How China's "hyper-competition" mentality contributes to the country's rapid economic growth

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 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, and thought leaders. It will help you unlock actionable insights around the Asia region and the entrepreneurial agility that actually defines it. This first season, season one 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 one, 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!

Showtime!

It's showtime. Look at that.

And we're back. Rocky Lee, ladies and gentlemen. Hello, my old friend, and welcome. Welcome to the pod.

Well, thank you, Rich, for having me. It's great. Technology has moved quite a bit. We're not even in the same place.

Indeed. Yeah. We're using the Riverside platform. As I spoke about Israeli founders and Alexis Ohanian, the founder of Reddit and Mr. Serena Williams, as he likes to be called, threw $9.5 million into this platform and we're recording asynchronously and automagically sewn together in the cloud.

Pretty awesome.

So yeah. So thanks so much for taking time to be on the pod. You came and spoke to my class. At Peking University at Guanghua MBA International Program.

Oh, was that pre-COVID? That was a long time ago. No, that was COVID. That was during COVID That was COVID.

You did it remote control and you held court and it was terrific. The students absolutely loved it because before we get into your origin story, I just want to set the tone that people often talk about during the gold rush, you want to be selling picks and shovels, but even better, If you're in the gold rush is to be that guy working inside, selling all the deeds and doing all of the legal work. How about that guy? Nobody talks about that guy during the gold rush, right? That's an even better job. You don't have to move around any picks and shovels and you're like a white collar worker during the gold rush.

Yeah. I'm the desk guy. That's what it is.

You're the desk guy, but you're the desk guy meeting all of the people that are just hitting it really big. And then they're like, okay, now I need more legal help. So we're going to dig deep into your Incredible catbird seat, front row at the show, legal lawyering up during the whole crazy, you know, tech boom in China. But before we do, let's go back to the origin story of Rocky Li, born and raised, and how you ended up being a lawyer in China.

Well, you know what, like most people, China was not on the map. So depending on when you arrived in China, I think Rich, you and I arrived At a time when China was not really in the Wall Street Journal all the time. No one really knew where we're going. That's right. They're like, what are they doing, right? So I went to China in 2001, right around that time. I want to say it was November. When you go to China and you get that stamp, you know, that's like the sort of mark as when you arrived and you're an expat. Remember hanging out at the Tree or the different pizza parlors? Because there's only a few that you can get Western food. And we talk about when you got your stamp as to when you arrived, right? We count how many days, months, or how many years.

Remember, Kaiser predates me, so we can reminisce that Kaiser's on the pod tomorrow, actually. So yeah, I'm getting the band together.

Oh, look at that! Kaiser Kuo. This is the original early crew because prior to that, I don't think there were any pizza parlors. That's really hard to guess stuff. So I arrived really for a legal assignment, and it had to do with the Olympics, and it showed me Beijing in a very unusual way. In this sense, I went straight to the inner circle of Beijing, which was to basically handle construction and construction finance. For the Olympics, at that time Beijing just—it was such a mystery, right? We don't know if Bank of China had money. They're not public; they're mysterious. People don't know how China is going to pay for this really expensive Olympics project. Really expensive. It was in the billions. But you know, now today we look at that was a rounding error. Long story short, I went straight to the diplomatic compound. I stayed there for quite a bit, met a lot of folks, had these really, really big. Banquets shook hands with a lot of people who were really, I assume, very high up. It was really fascinating because as a sort of a foreigner and with mediocre Mandarin at best, I found it fascinating because I've never been to China and it was just so different.

But despite your name Rocky Lee, you don't even have the China tie, right?

Yeah, I don't have the China tie. I think you and I have known each other for too long. So I recollect the last time I hung out with you was at TechCrunch Beijing.

How long ago was that? That was when they brought out Steve Chan, the founder of YouTube, and They brought out Kevin Systrom, the founder of Instagram, when they were still only on iPhone. They didn't even have an Android version yet. And we're singing karaoke together. Instagram was like the connection from Silicon Valley to China. And it was kind of a big deal. But I think you and I have known each other long enough that it got to the point where it's like, yeah, maybe I heard your origin story, you know, 20 years ago, but I'd forgotten it or something. Right. And you have so many legendary stories about you. The first time I read about you, we'll get into that, was at The Red Herring magazine.

The Red Herring. Oh my goodness. How long ago was that?

Yeah. Back in the dot-com boom. And Kaiser had written that article about you. And then I was like, oh my God, I gotta meet that guy.

This is kind of trying to destroy my career.

It was great. It was like you were right in the thick of it during the dot-com boom doing deals.

Yeah. Red Herring. Does Red Herring even exist in the US anymore? It does not, right? I think it's gone, right?

I don't think so. I think it blew up along with a lot of dot-com companies, but you do have the Chinese heritage and you studied at UCLA and Berkeley. So you made your Chinese family extra proud and then became a kick-ass lawyer. So even extra proud. So tell me about your view of China or like growing up, like, was there any aspiration? Like, I got to get back to the homeland or was it more like, you know?

