Crossing Borders and Building Bridges and Pillars

Hello and welcome to the Rich Robinson Show. I'm your host, Rich Robinson. Over the past 25 years, I've been an entrepreneur, investor, advisor, and professor here in Asia. After nearly a quarter of a century in China, I'm now based here in Bali, Indonesia, the island of the gods.

Asia is my home now.

60% of the world's population also lives here, but I would contend 80% of the world's dynamism and opportunity is right here in the region. On the show, you'll hear candid and fun conversations with some of my friends and colleagues, people I've met along my journey, entrepreneurs, operators, experts that will help you unlock actionable insights around the Asia region and the entrepreneurial agility that actually defines it. This first season, season 1 of The Rich Robinson Show, is titled At the Speed of China. Like, wait for it, at the speed of light. Things happen fast in China, and in this season 1, we're gonna take a deeper look at that. The rapid economic development over the past few decades, as well as the speed and cycles of innovation taking place all day, every day, right now. Let's go, Jio!

And we are back, ladies and gentlemen, boys and girls. Fasten your seat belts. We have yet another Old China hand who has forgotten more than what most people know about the Middle Kingdom, and we're going to peel back and celebrate his journey in China and kind of catch up and learn some nuggets of wisdom along the way. Welcome to the pod, Greg Pilarowski, ladies and gentlemen. Thanks for taking the time.

Thank you, Rich. It's a pleasure to be here. I've listened to a number of your podcasts. You've had some great people on, and so I feel very honored to be invited to have this conversation with you. I look forward to it.

Mutual, mutual. You know, I'd heard legend of you way back in the day and got to know each other over the years and been a big fan of your thinking and your journey in China. And I'd love to go back. I love going to the origin, back to the very beginning, like point, you know, A of like growing up all the way to point B of going to China and like what happened along the way. How did you get bitten by that bug? And let's start at the very beginning, please.

Sure. Before I Do that. Maybe I should let the listeners know a little bit about who I am so that they can put it into.

Sure, let's do the like present-day snapshot first, please. Thank you.

Yes, because I'm not famous, so nobody's gonna know who I am. I don't know.

You're kind of like you know China legal famous, so that's you know.

I run a boutique international law firm, and you know boutique is a polite form of. the word small. We're just 7 lawyers split between Shanghai and San Francisco. But prior to setting up this firm about 15 years ago, I also did some writing. I wrote a novel on China, The Great Firewall.

Yeah.

That under a pen name. I had other business concerns and wasn't sure if everybody would like what was in there. Before that, I was general counsel for Shanda. And Shanda was the first big success in the game industry in China. The company IPO'd in 2004. I was there for that and for 2 years later with a fair degree of excitement when the boss was number 2 on the China Rich List and we were riding high. Later on, of course, crushed and replaced by Tencent, the current game giant. And then before Shanda, I was at a law firm, Sullivan& Cromwell, a Wall Street law firm. The journey to China. When I was in undergrad, I studied overseas in Sweden, and that was my first time living outside of the United States, learning a foreign language, and it was fascinating. I learned a lot, loved the place, and Swedish is of course a very useful language with 8 million speakers. But Sweden, just like most countries in Europe, they have a lot in common with the United States. They have the same Western tradition. So after college, I wanted to go somewhere that was completely different. And at the time was engrossed reading novels from the Beat literary movement, Jack Kerouac and crew, On the Road, Dharma Bums. Reading Robert Pirsig's Zen and the Art of Motorcycle Maintenance. And through these Western authors, got an interest in Eastern philosophy, Buddhism in particular, and decided that Asia was the place to go. It was a coin toss for me between China and Japan, but I'm originally from Detroit. And we had a big auto industry battle with Japan and we came in second place. Being a bit of a sore loser, I decided China was it. And I thought that, of course, it would make a lot of sense to go to a communist country to learn about Buddhism.

Fantastic. And what year was that when you did that coin flip?

1994. So the easiest way to get to China at that point seemed to be as an English teacher. And so I went to Sichuan about a year before Peter Hessler to go teach English. And while I was there, I had an opportunity to live in 3 different places, Chengdu, which is the capital, and teach at a university there. Also in Panzhuohua, which is a mid-sized city in southern Sichuan, right on the border of Yunnan. And there I worked at a state-owned enterprise, iron and steel factory, teaching English to the researchers. And that was a fascinating experience.

Literally, figuratively forged by fire, like you're in a remote Village in Sichuan in the Zhou Shi Nian Dai, the Zhongguo, like that '90s China in that place. Like you talked about your novel, The Great Firewall, but Peter Hessler famously wrote Rivertown based on his time in the Peace Corps in Sichuan. He's somebody I know from my early days playing basketball with him. And I'd love to get him on the pod as well too. He has fascinating stories and written other books about China and other places, but man, he captured a zeitgeist and you were there a click before him. So that's pretty intrepid. Like that's how you do it. If you really want to learn Chinese, you go there because you're not going to get sloppy and go out, you know, drinking with hundreds of other students and, you know, stop speaking Chinese. You have kind of like, meiyou banfa, you're all the way in.

