Alibaba's World

by Porter Erisman

  After fulfilling a commitment he had made to a mentor to serve as an English teacher for five years, Jack decided it was time to “jump into the sea” and start a business. “Everything I taught my students was from books,” he said. “I wanted to get some real-life experience. Whether I succeeded or failed was not important. Because I knew I could always take that experience back to share with my students.”

  Jack’s first venture was the Hangzhou Hope Translation Agency, which he started in 1994 to serve the growing number of local businesses engaged in tourism and foreign trade. As Jack became known around Hangzhou for his English skills and ability to communicate with foreigners, local government officials asked him to travel to the United States to try to sort out a dispute they were having with a US partner who had promised to fund the construction of a toll highway.

  Jack flew to the United States with high hopes, but when he arrived in Los Angeles, he began to suspect that the man he’d been sent to meet was a con man. His fears were heightened when his host flashed a gun and then left Jack stranded without a car in a Malibu mansion for a couple days to stew about whether or not he would report back to the Chinese partner that everything on the US side of the deal was on the up and up. Terrified and suspecting his US host was hiding important information from the Chinese partner, Jack eventually made his way to Seattle, where he had American friends.

  In Seattle Jack’s friends introduced him to the Internet by sitting him down in front of a computer for the first time. “I was afraid to touch the computer, such an expensive thing. But they told me, ‘Jack—go ahead. It’s not a bomb!’ So I typed in the word beer, B-E-E-R, and I could see German beer, Japanese beer, but no Chinese beer. So I searched the word China and the response was ‘no results.’ So I said to myself, This is something interesting. If we can take companies in China and make a home page for them, this could be something big.”

  When Jack returned to China, he set up China’s first Internet company, China Pages, a sort of online English-language directory for Chinese companies and information. Unfortunately Hangzhou did not yet have Internet access. So the businesses he initially targeted as prospective clients reacted as if he were trying to sell them magic beans. Once he finally did make sales, he had to gather the client company’s information and have it couriered to his friends in Seattle, who would build a web page. To prove that Jack’s website existed, the Seattle friends would print out the pages and courier a copy to China for Jack to present to the customers.

  China Pages had some early success and soon caught the eye of the state-run Hangzhou Telecom, which had started its own rival service. Fearing he might have to compete against a government-backed player, Jack decided the only way to survive would be to team up with Hangzhou Telecom. They formed a joint venture, but Jack soon found himself at odds with Hangzhou Telecom’s management and left in frustration.

  Next he headed to Beijing, where he worked at a company started under the Ministry of Foreign Trade and Economic Cooperation (MOFTEC). Thinking he could help pioneer e-commerce from within the government, he took charge of an organization designed to help small- and medium-sized enterprises take advantage of the Internet. But once again Jack felt stifled by the government bureaucrats ultimately responsible for the organization. “My boss wanted to use the Internet to control small businesses, but I wanted to use the Internet to empower small businesses. We had a totally different philosophy.”

  Finally, as China’s own Internet boom began to take off in 1999, Jack gathered the friends he had dragged to Beijing to work on his team at MOFTEC and told them he had a new idea for a venture—Alibaba. He had learned from the ups and downs of his experiences with China Pages and the government. Jack now had a clearer vision for how e-commerce could finally take root in China. He’d chosen the name Alibaba because it was a globally recognized story and conjured up images of small businesses saying “open sesame” to new treasures and opportunities through the Internet. Thus Alibaba was born.

  Which brings us to early 2000. . . .

  Boom!

  I’ll see you in Shanghai. Let’s go have some fun!!!!

  —Jack

  It was the first email I ever got from Jack. The one-line delivery sounded more like a kid on his way to Disneyland than the CEO of a company that had just raised $25 million from Goldman Sachs and Japan’s Softbank. But the playful tone didn’t surprise me, given the spirit of the times. After all, it was March 2000 and a great time to be alive—if you were involved in the Internet industry in China.

  During the previous five years those of us working in China could only watch with envy as friends and former classmates took part in the thrilling US Internet boom. As companies like Yahoo!, Amazon, and eBay became listed on Nasdaq, wave after wave of Internet mania spread throughout Europe and the United States, minting thousands of fresh millionaires with each new IPO. But with less than 1 percent of the country’s population online, China’s Internet industry seemed destined to languish for decades.

  Everything changed in the summer of 1999, with the IPO of China.com, a Hong Kong–based consumer Internet portal that styled itself as the “Yahoo! of China.” Never mind that it was a hollow company with no real business model. China.com had a great domain name and appealed to investors chasing China’s 2.6 billion eyeballs. Just as Netscape’s IPO had triggered the Internet gold rush in the United States, China.com’s IPO sent investors rushing to China. And for those of us patiently waiting for the Internet mania to arrive, it was a welcome stampede.