No, no. I wish it was some kind of cool story like that. It wasn't, it was just work. I showed up and I was fascinated by what was going on in China because My sense of it was so different. My sense of China was sort of what I saw on TV, National Geographic, a bunch of folks in green and gray and brown and black, folks in suits. It felt very different. But when I arrived, I was like, oh wait, they have skyscrapers. They have stuff that, you know, I didn't know existed. And at that time in Beijing, it was very ceremonial. If you could recall in the old days, there was a lot of sort of pageantry, ceremonial sort of things going on. And, you know, it was fascinating. And what I noticed was that there was sort of this very, very early emergence of tech. I'm going to call this sort of like almost a seed still in the pod. And you can kind of see that there are folks talking about the internet, talking about computers. And, you know, I'm just going, oh, I'm from California. I was in the Valley. Yeah. Yeah. I kind of know something about internet. I know what that is. I know a bit about venture capital. And as a lawyer, I was in California doing venture-related legal financings. So I was at a firm called Pillsbury Shaw Pittman now, but you know, at that time I was in a corporate tech group. So we were doing sort of media, you know, dot-com going back. When you're in LA or if you're in Southern California, there was a lot of media deals, digital deals. Northern California was more software, hardware. And these were all sort of really interesting things that were happening in the US, but I didn't think there would be any of that in China. And when I showed up, there was definitely some tech and the tech was sort of just starting to emerge. You have folks talking about how the internet is going to change the world. But of course, China is also very different. China, we thought of it as a content regime, right? This is not where you go and say whatever you want. You know, what does this mean for the internet? And almost everything that we saw was sort of restricted. You know, foreigners couldn't really own things outright. You have maybe minority ownership. Some things you can own majority. So it was a bunch of legal quagmire, right? People didn't know how to do deals. People didn't know how to invest. The US dollar didn't really flow in. Remember, we have to still change currency, 8.33. That was the rate. Get a stamp and you get to sort of swap out your currency, the green for the red and red back to the green, right? So all of that, right? But today, you know, if I fast forward, I don't think they use stamps anymore. I think everything is a QR code, right? You scan, you're done, right? And that's what's happened in the last 20 years. And I think in many ways, China has leapfrogged the US in some aspects, right, in terms of consumer internet, mobile adoption, mobile-first, mobile for sort of services that were really sort of brick-and-mortar services, right, this O2O model that really came out of China. So I've been very fortunate in front of the front, you know, let's call it the passenger seat, because I think there are a lot of folks who are in the driver's seat. I get to see where people are going, what people are doing, how people think about things. So that's been really fascinating. I've been very fortunate. And I think when I was talking to your class, we talked about sort of some of the beginning of deals. How do we do deals? How is this so different when we look at deals in China versus in the US or elsewhere? And it is quite different. And when I'm in the US, I look at deals sort of happening and indeed it's 2 very large ecosystems, somewhat independent. Because the 2 markets are very different, right? So lots of cool stuff. You know, I love to sort of tell you all about this sort of historical, you know, what I did in the past, but I leave it to you.

No, I think that's great. I would love to hear, because not only are there 2 systems, but there's really 2 Chinas in a way too, right? It's been the thesis of my book is that it's kind of a 4 to 1 ratio. 4 years in the West is now a year in China. So 20 years, a generation is like a half decade. And things are evolving so quickly and there's such a rapidly spinning flywheel here that the whole pace and pulse is just at a completely different level than the West. But that certainly was not the case 20 years ago when you first came, right? I mean, things were slower in some ways, perhaps faster in a few others. But yeah, please do share some anecdotes of the early days, like the zips from like '01 until, you know, 2010, like what the— Ecosystem was like then and how it's evolved.

Yeah, so I mean, you know, when I look at what's today in China, you have Sequoia China, you have Hillhouse, you have big funds, you know, you have Qiming, Morningside, Matrix. You have almost every major U.S. brand of U.S. dollar fund investing in China and Greater China. When I first started, there were maybe a handful of funds. I can literally list them. I mean, SoftBank Asia Infrastructure, IDG. And you know, there's some funds from Taiwan, some funds from Japan, and that was it. And you can then begin to see sort of how this emerged. You have Neo Shen coming out with Sequoia China. Then you have the arrival of Kleiner Perkins. And I know the predecessor funds of Kleiner Perkins; it was called TDF Capital. Before that, it was called Venture TDF. So almost everyone in that ecosystem knew each other by name. We still know everyone by name. We used to sort of have a very small. Circle where we congregate and we look at opportunities in China. And I think everyone was developing their thesis. They were trying to figure out what does this mean, right? Is this consumer class going to really explode like people project? Is GDP going to continue to run up like a J-curve nonstop, right? There were a lot of these sort of assumptions. I remember debating with some really smart Goldman bankers. They were telling me, hey, in China in 2025, they're going to be the largest economy in the world. I was thinking, what are you talking about? It's 2021. 2001 and I see donkeys and mules on the street, like selling watermelon. What are you talking about? You know, it doesn't make any sense, right? But then there's some very smart people predicting that China's growth can be continued and that its development infrastructure and everything else and its investments in the right infrastructure, it's going to generate this flywheel of growth. And really, I don't think anybody expected the internet to be big. When we were looking at opportunities back in the early days, So you might remember Asia Info, Sina, Sohu, Tom.com even, right? Kongzhang.com. These are some of the early internet brands and nearly all of them are gone except for Baidu, right? But you can kind of then say that's the beginning, right? And then you have e-commerce. But for those of us who've been looking at deals, I've done so many deals, I can't even track all of them, hundreds of deals. And some of the more interesting things to see these waves of 1,000 Groupons, right?

I think there was maybe 7,000 at one point, right? If you want to just lump in Meituan somehow emerged, not unsurprisingly if you've met Wang Xin, but it's a pretty incredible just red ocean of competitors in China.

That's right. I mean, every one of these segments, you know, when we saw solar panel, dairy, every asset class, every type of business, there were always hyper competition. It wasn't just 5 competitors. You got to knock out 2. It was 5,000 competitors, right? 100 from each province, 40 in each city, right? It's just nuts, right? And the hyper-competition is one of the reasons why you see China's speed. It's because you have to move at that speed or you die, right? And I think that's actually sort of— you have entrepreneurs in China that are just very, very sort of hardworking, very disciplined, very focused because they know that if they're doing a startup, They're up against like 5,000 other ones, right? It's not like in the US where, oh, let's worry about the top 3 because they receive funding. In China, it's like 100 receive funding. Let's figure out how do we survive, right? Super different experience. So brutally competitive.

