Four Days, Five Public Speeches: What Was Jack Ma Trying to Explain?

From he's fine and Alibaba is fine, to the economy and the state of the world.

Jack Ma had a busy week.

Starting with the World Artificial Intelligence Conference on September 17, he turned up at five large events on four consecutive days and gave four public speeches. Then, over the Mid-Autumn Festival, he flew to New York for a United Nations meeting on the Sustainable Development Goals.

All of it came a week after he abruptly announced his retirement plan on September 10. Ma first told Bloomberg and The New York Times that he would hand over his position at the company, then announced on Teachers' Day that he would step down as chairman in a year, and that in 2020 he would give up his seat on Alibaba's board as well, even though that seat involves no day-to-day management.

Worth more than $40 billion, Ma is today the richest person in China, and he has never minded standing in the spotlight and saying what he thinks — about business, about current affairs, occasionally about history.

Even so, his past week was unusually full and unusually loud. The artificial intelligence conference on the 17th, the Alibaba Global Investor Conference on the 18th, the Yunqi Conference on the 19th, the Summer Davos on the 20th, plus an interview with Xinhua squeezed in between. From Alibaba's own events to state-backed industry conferences and an interview with state media, and finally to a United Nations event he had to leave the country for.

In a week of that much exposure, Ma had a lot he wanted to say.

He's Fine

After Ma said he would soon step back from Alibaba, Duncan Clark, author of Alibaba: The House That Jack Ma Built, commented: "Whether he likes it or not, he is a symbol of the health and prospects of China's private economy. Whether he likes it or not, his retirement will be read as a sign of discontent or anxiety."

There is plenty to worry about, on several fronts. Alibaba is China's most valuable private company and its largest listed company. It stands for the most dynamic part of the Chinese economy of the past 20 years — and China has arrived at the most awkward moment yet for its private sector.

The more immediate worry is Alibaba itself. Ma began his so-called succession plan long ago and handed the CEO job and day-to-day management to Daniel Zhang three years back, but no company is big enough to withstand policy uncertainty. Tencent, which not long ago looked unassailable, has lost more than HK$1 trillion in market value in the six months since gaming regulation tightened.

Alibaba's shares had already been sliding since the news leaked on September 7, before the retirement was formally announced. On Teachers' Day, when Ma made it official, the stock fell as much as 4% intraday, erasing about $15 billion in market value. Alibaba-linked stocks dropped with it: Alibaba Health, listed in Hong Kong, fell more than 6%, and Sun Art Retail and Alibaba Pictures were both down more than 3% at one point. More than 40 Alibaba-concept stocks on the A-share market fell together; only Qingdao Haier and Shiji Information, two stocks with little real connection to Alibaba, rose.

Appearing in one public setting after another over four days was itself a direct answer to those outside worries. Ma insisted the retirement was not a sudden impulse.

He said he had been thinking about succession since he started exploring the partnership structure in 2009 — a company meant to last 102 years cannot rest on its founder alone. Zhang and the leadership team Alibaba has raised already hold the same values as Ma and the company's other founders: "As long as those don't waver, Alibaba won't waver."

Alibaba no longer needs Ma in the day-to-day work either. He said there was once a 60-day stretch when he did not show up at the company and did not get a single call from the office. Jonathan Lu took the CEO job from Ma in 2013, the successor changed to Zhang in 2015, and real control of the company has already passed to Zhang. Alibaba's latest quarterly report showed 62 billion yuan in revenue, the fastest growth rate in three years. Revenue growth has held above 50% for the past two years, and the target for the new fiscal year has been raised again, to 60%.

Nobody forced him out, and it has nothing to do with politics. "Chinese government officials called me," Ma said in English at the investor conference. "They asked, are you crazy? What happened? Is something terrible going on, or are you sick? I said, absolutely not."

"There are also rumors overseas that the government wanted to push me out. If you don't want to leave, nobody can force you, right? This has nothing to do with politics."

