Matthew Brennan on mobile internet technology and China's transformation from poverty to wealth

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! Matthew Brennan, ladies and gentlemen. Welcome to the pod, my friend. I am in Bali, Indonesia. You are in Thailand. We got to know each other in Beijing, China. And it's a pleasure to connect here virtually. Nice to see you.

Thank you for inviting me on the podcast, Richard. It's a pleasure to be here. And yeah, awesome. We've already got talking just beforehand. I feel like we've got so much to cover.

Indeed. Indeed. I had to cut you off because I was just opening up that under the hood there in that turbo-powered brain of yours who just is so great at the pattern recognition and the analysis of China that I've always admired and liked. We're gonna dig into that. We're gonna dig into your entrepreneurial journey and also your kick-ass book about the most valuable startup in the world, ByteDance, the mothership of TikTok. But let's go back to yesteryear, shall we? I grew up in Boston. I feel like I've met more than 3,000 people named Matthew Brennan. So I guess you have a little bit of Irish heritage there, but you grew up in the UK.

That's right. My father's Irish, so I'm half Irish. But yeah, I'm originally from Southeast London. And I've lost my accent now, but if you speak to my family, they speak quite differently from me. And yeah, so how did I get to China from there is quite simple. I went to university, I studied economics, and I was going to go— the obvious thing to do being from London would be to go and work in the city. And I wanted to take a year off before that, do a sort of gap year, which is quite popular. And I almost went to Poland. That was very close. I was quite close to considering going there. I just wanted to teach English somewhere, but being, being an economist, I worked out the purchasing power parity of different nations, different options available to me. And I was like, hang on, like China, it seems like they don't pay you much there, but when you work out what you can actually buy with that money in China, you can live a pretty decent life on that.

That's great. 10, 12 years ago, is that right? What year was that?

Yeah. I mean, that's it. I mean, like the wages were low, but everything was super cheap. And then I started in Dalian. Oh, that's like 2000. That's like 16, 17 years ago.

16, 17 years ago. Yeah. Okay. So yeah, China was like. Eminently affordable then. It was really a different place.

Yeah, I mean, and I wasn't in Beijing. I was in a suburb of Dalian, this Hong Kong of Dongbei, but out in the sticks there. Yeah, I mean, it was really very Soviet. I mean, my first impression, I arrived there in February, March, and it was pretty brutal, the winter in Dongbei, and it was not a good first impression. I was like pretty shocked.

Yeah, I better be getting my money's worth for this place.

Well, it's a bit like sort of, what am I getting myself into here? Like it was Soviet was how I'd describe it. You know, everyone in Dongbei wears these huge big jackets because it's so cold. And back then there were sort of these sort of army-style jackets, a lot of them. And the roads, there's just one big street in this suburb. It's called Stalin Road. It's the translation. And it's so big, you know, it's one of those roads that's designed for tanks to go down. But, you know, nice enough place. And I stayed to learn Chinese. So I was originally gonna stay for 1 year and I was basically like yourself and many people, you just find after a while you sort of realize, hang on, I'm sort of dropped in the middle here of sort of like the greatest transformation of a country that's ever happened, probably ever happened, right? Like, yeah, literally in the whole history of humanity. It's like, it's up there in terms of a transformation from poverty through to extreme wealth. And you're sort of kind of 1/3 of the way through it. And so you're like, you go back to London, which is, you know, my home and I love it. You're like, wow, everything feels really slow now and a bit boring. And it's like everyone's kind of doing what they were doing when I left. And, you know, in that time in China, like just physically the environment around you, forget about people, culture, wealth, or business. It's just like physically every building's going down and coming up. There's just construction everywhere. You know, one of the common complaints people have living in China is like just the, you know, we'd be doing a podcast like this and they'd always be drilling somewhere.

Yes.

That's very difficult. China's a very noisy place, right? Chinese people have very high tolerance to noise. There's a couple of reasons for that.

Let's, let's put that back. Why do you think there's a couple of reasons for that? I love talking about these intercultural differences. Yeah.

I mean, like there's a big one that I noticed which really hit home was Spring Festival is like when you're, you know, everybody loves Spring Festival and from a kid, from a young age, Spring Festival is very, very noisy. You know, the actual sort of our equivalent to Christmas and getting presents is like fireworks and like all the loud bang poppings going off. Like during that eve, during that, you know, the highlight, the high moment of it, it's just deafening, right? There's just deafening noise. They kind of banned a lot of that stuff, but I sort of caught the tail end of it when there was like, it was okay to do that.

Yes.

And like literally the sky would light up You know, being from London, we compare it to the Blitz, right?

Usually fireworks are in one spot, but in that scenario, it's everywhere. The entire sky lights up. Yeah.

Yeah. The entire sky is like filled with explosions essentially. Now that got banned in most places pretty soon. Like a few years after I came in, it was like, oh, we can't do that anymore. It is super dangerous. Like the hospitals are full of people with injuries.

My jacket got set on fire once and that one hotel in Beijing burned down.

It's probably a good thing that it didn't get banned, but it was quite amazing to experience. That China's gone, unfortunately. But yeah, I mean, there's still a lot of people that have those memories. And so the firecrackers and that noise is associated with money. It's associated with spending time with family and just generally having some time off to relax, which is really quite a thing in China because of the work schedules there. Yeah, I think there's that association. And then yeah, Chinese people just naturally speak very loud, like most people. especially from the countryside, that a lot of people, you know, they speak really loudly and it just seems to be normal. Yeah.

It's not a judgment. It's just not a, you know, it's just basically, you know, objectively true and it's different, right? Peter Hessler, who writes for The New Yorker now, I used to play basketball with him in Beijing and he wrote this book Rivertown, you know, 20 years ago. You probably, it's a classic, right? And he was very vulnerable there and he is like, the guy honked his horn from the airport to where I lived, like, 217 times, like in a 40-minute ride.

What?

And then he said, I got into a really public battle with the shoeshine guy who had probably some sort of learning disability, but I just lost my shit. And I'm like yelling at this guy and he's yelling at me and there's a giant crowd gathering around. And he's like, I am so ashamed of myself. I'm like fighting with this guy. And I remember waiting under the bridge in Guamá, right in downtown, downtown business district. For my shuttle bus to go home. And there was a truck there and they had like modified their horn and it was under the bridge and they were honking that thing. So it was amplified. And I climbed up on the fence and I was yelling at the truck driver who was, you know, probably 2 meters away, but he didn't even see me or look at me. 'Cause it just triggered me like crazy. I couldn't deal with it anymore. This is probably 2002 or something. And then I looked back and all the people in my compound waiting for the bus were just Totally stoic, and I was like, "Oh my God, I'm that asshole now." I'm sorry, guys. I apologize. The noise just set me off, right? So yeah, it's just a whole different level there.

So that's it goes back to this one other anecdote. Little small thing. Like a lot of people have said that had this observation where they're like, if you don't speak Chinese and then you see two people, like I might be speaking Chinese to a vendor, you know, trying to buy something. They're like, "Are you arguing? Like you guys having a fight?" And you're like, "No, it's just." Like, what? And you're like, no, we were just talking. Right. But Chinese does have that element of, you know, loud and aggressiveness being sort of the standard for a lot of, not everyone. Right. There's plenty of academics. There's plenty of like softly spoken people, but yeah, it's quite the common observation.

Yeah.