  At the time I was working as the head of a technology group at Ogilvy & Mather in Beijing, managing PR and marketing campaigns for foreign companies entering the China market. When I first took the role at Ogilvy, I had assumed that I’d be helping grow the business of multinational companies like Nokia, our largest tech client at the time. But as the Internet boom took hold, my client list quickly grew to include an increasing number of foreign Internet companies that showed an interest in China. Not long after the US companies started entering the China market, homegrown start-ups emerged, modeling themselves after their US counterparts. Within a year, the number of Internet clients in my group had grown from one to ten. I watched these clients not only having a lot of fun but discovering the possibility of changing the world along the way. I was beginning to think it was time to join a start-up myself.

  Little did I know, while I was toiling away in Beijing, that Jack Ma and a team of his friends were secretly working day and night in a small apartment in Hangzhou, two hours south of Shanghai. While other companies in China were chasing consumers, creating Chinese clones of the hottest US properties, Jack and his team set out to capture businesses. Their vision was to build a marketplace connecting the world’s small- and medium-sized businesses engaged in global trade—the “widget economy” made up of manufacturers, trading companies, and wholesalers comprising the global supply chain. And their website—Alibaba.com—was meant to allow these small businesses access to the riches that only the Internet could unlock.

  In October 1999 Alibaba finally came out of hiding and was officially launched at a press conference in Hong Kong, where Jack also announced a $5 million round of investment in Alibaba led by Goldman Sachs. Word began to spread as news stories trickled out about a little-known schoolteacher who was trying to build a platform for global trade. In January 2000 Jack and his team raised another $20 million, led by Japan’s Softbank. And by March, in preparation for the company’s global expansion, Alibaba began to hire a professional international management team.

  At about this time I started looking for a start-up to join. But my hunt for the next big thing got off to a slow start.

  I started with an interview with a leading Internet portal. I met with the vice president of marketing, a transplant from Hong Kong who was hiring a corporate communications manager in preparation for a possible IPO.

  “I think it would be exciti
ng to work with the team to help craft the vision for you and the company as it moves forward,” I told my would-be boss.

  “Let’s be clear here. I’ll set the vision and you execute it,” he coldly replied.

  With that I scratched them off the list. I was looking to join a team, not a dictatorship.

  I next interviewed with an online stock trading company that billed itself as the “E-Trade of China.” But when I met with the husband-and-wife team who had founded the company, something didn’t smell right. Their company headquarters was a virtual office. And the sources of their investment seemed suspect. By the end of the interview I was convinced all they wanted was a Western face for their company as they pursued activities of questionable legality.

  Finally I interviewed with a Taiwanese e-commerce company called pAsia that operated an online consumer auction website in mainland China. The company was gearing up for an IPO and had invested in an expensive corporate identity and logo design based on the name eAsia. But when its executives learned that the name eAsia was already registered by a company in Central Asia, the Taiwanese company changed its name to pAsia to avoid redesigning the logo. This might have been fine if, when pronounced in Chinese, the letter P wasn’t a homonym for fart.

  On the sidelines of an Internet conference, I told a friend about the difficulties I was having finding a start-up to join. Even if the company had a good business model, I explained, the management styles seemed too top-down and regimented.

  “Oh, I didn’t even know you were looking. I should introduce you to Alibaba. They are trying to build China’s first global Internet company and are looking for someone to manage their international PR. You’d be based in Hong Kong but traveling to Europe, the US, and all around Asia.”

  My eyes lit up. I’d known many US Internet companies that were coming into the China market and many Chinese companies that were trying to become a local Internet giant. But I had never heard of a Chinese Internet company that wanted to go global. It was about as big a dream as one could have, and the challenge appealed to me. Plus, I liked the idea of being based in China but traveling worldwide. Even if Alibaba failed, I thought, surely more Chinese companies will be going global, and the skills would be great to have.

  “Alibaba’s just raised a lot of money, and it’s building an international team. You should give them a look,” my friend advised.

  A few weeks later I flew to Shanghai to meet Jack and his team. We attended a customer gathering Alibaba had organized to celebrate the opening of its new Shanghai office. As a taxi took me along the overhead expressway to the Galaxy Hotel, the Shanghai skyline whizzed by. The entire town seemed to be under construction; cranes adorned the sites of new skyscrapers and office buildings everywhere. Silicon Valley may be booming, I thought, but that was nothing compared to the changes going on in China.

  I wasn’t sure what to expect at the party. I exchanged business cards with a few of the Alibaba members, manufacturers engaged in a range of businesses I didn’t really understand, such as petrochemical fiber, ball bearings, and all sorts of widgets. There was an awkwardness in the room as people stood around waiting to see what would happen next. Then the doors burst open and Jack Ma strolled into the room, followed by an eager entourage of young staff members. After shaking hands with some of the Alibaba members who had assembled, Jack jumped on the stage and began to address the crowd.

  “Thanks for coming, everyone. Although we see you online all the time, nothing replaces meeting face to face. Tonight I want to lay out our vision. From the first day we started Alibaba, we had three main goals. We want Alibaba to be one of the top ten websites in the world. We want Alibaba to be a partner to all businesspeople. And we want to build a company that lasts 80 years!”

  As Jack addressed the crowd, he seemed distracted by a blinding spotlight and jumped around from topic to topic. Although he clearly had vision and ambition, it felt a bit like watching a first-time performance of a rock star wannabe at an open mic night. The crowd was growing impatient. One of the expats at my table leaned over and said to me, “They could use someone like you at this company; these guys need some help.”

