China and Entrepreneurship: Frightening

China is really frightening. Having spent the last three days meeting with Chinese startups and investors, I can see how their culture could easily eat our lunch. it is still difficult and expensive to get wi-fi here, so I will briefly summarize my thoughts and refer you to this presentation by Benjamin Joffee that tells it all. Benjamin is an Internet strategist who has been working here for five years. If what he’s seen is anything like what I’ve experienced on this return visit, my fourth over a 30 year period, it is mind boggling. Just look at the chopsticks in the preso and you will be convinced.

CENTRAL PLANNING

We read about it, but can’t easily visualize it. China builds the equivalent of two Boston-sized cities a year, and has done that for 30 years. People’s homes are torn down and they are relocated to modern high rises. Older generations used to squatting over a hole in the ground are now treated to hotels with modern bathrooms out of Architectural Digest (Kohler manufactures here, as does Toto, so programmable and heated toilet/bidets are everywhere in hotels and restaurants.

There are now twelve subway lines in Shanghai, where last time I was here i think there were two. In Beijing, the airport and the hotel we’re in were built for the 2008 Olympics.

INNOVATION

The Chinese have an unashamedly different view of innovation. They watch what we do on Tech Crunch and then they clone it in a matter of days for their enormous markets. They have several competing Twitter, Facebook, YouTube clones, and TaoTao and Alibaba are their EBay and Paypal. Baidu is their Google. They are PROUD of how quickly they can clone our IP, and since they don’t need our markets they can block our sites with no great suffering. The expats and geeks use VPNs anyway. They quickly build $500million local companies and exit by taking them public on our stock exchanges or their own.

China doesn’t have, as one VC who spoke to us put it, "those pesky privacy rules," so they can keep all the billions of text messages generated on their ubiquitous mobile phones (they skipped land lines) and mine them to generate targeted advertising. Watch a startup here called Massive Impact.

TAKEAWAYS

Just the sheer size of the financial district we saw in Shanghai and the enormous expansion of Starbucks is enough to convince me that if we don’t partner with China she can eat our lunch in healthcare, internet, and IT — the fields I know well. Not to mention that this current five year plan, their twelfth, is entirely focussed on clean energy and lowering China’s carbon footprint. China is fighting a different war; the economic war. For this, it doesn’t need soldiers, just armies of young people with entrepreneurial aspirations and a historical desire to get back to ruling the world.

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5 Comments

  • andreas moeller

    well in the near future (20years) there is nothing to fear since they copy what works elsewhere as you say and focus on the homemarket - where they have the advantage and knowledge. the government is trying its best to change this but Chinas educational system is completely rotten and students does not learn to think critically and create - i am a former student of the nr 1 university in China so I know what I am talking about. China needs to reform its educational system before it will become a serious contender to rule the world and this will take much time. Furthermore, alot of the locally really succesful companies have been created by chinese returnees who have spent a great deal of their youth in the West - thus the often the people creating these succeses have somewhat mixed background. So no need to worry too much in the short term - but in the long run China will regain its position as world leader for sure - unless the economy melts down of course.

  • Carrie Kelly

    I have worked with Chinese families for years. What I observe, over and over, is their tendency to spoil their children when they are very young, then switch abruptly to being outright abusive when they are nearing school age. The abuse is beatings for underperforming; wrong answers, not trying hard enough, etc. Of course, not all families conduct the outright physical abuse. Others use intense shame for under-performing. This type of conduct produces an adult who is constantly trying to outrun the feelings of shame and worthlessness created by the abuse. In my opinion, this may be one factor that drives them, as adults, to be so competitive and controlling.

  • Myriam

    "They have several competing Twitter, Facebook, YouTube clones, and TaoTao and Alibaba are their EBay and Paypal"

    TaoBao rather than Tao Tao?

  • Vic Williams

    You're right. And it's not that simple. Most aren't entrepreneurs, they're copycats. Starbucks franchising in China would do a LOT better if it adjusted to China. Hint, sell more Chinese teas. Have one or two 'proper' Chinese tea sets per Starbucks to attract that business. They fill up with wifi users.

    At the same time, full shan zhai is an EXCELLENT natural entrepreneurial pattern. Very akin to good agile development. Their products are already in America via American & HK & Taiwan brands today. But they don't have the interactive agile-make-it-work skills for a Western environment, services have been low down the totem pole for a long time.

    > entirely focussed on clean energy and lowering China’s carbon footprint
    Yes, and what happens out 'on the edge' can be an entirely different thing. Their use of coal has gone up during the 'recession' and it's serious business (the Rio Tinto affair). The Provinces operate mostly like separate countries, and a Beijing fiat often becomes a hint in the South.

    They often have whole new empty cities, bought as investments by people still living in the old cities. That economics is different and reflects a huge population with an extremely high savings rate. Their problem is adjusting that savings habit to anything else so there is more cash flow.

  • Destroyer

    I agree. China most certainly will 'eat our lunch.' I also agree it's time to partner with them in every way we can. Their dictatorship has allowed them to move extremely fast for the size they are. They can out pace us in every way except innovation, but even that edge, will vanish. We must now decide whether the world's greatest power will be an adversary or an ally and how we can influence them to adopt a more humanitarian and free social policy. Eventually, when their cultural quest for efficiency and dominance gives way to a sense of freedom and reason, we will have another great force for good on the planet. Right now, I get the sense that the majority of the world doesn't want China as the new power on the planet. They are afraid of their historically rigid, ruthless, and hierarchical culture. They need social reform if they are going to be accepted with anything other than solemn contempt.