Justin Mallen and China's ever-evolving telecommunications

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!

Justin Mallon, ladies and gentlemen, the mayor of Hangzhou, as I lovingly call him. He, for my money, is one of the best lawai foreign entrepreneurs. In the Middle Kingdom, 27 years now splitting his time twixt Hangzhou, the headquarters of Alibaba's there outside of Shanghai, and and the city of Shanghai. Welcome to the pod, Mr. Mallon.

Thanks, Rich. It's been a while. Hasn't it? It's been a while.

Great to see you.

I think last time we were in Beijing.

That's right indeed. We were at the Westin. I think you were you doing a business trip up there, and I think we were also interviewed. You and I and Bob Boyce, the founder of Cab and Blue Frog, which he. very well-deservedly sold for $40 million to a publicly listed company in Poland, his restaurant chain. And you and he and I were interviewed by CNBC about foreign entrepreneurship in China. And I always remember one thing that you said, which I co-opted, but I credit you, which is to do well in China, you don't necessarily have to understand Chinese. But you have to understand Chinese.

Yes.

And that's, that's coming from a guy who speaks Chinese just about as well as, you know, anybody that I know, including lawai and local. But it's really interesting is that, yeah, you really need to understand the sort of like Chinese, you know, mentality and where they stand and the nuances. And like, that's a, you know, we were discussing before we started the pod about how you and I have both spent our Entire careers in China, so sometimes it's a little difficult.

You know that old saw of like two young fish swimming in the water and an older fish swim by and he says, "Morning boys. Morning sir. How's the water today?" And they're like, "It's fine, sir." And then he swims away and they look at each other and go, "What's what's water?" Right? So when you're totally subsumed in it, but tell us here in podcast land myself just a little summary of like you know who you are and like what you're doing right now. And then I'd love to like. Peel back layer after layer after layer to go back to the origin.

Sure, sure, sure, sure. Absolutely. So, so as you, as you started off, I've been in China 27, 28 years now. And I started off in the garment trading business. So we were shipping off silk underwear to the rest of the world when that was a thing. But very early on got into the data center business. The sort of genesis of that idea was, you know, I'm originally from San Francisco and I had all these friends that were in dot-com land back in dot-com 1.0, I guess is what we're calling it now. And I was like, hey, this is this is interesting. I didn't get the concept of eyeballs. I wish I, but I did get the concept that they needed services. They needed servers. They needed hosting space. Exactly. Picks and shovels. So I was like, you know, let's see what's going on in China. And back then it was the telcos. In fact, back then it was the telco because there was only one telco, China Telecom back then. So went and checked out a couple of their data centers where servers were sitting on dusty floors and windows were wide open and cables were all over the place, and you could literally trip over cables. in these data.

I mean, it was for me, like, the entire province of, like, Hunan is, like, offline now because you weren't watching where you're going.

Not exactly. So, I mean, it was pretty scary. And for me, not having a technology or a telecom background, even I then knew I was like, something here to do. So, so we started, we started SRT Silk Road Telecommunications in 2000.

Wow.

And it turned out, for better or worse, that was way too early. You know, there were, the telcos were the telco yet again. Just the one, because Unicom I don't think came out until 2002, and I don't think Netcom came out till 2004 or 2005. China Mobile came out a little, a little bit around that time. And so we thought this was a great opportunity. The telcos had a different idea. They thought it was their business and we were going up against a monopoly that controlled all the bandwidth, you know. So the way to think about a data center is we're a virtual real estate company. We build office space and people put their servers or their Business into that, and the telcos provide the roads. So you know it was difficult because they didn't want to build roads for us; they didn't want to give us bandwidth. But you know we stuck with it, and and now we have.

Let's let's fast forward now. Like how many exactly? Like what's your? So now we have how many people, and then we'll go all back to the beginning.

Sure. So so so now we have three data centers: a couple in Hangzhou, one in Henan. We're working on a project in Shanghai. We support some great customers. We support Alibaba. We support Tencent. We support I T E. We support public. Public Security Bureau, a couple of banks, Duanan Air Conditioning Corporates and such like that.

Red chip companies, yeah.

Yeah.

We have a fa piao business customer in there. So people who get their fa piaos now all digital in China are actually coming out of our data center. And, you know, obviously we're looking to grow and expand the market similar to what we have done before. We like the idea of second-tier markets. We think Shanghai, Guangzhou, Beijing all tend to be overbuilt. And, you know, we think the growth really is coming down in these second-tier markets as we go forward.

Wow.

And there's so much to peel back about that 2-decade journey.

A little bit.

Let's go back to our humble hero's origin in the Northern California Bay of San Francisco.

Like, what was the jump from there to the Middle Kingdom?

I know you went to college in my home section of New England, but was there any, any calling beckoning to China earlier in your life?

