Читать книгу The Transpacific Experiment - Matt Sheehan - Страница 11
ОглавлениеSILICON VALLEY’S CHINA PARADOX
It’s eleven a.m. on a smoggy Friday in Beijing, and this busload of Chinese geeks is buzzing about smartwatches. As the bus driver muscles through gnarly traffic, programmers fiddle with watchband prototypes and debate the merits of different wrist-flick functions. The Apple Watch will be released later today, and the most popular models will sell out within seconds.
But the debut of the next big thing from Apple is not what has this group excited. The bus is carrying employees of Beijing-based artificial intelligence start-up Mobvoi to a twenty-four-hour smartwatch hackathon in a scenic village outside the city. The goal for the day and night ahead: build the apps for Mobvoi’s own smartwatch operating system, Ticwear. Mobvoi hopes Ticwear can rival Apple’s and Google’s efforts in defining what a smartwatch does here in China—and eventually around the world.
That’s a daunting task for any start-up, but one made easier by the background of Mobvoi’s founders and the geopolitics of tech today. Résumés for Mobvoi’s top brass read like a cross-section of the best in U.S. education and innovation: Google, Harvard Business School, Microsoft, Stanford research labs. The waves of Chinese students filing into American universities have generated an equally important undertow: ambitious Chinese engineers who are returning home with a U.S. diploma, work experience in Silicon Valley, and the desire to make a mark in China’s emerging start-up scene.
Giving another boost to Ticwear’s prospects is the fact that the operating system’s main competitor, Google’s Android Wear, remains effectively blocked in China.
The Communist Party treats Chinese cyberspace like the country’s physical turf—something to be policed, cultivated, and controlled. The Great Wall of China was constructed and maintained over millennia to repel invading “barbarians”—Mongols and a variety of steppe people who raided and invaded the Chinese heartland. To deal with twenty-first-century “barbarians,” the country has created the digital “Great Firewall,” a complex system of controls that blocks access to many U.S. tech juggernauts: Google, Facebook, Snapchat, Twitter, and many media outlets.
Like its brick-and-mortar predecessor, the Great Firewall is far from impenetrable. Internet users in China can circumvent most controls by using a VPN (virtual private network), a tool that routes their traffic through servers overseas and grants access to the global internet. Chinese people call this fanqiang—scaling the wall. But VPNs are slow, unreliable, and frankly an all-around pain in the ass. Slim minorities of Chinese people use them, and your average internet user here inhabits a distinctly Chinese version of cyberspace, one devoid of the companies and apps that Silicon Valley churns out.
The initial goal in building the Firewall was information control: maintaining a Leninist grip on the channels of information and communication, thus protecting the Communist Party’s grasp on power. But one of the side effects of that desire for information control has been the nurturing of China’s own thriving digital economy.
By keeping out global technology leaders, the government also created breathing room for homegrown Chinese tech brands to blossom and eventually dominate their country’s markets. Google’s 2010 exit from mainland China cleared the way for Baidu to own the Chinese search market. Twitter’s absence (and inspiration) made possible Weibo, the Chinese microblogging platform that eventually overtook Twitter in number of global users. The ban on Facebook opened up the social media space for WeChat, the omnipresent social app on the mainland. And, crucially for Mobvoi, the block on Android Wear means the market for Android operating systems on wearables is wide open. Mobvoi intends to fill that void.
Towering technological walls may insulate the Chinese internet, but you’d never know that from the chatter here on the bus. Conversations flow seamlessly between new Facebook features, Chinese smartphone brands, and one programmer’s favorite food: stinky tofu. Coders wear Google hoodies while typing out WeChat messages. They’ve got opinions on the algorithms in Chinese shopping apps and the best Hunan food in the Bay Area. Whenever the topic turns to technology or business, Chinese sentences are suddenly peppered with English phrases: “actionable path,” “back end,” and “why not?”
