Digital Pioneers: A Conversation With Joe Tsai and Jerry Yang

good morning my name is Laura Dee Lacey I run the Milken Institute in Asia I'm here here to welcome everyone and the Milken Institute now is heavily invested in Asia in terms of activities and our programs we have throughout this week at the global conference we're hosting at least 20 sessions on Asia from sessions on Japan China and on issues like one belt one road innovation disruptions that are happening in Asia that are shaping the global agenda and I wanted to let you know that if you're interested in Asia the Milken Institute is hosting its Asia summit in September and it's going to be a thousand people event in Singapore September 13 14 and we would welcome your participation and now I would like to introduce the panel this is a digital pioneers panel with Jerry sy drankin Jos I sorry and this will be moderated by Emily Chan from Bloomberg so please welcome them thank you very much so very excited to have the two of you here Jerry Yang obviously the co-founder and former CEO of Yahoo now you have your new thing on a cloud ventures where you're investing and you're still on the board of Alibaba and Josiah executive vice president executive vice chair and co-founder of Alibaba I thought we would start by talking a little bit about how you met because you've known each other now for how many years a couple of decades to 20 years yeah close to 20 years and it was in 2005 that Yahoo paid a billion dollars for a 40% stake in Alibaba which may have been one of the best business deals of all time so tell us about how that deal came about how you met and how the relationship evolved over time well I think the story has been told a few times but uh but we it's it's just in kind of epitomizes how being the right place the right time for me first having started yahoo and then having that jack you know quite kind of serendipity because when I visited China for the first time I've never been there in 1997 I was there to speak at a conference and the government sent a ministry official to be you know sort of my tour guide or make sure I don't get lost and that that that person was a Jack Ma and and so there's this you know we kind of enshrined this moment when he took me to the Great Wall we took a nice picture there karaoke of course I don't have any recollection and and and after that we kind of lost touch I know he was very very interested and in in what's going on the internet I mean it was completely nascent days and imagine 1997 so and and and I think Yahoo at the time was trying to build a business in China like Yahoo did in Japan which was very successful but we were you know Yahoo was one of the first companies to go into Japan which everybody thought was crazy so in in trying to do the same thing in China we just felt like we were competing against very strong local competitors and international players like eBay and everybody else and so it was a very difficult time to build businesses in China giving a local competition and in in early 2000 to 2003 we were pretty much told by the government that you know especially Internet content immediate businesses it wasn't really going to be suitable for companies foreign companies like Yahoo so at that time we felt it was important to kind of invest in a eventual winner in China and we were competing with Alibaba we were you know we were competing with Taobao and we found out that table was headed by Jack and so to kind of reunite after five or six years on sort of the commercial battleground was really interesting and that was when when Joe and I met right it was pretty soon after you you and Jack had that important conversation at Pebble Beach and then Jack came back and said Joe you have to go see Jerry and his team because they are very keen to make an investment in Alibaba and that's how the whole conversation started so how did the deal get done and how competitive was it I don't think we ever talked about this so it was actually a very competitive situation because we were at the same time being approached by eBay and they had made an offer to buy out Taobao for evaluation that we thought was was not quite there and but we also felt that eBay was a was gonna be a partner that's kind of in the same business in e-commerce and it would have been awkward to have a big shareholder that's it sort of in the same business as us and and and Yahoo provided a just a both the this the kind of scale that Yahoo's had and also the capital and meeting Jerry was actually a great experience you know I still remember visiting the yahoo campus at the time they had these old pictures with Jerry and David Philo on the wall and back in the days when you first started and we thought to ourselves wow you know this is this is just like us they're still very much of that startup culture and DNA in the company and then of course those pictures then led you into the the gift shop where you can buy some Yahoo swag and we're all well fell in love we needed the revenue a time but you know I I recall enjoying Kermie I recall the five billion dollar post money was the highest 4.25 0.25 but something you know but basically that was the highest valuation for an Internet company at the time time which is what Jack insisted on to get the deal done so that that was even before people invented the term unicorns yeah so you can imagine it was it was seeming like was a crazy thing to do back then for you know we I think we got to know Jack and Joe and the founding team and how aggressive they were trying to win the e-commerce market in China but but for the rest of the world for a billion dollars which I think it was a quite a substantial piece of the balance sheet at the time it probably seemed crazy so it worked out in your favor but fast forward seven years after you'd left Yahoo the board agreed to sell half at stake back to Alibaba which may have been one of the worst business deals of all time to deal for Joe I had to say you sold it $13 it's now about $180 a share so you left tens of billions of dollars on the table is that like a sore spot between the two of you or is there a punch line there I wasn't there so I guess you have to tell the story I thought it was a smart decision for Yahoo to sell half of their