[Music]
hi everyone today we have a special
guest visiting uh called Joe Sai chair
co-founder of one of the world largest
companies with more than 1 billion
consumers called Alibaba a giant in
e-commerce digital payments cloud
computing entertainment and much more we
own almost 2% of the company and you
know what Joe is also a huge sports fan
and you even own a basketball team
Brooklyn Nets so great to have you here
Joe and lots to talk about thanks for
having me Nikolai wonderful now let's
start with the beginning just to get to
know you a bit you were born in Taiwan
but when you were 13 you moved to the US
so how was that transition it was an
extraordinary transition I uh came from
a very different culture uh I grew up in
a chi very Chinese environment and went
to a Chinese school so I barely spoke
English when I landed uh in New Jersey
in the United States when at age 13 so I
went to a boarding school uh I thought
the best way for me to inte great and be
friends with everyone was to play a lot
of sports uh I tried out for a lot of
teams I got cut from the baseball team
were you any good uh I wasn't good
skill-wise in baseball but I was fairly
athletic and had some speed right I was
fast uh so I tried out for football
American football I played American
football U on the varsity team and uh uh
also played lacrosse in high school and
then went on to play lacrosse in college
okay who were the formative people in
your upbringing my father
uh he is one of the most brilliant uh
one of the most sharp-minded people I
know but he's very tough um I feared my
father um you you still fear Him I still
well he's no longer is he still kind of
a bit of bit of ghost in your life still
bit of a ghost but I I think over the
years I felt that I could now if he were
alive I could talk to him and say hey
you know I've accomplished something in
my life as well and probably could rival
your accomplish
accomplishments but I'm still not as
smart as he is you know I just love to
to see these drivers we all have
something we want to prove for somebody
um now before um I mean you you went to
Yale you studied law but before you
joined Alibaba you also worked for the
Swedish wenberg family the investor AB
MH um what was that like it was one of
the best experience I've had uh I
transition from being a lawyer uh to
being an investor uh I work for inv
in Hong Kong in their office and focus
on private Equity Investments and it was
really where I learned the fundamentals
of investing I still remember they gave
everybody a book the
McKenzie uh Corporate Finance book on
valuation right and that's when you
learn how to do a DCF model yeah and and
the discipline uh the uh work ethic uh
was incredible and I love that
environment um I still stay in touch
with him in fact before I came in here
earlier this week I was was in Stockholm
and had dinner with uh Marcus and uh
Jacob both both of them actually at the
same time which was rare um I I really
enjoy that uh uh time uh just catching
up with them yeah they are for sure um
are long-term thinkers now how did you
end up at Alibaba I was at investor AB
uh I think it was my fourth year uh
going into it um I started working at
invest AB in
1995 uh and then in 1999 a friend of
mine um who I knew from Hong uh from
Taiwan uh our parents are friends as
well he came to me and said you have to
go to Hanzo to meet this man Jack ma he
is special he is kind of crazy but uh
you should meet him so I got on a flight
uh to Hanzo back then there were only
two flights a week between Hong Kong and
Hanzo Tuesdays and Thursdays I got on a
flight and I went to Hanzo to see him uh
when I went into this uh apartment he
had a second floor apartment in uh uh
the city of Hanzo and it's called laide
Gardens it's in this complex uh I saw
multiple pairs of shoes outside uh so
there were quite a few people inside
working there were engineers there were
customer service people and back then uh
Jack had uh created a website to have
small mediumsized companies from China
that are exporters uh that want to sell
around the world and our first website
believe it or not at Alibaba was in
English language because it was customer
facing to the West uh and uh there were
engineers working away customer service
people doing things I still remember
they had a notebook of uh they wrote
down every single registered user on the
site and there were 28,000 register
users at the time and and then after
about an hour I chatted with Jack I said
Jack I have to uh use the restroom can I
uh use go to the bathroom and I went in
there uh there were like 10
toothbrushes uh next to the sink I
thought oh my God these people are 24/7
living breathing in this room uh working
away that was the star of culture that's
the the equivalent of a garage right so
did you join that toothbrush Club I I
joined I joined the tooth I didn't bring
my toothbrush but uh I went away very
inspired uh not just by Jack's vision
and Charisma but also the fact that
there were a lot of people that are
willing to follow him it was very early
he didn't have any money um uh and the
people that worked there were his
students why do they want to follow him
what what what are the characteristics
