Based in china advising Foreign Companies on chinese tech and kind of, you know, alibaba status and explosively successful company. I think in a lot of ways mirrors the chinese economy choose why someone with the kind of insider knowledge and 20 years of experience, he can explain it in a way that very few can and we are privileged to have him here today. If you can join us in welcoming mr. Duncan, enjoy the talk. [applause] i thought you were reading that information. [inaudible] it was great. I just did a lookaround on wichat. Its appropriate because its not an alibaba product. So we just dont have to talk about alibaba, internet culture, Internet Society that is china today but obviously theres this book called alibaba that my publisher forced me to talk , no i want to talk about it and whenever you look at entrepreneurship, entrepreneurs failure is more interesting than success. And jack had a lot of failure, you dont really get into the book, the book starts with a chapter on alibaba the company. Then we really go back in time to birth in 1964 and go through, you know, a lot of challenges and i think hopefully one of the stories, one of the things that will resinate most about the story, i think it is resinating is, its not just a china story, its a story of overcoming adversity and being underestimated and cultivating being underestimating. [laughter] so maybe just start with three things. The first thing is what is alibaba. Its kind of not an amazon, kind of is in some ways, what we mean by this is it has elements of things that we associate with some of the Iconic Companies in the u. S. , but obviously the Chinese Market is not the u. S. Market so we wouldnt so we wouldnt expect the u. S. Market equivalent. Jack didnt start to create the amazon of china and it wasnt amazon of china, actually there was a company that tried to become amazon of china, it was convenient to have a lucky 8848 but unlucky name for company. He was right because the Chinese Market was mature enough for three Important Reasons including people didnt have enough money, they also couldnt pay easily for the goods and you couldnt ship them reliable, if you fastforward today, one of the reasons that hes successful is he solves the problems and he created what i called some architecture of trust. Those of you who lived in china, the rarest commodity other than fresh air is trust and i dont mean that in a negative sense for people of china, its just a society has developed in a different way, trust was the preserve of the family within the family and then theoretically it was going to be the state, the party, but obviously those things have broken down. And to ultimately create a successful trading environment, jack understood that he had the close the loop and he did in innovation, theres really no innovation in china, thats not true. Its partly like paypal. Its actually a lot better. We took from another company. I think its better than a lot of equivalence than the u. S. I talk about innovation of stanford, people think of the lightbulb moment. Thats what jack is done. Hes not a typically tech entrepreneur. Hes an entrepreneur entrepreneur. So in the book we talk about what jack calls the ion triangle, how he solved the problems only to note three things that he become dominant in consumer ecommerce and famously took on ebay and defeated them. Now, i guess this book has left to center origin, i almost became an evil capitalist because i met jack in the summer of 1999 and worked with similar several years. I was given the right to buy shares and i didnt in 2003. So thats the 30 milliondollar mistake, that gives me street cred here. Im clearly left wing, so the fact is, you know, i underestimated jack and i am not going to do that again, its because this problem is so difficult like nobody thought anybody could and also ebay when they started coming in, people, said, jack, nobody is going to able to refuse the huge Company Coming in. Im going to play up for the leftwing here. Ebay was basically, if you remember, some were born back then, we had the boom and the bust, ebay survived well and then we went to china but jack outsmarted them. He took on and defeated the big bad american or International Company that everybody thought would crush the upstart. People talked about quotes and ebay is coming from across the pacific ocean, im waiting. Jack is a quote machine. So i have here rather than confetti, theyre great, but he would like a comedian, there are a bit, you know, comedians have bits where they basically, the standup is not really standup. Little mini hate things in their head and similarly we could just pick up one at random. This is quite good. When everyone thinks theres a great danger theres opportunities hidden there that can be brought up. They can try to make fortune cookies because jacks quotes are made and maybe theres a joint venture to actually make mass fortune cookies. He always had and the second one is really about jack, i think, this book. It was interesting as i start today dig in the history, aye known him again, ive known him since 99, i didnt really know him before that. I heard his stories but i really wanted to go back and as i actually found as a researcher i invested in factiva, dow jones search service. You think google has everything, but it doesnt really. I found this news article from shortly after jack had started the company talking about australian family that jack had met when he was 15 years old. Anyway, i tracked down this boy who was 12 years old when he met jack. He is name is david moorly and hes been helpful and some of the pictures in the book are never been seen before. That was interesting. You talked about the ipo. This is when i decide today write the book. Every story is recycling the same pictures, the same kind of narrative that was tired and also didnt often make sense. So i dug into the story, i actually started calling david moorly in australia, randomly calling and emailing and then losing but i emailed a i dont goa studio and emailed me back, good day, thats me, imposing austere owe a stereotype. David has been great. Flicking matches. And jack took interest in this. Jack has kind of made his