These are the twenty- and thirtysomethings driving China’s tech renaissance. Apps and algorithms conceived by these types of coders are fueling a rash of billion-dollar valuations and business-model innovations that have caught the world’s attention. Many on this bus studied at top-notch American universities and worked for the same companies that the Firewall blocks. They move fluidly across borders, languages, and cultures, mixing Silicon Valley idealism with a dose of Chinese reality. Having honed their chops in the global epicenter of technological innovation, they’re now putting those skills to use in the rough-and-tumble world of Chinese tech.
These returnees are the haigui—“sea turtles”—who make up a good chunk of the audience for Tim Lin’s College Daily, and they’ve been a driving force in China’s tech scene for over two decades. In the mid-1990s, a batch of returnees founded the first wave of Chinese internet companies to get listed on global stock markets. Today, sea turtles from places like Stanford, Berkeley, and Harvard are founding and funding the companies vaulting China’s tech scene to the top of global rankings.
Up at the front of the bus, dressed in an Android-branded jacket, sits Mobvoi’s founder and CEO Li Zhifei (surname Li, given name Zhifei; pronounced “Jur-fay”). Li embodies this game of transpacific technological ping-pong. Born and raised in central China, he did stints at Beijing start-ups in the late nineties, earned a PhD in computer science at Johns Hopkins University, and spent two years as a researcher for Google Translate at the company’s Mountain View, California, headquarters. But when Li wanted to found his own company, he picked up stakes and headed back to China, splicing what he calls the “Google DNA” into his own start-up’s culture.
Ensconced behind China’s Firewall, Li’s company now produces apps, operating systems, and smartwatches, many of them filling the vacuum created by China’s decision to block Li’s former employer, Google. You might think that Li’s decision to ditch Google and found a competitor in a protected market would have engendered some bad blood between the parent company and the start-up, but the opposite is true. In 2015, Google decided to invest in Li’s company, and in subsequent years Mobvoi has served as a trusted partner and potential back door for Google’s long-anticipated return to Chinese markets.
TRANSPACIFIC FLOWS AND GREAT FIREWALLS
Li and Mobvoi’s story takes us to the heart of the fundamental paradox that long bound together Silicon Valley and China: while the transpacific flows of people, money, and ideas reached new heights, technology companies and the internet itself have never been more divided by national boundaries.
Chinese companies have set up research labs in Silicon Valley. American executives have taken the helm at their Chinese competitors. Venture capitalists from both countries began splashing around cash on both sides of the Pacific. Product managers in Silicon Valley are studying WeChat, and Chinese AI scientists are looking to Google for inspiration. And ultimately, a dose of the cultural zeitgeist of Silicon Valley has seeped into China’s tech scene. As entrepreneurs and engineers bounce between the two places, they cross-pollinate the philosophical underpinnings and the management practices of the two technology ecosystems.
But that’s where the exchange stops. Apart from Apple, virtually every major consumer-facing Silicon Valley company that’s entered China has either been outcompeted or outright blocked. Chinese companies attempting to pierce U.S. markets have faced fewer legal obstacles, but their business ventures on U.S. soil have largely fallen flat.
China may have begun blocking foreign websites as a practical quest for information control, but an increasingly robust Chinese technology sector and the revelations of Edward Snowden helped turn those efforts into an ideology: cyber sovereignty, the right of a nation to absolute control over its domestic “cyber sphere.” The result is a global internet that increasingly mirrors traditional economic and political systems, with governments asserting control at home and vying for influence abroad.
THE ETHICS OF ENGAGEMENT AND THE NEW TECH TENSIONS
Stakes are high for all the key players in this environment. But for the Chinese Communist Party, they verge on existential. That’s because the rise of the internet touches on two of the key pillars of the Party’s legitimacy: information control and economic growth.