state back and so they they went from forty percent to twenty percent and it was because if Yahoo were still a forty percent shareholder in us today Alibaba would not be Alibaba we would not have developed and thrived in in the way we wanted to what would you not be where it is today well I think it with the argument one of the arguments we made to the Yahoo board was if this asset became very very large then you will no longer be Yahoo you would be something else that all of your shareholders will be looking at this salt this large asset and they would ignore Yahoo's own performance and so you you know to to Yahoo at the time I think very much the minds that was this this was a great investment they there was they've already made a lot of money and taking some money off the table while retaining the other half that was a perfectly rational decision and I think if you were to replay the decision back back to the that board they probably would have made the same decision I mean hindsight is always 20/20 so speaking of hindsight Jerry what do you think is a bigger achievement as you look back on your career is it starting Yahoo or is it making this big bet on Alibaba Jack Ma and Joe sigh well I think one leads to the other there's no way I could have met Jack if I didn't start Yahoo and and I know the panel is called digital pioneers which implies that were old but I like to think I have a couple more acts left so who knows maybe the best is still ahead of me and Joe but but I think to the point of hindsight even in certainly in 2005 when when Yahoo invested or even later on in in 2010 and love and 12 nobody thought I certainly don't didn't think that the Alibaba would become sort of a not only a national sort of icon within China but also an international icon so a lot of credit goes to the company having built its massive presence and and and I personally feel like they deserve all the credit not me because obviously we were there at a moment in time but but all the hard work was done in the last you know five to seven years so I I feel like I have to ask you about Yahoo since we don't know you talk about it very much you know it is it's now a shell of what it once was how do you reflect on that how do you sort of like peace with that yeah I you know when I left in 2012 so that was six years ago I made peace then and and I am a big fan I'm a big tall the shareholder and and so as a shareholder I have a lot of routing interest but as somebody who started the company and having seen it though through the subsequent changes and and you know having David follow their to the end I still obviously feel some strong connections but honestly I feel being part of the risin and O's and is it good is a good outcome it'll it'll continue to have the investment that I think it needs to find where it needs to go because clearly I think that that the direction for the company was lost and you know knock on wood the the brand is still relevant I think in a big way so I'm looking forward to see what a Verizon does with it with Tim and others will will transform it and always will be found and certainly I'm a big user so hopefully hopefully to keep the service going so so are you of the mind that Marissa Mayer did everything she could with what she was given or that another CEO could have had a better outcome you know I think Marissa was when when I had nothing to do with her going to Yahoo and when I heard it was her I was very positively inclined because she was a she's a product person and I felt you know at that time Yahoo needed a product revamp a new strategy a new representation to the users and and by the way I think that was around the time when alibaba's stock was was already starting to play out to be a significant part of the the value so I felt like she had time also to re-engineer sort of the take the time it needs to really invest in the company ended up not being that way but I I certainly don't think she was the wrong choice Joe what do you think about Marissa in particular and are the outcome always like the fact that you have a product person in the role of a CEO with because that means you're gonna be focused on your users and be an Internet company the users are the most important constituency and I think that at the time when they made the decision to sell the stake back to us it was just in the transition period before Marissa actually came in but during the time when they held the other 20% the relationship was fine and she was very very focused on developing you know she put in a lot of effort into you know developing the Yahoo business they appointed another person to our board Jackie Reese's and who we got along very very well so it was a period of a very good period from from our perspective it is a reminder of how quickly things can change and dramatically things can change when you do have some hindsight and we can see back over the last two decades now you know transitioning into sort of the state of China and the relationship with the United States and present-day you have shot me which might potentially file for IPO this year it could be the biggest IPO since Alibaba how optimistic are you for that offering well I'm very optimistic for generally the development of the Internet globally I think users are still growing specific to China there's close to 800 million Internet users in China but the one thing that you need to keep in mind is about seven eight years ago China went through a huge transition from the desktop to mobile and in fact that transition happened much faster much more intense than anywhere else in the world I think when we look back today when everybody is spending so much time on a mobile phone accessing the Internet doing a lot of things they're buying shopping on the internet or talking to their friends or buying movie tickets you're ordering meals on the internet all through a mobile device we we kind of look at that and say wow you know China today is technologically product wise a lot more advanced than any of the other countries and we feel very very excited by that so what does that mean from an investment perspective Gerry well I mean I think you know if you look at the number of global Internet companies in the public market you know china now