Brutally competitive. Yeah. Like I had Alvin Seh from Xiaomi on the pod, you know, he runs Xiaomi for Indonesia and he's like, we compete against Chinese brands in Indonesia. And I think that's becoming more the case, right? Where you're a Chinese company abroad, but you're like, I can't give time and effort to the local competition. I have to worry about the competition back home that's competing locally here with me. Right. And I think that's part of like the purpose of the books. People like understand, like things are moving really quickly and it's like, well, I may not even want to go to China. It's like, it doesn't matter. China's coming to you and it's bringing this kind of peace and pulse. And this is what you can learn from it. And this is how you can best compete against it. Right.

Kind of like a Sputnik moment. Yep, that's right. And I think the capital base is now very diverse in China as well. Back in the days when we were doing deals, it was only US dollars. So today you have RMB as a local currency. You have not only the local currency, you have US dollars and global US dollars coming in. You have really, really big funds that have billions under management, right? And you have sort of super early-stage funds that are coming in doing You know, fifty thousand dollar checks on sort of pre angel pre seed, right? And it's so diverse in China now that you will see that in every major tier one city. You can see that in Shenzhen. You can see that in Hangzhou. You can see that Shanghai, Beijing, and you might even see that in Suzhou. It's just sort of going gangbusters, right? And you also will see that a lot of folks are willing to roll up their sleeves and do the startup thing because it's also. Concept or a trend, even a movement that is generally seen as an honorable thing to do to build your own business, right? Because I think in China, you'll hear that, hey, it's good to be an entrepreneur, right? It's not seen as, oh, you couldn't get a job at a bank or you couldn't get a job doing this and that, right? It's promoted. Certainly.

Yeah. I think it's some other Asian cultures, Korea, Japan, maybe even some of like Singapore as well too, right? GDP per capita is higher than the US and You know, people are enticed to take the safer route, right? And society may not support it, but in China, yes. And there's such this kind of cultural sort of DNA, right? To not just glorious to be rich, right? But it's also great to start your own thing, right? And that's why I love China. The view in the West is copycat culture. That's still something that people believe, right? And that, you know. Big Brother plays a looming role. And like, you know, both of those have been true and can be true in some ways. But the true 2 things that, you know, I've lived and breathed, and I know you have as well too, is that it's incredibly competitive, like you said, and that it's incredibly innovative as well too. And those are really what informs what's happening on the ground in China at such a lightning pace.

That's right, Rich. And I think this copycat sort of finger pointing, I think it's kind of come the other way around, right? I think share bikes, that's a China concept, right? That's In the U.S., right? Food delivery DoorDash—that's like a May one, right? It's just a few years late. I think the last time we saw China taking a big concept from the U.S. was really the rideshare Uber. And if you kind of look at what's happening today, I would say that Instagram is probably looking at WeChat for inspiration, probably looking at TikTok for inspiration, and social commerce direct to consumer, right? The D to C category China is really strong on that. The influencer KOL category, China is way ahead. Super app way ahead. So all of these concepts are really China concepts. And I think what people have not figured out in the US is that, and I dabble in investing, so I see this stuff too. There's a fundamental misunderstanding of how mobile-first works because I think so many products and innovation in US are still PC legacy. Let's see, transitioning to mobile, right? And that's the part where I think people just don't understand. How do you get to the super app? How do you get to this type of build around this technology? It doesn't make any sense. Why are you spending so much money? Why are you sort of building it this way? Why does your team look at this metric? I think that China is going to be probably the source of innovation as well as maybe some of the inspiration. For anybody in the U.S. that is going to tackle mobile, right? I think U.S. is just at the tip of the iceberg in terms of what mobile can do. Because if you look at China, I remember I debated with somebody that, hey, I don't think the grannies were ever on a mobile device in China. I think you're not thinking about this correctly. I remember telling a VC this. We were debating this. He said, no, no, no, no, grandma and grandpa is going to get on the mobile. I was like, no, I just don't see that. They can't even see through the bifocal. How are they going to touch this stuff? Right. Sure enough, right? Every grandma, grandpa is on Pinduoduo, right? Everyone's looking for that discount on the mobile. They don't have PC. They've never even used the PC. They probably never even had a landline and they're on their mobile phone, right?

They're getting a deal on Pinduoduo. I remember my ex-Chinese wife, you know, I'm still very close to my Chinese family and my ex-mother-in-law who I love, right? I see her going to, you know, Jialufu or somewhere to get a deal in line. Don't ever get in front of a Chinese grandma that's on their way to get a deal. Right. And like, it's pragmatism because it's so practical. Like, oh, this works. Then give it to me. I'll figure it out. Right. And I think that's a great point about PC legacy. I think sometimes people conflate, oh, well, you know what? Chinese do things in a different way. Like there's a different aesthetic and UX/UI and like, yeah, okay. That's partially true. But also like they've completely abandoned the PC legacy and said, let's do mobile first because it makes the most sense. And I think in the West, people still haven't embraced that. There's still this like sunk cost fallacy and this sort of mindset around it. And it's not the most practical and it's not really what's going to work. Right. So I think conflating those 2 different things holds people back. I don't even think Zuck saw that. Right.

Yeah. To their defense, maybe the timing has to be right. Right? But we also know that in China, if you build it, they'll come. That's the other sort of logic, right? I remember being in China looking at like, what are you going to do with all these office buildings and apartments? They all look empty to me in Beijing, right? And then somebody told me, oh, it's because the Olympics is coming. I'm like, how does that make any sense, right? And sure enough, Beijing, like everything is filled, right? You can't get an apartment. You can't even buy an apartment, right? They were able to predict supply and demand. Right. And with mobile, it's very much the same thing, which is that, hey, you know, if you build it, if it's a good service, it's a good product, people are going to use it. You shouldn't have to worry about whether somebody will prefer a PC or mobile. If it's a really good product on the mobile, people aren't going to go to PC. You know, people are just going to go straight to mobile. Right. And there were lots of really cool ideas in China where for me, I'm like, how are you going to do this on mobile? I just don't get it. Why would you ever want to do an Excel spreadsheet on mobile? Are you nuts? Right. That's just ludicrous. Right. And then I saw the product. I don't know if you saw, but you know, TikTok has an arm that's doing sort of this enterprise Excel work, right?