Wow. Yes, that was the case in Panzhouhua. And I also lived in a small village called Nanshi in southern China for a period of time as well. And in both of those places, there wasn't really a lot of other foreigners. In Chengdu at the time, that was a city of 3.5 million back in 1994. It's a lot bigger now, but at that time there was only about 100 foreigners and most were students studying the language. So it was a very different time and place back then than say what Shanghai or Beijing Might have been, say, pre-COVID before a lot of foreigners departed.

Wow. Fantastic. That's great. Good job on the coin flip. That was, you know, of course back in '94 it was getting clear that Japan, you know, was on the, you know, on the mend. Let's not call it decline, but at least it was trying to like dig itself out of its kind of heyday of the '80s. But '94 was not so clear that China was going to be what it was going to be. I mean, it was much closer to Mao. That's only, you know, 18 years after Mao checked out. So it was, you know, still kind of infrastructure and, you know, there wasn't, you know, you couldn't get cheese in Beijing. It was still like a hardship posting and like Sichuan was even deeper, but you smelled that. It's really interesting how you channeled these, like the '60s was an interesting time. literary time, but also an interesting time for people kind of bridging into the '50s and '60s with the East and West, with like Alan Watts and others, people starting to look at like Eastern philosophy and that unlocked it for you. That's fascinating.

Yes. Gary Snyder was— never had a chance to meet him, but he was an inspiration. His character was Jaffe Ryder in The Dharma Bums. And he was a professor of East Asian language and literature at UC Davis. And just watching, reading about his character in that Jack Kerouac novel definitely piqued my interest. And for him, he, I don't think he was able to go to China. That was during the Mao era. And so his exposure in the East was primarily in Japan, although certainly working with a lot of the Tang Dynasty poetry and providing translations of those.

Wow.

Wonderful. And post-Sichuan, what was next?

Yes, Sichuan was fascinating. And we'll probably get to this later, but the differences between mid-'90s in Sichuan and then later experiences in Hong Kong and Beijing, it's hard to capture the degree of change that happened.

Share an anecdote, if you will, about your time there and, you know, something that stood out.

Well, living in the village in the countryside, I think, was particularly sharp contrast to Shanghai today. You know, we didn't have heat; we cooked with coal. There wasn't any hot water, so we just boiled the water in a wok over a coal stove and then took showers out of buckets in the restroom. And so it. You know, back then nobody had cars, even in the city. Everybody just went around on bicycles. It would be very rare to meet anybody who had left the country or had a passport. And that's entirely different from the situation today. I mean, everybody moved to cars and then with the shared bikes, they're going back to bikes again. But it's been, you know, the increase in gross domestic product per person since 1994 to 2023, It's incredible. More people, hundreds of millions of people have been lifted out of poverty during that period of time. And the direct impact that that has on the average person in China, from my early days there in 1990 to experiences today in Shanghai and Beijing, it's just inconceivable. You know, China is an authoritarian state. There is a one-party system. But the performance of that party over the last 40 years has been so incredible that even if there was an election today, I think that they would win it because they have done more for their people in that period of time than any other government on the planet Earth.

Amazing.

Yes, indeed. So, you know, 70% of China in extreme poverty back then. And now the official statistic, it's not even a Chinese statistic, it's 0.0 something, which, you know, if that's not miraculous, like, of course there's all kinds of, you know, it's a double-edged sword, but that's amazing. And you talked about GDP growth and that's what really kind of sparked my thesis around this book, which is, you know, qualitatively, I felt all of this growth as a tech guy, like, okay, there's a hardware stack that comes from America. There's a tech stack that comes from America. There's a lot of derivative internet companies, but what's uniquely Chinese and very much just heads and shoulders above everything else is the speed of which things happen. And that's just something I qualitatively felt, but quantitatively, it's a 4 to 1 ratio. Like you can clearly see GDP growth either side, and it's quite compelling. But even more so, I had the guy named Zach Deichtwald on the podcast. He that's going to air soon. Young China is his book and his firm, and he has something called the Live Change Index. And I think it's not just for Chinese people that felt it, but expats like you, intrepid expats who were there, the arbi wulawa who were like going to these like you know far-flung places in the 90s. You might as well been in the 1890s in. Other in Sweden, right? And so you've also just had this incredible acceleration. Just you know, and then just five Gs into the future, four X from there. That was thirty years ago, but that could have been 120.

I think you're absolutely right. The change has been dramatic, and part of that change is possible, of course, because. China made some poor choices, if you will, in choosing the Marxist approach as opposed to the capitalist approach. And so had the civil war gone the other way, then perhaps there would have been a different baseline to start from. But in essence, after Mao's death and when Deng Xiaoping came to power and initiated the改革开放, the reform and opening era, and starting to borrow from market economics while still maintaining political control was starting from such a low baseline. And one thing— I have traveled to other places, lived in other places, Europe, Latin America— one thing that captivated me about China is the people and the culture and the focus on education. The people in China, your average person in China, And there might be some differences between city, country, what have you, but the intense focus on education and doing what you can to provide your kids with a better opportunity than what you had, that is so ingrained and so apparent everywhere that I've been that in essence the government just needed to get out of the way. And let the people do what they have done for 5,000 years that put China at you know the center of the planet during the Tang Dynasty. And so, in essence, it's just a return to former greatness. Yes, after some periods of mistake.

