hello, everyone. thanks for coming tonight hosted by politics and prose bookstore. politics and prose bookstore we have been kind of a mainstay of the cultural very seen that it's only the last year or so politics and prose has partnered and we've taken up the book operations here and part of that, you know it's exciting opportunities to bring more books to more people but part of that is hosting events like this where you can no can only hear discussions about the current events and literature but also enjoy the delicious food and drinks so thank you everyone for coming if you have any questions about the event just hop on over

to the register and we have a full calendar of events available. a couple quick things on the protocol since thiprotocol sinca that we live in if you could silence or turn off your cell phones because c-span is here recording and so tha info that n uninterrupted experience here and the second thing, he graciously agreed to sign books which will be in that corner however we do ask that you purchase the books at the bookstore register that will be near the front you will see it t as the places with al place is e books. third thing, he's also a great answer questions. raise your hands and they will e around with a microphone. as you can see it a is kind of loud so don't get too close to your face but do speak clearly

for the benefit of everyone and again, c-span. so today i'm pleased to be introducing the new book the house that jack built. for the u.s. ipo it turned out not to be the largest by any chinese company but the largest in u.s. history, period and that is kind of amazing considering that we don't really know. it's hard to describe. the founder which is consulting company based in china. if the status more like the

explosively successful company. someone with the kind of insider knowledge having 20 years of experience can explain it in a way that very few can and we are privileged to have him here today so if you can join us in welcoming and enjoy the talk. [applause] >> for those of you i did a look around so that we could all connect which is not appropriate because that isn't a product. they are behind another company we will talk about. we want to talk about this

thriving internet culture society but obviously there is this book. i want to talk about it. it's my first book but it was the third company and i think that when you look at entrepreneurship, the failure is more interesting than success and jack had a lot of failure. you don't get into the book but it starts with a chapter on the company and then it has a chapter on the man but then we go back in time to his birth in 1964 and there's a lot of challenges and hopefully one of the things that will designate about the story that is resonating is it's not just a china story, it is a story of overcoming adversity and being underestimated and cultivating being underestimated so maybe we

will start with three things. it's kind of not permit candidates icome it kind ofis it ebay. it's some of these iconic companies in the u.s. but obviously the chinese market is in the u.s. market so we wouldn't expect this company to reflect the u.s. equivalent. jack didn't start out to create the amazon of china and it is into the amazon of china because there was a company that did try to become just the height in meters of mount everest except that it isn't that it was convenient and there was an unlucky name for the company. jack didn't want to do this in 1999 when he founded the company and he was right because the market wasn't mature enough for

three important reasons including he didn't have enough money. he also couldn't pay for the goods and he couldn't ship them reliably. if we fast forward one of the reasons it is so successful is that he sought peace problems and he created what i call an architecture of trust. those of you that visit china know that the rarest commodity oother than the fresh air is trust. it's just the society developed in a certain way and trust with preserved within the family and then theoretically it was going to be the state and the party but those other things are broken down and to ultimately create a successful trading environment he understood he had to close that loop so heated and innovation some people say there's no innovation it's really not true.

yes it is partly like paypal that we take another example of another country that's better than other equivalents in the u.s. and elsewhere and once we studied them to talk about what is innovation people often think of the moment often it's incremental and market driven. he's not a typical. in the book we talk about the iron triangle of the payment logistics and it's in those things once he got them together to become very dominant in the consumer e-commerce and famously took on ebay and defeated them. now i guess they have the left

of center origins and i'm happy to say i almost give the evil capitalist because i have a stock options. i met him in the summer of 1999 and worked with him and i was given the right to buy some shares and they didn't just before they launched so that is the 30 million-dolla 30 milliono this gives me street credibility that i had an opportunity and i said no. [laughter] because i am clearly left-wing. the fact is i underestimated him and i'm not going to do that again. [laughter] but because this problem was so difficult nobody thought anybody could solve the problem and also when they started coming and people thought nobody is going to be able to resist this company coming in. i'm going to play up the left wing thing here but basically it was if you remember some of you

hopefully where they are at the time that we had the boom and bust and ebay was the company that survived reasonably well and then he said it was the presumption that they were just dominating and he outsmarted them and that's why he is an icon, the origin of the iconic status as they took on and defeated the international company that would crush this local upstart and famously people talk about his quotes but it's coming across the pacific ocean is. so we went through and analyzed every speech that he's ever given and it took a while. they stand up and they have a