So, so I think the idea really was that, you know, growing up in San Francisco, you know, I got to see and be a part of, of the Chinese community there. And so to me, I guess growing up, I think, you know, the first concept was San Francisco is a very international city. And, and—

Like, did you actually go to high school in the city?

I did.

I did.

Wow.

So, I mean, were there a bunch of Chinese kids in your class?

Was that like the neighborhood?

There still wasn't. But, you know, the city in and of itself was just very international. And, and the city itself being very international, you know, just meant that I gained an appreciation for what it meant to be living in an international world. And so very early on, what I wanted to do was something international. And then I guess the other piece of that puzzle simply was being in a city that was very Asian. Asia was where I wanted to be. And yet again, graduating high school in 1989 was an interesting time. And I saw what happened obviously on the news, you know, in Tiananmen. But to me, it really just sort of laid out this idea that China was coming, that China was coming. And so I just started learning Chinese history. I started learning about the culture, just additionally from what I had. Got into college, took Chinese language, took a year abroad, spent that year in China, had a fabulous time. And the only thing that just—

Where was that?

Beijing. Well, actually Beijing for 6 months, Taiwan for 9.

Ah, yeah, back then Taiwan was still a big place for language learning, right?

It was brilliant for language.

Pretty lovely.

It sort of showed Taiwan back then, showed what China could be. And so post-college, the, the thing, only thing I wanted to do was find a job that brought me to China, and I did.

Amazing. Yeah. Wow. So you decided at Bowdoin that you were going to study Chinese back then. And I think early '90s, like that was still— I graduated, I'm 4-year cycle ahead of you. So I graduated from college in '89 and '89, yeah, was this pivotal year, right? Apartheid fell, the wall fell in Berlin, but then Tiananmen Square happened. But also at that time, there was still like afterglow of Japan because Japan, it was— had such heady days in the '80s that people were still not People might've still been a little bit interested in Japan, or maybe the entire luster was lost across all of Asia because of, you know, Japan. So did you find other students or that were also like keenly interested, or was it still kind of like unusual? And what was your class made up of?

The Chinese class had— the year 1 had maybe 12 students. The last year I took Chinese, actually, I only had 2 years of Chinese in college. I don't think they offered a They did not offer a Chinese class, advanced Chinese or senior level Chinese when I went back. They had 2 years and that was it. Year 1 was 12. I think year 2 whittled down to 6. And same thing, it was just people were curious, but you know, I definitely was an outlier. There's no question. And you growing up in Massachusetts within a 4-year cycle of that, you could probably understand what it was like back then to be a white kid going, hey, I want to learn Chinese. Like, what the fuck's wrong with you? Are we allowed to use colorful language?

Let it rip.

Let it. Oh, now you're in trouble.

Grandmother being from Boston, my grandmother straight from Ireland, and you know, she would, when I was doing stand-up comedy stuff, she's like, Richard, if you have to swear and curse to be funny, then you're just a fucking gobshite.

No, she didn't say that.

She was, she was lovely. But I love telling that joke in an Irish accent and saying fucking gobshite. But yeah, very interesting because like, how was your experience studying Chinese in like, did you feel like you had a, like an acumen for it? Because absolutely, really, because, because I look at you as somebody who is just so smooth and comfortable in the language in a way that's like, it's really different from a lot of other people because you really like at all levels, socially, business, and pop culture and other stuff, like you, you have this like fluidity that is great. And I think, you know, probably that's a lot to do with the fact that you were in Hangzhou, you know, where you were just immersed for decades.

So 2 years of college Chinese, I'll tell a story. I had a full year of college my freshman year. I had a full year of college Chinese and I decided to further enhance my understanding and language and culture and actually managed to get a summer program in Taiwan. So hopped on a plane, went to Taiwan, got off the plane and realized I couldn't speak a lick of Chinese. And I'm sitting here going, well, maybe it's the Beijing accent versus the Taiwan accent, or maybe it's this. No, it was just— it was all me.

Mm-hmm.

It had nothing to do with anybody else. It was all me. And then I realized that the best way for me to learn the language was to actually live in a place where you had to use the language. I remember You know, first day at the school, getting into an elevator and you know getting to my floor and being blocked by someone. And I didn't know how to say you know. I was like, "Bu how is?" Oh no, I was like, "That's not right. Wait, hold on." So so to me, the language definitely you need the the classwork, but you need to be in real life situations. Now that said, the second time I went back to Taiwan for my junior year abroad, and I guess this is fair enough to share. Same thing. I had done a pass fail program for my school. That's all I needed. And and week one. of the program, they said, if you miss more than 3 classes, we will fail you. By week 2, I'd missed 6. So that wasn't good. I did manage to show up for all the tests. And at the tail end of the program, of which I probably went to 15% of my classes, but I did take all the tests. Teacher comes back to me and she goes, I don't know what to do with you. I'm like, yeah, I'm sorry. Listen, just gimme a D, anything to just get me a passing grade. You know, I'm really sorry. She's like, no, no, no. The problem is you showed up for all the tests and you got the best score out of the class. And if I fail you, that won't look good on me. I'm like, just give me whatever, give me whatever. So I got straight Bs for never going to school.