Yes.

The email replacement.

Yeah. And also their Slack. I mean, they're sort of like Slack that they used internally, right?

They have Lark, right? They have all the stuff, right? It's mind-blowing. When I saw that, I was like, wait, this is intuitive. I might prefer using this to do my Excel. Like that's the sort of mind-blowing moment. It's like, wait, I'm not a good Excel guy. So I don't have any of that baggage where I need to have that fancy shortcut on Excel. I don't need that, but this Excel works, right? So it's really interesting what's happened. And I remember there's a company that does mobile PowerPoints, right? I was thinking, why would you ever want to do that? I don't want to ever look at a PowerPoint or do a PowerPoint. or do anything to do with PowerPoint on a mobile device, but it turns out it works great. So it's really about having the right design thinking and also the UI/UX that's going to allow the business to attract the user to want to use this because it's convenient. It's super convenient, right? And if you think about what's going to happen in the next 5 to 10 years, my guess is that you're going to have China mobile business models being looked at by everyone in the People have to do it because that's where it's headed, right? I believe that US will be mobile first for anybody who's born after 2000 or 2010. I'm guessing that they're not gonna use a PC. I'm guessing that they're gonna be super comfortable on a mobile device, swiping left and right or on a pad. They're not gonna prefer a keyboard. They're not gonna prefer a mouse.

Sure.

And that's coming. That's in the next 5, 10 years.

Yeah. And that, that whole AR/VR paradigm shift too, right? I mean, it's next year, it's 15 years since the iPhone came out and that's when everybody was like, come on, people at Nokia and Microsoft, like this bullshit device, little toy with no keyboard. Right. And then it revolutionizes planet Earth. But you know, like that can't last forever. Like there is going to be some sort of paradigm shift, right? It's going to be some sort of hybrid of like something mobile and something AR/VR that's going to completely shift. And then I think you're right. It's going to. You know, it's already started to shift where people are not only just copying from China, but being really influenced. And here in Southeast Asia, almost all of the VC historically has come from Silicon Valley, you know, and then some local funds as well too, similar to China. But now a lot of the ideas, like it makes so much more sense to look at a roadmap from Beijing, Shanghai, Shenzhen than it does from Silicon Valley in a lot of ways.

Yeah, I agree with that. I looked at funds. Covering Southeast Asia. Like I said, I invest, I'm an LP to funds that look at Southeast Asia. I would tell you right now that if you talk to any entrepreneur in Southeast Asia, you ask them, where are you getting your inspirations from? They're China. Why aren't you looking to the US? They're not mobile first. Okay, I see, that makes sense. And then they talk about the architecture, the user experience, UI/UX, and the logic. And, you know, entrepreneurs are building for the mobile experience, they understand that This is just entirely different. It's better to get a roadmap from China than to look at something in the US because the US, their users are still tied to some legacy sort of habits, right? And for me looking at opportunities, and I guess I can talk about what I'm looking at. I've been looking at a lot of investing, right? A lot of investing is cool too.

If I can interrupt you, you've been really humble about like, oh, I didn't see that. I didn't see that. I didn't see that. But you've seen, you know, and I think VC is a game of regret, but you've seen and made choices on a lot of really good stuff too. So I think it's okay to encourage you to Maybe put aside some of your humility, which I really like about you, but like let it rip and tell us some of the stuff you're really pumped about.

No, I love telling you about all the disasters. I love telling you about all the times I thought I was going to hit it big and I was wrong, right? I can tell you firsthand that having invested in this entire Groupon frenzy, then I understood what it meant to have sort of capital raising pressure. I remember going to a company that was sort of seed angel went in. 3 months later, Series A, 4 months later, Series B, and then 5 months later, Series C. I was still holding onto my pro rata, trying to hope that, oh, you know what, this is the one. But no, no, no, you really have to be sort of the one to be able to make it in China, right? It's very hard. That was one of my biggest disastrous investments ever. It's like wiped out in like, you know, in a year and a half gone, right? It was a big number. And I thought, wow, you know what? That pro rata could be a really bad thing to you when you try to keep your percentage because you're just going to go down with the ship. And there were big funds in there too, right?

You could have taken money off the table on the way, right? Sold some of that.

No, no, no, no. It was so fast. There's no way you could have reacted. It was like a falling knife. There's no way. I can also tell you from that experience, that's also why I've been very fortunate. I sat across the table from Weinstein because we're trying to combine the business because this is where you get sort of Firsthand insight as to what's the sort of competitor thinking. You know, here's one CEO, another CEO, 2 founders in a cutthroat business and group buying. How are they thinking about this? Right. And are they seeing eye to eye? Do they see that they have to merge in order to not die? Right. So it's really, really interesting. I was in a war room sort of for a month trying to see how do we salvage this business? Right.

And he's an extraordinary entrepreneur. Like he really is like one in a million is insulting because that means there's 1,400 people like him. He's like 1 in 100 million, right?

Yeah. I can tell you that the conviction that he had on what to do and what not to do was absolute. But interesting thing is that the CEO at AIPAC was also very absolute. That's why they couldn't merge. But one had to be right, one had to be wrong. And it was literally binary, right? It's so interesting. And then some of these war stories, and they're also sort of big wins too, right? So for me, The funny thing about investing is that I don't think there's any aspect of investing for me. I don't think it's tied to any skill. I think it's tied to basically probably luck and the best moment in time. Who do you know? Who did you talk to? Did you have the right conviction? Did you see the signals?