Indeed, yeah. Industrial Revolution, of course, you know it was 150 years of what's you know. hit the reset button post-Industrial Revolution. They kind of left behind and now they're sort of regaining their seat at the table. I talk about GDP since Jesus from like 0 to 1800. Of course it was mostly a function of population because you only had sunlight and beasts of burden, but China layered on ingenuity and inventiveness and also industriousness and then other systems, the man, you know, the whole sort of kind of like Gaokao system is still based on these, you know, ancient dynastic systems of this meritocratic, you know, mandarins that kind of ran the show and all those, like you stack those 3 on top of it, then it was like, you know, it just kind of stumbled for a bit and it's back.

That's right. You know, now when I was in Sichuan, there was some hostility towards foreigners that was 5 years after Tiananmen Square. I later studied Mandarin in a summer camp in Beijing with Princeton in Beijing program, and the textbook that we use was Renmin Ribao, or the People Daily articles written during that era when I was in Sichuan. And I didn't appreciate it at that time because I was new to the place, but reading the People Daily's articles in the early '90s written about America. There was not many kind words that were said. A lot of people still accepted me and were very nice to me, but many other people, you know, with only one source of truth, one source of information, there was a fair degree of hostility towards foreigners in Sichuan at that time, and I think to Americans in particular. And then there was also just some novelty factors. There weren't very many foreigners, and so That led to a lot of curiosity. Whenever I was walking down the street, people would be yelling "Lao wai, lao wai," which is the word for foreigner. It was funny for the first two weeks, but after that it got a little exhausting.

My parents that's fascinating. So like all that is old is new again because for a big period people are like, "All right, let's open it up. Let's have the West come in. Let's open it up." And I think it was some really you know a big influx of Chinese students and people, you know, immigrating to the States. And for a 20 or so year period, I think it was, you know, there was some good inflows and pretty friendly, but it seems that that's kind of shifted back to some of that earlier sentiment, which is also one of the reasons why I think it's important to write, you know, write this book, even though people are going to accuse me of, you know, kissing China's ass and trying to be a panda hugger. And I'm neither a panda hugger nor a panda slugger. I just think People just need to understand and have this dialogue. But when it comes down to it, people to people, like I never had any, you know, anything but positive interactions with Chinese people, you know, one-on-one. When you speak the language, you get to know them, right? Unless somebody cuts in line, it's actually okay. Everybody's like, all right, you know, hey, it's cool. Like I never, I rode the subway in Beijing for years and I'd be the only foreigner. I never once ever got a dirty look or anybody judging me or whatever. It was all curiosity. And for the most part, you know, I think that's kind of being forgotten. People are just like, China equals Chinese people and America equals American people. And it's the biggest story of our life and the most important thing. How do we bridge that? Can you give us the answer? Can you solve that problem for me, Greg?

You know, Rich, it's your good work and good work of others like Kaiser Kuo. I love his podcast, a regular listener to Cynicism. Also, Bill Bishop, his regular newsletter. I think that engagement— we had that as official US policy for 8 presidents. That's shifted recently to strategic competition. Thucydides would tell us that that was inevitable, but keeping that people-to-people engagement going, or rather having it recover, Post-COVID, I think is probably one of the most important things that we can do. I have been a China hand for 30 years, and the last four years I haven't been to China. I'm on the phone every day with clients. I'm speaking to our team in Shanghai. But you know, I think that the interruption that came with COVID was unfortunate, and if we can get those airplanes flying again and have people going back and forth. That will be a positive contribution.

Beautiful, beautiful. Yeah. Tell us post Sichuan now, like your sort of journey following that.

Yes, Sichuan. It was challenging, but I loved the place and knew that I wanted to spend more time in China. I was earning $200 a month though as an English teacher, and I thought I met a guy in a bar who was working for Procter and Gamble. He bought a round for all of us poor. Teachers. And I said, well, wait a minute, he's living here in China, and he can buy beer for everybody. How do I get to be him? And so the answer obviously was to go back to the United States, get a graduate degree, and come back in a different capacity. I went and took all the tests. I didn't know what graduate school to go to. None of the business schools wanted me. All the law schools did. And so I ended up being a lawyer.

Fantastic. And where, where did you study and did you have any sort of like emphasis in your study to do something to come back to China or was it?

Yes. So I was in your town in Boston for law school at, I think they might've—

I knew it. See, I'm gonna make you say it because that's the thing people always say, oh, you're from Boston. I went to school in Boston and I was like, I know you went to Harvard. I know you're wicked smart. I used to work in Harvard Square when I was in high school, so. I just, I needed to make you say it. So yeah, Conan O'Brien has this great commencement speech. He's like, don't ever tell anybody you went to Harvard because you put your underwear outside your pants by accident. Oh, you went to Harvard or you get your head stuck in your niece's dollhouse because you want to know what it feels like to be a giant. And Uncle Conan, you went to Harvard. If anybody asks you where you went to school, just say, I'm not into book learning and such. and then get in your BMW and drive the hell out of there. So.