That's funny. Wow.

But you—

And then that just goes into how—

You really worked it socially. Exactly.

You know, socially you learn the language. To me, it just started, you know, making sense. You had the foundation, you get the grammar in place, you get the, you know, the core keywords. But Chinese as a language continues to evolve. You know, right now, obviously in China, you need to keep up with the internet language that, that's coming out. And, and, and, you know, how that language evolves and, you know, it's kind of important and you don't learn that in class.

That's great.

That's amazing. Excellent anecdotes.

So, and the other thing too, that before I ended up in Taiwan, I was doing 6 months in Beijing, also language. And that was actually really quite good, but I kind of realized that academic or school part of that language kind of ran its route when one of the lessons was about nuclear power and radiation sickness. And I'm sitting there going, wow, you know, I'll never use that. And I've never used that word, actually.

Let's hope you never use it.

Well, that nuclear power accident in Japan, it actually came to use. But outside of that, I was like, I'm never going to use that.

That's funny. Yeah. Yeah. Joe Wong, you know, Huang Xi, the Chinese comedian who born in Dongbei and, you know, lived 20 years in China. I've done a few shows with him and he's like, yeah, my mom is China because that's where I was born and raised. But, you know, my wife is America. 'Cause I spent, you know, almost my entire adult life there. And now my mom and my wife are having a horrible argument, you know, and I'm doing what any real man would do, and I'm hiding in the kitchen because I'm petrified because my mom and my wife both have nuclear weapons. So, uh, think about that, right?

I know. To me, this whole thing between China and the US is— it's unfortunate. And it's unfortunate because it's really just a gross misunderstanding of culture, of people. Yes, there's a lot of just ignorance. And of how business is done. I mean, I hate to say it, China has done a phenomenal job in the last 5, 8 years of going from a country that would copy or take and, and try to replicate business models and whatever, whatever, whatever, into now where they're starting to lead in AI, in self-driving, 5G, as we know. So on the flip side, China's done really well at that part. And to be fair, a lot of that came from government policy, government support, government subsidies, and China was playing catch-up.

Sure.

But I think also combined with The incredible adaptability and adoptability of Chinese consumers and the incredible entrepreneurial drive and the incredible, I think all of that confluence in the number of STEM grads and just the pragmatism. And I think also there is this kind of like energy, you know, any like Chinatown in the world you go to or any Chinese community, you just feel that there is like, things just are in a different pace and pulse and flywheel, right?

Exactly.

Which is great. Yeah.

Which is great.

Sure, sure. Yeah, it's really, it's really starting to like get traction now, right?

Yeah. And my issue is simple. People don't know is the US is all built on competition. So why are we afraid of actually competing?

Yes, indeed. Right.

And it's like, that's the whole thing is like the tariffs obviously didn't work.

Like, it's like, I think we have a little bit of it like last week with that legislation. You know, I'm going to date this podcast, but, you know, Biden administration passing bipartisan support of like, let's, let's compete with China.

Let's put some subsidies into chips and others.

And, you know, and that, that's partially this book, right? I want people to understand what's happening, the speed of China and like how China's evolved, but also like, let's, let's cooperate with China and let's compete. Right. And then everybody gets better. And there's some stuff that's off the table, like sensitive military stuff and espionage.

And that's not acceptable, right?

That has to be separated. But in the commercial sector, it's all, you know, simply put, let's compete like hell.

But let's take an example out of the US. Facebook bought Instagram. They bought Instagram because they felt that they couldn't compete with Instagram. They tried to copy Instagram. They bought WhatsApp because they saw what was going on with Tencent's WeChat. You know, it's not like this stuff doesn't happen in the U.S. either. You know, so so what's so bad about letting China compete and then giving us the tools or you know the U.S. the tools that they need to catch up because the U.S. is going to be playing catch up.

I think it's starting to happen. I think it's starting to happen. I think the thing with democracy is that it takes a little longer to turn the ship around. That's all right because it's got to be more consensus, consensual, right? More of a consensus, right? But not yeah, consent.

That that's how mom and dad should behave.

I'm just trying out.

I'm just sensual relationships. But yeah, hopefully hopefully this will all turn around, but it's going to take. It's going to take a long time. And China's got some of their own stuff that they have to figure out. I'm not going to say that everything China does is, is right, because it's not. But also, at the same time, China's trying to figure out its own way, its own path forward. And unfortunately, this will put me in a certain box, but, you know, the last 4 years prior to this did not help anybody at all.