has three or four top tens Alibaba Tencent Baidu and so you know it feels like that economy the Internet economy there is a substantial part of the overall Internet global economy and there is also a very healthy ecosystem for startups there and and that's obviously the part that I watch more and you know you're starting to see Internet companies that are startups in China really take a change in the last five years or so I would say they went from trying to be you know a copy of something Western in the late you know 2005 to 2010 era to you know in the last seven or eight years really companies emerge to become part of the Chinese domestic internet scene so whether it's DD or Mait Wan or Allah MA or you know a lot of these startups are very focused on the Chinese consumers and the business models are different the product are different the technology is different and so I think that is a whole new world where you have large companies like Alibaba intention and others really heavily investing in that ecosystem as well which is really I think a different trajectory if you will in the rest of the world so how do you find though I mean each you're investing in companies in the US and in China and sort of how do you find the points of opportunity there and exploit it knowing what you know well I think you've invested in DD by the way I should say wish which is a mobile commerce service zoom docker zipline drone delivery of medical supplies yeah you know I think the the Silicon Valley opportunities are are more obvious to me at least the ones I can evaluate more the ones in China are much more difficult and you know didi I got involved with much later when they have already established itself and I think in China my feeling is you have to be there you have to really be on the ground you really have to be part of the scene and and with you know the latest sort of rushed towards artificial intelligence and you know sort of next-generation retail there are opportunities that's emerging you know almost every quarter there that if you're not there on the ground and looking for these companies it's it's very very competitive as investors so for me even though people may know who I am there's no reason that they want to take my money because I need to have value in their ecosystem I can do that a little bit more in Silicon Valley given we live there and we have some expertise in networking and help there but but the idea with these early-stage companies emily is really to be able to help them at the time they need help and and and it's not about you know being a name on their resume or being a name on their cap table it's really about you know helping them recruit helping them find strategic partners help me get funding those kinds of things so so for us it's really a I call it a ground war you really have to be on the street corners you know holding out your house and hoping that entrepreneurs picky I lived in China and covered China for three years and it is very nuanced very complicated I sort of agree with the sort of boots on the ground that you need to have there so Joe since you are on the ground and we constantly hear this rhetoric you know China is surpassing the US and this isn't this you talked about mobile we hear about AI where do you see China being more advanced than the United States when it comes to technology you know first of all I think it it's it's like trying to argue whether Chinese food is better than American food and you know when I'm in America I like to go to an American restaurant here when I'm in China I like to go to Chinese restaurants so different you know I'm not sure you get much out of saying who's who's more advanced or not but in I'd certainly you know think that in China there there's the conditions for there Avance development in technology and what are those conditions number one there's a massive user base that's much bigger I mean 800 million people that's you know close to three three times the size of the US population you have most people you know as I said more actively engaging their daily lives through a mobile device you also in because of this active engagement and user base they're actually a lot more use cases in in China that people have never seen here in the United States so for example in what we do in e-commerce we've actually included included a lot of content and interactiveness we actually have light broadcast on our in on our ecommerce platform so imagine if you had light broadcast on Amazon I mean you know you can't imagine that right it's it's it's because users want to engage in a in a much more you know intense way with with the platform and what we found is having all that actually increase the likelihood that somebody will purchase something on our platforms so it's actually good for our business to include all that content so I think I think the conditions are there for for Chinese internet companies to capture the opportunity and also develop something really exciting from a technological and product standpoint now with the large user base and high engagement that means there's a lot of activity and insight about consumers that companies like ours can capture that we could leverage to offer new services in in in the adjacent space so you know I'm curious what it's like starting a company in China today you know especially you know Mark Zuckerberg for example was on Capitol Hill a couple of weeks ago one of the senators asked if he could have started Facebook in his dorm room in a country like China and I think the senator was expecting him to say no or something like that but he said well senator there are plenty of very successful technology companies in China and yet there is this perception and you know some sort of you the Chinese government and censorship can prohibit entrepreneurs and companies from flourishing to their full extent do you think Mark Zuckerberg could have started Facebook in China or could he today absolutely I think we sit here as entrepreneurs and people tend to I think it's kind of a self-centered way of thinking about the world where we only think about regulators and how they're going to come in and control us and and limit our business but the whole point of the senator asking Zuckerberg the question was