reservoir of these things in their head and a similarly we can just pick one at random. when everyone thinks there is a great danger there are opportunities hidden that can be brought out and i pointed us to try to make fortune cookies actually because his quotes are just made for these to actually make these he has always had this kind of charm and the other point i want to talk about and we can go into more detail about the company but it's really about jack. what's interesting is they started to dig into his history and i've worked with him when. i've heard has other stories and wanted to go back and dig into the real jack. and essentially as i found as a

researcher i am vested in the dow jones search service. you think google has everything but anyway, i found his article from shortly after they started the company that he meant when he was 15-years-old and they tracked down the subwa boy thats 12-years-old and he was doing things extremely helpful to understand the demand and some of the pictures in the book are never seen before and that is interesting. every story was recycling the same picture and the same kind of narrative that didn't often make sensei was just based in to the story so i started calling them in australia randomly calling and e-mailing and then i

was losing hope that i e-mailed the studio and he sent back good day, that's me and posting a stereotype he probably didn't say good day but anyway, he's been great and he shared with me the family photographs and the whole story but it was a meeting with basically trying to burn down a forest outside the hotel and he took interest in this. anyway, it is a sign that in life we think of me as well the people that created these big companies. so did they make their own luck and he kind of made his own because he is a person who really isn't a technical guide and we go back and we see that he failed the exam's terribly. he got one out of 120.

i don't know how you even get that. then he got ten or something. and in china it isn't a society that values necessarily purely the liberal arts or creativity. we all know the language involved and so this is a huge obstacle for him but he had already become a quite interesting person because his english was good and because he would go up and walk up to anybody frankly at 5:00 in the morning this is the kind of stuff that we knew that i wanted to get the detail. so it is true to the traditions of the books i'm overplaying the element which is good but he was a union organizer and his mother was a member of the australian communist party until it was disbanded. so he had taken his family to china in 1980 when he was 15

because he wanted to show the children to socialist paradise and we also went to cuba later that year. he became a penpal with david and i have one embarrassing thing for jack. this family brought him to australia and it was a big deal for the 80s and they ultimately helped jack and they bought him an apartment and then that became the genesis of how he actually had some savings that could allow him to take a risk and beyond generic. so there is there's a personaln a corporate element and a broad picture of what is done right to tell us about china and its relationship in the world and i think that by the way, i don't

know if you knew, and i think he might be here -- is opening an office here in washington, d.c. i think they already opened it. they have a space of a temporary office and the opened in new york and they were already up the west coast and one of the things i did in the book i don't know about you but i lived in china for 22 years and i find the geography and pronunciation of things quite difficult figure to the airport and the there are cities on the airport i never heard of before. this is where he's from and this is his constituency [inaudible] this is how the investment that we have seen up the west coast is important because he discovered the internet in

seattle and i will be there on tuesday of next week and there is a whole back story to how we got there but in a sense we have had this west coast technical trade relationship that has been underpinned but now he will be here on the east coast and also they are in europthe year in eud london and munich because they are increasingly reaching out to the point is they are having an impact on us even if you are not in china and won by the sheer scale is a company that we heard a bit become the largest retailer in the world and it doesn't have any inventory. it doesn't actually own the. it's a platform. but this massive scale is allowed because it doesn't have the cash flow and so it is an impactful business model but it is going to be bringing in

products that the u.s. makes, and it's not just coach bags or luxury stuff that they are trying to move into next week in washington state. there are some from the washington state apple commission last year at a promotional event event they fee equivalent of and within 72 hours there on the tables select other through doing through he is in through because this is the dream they want to have so that they can be the small merchants kind of allies in the u.s. or europe as well as in china and in that constituency the strength comes from representing the interests. i have a whole chapter on the

province maybe some of us know the fixtures in this room have come from this trading place. 95% of the world's toothbrushess otoothbrushesor maybe there's a are made there so this crazy element of concentration in this province and what we are beginning to understand i if ths is how propelled the company is but we need to know what is the rise of the private sector what does this mean. this is different from the headlines particularly in washington, d.c. and tomorrow will be the state department and eisenhower to talk about the defense side of things but there is that scary part frankly. but there's also that kind of chinatown and i've been involved in trying to connect dc for some