own luck because has a person, as i mentioned, hes really not a tech guy. We go back and see, you know, he failed exams terribly, he got one out of 120. I dont know how you even get that. [laughter] purely the liberal arts and creativity, we all know the very language involved, you know, and so this is a huge obstacle for him, but he had already become quite interesting person because english was good because he would go up to these people, wake up at 5 00 oclock in the morning to ride his bicycle, this is kind of stuff that we knew but we wanted to get the details. True to the traditions so im overplaying the leftwing element, which is good. The australian guy was a union organizer, david moorlys mother was member of communist party so ken had taken family to china when jack was 15 because he we wanted to show the children, three children, they also went to cuba. 1980 and as a result of this meeting, jack became a pen pal with david and i have one probably embarrassing for jack, but i think its cute. Its a big deal in china in the early 08s. And then they ultimately help jack and fiance and bought them an apartment and it became genesis and had some savings that could allow to take some risks and be entrepreneur. Theres a lot in the story. Personal element and corporate element and then theres the broader picture, what is does what the rise of alibaba tell us. I dont know if you knew he had to go to San Francisco at the last minute. I think it already opened. Opening of Permanent Office here. Theyre opened in new york. Theyre already in the west coast. One of the things i did in the book, i dont know about you, ive lived in china for 22 years i find geography and theres cities that ive never heard of. This is where alibaba is from, where jack is from. I have a map and showing people where it is and i have a map of the u. S. Coast because we need to know the names of the chinese of u. S. Cities because, you know. [speaking in native tongue] we see up the west coast and its important because jack discovered the internet in seattle and ill be there on tuesday of next week and the whole story how it got there, but we had west coast tech and trade relationship underpinned but now alibaba is going to be here on the east coast and theyre also in europe, milan, munich, because theyre increasingly reaching out, so the third point alibaba is having an impact on us even though youre not in china. Its a huge company as we heard. Ipo 25 billion and all that, but it just surpassed walmart to come the largest retail e in the world and it doesnt have the inventory, it doesnt actually own the goods, its a platform. The massive scale is allowed because it doesnt have to own the inventory. Its going to be buying or bringing in products that the u. S. Makes and its just not coach bags, i met a guy from the Washington StateApple Commission and producers and cherries, last years, promotional event, alibaba filled three 747s and they were on the tables of cherry eaters in china. I did a lot of radio interviews. I was talking to somebody in rural new york state and in pennsylvania, you know, this is places they can be the small merchants and the strength comes from representing the interest of the small merchants. I have a whole chapter. When the window and probably the shares that youre sitting on, probably most of the pictures in the room from the trading place. 95 of the worlds toothbrushes are made there. The crazy element of concentration, what we are begin to go understand this helps propel the company alibaba. We need to know what the rise of the private sector in china. What does it mean. We hear tomorrow ill be at the state department, eisenhower, defense side of things, theres chinatown not to far from it. Ive been involved in trying to connect dc and china for some time. We have some of the students that came out to china from dc Public Schools, like this crazy place that, you know, but has changed your life. My colleague ted who introduced me, and the back story, i love the dcbeijing connections. We are trying to connect beijing with back allies of dc that you showed me sally, just around the corner. Its just true. People to People Matter and commerce is about people to people ultimately. And thats, you know, the scariest stuff will never go away and sells newspapers and theres a lot of fear out there. I had a question yesterday at the society of new york, but other lessons from jack, its possible for Business People to go into politics. Clearly the u. S. Is a shining example of why that should not be the case. [laughter] i actually support the communist wall of china because its actually interested. In a normal country it would be a wealthy person and they have huge constituency. I think hes a politician with a small p and he really knows what hes saying and motivates people. I saw him on the stage with bill clinton when clinton was basically hired. Thats getting political. Bill clinton has amazing charisma. Jack has it in space too. Obviously in manila president obama interviewed because jack was on the stage, you never wanting to on stage after jack because hes i dont know if youve seen the videos supporting a mohawk or singing. Hes not a tall guy. He calls himself et. Who knew that somebody could go from being an english teacher to somebody who struggled to become i think we are going to take questions because we can go in any direction and i am probably doing that. At least i can blame you this time. First question. I have a question for you concerning tmob. Why is it that nike feels the need to go to tma website in china that all the westerners and International Businesses are having to go to tma . Im grad you answered that question. I can answer specifically. By the way brands dont put everything. They think we are the best, we want to direct relationship with the customer, often theres ecommerce, do we have to, maybe for some of the higher end brands, they want to get like training wheels on consumers basically. One consumer to know about the product so even if to go even higher up, you know, they dont want to start selling their 5,000dollar coats but they will, scar, have some kind of promotion. Its interesting in china you