And I think it's changed in some circles in some ways, you know, a lot more like it's become dialed back a little bit, but there's still like, especially secondary, tertiary you know, and the other cities as well too. It all goes to 11 and then another 11, you know, again. So it goes to 22 actually.

Well, that's it. And then you say like second-tier cities, third-tier cities, and that's really where I spent nearly all my time in China. So I'm quite unusual in that respect in that, yes, I have lived in Beijing, Shanghai very briefly, and Shenzhen as well. But like it's 90-plus percent of my time in China has been in places like Dalian, Mongolia, Chongqing, Chengdu. Whoa.

Really? You lived in Chongqing? I didn't even know that about you. I've never even been to Chongqing, but that's the biggest urban, you know, sprawl in the world, right? Arguably the biggest city in the world, right?

It's— yeah, it's like the largest city in the world you've never heard of.

24 years in China for me, and I first came there almost 29 years ago, and I'd never been. I just didn't have any reason to go, right?

It's probably my favorite city in China, Chongqing.

Really? Wow, I gotta go. So let's take us back to— what is it? 2004 or something like that. And then you kind of go back to London and you're like, okay, I gotta get back to the biggest story of our lives.

Yes.

I learned the language, you know, like started that long journey in Shandong Province. I was learning in a city called Weihai.

Wow.

A very small place that's technically the closest city to South Korea in China. There's a ferry that goes across full of South Koreans and I was learning with the South Koreans. And from there I went to Jinan briefly to work in the summer and then I went to Chengdu. Yeah, that was it.

Sichuan.

So from there, lovely. I was, Yeah, down there. And from there, you know, I got into entrepreneurship. So that was where I was working on the weekends in the school. And I met some other sort of friends there, another guy from the UK and some, an Irishman, an American. And we sort of pooled our money together and franchised the school chain because we could see that it was booming, right? Like this, the company we were working for, my friend was managing the schools, running the finances every day. You know, he had the spreadsheets out, he knew what they were making. And was like, hmm. you know, pretty much every aspect of the business. Why aren't we just investing in this? Why is the boss taking a— which is a very Chinese way of thinking, right? That's one of the risks you always have in China is like your employees always think that way as well, right? Like that Chinese are great, hardworking people, but when they're in that situation, they're like, hang on, what do I need the boss for anymore? Like, I know everything. Very common. So we did that, but we, you know, we did, to be fair, you know, like. We just franchised the company and they were very happy with that. So that's what led me to, you know, get involved in entrepreneurship, I guess. It was a very sort of safe thing because it's a franchise, but it was also like very Wild West because I ended up going to Inner Mongolia eventually to do that. So I spent 2 years in, in the property ghost town Ordos.

Well, well known for—

So our logic there was like, oh, this is famous property ghost town where all these hillbillies became rich overnight with coal under the ground, right? It's basically massive deposits of coal in Eridos and suddenly all these farmers became super rich and there's no foreigners there, but they've all got kids that need to learn English. So let's go there to open the school. That was the kind of logic.

How did that thesis play out?

I mean, it was crazy. Really, really crazy because it was super, super Wild West. I mean, like you can imagine that, like a property ghost town with lots of rich hillbillies, no foreigners. I go there with some, a big lump of money in a bank account and like a legal rep from Wholeheart. Who, you know, I could call if I got into trouble or anything, need her, and that's it. And it's just like, go open a school. And this is like 2008, right? So around the time of the Olympics.

Much different era.

So the Olympics is happening. I remember vividly watching that on a tiny television in Ordos. Then, you know, just like we were stuck in this crappy apartment and we're just out every day scouting for locations for the school. And then, yeah, but we made it happen. I mean, there was some pretty wild stories. So it was super wild west back then. We didn't have a license. Because there was this sort of catch-22 type thing in the education industry where you need to operate a school for a year to be able to hire foreigners, but you need to hire foreigners to open a school. So it's like, it's impossible. You have to break the system and everyone does break the system. And what they do is they put the foreigners on the license for another school during the first year.

Oh, okay.

Is what everyone does. And that's what the company I'd been working for did. And that's what everyone did. But you know, that left you open to like, if anyone came and checked, they'd be like, oh, naughty, naughty. And like, basically that's kind of what happened to us. And like, they were like, what are you doing here? Oh, your visa's from another city, but you're here. And we had to like bribe them, basically had to pay them off. You know, that China's gone as well. There was a lot of that, you know, going on, especially in a place like Ordos. Fortunately, you know, though I was so novel that I was, you know, a foreigner in town, I did get treated quite well.

They loved that.

Yeah. You could always play that card, which was good and ham that up. And so I definitely, but I did get caught with a few baijiu dinners and that was not so good.

Pay the piper indeed. Yeah.

That was pretty rough sometimes.

But in some ways there's like reverse discrimination, I think, in the early days. Like if you're a foreigner, you just get like such a pass.

Yeah. I mean, overall it was, it was a pretty, it was okay. But when we did get the school open, we later sold that school and overall we did make money, but it was really tough work. It was really tough work. I mean, like I worked myself into the ground doing that because I was, you know, the franchisee and the manager and the teacher to get it rolling, right?

You're doing everything.

You're wearing all these different hats. But then after that, eventually I went to work in the head office for that same company. So this is a national education chain of about 100 schools across China. And they said, okay, like come to the head office. I was interested in like curriculum development. And so I started working on the brand team there.

Like a totally local company.

They're an American company, but like they're very local. They're very, very local. They're mostly Chinese operated, kind of Half, half. Yeah.

But a totally local team? Were you the only foreigner?

Yeah. I mean, I was working in an office of about 60 people with, let's say, 8 foreign staff, most of which who are on the phones all day hiring foreigners for these schools. So there's a hiring team and then I'm— so non-hiring team is like, there's about 3 people, right? So it was sort of like you could do most— it was a case where I could use English for a lot of the work, but, you know, occasionally you also had to work in Chinese, which was, you know, To be fair, and that's pretty fair. But yeah, I was doing that and it was just opening up for like, one of the first projects I did was an online training, right? So this is very, very early in China for doing anything with education and online. So, and I was kind of very interested in it and was like naturally sort of trying to spend time on this and people could see like, oh, Matthew's into this. And like, so I'd get more work in that thing because they'd be like, over time you develop a reputation for that. And I ended up leading their big push into e-learning, it was called at the time. Now you call it edtech, right? E-learning is not a term that anyone uses anymore. It's a bit like IT, right? But e-learning was the buzz term. And it was not actually done on software. It was done on discs, right? CDs, because we were selling educational software into tier 2, tier 3 China around 2010, '11 by now. And that was a pretty tough sell back then. A lot of parents did not see the value in software and there was this sort of like general consensus around in China that like anything intangible should be free. Like you don't pay for intangibles apart from education, of course, you know, that everyone will pay for that, but they won't pay for software. So back then, you know, this is just as mobile was breaking, actually. This is a super interesting time in China because one of the little stories I have there is like in working in that office, about 60 people in Dalian up on like the 15th floor or something like that, it was very interesting that The first person got their smartphone in the office. I remember it was probably like an HTC or something like that. And they, you know, there was a crowd of people around them, like looking at his smartphone, like being like, oh, like, what's it? And they were talking about the features and functionality. Everyone's like, oh, okay. It took about like a month before basically half the office got a smartphone. Everybody.

Yeah. That's funny. And it was probably like a giant percentage of their disposable income too.