At Davos he said much the same thing: "There are plenty of rumors — that I was forced out, that the economy is bad, that the government had had enough of me, that I'm getting ready to run. All sorts." One has to learn to "swim through the rumors," he said.

But the founder's halo never quite comes off. On one hand Ma said he was letting go for good and that "it's impossible for me to come back"; on the other he said he had "never left," that he would still care about everything at Alibaba and still talk problems through with the team. "To say that from today I'm done with it, that I don't care at all — I don't believe that myself. I still love it… I believe that even on the day I close my eyes, I'll be happy."

Alibaba's Future Is a Digital Economy of 2 Billion Consumers and 100 Million Jobs

"Being Alibaba's chairman and CEO is not easy at all, because what you handle isn't only business problems," Ma said at Davos. Given how complex and how large Alibaba's business is, he said, its mission has to be treated as a real mission.

On that mission, Ma said at Alibaba's anniversary celebration in 2017 that the company is a large organization that goes beyond being a company, having built a distinctive "digital economy" spanning commerce, finance, logistics and cloud computing.

By 2036, Alibaba wants to become "the world's fifth-largest economy." That economy's mission is to create 100 million jobs worldwide, serve 2 billion consumers, and make 10 million small and medium-sized businesses profitable.

In his 2017 letter to shareholders, Ma returned to the idea, saying small and medium-sized businesses, young people and women should all have fair access to financial services, and talking up the commercial opportunities in the countryside and in poor regions.

Alibaba's full-year GMV in 2017 was 3.767 trillion yuan (about $549.5 billion), roughly the size of the world's 23rd-largest economy, more than Sweden's entire GDP that year.

The "economy" line is something like an upgrade of "make it easy to do business anywhere." A company, Ma explained, only has to think about its own interests and only has to make money; an economy has to carry social responsibility. The difference between a company and an economy is not scale and profit but duty and responsibility.

At the investor conference, meant to reassure shareholders, Ma brought up the digital economy again. It is still Alibaba's plan for the future, he said, and the target is still 20 years out: $1 trillion in GMV by 2020, and by 2036 the consumers Alibaba serves rising from 640 million to 2 billion, the small and medium-sized businesses it serves going from 10 million served to 10 million made profitable, and the jobs it creates rising from 36 million to 100 million.

Chips and New Manufacturing: Alibaba Is a Technology Company

Besides the grand vision, Ma gave Alibaba's future a concrete goal: to be a technology company.

At this year's Yunqi Conference, Alibaba announced it had set up a chip company. China's chip technology lags far behind the developed world, Ma said at the event, but China has an enormous market of internet users and a vast base of data, and it ought to be able to take the initiative and "overtake on the curve" in chips: "Data is the means of production, cloud computing is the productive force, and the internet is the relations of production."

In Alibaba's technology story, chips, big data and cloud computing all end up serving "new manufacturing." In 2016 Ma proposed new retail, one of his "five new" ideas, and Alibaba went on to build supermarkets of its own and to remake small merchants. Now the concept has been scaled up to a larger frame.

But just as new retail was hard to pin down, Ma's account of new manufacturing came with no concrete definition either. New manufacturing, he said, "isn't internet companies combining with traditional industries, and it isn't putting a chip in a product. The test for new manufacturing has to be whether it's made to order, whether it's personalized, whether it's intelligent."

He warned that "the next 10 to 15 years will be very painful for manufacturing." Where an assembly line used to turn out 2,000 identical garments in five minutes, he said, it will have to turn out 2,000 different ones in five minutes. "New manufacturing isn't the fusion of the physical and the virtual — it's manufacturing combining perfectly with services."

Chips are the most concrete of these technology businesses. Ma's interest in them goes back at least four years. In April this year, at a student exchange event at Waseda University, he said Alibaba had bought five semiconductor companies over the previous four years, and this year had bought a domestic one, Hangzhou C-SKY Microsystems.

One motive for going into chips is that the company has to plan ahead. At Davos, Ma moved from chips to the dangers facing Alibaba's future: "If you don't think about tomorrow — well, there may be ten disasters tomorrow, and if you've thought through seven or eight of them, you can kill them off."