you were in America you've been offered all these great opportunities to start something now it's time for you to step up and takes responsibility for some of the things that you have done your users demand it that's really the whole point behind it in China it's the same thing we've been offered a great opportunity in the in this environment of being able to create Alibaba so of course I think if Zuckerberg were Chinese and he was in China he would have started something you know the Facebook equivalent of of China or something else that that could grow very very big but the thing that we are thinking about is gee you know we're we're given this great opportunity in the past 20 years to create this a great wonderful platform we have hundreds of millions of users but now instead of complaining about regulation let's think about what kind of responsibility we have to our users to our constituents to what let's hear what the government is worried about you know why why are do they want to regulate us here and there right so I think that that it's a two-way conversation it's a it's it's part of the responsibility the threat of regulation is really I mean I was in China when Facebook got blocked and it still hasn't been reinstated Twitter when Google left the country so Jerry I mean as an as an entrepreneur would you want to start a company in China knowing the massive potential but yeah I think I think it's you know I think it's difficult for large Western companies now to operate in China there is a lot more sensitivities and and hopefully this is a phase that will pass because I do think ultimately having great companies that are in the rest of the world operate in China is a good thing for China but I understand also because I I certainly don't know where it's headed but you know but I think you're you're right III think that if you look at the Chinese companies that have started within China if you're an entrepreneur in China and and you know we see this through a lot of startup accelerators we sees this through a lot of the the universities and now have their hands in startup scenes if you're a Chinese entrepreneur China is a great place so there's this dichotomy of and by the way there are plenty of you know entrepreneurs from Europe and America that are living in Beijing kind of trying to help companies get started so so it's a it's an interesting transition time in and maybe not so much transition in the sense that because you already have great examples of companies having started in China but there is just I think a very rich environment for entrepreneurs to to to have that dialogue in in China one thing I would say that I noticed both you know as obviously being alibaba's board but also talking to other big Chinese Internet companies there is this you know there there is a sense of what they can do what can they do to kind of get the rest of the country in China be more more along the movement and in in the internet for example I think you know Alibaba has this rural China initiative to really trying to bring townships and villages online and I know $0.10 and Baidu all have the similar initiatives I don't think these are necessarily government saying you got to come and do these things I think that you know coming from that country and a lot of them they're in that generation where 20 years ago 30 years ago they all had nothing that there is a sense of social involvement and and that it's not to say that is not true here in the US but but here I do think there's more capitalistic where you know and so there's a bit of a contrast there but I I think you know in areas in certain areas you're seeing the Chinese government starting to open up a little bit more and but I think this is clearly a market that they they have a view of how they want to grow the market how they want to continue to see it evolve and but but I would say right now if you're China and you're Chinese entrepreneurs there are some great opportunities so I have a perspective I've respected on that first of all you know in in our space in e-commerce there was never any restriction eBay came in and made a hundred percent acquisition of a Chinese company and they immediately got ninety percent market share of what was then a very small market back in 2003 Amazon came in and acquired another company and that became their Chinese business so so in e-commerce there were no restrictions but when it comes to more sort of content social networking I think you understand this that that there there is a reason why the Chinese political system is a single party system at this point in time in the current stage of the development of the Chinese economy we're at eight thousand US dollars per person GDP per capita okay in the next 10 15 years China is trying to try to get to 20,000 30,000 the United States is at fifty four thousand so the the primary objective of the leadership when they think about how do we you know govern this country one of their primary objectives is to raise the standards of living and also improve the quality of the standards of quality of the the you know living in China in terms of dealing with the environment and and all that these are large large problems to solve and you need to have a very unified government not a divided government with multi parties a gridlocked into not taking any action so that's why that that's the current political system I get into this because you need to understand that it is important for the communist government that there's absolute stability in in the country and is in the American context we talk about freedom of speech freedom of press but in the China contacts not having the the you know being able to restrict some of those freedoms is an important element to keep the stability I think in some parts of the in parts of the government the government is very very focused on the well-being and the people I was just talking to the CEO of a company that makes trains and they say that the the the level of care that the Chinese government approach in terms of the safety of a train high-speed trains that go from at over 300 kilometers an hour is extraordinary much more so than he's seen in any of the other government officials in any of the other countries you know why because