Yeah. I mean, wages were still pretty low. And yeah, it was not a sort of thing. It was a big purchase for sure, but people were buying low-end Androids, right? They weren't buying iPhones mostly. Some people were, but not many.

Probably back then it was mostly like Symbian or maybe some Android too, right?

Yeah.

Yeah. I remember my first one had a keyboard in, right? It was like the ones you flip on the side because I was like, well, I, you know, I send emails, I want a keyboard. Right. And so they actually, it was an HTC keyboard.

But you're right. Like you can taste and like see the adoption and, you know, People adapt and adopt so quickly, right?

That's the point of the story. Oh, it was lightning fast. I mean, it was just like, bam, suddenly everyone had a smartphone. It went from like, ooh, people crowding around, what's this? To like being everyone, like pretty much most people having it like very, very fast. And I got caught up in that wave, but at the time software was desktop. It was still mostly desktop, but there was this revolution happening then. Like later on, we talk about ByteDance, you know, that was the thing that sparked The founder founding ByteDance was that same revolution. He saw the same thing in Beijing happening at that time, and I think everyone in China must have. Like it was mobile was just an absolute revolution. It fundamentally changed society to a far greater extent than it did in the West.

Yes, because the West had such high PC penetration as well too that mobile phones people were maybe slower to adopt.

Yeah, that's definitely a big part of it. I mean, like for a lot of people, it was just onboarding them to regular internet use because we have really. before that, the vast, vast majority. So there's like, when you look at absolute numbers, absolute numbers of people who are on PC internet was very high because China's so big. But when you look at it as a percentage of the population, especially once you get outside Beijing, Shanghai, you really only saw PCs in a work environment.

Yeah.

Or in internet bars. They were basically the 2 scenarios. Not many people in tier 2 and below. So, you know, 90+ percent of the population, you know, did not have PCs in the house, right? It was quite rare to see that.

Indeed. And then you think about the West of like, oh, well, you know, there's at least Walmart or there's a shopping center, or I don't know, you have a catalog. Catalogs have been around since the 1800s. Or you have like Moviefone. You can, okay, call Moviefone and they can press 2 to hear the, you know, 8:10 movie, right? There's like all this other infrastructure to like find information and to purchase things that just Did not exist in China at all, or it existed only online, but then people couldn't even access it because they don't have a PC, right? And then they get a phone and all of a sudden—

You're totally right, Richard. There's 2 things. One is information, one's e-commerce. These are the 2 big things. Information, you've got this situation where it was a massive big deal because when you look at all forms of information distribution in China, whether that's radio, television, books, magazines, newspapers, all of them are so heavily regulated by the government, right? Like, they're basically all super duper controlled, and they're basically nationalized in nearly all cases. And the internet suddenly, for the first time, especially Weibo— Weibo was the big, big breakthrough, right? Was like suddenly just this flood of information, and the regulation couldn't keep up. And so it really just opened up this entire world to people that just didn't exist anymore. So That's what on an information level, that's why it was such a big deal. And then on the e-commerce level, you're looking at, lots of people commented, right? Like how the mall infrastructure wasn't there. Like you just said, there's no entertainment infrastructure, but also that the economics are growing so fast. You know, for Chinese internet is so e-commerce centric, whereas Silicon Valley is very advertising centric. And one of the big reasons for that is because the economy in the West is developed. So advertising online makes a lot of, you know, businesses are willing to spend on that. Whereas today in China, it's different. But if you roll back the clock to 15 years, let's say, or even 10 years for the beginnings of mobile, the problem's not actually advertising. It's not mature. The problem's getting the actual product to the consumer. The problem's actually distribution. If you could get distribution, you can sell. Selling's not a problem. People will buy your product. They just can't get your product. So then in that situation, it's not so much about marketing or advertising, it's about just Literally distribution is the issue. So e-commerce solved that problem for so many brands.

You know, famously, as you very well know, you know, Tencent couldn't sell any ads at all. And then they were like, well, let's deliver virtual things, then we can deliver them instantaneously. And that's why I think Facebook is like 10 to 15% from virtual, but all the rest is ads. But I think Tencent's probably the reverse. You know better than I, but it's like, what, 80/20, 85/15? Virtual items and advertising.

Yeah, Tencent's very diversified in terms of their business model, right? Like fintech, which is payments, accounts for a lot of it now as well. Their advertising is there. I think advertising is roughly about 15%, but it's stayed fairly, fairly consistent, like over the years. It's like 10 to 12, even going back to like when they IPO'd, it was there. They had it. I mean, it's an obvious business model, right? You can sell banner ads on QQ, right? QQ back in the day, you know, everyone in China is looking at QQ, right? If you put a banner, they can reach everyone. pretty much if they want. But like, the thing is nobody trusted online advertisement very well. Businesses, the ad fraud was a real big problem in China as well. So that was another thing. And let's say distribution was more important. Ad fraud's a big problem. And then the payment infrastructure wasn't there as well. And the trust around payments had to be built with, you know, Alipay eventually. So there's a couple of factors, but yeah, super interesting. Yeah. Like you say, like delving into how different Tencent is from A company like Facebook is super interesting.

Fascinating. Yeah. Great. So then now you've been working inside of a larger company and then where does our intrepid hero go next?

Well, our intrepid hero is stuck trying to release this software product, like the first big software product for the company to 100 schools. And parents are like, we won't pay for this. So that was really tough, but baptism of fire really. It was a fantastic experience. And we hired someone from IBM to help To be my assistant and work with me, who was like, in many cases wasn't the assistant, was leading because he was in the IT industry. I say these terms that we don't use anymore. Always making people better. Yeah. I mean, that's it. I mean, I wasn't an IT professional. I did lots of things I didn't know. We were working with a Shanghai company to do the coding and, but I was doing mostly curriculum design and user experience essentially. So it all fit together. We managed to get it worked. We got it out on time and we had to bundle it together in the end. Was the way we sold it. Blended learning was how we marketed it. And yeah, you know, the boss was happy. Certainly the company made a lot of money on it. From there, after that project, I sort of went into full-time curriculum development, research and development. So building out, we did an app later on. You know, we kept expanding the curriculum online for that and updating it. And we did their whole books and everything, basically. It was like a 3, 4-year project.

You also have like, you know, so much rope to hang yourself, so to speak. You're probably given an incredible sort of freedom and opportunity to do things you wouldn't in a typical career in the West.

Yeah, that was part of what attracted to me. It was like they trusted me. And so I did have the freedom that you wouldn't get in other organizations. So I did that from Chongqing though. So like I went home and I was gonna leave and they said, Matthew, don't leave. Like, you know, 'cause I wanted to go back to Southwest China. So they were like, okay, well, how can we make this work and keep you? And I said, Well, perhaps we just, you know, do a research and development division and I run that division and we hire, you know, some people there. So I had about a team of about 8 people in Chongqing that we were hiring and they were doing things like graphic design and Flash. It was Flash development that we were using for the animation and people like proofreaders and things like that. And audio, we outsourced the audio to Canada, I think, but like we were doing lots of different stuff and it was all about content creation. And then, so doing that, that's going well. And then in 2015, WeChat sort of dropped. Well, WeChat Pay in particular dropped. Official accounts were the two big things. And that really just revolutionized so much in China. I found myself super inspired by that. And yeah, that was 2015 in Chongqing when I was like, I remember the first time I used my phone to buy something in a 7-Eleven. I was just like, holy shit, I just used my phone to buy a sandwich. That's That's crazy.