time. they are from the dc public schools like this crazy place that was so foreign that this is my colleague that introduced me to the back story and i love the connections between them because there are some important similarities between the cities. we are trying to connect them with the back alleys of dc that you showed me just around the corner so it's true and it's about people to people actually end that is the scary stuff that will never go away. i had a question yesterday at the society in new york but other lessons from the experience is it possible for business people to go into

politics i said clearly the u.s. is a shining example of why that shouldn't be the case, so i support the communist party of china having a wall is because there i think it's actually interesting in the normal country he would be a person with a constituency he would think he's a politician with a small piece. she knows how to motivate people that i've seen him in 2005 a 20. with him on the stage with bill clinton. he showed up at an event. actually in november in manila, president obama interviewed jack on the stage but that was kind

of the reversal approach goal because if he was on the stage one thing you never want to go on stage after because i don't know if you saw the videos of him sporting a mohawk and singing that he is not a tall guy and he calls himself the t.. but who knows somebody could go from being an english teacher to some questions we can go in any direction and i'm probably already doing that. [laughter] at least i can blame you this time. [laughter] >> next question? spinet i have a question. i go online and buy some goods and go to the site and buy whatever it is i want to do why is it they feel the need to go through, what is so special about the website in china that

all of these western and international businesses are having to go through, what makes it so special? they don't put everything on their store. the brands are special. often it's the numbers for the higher-end brand. >> there's 5,000 color codes 5,t we would do this for the promotion and you can see the key rings and eyeglasses.

if you think about china you're standing on an escalator and if you walk into the market and are able to defend your position if i'll be writing up because in the urbanization there is still despite this, there is a rising middle class so you are right. they don't have the limited-edition high-end stuff but frankly sometimes there will bbe like inventory clearing and things like that but it's more than that. it is the most attractive way to connect into digital or the middle-class platform. it is way over half now. i think it's right to say it's more like a virtual supermarket in that it is the brands that have very large merchants and

it's how this is why i should have invested in 2003 they started the cycle and that's when the small merchants and there are 9 million selling so it's my friend who might be a government official who doesn't have much to do and she is training during the day was a maybe it's an idea for the bureaucrats but frankly there's a lot of underemployed people as well as unemployed people are just need to supplement their income and what they can do what ican start selling plastic garbage cans and this is why everything is made in china when you buy second hand and people start selling things. this could be another brand that you said nike.

there's a lot of things in the early days. most of the westerner westernere believed could see in beijing it's getting harder to shut down the market and things like that but they go overseas to buy the real thing and i'm going to repeat this and i will probably get myself in trouble but i will do it again. hopefully she isn't in the room. she was walking down as one does they said can you come to me it was 200.

when they gthe big overseas theo buy louis vuitton but they know there is basically parallel input into somebody walks in and says i want 100 bags so they are allowed to wear three. so they go up to people sure do. i just need your id and i will pay you up front and then you will keep whatever it was and to her credit she said yes. so they want to buy the real stuff into the westerners want to buy the fake stuff. it is a market. so how they keep this building was important to understand about it is it is free so i can sell these plastic garbage cans

for nothing but i don't have to pay them because it is free of course. i'm going to probably spend some time on advertising. so they make nothing from the listening fees and that's why it died. they famously said free isn't a business model but i that is, ty were wrong. they want to do more and more and it's becoming a bigger part of the business. but there is an issue with is the merchants sometimes by their own products. it will get them the rankings and they are the number one licensed companies are those that have lived and visited no

it is completely unpredictable in the way that we all become addicted to so if you went across the road and i can see a stoplight here it doesn't mean it's okay. green is more like read actually. that's kind of how you have to understand the often contradictory rules. in the first day or two you kind of -. it is intensive but we miss it t and we love it there. that's what they have com, they captured the feel. so if you buy one from a merchant for example let's pick another that might be someone

selling title stockings and all he does is a very narrow range thabut many people use him becae he is always using good quality and it's always delivered on time but he makes five times just making but what happens is it isn't just a one off type of thing. you have almost like these vendors you basically have people like the old market that will give you discounts and send you free stuff so they are thriving because they've re-created the china that we know online and others.