if there is a train crash and there's hundreds or even thousands of people died from that crash there will be instability and here in the United States we have people going into schools and shooting up children and the government doesn't do anything about it right so I think in this context you have to understand stability in the in China is very very important is it the way that most Americans see the world no is it something that we like not really but remember we're at 8:00 on eight thousand dollars GDP per capita going to 2030 thousand trying to catch up trying to make sure that we lift the standards of living there's 600 million people in China that are still living in rural villages they need to be dealt with and and of that 600 million a lot of those allowed the parents have gone into the cities to seek jobs so they have left behind their children so there's 60 million children that are left behind living with their grandparents these are some of the problems at that kind of scale that the Chinese leadership is trying to solve we're not talking about trying to divide up the pie we're trying to figure out how to grow the pie how to lift everybody up so on that note let's talk about a potential trade war and tariffs and by the way we're gonna start taking questions so start winding up you know tariffs on billions and billions of dollars worth of Chinese goods Jack Ma has said you know Ali Baba's plant promised to create a million jobs those could be at risk here in the United States if this happens Jerry what are the that the dangers of this is it so bad as it's been made out to be or as some would say the Chinese and the Chinese government have gotten away with a lot for a very long time and it's about time two schools of thought well I I can only speak from sort of the you know the technology perspective there's there's obviously a lot of moving parts but but in general I think having trade barriers are a bad thing especially if you're in the technology business and I think we're you know have seen a very active US government in in stepping in on deals on M&A on investments especially involving Chinese entities and obviously now there are there are I think obviously there are perceived differences between the US versus what think China has gotten way with for example but also I think the Chinese have you know really really you know seen this as a cooling of technology cooperation between the two countries which i think is dangerous because if you if you play this out over the long term the two countries in the world that ought to have conversations and potential joint leadership around where technology is headed are the US and China and if that if that dialogue stops or cools down and for example China pursues its own artificial intelligence agenda in the US and the rest of world have others is that good for for the globe is that good for the world and I would argue that ultimately it's not about trade wars and it's not about you give me this and you give me that these are fairly transactional I think if you look out ten twenty you know years it's so important that that for the sake of how the societies are going to involve in general because we all know that technology ultimately is going to affect a lot of the societal issues that those dialog needs to continue happening I think that can only really happen not only at a government level but also commercially academics academia etc so so I'm hoping that that these are a series of transactions that will either happen and and people move on but a prolonged trade war is is obviously terrible I think in for both parties Joe Jack has said a trade war would kill jobs opportunity and hope it's true because it's very ironic that there is a trade war right now starting at Ray Ward I mean it's been instigated by the US government and then of course China feels like they have to retaliate and [Music] you know right now what we're seeing is China is transitioning its economy from a manufacturing base export-based economy into a consumption led consumption-driven economy that's domestic consumption there's now 300 million middle-class consumers that are going to be demanding products not just domestically made products but also from all over the world imports so this is the greatest opportunity for the rest of the world to sell into China to sell to Chinese consumers you you know on our e-commerce platform we see there is demand for high quality non Chinese products in the area of food cosmetics items that mothers buy for their babies so anything that you would ingest or put on your face or use for your children there's a demand for high quality stuff and there's perception that imported things are better and and at this moment there is a tray war that's quite ironic because we think it'll actually hurt the United States a lot more than it'll help how so because the retaliatory measures are going to be drastic what happened was after the initial wave of terrorists that the US administration have put on China China immediately came back and put a tariff on soybeans there's fourteen billion dollars worth of soybeans that China buys from the United States that's two thirds of the entire US soybean exports and all of sudden the farmers are hurt where else are they going to sell their soybeans if they lose two-thirds of their market so that you immediately see this thing devolve into a tit-for-tat kind of thing so I think it's time for cooler heads to step back and say all right what are the real issues let's let's talk and not get into a trade war and and we think it's quite ironic that you the US producers are facing the greatest opportunity to sell to a huge new market and this is a time the US government decides to shut down and and put the gates down quite ironic Jerry soybean farmers are one thing some of that Apple could be hurt particularly hard nobody's crying a river for Apple but obviously US technology companies that manufacture goods in China could be significantly hurt by this you know how do you expect this to play out if indeed it is as as expressed well I mean you lived in in China Emily I mean I think the ecosystem between technology companies and suppliers and vendors especially around the devices and and hardwood even software