Since its founding in 1921, the CCP has seen “ideological work” as core to its ability to gain and maintain power. Controls on information and speech have never been absolute, but they have always remained strong enough to shape the contours of a national narrative, one that casts the Party as the protagonist in a tale of national rejuvenation. Brave Chinese journalists or academics can be pesky in undercutting parts of that narrative, but the distribution sources and perpetrators all remain within striking distance of Party authority. Newspapers can be shut down and professors can be jailed.
When they emerged, the internet and social media posed the greatest test yet because they challenged both of these mechanisms of control. What happens when police can’t seize the means of distribution? And what happens when the sources of information either are so diffuse they can’t be controlled or are physically outside of China’s national borders? From the Party’s perspective, these propositions are unacceptable. Control over the internet—the content posted and the companies that host it—remains an issue of paramount importance.
But control isn’t the only goal. China’s leaders and its companies are banking on technological innovation and commercial applications to help fuel the next decade of growth in China.
The engines that powered China’s three-decade economic boom—cheap exports, rapid urbanization, and a massive infrastructure build-out—are sputtering. Rising wages are undermining China’s export powerhouse, and a spending splurge on basic infrastructure and housing has reached saturation. If China hopes to pole-vault into the ranks of developed countries, it needs dynamic new sources of growth to spur domestic consumption and bump it up the production value chain.
For that, China’s leaders are banking in large part on a flourishing tech sector. China’s technology juggernauts are the grease in the wheels of the country’s new consumer economy. The companies themselves continue to post astonishing profits, but their importance goes far beyond that. The auxiliary jobs they create in logistics, sales, and services are providing a major boost for an economy struggling to wean itself off heavy industry.
Alibaba—the Chinese online shopping juggernaut—is fanning the flames of consumption by placing the world’s largest shopping mall in the palm of people’s hands. That shopping is also fueling a logistics revolution that employs millions of drivers in trucks, in cars, and on three-wheel trikes. Baidu and Tencent, the Chinese internet juggernaut behind WeChat, are opening whole new on-demand O2O (online-to-offline) service industries: nail technicians that show up at your door, grandmas who’ll cook you an extra meal for cash, and live-streaming stars who sing for money from fans. China’s rapid rise in the field of artificial intelligence could reenergize China’s manufacturing sector with robots and unsnarl traffic in China’s cities with autonomous vehicles.
Accessing all those material benefits, while keeping its grip on power, has required the Chinese government to perform a tricky balancing act: absorbing ideas and talent from Silicon Valley while also ensuring that any company operating in China is squarely under the Party’s control.
For their part, American technology companies looking to enter China face ethical and financial dilemmas. Silicon Valley is both an industry and an ideology. Its juggernauts rake in massive profits but declare themselves to be mission- and value-driven. Google long used the straightforward “Don’t be evil” as its ethical ethos and made it the company’s mission “to organize the world’s information and make it universally accessible and useful.” Facebook, meanwhile, wants to “give people the power to share” and “make the world more open and connected.”
By acting as the gatekeeper to the country’s billion-plus consumers, the CCP possesses tremendous power to demand concessions in exchange for access. For American and European automakers, those concessions have included forming joint ventures and sharing technology with local companies. For information technology companies, that means agreeing to strict censorship requirements and granting the Chinese government access to source code and data on Chinese users.
Those onerous government demands would be laughed at in many smaller markets, but the allure of the Chinese consumer base is simply too great. Totally abstaining from the market would be analogous to European automakers simply giving up on selling cars in America after World War II.
Even if one ignores the profit motive and takes these companies’ mission statements seriously, the dilemmas are no less thorny. When Google’s search engine provides Chinese users with censored search results—including top-notch English-language sources that aren’t found on Baidu—is it helping to make information more universally accessible, or lending legitimacy to powers that seek to control it? If Chinese Facebook users can’t share political opinions on the platform, but they can find and communicate with friends overseas, is the world a more open and connected place?
