I was a longtime Yahoo shareholder and consequently have followed co-founder Jerry Yang for a long time. He likes his privacy, though, and hasn't granted many interviews over the years.
So I was surprised when I found that he did a 90-minute podcast last week with GGV Capital's Hans Tung and Zara Zhang.
This is a deep dive into Jerry's experience investing in China over the last 20 years. In case you don't have 90 minutes to devote to listening to the podcast in detail, here are my summary notes:
In Chinese tech, it's normal to work 72 hours a week. The name of this podcast — 996 — comes from a saying in China that describes the work ethic there: working hours are from 9 a.m. to 9 p.m., six days a week. That was one of the most surprising things I noticed when I first toured around China in 2009 visiting different tech companies. I thought we worked hard over here in North America, but it was not even close to the pace there. These are the companies you are competing with. Can you keep up? It reminded me of this Michael Moritz opinion piece, as well as this tweet that made the rounds last week:
Yang discussed how he noticed this work ethic when he first visited China 20 years ago and it's the same today. He encourages all American entrepreneurs to travel there to see it firsthand.
Not just copycats. Even 5 years ago, many Americans had the impression that Chinese tech companies were just copycats. They'd parrot whatever new concept originated in the U.S. (e.g., you'd hear about the Facebook/LinkedIn/Airbnb of China). However, Yang says this is not an accurate representation of what's happening today. Chinese tech companies are innovating just as much as Americans. You put that together with the work ethic, and it's a formidable combination.
If you're an outsider in China, expect to invest for a decade. Yang recommends to American entrepreneurs he backs that they expand their businesses to China. But he says they shouldn't expect to make money there — perhaps for a decade. Doing business in China is all about relationships more than transactions. Those require time to build. Great success doesn't happen fast in China — and definitely not for outsiders.
The Alibaba investment only came after years of failure. The hosts credit Yang with the greatest American investment ever in the country: Yahoo's 2005 investment in Alibaba. But he's very humble in discussing it.
He met Jack Ma in 1997 — as his tour guide during a visit to the Great Wall. Amazingly, Ma made such an impression on Jerry that they stayed in touch. Eventually, Ma started Alibaba. Meanwhile, Yang entered the Chinese market in 2004 when Yahoo acquired a Chinese firm called 3721, which made software for keyword searches and was run by Zhou Hongyi. Yang made it into a subsidiary called Yahoo China, but it only lasted a year.
Alibaba out-competed them, and then the Chinese government said they'd have to shut Yahoo China down as there were new foreign ownership restrictions for the "information" space. So Yahoo decided to invest $1 billion into Alibaba and hand over its Yahoo China operations to Ma, while Zhou left to start Qihoo 360. Yang explained that today, the Chinese government probably wouldn't permit the kind of investment Yahoo made in Alibaba.
In basketball, there's a saying about "hanging around the hoop" in order to grab a rebound and score. In business, if you are in the arena operating — even unsuccessfully — you see and hear things that give you an opportunity. Because of the long relationship with Ma and its experience operating in China, Yahoo got the opportunity to invest in Alibaba.
The point is: Yahoo's brilliant investment wouldn't have happened if they hadn't been in China — and failing there — for years.
His most admired entrepreneur: Didi's Cheng Wei. Yang was asked to name the entrepreneur he admires most today, and he chose Didi's founder, Cheng Wei. Didi is known in America for having taken over Uber's Chinese operations and nabbing a $1 billion investment from Apple. Yang has board observer rights for Didi and has gotten to know Cheng well over the last few years.
Even though he doesn't speak English, Cheng Wei's nickname is Will, and he's extremely driven. After spending 8 years working at Alibaba and Alipay, the now 34-year-old started Didi late in 2012, merged with its chief Chinese rival Kuaidi Dache in 2015, and acquired Uber's Chinese operations in 2016. It's also expanding beyond China. Over the last several years, it's made investments in all its major international competitors: Lyft, Ola, Grab and Taxify. All these companies are making inroads across the world. Didi recently declared war against the various bike-sharing companies in China. It's betting that its 450 million users, billions in the bank, and deep investments in AI will keep it in the lead.
Yang says that, if 996 is the general work ethic in the Chinese tech world, Cheng Wei works 15 hours a day, 7 days a week. Keep an eye on Didi on the global stage.
Apple is the most successful American company in China. Yang discusses Apple's efforts in China and calls the company "the most successful American company in China that no one talks about." Apple has made a long-term commitment to the country, spending time, money, and making billions in terms of investments in jobs and stores. Yet, they are recognized very little over here for how well this investment has worked for Apple. Similar to the Yahoo story, Apple would never have grown to be as successful in China today if it hadn't made the initial effort a long time ago and proven willing to follow a long and winding road.
This is a fantastic interview. The biggest takeaway for me was that the Chinese tech companies of today are still underappreciated in North America. They are smarter, more driven and more creative than ever. They serve a massive market much larger than ours but now have global ambitions. They are no longer copycats.
(Disclosure: Affiliates controlled by Eric Jackson have long positions in Apple.)