these days the the supply chain is so intertwined it's so global China is a huge part of it but so is you know the rest of Asia Southeast Asia and so I think to try to pick pieces and create tariffs of trying to create walls it's it's really gonna have a lot of unintended consequences because right now if you open up the iPhone you can probably find vendors from you know five to ten different countries if not more so there are just huge problems and challenges that can result by having these you know what people think is very specific sort of transactional or point point sort of tariffs muharram up with one that really won't affect you know everything else and so so I think it's a very dangerous game to play from the perspective of you know how do you how do you how do you make up for something that may come up come back and boomerang around and hurt you hurt yourself and look I feel like raising the issue of trade deficits raising the issue of having one country selling way more to the other is is a you know it's a politician's job and and that's what that's what the ministration is trying to do but I think they are ignoring some very very smart and intelligent people's advice across the board about what this could mean I would hate to step you know see that what you know they think they're taking a step forward and and the world goes to step backwards and and Sally I don't think you're gonna know that until the cycle plays itself out you you you you inject something you disturb the system and that system it's gonna take a while to work his way through and so I just feel like it's very short-sighted right now but but like like Joe says maybe cooler heads will prevail maybe dialogues will continue to happen that allows people to come out of this is not just trying to win points for each side and trying to escalate the situation you know when you talk about losing face that's when things can get that and you know I think I think we're on the brink but but obviously you know there's a delegation in China I think now or very close to now so we'll see what happens but but but from a tech perspective that world is so intertwined already we'll take questions right after this one Tim Cook just had a meeting with President Trump we don't know what was discussed but we know trade was on top of the agenda so Joe if you had five minutes alone in a room with President Trump what would you say I would say look at the long term the the relationship between China and the United States is going to be the prop that the most important foreign policy relationship that either country both countries will have in the next 50 years why because these are the two largest economies in the world these two economies are already very very symbiotic look at the way Apple has created an empire on the back of production capability in China and look at the way that Chinese exports bringing in lots of US dollars are recycled back into US Treasury bonds to fans the government deficit in the United States so the the relationship is very very symbiotic and don't let a don't let a trade war or the politics of trade war get in the way there are genuine difference differences does China need to open up its market a little bit more in certain sectors yes let's focus on those and and talk about it rather than getting into kind of a bravado kind of trade war thing there's there's definitely room and also channels and and and framework for people to sit down I think a bilateral discussion is going to be very very important is Alibaba doing anything to prepare for the worst we are every day we prepare for the worst not just government stuff we prepare for the worst if there is a competitor if there is new technology or product that would come in and disrupt us so we're always prepared it's like a you know sports team you're always prepared to get beat and and figure out how competitors and beat can beat you in in different ways all right questions back there thank you : my name from Connexus financial in Australia given that the internet was never designed to have the world its people and its data controlled by just a handful of companies and platforms what is the next iteration of the internet will the internet itself be disrupted and or will companies like Alibaba be disrupted potentially destroyed let's start with Gerry the question but I think you know I think if you look back you know the web really as the the beginning of the current version the internet you know and Tim berners-lee started the web in 89 eighty something late eighties early nineties sorry Tim I should know this but you know it was it was based on this notion of a very open access and you published it once put it on a web server and you have a browser and you could see this content now to your point I think there's a lot of fragmentation right sovereign countries are trying to place boundaries around the internet companies large companies essentially have a lot of say in how the internet is is run and operated and that's why I think you continue to see you know really open really peer-to-peer efforts that that happen every you know five to ten years of generations because you saw peer to peer of music and then peer-to-peer video and now you're looking at peer to peer financial transactions in blockchain and and and I think for all the control and fragmentation that's happening internet there's always this sort of this counter trend of open and very accessible and and and we'll see I do think that and I've said this before I feel like blockchain represents a new opportunity for you know kind of kind of having value being a open and exchangeable element how that takes storm whether it's in currency or helping companies or backends of companies really create efficiency that's yet to be seen but it's clearly a technology trend that we're paying a lot of attention to but but but I think the pendulum definitely swings from open to more fragmented and closed and and and and and I think it'll swing again that's interesting given that we have virtual monopolies certainly regional monopolies Facebook Google Amazon in China its Alibaba $0.10 I do so will those be disrupted absolutely yes absolutely because the all of these companies became successful because they