revenues; we didn’t even talk about a business model. . . . We just talked about a shared vision. Both of us make quick decisions,” Jack recalled.”

August 13, 2016 

“A few weeks after their first meeting in Beijing, Son invited Jack to Tokyo to finalize terms. Joe Tsai joined him on the trip.

As soon as they entered Son’s office, the negotiations began. Jack would later infuse his description of their meeting with martial art imagery: “Masters of negotiation always listen, don’t talk. Those who talk a lot only have second-rate negotiation skills.”

August 13, 2016 

“A true master listens, and as soon as he moves his sword, you pretty much collapse.”

August 13, 2016 

“Instead he offered to take in $20 million for 30 percent, adding, “If you agree, we will go ahead; if not, that’s it.”

August 13, 2016 

“In less than a year after the company’s founding, Jack and Joe had reeled in $25 million from two of the largest and most prestigious investors in the world.”

August 13, 2016 

“Shirley Lin at Goldman Sachs had been attracted to Alibaba for its “localness.” John Wu saw the same merits: “There are a lot of Internet companies started by people who studied in the U.S. and came back to China. . . . Jack Ma is different. He has been in China all his life.”

With fresh capital, new recruits, and more than 150,000 members in 188 countries signed up on the website, things were looking up for Alibaba. But the bubble was about to pop.”

Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” iBooks.