Absolutely. I think they made a mistake in the admissions office, but I was not going to point it out to them. You know, it was funny. I had a choice to go to a couple of different law schools. And I talked on the phone to some of my contacts back in Nanxi. And I was, I was telling them which schools I went to, I was going to go to. And I don't remember the name in Chinese for Stanford, but At the time, I knew it, and I said that was one of the choices, and they had never heard of it. When I told them that I got into Harvard, they said, "Well, that comes as a big shock to us, Greg, because we didn't really think you were that smart." That's great.

You know, I gave a guest lecture at Harvard a few years ago, and you know, I teach a course at the Guanghua MBA program, Entrepreneurship in China. Clinical professor, total entrepreneur. I mean, imposterpreneur syndrome. And, you know, they call Peking University the Harvard of China, but, you know, 1 out of 25 get into Harvard, which is still amazing, right? But it's like 1 out of like 1,200 get into Peking University. So I was like, maybe Harvard's the Peking University of America. And that gets a huge laugh in China. Did not get a laugh in Cambridge, Mass. So. That's great. So come on, nobody gets into Harvard by accident. So, you know, you're wicked smart. So then tell us about your time there. Like maybe share an anecdote of like law school at Harvard. Like that can't be easy.

It was, there was a lot of confident people there. And so that was a new environment for me. I grew up in a trailer park north of Detroit.

Boom. I didn't know that. That's even better in the hero's journey. Sorry, I gotta celebrate that.

Went to Ohio State undergrad, you know, public school north of Detroit. Enjoyed all of those things. But the culture at those places was definitely a little bit different. from the culture at Harvard. It was a different group of people, but it was very inspirational because everybody who was there, they were obviously very clever, but more than that, they were very ambitious. And the amount of things that they did, not only in the classroom, but with extracurricular activities or planning conferences or, you know, writing for this journal or for that journal or what they were doing in the summer, it inspired you to want to do more. And even to this day, whenever I go to an alumni event or when I'm fortunate enough to go back to Cambridge, you can feel that same kind of energy where you just want to do more and try harder. And in a sense, it's a similar energy, I think, to being in China, tying into your theme, because things do move at a really fast pace in China. And there's a lot of folks who are working really hard to make things happen. And that kind of energy can be felt on the ground when you're in China.

Beautiful that you say that. So anybody listening out there, you know, I often talk to students or just, you know, talk to people that I'm mentoring. And I first went to China in '93 by train and I felt this incredible, you just feel the energy. And then I got to grad school in '94 in Erasmus and I got on the internet the first time, Mosaic, the predecessor of Netscape, you know, started by Marc Andreessen from Andreessen Horowitz. Felt the energy of the internet. And then I was like, China internet, let's put that together. So a lot of people are just trying to figure out like what the path is. And then you just get out there and you can literally, it sounds woo woo, but it's very real that there is energy around things that can help you get out of bed in the morning and be motivated to do things and, you know, follow that energy. So that's beautiful. And how you glue that together, very, very well done. Thanks. That's a great anecdote.

So my path in law school, I just wanted to get back to China with a better job. And so after law school, I just interviewed with firms that would send me to China. And at that point in time, so this is 2000, China had just been admitted to the WTO. And to have somebody who spoke Mandarin and wanted to go to China, that was a pretty easy sell. And so a lot of job opportunities at that point, which I was grateful for. Also, the dot-com era was just happening, as you know, and that I think also increased demand for paper pushers. And so I went to Sullivan& Cromwell, which was a Wall Street law firm, and just spent one year there in New York and then moved over to their Hong Kong office in October of 2001. So it was just one month after 9/11. And Sullivan Cromwell's office was, you know, just is right downtown. I was actually a couple blocks away from the World Trade Center in a dentist chair when the plane slammed in.

Wow.

So I felt a little bit like I was abandoning New York. There was a little bit of survival guilt there, but nonetheless was very glad to get back to China. Although, you know, Hong Kong is certainly a different beast than the mainland.

You land in that, in that time, it's dot-com bust now. It's post-9/11, but in some ways China's a little insulated from that. And there's like all of this kind of like growth and opportunity. Like NetEase at that time became the number one performing stock in NASDAQ that next year because they had listed, like the dot-com boom happened late in China and then ended at the same time. So all of these Sina Sohu NetEase, but then you could really feel the momentum and You know, you talked about how Shanda got eclipsed by Tencent, which is now the not just the biggest game company in China, but in the world. But at that time, Shanda was like you said, the founder was one of the richest men in the world. And like tell us about docking with that rocket ship.