can also see porsche, ferrari eye glasses, we will get them when theyre young. Its like smoking. Ultimately china if you think about china its standing on an sca escalator. Despite slow in the economy theres still rising, theres a consumer class. So youre right, nike, for example, will they dont have the limited edition highend stuff but theyll have frankly sometimes like inventory clearing and things like that. But its more than that in china. It is actually the most attractive way to connect with digital for the middle class through platform. When i say digital. Its really cell phones. Its way over half, 60 is on the cell phones. So useful, youre right. Its another site. Virtual supermarket. Its brands that have those stories or very large merchants. Towbow. They just started the cycle and thats when small merchants and theyre 9 million merchants, so when i say 9 million merchants, a lot of those are individuals. So my friend ms. Wong might be Government Official and shes trading so maybe an idea for bureaucrats in washington, but basically theres a lot of underemployed people in china as well as Unemployed People or people just need to supplement their income, what these people can do, i can start selling plastic garbage cats and i could these are new this is not this is why ebay didnt like this stuff. People start selling things. They could start selling fake ones. I dont know what the brand of plastic garbage cans is. You said nike. Bike, sike. Theres a lot of fakes. Alibaba has been criticized for that. Willing buyer and willing seller. A lot of people want to buy fakes not just in china. Most of the westerners we see in beijing are hunting for fakes. Its getting hard because they have been shutting down markets. I will probably get myself in trouble, so i just with a british telling me the story about kristin lagard. She lives here. Hopefully shes not in the room. She was walking one day as one visits paris and a Chinese Women came to her, can you come with me, i think 200 euros, excuse me, what happens in china when chinese go overseas they want to buy luois vui, the, they are allowed two or three and thats what they do. It has happened to me. You might be able to pay for your trip in paris. So they go up to people on the street and say come with me, i just need your id to say youre buying and i will pay you, i pay up front and you keep whatever it was and to her credit kristin said yes. She actually made 200 euros or 500 euros, so the chinese want to buy the real stuff, the westerners want to buy the fake stuff. Its a market. Towbow is a scrappy market. How alibaba keeps on going, its free. I might do. Its excite exciting as i do. I could sell them for nothing. I charge but i dont have to pay alibaba because its free. Of course, to get my plastic garbage merchant store known im probably going to spend money on advertising, to alibaba makes advertising but nothing from listing fees and thats why ebay dies in china. Ebay famously said free is not a business model, well, it is, theyre wrong, if you do something else. They do charge commission. Maybe 2 , 3 . So alibaba wants to do more, much more bigger part of the business because, of course, they make commission and also the issue of fakes. But theres an issue with temo, mother merchants buy their own products. Itll get them up the rankings and theyre the number one licensed plastic garbage can whatever company. China, those of you who lived an visited there know its completely unpredictable in a way that we all become addicted to. In china if you want to cross the road, i could see green does not mane its okay. Green is probably run with more awareness than red, actually. So you know thats kind of how you have to understand china, contradictory rules. When we come i was talking about belinda. The first day or two when we come out to china, you kind of i find this, ive yelled at people, like chill, life is not stressful but we miss it, we love it there. Thats what alibaba has. Capture the street field. So, for example, if you buy an alibaba from merchant, lets pick another example because im tired of the plastic garbage can. It might be, i dont know. Its not for me. A guy selling tights, women stockings and all he does and its very good. Many people use and hes been good quality and always delivered on time and he has another job. He makes five times salary just selling womens tights on talba. Its not just one off kind of thing. They have a chat function. Its like a marriage client that popped up and you have almost like the vendors, garage can vendors but you basically have people who you know are your guide which is kind of like the old market, the umbrella person and they will give you discounts, send you free stuff. So alibaba is thriving because its recreating the china that we love online. They just failed, you know, even though they had a very good early start ebay but they messed it up and i have a whole chapter of humiliation of ebay. I think she was let down by some of the people in her team. So its very long. [laughter] any next question. First of all, thank you for being here and sharing the story of alibaba. I was wondering if you could tell us a little bit about 10 cents and with respect to alibaba as well as if you brought up in your discussion that theres going to be a venture here in dc and new york, where does that two questions. With the second question, is it going to be a Government Affairs office or just going to be again, help me out with respect to so the second one i mean, i think, yeah, governor relations, representative to San Francisco, but they have a lot of people who work in the white house and commerce, trading bodies, you know. So clearly theres a political element or governmenttogovernment elements because we have seen Many Companies do not play the card well. Its a major manufacturer and im originally from the uk. Its cheap and i love it but the u. S. , no, sprint was not allowed to buy from them and i think it was maytag put review. I dont know. So theres an awareness but theres also practical reasons to reach out to the commerce, i think penny has visited, in fact, my former colleague ted dean whom i met, you know, theres a growing