No, but I think the skill is pattern recognition and there is network. I think that makes a big difference, like deal access and pattern recognition. Like somebody like Robin Chan. He's like filtered so many people through his skills. He's like, I got pattern and I got access. Right. So I think the skill is more around that than it is any sort of like spreadsheeting or being like a finance jockey. I think it's much more like a little bit of gut, like knowing the person, right?

Yeah. I think knowing the entrepreneur and how he or she thinks about issues is key. There are a few traits that you'll want in a founder, and these are not typical traits. And when you find them, you got to hold on to them like that. Those are the right traits, right? And the right combination of traits help them succeed. And we can dive into that. But I think today is really about talking about sort of what you're describing, which is sort of this: what's going to happen when China takes the competition to you, right? You said it exactly right. I think that you're going to see China manufacturing direct-to-consumer. Being the next wave. I think you're gonna see that. I would even question the viability of Amazon. I probably shouldn't say that, but I would dare to say that direct-to-consumer, if it's big enough, it would challenge traditional platforms because you can have influencers sell, you know, sunglasses. You can go find sunglasses maybe on Amazon or somewhere else. You can find it on an online store, but the idea is that the influencer has the ability to actually Peddle goods. If the supply chain is efficient enough, you can actually have influencers or KOLs sell direct. And that's what we're seeing in China, right?

But fascinating you say that though, because think about this, like we were talking about in a previous podcast about all of the telecom, you know, telecom companies, right? And they were the monsters. They were unassailable and they did all the gatekeeping when it came to mobile content. You want to put your game in the deck, you come to us. And then what have they been relegated to now? They've been relegated to dumb pipes. Because do you really need to go to the operator's deck to discover stuff? Like, absolutely not, right? The power went to, you know, iPhone and to—

well, in China, it was really Tencent that rewrote the books, right? It was QQ. That was really the reason why, right? You were able to find the games. You didn't have to be on Monternet. Remember Monternet on China Mobile? That's where you had to go. That was the deck. That's right. Yeah, pay a little bit of money, right? That's right. Premium subscriber, you get Monternet. And, you know, on the Symbian phones, you trying to figure out what you can get. And then all of a sudden internet just kind of, and Tencent kind of wiped that out because QQ made, you know, such an inroad into sort of the way we think about communication. And you can kind of see WeChat is gonna, I don't know when's the last time you used a mobile phone to dial the digits or did you pick up WeChat and call, right? Think about that, Rich.

That's right. That was a big change where a friend called me, I remember in 2019 before I Came down here to Bali on the phone and I was like, hey buddy, is everything okay? What's going on? He's like, are you okay? And he's like, no, everything's cool. I've just given you a call. And I'm like, giving me a call out of the blue? What's the matter with you? It's like you send a message first or you call me from WeChat. And he's like, dude, I've known you since 1996. I've always had your phone number. And I was like, man, you scared me there for a second. You know what I mean? Like how quickly the turntables turntable, right?

Yeah.

But then you think about somebody like Amazon, like they have an incredible distribution, you know, system and like, could they get relegated? Could they become a kind of a dumb pipe in a way where it's just really all about distribution because people are disintermediating them to be able to find things and discover things, right? And like pay for things. Like, is that possible? Right? Like, who knows who can, like JD, if you look at JD, I remember meeting them and they're like, we do basically kind of like logistics or fulfillment as a service, because we don't know what's going to happen in the future. Whereas of course, Alibaba, their platforms are different. It's like, maybe that is just what becomes, you know, the play in the future. Like who knows? Right. But then, you know, there's so many more billions of people that are coming online and that are going to, of course, be using e-commerce. Like who's going to mop those up? Yeah. You know, and that's the real battle.

I think you're absolutely right. I think the folks in China are already dealing with this sort of future problem that I guess some of the Amazons in the US, which doesn't matter which country they're in, they have to compete on this, right? Because direct-to-consumer means that there's going to be niche brands, there's going to be really cool stuff, and it's going to sort of become sort of the it, right? Just like in China, we saw that, you know, people aren't going to buy Gap, right? Nothing wrong with Gap per se, but just that, hey, that's like mass consumer, and there's niche brands. You could buy the same t-shirt somewhere else, right? And you have these sort of in a call the one home brands, right? So yeah, that's exactly what's happening. The influencers are navigating consumers to something different and consumers don't mind it. And if fulfillment is being equal, if fulfillment Amazon and fulfillment somewhere else are identical, you're going to expect, you know, yeah, you just don't care.

Yeah. I don't care. Like how, how are you getting your data right now? Or how am I getting my internet access? Like I literally don't care. I just want it to arrive. Right. And then when you have like AR, VR, and blockchain for payments in the future and everything becomes so, you know, just fluid and, you know, frictionless.

So I'm going to tell you something, which is that in the US, with the exception of maybe Uber, but not really, you haven't really seen any mobile product or service that alter traditional behavior. I'm going to give you an example of that, right? WeChat altered your Calling on the phone behavior, right? You just don't dial the digits anymore, right? You just WeChat. And the other, yeah, the payment, right? The payment's a big one. Anytime you know there's a mobile product or service that's altering traditional consumer behavior engagement, that's a winner. That's kind of how you should think about it. And I haven't really seen too many of these in the US except for Robinhood, where you're not trading maybe on your desk. Because you know those big terminals, we've all seen those right from the Wall Street movies where you got to have two terminals and you're trading. But a lot of these folks are just trading on their mobile phone, and that's okay, right? And that's actually a different engagement. And you can also look at sort of how in China, remember the days when we all had a business card? Like if you didn't have a business card, it's like what are you doing? Like you did you forgot your shirt almost, right? You came out naked. You didn't have a business card. What are you doing, right? Today. I don't think anybody trades business cards anymore, right? It's a WeChat, right?