Yeah. And you don't mean like, you know, oh, I just ordered it and, you know, like you do a transaction on Amazon. You meant like just scan, scan and go. Yes. And I remember mine. I remember when I broke my first cherry with that as well too. And you're like, oh my God. It reminded me of like being like in an Uber or DiDi where you're just like, oh, I'm just getting out the door and leaving.

Yeah.

Right. See you later. And you're just like, it's a small thing, but it's like, it all adds up and you're just like, oh my God, we're never going back.

Yeah. Yeah. I mean, the Uber comparison's a great one. Yeah. So it's a bit like that. Or maybe just buying something online for the first time, you know, it's that kind of experience where you're like, oh, wow. And yeah, I was like, we don't have this in the UK. I don't think we had this in America either. This is something very special. I'd never seen this before. And I just went in and started learning everything I could about it and writing about it. And I started at— we were already expanding. Experimenting with using WeChat official accounts for our internal communication of products within the company, and every school had to open an official account was one of the things that was on the you know recent announcement. And I was like, oh okay. And so we started that. I started just blogging about it online. I've set myself a task of like writing one blog post a day for a month, which was I didn't realize what a commitment that was. Pretty big commitment, but I did it and oh. From that, you know, back then there was only about myself and maybe Thomas on WaterChat. I think there's basically us and we were the only people writing about it. There's no English language content. It's completely blue ocean. You can, you know, back then, like nobody was really very interested in China tech. There was really not much information online about this kind of stuff. So from that, very quickly built a following very quickly. Like, even though I was in Chongqing, I didn't realize at the time, but like all people in Beijing, Shanghai were all like, you know, consuming that content. And so when I eventually—

Me, me, Erdos.

I wanted to start my own business and move into doing this full-time, then, uh, you know, when I went to eventually Beijing and Shanghai, people already knew me, which I found surprising because I was like, I totally was, you know, just away in Chongqing and like Chongqing's got very few foreigners. It's no Erdos, it's no Beijing or Shanghai either, right? It's totally on a different level. And everyone kind of is a community and most people know each other. So going from that into Beijing, Shanghai was a big jump. I felt like I was going from the sticks into like the big city. Even though I'm from London, like I'd spent so much time in like places like Chongqing and Dalian that like going to Beijing, I was like, ooh, but pretty quickly got used to it and sort of like tried to, you know, find your feet there doing your own business. And what we did, consulting, we worked with a couple of brands to help, you know, do help them understand this ecosystem quickly. It became clear there was a lot of demand for that kind of thing. One of the things we did that took off really well was the conference. You know, I'd already been very comfortable doing public speaking for, you know, there was an annual conference for our education group. And because I did the R&D division, I always had to do the—

I was throwing you on stage.

And it was always the presentation that everybody wanted to see because most of them were boring. And suddenly it was like, oh, what new products are coming out? Like it was something that everyone could relate to. And it was one of our basically KPIs that we had to impress all the franchisees every year with that kind of presentation.

You're the man to do it. That's great. I've seen you up on stage a number of times and yeah, you rock it. It's really important, right? Do you have a great analytical mind and really good, but you gotta be able to tell those stories though.

You do it well. I mean, you're a great storyteller. You know, storytelling is super important. When I worked in the head office also, like people eventually worked out I was good at PowerPoint and were like, Matthew's great at PowerPoint. Let's get— and then suddenly everyone will be, Matthew, can you look at my slides? And like a month before the annual conference, you're like spending a lot of time helping people to get animations right on their slides, which doesn't really matter that much. You really shouldn't be spending time doing that. But it's very wasteful of resources, I feel, looking back on it now, but everyone cared about it so much. But yeah, you know, I've always been a visual thinker. And so things like visualizing concepts for me is you know, something that comes very naturally and that really helps with doing those type of presentations. So yeah, I was already comfortable in that area and doing events and things. And we did those in Chongqing on a very small scale. And then when we came to Beijing, perhaps because I was just so fresh and naive, I was like, well, why is no one doing a big WeChat event? Like there should be a— Yeah, you own that. There should be a big conference, right? And we went, there was one there, but it was small and it was in Shanghai and it was just totally not what it should have been. In terms of scale and ambition. And we were like, well, let's just think. And so we did that and that was very successful, the chat conferences and lots of, lots of people found a lot of value in that.

But if I may, you know, for some of those listeners out in podcast land, you know, it's a really good lesson because you weren't necessarily like a digital insider. You know, Beijing is really the Silicon Valley of China, right? And so there's like a lot of people, myself included, that came there to build their career around internet, right? And of course, internet was important for you, but you were really more of an educational professional, but you had like tasted this. But then you were like, you know what? I'm taking all of my skills, experience, network, and my pattern recognition. Like, this is hot and I'm putting my flag in the sand and I own this. And then you came in and you were like, like nobody else. You, you did own it, right? Because, because it's a new platform and because you said, you know, the universe kind of conspired to make you successful around that cuz you were early and hard and fast and you saw it. So I, it's a really good lesson for anybody that like you can completely reinvent yourself. Like, I only knew you as that guy.

Yeah.

I was reading your stuff and I was like, oh, that guy's— yeah, absolutely. He knows what he's talking about. Maybe it's kind of like the way that the Beatles had to play in Hamburg, you know, 2 sets a day for months or years and they got really good. And you're like, I'm writing 30 blog posts in 30 days. And like, you were like, okay, I gotta really, really do some deep thinking about this. Right. And I think deep thinking is probably one of your things that you like to do.

I've always gone by passion. Right. So like going back to The e-learning and stuff like I just described, I sort of fell into that because I was just following what I was interested in, which was internet. And then from that, you know, going into e-learning curriculum development, I was just interested in it. And it's really just, you know, it really was. I could feel WeChat was just changing society, and that was like super interesting. But I did not know that it would, you know, become the. I had no idea what was going to happen in Beijing or Shanghai around this at all, or like that ecosystem of digital marketing. That was taking place because what was in a bigger scale, what was happening was you know WeChat became this sort of must-have platform for every brand, and so you'll just find yourself in a situation where every international brand in the world suddenly needs to be on this platform. And so there's a lot of but it's so new that not a lot of people really know how to work on it. But to be honest, it wasn't that new by then.

It had been around for years as a chat platform, but it wasn't really just you know. It would be like, yeah, I mean like WhatsApp. It's like, oh, launch, everybody use it. It was like everywhere. It was like electricity or water, right? It was just like big deal, right?

Yeah.

What, but what can you really necessarily do with it? And then it, it was so brilliant because of course with payments, it's something that I see it here in Indonesia and like mobile or virtual payments are still not taking up because there's so many competing platforms and people are like, oh, I gotta download this additional thing and I gotta register here. Like it should just be. so painless and so easy to do that then it becomes ubiquitous. And then I like to say this to when people visit China, China invented paper money. China is the biggest population in the world. China is arguably the oldest civilization in the world. China's the first country to say bye-bye to paper money, right? It's like extraordinary. Like what, how could such a large and old Civilization, like that, you know, just get rid of paper money. It would be like preposterous. But like now there's problems where like the government's like you have to take that paper money. Like nobody wants to touch zhang de xian ji, right? It's kind of like think about this. You're like okay, what we're gonna do? We're gonna chop down trees. Just stay with me, and we're gonna destroy you know all kinds of forests, and we're gonna make this piece of paper that people can counterfeit and stuff, and we'll make sure all the foreigners get those bills when we give them change in the taxi. And then gonna be these rectangles. And, you know, people are gonna have to keep them with them. And it's like, that's the dumbest idea ever. It's like a really silly idea. It's like, I can just scan with my phone. I always have my phone with me. It's like nobody's going back once you touch that, right?