Chips also rise to the level of geopolitics. In Japan he said: "The Americans got there first. The chip market is entirely controlled by Americans. You know perfectly well what it would mean if they suddenly stopped selling chips." The United States had just announced sanctions on ZTE.

Behind all the technology talk is still the question of Alibaba's growth.

In 2017, online shopping accounted for just 19% of China's retail market, about the same as the year before — no gain in market share. The remaining 80%-plus is what drives Ma and Richard Liu to push so hard into offline retail.

Add the trade war to the picture, and even if Alibaba has taken no direct hit, investor confidence is hard to keep intact.

The Trade War Will Last 20 Years, and Alibaba Can't Bring America a Million Jobs Either

Compared with China's low-key entrepreneurs, Ma has always had an unusual appetite for commenting on politics and the economy. That has not changed.

"On the U.S.-China trade friction, it's the same line: everyone needs to be prepared for 20 years." Ma came back to 20 years again and again, saying the trade war cannot be settled quickly — it will not be over in 20 days or 20 months. It is not really about trade, he said, but about competition between countries, as it once was between the United States and Japan: "This will go on for a long time, and there's no short-term fix. U.S.-China trade has run for 40 or 50 years and grown this big; of course there are problems. Big problems are completely normal. When both sides are unhappy they sit down and talk; if they can't agree they fight, and then they talk again."

A number of scholars and analysts agree. Gary Hufbauer, an economist at the Peterson Institute for International Economics, argues that Trump has sped up and widened the populist forces set against trade globalization, the biggest systemic break in 75 years, and that even Trump's successors are unlikely to return the United States to the postwar model of leading the world economy through free trade. Edward Alden of the Council on Foreign Relations said: "We will never go back to the status quo before Trump took office. Congress and the administration intend to fundamentally rewrite their foreign trade relationships rather than try to restore the old rules. The WTO will either be overhauled from top to bottom, or it will die."

What can a company do in such an environment? Ma started out optimistic: "Even when the economy is bad there are good companies, and when it's good there are plenty of terrible ones," and "if everything went smoothly there would be no entrepreneurs — great companies and great entrepreneurs have all been through hard times, or were born in them."

On how to get through hard times, Ma told a story:

"Three children went out just as a storm was about to hit. Their father said, you three go and bring that thing back to me. The eldest was dressed properly, in full rain gear. The second had a big umbrella. The third had nothing at all. That afternoon all three sons came back — the eldest with a broken leg, the second with an injured back, and the third with the thing. Do you know what happened? The eldest said, I'm dressed properly, I've got good equipment, so when he saw the wind and rain he walked straight into it, and broke his leg. The second thought the big umbrella would be enough, and came back with his back broken. The third had nothing, so he found a hole and hid in it — a storm always passes — and then he brought the thing back."

You cannot control an act of God; better to sit still and watch: "Cursing today does no good, Trump can't hear you. Just do your own work properly — you can't change it anyway. If everyone gets their own affairs in order there won't be so much anxiety. When you're struggling, your opponent is struggling more."

At the investor conference he put it more bluntly: "This will go on for a very long time. You want a long-term solution — there isn't one."

Ma himself moved fast when things were "good." He was among the first entrepreneurs to call on Trump. In January 2017, after Trump's election, Ma went to the United States to meet him — after Masayoshi Son, before Terry Gou — and told the press he would bring a million jobs to America.

When things turned "bad," he adapted to that too. In the Xinhua interview, Ma said the promise could no longer be kept: "That promise was made on the premise of friendly U.S.-China cooperation and rational, objective bilateral trade. The current situation has destroyed that premise, so the promise cannot be delivered."

Bill Bishop, a veteran American technology investor living in Beijing, commented: "Did anyone really take Ma's promise seriously?" Still, withdrawing it was a statement in itself.

