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  Jack’s Mantra

  Perhaps the most famous lesson of Jack the teacher is known by heart by every Alibaba employee: “Customers first, employees second, and shareholders third.” Jack describes this as Alibaba’s philosophy.

  Customers, especially the “shrimp,” come first in his mantra. When asked by the journalist Charlie Rose if he saw himself as an “apostle for small business,” Jack agreed, “I’m a strong believer. It’s my religion.” Many small businesses in China don’t just use Alibaba’s websites as a marketing channel, they depend entirely on them to make a living. Jack has always insisted on offering most of Alibaba’s services for free.

  Employees may come second to customers for Jack, but an ability to motivate his team to overcome obstacles has been critical to Alibaba’s success. Joe Tsai didn’t hesitate in describing them to me as “disciples,” when recalling his first impression in 1999 of Alibaba’s earliest employees, some of whom had already followed Jack for years. Jack doesn’t sugar coat the challenges to his employees. One of his favorite messages to them, and a “bit” in his comedy routine, is “Today is brutal, tomorrow is more brutal, but the day after tomorrow is beautiful. However, the majority of people will die tomorrow night.” The goal for Alibaba to survive for 102 years might seem weird to outsiders but not to his employees, especially the Aliren (the “Ali People”)—those with more than three years of service—for whom it is an accepted part of the Alibaba culture.

  Shareholders come third in Jack’s ranking because he refuses to be diverted from his lofty ambitions by short-term pressures to generate profit. In public, Jack likes to make fun of his shareholders and investors, a means to burnish his credentials as a maverick with his employees and the general public. When the share price of Alibaba’s first business, alibaba.com, languished on the stock market in 2009, Jack cried out at the rock concert–style gathering for the company’s employees, “Let the Wall Street investors curse us if they wish!” Not exactly standard behavior for the senior executive of a publicly listed company.

  Yet despite the populist rhetoric, Jack has assiduously created opportunities at regular intervals—on average every four years or so—for employees and long-term shareholders to turn a profit from the sale of their shares. Investors who supported Alibaba early on and stuck with the company for years have been richly rewarded, much less so those public investors who purchased the company’s shares in their post-IPO peak.

  Company Campus and Culture

  Jack’s imprint can also be seen in the design of Alibaba’s 2.6-million-square-foot Wetlands headquarters campus. From the main south gate visitors enter a massive complex of futuristic glass towers. At the base of the office towers lie a large gym, Starbucks, and a country-style store stocked with organic fruit and vegetables that could be straight out of Silicon Valley. Farther to the north lies a huge, man-made lake. Dotted with lotuses and lily pads and bordered with reeds, the lake is overlooked on one side by a cluster of elegant, white-walled villas topped with curved, black-tiled roofs, a scene reminiscent of Jack’s much-loved classical novels, like the sixteenth-century work The Water Margin.

  The lake reflects Jack’s newfound passion for environmental protection. When asked by President Obama in Manila what spurred his interest in the environment, Jack told the story of a lake in which he had last swam when he was twelve years old. “I went to swim in a lake and almost died in the lake because the water was so deep, much deeper than I thought. Five years ago I went to the lake, the total lake was dry.”

  On a visit in the spring of 2015 to the campus, I had to step gingerly to avoid squashing the tiny baby frogs that had hopped out of the man-made lake onto the walkway leading to the office towers. On my way I also stopped by Alibaba’s large library and bookstore. Jack is a keen reader, particularly of titles by the Hong Kong–born martial arts writer (Louis) Cha Leung-yung, known in China by his pen name Jin Yong. His works are featured in the library along with classical works and the latest books on management theory or Silicon Valley icons like Steve Jobs and Elon Musk.

  But beyond the design of the campus, it is in the culture of Alibaba that we can most clearly see the influence of its principal founder. To zip around the Wetlands headquarters complex, Alibaba’s employees make frequent use of the free bicycles the company provides, a perk no doubt inspired by Google’s fleet, which is decked out in the U.S. giant’s signature blue, yellow, green, and red colors. The bicycles at Alibaba are orange and include tandems: the two seats illustrating the company’s emphasis on teamwork above individual achievement.