Yeah, that was a lot of fun. You know, moving to Hong Kong from New York, I thought that New York was where the world. Came to compete and it was just the most intense, fast place that existed. But going to Hong Kong at that point in time when a lot of IPOs were happening for China tech companies, that was the work that I was primarily doing. I pulled more all-nighters at the printer during those 2 years in Hong Kong than during undergrad, during law school, during that 1 year in New York. And the people of Hong Kong, they have a real hustle factor. They have played a middle-person role between mainland China and the rest of the world for many years, and just incredible pace of work there. So it actually ramped up quite a bit moving from New York to Hong Kong. But as I sat there in this office with a tiny little window looking out over Victoria Harbour and seeing the mountains of Kowloon beyond that, and knowing that On the other side of that was Shenzhen in mainland China, and working on deal after deal for China companies to go IPO or for M&A deals, I knew that Hong Kong was a service center and the place to be was mainland China. And so I moved up to the Beijing office of Sullivan and Cromwell, which was again incredibly easy to do because life in Hong Kong was so comfortable and the tax rates were so much lower and SARS just kicked off. So there was nobody in Hong Kong who wanted to go up to mainland China. And there was a bunch of people up in mainland China who wanted to move to Hong Kong.

Wow. Zigging where everybody else is zagging, but crazy like a fox. That was the right move.

And then we helped with the IPO for Tom.com, which was an early tech company backed by Li Ka-shing, the Superman of Hong Kong.

The richest, the richest man in Asia, you know, at the time, right?

That's right. And right after that deal at Sullivan& Cromwell, we represented Goldman Sachs on the Shanda IPO. And quite fortunately, many of the same issues came up and the senior partner on the deal switched a couple times. And that gave me an opportunity to have all the answers at a couple of meetings. And there was one important person in the room for some of those meetings, and that was Chen Tianchao, who was the, the founder for Shanda. And he wanted to hire a general counsel that could help him stay compliant with the NASDAQ rules and the SEC rules. And he just looked around the room, and I guess I was the guy. Now, for me, I had taken a bunch of writing classes, Previously, and had always hoped to write a book about China. And so, to have this opportunity to be the general counsel for the richest man in China, I jumped at it. Took a big pay cut, packed up my bags on a Friday, closed down the computer at Sullivan and Cromwell, and started working for Chen Zhong the next Monday.

Wow!

Wow!

Wow! Wow!

So much to peel back there. I mean, another zigging while everybody else is zagging. But you really put yourself in this, you know, pole position to find these opportunities. That's amazing. And also post-Dock on Bust, there's all these Sarbanes-Oxley rules, very usurious compliance now. So they need somebody. So back then it was like you could see law-wise in these big companies. I was one of them as the head of international doing deals. And then there's the head of PR, and then there was the legal counsel, and then it was a sea of you know Chinese people in a gigantic Chinese company with very you know Chinese you know culture. So I was part of Linktone, and we were 100 people, and then we grew to 1,000 people. And you know, jer i jer lawai. I was the one head of cattle, one head of lawai. I was the only foreigner in the company at that time, and it was a you know it's a completely different. Experience. So can you share? Like you had air cover from the top, but I mean still being in a fast-growing gigantic Chinese company. I mean that's like you know really really no matter how good your language skills are there's a whole there's three level of chessboards and you're you know you're wicked smart Harvard grad but we're all playing checkers while everybody else is playing this. 3-level chess, right? So can you share some of the stories there?

You're absolutely right, Rich. And I don't think that the importance of language can be overstated in this context because of course everything was in Mandarin and I would always be the least best speaker of Mandarin in the room. And then of course all the emails, all the internal communications, everything is in Chinese. And so your reading speed Is not my reading speed in Chinese is not what it is in English, and so there is an informational disadvantage. We did have management meetings every Friday, and so it was a big conference room table with twenty people all sitting around it. Chen was the boss right in the center of one side, and then everybody all around the table around it. And one thing that I really appreciated about Mr. Chen is that. He speaks Mandarin very, very clearly. And so it was always easy for me to understand him until he jumped into the chéngyù, which is the—

Whoa, really deep idioms.

The short character phrases that all have a story behind it. And so—

Apple a day keeps the doctor away, something like that, right? But like really much more like, oh, I can understand that as a non-native English speaker. But then it would be like, you know, Tian Gao Huang Di, and heaven is high and the emperor is far away. And you're like, okay, let me look that one up, right?

So absolutely right. And so, you know, he'll be speaking and I'm following him, and then all of a sudden it's, you know, 4 characters, 4 characters, and there's 20 people around the table all kind of nodding at his wisdom. And I'm like, I have no idea what you're talking about.

Wow, wow, that's fun. I've been on the other side of that with like different Because there's so many different accents with Chinese as well too, even if people are speaking Mandarin, right?

So that's that's right. Our chief technology officer, I forget which province he was from, but he would speak quick. It had a strong accent. I think for those two years, I don't think I understood a word he said.

Fascinating!

Wow!

And tell the listeners out there in podcast land about Shanda and about that. Crazy rocket ship that you, you know, strapped in.