Oh yeah, for sure. That's, you know, yeah, certainly indeed, right?

And that's not the way you want to deal with China. China's earned respect. They have earned respect. And granted, they didn't— not everything was great, but they've done some really amazing stuff in terms of technology, in terms of raising, bringing hundreds of millions of people out of poverty, in terms of building a nation that's doing really well.

Yes, 700 million, right?

In terms of having Alibaba and Tencent as some of these, the greatest companies on the planet, they've earned respect for that. Now, on the other end, they're not a democracy. They have a different way of doing things. So, same thing, as I come back into China, it's not my job and it's not my position to, to say, this is wrong. I don't have to like it, but it's not my position to say it's wrong. The same way it's not China's position to come into the US and say, Your democracy is screwed as well.

Exactly right.

And, and you know what, I go visit my mother-in-law. I love her.

She has this beautiful cottage in the summer, right?

And I can't really say that I agree with, you know, absolutely everything, all the rules of her cottage life and everything that goes on there. And what do I do? I keep my mouth shut because I'm a guest in my mother-in-law's house, right?

Like, of course I have the freedom to say anything. I can say something, especially if it's like, beyond the pale.

But it's like, but the fact is, if I want to continue to be a guest there, then I better just respect—

See, I get to say things. I've been here 28 years, 27, 28 years, and I've got a lot of friends.

Yeah.

And I have open dialogues with them and we talk about it. And there are things and areas where I make progress. And it's more just about opening up their understanding of what the world is. In fact, the things I'm pushing them for a few years back, all of my friends here have gone to the US or have been around the world, but they only end up in the large cities. So a US trip for a Chinese delegation is likely San Francisco, uh, Washington, D.C., New York, and then maybe a stop-off in Vegas or Miami or something like that. Seattle. That's not all of the United States, as we very well know now. So I've put forth the idea, and when, when it can happen, I'm really looking forward to it, of taking a tour of the red states, of going to the countryside and having them see what the other part of America is.

Mm-hmm.

So they don't just seem to think it's this way as opposed to that one. They get a greater picture of it.

Did you did you see American Factory, that documentary?

Yeah, I mean, how delicious was that? Being like an inside baseball person to see both sides there.

And what do you see? You see the Chinese and the Midwesterners fighting in the streets. No, you saw them like hanging out Thanksgiving, going shooting together, like being like that's the thing is that like Chinese people are freaking awesome.

And you know what? Americans are freaking awesome, right? And like we we try to like distill everything down to like. one leader and one party and, you know, the government. And like, that's like, how much of that is really in our lives day to day anyway? Right? Like, it's like, it's the people, right?

And like, I think that's what, you know, like more of that exchange.

It's absolutely important. I remember, this was fun. I had some of my friends back on this road trip in the US. And it was my friend's birthday. And we were in Portland.

You went to Yosemite and like really—

Well, that was Yellowstone. This was the same trip. We were actually in Portland, Oregon. And one of my grade school classmates was there in Portland. And so, so he took us all out to dinner. It was my buddy's birthday party, or his birthday. I think he turned 50-something or another. But so, we did this great dinner. You know, he brought his wife out. I was there. Local Portland food, up-and-coming chef, everything you could think about for Portland, Oregon. And to that, you know, what do you do with a Chinese buddy when it's his birthday? You bring out the baijiu. So, you know, we brought the Moutai from China on this purpose to drink the baijiu. Nice. Wow. We're at a Portland restaurant. So, you know, American food, basically. We had the last sitting, and we break out the baijiu after drinking some of the red wine. Restaurant was sort of closing up, and, you know, as you do with a Chinese meal, you're— or Chinese friends having a meal, you just keep going and eating and drinking and having a brilliant time. And so, all of a sudden, the chefs come out, and they're like, what are you guys drinking? Baijiu. Oh, can we get some of that? Chefs are loving the baijiu. So, we ended up, you know, this restaurant's supposed to close at 9:00, 9:30. We're there until, like, midnight, hanging out with the chefs, drinking baijiu over the food that they cooked for us with my buddies.

Brilliant.

It was absolutely great. Absolutely amazing. It was one of the one of the best times I've had doing that, and that's the type of thing that needs to happen. And you know, yet again, that just goes back to the earlier times I was in China, just figuring out what those dinners really meant. You know, they're not about dinner; they're about getting to know each other. Joe is for the I'd say ten fifteen years I was in China. I just you know I suffered through it. But there's a tipping point. There's a tipping point. Once you've had enough by Joe, all of a sudden you actually start to appreciate it.

Once your liver starts to calcify, then it then it's actually okay, right?