they created products that users love and want to use and are engaging but if if we stand still we're gonna be disrupted so I think one thing about founder let companies and especially these high tech companies is that there is that very driven very determined mentality to be better and even though you know all these companies are large corporations now there is still very much of the entrepreneurial spirit and for example we're always thinking about well the next innovation is going to come from different ways of pivoting figure out different ways that human beings will interact with the machine in the past in the desktop world you used your you know fingers and index fingers to click in the mobile world you're using your phone to swipe what's the next way of how human being will interact with the machine is a voice is it by a blink of an eye these are going to be new complete computing platforms and companies like ours have to think about that question and and invest in those new technologies so you know Gerry Facebook Mark Zuckerberg said you know I told Congress he doesn't think Facebook is a monopoly do you think Facebook as a monopoly is Google a monopoly and can or will they be disrupted everyone's trying keep buying I mean I look I think it's you know I think monopoly is a technical definition so I have no idea but but I think when you look at the advertising market I don't know the exact stats but every you know incremental dollar now that's added to the ad market I would say Facebook and Google have the lion's share so and and you know if you're an ad-supported Internet company outside of China you know there are obviously some examples like Twitter and and and snapchat and and maybe Yelp and couple others but you know nobody is really I think in that next scale compared to Facebook and Google so clearly these are very large companies but I'm of the mindset that I think you know you you can't you know regulation always seems to like innovation you know the day that regulation catches up to innovation now I'd love to see that day but well I mean that means you're actually having smart regulators that are thinking about the future rather than looking at current patterns and look in the past so I would say that there is probably just many innovators now trying to disrupt business models and and and that that to me there is more sort of disruption on the way now of course the big companies or how to make sure that they they don't get disrupted but I do think that as business models change there's opportunities for new entrants to play more bigger role but but in the current static way of looking at things clearly these guys have all gotten really big because they have huge share question Joe is nice to you I mean executive producer of film called better angels which I think you maybe saw it's about kind of trade between the US and China and I learned so many things in that process my question to you is bearing in mind that most people in China kind of missed the desktop and went straight to the mobile phone is there one particular usage that is kind of prevalent in China which doesn't exist here yeah in in America in terms of the way they use mobile phone that we don't use or just are not conditioned to yeah just a quick plug for a better angels it's coming to theaters near you pretty soon it's a great documentary about ordinary people in the us-china relationship so I really commend congratulate you for you know working on that project I think the area where we see a big difference is in payments today in China you don't have to you don't have to bring wallets people don't carry a lot of cash or they carry no cash at all when I'm in China I don't I don't bring cash but everything is paid and a mobile device whether you're using an online service or you're offline you're in like a restaurant or a retail store you could just you know have the you know the point-of-sale system scan a code in your phone and pay so I think that's a area of innovation and advancement that is that we don't see here in in the United States question on that standpoint do you think that we chat will become an e-commerce platform now that it's already a universal wallet they will they will feed traffic to other e-commerce platforms but for a platform like WeChat to become a ecommerce platform is very difficult because ecommerce is a very deep business with supply chain you got to make sure the merchants have stock you have to worry about logistics you have to worry about the user experience and seamless payment that whole customer experience aspect is not just about launching an app an app on on the mobile phone it's there's a lot of all flying components and to all this so be very difficult for someone like someone who's really thrived on developing a very light model of a mobile app that is chat to get into that business they will require massive investment and massive execution risk to get to that that point but having said that I'm not under estimating any any competition you know I think one of the most important characteristics of Alibaba is we're always paranoid we're always thinking about who can disrupt us absolutely especially with the new moves that they're making into different industries whether it is grocery or brick-and-mortar or cloud I mean our Lee Baba's has its own huge cloud computing division yes I think we are right now fortunately we're right now operating in very different Geographic footprints so both of you aspire to expand those footprints into each other's territory not yet not into each other's territories there may be third-party territories where we might have some skirmishes in but the world is a huge place and you know China is United States the United States and then but then there's a lot of other white space that we haven't gone into so those are present huge opportunities hi thank you I've read that the Chinese government has got a giant initiative working with five and ten-year targets and investment in artificial intelligence and I think the the US response is more entrepreneurial can you both talk about how you view artificial intelligence and how it is involved in your business and how you see it in the future yeah I I think there are several ingredients to making