of a leader who people want to follow I
I think the most important thing is to
give people uh a sight of what the
future looks like and what kind of and
what kind of sight did he give you at
the time of what Alibaba could be well
at the time our business is a B2B
Marketplace and he said on the cuss of
China joining the WTO uh all these small
mediumsized companies want to do
business around the world and alibaba's
Mission back then was and still is to
make it easy to do business anywhere and
our DNA our culture is to help small
businesses uh to to go as far abroad as
possible and uh that was kind of the
vision and uh obviously we developed
into a big uh domestic consumer company
uh as well as cloud computing now when
did you understand that this was going
to be really big I didn't
appreciate uh the scale until around
2005 when uh that was you know six seven
years into our
founding uh when Yahoo came knocking on
the door and they said they we want to
invest and uh at the same time eBay was
also looking at investing in the company
and we were even thinking about selling
our little baby
called Tau which today is the largest
e-commerce Marketplace in China for uh
consumer e-commerce and uh uh uh
eventually we negotiated with Yahoo and
it's just the size of their investment
they invested $ 1.25 billion into the uh
the uh not not just into the company but
they also bought out a number of VCS uh
in a secondary transaction 1.25 billion
that value the company at over4
billion and I I I what I still remember
it was the summer um and then I saw my
parents in the summer I would you know
talking about my dad that was a proud
moment when I said to my dad I think
I've uh made it sort
of um but when did you see the real
potential scale of the business when did
you really feel that it was taking off
it's a good question um the scale of the
business didn't take off until when tbal
started to monetize mhm uh we we knew we
had a good thing going with tabal with
buyers and sellers in the marketplace
but we were having trouble monetizing
and there were several efforts in 2006
and 2007 that sort of didn't work out
that well uh but then we we got onto
something we basically monetized the
marketplace using search
advertising and uh so you can imagine
you you have a Google way of monetizing
the marketplace on an eBay type
Marketplace and that was unique that was
a actually
new Pioneer by
Alibaba and uh in I just remember in
2008 our cash flow started to uh uh go
uh grew
exponentially and uh that's when we
realized we had a really good thing
going now there is um of course uh
you're not the only one who have seen
the opportunities here and so you have
now competition in several of your
businesses um tell me about the most
serious competition you all facing I
think the
competition we I can name a number of
competitors yeah uh and you know them
too you probably invest in some of them
uh and I think our our uh when we look
internally and uh kind of self-reflect
over the last several years we have
fallen behind because we forgot about
who our real customers are our customers
are the users that use our apps that are
shopping and
uh we did not give them the best
experience uh so in a way we kind of you
know stepped on our own foot and didn't
really uh focus on where the value is
where where we could provide value and
uh so as part of the reorganization our
new CEO comes in I'm the chairman but I
work with a CEO who's 12 years younger
than I am and uh uh he's very very user
focused focused on the uh product and
the interface and the user experience
and that's the most important thing for
us and how are you rectifying it what
are what kind of steps are you taking
the the first thing we did was to
acknowledge mistakes um we've
acknowledged that in the past we might
have not focused on our user
experience uh the second thing is to
reorganize our Personnel change the
organizational structure that fits the
strategy I think this is a a very common
problem of big companies big companies
are set in their organizational
structures and then they don't change
because people don't like to change they
don't want to uh uh change job they are
afraid to be fired and things like that
uh and then you start to fit the
company's Direction into your or
structure it which should be it
shouldn't be that be that way it should
be the other way around you should
Define what the direction is and then
set the company's organization so we
actually reorganize ourselves within
tbal uh the our our the our group CEO
who's also directly uh the CEO of the
tal t-all
Marketplace uh if you look at his direct
reports today uh they're drastically
different from who his direct reports
were uh three months ago but was there
like bureaucracy building up or what
happened what what made you not uh kind
of see the change in the in the
marketplace I I I think it's human
nature that people uh don't like to
nature that people uh don't like to acknowledge
acknowledge
mistakes uh and true leaders and true
mistakes uh and true leaders and true good
good
managers uh have that sense that have
that ability to self-reflect and say I
might not not have done something right
uh I did this wrong I need to change