Government Should Do What Government Should Do, and Business What Business Should Do

At the artificial intelligence conference in Shanghai, Ma turned to the deadly scandal Didi has been through: "Knocking out an industry is very easy. Making an industry better is extremely hard."

"Government should do what government should do, and business should do what business should do. My view is that government shouldn't worry about whether the taxi industry gets wiped out — that's a market matter. What government should care about is whether things are safe, whether people are dying. Traffic safety is the number one factor. As for one industry replacing another, let the market do the replacing. And when there's a traffic accident, we should be working out how to cut accidents to a minimum, not how to destroy an industry."

A week before Ma's speech, Didi's troubles had escalated. Several Shanghai government departments moved into the company and ordered it to clear drivers without Shanghai household registration off the platform. The disruptor that once looked set to replace the entire taxi industry had already lived through two years of tightening regulation, and then two violent criminal cases brought scrutiny that was denser still.

Ma's own company has met regulation just as forceful. There was no eye-catching criminal case, but the treatment was every bit as thorough.

Alipay's trouble began at the end of 2017. In December, the central bank and the China Banking Regulatory Commission issued a document capping the issuance of asset-backed securities (ABS) for consumer loans, which directly limited how much Alipay could lend to users and to small and medium-sized businesses. Around the same time its deposit business was restricted too, with deposit ceilings, purchase limits and withdrawal limits all cut again and again. Think of Alipay as a bank, and both its lending and its deposit-taking were being reined in.

On Alipay and China's state-dominated banking industry, Ma's line has been adjusted several times. Back in 2008 it was "if the banks don't change, we'll change the banks," and "if someone goes to prison because of Alipay, that person will be me, Jack Ma."

In a 2013 interview with Bloomberg Businessweek it was "we want to be in love with the government, but not marry it — never do deals with the government." By 2016 it had become "the state needs Alipay, and we'll hand it over the moment it's wanted."

In May 2018, Alipay announced it would connect to NetsUnion instead of settling directly with banks. That same month, Alipay opened up to money market funds from other financial institutions, no longer confining users to Tianhong Fund, controlled by Ant Group. Alipay went from a disruptor challenging the rules of banking to an institution that serves the banking system.

What He Didn't Spell Out: What He'll Do After Retiring

Taking Bill Gates as his example in the Bloomberg interview, Ma said: "I'll never be as rich as him, but I can retire earlier than he did."

Gates ended his day-to-day work at Microsoft in 2008, when the company was already 33 years old. He did not step down as chairman until 2014, at 59, and he sits on Microsoft's board to this day.

Ma has indeed managed to step down earlier than Gates. But if anything went largely unexplained in his week of appearances, it was precisely what he will do after retiring.

"I think at 54 I'm a bit old for the internet, but for other industries I think I'm still quite young… Once you're past 55 and heading for 60, people form a habit — you don't want to leave," Ma said at Davos. This is exactly the right moment to retire: any earlier and he would not have been ready, any later and he might not have wanted to go.

When Gates ended his day-to-day work in 2008, the Bill & Melinda Gates Foundation had been running for eight years, with a string of concrete projects already under way. By the time he gave up the Microsoft chairmanship in 2014, his main identity had long since shifted from entrepreneur to philanthropist.

On what comes next, Ma offered very little. He said he would go back to education and concentrate on philanthropy, and beyond that named no goals or plans.

At Davos he mentioned one new direction: making liquor. Young people today don't drink Moutai, he said. "I tell them not to worry — after 45 they'll drink it, because you only understand liquor once you've been through life and death and hardship."

At the investor conference he also said, "Before I turn 70 I can still do some truly remarkable things."

After all those days, the one thing Ma never said outright was what remarkable thing he plans to do once he retires.

Attached: full transcripts of Jack Ma's five most recent speeches

The artificial intelligence conference on September 17; the Alibaba Global Investor Conference on September 18 (the link is a YouTube video; the livestream was interrupted at one point); the Yunqi Conference on September 19; the Summer Davos forum on September 20; the Xinhua interview on September 19.

Cover image from Visual China Group