It’s a classic dilemma in dealing with unscrupulous or authoritarian governments: should you opt for messy engagement or take the moral high ground? Do you refuse to engage with people and companies in that country, hoping that your abstention sends a message and leads to fundamental change down the road? Or do you continue to work within the rules set up, pushing for change where you can and hoping that greater engagement and exposure contributes to incremental progress?
This dilemma—messy engagement versus moral high ground—confronts not only technology companies, but also American universities that want to open campuses in China, film studios that want their movies shown there, and even governments that fear publicly confronting the Party on sensitive issues would mean a break in transnational ties.
And these are not abstract or academic questions. A Chinese journalist spent eight years in prison after Yahoo cooperated with a government investigation into his email account. Cisco has faced a class-action lawsuit in California over the company’s alleged complicity in supplying software tools that could track users and aid the brutal suppression of Falun Gong practitioners.
Beyond the financial bottom lines and ethical breaking points of Silicon Valley companies, the evolution of Chinese cyberspace holds tremendous importance for the future of the internet itself. Technologists and ordinary citizens have long envisioned the internet as a global digital commons, a place where information and ideas flow freely, unburdened by the constraints of the physical world and its outdated political institutions.
But the Chinese government has shown that a combination of cutting-edge censorship technology and old-school authoritarian intimidation can effectively bring the internet to heel. Today, China’s ability to wall off its domestic internet, while also fostering wildly successful technology companies, serves as both a warning for internet freedom advocates and an inspiration for other authoritarian regimes.
China is one of the few institutions with the clout and cohesiveness to shape the evolution of internet governance. The United States used its post–World War II dominance to create a new economic order built around free trade and stable exchange rates. Today, China is deploying its leverage over Silicon Valley to rewrite the rules of the internet, coaxing the world’s most influential technology companies to play along with its conception of “internet sovereignty.”
For years, the question on everyone’s mind was, How will the internet reshape the Chinese government? Today, the question persists, but the subject and object have reversed: How will the Chinese government reshape the internet?
The revenge of internet geopolitics hasn’t been limited to issues of censorship and market access. Trade wars, hacking attacks, and territorial spats have put the national U.S.–China relationship through the wringer, dragging it from the realm of strategic competition to outright rivalry. And as those tensions escalate, technology has taken center stage. Politicians in Washington, D.C., have begun to treat the nation’s technology ecosystem in a way that more closely mirrors their Chinese counterparts: as a core component of geopolitical strength, something to be leveraged, regulated, and protected from rival nations.
That global technological retrenchment is putting heavy strains on the multidimensional ties between China and Silicon Valley, ties that were slowly nurtured by people like Li Zhifei. But can two ecosystems so deeply interwoven really be wrenched apart? And what happens to innovation and national security when the global tech landscape is divided against itself?
HUMBLE BEGINNINGS
When Li Zhifei was born, China was closer to the monomaniacal reign of Mao Zedong than it was to connecting to the global internet. After Mao’s death in 1976, China began taking its first tentative steps toward “reform and opening,” the set of policies that gradually opened up a space for private enterprise amid China’s command-and-control economy. Those policies would put China on the path to being a global technological force, but the country had decades of catching up to do. While Steve Jobs was marketing early Apple computers out of a Cupertino, California, garage, Chinese leaders were still squirming over whether farmers should be allowed to sell vegetables for profit.
It wasn’t until 1994 that China saw its first connection to the global internet, the result of a partnership between the Stanford Linear Accelerator and Beijing’s Institute of High Energy Physics.1 Even that first academic connection was not without controversy: while the U.S. Department of Energy supported the partnership, the Department of Defense was leery about the implications of bringing China onto the global network. A compromise was reached when it was agreed that China could be brought online—as long as an email first went out to everyone on the internet warning them of the onboarding of the People’s Republic.2 The following years marked China’s first internet boom. College chat boards and internet cafés sprang up, and with them the breathless anticipation of a new age dawning. Bill Gates’s book on the future of computers and the internet became a sensation in China. Actual internet access was limited to a tiny fraction of China’s population, but Chinese media insisted that China’s traditional greeting—“Have you eaten?”—was fast being supplanted by a more modern question: “Have you been online?”