you have to fill in this forum m and they just failed even though they had a very good early start but they kind of messed it up and i have a whole chapter so the credit was early to see the promise of china but was let down by some of the people in her team. d thank you for being here and ensuring the story of alibi. i was wondering if you could tell us with respect as well as the discussion that there's going to be a venture in dc and new york, sort of two questions. and the second question is there going to be a government affairs

office or is it going to be just again helping out with respect -- syndicates the representative that sent us into san francisco but they have a lot of people in the white house in the penetrating bodies so there is a political element or a government to government element because we have seen how many chinese companies haven't played that card well and i am originally from the uk. my home broadband but in the u.s., no. they were not allowed to buy from them and he' he stopped toe chinese or something so there's an awareness that there's also a practical reason to reach out

and i think they visited and my former colleague whom i met is now working at the departments of there's a growing awareness you have to engage in the government aspect and it is true also for china in this question hell do the deal because the government and internet they tend to think of it not just in the country but on a global level you have apple and the fbi so they have a huge influence and of course they have to consult and i forgot the first question which is the competitors. i just did a look around but it's also a way to connect the red sox looks like others like ourselves who use this as an application for their daily

lives. this is your digital wallet and i can send you money right now. everybody in this room we could actually put ourselves on a map say that we were dispersed over dc and we could convert on this one point was that there is a huge functionality and that's actually been the challenge they have their own bath was a bit late to the game and they spend money catching up with the china clipper and invested in the snap chat and things like that so they've been trying to close the gap but what is important is i think i could have up to 100 people in a group or maybe it was 200 of people selling stuff this way so they could have 100 people in the group and it is very powerful because as my

friend said these are the best umbrellas so it's like the chad commerce. it was an interesting come across the border and it is worth actually more the last time i checked. so that is the main competition on the e-commerce i say in this arena and it is the chinese google partly because they messed up by leaving prematurely when they didn't need to frankly and there is a whole debate about that but also they are not as innovative as the company as they would like to be and they have some headway in the delivery so everything you do right now you do for yourself and you can order any kind of food and product will be with

you normally in an hour or ten minutes. so others have been investing in the online to off-line so they brought up the equivalent because you need to merge and stop blending using cell phones and this other stuff so the main competition we call it ali baba 10-cent and sometimes they gang up. it's not frankly related but huber isn't doing very well. but in the one market where they

frankly are behind him but i reasoned that they don't have the proxy equivalent and they are very quick to scale because they have a huge distribution and ended up it was so intense they ended up merging them because at one point they were spending hundreds of millions of dollars to the passengers were being paid to get in the car and the drivers were being paid and in one case he was offering free beer to drivers so they could pick up a crate of beer, not the most intelligent but it made at the improving of the driving conditions so they ended up merging. you see now that they are investing in the main competitor list. who here uses lyft and uber? was interesting in this

competitive landscape is influenced by china so this is a chessboard if you can imagine that that is what is happening and that's why the stakes were so high in the competition. >> [inaudible] >> [inaudible] this is the cross marketing. >> i want to ask a very simple question which is what is the weirdest thing that you can buy online and i'm talking about the absolute weirdest thing. >> this is c-span, right? [inaudible] [laughter]

one was making earrings made from mosquitoes and they were quite popular. i guess in a jurassic park kind of fashion he got a lot of requests and then he actually told the story about this guy he said i would like matching mosquitoes because they are not all unique like snowflakes. [laughter] so you can outsource a breakup with your girlfriend or partner and there are people that offer services. it's not just products increasingly moving to the services so you are too scared to break up and you get somebody else to do it for you. so you show up at the date and you talk about all these

horrible stories of a gay die buried a lesbian just to appease the appearance that the new hire somebody to show up so you name it. it's partly due. i'm really overdoing it here. there is a law that is implemented. you can actually hire somebody to visit your parents. how great would that be if you didn't have to fly. [inaudible]

it's just a reflection of the society. one thing is that they pretty much continue to exert a lot of influence including in the area accusing corruption to clean up the system if you want to take one kind of headline and on the other hand it's clear it is leading in a different area that you used the phrase the global situation.

can you elaborate? this gimmick it is really the key part of the conclusion. we wouldn't be having this discussion but certainl certainr the authoritarian centralizing influence. two days before they declared the italian feminist or jack declared that it would be winetasting day.