they need to change themselves uh but it
is human nature that they uh don't do
that and uh I think we we we fell into
that trap and uh it you know you you
have to eat a little bit of Humble Pie
uh I think part of leadership is
humility you got to be able to admit
your mistakes and say all right let's
correct course uh but here's the New
Vision because employees are looking for
that direction it's very very important
what what is it due to morale in a
company which has been growing so fast
and where the share priz went through
the roof when these kind of things
reverse the morale has not been good
good in the past 3
years uh I mean through a multiple
factors first we had Co yeah and then uh
the economy the Chinese economy uh sort
of bounced back after Co but then it
sort of flattened out and uh uh uh
competition was another issue uh and
also another issue was regulatory uh
scrutiny uh we paid big fines uh but
that's all behind us but all those
things combined was was quite uh
devastating to the morale um but I as I
said the most important thing though is
employees are looking for a direction if
you can clearly communicate what the
direction is uh then they will get
rejuvenated changing um t a bit uh of
course your business depend on a strong
consumer um how do you see the Chinese
consumer just now if if you look at the
whole Chinese economy um China is about
31% of uh Global Production but uh the
consumers only consume 14% uh Global
consumption uh so obviously there's an
imbalance China is a net export country
makes a lot of things but at some point
Chinese consumers should come uh come
into uh more significance and rival that
of the western developed markets uh in
China overall consumption is slightly
over 50% uh whereas the developed
markets uh consumption is over 70% of
the total economy uh so so there's a lot
of potential uh but the way I see the
consumers today is there's a couple of
factors that kind of temper their uh
confidence and willingness to spend
number one there's a wealth effect from
the property downturn uh I think on
average property prices have come down
30% and uh uh When people's assets a lot
of their wealth is tied up in uh real
estate they don't and this sort of
downturn happens they don't feel as
wealthy and they don't they want to save
they want to uh propensity to spend uh
is is diminished uh the second thing is
I think young people today are uh still
worried about uh being able to get a job
uh just look at ourselves in the last
several quarters we've had headcount
reductions just through attrition it's
not like we were laying off people but
just through attrition we're not hiring
I think it's important that businesses
especially private businesses are given
uh incentives and the signal uh and the
confidence to invest and hire people so
when people don't feel very certain
about the future about their job
stability then their propensity to spend
is also uh uh affected the ability to
spend though is there uh China has very
high savings rate and people uh
household cash is still very strong yeah
we had expected the uh the upturn after
covid in China to be stronger than what
covid in China to be stronger than what actually
actually
happened but it sounds the same it
sounds like the same you had the same
opinion well just I I just said uh
consumer confidence is quite low right
now because of the wealth effect and uh
uncertainty about employment in the
future you mentioned um reg increased
regulation are you still seeing um
increased regulatory pressure I don't
think it's increasing I think regulatory
framework is now more clear uh we know
uh what are the lines uh how to keep
within the boundaries and not to
overstep the boundaries so uh having
that Clarity is uh very good for
business um now China has been the
factory of the world for many years now
how do you see this development going
forward oh I still think China will
continue to be uh a manufacturing
Powerhouse uh in the world despite
declining population uh on a relative
basis China's population is still very
large uh you're looking at 800 million
productive workers in in the economy and
uh even if that reduces to 6 600 million
650 million that is still a very SCA
size sizable and at uh production Force
at scale uh uh the Chinese people are
industrious and uh the education system
has been very good uh so you have a well
educated labor force and skilled labor
force and uh just relative I mean you
know you see a lot of
uh reshoring or offshoring to people uh
diversifying their supply chains to
Vietnam Mexico but look at the
population I mean the population of
Vietnam is about 100 million the working
population the workforce is 60 million
China is more than 10 times the size of
that they will never be able to replace
China as the manufacturing center of the
world now we are know in the second year
in the AI Revolution how do you approach
AI as a firm we're one of the largest
cloud players in China so AI is it
essential uh having a a good large
language model that is proprietarily
developed inhouse is very very important
because it helps our Cloud business if
we have a great lln and other people
other developers are developing on top
of it they're using our Computing