No.

And it's like, it's just become like people outside of China. I tell people when they visit, there's 3 groups of people that use money. That's people that are really young, they don't have a phone. People that are really old, they don't also don't have a phone. And you, the people that are visiting, because pretty much just about anybody else except for maybe the very, very low tier, you know, subsistence style citizens of China, everybody's using it.

Yeah.

And it's just extraordinary. Right. And do you know much about the origin story of WeChat? Because I know you've wrote a great book about ByteDance. We're gonna dig into that, but you've really become like a kind of, you know, WeChat Godfather. Could you recount that for people here? Like how it sort of came about? Yeah, sure.

No, I've researched it all. I mean, like, got that super familiar with pretty much all of the major, the history. It's only like 10 years really, but it's still, it's like a long history of WeChat. How it got started. I mean, like, as you've accurately described it, you know, it's a messaging app at its beginnings, right? That's all of the things we've just discussed. At the very early days, there wasn't much consideration that it would ever grow in that way. I mean, it started off as sort of a skunkworks project internally within Tencent in 2010. So what the idea was, you know, first of all, I need to bring you back to 2010 and say like in 2010, everyone was on QQ. There already was a messaging platform for China and it was super popular.

And it was owned by Tencent.

It was owned by Tencent and it had a mobile version, right? There was mobile QQ. And then there was basically for feature phones, there was a system where you could pay a small monthly fee and receive free messaging as long as you were messaging other QQ users through that phone. It's not just a desktop app. So the big question for a lot of people had at the beginning was like, why do I need WeChat?

Right?

It wasn't actually that obvious a need for this product in the market from a lot of people's perspective. But the founder, Allen Zhang, who's like an old school internet guy in China. He basically founded Foxmail, which is one of the very earliest internet freeware back in the, I dunno, 1996, I think something like that. So back then the software industry in China was tiny. There was Kingsoft, which is, you know, Lei Jun's original company that is working out, you know, Lei Jun and Alan Zhang are like from the same generation of basically first generation of internet entrepreneurs. And people who went out in China and actually did stuff. So Lei Jun was doing Kingsoft, which was like at the time the largest software company in China, I think. And Alan Zhang was doing freeware, which he was doing Foxmail. And he was known as this guy who was probably one of the most talented developers in China. Some people say was the most talented developer in China, but he was like on the poverty line because his software was freeware. And he didn't want to put ads in it. And he had no way to monetize, even though millions of people were using Foxmail every day. And it was one of the best softwares on the market. And lots of people were using it outside China as well. So he's got this long history there of super well-respected. And the founder of Tencent, Pony Ma, knew from day one that this is a guy. And once they IPO'd, he bought Foxmail. I think it's the first thing he did was like, let's get Alan. And I remember the President of Tencent was this story of like he had to go down. One of the first things they hired him after the IPO, he had to go and like get Alan Zhang and buy this company from me. It's like I don't know why we're doing this, Pony. Like well, who is this guy? Like I don't get this doesn't make any strategic sense.

So he was like, "Don't worry, just get him." So it's kind of like an acquihire, but then you also get like tens of millions of users along with it as well.

Basically, it was really just an acquihire. They just wanted Alan. And he took over QQ Mail, and eventually that was failing, and he made it a success eventually. But you know that acquihire they made in 2004 when they IPO'd? You know it took six years for that acquihire to pay off because in 2010, Zhang saw something that was happening in Canada, which was Kick Messenger, which is again something that probably most people don't remember. Which was it was called the miracle first in China. They referred to it as the first miracle of the mobile age, which was Kik Messenger got a million users in about 2 weeks or something like that. It was unheard of. And so in China, everyone was like, what the hell? A million users in 2 weeks? How did that happen? So what actually happened was the key to how they got that— users was mostly BlackBerry users. And the key was email spam. So what they did was when they onboarded a new user, they brought in the address book from BlackBerry and then spammed out everyone on your address book, hey, I'm on Kik Messenger now, come and join me. Right? Like what LinkedIn does, right? Like LinkedIn's always like sending you, hey, do you want to find your address book and like message, find out who's on the— so it's that hack, which is a very spammy hack. And I think should be illegal really. But I don't know, like back in the day, like this was so early. Nobody knew. Nobody even knew. Most businesses didn't even know this was an option. So they scaled incredibly fast doing that. And of course, Alan Young's an email guy and he's like, hang on, the key to the first miracle of the mobile age is email. And I'm probably the top email guy in China. Might want to do something here. And so sent a famous email to Pony Ma at like 2:00 AM in the morning saying like, I want to do Kik. And Pony's like, do it. And so—

And didn't they have competing teams? Didn't they make like kind of like a skunkworks and like say, okay, do it, but I'm going to, you know, line up a couple other teams to kind of—

Yeah, exactly. That's another aspect of it. You're totally right. So Tencent is famous for this horse racing culture, which is, you know, put different teams, you want to go into a different area. Okay. Set up 3 teams and have them all compete with one another. Right. And say, and let them know that openly, right? You've got 3 different divisions and say, hey, like whoever wins this, you know, whoever gets the product, we'll give them the funding. They'll end up being their horse.

So that's fascinating. So I have to peel that back more. I know that story about the 3 teams, but I didn't really hear about the horse racing culture. And I feel like That's got to be one of the reasons, you know, really does drive speed inside Tencent as well too. So that's for another, another talk. But Alan Zhang and team emerged victorious.

Yeah, I mean, and that's it. And they were the outsiders on this horse race because they were from the R&D division and a little bit like I was in Chongqing, right? For the head office in Dalian and I'm in Chongqing with just a team of 10. Alan Zhang head office is Shenzhen and everything's in Shenzhen for Tencent, but Allen and his like team of like outcasts are in Guangzhou. Right. And so they're physically away from everyone and like sort of hidden to some degree, cuz Allen Jun's not the most sociable guy. He likes to be left alone to run his own little kingdom. And so they're working away in Guangzhou, away from everyone else. And so no one in Shenzhen, the logic within Tencent was like, QQ's this beast, right? It's like literally every user in China's on QQ. And so all you need to do is like find a way, what you need to do is run banner ads in QQ basically. Right. Like that's the phase, like drive those users. If you can get some advertising space or some trick to like get users to download your new messaging, mobile messaging app from QQ, you've won. Right. Because you, how can you compete with that kind of traffic? You can't. Right. That's the logic that everyone had, but also Tencent had this problem, which was a large part of their revenue at at the time came from China Mobile. So they were actually working together with telcos and the telcos were super scared of mobile messaging. They saw what was happening with WhatsApp, right? So WhatsApp all around the world, telcos, when that came into market, you know, if you remember, especially places like—

Russia.

Like Europe, right? Like, so I'm from, I consider myself European, even though a lot of people, British people, but in Europe it was like you could live in Belgium and if you had to send an SMS message to France, Right? Just across the border, or Germany, that could be like one euro, right? So the telcos are just making this is just a massive cash cow, especially in places like Europe, but also anywhere where there's these cross-border things. So Hong Kong, Singapore, these small nation states where there's lots of cross-border SMS, that business just got decimated by WhatsApp, right? Globally.