In its early years, China’s internet ecosystem begged, borrowed, and stole from Silicon Valley. Many of China’s early internet giants were founded by Chinese students returning from the U.S., funded by American venture capital money, and inspired by Silicon Valley culture. Of the three Chinese internet companies that were the first to list on the Nasdaq, two of them had deep roots in the United States. The first major Chinese-language search engine was named Sohoo, a thinly veiled tribute to the Silicon Valley company that defined the field, Yahoo. (The company later changed the spelling of its English name to “Sohu.”) Sohoo was the brainchild of Charles Zhang, a Chinese-born physicist with a PhD from MIT. Zhang launched his first internet company in Beijing with funding from friends in the U.S., and after a meeting with Yahoo founder Jerry Yang, Zhang switched his focus to creating a search engine, taking on funding from Intel’s venture arm to make it happen.
Few people did as much to spread the early gospel of Silicon Valley in China as Eric Xu, a Chinese-born PhD in biology at Texas A&M. Xu was working at a biotech start-up in Silicon Valley when he decided to create a documentary showcasing the Silicon Valley ecosystem for Chinese audiences. Xu interviewed U.S. entrepreneurs, programmers, and investors, introducing Chinese viewers to concepts like start-up culture and venture capital. When the time came to interview Jerry Yang, the Taiwan-born and U.S.-raised whiz kid behind Yahoo, Xu brought along his friend Robin Li, a Chinese-born and U.S.-educated software engineer in the Valley.
“I got inspired,” Xu said in an interview with Bloomberg Businessweek. “I’m sure Robin got inspired, too, seeing an ethnic Chinese who created such a powerful company.”
Xu’s film, A Journey into Silicon Valley, was broadcast on China’s main state media channel, giving millions of Chinese their first glimpse into a region, culture, and business ecosystem that would reshape the world. At a screening of the film at Stanford, Robin Li’s wife approached Xu and told him that she wanted her husband to be an internet entrepreneur. Soon after, Xu and Li together founded Baidu, the Chinese search engine that would fight tooth-and-nail with Google and go on to become one of the most powerful technology companies in the country.
NAILING JELL-O TO THE WALL
While Xu spread the gospel of Silicon Valley in China, the Valley’s own techno-utopians were proselytizing a lofty vision of what the internet would become. They envisioned cyberspace as a world wholly detached from the stodgy political order of the twentieth century, and framed the internet as an almost organic sphere beyond the fumbling grasp of hapless bureaucrats. That philosophy crystallized in the 1996 essay “A Declaration of the Independence of Cyberspace,” a manifesto by John Perry Barlow, a former lyricist for the Grateful Dead and founder of the Electronic Frontier Foundation. The manifesto was initially a response to the United States’ Telecommunications Act of 1996, but it spun a much larger prophecy about the fate of the global web.
Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather. . . . I declare the global social space we are building to be naturally independent of the tyrannies you seek to impose on us. You have no moral right to rule us nor do you possess any methods of enforcement we have true reason to fear.
China’s Public Security Bureau had other ideas. As internet access grew, what began as sporadic shutdowns of controversial student message boards in China quickly coalesced into a more comprehensive set of controls. By 1997, authorities already had a relatively well-functioning filtering mechanism that came to be known as the Great Firewall. All Chinese internet traffic to the outside world had to pass through a limited number of physical cables, and searches or requests to access websites containing “sensitive” keywords could simply be turned back at the border. In its early incarnations, the Firewall blocked many Western news sources and a smattering of overseas Chinese human rights sites.