Services right so so we see AI as very
much uh the left hand and right hand for
our Cloud business uh and the other
aspect is the
e-commerce um business is one of the uh
places where you can have the most the
richest use cases for AI uh so you can
develop a lot of uh really cool really
cool products on top of uh our our own
model or even someone else's open open
source model we have multiple
development efforts going on and in
those scenarios for example you can try
something on using virtual uh dressing
rooms uh uh the our Merchants uh doing
business on our Marketplace will be able
to use AI to self-generate uh photos
product descriptions and things like
that is that because you is that because
you have less gdpr and more personalized
data I don't think it's less GDP I don't
think regulation you know we collect a
lot of data we get have a lot of data of
our consumers and we also have uh
uh there's a lot of Open Source data uh
because the whole sort of premise of a
large language model is you can crawl
the web and be able to get open source
data to train your model and uh uh it's
the same thing in in the US it's the
same thing in China right and uh uh uh
but we are able to use further use AI to
develop vertical applications given our
own data uh what we know about the
consumers and the merchants so it's it's
uh it's it's a beautiful uh combination
uh using AI to improve our user
experience where do you think uh China
is in the AI development compared to the
US companies
now I think China is
today uh
behind uh it's clear that the American
companies like open AI have uh you
know really leaped ahead of everybody
else uh but China is trying to play
catchup how far behind do you think it
is I think uh uh it China could have a a
lag that will last for a long time you
know it's not like you know because
everybody else is running very fast as
well but do you think it's one year five
years three years what do you think I
think today we're probably two years
behind uh the the the top uh models m
now um what is your situation when it
comes to chips and
semiconductors uh so last October uh the
US put in very stringent restrictions on
uh the ability of uh companies like
Nvidia to export high-end chips yeah uh
to every company in China uh so they've
sort of abandoned The Entity list
approach and they put the entire China
you know uh on on their list and uh uh I
uh think we're definitely affected by
that in fact we've actually publicly
communicated it did affect our Cloud
business and our ability to offer uh
high-end Computing Services to our
customers yeah so uh it is it is an
issue uh in the short run and probably
the medium run uh but in the long run
China will develop its own uh ability to
make uh these high-end gpus and you are
doing that yourself as well we we have
some uh effort of doing that uh but we
also are looking at other players uh to
Source chips from other players so how
big um an issue is this lack of chips
it's a big issue it's something uh that
everybody is trying to Grapple with uh
in the short run though uh I I think
prior to the restrictions coming down uh
people have stocked up inventory uh So
currently you know I think in the next
next year or 18 months the training of
large language models can still go ahead
given the the inventory that people have
uh uh I think there's more High
Computing uh that's required for
training as opposed to the applications
what people call inference uh so on the
inference side uh there are multiple
options uh you don't need to have as
high power and high-end chips uh as the
Nvidia uh you know the the latest model
so if you had had limited supply of
Nvidia top models and everything else
you wanted how would your business have
look differently I think we will have a
more robust cloud computing business and
we will be able to have customers that
want to rent computing power from us so
this leads us to the geopolitical
aspects of running a company like
Alibaba now what kind of um um
geopolitical considerations do you need
to take when you run a company like this
I I think the first thing is to
understand all the regulations uh we
need to make sure that we are compliant
with law and with the policies
everywhere we operate uh so you don't
run a foul of
regulators uh and then catch the
attention of uh uh the politicians um
and that's very very important to us I
think in terms of compliance structure
uh we are one of the most robust
companies around the world not just one
of the robust Chinese companies were one
of the most robust companies around the
world I think that's very very important
uh now you know speaking of us China
specifically if you look at Alibaba we
do so much business uh on behalf of us
companies um we sold over $60 billion of
American Products to Chinese consumers
annually and uh uh that trade is two-way
right and uh in in Europe uh uh you know
about 14 billion euros uh of French
products to Chinese consumers 7 billion
German products to Chinese consumers the
these are all really great uh stories
that people really don't understand uh
so Alibaba is good for the world good
for global trade and uh uh uh so set in
that context people can understand
Alibaba better uh and and really not say