And the beautiful thing is, as it should, just like bank transfers and you know, I mean, it's just like ridiculously you know usurious fees.

Big parallel there with blockchain, actually. You know, you could dive into that. With what people say about Bitcoin these days. So yeah, telcos around the world got decimated by this, and the Chinese telcos were also— no, they saw this campaign coming. So the people that Alan was competing against were under the QQ division, and the QQ bosses got to— basically, the rumors are, and still the boss denies it, but everyone says it's true, like, of how China Mobile leaned on him to say, like, you know, put pressure on the boss to say, you know, do you really want to do this messaging project? Because, you know, you rely on us. For all this money, right? We about one third of Tencent revenue comes from this deal with China Mobile. Are you sure you want to do this messaging app? So they were like they still did it, but they had to do it in a very sort of roundabout way. And like like they couldn't just throw banner ads into it and throw all the traffic into this thing because they'd get a call from China Mobile next day like what the hell? So they had to be a little bit you know they couldn't go at it hardcore. Whereas you've got Alan in Guangzhou like nobody know basically even Tencent people don't know who. This guy is. Like, he's just an outcast with his small team. And this guy just goes at it. Now, but to be fair, during the first 6 months of WeChat, it was a failure, right? They didn't do well. It wasn't like out the door. It wasn't like Kik, right? Where out the door they just spammed everyone's mailboxes with email spam. Even though they did have, they could have done that actually, because they were running one product they were running was QQ Mail. But what they did was they were quite conservative. They tried things out. It wasn't working at the time. Xiaomi was the market leader in China with their products. So actually, Lei Jun was competing with, you know, the first generation guys were competing with MeTalk, the product that actually seemed to be leading the China market. WhatsApp wasn't really in the China market. They weren't focusing on that and they didn't have localized servers. So the speed was slow. But then TalkBox came along, this innovation from Hong Kong. So this is a small startup team in Hong Kong who come up with voice messaging. Which was their thing was like, okay, why are we, you know, why are we sending texts? I think the story goes like the founder was inspired by having to send mobile messages to his grandmother. And he's like, my grandmother doesn't know how to text. And like, she just, you know, she can't do characters on the phone. The buttons are too small for her. And why don't I just do voice messaging? And so they were like, okay, that was the innovation that they came up with from Hong Kong. And that blew up, right? That became really popular. And then everyone copied it, right? MeTalk copied it. WeChat copied it. That was a big boost to WeChat as they copied that. They actually did it better than the original. But that was the first thing. And then the second thing was Friends Nearby. So after about 6 years, 6 months rather, they worked out that they released this other feature called Friends Nearby, which was super, super popular at one stage in China. I dunno if you remember this. There was a very short period of time where this was— Where basically you could find people, right, based on geolocation. So the thing was, this is about the time that Momo came out in China. So there's no Tinder at this point in China, right? Online dating is not really on your phone. There's no Tinder. So, and this is pre-Tinder. So it was basically the first Tinder of China.

Yes.

And people were just blown away that you could set like, find women like within 5 kilometers of me. And suddenly you get a list of like all females who are using WeChat within 5 kilometers. You could just say hi, like, and you know, they might reply. Most of them—

I'm at this club, I'm at this bar. Yeah.

Yeah.

There were so many things that blew it up. But yeah, you know, I never knew about that China Mobile pushback, but that makes sense. But then also you think about it, you're running QQ. QQ is like the cherubic, you know, sort of fat entitled baby of Tencent. And then this new one comes along and then you're like, screw that newborn. Like, Wait a second, I'm not gonna support that business unit, you know, is at the expense of my business unit, right? I think there's like, you know, that's just one, you know, perhaps something that happened internally. But I think also most companies just don't have that number one vision or commitment to do it. And you think about like Zuckerberg, like I tell the story about how Zuckerberg gets lauded as like boy genius. He goes and identifies WhatsApp as this acquisition target, closes the whole deal personally in 6 Weeks, you know they signed the shareholders agreement or the whole deal in the original office where the founder of WhatsApp, you know, sort of got his like they signed it on yeah. Yeah, something like that. Yeah, maybe something like and it ended up being a $22 billion acquisition because it was cash and stock and the stock went up, right? And it was like wow, you know the GDP of Djibouti. But like really though, like how much did it really cost Pony Ma and team? To put those three horses, you know, together in that race. Like they were already. I don't think it cost them much of like opportunity cost of them. They probably did it in their spare time even, right? It was like probably a million bucks, maybe a few million renminbi, and then they've added hundreds of billions to their market cap. You know, because mostly because of that, right? And it's actually pretty fascinating that I think that story doesn't get told so much about how extraordinary that that came from within. And if there's one company that should have won that race, it's Yahoo. Yahoo Messenger was really dominant and really out there, and they had it all, and they could have easily owned and dominated that in a way.

Oh, MSN.

You know, but they— or MSN maybe, but I think MSN— but I think Yahoo really had all these other services and other— like, it was just the right kind of vibe around that, right? For mobile anyway. And they lost it. And it's like, you know, Tencent has remained with Pony Ma at the helm and like very paranoid and very Aggressive and you know no hesitance. You know, like Zuckerberg got his milkshake drunk. Like why is he allowing another company to do? Like Pony Ma's not gonna let somebody else do that. Like he's going out and like and it's funny. You know, I think the mobile revolution and the whole you know messenger thing—they totally like Instagram—they did a great acquisition.

But other than that, I think it's you know there's not many you know a company the size of Tencent at. Completely self-destruct, you know, changed engines mid-flight and completely self-disrupted itself. That's not easy to do. But having said that, you know, everyone kind of had to do that in China to some degree because everything shifted to mobile. So Alibaba went through a same shift as well, where there was a period in 2013 where Alibaba were absolutely crapping themselves because they were super scared of WeChat, and WeChat was just Growing like a weed. They had nothing to answer. They tried to do their own messaging app. There's a funny story of Jack Ma getting every Alibaba employee to download it and try and get like 100 friends on their version, and it completely failed. That's a very—

it took a pandemic for them to be successful with messaging, but that's another story, right? I think that their messenger is now widely used by students, but I think they were sort of forced.

Well, in enterprise messaging, actually. DingTalk. DingTalk. Yeah. Yeah.

But I think DingTalk was used a lot by students. Yeah. And then the enterprise messaging as well too. But yeah, it got horrible ratings in the App Store because all the students started to give it 1 star or 0 because they were so bitter that they had to use it for remote studying. But in any case, like, yeah, wow. There, there, there's so many amazing, you know, trials and tribulations around Tencent. Let's go to your book. Tell people in podcast land the title of your book and how that ended up. Yeah, sure.

Okay. Well, the book is about ByteDance, right? And TikTok. Again, it's just going by passion. Like I was really inspired by what they did with Douyin predominantly in China. And I wasn't, you know, I wasn't a super early Douyin user.

Tell listeners about Douyin for those who don't know.