My buddy calls it the ultimate.

Equalizer. Everybody's on the same level, which, which means eye level on the floor, actually.

Cross that line though, then you appreciate what it is. And you appreciate that, that, you know, drinking baijiu with your buddies just opens up the conversations. And instead of then going to a bar afterwards or whatever, you're just hanging out drinking baijiu and having, you know, these great long dinners closing down restaurants and all the conversation is going. That's how you get to know people. That's how you get to know people.

Yeah, I miss that, like private room, lazy Susan, and just a whole group of people.

Yeah, it's just like, that's like one of my favorite And a lot of people who come to China, you know, and it's not something that you can tell people as much as you can until you're blue in the face about what it means. You still have to cross that tipping point before you really truly appreciate it.

Yeah. And that food as well too, right? I become a, you know, a food snob just because you're just pummeled with amazing options all across China, right? And then like, so it's like really, you know, and it's all shared and it's just a, it's a beautiful communal thing, right? So yeah. That's great. And I think like just that engagement with China, like that's just all the more important these days.

And that's how you do business too.

So tell me about that. Tell me about some of your tips and tricks for people that want to do business in China or somebody that's already in China, but still a little bit wet behind the ears. Like for some of the first things first that you've gotten over the last decade.

First things first is try to distill everything down into the core basics. And so what I mean by that is if you are trying to do business with someone, does it make sense? Is it a good deal? Is it a good project? Is it a good order? Is it a good opportunity? Does it work for you as well as it works for your partner? You know, because that's your underlying foundation for doing business. And then, you know, simply put, then you try to understand what their motivations are. What are your motivations? What are their motivations? And get the whole China-US whatever, get that out of the picture. I mean, it's still at the very end of the day, you're completing a transaction of some sort. Can you provide a service that they want? Is it something that works for them? It's different with state-run organizations. In that state-run organizations don't necessarily look at profit or, you know, the project in the same way that you might look at it because sometimes it's strategic. So that's understanding your partner. And then once all that is up and done and settled and that there's a relationship, a business relationship there, then make sure that you're going out and having that dinner because that's where the personal relationship comes on.

Mm-hmm.

And the personal relationship is very, very important because no, it's not going to make your business or your transaction perfect. But what it does do is it allows you that personal relationship to pick up the phone, go and visit someone when you need to have that conversation, whatever that conversation may be. And that's the dinner.

And you're more likely to have that conversation in China, right? So, I think in the West, you're like, this is black, this is white, and there's a thin gray strip in the middle, right? But in China, it's like, this is black, this is white, and there's a giant gray strip in the middle, right? So, I think if I could peel that back, When we were on CNBC, I shared a story which was like, hey, let's make, let's make chicken. And you're with a Chinese person.

Great.

Let's make chicken. All right. What are we going to do? We're going to make this much chicken under this budget, you know, in this time. Beautiful. Chicken's delivered on time, under budget, the exact amount. And instead of juicy white meat chicken breasts, it's a chicken head, the chicken gizzards, and the chicken feet. And you're like, oh my God, what is this? And like, it's chicken. And it's like exactly to spec. It's chicken, it's this much, this time, this budget, but it's absolutely like literally the complete opposite of what you wanted. And Chinese people look at it and go, oh, wait a second, chicken breast is like dry and not very delicious. Like this is all like the delicious parts here, right? And you're just like, oh my God, I made all of these assumptions and I just set metrics and I thought it would just take care of itself, right? So I think, yeah, when you do a deal, you're like, oh, obviously this is what's happening. But like the, you know, incentives and the sort of misalignment around what people are really motivated by, like that's the, that's the foundation of the assumptions, right?

In China, and you know this, each province, each city is different. So, you know, doing my project in Shanghai, we spent a lot more time drawing up the documents, getting everything together, less time on the ice and the drinking part of it. But that was also extremely important. Because it is with a state-run organization, whereas in Hunan, when I did my project in Hunan, day one we were eating and drinking, and and we went through all of that because it was about getting to know you. Do I trust you as a person? You know what you have on paper is great. What you do as your business is great. You know, are you someone I think I can work with? And much more time developing that personal relationship, and then into the actual negotiations of everything. So each place is different, and the way each place does business is different. And it's just important also within China to know it's not just one. size fits all. Every place has its own little way of doing things.

Certainly, certainly. Yeah, it's definitely not a monolith. Wow, fascinating. So tell me about some of the anecdotes and stories along the way of building Silk Road Telecommunications and some of the triumphs and tribulations.

I guess, I mean, there's too many to sort of pick from. I'm not quite sure where to start and go. Let's go from the idea of when I started, the carriers, China Telecom, Unicom, mobile were competitors to now where they are partners, and they're our greatest partners. And that was twofold. Strategically, within the last couple few years, the carriers have come to the realization that bandwidth, core networks, billing systems, brand reputation is what they're really good at. Data centers really fall under a high, you know, a very much hands-on, very much high-intensity service model just to keep those data centers operating.