oh you're just a Chinese company that is
trying to flood the market with your
cheap Chinese products uh I think it's
very very important for the world to
know uh Alibaba is here to do business
globally now in addition to the to the
chip act um are there any other
geopolitical tensions that impact the
way you do
business uh just generally uh being a
comp Chinese company uh in the US we
have to be very careful uh so for
example we don't have much of a consumer
facing uh business in the United States
uh and that's because concerns about
data privacy cyber security and things
like that uh and and these are some of
the issues that we will have to navigate
in the future what are some of the
misconceptions that you see that people
in the west have when it comes to the
current situation in
China um I I think people tend to be
categorical about China whereas a lot of
the truth is somewhere in between uh I
find this talk about whether China is
investable or not quite
ridiculous uh you're talking about the
second largest economy in the world uh
the a very industrious labor force as I
refer to before um 800 million people uh
that are working very hard um
so it I don't think it's constructive to
talk about whether to pull out from
China or investable in China uh I think
people have to recognize that you can't
bet against the Chinese people uh this
is an economy that'll be around for a
long time and uh that'll actually be
good for the world you mentioned that um
one can't bet against um China which
kind of brings me to to corporate
culture and and work ethics so what um
what is strong corporate culture to you
uh a strong cor corporate culture means
that you identify with the mission of
the company you see the company's
Direction very clearly and you love
working with your colleagues yeah you
love your boss you love your colleagues
I think that has always been the Alibaba
culture uh we are uh we have a saying
work happily live seriously uh people
always talk about work life B balance
but at Alibaba we say well why does it
need to be
a you know a dialectic of work versus
life uh when you come to work you should
be happy because you're among friends
and uh do you work all the time no I
don't work all the time um I have to
admit um I have actually found uh ways
to become more efficient so I don't have
to uh work I used to you know work a lot
more a lot harder you used to have the
toothbrush in the office I used to have
the toothbrush in the office but here's
the thing and what what what do you do
to make yourself more
efficient uh I apply some uh some of the
things I learned in sports and Athletics
uh you know like what like what like
training high-intensity training for a
few minutes and then you rest right so
on a given day I don't want to go 10
hours a day uh the whole day working
really really hard I would go two or
three hours very intense work uh I'll be
very efficient and get something done
and then I'll take a rest uh I'll read
the newspaper or take a nap or go out
for a workout uh so this uh interval
training is the concept that I I take
from Sports and apply that to work what
does it look like when you do high
intensitivity work in your office what
do you tell me uh people are very afraid
of me I'll make a lot of phone calls and
you know ask tough questions
um but I also like the fact I'm I'm
trained as a lawyer uh so I like and and
as well of the training and investor AB
I you know they taught me how to work a
spreadsheet I do a lot of things by hand
myself um if I'm working on a deal for
example an investment project um I'll
write my own term sheet you you close
the door and have no interruptions and I
mean how does it look like in your
office what do what do you how do you
operate nobody likes interruptions uh
but some I I seldom work in the office
um I'm always traveling I'm in a hotel
room um I'm on the plane uh I uh you
know in uh sometimes I I just say call
in and say I'm going to stay at home uh
and uh in the next five hours I'm just
going to focus on doing something so
nobody should call me so it's um it's
never in one place it's always uh
finding finding that chunks of time
where I can I can be uh not bothered do
you see yourself as a nice
boss I would like to uh I think uh being
a good
boss I think nice is not um because if
you're too nice to
people uh you are misleading them uh I
think the most important thing about a
good boss is you give him immediate
feedback feedback can't be a quarterly
review thing or a yearend review thing
feedback back has to be immediate and
people need to know uh whether they did
something that wasn't quite right uh or
they didn't apply the full effort they
need to know right away what are some of
the other leadership principles that you
adhere to I I think humility I talked
about humility you have to be able to
admit to your own mistakes the other
thing is you can't pretend to be the
smartest person in the room always
sometimes you you want people are
looking for that leadership you want to
come up with a good idea whatever but
that can be all the time uh because you
got to let your people the people that
report to you be empowered to come up
with your own ideas uh otherwise you