It's completely altered. Isn't that crazy? And especially in China, people are like, oh, you're going to China. You need 2 boxes of business cards because that's like 2-handed and like, oh, you know, China, Korea, Japan. Like it's just ridiculous if you don't do that. Right. And now it's like, poof. It's a WeChat, right?

It's a WeChat. Let me sort of get your, you know, scan. Right. So it's all right. Oh, you scan me or I scan you. Right. That's always the question, right? The polite thing is do. Okay, I scan you, right? So it's really interesting, right? If you look at that engagement, that behavior, WeChat completely destroyed the business card business. It's like it's gone, right? And I haven't seen anything in the US that has that kind of sort of, hey, we're so mobile first, we're so good that we're just gonna alter your behavior. And not only yours, but the guy next to you and the lady next to you. And all of you guys are gonna do it this way. Right? We haven't seen that yet. And I think part of that is because there's been no super app in the US, right? We haven't seen that. And, you know, then people kind of talk about it, oh, is super app too hard? You know, US is about one single feature MVP. That's the wedge in, you know, that's how we want to build to scale, but that's actually not how it works because anybody who's been around mobile apps in China would know that no, people don't monetize every engagement. It's a few engagements and then the rest is free, right? I don't think you need to charge money or pay money when you scan, right? So the key is that people don't understand that it's the sort of the core features plus all this free stuff that gives you utility and convenience that creates a super app, right? And people haven't figured that out yet.

Yeah, you're right. And I remember the first time I used Uber and just said, oh wow, you could see it coming and then like get in the car and then you just walk out. And I was like, oh my God, that's so Small things, but it was such a mind blower. Did you meet Travis when he first came to China?

Yeah, I met with him, but it wasn't for long. So Travis made the rounds, met a lot of folks.

Yeah, I met him when he first came out and felt like he was, you know, a guy that was going to make it work in China. Like he just had that incredible drive. And in fact, now DeeDee's going public, right? And you know, they put $2 billion into China, completely different entity, different fund, and it's probably going to translate into $8 billion, right? Which is a kind of like Yahoo taking all of their investment. its stake and putting it into Alibaba, right?

Uber sold their stake in Didi. You probably don't know this because I know this. I did the Didi deal, so I know the cat people very well. So just for the record, I think, you know, Didi and Uber didn't get along. As you know, you remember this, Uber China exited. Uber sold their positions. They left Southeast Asia. They left, they sold their Southeast Asia Grab and they sold their China.

And their Russia one as well too. Yeah. Yeah. Yeah.

That's right. And The company that partnered with Didi is actually Lyft. Probably didn't know this. John was out in China and there was a meeting and it's actually Lyft.

So now there is no ownership in Didi by Uber anymore? To my knowledge, no.

I didn't think there was. I mean, heck, I mean, it's been such a long time. I could be wrong, but I definitely recall it was Lyft. You know what?

No, I mean, but in any case, like it was not, you know, it was something that I even told Travis, but it wasn't like it was any revelation. It's just like, I don't know if you're allowed to win in China, right? Like, is the Chinese government going to let some, you know, U.S. company like dominate all of the transportation on the ground? I kind of doubt that, right? It's not that it's really sensitive, but I just didn't think that there was going to be, at a certain point you become too big and then you have to basically exit in a way, right? I think there's part of that, but I don't know. Was I overstating it, do you think?

I think they had a chance. I honestly can say that I felt that they had a chance because I mean, you remember Didi was just a really kind of a choppy app when we first saw it, right? I mean, there were a lot of issues.

Certainly, right? And there was 30, 30, 40 competitors or whatever, right? And it was just, you know, 10, 20 competitors.

Every local taxi company in every city and province had a competing app, right?

No, you're right. It was the first time and the only time that I was like, wow, there's an entrepreneur coming from Silicon Valley who is probably going to get traction in China, right? It was the very first time and not a gaming, not something that was online gaming that, you know, people had to play within the state of the game and they had no choice. And it was, you know, but I'm talking about somebody who was, you know, spinning so many plates and he actually spent a lot of time in China, Travis did, right? And he was like traveling here and really like being like putting a lot of time and energy and they raised a specific round just for that entity. And I was like, you know, I said, I think you actually probably could pull it off. Because you already have so much traction and lead, but it's like, are they really, really going to be able to be allowed to do well? And like, I don't know, but in any case, what really happened was what's happened to everybody in coming to China is that competition just started heating up and then it became, you know, too distracting to do very well in China. You have to make a choice. Do I sell and, you know, try to have some upside? But, but actually I think it's a big win. I thought it was a big win for them in China, you know, considering what happened to most people. Do you have a different point of view?

I don't have a strong view either way. I think for Didi, what Didi had going For them was the fact that it was so competitive in China, right? You remember they actually merged. I don't know if you know this, but Didi merged with that's right, Kwai. So I did that transaction and merged the two, and and you know it was one of those things where I can carry that back in the Groupon days. It was also hyper competition. Had the company that I invested a bit of money in merged with Meituan, I suppose that would be sitting in a yacht inviting you to. Via helicopter. Come over, Rich. Let me have my helicopter pick you up.

Like you can fly your yacht and have the flag going straight back and then you can land while the yacht's moving. I prefer to land my helicopter when the yacht's anchored. I just want to let everybody know. I actually observed that conversation once between 2 investors in China. I'm not kidding.

So, you know, I think I definitely saw that I've been in front of the Groupon war. I've been in front of the sort of share buyback Ofo and Mobike, right? And Didi and also Huaidi, right?

So like, come on, how many goddamn transactions have you not done? Like, that's amazing. These are all like seminal, like, huge deals. I love it. I can't even keep track.

So the battle scars that we have from sort of seeing what happens when you have hypercompetition, someday I get to write a book about that, right? Yeah.