That's a good way to describe it. In 2004, in March, we IPO'd on NASDAQ. And at that point in time, there were not that many people in the online game space in China. Now, part of the reason for that was because of piracy concerns. So if you're trying to sell any type of game on a disc, just like any type of movie on a disc, at that point in time in China, it wouldn't work because the pirates would be out right away. What Shanda figured out, just licensing a game in from Korea, was to make it an online game where you had to have connection between the client-end software and the server-end software. And as soon as you needed that connection, then just buying the DVD for the client-side software wasn't going to work anymore. And you could actually monetize the games. You could defeat piracy. And that's what made Shanda possible and led to an explosion in the online games market in China. So today, China is the largest game market in the entire planet. They have over 30% of total game spend. From anywhere. And all of it really is made possible by defeating the early challenge of piracy.

Amazing. A pioneer indeed. And that's the playbook now for the rest of planet Earth. And, you know, if China can defeat it, then it's really become— that's why gaming is almost $200 billion industry now, just dwarfs music and entertainment. And unless you're really in it to win it, It's difficult to really peel that back. And I think now Web3 where you can own digital assets, and I think that's going to, you know, eventually it'll be quarter of a trillion and then, you know, half trillion dollar industry, I think gaming over the next, you know, by 2030. And you were right there at the beginning where it was impossible to make any money and the only way to do it was through the subscriptions or virtual items.

Even at that early stage, Chen Zhong knew that the real competitor was Tencent. He recognized that the QQ Messenger app that Tencent had and that massive user database that everybody in China was using QQ, that would be the opportunity to cross-sell games into it. And part of the reason that that was well understood is While we were there, we had a conflict with our Korean licensor. And being the general counsel, managing the litigation and arbitration around that was something that I took the lead on. And our licensor, they really wanted to pull the game away from us, but they couldn't because we had the user database. And that was the big difference. Now, the World of Warcraft, they moved from The Nine to NetEase. Recently in headlines is their move away from NetEase, of course, but that was possible because Blizzard at that time had control over the user database. So they were able to move, whereas Actos wasn't. Of course, we solved the problem by just buying Actos, but that was another story.

Tell us a couple more stories about Shanda and like what transpired over the next few years as kind of like the staircase in Harry Potter just shifting in real time with not just Tencent, which became, you know, it's the biggest, like I said, the biggest game market in the world, but they're the biggest game company in the world now, the biggest music company in the world. And, you know, just an absolute 8,000-pound gorilla, but there's so many other players in China as well too. So you guys kind of unlocked this ability to monetize and then just gladiatorial competition.

That's right. And I think that He didn't mind games, but that was never his true passion, if you will. He wanted to be something more than that. He wanted to be the Disney of China, and he explored a lot of different opportunities. There was a period of time when we were trying to buy Sina and bring that into our platform. Online literature was explored with Cloudary. A box to capture the TV screen and be able to play games in the living room in China was another project that was tried. Music distribution was tried. So he had, and still does, has a very active mind who wants to do a lot of different things. And so the pace at which things happened was blistering. And in my way of thinking, I always thought, oh, maybe a little bit more research should be done here. I think lawyers are by nature a bit conservative. And so maybe we should look into this a little bit more. That didn't happen. He had a saying that he always said, 小步快跑, small steps, run them fast. And that was just happening every day. And in the legal department, You know, we're risk control. So we're just trying to keep up and trying to come up with different ways to increase our efficiency so that we can be signing these contracts, signing these deals, doing these things at the speed of China while not having really awful contracts. And so it was, you know, most people think that when you go from a law firm like Sullivan& Cromwell, Wall Street law firm doing IPOs, doing M&A deals to go in-house, well, now you're going to be in the cushy job. Where it's just the nine to five day.

That's typically yes.

That was not wow.

Hey, by the way, Xiaobu Kuipao. Like wow, that's a beautiful nugget. I'm going to actually you know like that's a nice call out in the book and like I think that captures it. I've never heard that before. I don't know if that's a probably not a Chengyu. It just sounds like a you know something you know that he probably made up, but. That's a really terrific nugget. Tell me about, you know, other things in Shandong or since that you've seen and smelled of that sort of like, you know, Xiaobu Kuipao, like, you know, like flavor in China over the years.

Well, I think, you know, when we talk about the speed of China, there are a number of reasons for that. speed, some of which we've talked about, which is just, you know, China's going through, continues to go through a tremendous transition from a command economy to a more market-based economy. And when you start with that low base and go to something that's rivaling the size of the US economy, that's going to be a lot of change in a short period of time, and that's going to be happening very, very quickly. But it's also important, I think, to keep in mind that democracies are inherently slower than autocracies. And so if you look at construction, you're from Boston, you're familiar with the Big Dig. That was a 15-year project to put 1.5 miles of expressway underground in downtown Boston. So that the city can reunite the waterfront with the downtown area. The whole time I was in Boston, that was going on. In China, you know, they probably wouldn't finish it in a week, but certainly a lot faster than 15 years. And there's reasons for that. China doesn't have to deal with voters. China doesn't have to deal with environmental studies. China doesn't have to deal with eminent domain. To gain access over the property rights to go ahead with their construction. So China has built incredible infrastructure during the period of time that you and I have been watching them, whether it's subways in cities all over the country, whether it's high-speed rails, whether it's the very beautiful expressway system that is in place, or the skyscrapers. There's, you know, 3 of the 10 tallest buildings are Right down from where I used to live in Pudong, the amount of change in infrastructure that they've done— bridges, ports— it's mind-boggling. But that can happen a lot faster than the high-speed rail that we're trying to put in between San Francisco and LA that was approved back in 2008. And there's a section from Merced to Bakersfield that we hope to open by 2030. That's 22 years. But the legal battles behind that, you know, it does slow things down.