  A sense of subjugating one’s own needs for the interest of the customer is a cornerstone of Alibaba’s corporate culture. Just as Disney refers to all of its executives and employees as “cast members,” Alibaba places a big emphasis on camaraderie and a commitment to the greater good.

  Every May 10, around the time of the annual “Aliday,” a company anniversary that celebrates the spirit of teamwork shown by the company’s employees as they emerged from the spectre of the SARS virus, Jack presides as chief witness over a ceremony to celebrate recent weddings of company employees. Alibaba covers the lodging and meal expenses of the immediate family members who are invited to join. The photos of a hundred plus couples celebrating their matrimonials together at one company has inevitably invited comparisons to cults such as Rev. Sun Myung Moon’s Unification Church. But Alibaba takes pains to point out that the event is just a celebration, not a replacement, of the couples’ official marriage registrations.

  A more tangible benefit for the couples and other Alibaba employees is the interest-free loan of up to $50,000 offered to finance the down payment on a new apartment, an increasingly valued perk for staff members working in high-cost cities like Hangzhou and Beijing. Thousands of employees have taken advantage of the loans, amounting to several hundred millions dollars today.

  Alibaba encourages a sense of informality at work. Every employee is asked to adopt a nickname. The practice is so widespread that it can invite confusion when they have to search to find out the actual names of their colleagues to communicate to people outside the company. Initially, the nicknames were drawn from characters in the novels of Jin Yong or other stories of martial arts and bygone eras. As Alibaba grew this pool of names was soon exhausted. Using their nicknames, employees post comments about the company’s products or culture on Aliway, the company’s internal bulletin board. They can even initiate polls or invite the support of their colleagues to dispute assessments or management decisions, and address suggestions or complaints directly to Feng Qingyang. That is the name of Jack’s online persona, a swordsman from one of his favorite martial arts novels.

  Employees are discouraged from ever complaining—a pet peeve of Jack’s—and encouraged instead to shoulder personal responsibility, carrying out or delegating tasks rather than waiting for orders from on high.

  Military terms crop up a lot at Alibaba. Top-performing individuals at Alibaba are known as King of Soldiers (bing wang). Fictional character Xu Sanduo is sometimes used to illustrate management’s message. In the 2007 TV drama Soldier’s Sortie, Xu, a shy village boy, rises despite the odds to become an elite soldier in the People’s Liberation Army.

  Six Vein Spirit Sword

  Alibaba has codified its own company values in something it calls the Six Vein Spirit Sword. The term originates in the work of Jack’s favorite novelist, Jin Yong. The sword he writes about is not an actual weapon, but the art of building up one’s own internal strengths in order to defeat any opponent. In Alibaba’s case, the strengths that form the Six Vein Spirit Sword are akin to those outlined in the “Mission, Vision, and Values” of Jack’s favorite corporate guru, Jack Welch, the former CEO of General Electric (GE).

  Welch’s 2005 book, Winning, recommends an almost messianic culture in the workplace: “Leaders make sure people not only see the vision, they live and breathe it.” Jack (Ma) has always held GE in high regard.

  The “Six Veins” of Alibaba
’s “Spirit Sword” are “customer first, teamwork, embrace change, integrity, passion, and commitment.” Generic-sounding as they are, the company treats them very seriously. Commitment to the Six Vein Spirit Sword accounts for half of employee appraisals.