So I think that's actually, if I may, is that like, that's why there have been so many mergers because it's such a high price to pay. That you don't maybe see as many in the West that are like that because it's not as so hypercompetitive. And they're like, wait a second, like truce. We're covered in blood and sweat and tears.

Like we're killing ourselves. We got to stop, right? And that's the psychology, right? So I can tell you that in the Groupon battles, you know, Meituan came out as the literally lone survivor, right? And I think it's because his commitment to not having subsidy killed the business model. Was fundamental to his success. Lasha was just getting sucked away into the subsidy war and also sort of raising capital to fill the subsidy hole, right? And then you have sort of the DD quite— I think because Uber was so competitive, Travis played a strong hand, right? And because he was very good, the local guys merged. Once you have that, it was almost a forced merge, right? So once you have that merger, then you have this singularly strong DD, right? That's very hard to beat. Okay, so it had to do with the merger. But then you can also, you know, fast forward. Remember Mobike and Ofo, the orange bike and the yellow bike? And I did Hello Bike as well. So there were a thousand bike companies. I'm sure you've seen those photos of thousands of bikes laid to waste of different colors, right? Yeah, bicycle graveyards. So today Ofo's gone, right? There was an attempt to merge Mobike and Ofo as well, and this was one of those where You're kind of thinking, what does this mean when these two companies merge? Right? What does that mean for Meituan? What does that mean for Tencent? What does that mean for Alibaba? Right? Because everyone had a hand in this, right? Everyone was in this sector, and it was so competitive. But what you end up having is basically Tencent doing their own, right? And Didi doing their own, right? So the bikes that you see now are the Didi bikes and also the Tencent bikes, right? Or Meituan bikes. I'm sorry, I shouldn't say Tencent. Meituan bikes, right? Ofo's gone, Mobike's gone. And it really sort of, it tells you a couple things. It tells you that, hey, the big giants, right? If they want you to sort of go to zero, they can, right? That's the first sort of time we saw, okay, you know what? You don't have this too big to fail. Stop thinking that this too big to fail, that investors will bail you out. That doesn't work, right? Ofo was the time when we realized, okay, no one's ever too big to fail. To fail internet. So cross that out. The second one is that, hey, the BAT, and now you have Ant, right? So, and maybe I might even add, let's say Xiaomi and Pinduoduo, all the big internet players, and JD. If you add these big players in there, if they want to go into your space, you're a walking dead, right? That's the crazy thing, right? So, you know, and I think what we see with this hyper-competition in China, also with some of the big major internet companies that have the muscle and the capital to go walk into a space and say, I'll take it, just like grocery delivery, right? They'll just take it. And I think the playbook from China, which is subsidy first, right? You know, you get everyone hooked on the super cheap, or I can't believe the price, right? This is barely free. They're paying me to use the product, right? And then slowly sort of taking market share, and then very quickly sort of monetize, right? And they might even monetize on something else. The original product or service is still free, but they're monetizing you on somewhere else. And that model, I haven't seen any of that in the US yet, right? So I think it's coming. You know, I think someone's going to figure out that you don't need to actually subsidize. You subsidize to get the users in the door. And China is so used to sort of very highly competitive subsidy, right, where you bleed your competitor to death, right? You don't worry about how fast you bleed. You just look at it and say, "He's bleeding faster than me." I'm okay, right? So it's literally just nuts, right? How competitive it is. And I think Chinese tech companies will take that style of hyper competition to every market. You know, if you go to South America, you're going to see that. You can see that Indonesia, in Singapore, right? In Vietnam, in India. This hyper competitive sort of a approach to building business. I mean, we see that.

I was just talking to, you know, like Alvin from Xiaomi, like I said, and they were like, they were number 5 in Indonesia. And then he came in and he's like, we're going all in online. And, you know, likely they're number 1 now. Right. And that's a whole nother, they were, you know, reminds me of when I went to the Galápagos Islands. I was in Ecuador for a friend's wedding. And then you go to the Galápagos and it's like Dr. Dolittle. There's all these turtles and sea lions and birds and lizards. And they have no natural predators at all. And they come up to you and they eat out of your hands and penguins and they're swimming with you. Right. But you know, the turtles almost went extinct because people came in and took 300 turtles onto their big ships in the 1700s. And the turtles don't have to be fed or given any water and they can just cut them open and make turtle soup and then sell their shells. Right. And they almost decimated the place because it had no local competition that was really intense, right? No predators. And in some ways you see like some of these Chinese companies now going into these markets. And it's just kind of like the Galápagos in a way, right? There might be some predators, but the predators are going to eat those predators and then eat everything else as well too. Right. And it's fierce competition. So, wow, man, thanks for sharing. Tell me, you know, before we wrap up, like, just tell me some of the things that you've maybe invested in that you're really excited about these days.

Yeah. So I'd been investing and it's 2 passions, right? Sometimes the lawyers don't have a whole lot to do other than to sort of look at deals and so, or do real estate. So, you know, for a while I was doing a lot of real estate investing, but I've been doing a lot of seed and angel investing. And initially it was to take US concepts and to see if they'll work in China. And in the last 2 years, 3 years, it's been the inverse. What's working in China, let's see if it can work in the US. So I've been very fortunate to sort of, you know, See some companies and, you know, back some ideas. It's funny you mentioned Steve is one of the angel investors. So is some of the other folks, well-known, because I think— Steve from YouTube. So some of these ideas, for those of us who've been in China looking at them, we look at it and say, hey, if this works in the US, that's a home run, right? It's about seeding these ideas and these business models that we think can work in the US today. Right? Because there's also sort of, you know, being too far ahead of the curve, right? You don't want to sort of bring something over and say, oh, everyone's going to scan QR codes in the US. No, that's not going to happen. That's not going to happen for a while because they still have credit cards. We still have legacy credit cards, right? Before we go to the tap, let's first go from swipe to tap, from tap to scan. We're missing the tap, right? So, you know, you kind of have to think about what might work. So I've been sort of very busy with one of my passion projects to bring what is basically Ant Financial to the US. So I think that's cool. It's still very sort of hush-hush, but you know, I think that model can work in the US.