Yeah, and you're absolutely right. And that's something I struggle with because sure, you look at China's rail system, it's the biggest in the world now. And okay, so what? Like, what's to be learned from that? Like, you know what, there's this, you know, protected salamander that they just blasted through their habitat and, you know, connected These two cities and like we can't do that, right? And I think you know also there's like you said it's a multi multivariate you know eminent domain and environment and other things.

And that's true.

But I think also there's like there's something to be learned from that. Like there's a great podcast with the the founder Airbnb and Reed Hoffman on Masters of Scale, and he said. You know, there's like 4-star hotel, 5-star hotel. What if it was a 6-star or 7-star or 10-star? Like, what would a 10-star experience be like? Like, you'd be met at the airport and there would be like an elephant and a parade and you'd be on the, you know, elephant. And like, you know, of course, like, all right, that kind of like extreme example is not possible, but oh, wait a second, you have a custom surfboard? Like, that's kind of possible. Like, you could have an Airbnb by the beach and be like, all right, what kind of surfboard do you like? You like a Longboard or shortboard, and like, I'm going to give you a surfboard to use there, right? So there's like elements to take away. And if you look at like this Gigafactory in 168 days, or, you know, even I think it's worth looking at like Korea, how Korea has engineered this renaissance. Like, okay, we have electronics, we have phones, we have cars, but we're going to take number one show on Netflix and we're going to take the Academy Award for Parasite and we're going to take You know, number one music category now, K-pop and BTS, because the government really got behind it and really helped to kind of intentionally engineer that. So I think there are some elements from the government side where they're kind of incentivizing people, you know, and aligning people. But, you know, it's much more difficult with democracy, of course, and, you know, changing blue and blue and red. But I think there is like, I, I hope that this book is kind of like a clarion call, like a Sputnik moment of like, let's speed stuff up. Like, what can we do? You know, all that other stuff's off the table, but there is a way to be a little bit more intentional and faster, or am I just being completely naive? And like, what do you think could possibly be learned from the government level to government level to make things faster?

I think that's a great question. 2 thoughts on that. One is that there is great power competition happening again today, much like we saw during the first Cold War between the Soviet Union and the United States and the Western Bloc. When the Soviet Union collapsed, Francis Fukuyama, academic, he wrote a book called The End of History and the Last Man. And the argument was that with the collapse of the Soviet Union and the primacy of liberal democracy with market capitalism, We've now arrived at the end system. We know what the best system is now. Here it is. Everybody's going to coalesce around that. At the same time, Samuel Huntington wrote a different book called The Clash of Civilizations, and he saw a future world in which the cultures of different places were going to be the center of identity, and there was going to continue to be friction, and history was going to continue in a Hegelian In sense, I think ultimately Huntington won that argument, and Fukuyama guessed wrong. And so now we appear to be heading into another kind of Cold War with the associated risks of that. And so I think that the work that you're doing on your book to help to increase knowledge of China in the United States is very helpful to constrain some of the potential. Negative externalities from this new great power competition.

Yeah, that's kind of you to say. I think both of my readers are gonna you know, like I saw this one mug. It was like said world's most okayest dad. So I think this might be like the most okayest book about China that people just ignore. But I need it to come out of me. But I think there are some ways you know to try like. This, you know, Korea also democracy, but you know, they've had this intentionality of like, let's build this soft power. Let's give a lot of subsidies. Let's give a lot of incentives and breaks to the entertainment industry so that it will become this world power. And then, you know, it's 50 million people in, you know, something like, is that 6, you know, like a tiny percentage of the world's population, but they have this outsized You know, and of course we already have that in the U.S., and that's why they're trying to emulate it. We're not talking about Korea, but we are talking about like how the government can be maybe more intentional in supporting things like why don't we have light rail? Why don't we have 5G? Why don't we, you know, in the States, like why is that? And it's kind of a fail in a way. I think there can be some kind of, you know, I think the Adam Smith's, you know, free hand of invisible hand. I think maybe the hand needs to be maybe a little bit less invisible, but I don't want to get, you know, political. I just really want to talk about like, you know, how things do move in China. So, you know, you talked about how the government has kind of enabled some things. What have you seen in the private sector and what's been your sort of, you know, you're definitely very much on the front lines of like that kind of peace and pulse and Even if it's not, you know, you've already given me some crazy amazing anecdotes that I'm going to include in the book. Thank you. Your framing of things is really, you know, with history and with literature and with other views is great. What are maybe some personal anecdotes or some just views that you've had on the speed of China?