Service.

And their investment and everything now is going into what they're really good at. which is base stations and cable networks and fiber networks and such, whereas they're realizing that this is a better business for us to be in. And that was a very interesting shift in transition really just from the idea that a lot of the actual operators, meaning China Telecom sits or China Unicom sits above the 30-some provinces in China, but each individual province has its own individual general manager. And they seem more on the ground And so that really happened sort of bottom up with some of these, these people in the province going, listen, we just can't build data centers as quickly, as well, as customized as these third-party people, as we can do.

Staff them.

We can't really run it as well as they do.

Yeah.

So we're really good at the network side. So why don't we just start partnering with them? And then that's now filtered all the way back up to the national level. And then throughout that entire time, One of the best things we've done is because we've worked with these telcos for a very long time. We've developed these these great relationships with these general managers across the board, and so I guess the nut on this anecdote is maintain your relationships. Your competitor today may be your partner tomorrow, and that kind of goes, and that's something you can take to just about anything when you're working around in China because it moves as you said. China moves and changes really quickly. Someone today who Maybe interesting, but just doesn't quite fit in your strategic business or wherever you're looking at. 2, 3 years down the road, that could be something entirely different.

Fascinating. And tell me about the evolution of your company against the backdrop of the whole cloud paradigm. Like, how's that affected your business? And has it— we do not run a cloud.

We build, uh, we build the facilities. So Ali's our customer. We have AliCloud as part of what we do for them.

No. So Aliyun is like on your premise. I can't confirm or deny. Okay, okay, then I get that. I don't want to pry into confidential stuff, but I guess obviously like you're around and growing and thriving. So obviously like the cloud is not crushed you. It's opened up, like you said, other opportunities.

Exactly. We support Ali for their clouds. We have a small-medium enterprise business where people would have the single-unit servers come in. That was back in the day. It's a legacy business. That entire business now is definitively shifting towards the cloud. And same thing, Ali is and was a huge customer. They're also a huge competitor at the same time. We lose a lot of our small, medium enterprise customers, single unit customers, half rack customers to AliCloud. But that's okay because that then means AliCloud is growing and there's opportunities there. So we're in a business that's really actually growing quite quickly.

Mm-hmm.

And obviously this pandemic has shifted a lot more stuff up to the internet, up to the cloud. I mean, I'd be fairly certain that if it wasn't for this pandemic, and you hanging out in sunny Bali that we'd be doing this in Beijing somewhere in person. But it's fine. We can, we can get away.

Indeed.

And I'll be back and forth a bunch to China in the, you know, I think post-Olympics, I imagine I'll be back once a quarter, if not like the great part about living in Bali, same time zone as Beijing, China has one time zone. So I can do the flight. And as you, we're both road warriors, as you know, like being up in the air is kind of fun if there's not jet lag. Right.

So Yeah.

And I'm going to be bridging a lot of like China. Southeast Asia gets a lot of money from the Valley, but they get most of their ideas from China. Like the roadmap of what has occurred in China over the last decade is really the roadmap that Indonesia and Thailand and Malaysia and Philippines and India and everybody else is following.

Right.

So I'll be, I'll be bridging that a bunch, but yeah. Wow. Fascinating. So, so you, you ended up, how did you end up in Hangzhou? Like, that's like, it's one of the loveliest cities in China. What was the origin story there?

just where I was based. When I was doing my trading company, my trading business, we were doing silk, and silk is from Hangzhou, or one of the key manufacturing places was there. And I mean, it's kind of funny, when we started the data center business, Alibaba had also just started out, and they were already starting to make some noise. Turns out our offices and Alibaba's first offices were in the same building. So it just kind of sort of was this fortuitous fate that just kind of had us centered in Hangzhou, and we sort of started We started growing our business. Obviously, Alibaba really just took off a few years after that, just based on what they were doing, which was phenomenal and great to watch. And it was a lot of fun back then. There was just a lot of energy, a lot of just sort of curiosity. A lot of people were just— they were all just getting fired up about everything that they could do.

Everything's possible.

It was great. It was great. And it's great now too. It's just gotten very, very big. Clearly, when Ali and I were in the same building, we had half a floor and they had 2 floors. Now as comparison, we have 3 or 4 data centers, buildings, I guess. Alibaba now has campuses, multiple campuses and blocks and blocks and buildings and office towers and stuff. So they've done very well, which is great.