  “Customer first” is reflected in the power given to Taobao’s xiaoer referees and in the composition of Alibaba’s workforce. Most of Alibaba employees work in sales, a much higher proportion than the more technical bent of competitors like Tencent and Baidu. Face-to-face visits are a key part of Alibaba’s sales methods.5

  “Teamwork” at Alibaba means regular group games, songs, and outings. These can come as quite a culture shock to employees joining Alibaba from firms based in Silicon Valley. But for those fresh out of college, the system of apprentices and mentors is well received, including the routine of holding regular meetings to “kick off in the morning and share in the evening.” One former employee summed it up: “Lots of companies focus only on results: You have to complete a certain number of orders. Alibaba takes the opposite approach: If you want to complete a certain number of orders this month, what do you need to do every day? By breaking it down into phases, each day could be dedicated to one key step in the process—and eventually you wouldn’t be far off from your goal.” Recognition of high performers in company-wide announcements helps, too, as do the prizes awarded to the “A-teams” (lao A, a military reference), ranging from Louis Vuitton wallets, belts, and limited-edition sneakers to monthly bonuses of tens of thousands of yuan or even a car.

  The call to “embrace change” is reflected in Alibaba’s frequent rotation of its employees, switching them regularly between various new products or between regions of the country, regardless of performance. This creates lots of challenges, but Alibaba asks its employees to “embrace setbacks,” a radical departure from traditional Chinese culture, where failure is seen as something shameful. Alibaba’s approach is in line with the Silicon Valley practice of entrepreneurs celebrating previous failed ventures on their T-shirts, a recognition that on the fast-moving battle lines of the China Internet, some failure is unavoidable, or even desirable.

  The “integrity” vein of the sword highlights the fact that corruption is a constant risk for Alibaba: Millions of merchants are constantly looking for ways to promote their wares on Taobao, overseen by only a few thousand xiaoer referees. The Communist Party of China regularly uses rotation of personnel to avoid alternative centers of power from developing, in an effort to keep corruption under control. David Wei, who served as the CEO of Alibaba.com, experienced Jack’s penchant for rotation even before he had joined the company. In the nine months between leaving his previous employer and joining Alibaba, David recalled, “[m]y job description and titles changed four times before I joined. First I was going to be head of Taobao, then head of Alipay. I didn’t know what I was doing until one month before I was on board.” Once he finally joined as CEO of Alibaba’s B2B business, David joked to Jack, “You changed my job so many times before I joined you couldn’t change it anymore.”

  Whatever the inspiration for regular rotation, Alibaba devolves a lot of autonomy to its business units, an effort to maintain a relatively flat management hierarchy and minimize the temptation to shame and blame.

  The need to demonstrate “passion” when working for Alibaba was summed up by one employee as “being a swordsman is all about being hot-blooded.” Compared to other firms, “people at Alibaba are more passionate about their work, more honest, and more hardworking.” Jack’s emphasis on “commitment” is reflected in his frequent invocation of the phrase to “work happily but live seriously.” The whimsical approach he encourages at Alibaba is, he says, in stark contrast to most companies who emphasize “working seriously but living happily.”

  Measuring how employees live up to the Six Vein Spirit Sword is the job of Alibaba’s human resources department, which plays a critical role, overseeing the hiring of twelve thousand people in one year alone. Relegated in some companies to a purely administrative function, HR at Alibaba has tremendous power over promotions and hiring. With its constant emphasis on culture and ideology, people at Alibaba refer to HR informally as the “Political Commissar” (zheng wei). The HR department also oversees extensive training, with manuals of more than one thousand pages for new employees and a sophisticated database, matching performance closely with promotions and pay raises.

  The culture of Alibaba endures even in the employees who have left the company. Given the long history and rapid growth of the company, they number over twenty-five thousand. Many have banded together in a nonprofit organization called the Former Orange Club (qian cheng hui) to help its members share investment opportunities and career advice. One member, Hu Zhe, who left Alibaba in 2010 after working there for five years, described6 his reason for joining: “Former Alibaba employees are closely connected, as if there is a bond linking us together. The club serves as a very important platform for us to communicate and exchange ideas.”