Those mechanisms of control were crude, and many in the technology community viewed them as the last gasps of an archaic political system on its last legs. And it wasn’t just wild-eyed techno-utopians who saw China’s efforts to control the internet as doomed to failure. President Bill Clinton captured the zeitgeist of the era in a typically down-home metaphor:
“In the new century, liberty will spread by cell phone and cable modem. . . . We know how much the internet has changed America, and we are already an open society. Imagine how much it could change China. Now, there’s no question China has been trying to crack down on the internet—good luck. That’s sort of like trying to nail Jell-O to the wall.”
China’s political system may have survived the fall of the Soviet Union and the turmoil of Tiananmen Square, the thinking went, but it wouldn’t survive the internet.
BOOM TO BUST IN BEIJING
American observers often framed the Chinese internet as a tool for the liberation of information, but in the late 1990s many of China’s first-wave internet entrepreneurs were focused on cashing in at U.S. stock markets. The same hot air that inflated the U.S. dot-com bubble had spread to Beijing and was ballooning expectations for overnight internet riches. During the year 2000, Chinese portal sites Sina, Sohu, and NetEase all listed on the Nasdaq to much fanfare. That same excitement spread to Li Zhifei, who fresh out of college joined China MobileSoft as a software engineer, hoping that his own millionaire-making IPO was around the corner.
The timing was perfectly wrong. By the summer of 2000, Silicon Valley’s dot-com boom was coming unraveled, and it wasn’t long before investors soured on China’s tech giants. Stocks for all three plummeted, with Sohu and NetEase sinking so low that the Nasdaq’s own rules on minimum values threatened to boot them unceremoniously from American capital markets. China’s first internet gold rush fell apart as quickly as it had come together. It had been inspired by Silicon Valley culture, funded in part by American venture capital money, and driven by returnees from American universities and Silicon Valley companies. The Chinese internet had shown its first hints of promise, but in the context of the global internet it was still a backwater. For now at least, the real action, real money, and real innovation was in the U.S.
And so Li Zhifei headed across the Pacific. In 2004 he enrolled in the computer science PhD program at Johns Hopkins University, in Baltimore. There he would dig into machine-learning algorithms and lay the foundation for a career on the cutting edge of artificial intelligence.
Li and his cohort were part of a new generation of Chinese students in the U.S. The generation that came before him was largely composed of elite PhDs, most of whom wanted to stay in the U.S. long-term, preferring the middle-class life of an immigrant engineer in America to the barely controlled chaos of entrepreneurship in early-reform China. But Li and his cohort were different, and so was the China they left behind. The rough edges of 1980s China were slowly being smoothed out, and the first seeds of the country’s start-up culture had been planted. Chinese tech wasn’t ready for the prime time yet, but there was potential there.
“When I decided to go to the U.S. the main reason was I wanted to broaden my vision and get advanced training,” Li told me. “But my real goal was to come back to China to do a start-up.”
As Li soaked up algorithms and international best practices, the battle lines were being drawn for the earliest head-to-head competition between the giants of Silicon Valley and their scrappy Chinese competitors. The first of these skirmishes to break into all-out warfare would pit the global behemoth eBay against local upstart Alibaba.
LOCAL DAVIDS AND FOREIGN GOLIATHS
Looking back with fifteen years of hindsight, it’s hard to mentally reconstruct the David-versus-Goliath nature of this showdown. In the intervening years Alibaba has become the glitzy golden boy of China’s internet economy, while eBay has lost most of its shine and fallen far behind Amazon. But at the time, this outcome seemed like the longest of long shots. eBay was one of the most valuable internet companies in the world and a darling of U.S. media. Alibaba was instead a local curiosity—a company with a catchy name and a goofy founder.