Monster. Amazing. Amazing. So yeah, I mean, the national bird of Beijing was joked about that it was the crane because there's so much construction, especially leading up to the Olympics. And there's been just dramatic changes in the cityscape of all the major cities in China, even, even smaller cities. What are some of the other things that you can sort of taste, or that was like sort of like palpable for you, kind of like a high-speed movie living, living in Hangzhou, and some of the changes that stand out in your mind over the last couple of years?

I mean, it's still changing. Cranes was one thing, and we have cranes now still, but now we're putting in subways. You know, I think you must have been in Beijing when they started putting in the subway. That must have been miserable with the Yeah, 2 lines when I got there, and now it's the 2nd largest subway system in the world behind Shanghai. Roads being blocked and construction all over the place. The short version is China just, yet again, a lot of investment into infrastructure. It's fairly well targeted and needed. Hangzhou, when I showed up, was a— was really a small town. From one side of town to the other via car was probably a 20-30 minute drive. Now it's 2 hours. Because everything has just grown so far out and traffic is like bad. But wherever you go, I mean, yet again back to Henan, I remember going back to Zhengzhou, which is where I'm doing my project and where my project is in Henan. And I went there 15 years ago, small town, they had the dust storms, the沙尘暴, which you guys I think had some of those in Beijing and those were miserable. And then when I went back a couple few years ago to start this project, They had literally built like 2 new downtown areas and, and that which was this sort of old kind of crappy downtown that was just kind of miserable back then. 'Cause it was never on my high places to go. I mean, I, I love Henan now. Back then I was like, I really don't, really don't wanna go, but it's a phenomenal city now. And you know, they're same thing. They're growing really quickly. They're growing really quickly. Wow.

I've never been to Zhengzhou, but yeah. Yeah. I mean, but it was like 15 years ago, but that's like my thesis, as I said in the book, is kind of a 4-to-1 ratio. It's kind of like 60 years ago.

It's kind of like thinking like a town from— or a city from 1960, and then you see the pictures today, maybe Boston or even San Francisco, and then you're like, oh wow, 60 years, it's changed quite a bit. But you know, that's compressed into 15 years or even less, right? Fascinating. Yeah, back then it was like, oh, first prize, one week in Jeonju. Second prize, 2 weeks in Jeonju.

And now it's amazing because I mean, if you take sort of Zhengzhou as an example. Yeah. And, and, you know, it's, it's one of China's most populous provinces with like 100 million Hukou people. It's also one of China's poorest provinces. It's very agricultural. It's led by grain and agriculture primarily. A very— on the flip side, it's known as Zhongguo in sort of its traditional understanding, meaning it's the middle of. And so Zhengzhou is like the middle of all of China. And so as China continued to grow, the government started throwing investment into Zhengzhou to build it into this metropolis that it is right now. And, and you can just see where they're going and what they're doing with this, and it's absolutely amazing. And they're bringing up yet again a whole nother province out of poverty, trying to bring them back up into— or trying to bring them up into this, this sort of global community that China's, uh, trying to get into. And they got to take it in stages. Like you said, Shanghai's here, they get it all, they're very high up on the international standards. Zhengzhou is much further down that path or behind But they're they're catching up, you know, probably faster than the four to one concept because China's had this model. They took Shanghai and grew Shanghai from a little fishing village into the metropolis. They they've probably made some mistakes along the way. They learned a lot of stuff along the way, and they're applying that now down into the tier two markets. And as you do that, they can move it even more quickly.

Exactly.

And you know, to that turbo charge, having as many having as many people as they have. I don't know if you know this, but Foxconn's largest manufacturing. Is is in Hainan right now. So a large portion of iPhones are coming from Hainan, which is something I never would have thought 15 years ago.

Wow, interesting.

Yeah, that's actually a really great a great nugget there because I'm definitely in the book you know showing and after with Beijing, Shanghai, and you know Shenzhen.

But you know even like Hangzhou and Guangzhou, those cities have transformed. But a place like Zhengzhou, like I don't know that many lawai who have actually been there. Like it's you have to have a really good reason to go there, and there's not much unless you're building data centers. So it's not even on my radar. But I bet yeah, the before and after is probably even as stark as like Pudong before and after, right? Because you know, it's just the scale of it all, right? Because the it probably happened in a faster time period.

And that's one thing that half the time, and that's one thing people outside if they see you know China to them is Shanghai, Beijing, Guangzhou, you know. But to get into what really is China, start having the ability to compare someone from Shanghai with someone from Hunan, and then trying to understand how that all works. And I'm not you know I'm not picking. I mean, I'm picking on Hunan because I've spent a lot of time there. But this goes to Chengdu, Sanxi, Xi'an, Hangzhou, you know, Shandong Qingdao, Dalian. These are phenomenal cities that are only now going to start making next three four five six seven eight years. That's where all the growth is going to be in China now.

Indeed, yeah.

And then there's like super clusters, the Greater Bay, the Shenzhen, Hong Kong, Macau area of cities, right?