Well, one thought that I wanted to get out, and you can perhaps look at this with your own research, is the recent CHIPS Act, where the Biden administration has gotten this through Congress to put in, I think it's $53 billion into the development of the domestic semiconductor industry. You know, some folks haven't been pleased with that because it's essentially industrial policy. China's complained, but we're essentially copying China, if you will, and making decisions that because of the concentration of semiconductor manufacturing ability in Taiwan and some of the supply chain challenges that we witnessed during COVID that we're starting to look more strategic in terms of what type of manufacturing capability do we want here in the United States and recognizing that the market is not doing that. And so for strategic considerations, we are starting to copy China and to make sure that some critical components. We have those distributed around the world in friendly countries and also here at home.

Indeed. Yeah. And like, let's see where that actually, you know, lands. You know, I remember during the Obama administration, there was some sort of subsidy around clean energy and a company failed, but companies fail. They're supposed to fail. That's the default setting is You're not supposed to make it, but the pace of innovation and the winners help to drive the industry. But how much appetite do we have in a democracy to say like, oh, look, the government is subsidizing and these companies are failing. It's failing. The whole policy is failing. Or is that really just the nature of this industrial policy or just, you know, trying to support an industry or even a new concept in general? So. Yeah, I think it's a step in the right direction just because there is this whole new world order and you can't purely let the market set the terms because it doesn't seem to be working. And this is way out of my swim lane and I'm going to, you know, only propose, you know, just some ideas and like what's actually happening. And I think it's important to have a page of like, this is what Korea did. And, you know, Korea is kind of like taking a page and it kind of like shows that they've kind of learned from China as well too, to set this kind of industrial policy. Like we have this very strong intention of growing these industries and, you know, that's worked. So what can be learned from that?

I think that those are really interesting questions. Essentially, what is the role of government? How large of a role should government play in the economy? We witnessed during the era of Reagan, of Thatcher, of Deng Xiaoping, a retreat of government and an advance of markets. Publications like The Economist would argue that that is the correct way to go, and that markets with many different decision makers competing against one another will lead to better outcomes than government elected officials or bureaucrats. Making decisions over the long term. Perhaps that's correct, but, you know, we do have to acknowledge that our leading competitor in the world doesn't function that way, and they've been incredibly successful over the last 40 years. One of my favorite books about China is written by Jonathan Spence, a history professor at Yale, originally from the UK. Who I had a chance to meet once in Shanghai and really, really enjoyed. But his book that I liked was To Change China. And it told the stories of Westerners from the early missionaries through the traders, through the economic folks coming later, people going to China with the effort to change that country.

And how did that work out for them, Greg?

You know the punchline, you know, it's always China that's changing them. And some people would argue that the policy of engagement that we had during 8 presidential administrations, welcoming China into the world, allowing China to join the WTO with perhaps some naive hopes that the political system would evolve to be friendlier from our perspective, some people would argue that that policy of engagement was incorrect and that we should have been combative with China from the beginning and that we contributed to the creation and the development of what is now shaping up to potentially be a new adversary for the United States. I don't think engagement was wrong. I think that it was the right policy. And at the end of the day, looking at it from a humanitarian-wide perspective, you know, the lifting of 800 million people out of poverty is a global good. We do have a new adversary, but at the same point in time, the United States and China, neither one of us are going anywhere. We have to figure out how to coexist. You know, the state of the relationship today is depressing, but whenever I look at things that depress me, I try to look for some Historical precedent, and sometimes that makes me feel a little bit better. So you know when I look at the polarization in American politics, I think well, it's not as bad as the Civil War. If I look at the war in Ukraine, well, that's not as bad as the guns of August in 1914 or storming the beaches of Normandy on June 6th, 1944. And when I look at the current state of the relationship between the United States and China, the natural— perhaps it's lazy— historical precedent that we would look to is the first Cold War with the Soviet Union. And we have so many advantages in this relationship that didn't exist in that relationship. And one of the biggest ones is Chimerica. We have grown together and grown to be reliant on one another in the economic realm. And that makes it incredibly expensive to everybody to have conflict. We are, you know, decoupling is now called de-risking, and there will be strategic decisions where each country cannot rely on the other, where we'll have to have some of that pulling apart. But I am, I'm very hopeful that we can limit the economic damage that happens as we strategically realign. And the other point on it is beyond economics, it's the people-to-people exchanges. Back during the first Cold War, Russia-to-United States exchanges were very limited. But today, look at how many Chinese students are on American campuses, even in the Cold War, even in the COVID period. And look at the number of people who are going back and forth. And so, I think that one of the constraining factors that we can have is post-COVID to get those people-to-people exchanges up and running again, and try to make sure that each side has as much information about the other as possible.

Beautifully well said. Wonderful. That was as advertised. Ladies and gentlemen, Greg Pilarowski. Wonderful, redonkulously quotable. Thank you very much and all the best to you.

Thank you, Rich. It's been a pleasure talking with you.

Continued. That's a wrap. Thanks for listening to this episode of The Rich Robinson Show, Season 1, at the speed of China. Visit therichrobinson.com/show to smash that subscribe button. Please also go to iTunes or whatever platform of choice, rate and comment. And until next time, thank you very much. Zaijian. Cheers, y'all.