  Jack wrapped up his speech, receiving a smattering of applause. Although the event wasn’t a slick production, the innocence of it appealed to me. Unlike a lot of the other companies I had interviewed with, Jack and his team seemed to be driven by more than just money. It seemed like a fun adventure. Shortly after the speech Jack’s assistant motioned for me to come over and sat me down with Jack.

  “That was a great speech, Jack,” I said, being generous to the man who might be my future boss.

  “Actually my performance wasn’t that great tonight,” he replied. “The lights were in my eyes the whole time.”

  He asked me a few simple questions and then, with a smile on his face and glint in his eye, he said, “I’ve heard a lot of great things about you. So when are you joining us?”

  I guessed he hadn’t even seen my resume. We spoke for only about five minutes before he offered me a job. It was clear that Jack was someone who made decisions quickly, based on instinct and gut. But he had a sort of mischievous charm about him—I could tell that whether Alibaba failed or succeeded, working for him would be a great adventure.

  I was invited to drinks at the Hard Rock Cafe with a group of expat managers who had recently been hired from a number of big-name companies, including McKinsey, American Express, and Oracle. They had given up their large expat compensation packages for a chance to join the dot-com dream. With the euphoria of the Internet in the air, we drank and chanted “A-li-ba-ba, A-li-ba-ba” all night and bar-hopped around Shanghai.

  I woke up the next morning with a wicked hangover and stumbled down to the lobby for a meeting with Alibaba’s CFO, Joe Tsai. A graduate of both Yale undergrad and Yale law school, Joe had given up a high-paying finance job to join Alibaba in October of the previous year. He was sharp, composed, and had a strong sense of purpose. With bloodshot eyes and a queasy stomach, I tried to maintain a professional posture as Joe began speaking.

  “Everyone is really impressed with you, and we’d love for you to join our team. We’re prepared to offer you a position, with a salary of $100,000 per year, plus stock options.” I gulped and tried my best to stay calm. The amount was about 50 percent more than my current salary.

  I wanted the job. But with my best attempt at a poker face, I bluffed, “Hmm . . . I’m pretty happy with where I am now. I’m going to have to think about it.”

  “Well, you should consider that we are planning to go public in about three months. Based on current valuations that we are being given by Goldman Sachs, your stock options would be worth $1 million when we IPO.”

  I gulped again. One million dollars? All I ever wanted was enough money to put a roof over my head and have time to travel, and this would make it possible. Could I actually become a millionaire in just three months?

  A few days later I signed my contract and prepared to move to Hong Kong. With a month between jobs I decided to take a couple weeks to lie on the beach in the Philippines and relish the new opportunity ahead. Not only would I have a new job I loved, but I also might get rich along the way.

  Before I left, I sat down at my computer and pulled up a blank Excel file. At the top of the spreadsheet I typed “Countdown to Millionaire” and saw that I’d be able to retire in just four years, once all my stock options had vested. But of course the stock market had other ideas.

  Bust

  I unpacked my flip-flops and sunscreen and settled into my beachfront hotel room in the Philippines. Outside I could hear the waves crashing as music drifted in from the beachfront bar. After a year of being at the beck and call of my clients in Beijing, I could finally enjoy a guilt-free vacation, with no projects hanging over my head or client calls to disturb my peace. There was only the shining promise of the next exciting chapter
in my career and life.

  Before heading out to the beach for a sunset drink, I decided to turn on CNBC to see the latest news about Internet stocks. Crash! Bust! It was clear that the market correction that had begun in March 2000 was continuing into April, creating a Wall Street train wreck.

  “The Nasdaq tumbles for a fifth day in a row. . . . Stocks headed lower again. . . . More troubles for tech. . . .”

  For the next few days I hardly left my room. My eyes were glued to the TV screen. And as the ticker scrolled relentlessly, I watched my Internet dreams slowly fade away.

  The Foreign Experts

  I stood at the base of Hong Kong’s Citibank Tower and scanned up the building until its glassy facade met the clouds. It was a far cry from the dusty streets of Beijing, where I’d been living in a drab Communist apartment block on the city’s outskirts and scrimping to save enough money to pay off my business school loans. Although I’d come to like the gritty vibe of Beijing, moving to Hong Kong to join Alibaba was a welcome return to the modernity and convenience of a global business center.

  As I walked into the building, I felt a bit like a kid on the first day of high school. I was excited to start something new but wondered how I’d fit in with the big kids. I’d been working for two years in Beijing and had gotten used to mainland China’s raw form of entrepreneurship, which stood in stark contrast to Hong Kong’s polish and style. This was the big leagues.

  When I reached the twenty-eighth floor, I strolled down the quiet hall and buzzed my way into Alibaba’s new offices. In the corner office I found Todd Daum, my new boss and Alibaba’s vice president of marketing. Even though I hadn’t known Todd before joining the company, I felt a certain level of familiarity with him; he had a marketing background and was a fellow alum of the MBA program at Northwestern’s Kellogg School of Management.