Yeah, the GBA down in Hong Kong, right? And then like these clusters, you know, Beijing and Tianjin, and it's just fascinating. You compare that, it's like really not even comparing cities in the States.

It's really— Greater Macau, Hong Kong, Shenzhen area. I mean, GDP-wise, it's like, it's like, it's a, it's one of the largest countries on the planet or something ridiculous like that.

Yeah.

I mean, you look at like New York City is the big village. That's a city in America with 8 million people, right? Yeah, so and and Qingdao has eight million people. That's like that that's like just about a second. It's like a secondary city, right?

And it's like it's not even one of the top secondary cities.

And you're like, man, yeah, I'm looking up right now.

The GBA has seventy one million people, and the GDP there must just be off the roof.

Like it would make it the twelfth biggest economy in the world, right? Like that's that's and it's like for just five percent of the entire GDP for the mainland. Right? So the mainland's get correct five percent of them.

And so then what is China? What is China starting to do now is they're trying to take those learnings and then start shifting them down and in, you know, to bring up everybody else. It's a consistent drive going forward here. You know, they're like, we're done with you know we're done with the greater bit. You know we're going to set up a couple more policies, put in a few more roads and bridges and whatever, and then you guys are on your own. Shanghai, same thing. You know they'll start directing it. You know I guess into a financial hub and other stuff. But same thing, back to a Zheng Qingdao. Let's throw— let's start throwing Jinan. Let's start throwing the investment into the core infrastructure, bring in the pipes, meaning the internet, start doing these technology parks, and let's see if we can find another Jack Ma. Let's see if we can find another Pony Ma.

Yeah, and then they, and they, they not only align, but they hugely incentivize and set metrics for their cadres to like, you better go and set up this brain Park, this tech hub in that part of the city. And you got to make sure people are moving in and you got to make sure there's this many. Hey, great. So, wow, what an amazing journey, my friend, and many more chapters to go. We're on the board of this really— I think it's sexy, this company doing tech travel together and your guidance and sage advice and insights. I'm like taking notes when we do our board calls and I love it. It's a very local company, right? Doing tech for, for buses and for transportation efficiency. So it is like as local as it comes, local founder, local team. And you just spew forth all of these pearls of wisdom over and over and over again that I love it.

Yeah.

And I think you're covered in scabs and calluses and scar tissue like armor, and you can help lead people into the ultimate battle Which is entrepreneurship in China, and I really, really admire that. And I know you're a little weary after 2 decades of running SRT.

All of us came for the adventure. All of us came just to, you know, this is gonna be amazing. I mean, you don't come to China thinking that everything is gonna be like it is outside of China because that's not the way the world works. You don't go to— the US is different from Europe, you know. India, you don't go to India thinking India is going to be anything like that. I mean, so you got to come in going, you're going to take your licks, you're going to get hit, you're going to figure it out, and you're going to keep going forward. And, you know, to be honest, that's half the fun. Half the fun is like a huge puzzle just trying to figure shit out. Before I came back to your first questions was, how do you work in China? You know, and the answer was, you know, first you have to have a business case. Does this business— does whatever you're trying to do— does it make sense? And then you got to figure out how to build that relationship and do it. Whereas in the US, if you have a business case, you just negotiate it. You can do it all over Zoom, you sign your contracts, you call it a day, and everybody expects how it goes, back to your chickens. But in the end, it's really just how the sausage gets made, so to speak. It gets made. Yeah. And it's just trying to understand that and work with that and coming in. And for me, it's always been you going with an open mind. Nobody wants to do business with you because they want to screw you. Nobody wants to do business with you because all they want to do is steal your technology. That's not what they're starting off. Everybody's starting off from the same point. It does this— can we do something together and create something better? And that's not what anybody's trying to do. So make sure your business case is good and then build that relationship because that relationship is very, very important in making sure that when you run across a chicken breast versus chicken legs and chicken gizzards, you're like, okay, well, we screwed that one up. How did we do it? And let's have a conversation.

Indeed. Indeed. That's great. Excellent. Justin Mallon, the mayor of Hangzhou, ladies and gentlemen. I love hearing you hold court, my friend, and look forward to hugging you in person in some part of planet Earth.

Richard, if what we can share helps people get a better understanding of China and how it operates, that's a good thing. I think more people need to just come in with an open mind. And it's not to say it's right or wrong. It's just, let's just understand and figure it out. Because in the end, what people want is that, uh, what is it, a hierarchy of needs. And that's basic across the— all right, dude. Fun.

Indeed. Excellent. All right, my friend. Thank you.

That's a wrap. Thanks for listening to this episode of the Rich Robinson Show, season one at the Ski to China. Visit the rich robinson.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. Say again. Cheers, y'all.