  A number of members7 have founded their own Internet companies or investment vehicles, some of which have established links with one another, active in a range of sectors including e-commerce, online travel booking, Internet financial services, online music, online recruiting, O2O, venture capital, and health care. A search in a database8 of Chinese Internet-related start-ups reveals that former Alibaba employees have been associated with 317 start-ups, compared to 294 from Tencent and 223 from Baidu. While not all of these start-ups will be successful, indeed some of them have already failed, the web of entrepreneurial activity is important both as a source of future innovation and acquisition targets for Alibaba.

  A common thread in many of the ventures founded by Alibaba veterans is what some have described as a “Long March” culture, an ambitious management ethos that involves personal sacrifice, and huge investments of personnel and time. In contrast, in their new businesses, the veterans of Alibaba’s rivals such as Tencent are known to focus more on reducing “time to market,” launching products that they can perfect later, an approach some refer to as “running with short steps.”

  Alibaba has been a team effort from the start. Jack doled out much more equity, and at an earlier stage, than many of his Internet founder peers. But he has kept a firm control on the company through his gift for communicating and his lofty ambitions. A modern-day Don Quixote, Jack relishes tilting at windmills, from retail to finance, to entertainment, health care, and beyond. To gain a sense of how likely Alibaba is to conquer these new horizons, let’s look at the events that made Jack and the company what they are today.

  Chapter Three

  From Student to Teacher

  If you are one in a million in China, you’re one of 1,300 people.

  —Bill Gates

  Barrow Boy

  Jack Ma was born on September 10, 1964, the Year of the Dragon, in Hangzhou, a city one hundred miles to the southwest of Shanghai. His parents named him “Yun,” meaning “cloud.” His surname, “Ma,” is the same as the Chinese word for horse.

  Jack’s mother, Cui Wencai, worked on a factory production line. His father, Ma Laifa, worked as a photographer at the Hangzhou Photography Agency. But both share a passion for pingtan, a form of Chinese folk art performance that involves the singing of ballads and comedic routines punctuated by the sound of wooden clappers. Exposure to the art form may help explain Jack’s abilities as a communicator. Pingtan no doubt provided Jack’s parents a welcome escape from the hardscrabble life of postrevolutionary China, a window to a richer and more colorful past.

  A future icon of Chinese entrepreneurship, Jack came into the world at a time when private enterprise had almost been completely extinguished. Ninety percent of industrial production had been taken into the hands of the state. China was alone in the world, struggling to recover from the Great Leap Forward. Faced with the starvation of millions across the country, Mao Zedong had been forced to make a “self-criticism” and was relegated to the margins of power. Deng Xiaoping wa
s among those tasked with reversing the most damaging aspects of collectivization, a foreshadowing of the pivotal role he would play in unleashing the country’s economic miracle, which, two decades later, would provide the opening for Jack’s entrepreneurial career.

  But when Jack was two, Mao was back in power and China was subjected to the ravages of the Cultural Revolution. Mao launched an attack on the “Four Olds”—old customs, culture, habits, and ideas—and Red Guards marched to destroy cultural sites and antiquities, including in Hangzhou, where they attacked and badly damaged the tomb of Yue Fei, a famous Song dynasty general. But even the Red Guards were not immune to the charms of the city, taking breaks from their violence with boat trips on West Lake. Mao himself developed a strong attachment to Hangzhou, visiting it on more than forty occasions and staying up to seven months at a time. He enjoyed performances of pingtan. Despite Mao’s fondness for the art form in private, old customs like pingtan became a target of the Red Guards and its practitioners were denounced. Jack’s family was at risk of persecution, particularly as his grandfather had been a local official1 under the Nationalist (KMT) government. During the Cultural Revolution Jack was taunted by his classmates, although fortunately the family was not broken up like many were at the time.

  In February 1972, President Nixon traveled to Hangzhou as part of his historic visit to China to meet Mao. Nixon was accompanied on the trip by almost one hundred reporters, including Walter Cronkite, Dan Rather, Ted Koppel, and Barbara Walters, their live broadcasts generating support for the normalization of relations with China, leading eventually to cities like Hangzhou reemerging as a destination for foreign tourists.