kill Innovation you mentioned sport tell
me about your love for sport and why you
bought uh a basketball team I I've
always uh been fairly athletic myself um
and uh just having participated in
sports um both in high school and in
sports um both in high school and in University
University
uh yeah but Joe there are lot of people
who like sport who don't who don't buy
sport clubs you're right you're right um
but first about sports I think Sports
teaches you not only the discipline and
hard work but also sport teaches you how
to how to fail if you fall down if you
lose a game you got to bounce back I
think that's really really important a
lot of those principles apply to
business so why I bought a sports team
it's actually Serendipity um when the BR
Nets were up for sale uh this is in
2017 I really had no idea what it's like
to invest and be an owner of a sports
team uh but then I looked at the
characteristics of the league uh how the
league shares economics uh one of the
great things about the NBA is they have
a very good collective bargaining
agreement that splits the economics
between the teams the owners and the
players the players are really providing
value right so they should get their
fair share of the economics and that's
set out in the collective bargaining
agreement uh and then the other thing
about the NBA is among the 30 teams uh
it doesn't matter if you're
competitively successful or not there is
a mechanism for all teams to be even the
small Market teams to be competitive and
to also make money uh so there's a
pretty fair sharing e economics among
the teams for example the TV rights uh
the NBA today gets something like $2.7
billion of national TV revenues every
year that gets split among the 30 teams
evenly that's very very different from
the eepl for example so um uh I thought
those characteristics are um almost like
a little bit socialist uh but it ensures
that everybody that invests in the
league uh will not lose a lot of money
and the other thing is Brooklyn right
we're in New York City uh where else and
how else can you get an opportunity to
own an asset uh that is kind of like a
crown jewel in a big city um in a big
country and with one of the most popular
sports in the world is it fun it's
absolutely fun I love I love going to
games I can I can see you having fun
with it what are the other ways you're
having fun I I spend time with my kids
uh I uh you know one of the most
rewarding things is to see my
17-year-old son play a basketball game
just a high school game he's uh the
starting point guard on the basketball
team and uh it just gives me so much
pleasure to see him do well um on on the
court do you read yeah what do you read
well I like to read uh spy novels I'm a
big John l Cary fan okay and um I still
remember when I was a um teenager one of
the first books I read was Tinker Taylor
Soldier Spy yeah and uh I got hooked on
it uh right away and so all that
uh I I think I think ler the author is
has been able to uh take some of his
real life and turn it into this
experience for the readers uh it's
experience for the readers uh it's almost
almost
aspirational like you want to be one of
the characters in the book and uh uh so
I I I enjoy that very much and other
than that I I try to read as much um
sort of current affairs I love The
Economist um you know but that's uh
probably not reading books um what would
be your advice to young
people my my advice is um learn one or
two very fundamental skill sets that
you're you're going to be on the top 10%
of everybody else uh like you know if
you want to learn how to code if you
want to learn uh a particular subject
area uh I think you have to develop some
specialty my
specialty uh professionally was actually
tax law I was a tax lawyer for three
years and I knew I can go into a room
and be at least somewhat smart when
people talk about tax structuring and it
still actually is helpful to me today um
we're looking at some things
internationally where uh uh structuring
the right corporate entities and uh tax
structures and Licensing structures are
important so I get very involved in that
uh so someone you can't just be a
walking into a room and just be a
generalist in all areas someone some you
have to be able to tell somebody I'm an
expert in one thing this particular
thing and that's how you get respect the
other thing uh that I would say to young
people is um you know learn multiple
things uh in particular I think in the
future data science is important uh take
a class in data science it used to be
called statistics but data science is
the more fancy way of naming it uh and
also take a class in Psychology I think
there is something that's fascinating
about the human mind and how the mind
works and uh that's very different from
machines and uh uh so if you are
equipped with some ability to code like
young people nowadays they all learn how
to code on python or Java or whatever it
is uh have a uh understand data science
and understand a little bit of
psychology I think you're equipped with
uh all the tools that you need to be
successful in life sounds like a good
plan that you for sure have been very
successful and it's been really great
having you on thank you so much Nikolai
it
