I have recently taken an interest in looking at the top level management in very large Chinese businesses and I have noticed an interesting pattern. The founder, as we would expect, is someone who has great vision for the company, charismatic and interestingly not necessarily highly educated. A great visionary is someone who is able to articulate the story for the business and can paint a picture of how their business is going to change the world. For example, the founder of Alibaba Jack Ma always talks about how to empower the millions of small businesses in China through the internet and the founder of Amazon Jeff Bezos would talk about creating the “biggest store on earth”.
Interestingly, these visionaries are always aided with a CEO or CFO who is almost always highly educated (graduating from top tier universities), have past working experience working in professional services; most notably in law firms and investment banks. They are the ones who execute the founder’s vision and turn it into reality. This is what I call the Batman and Robin partnership and I will share three notable ones in the following.
Alibaba: Jack Ma and Joseph Tsai
Jack Ma is a great visionary who built by the far the biggest e-commerce business in China in the form of Alibaba and Taobao. He is a great speaker who is able articulate a grand vision (and also quite perceptive and unique) view of the future, but I always struggle to see him as a great operating manager. Indeed, he has often quoted his inability to get a job in KFC as an example of evidence of how he struggled earlier on but I think that is equally reflective of his working attitude in the workplace. Visionaries breaks boundaries and change the ways things are being done (“disruptors” is the buzzword nowadays) but they are frequently poor workers as they do not like following the rules and procedures. They are every manager’s nightmare. As they are great in thinking of big ideas, they are not good with details or dealing with processes. It always strikes me as quite funny that Jack Ma prides himself as never written a single line of code in his life and he owns one of the biggest internet businesses in the world. So what does he actually do on a day to day basis when he started out? With no formal education, how was he able to deal with the legal documents, financial accounting and other technicalities that comes from building a large business. Yes, it could be outsourced, but those tasks can only be siphoned off to professional firms to a certain extent because external tasks such as raising money from professional investors cannot be done but telling a nice story with little to back it up.
It all made sense of how Alibaba managed to grow to the size it is when I learnt that the vice chairman of Alibaba was Joseph Tsai. Joseph Tsai’s background cannot be any more different. Tsai has a BA degree in Economics and East Asian Studies and Juris Doctor i.e. law degree from Yale University. During his time at Yale, he played Lacrosse and I don’t think you can get posher than that. He worked as a tax associate in Sullivan & Cromwell LLP, one of the prestigious New York based law firm and later in the private equity firm Investor AB. It must be one of the highest risk to return career jumps when he joined Alibaba in 1999 as a member of the founding team. He was making USD 700,000 (cc. HKD 5.5 million) annually at Investor AB and Jack Ma was only able to pay him USD 7,000 (cc. HKD 55,000) annually at the time. He was the only person who was educated abroad and has any international working experience. He was probably the only person apart from Jack Ma who spoke any English as well. Imagine moving from working in the glitziest offices in Central, Hong Kong to a scruffy apartment in Hangzhou shared with 20 other workers who differs from you completely culturally and has grown up in completely in a different environment. And there is no promise that the company will become will be successful. It was just based from a conversation with Jack Ma when he was a business trip to China (Tsai’s friend said to him “Joe, you have to meet this guy in Hangzhou. He’s kind of crazy, but…”.) Tsai became Jack Ma’s righthand man and set up the financial and legal structure of the company. His qualifications and background probably lent a lot of credibility to the company (Hangzhou Teachers College (Ma’s school) vs. Yale University (Tsai’s school) and proved it to be a legitimate business. He was Alibaba’s dealmaker and was responsible for its listing in Hong Kong in 2008 and subsequently on the New York Stock Exchange where it became the biggest IPO in US history where it raised USD 21.8 billion (bigger than Google, Facebook and Twitter combined).
As of 2019, Ma has a wealth of USD 38.9 billion and Tsai USD 10.3 billion. Why, you might think would Ma be almost be 4 times richer than Tsai when Tsai had played an indispensable role to the company. Recall that the four factors of production are Land, Capital, Labour and Entrepreneur. Even though Tsai was part of the founding team and is officially a co-founder, the real entrepreneur was Ma and he was the person 1) who came up with the idea, 2) bore the risk on himself by committing his own capital and 3) executed the idea by “gathering” the factors of production e.g. hiring good people like Tsai. He is “rewarded” with the most shares in the company and enjoys a lions share of the profits. With 10.3 billion, Tsai is not exactly poor but has proportionate much less than Ma. Is Ma part of labour or an entrepreneur? That is hard to determine since he did not start the company but since he also bore substantial risk, he would probably be more of an entrepreneur than a normal salaried worker.
Who would you rather be? Most people would say Ma because he is much richer. But I would say that it is not actually a choice that people can make as it depends on people’s individual talents. Some people are more detailed oriented and good at more operational ideas and therefore would be better at a CEO/CFO role whilst others are born leaders and are great at thinking up novel solutions to some of the world’s biggest problems.
Mr Lai's Ramblings 