Well, we'll maybe talk a little bit because some people in this, you know, listening to this are inside baseball, know what's going on in China, but what is so interesting about Ant Financial for some people that don't know about it? Like talk about speed, like how quickly That has grown from a player that's absolutely really not a financial powerhouse, right? Or not the DNA anyway, right? Yeah.

You know what the power of Ant is really data, right? Imagine that you have all the data of Amazon. You know who's buying organic milk, who's buying this and who's buying that. You get a pretty good sense of who your consumers are. And if you ever want to peddle them a credit card, I would say that you know Amazon knows exactly who can pay back and who can't. Right. So Ant took advantage of the fact that they have all this consumer data, and they were giving credit to consumers. And many Chinese consumers, as you know, Rich, are underbanked, right? They don't have the ability to walk in a bank, or maybe they might have a bank. But you know what, going to the bank is not a happy thing to do, Rich, is to get that little number, wait in line, 40 minutes later, you get called up, and maybe they'll do your transaction. But Mobile has made it so that it's instantaneous, right? And people thought, you know, I never want to go back to a bank and wait in line again, right? Ant Financial gave a really interesting app, Yuebao, right? Leftover money. You probably know this one. That was the capital aggregation, right? They take that capital and they lend it out. They make a spread in the middle, right? Super awesome. If you have all the data in the world, and if you have access to all the consumers, very, very big business. And what people don't really fully understand is that this is a business that That's an alternative to the existing sort of capital framework that's in China, right? Because in China, you have a very, very established framework that is for sort of normal lending, right? Secure lending, unsecured lending. And frankly, Rich, unless you work for the state or the state-owned enterprise, you probably don't have good credit because your job is not reliable, right? Like we got to make sure you have your job, right? And anybody who's maybe a sort of independent contractor who's like an internet entrepreneur who works in software and tech, they're not getting the best deals, right? They're not getting the best loan terms. So what we know is that Ali had fantastic data on those people, right? And they know exactly how much they make. They know their affordability, right? And they also know that they're good, honest people, they'll pay back. So the short-term unsecured lending was what, right? And you see a lot of neobanks coming out of the US, right? So you have neobanks that basically go To a lot of folks and provide a service. But I think China-US is a little different in the sense that China had a massive savings, whereas US doesn't have that. And so that model doesn't port over perfectly, but there's a way to sort of solve for that. I won't talk about it here, but the idea is that there's actually an opportunity for the model to be used in the US because the data allows you to lend, right? And the same issues or same problems that consumers in China face are also faced by the US consumer. The China consumers is that they don't get high yield, right? They also don't get great banking experience. So going back to sort of waiting in line at a bank at a branch, that's not the best. Even if you have an app, you're not yielding, right? So it's not like the major banks are paying you a high yield unless you go into some sort of weird financial product. And they always try to peddle you some sort of financial product and you just don't want anything to do with it, right?

Yeah. With high hidden fees and, you know.

That's right. It's just, there's no transparency, right? Same thing here, right, in the US. So that's ripe for disruption on that type of a model, right? Anyway, so yeah, I think what we're going to continue to see is that the China models will come to the US and we're going to have a lot of fun trying to figure out what will work and what won't, right? It's going to be hit or miss. It's going to be sort of maybe 10 fails and 1 success, right?

Sure.

But the idea is that if it works, It should work better, right?

Well, yeah, you've reversed the flow of the river and you're now taking all of learning from China, those scabs and calluses and scar tissue like armor and going into battle in the U.S. market with knowledge from China, right? And I had Eric Rosenblum on the pod and, you know, he's part of the Tsinghua Fund that, you know, started with funding Eric and from Zoom, right? And there's so many Chinese entrepreneurs now that are also like leaving China and starting companies like see down in, you know, Singapore, Forrest, you know, Sam, the founder of Otterdot, and then so many others from China, right? So it's business models and Chinese entrepreneurs. So it's kind of reversing the tide. So fascinating to watch.

Well, wait for the D2C, direct to consumer. That's going to be big. You heard it here, folks. Wait for the influencer, the influencer KOL, that economy that's going to be big in the U.S. I I think that's just early days. And then, you know, I think case in point would be like Lime, right? Lime Bike was basically taking the scooter model to the US and realizing that, hey, you can't really have people in America on bicycles. It has to be electric. So they had to make a change, right? And that's why you have electric scooters that are shared, right? And the team is China, right? So they understand, they've seen it, right? So I guess we have the benefit of having seen some of the future. from China because that's the superpower we have, right? We've seen it. And when we first got to China, we had that same superpower, right? We know where China's headed.

Yeah. So, I mean, it's fascinating that even now, like maybe more so now, there's such a one-sided, non-nuanced view for the most part of China that it even obfuscates people's ability to really see clearly of like what's actually really happening, right? And like, That's the whole purpose of this book and this podcast, just kind of bring some of those things to the fore and let people realize that for fun and profit. Right. So, hey, Rocky. Wow. As advertised, Rocky Lee, ladies and gentlemen. Thanks so much for your time, my friend, and always a pleasure. And to be continued at another time.

Yeah. Thank you, Rich, for having me. And we got to wait for the next time we get on stage, right? I don't know when that's going to be, but hopefully we'll have another one of those.

Hopefully sooner rather than later. Thank you, my friend.

Yeah, yeah. All right, be good. All right, take care. Bye-bye.

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. Sixty percent of the world's population also lives here, but I would contend eighty percent 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 one, 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, Jiao!