artificial intelligence or development of products and services that use artificial intelligence successful obviously you need to have you know a very robust computing system so hot you know intensive compute is very very important element that's an area where the government can make investments in but an area where you would have to rely more on the private companies is the user base and the use cases if you don't have a use case it it doesn't matter you know you have the best algorithm because the best algorithms will have to be trained with data that come from or is collected from use cases and then reinvested into new use cases so by large those in those scenarios you will have to rely on the private companies the internet companies that have lots and lots of users so I have a question which is a slight term but still of the moment you know I just wrote a book about women in technology very much focused on women in Silicon Valley and I've often gotten the question about how the opportunity that women have in the United States tech industry compares to the opportunity in China and Alibaba has actually very much been I agree that it's not apples to apples in the same way it's you know American food versus Chinese food but I'm curious what you think about the we're having as it relates to the experience of women in China and it also love it if you would talk a little bit about how Alibaba managed to diversify its executive team because I think some us technology companies have a lot of all technology companies have a lot to learn from that and I would like to hear how you're approaching it as an investor you know I think in China there is actually a very open receptiveness to women coming in and running major businesses and major operations so in a lot of corporations you actually see women very you know high-level senior level women executives just within Alibaba you know roughly about 45% of our employees are women and within the senior management team about one-third are women it's we don't we don't sit in one room and one day and say gee you know we ought to have these special programs and promote women women is just good they're just good managers and good engineers and so so we said well they should be they should be running this business they should be promoted so that's that's how it happened hmm you know when Alibaba first started we have we had 18 founders and about six of them were women and so we have a pretty you know high proportion of women founders in the business and they they now are in various business units various departments our financial services division the former chairman of that division who led the company over the last five years lucy pang you know is a terrific founder and and have been with us for almost 20 years and we have women leading engineering teams leading product teams are the head of our team all genie business which is equivalent to a sort of an Amazon echo type business you know a woman it's just very natural we just say these are great people and so we didn't we didn't have any specific policies as an investor well I mean I think there is it's interesting because again was it's sort of as I was recalling you know two things about Alibaba you know through all these years I don't ever recall a conversation about saying you know are are there you know are there a way to get more women in or do this or that because it is quite natural and you have women in leadership positions like Maggie now and the CFO role and and so it just almost seems like it was it was part of the design and joke and the testers I think Jack spends more time thinking about his team and he you know he really is a people person at heart something you're thinking about as you are investing it yeah and so I think I think for for us and it's interesting because part of it is that you know you you you want to design at the outset to try to find the best entrepreneurs invest in but as we have moved into areas like digital biology or Biosciences or bioinformatics you know anything that has organic something in it science in it there is just terrific women entrepreneurs you know we recently funded a company that I think the entire team are women so and so so it's interesting to see as areas move there are just talent everywhere and and again we're not necessarily targeting a certain to me targeting is very tough to do but if you're open-minded and you're just trying to find the best teams it actually kind of works out all right one last piece of advice one sentence for the digital pioneers of today what's your advice I think put on your seatbelts I think next 20 years is gonna be a lot more exciting the last 20 like Jerry said you know the word pioneer implies that we're old so definitely look to the next generation look for the people in their 20s and 30s because they're gonna be leaders in your company in a few years right thank you very much Josiah Jerry thank you

Channel: Milken Institute

Views: 49,186

Rating: 4.8731341 out of 5

Keywords:

Id: Y1IX0W0CVQo

Length: 58min 53sec (3533 seconds)

Published: Mon Jul 09 2018

Reddit Comments

[u/[deleted]]

I think its great to see these guys talking but my big question for guys like this and also our friend at nvidia: what are you doing to pull the rest of us up?

[u/aureolae]

This is great, thanks for sharing. It's a year old, so I probably would never have picked up on it without you.

I never knew much about Joe Tsai before. He's definitely Asian American elite: Billionaire, Yale undergrad and Yale law, high school lacrosse and football jock, son of a doctorate/lawyer, Taiwanese by way of Kuomintang. This is the kind of guy a lot of young brothers should be emulating.

It's also interesting, despite being Taiwanese, his pro-China attitude on the Hong Kong protests. https://en.wikipedia.org/wiki/Joseph_Tsai#Politics

Reading between the lines of what he says in this interview, on Beijing's premium on stability, the anecdote about Chinese trains being built with such a degree of care unseen before (around 29:00), the efforts of Beijing to move the per capita GDP from $8K to match the developed world's $20-$30K, the 600 million people in rural China that still live very poor lives -- he's woke, he understands he's helping his people.