Yeah. So Douyin's the original version of TikTok, right? It's a Chinese version of TikTok and it. Was launched originally in 2016, had a cold start for about four or five months, and then started to take off around springtime 2017. And then by 2018, it just completely blew up. Spring Festival. I think WeChat and Douyin are really sort of S-tier Chinese internet products in my mind. You know, there's nothing else on the same level as those two. You know, there's lots of other amazing companies. And amazing products. Think of Meituan. Yeah, so like we're going from zero to like 200 million daily active users in about year, year and a half. Yeah, that's like. And now today at about 650 million daily active users—not monthly, daily active users, right? So you know, that's like six. I was doing a presentation the other day, so it was like to put it into context, that's like ten times the UK population. Every man, woman, and child opening up Douyin every day and spending roughly 45 minutes in there. Imagine the amount of time, man-hours that is. The reality of what it is today in China, right? So that's a normal day for Douyin in China. So that's incredible. And that really happened super fast. And it happened because the product's so compelling. It's just such a breakthrough in so many ways, user experience, in In terms of content, this short-form video, I think, is, you know, it's just really become something that you see in China. You see it across all different products. Now everyone's integrated short video and Silicon Valley is really behind on this trend and they're just catching up. You know, you see that even very recently YouTube's just integrated YouTube Shorts, right? They've gone into short video now. And this is only like 2021 they're doing this. It's like, it's so behind. It's so like everyone in China was scrambling to integrate this kind of stuff in 2018. So it was obvious to everyone in China, I think, in the internet industry that this was a major breakthrough back then. And the only question was, could this go global? And as a foreigner in China who by then I feel, you know, had some understanding of how the internet industry worked, I felt like, well, do you know what? Like, I really think this can go global. And it's like, there's no, what's going to stop it? I mean, What was super interesting about Douyin, it was probably the first, we can say, social content platform in China where foreigners did really well, right? They didn't do so well in Weibo. There were some case studies. They didn't do very well in WeChat. Again, there were some case studies. I was probably one of them, but like, there's not really that many, but on Douyin there was lots. And today there's even more. Whereas if you're a guy or a girl who's like handsome, good-looking, and can speak good Chinese and want to entertain people, there's a very decent chance you can build a very large following quickly on Douyin. So there was a break, you know, there was obviously something going on here that was very different and it ended up, you know, it did take over the world. It did, you know, today TikTok is pretty much big in every market in the world except for India where it's banned. Everywhere else it's rapidly, if it hasn't already overtaken Facebook products, then it already And then it shortly will do. I think in Western Europe and North America, it already has quite considerably exceeded the amount of time that people spend on platforms like Instagram or Facebook and still has a long way to go if we look at China as being a window into the future, which I think we can, this particular trend. And so that's why there's so much to unpack in this book is just laying that out and that journey that happened and how this breakthrough happened from zero to one, the whole story of Musical.ly, which is so fascinating. And then even before that, the early video products from, you know, things like Vine, things like Dubsmash, and also Kuaishou in the local Chinese market, you know, all of this packed together to create a sort of picture of how did this happen and why is it so important? And yeah, it's, you know, I think there's nothing else like it on the market. And since we launched the book, it's done pretty well actually. And the Chinese version will be out next month. Oh, wow. Month. And so we've got a major publisher in China to license that, and it's kind of semi-endorsed by ByteDance now in the Chinese market. So, so we're fingers crossed it should be available.

So the English name is Attention Factory. Do you sort of translate that into Chinese?

Zhuyi Li Gongchang, direct translation. Yeah.

Share a few ByteDance stories or anecdotes if you can.

Let me think of the— sure. I mean, you know, I, again, I think the Musically is a really interesting one. Or maybe I could talk about the founding of the company, actually. That's also pretty interesting. So they're a Beijing company, right? And the founder, Zhang Yimin, is, you know, an industry veteran. And around the time that I was saying I was in Dalian and people were crowding around a phone going like, oh, this is new. And then suddenly a few weeks later, everyone's got one. Well, the same thing was happening in Beijing at the time. And Zhang Yimin's looking around going like, Hmm, okay, this is actually a pretty big deal and I should probably. He was doing real estate, a real estate portal called 99 Fang at the time, which did pretty well. You know, it was about number three player in that vertical, and he was already pretty competent and knew how to run a team. And he's like, "No, do you know what? I'm just going to go all in on apps. Like this is a revolution. You know, we have to go all in on this, and it's a once in a lifetime opportunity." So he quit his job. And took some of his friends with him to start ByteDance. And they basically bought a bunch of IKEA furniture, shoved it into an apartment in Beijing, rented out 2 apartments, 4 bedrooms in total, got a chef in to cook the meals at lunch and dinner, and then hired about 30 people in total to, you know, so in the Valley, like you have a garage startup, right? Like this is sort of like famous thing in Silicon Valley. In China, the equivalent of that is like To just rent an apartment, like actual not in a residential block, right? So all around you are just like normal apartments with normal people going, you know, who own them and their kids are there. And then you're just like running your internet startup in like bedroom, like with like the wardrobe in there and stuff. Like you just get it out so it's like an office and you go and have cigarette breaks on the balcony and things like that. That's what Chinese internet startups.

What year was that that he got going?

That's 2011. Yeah.

2011. And he was still a pretty young guy, right?

Yeah. That's the thing. I mean, that's one of the comparisons with Facebook there is that he's a similar age to Mark Zuckerberg and he's like 39, I think.

Yeah. Susan is like late 20s. And I think it was kind of tough for him to get funding in the beginning, right?

That's right. Yeah. I mean, so they started doing news aggregation. Well, they started doing memes actually is what they really started doing. If I'm being honest, most people don't know that. They basically churned out about 20 different apps in the first 6 months. And most of them were just very spammy, very sort of entertainment-driven, very trashy content, but they were acquiring users very fast. So they worked out that entertainment was a real need for people. And it was the fastest way to scale and to learn was to just experiment and do all different types of entertainment apps. You basically doing the same format so they could release an app within like 7 days. They had this system worked out. It was super. They were just spamming them out and learning as they went. And eventually they said, you know, we need to do something and we can't just keep doing this. What are we actually gonna do? We're gonna do news aggregation. We're gonna do a news portal, which wasn't a very sexy industry at the time for the VCs. They'd look at this and go, hmm, news portal, news aggregation.

Yeah. It's been done already. It's been around already 15-something more.

Right. Well, you know, Tencent's in that game, you know, Sinelung's in that game, you know, NetEase is in that game. Like these are all like, they've got like 1,000 times more money than you have and 1,000 times more people. And what have you got? And Yiming's there going, you know, we've got algorithmic recommendation.

Oh, it's actually the DNA of the whole company, right? Because they've taken that into Douyin, into TikTok and like, that's the juice. Like, is he a coder? Did he have any chops around that or he smelled that? It kind of in the same way that you were like, I smell WeChat and I'm going all in, right? And he's like, I smell machine learning and out. Like now it's the same, you know, it's like I smell, you know, WeChat because it's messenger. We already have a messenger, but we're going to do it for smartphones and we're going to do it in a different way. It's one little angle and that's enough to just transform. Yeah, that one. Yeah. So yeah, totally.

I mean, you're totally right. The whole ByteDance empire is built upon that. Single insight from the founder at the very beginning. You know, they, there's no way they could have predicted TikTok, right? Back in the day, no one could have ever predicted. But, you know, looking forward, you can't see it. But looking back, it's obvious that everything connects and everything does come back to the idea of algorithmic recommendation, like neural networks, using neural networks in order to match content with people.