Jack Ma gained fluency in English as a kid by standing outside a local hotel and offering to lead foreigners around his hometown of Hangzhou’s famed West Lake district. He went on to become an English teacher at a local college and discovered the internet on a failed business trip to the U.S. in 1995. He spent the next few years stumbling through a couple early internet start-ups, including creating the “China Yellow Pages” for international sourcing of Chinese goods. In 1997, a temporary job at a government ministry gave Ma the chance of a lifetime: to take Yahoo founder Jerry Yang on a tour of the Great Wall. At the time Yang was the golden boy of Silicon Valley, and his company stood alongside eBay as one of the giants of the early internet. But Silicon Valley’s colossal stature in China didn’t intimidate Ma—it inspired him. He and Yang hit it off, chatting about the growth and future of the web. That momentous trip was captured by a single photograph, of Yang and Ma sitting on the brown stone steps, smiling at the camera. Within two years, Jack Ma had launched his next start-up: Alibaba.
Alibaba began as a platform for international purchasers of Chinese goods, but when eBay decided to enter the Chinese market in 2002 with its auction-style sales, Ma created the Taobao platform to compete head-on for customers in the auction market. At the outset, it looked like the mighty eBay would steamroll Jack Ma’s little start-up. But the former English teacher from Hangzhou turned that power imbalance into an advantage, waging a multiyear guerrilla war against the American company.
eBay began its China venture by buying up the top Chinese e-commerce company at the time, EachNet. EachNet had been founded by Shao Yibo, a Chinese national math champion with two degrees from Harvard and funding from Silicon Valley. But instead of leveraging EachNet’s local know-how, eBay gutted it. The Silicon Valley giant remade EachNet’s original (and successful) user interface in the parent company’s image. It sent in foreign managers to run its China operations and insisted on routing all China traffic through one global platform, slowing down the site as traffic bounced back and forth across transpacific cables.
By contrast, Ma sought every opportunity to localize. His team created a home page that was packed with links and text—irritatingly crowded to Western eyes, but somehow appealing to Chinese users. He built new payment methods that held money in escrow until the receipt of purchased goods, a move designed to assuage the fears of Chinese users who were still new to both credit cards and e-commerce. He tacked on messaging functions that allowed buyers and sellers to communicate in real time.
But Ma’s real coup came from business model innovation. As a company listed on the New York Stock Exchange, eBay was under pressure from bankers to show returns, and so it charged multiple types of fees on every transaction in China. Knowing that his company lived and died with growth of the Chinese market, in 2005 Jack Ma pledged to keep his platform free of fees for three years. It was a big gamble, a pledge to forsake short-term gains in hopes that he could expand the market, win user loyalty, and find a way to cash in later. eBay’s China operations mocked Ma with a condescending statement, chiding that “free is not a business model,” but Jack would get the last laugh.
Alibaba was gaining momentum with Chinese users and funding from allies abroad. Ma scored a major coup that same year when Jerry Yang handed over Yahoo’s China business and $1 billion in exchange for 40 percent of Alibaba.3 That deal had its origins in another walk that Yang and Ma took, this time in Pebble Beach, California. It would turn into the single best financial decision by an American internet company in China.
After four years of losing money and market share to the scrappy start-up, eBay CEO Meg Whitman invited Jack Ma to Silicon Valley to try to broker a deal. But with the American giant on the ropes, Ma refused to negotiate. In 2006, eBay retreated from the China market. It was the first time a Chinese internet company had gone head-to-head with its American rival and won.
“Nobody was betting on the little guys,” said Kaiser Kuo, host of the Sinica Podcast and former head of international public relations for Baidu. “It seemed like having a big American brand behind you was magic. It really never seemed like the local Davids were going to beat the foreign Goliaths—it just never seemed possible. But then it started to happen left and right.”
WWW.GOOGLE.CN
eBay’s challenge in conquering China was that of a powerful colonial army facing a ragtag guerrilla insurgence. Google’s conundrum was even more complicated—like a game of multidimensional chess played against three wildly different but equally intransigent foes: local competitor Baidu, the Chinese government, and its own much-hyped ethical code. Any move that Google made against one of these foes compromised it along another dimension, leaving the company tangled in a web of moral, political, and business tradeoffs.
