Jack Ma has always been precocious. When the founder of China’s e-commerce giant Alibaba was only 12 years old he became interested in learning English. This desire was so great that he spent the next eight years riding his bike for 40 minutes every morning to a hotel near Hangzhou’s West Lake to practice his speaking skills with foreign tourists.
Ma’s life fundamentally changed in 1979 at the age of 15 when he met an Australian family by the lake. They spent the next three days together, getting to know each other while playing frisbee. A few years later they invited him to Australia for a month-long summer holiday. Ma says the 31 days he spent there changed his life.
"Before I left China, I was educated that China was the richest, happiest country in the world,” Ma told Inc. magazine. “So when I arrived in Australia, I thought, 'oh, my God, everything is different from what I was told'. Since then, I started to think differently.”
Fast-forward to today and Ma’s company Alibaba is poised to take on the world. That chance encounter with an Australian family proved to be pivotal point that propelled Ma on a path that would see him go from English teacher to the chief executive of the largest e-commerce company on the planet.
Ma and his executives have now embarked on a roadshow throughout the US to reveal how the e-commerce industry is different to what they’ve been told.
After a flurry of deals in recent months, the company has become somewhat of a behemoth, encompassing a wide variety of often seemingly unconnected industries from movies to sports, with their recent purchase of a 50 per cent stake in China's Guangzhou Evergrande soccer team.
At the core of its business is its popular e-shopping platform Taobao, which has more than 90 per cent of the online market for consumer transactions in China. According to its latest filing, the company made a profit of nearly $US2 billion on revenue of $US2.5bn in the quarter ending June 30.
The full extent of the Alibaba ecosystem is mind-bogglingly complex as Quartz points out -- the company isn’t simply China’s Amazon, it’s also China’s Dropbox, PayPal, Uber, Hulu, ING Direct, and more.
The other crucial part of Alibaba’s sales pitch is to ease potential investor concerns about governance issues at the company and Ma’s now infamous unilateral decision in 2010 to spin-off its online payment service Alipay.
The company’s use of a variable interest entity structure to get around China’s foreign ownership laws is also cause for concern among investors (Is investing in Alibaba too risky? June 25).
Ma is reported to have taken those issues on in a presentation to potential investors in New York yesterday. Some reports indicate that while his defence did not go into a great amount of detail, Ma came off as “charismatic” nonetheless.
Former Alibaba vice-president Porter Erisman recently told China Spectator that the company’s corporate governance structure was adopted to help it from making the same mistakes of other companies that had gone before it.
“The reason we were so determined to do this was because we had watched a number of our competitors follow Wall Street expectations right off a cliff,” he said.
Most of the business-to-business marketplaces that were around in the early days of Alibaba’s existence became bankrupt because they were trying to please investors rather than customers, Erisman says.
At the time, Alibaba was able to vanquish eBay as a competitor in the e-commerce space because, unlike the US competitor, it was not beholden to investor expectations.
“We knew that eBay could not keep their website free because Wall Street investors were going to put pressure on them to generate revenue in the short term but we always knew that we had set the goal that the company would last 102 years not just 102 months” he says.
But Erisman thinks the company has done a poor job of explaining that the structure is about maintaining the company culture that has served them so well and keep the business focused on the long-term.
“Because they’re a Chinese company sometimes, maybe, they’re described as trying to protect the management from the investors,” Erisman says.
“The way I think they should see it is that they’re trying to protect the long-term investors from the short-term investors and the day traders.”
Ma has long maintained that the company’s guiding principle is to put the customer first, employees second and shareholders third. The formula has worked until now and it looks likely investors will buy it.