And even algorithmic recommendations, I mean, that's been around like, oh, you like this movie, maybe you want this movie. movie, or you bought this on Amazon. Yeah. And like, even that was not so fresh and new, but I guess what was really happened is that it had just become, it was ripe. It was time now, right? Like he got the timing.

Right.

Like you think about it, what did all these engineers in Beijing know about tweens twerking in Tulsa? Like nothing. And they don't need to know because the algorithm knows way more about tweens twerking in Tulsa than even they know. The tweens themselves, right?

Well, TikTok's like a voting machine is how one engineer described it to me. They're like, it's just a voting machine. And you know, all it does is look for engagement and signs that you're engaged and it actually doesn't really know what the content is at all, right? So yeah, it's a good, good way to think about it. Fascinating.

And like that, like Susquehanna Investment Group, SIG, they put in the first money and that's got to probably go down as the best investment in the history of mankind, I think, right?

That's a legendary— in China, in the VC industry in China, I think that's the number one, like, sort of legendary deal. Maybe the Tencent deal with Naspers or the SoftBank deal for Alibaba. Those are also up there with them. It's up there. Those 3, I think, are the ones that just like 1,000, multiple 1,000x return easily, right? And so Yeah, but she knew Joan Wong, who's the VC who worked for SIG, who backed— was already a friend. She knew him from his previous startup and she backed his previous startup.

Another expert insight from Matthew Brennan, ladies and gentlemen. That's great to know. Keep going.

Yiming is, you know, they were friends. Yiming wasn't very good at funding, right? So that was one of the problems that was in the early days was like, he was softly spoken engineer, techie, geeky, babyface, and You know, these VCs, they're looking for the next Ma, right? They're looking for the next Wang Xing. They're looking for like warriors. And then there's this guy walks in and is like, hi, I'm doing algorithmic recommendation. He doesn't speak like that, but you know what I mean, right? They're like, one of them was like, who is this kid? They literally said that. Like, I don't want to look at kids like this. Like, give me someone. It's like very dismissive. But, you know, now they all regret it. Every VC in Beijing has got a story about how they turned down ByteDance. Right?

But I think Google was the same way too. This one VC was like visiting the house where they were in the garage and he's like, do you have another exit? I don't want to walk past that garage. She's going to pitch me. And, you know, I mean, like everybody's got the woulda, coulda, right? Yeah.

Fascinating. VC is a game of regret is what Neil Shen said, right? Yeah. So they did that. But who came in, who swooped in on the Series B was Yuri Milner.

So that's huge. I actually had lunch with Yuri Milner in 2003. I was head of international for Linktone.

Wow.

And the founder couldn't make it. The president, the CEO couldn't make it. The COO couldn't make it. So they sent me, head of international. And I remember I had a backpack because I just, that's the way I, I was wearing a suit, but I had a backpack and I walk up to him and he has like these steel eyes. He kind of reminds me of Putin a little bit. Right. And he's just like, are you a student? Are you a student? And I didn't read it so well. It was almost 20 years ago. He was basically saying, who's this bullshit junior guy they're sending to me in his 30s, right?

Yeah.

But I was like, no, I'm not a student. And then we were at the Grand Hyatt in Beijing. I piled on the buffet and he had like 8 pieces of sashimi and he was, you know, sitting ramrod straight and, you know, slowly eating while I gorge myself. I'm like, wow. And then this apparition just floats over his Siberian supermodel wife. With like ice blue eyes and like these Siberian features and like blonde hair, stunning, taller than him, just like glides over in her beautiful outfit and like sits down next to him. And I was like, you know, I was really getting into angel investing and doing things. And I just, I often think back like, all right, you might think I'm a student, but I'm a student of the internet in China and give me a fund and I'm gonna invest it on your behalf. And what, you know, of course, you know, We always run through these things in your in our mind, and I never did that. I never saw him again. But yeah, he's definitely been you know quite successful in China. But yeah, that was a smart move. He's a backer of Lei Jun from early days as well too. So he's definitely the most savvy guy. There's very few people that have done that, been able to come from another country, even from the valley, and do that.

Yeah, early investor in Facebook, ByteDance, Xiaomi, Jingdong, Alibaba. I think they did as well. And like. so many and yeah, just, he's so underrated. Like he's, I don't know how he's not more famous, to be honest. It's kind of, kind of mind-blowing. Yeah. Well, he does, but even so, I mean, he should be worldwide. He should be like Elon Musk. Like he's that level of what he's achieved is like, is on that level, certainly as an investor in a way.

You know, he's a physicist, right?

Like he's just a scientist, like self-made as well. Like, oh, it's just an entrepreneur.

A successful entrepreneur in his own right in—

Mail.ru. Yeah. So he was the guy who got the deal. And, you know, and in this story, he got the deal with ByteDance when everyone else in China turned them down, if you can believe that. But, you know, the reason he got it, and we found out when we wrote the book, is one of the scoops we got in the book was we found out the real story behind it, which was everyone thought it was because he made an investment in a Silicon Valley company called Pragmatic, and Pragmatic was quite similar to ByteDance at the time. But actually it was for another reason, which was that this angel investor, a guy called Matt Huang. In that case, yeah, he got the deal. It's one of the scoops in the book is because he got that deal because of the angel investor. One of the angel investors in ByteDance is a guy called Matt Huang, who's a big guy in crypto right now. But he also made an angel investment in ByteDance, which is like kind of So he's done very well in crypto and very, you know, also made a, you know, super, you know, life, lifetime-changing investment deal in ByteDance because he came from Silicon Valley that basically Yuri invested in his startup blind. Right. Yuri invested, he went to Y Combinator in 2011, I think. So it's one of the sort of early stories of Y Combinator of like Yuri Milner came in and just gave like 2, I think it was $250,000 convertible note. To every single startup blind, literally not knowing what they were doing. He ran a deal with YC and said like, "I just want to give them money because I think like one or two of them are gonna be huge." And Matt's startup was one of them. So when they were struggling in Beijing, Joan Wong from SIG said to Matt like, "Do you know anyone who might invest in this? You know, Yiming's really good." Like, and he's like, "Yuri might invest. Yuri invests in everyone." And so Yuri's strategy really worked there. He was just like, you think about it, it's just a very scientific, logical way to do it. Just like invest across the board in these industries. Like it's actually very similar to SoftBank. I saw, you know, a presentation from Masa there who is just like, you don't get involved in sort of the day-to-day stuff or like even like the mid-level stuff. You just look like, if you just invest in internet and then look at the chart for internet over like a 30-year period. He's like, my ROI is like 40% a year because it's just gone like this. And so it doesn't matter if it goes down. Like, so I think like that when people would say, you know, WeWork was a disaster and all these other things and criticize him, he's just sitting back there going like, no, I'm pretty sure it's going to be okay. You just need, it's just a short-term thing. And so that's, that was DTS's strategy as well. It was just like, they'll pretty much invest in this because it's China. And it's internet, so it's worth a bet. Some good bets. Wow. Yeah.

Fascinating. Hey, so your book Attention Factory, I really enjoyed it. It's great. And I'd love to maybe have a, you know, another session with you in the future to kind of peel back some more learnings there. I know you're working on another book. Look forward to that. And man, thank you for your time, energy, insights, stories, as advertised. Matthew. Brennan, ladies and gentlemen.

Thank you, Rich. Thanks for having me on.

Thanks so much. That was great.

Thank you.

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