they will clear it out so that t we have is engaging china. it's quite dominant in e-commerce today in the new areas. i talked earlier about how jack created this iron triangle. >> it was the leftover treasure.

the banks were scared even though the banks controlled the hundreds they never experienced competition like this if they had been pushing back the. of the banks are fighting back at thand the same in the media increasing state control. but on the other hand. so the quotes that he makes is probably going to be this one. if they want to be successful they have to be wise, credible

and audacious. they had a great design like this. they have the visits in one year and this could be the bureau. they are proud of having the government officials. it's to say china is moving towards a consumer driven economy and we are moving away from the old positions if it is

useful to the government and he's made himself useful. it's not a strategy that his whole life is about being very entrepreneurial and knowing the customer so i don't know the answer to where the disconnect will happen. they don't have much power. cover. he's a good friend of jack and often he was the secretary in theory as a part of the connection nobody knows the chemistrchemistry but she's rig. so, interesting.

we just met there in 2000. [inaudible] i think we needed for the tv. i wonder if that is something that he is known for asphalt and how does that resonate with the chinese [inaudible]

bill and melinda gates. it's interesting because he's talking about healthcare and hed investing in pharmaceutical companies but objectively there is the aging population and jack wants to do something about it. in the u.s. it is easier to do something about it for example in the huge state to help preserve the fisheries and you can do that because for example i don't think that it was him

but people come out of the woodwork claiming this and that and china is still debating the organizations another example of jack pushing the envelope that we need to change the sting helping reduce the consumption but he has done amazing things and actually the celebrity culture is in china, to back so they move to that and you're right this is his legacy mode now and the gentleman has been very patient, yes.

very interesting commentary. the government has been trying to move away from the investment and export model towards consumption for many years and seems to be giving it more successfully. this model that they've come up with is very much a mass-market model and do you see this actually having a significant impact on shifting the demand within china to do more domesticated model or even though the numbers are in the millions and billions is that so too small of a part to make that difference? >> talk about grocery deliveries and over 50% now online. i try not to put too many in the book that e-commerce is deserved but it's the main course what he means by that is it was never

very efficient in china so. it is pension reform and labor market reforms. to shift the economy. it's the small portion compared tto the trillions of trillions f the entire economy.

this is opening up new markets. it depends where you go to. you will have a completely different experience. for example there are many different realities and i think la but is trying to make himself accessible from that happening which is good for them but it's also good for the country and the vice chair i interviewed in the book that it's like gm. what's good for america is good for gm and vice versa and that is what he was going for. we were so in trouble.

but a major slowdown in the economy. but we still have this organization and its hard to put the genie back in the bottle and i think that's the thing about getting the consumer's trust in the sense of choice that's what has been uncovering the economic revolution yes, it will be a race against time. [inaudible] >> based in chin >> based in china for the u.s. news and world report. by question is related to that. someone that is sort of concerned about the development of press freedom in china or the lack thereof what do you think that the intentions are? >> they did purchase in hong

kong which is the main english newspaper and there's still one left. my colleague ted roche but there's been some symmetry. they did it personally for the company is why is the company doing it it wasn't pretty choppy waters of. today hong kong is divided as a society in the party after so

why would you wonder into that there is some argument it's not just south china in that group like the other states but it's pretty hard to say they are unaware of the risk so if they are to give it. they are investing in the business and they probably faze the paper. but they don't but they will doy will do it for the editorial staff. they are more mature than that but it's going to become a vehicle.

it took a while if they were not participating in the release. but who knows. it's still in that post. is it completely saying nothing happened but in beijing is increasingly sensitive on the domestic newspapers including some of the more limited ones. it's sensitive because that is the whole show so i think you're right it is increasingly either speaking last night as you know

he's written about the deteriorating environment and we see that about how many people are coming to him in academics that just wants to leave to go back to china and they have been recruiting talent and things like that but they see people wanting to leave so this is an issue in the nation if the talent is leaving but certainly we see more and more because they are frustrated to study liberal arts so there's a lot happening in that society where they are just hammering down the list probably not a good idea but it can be a release to some extent allowing people to vent and also giving people things

they can do to play games and buy stuff, retail therapy. i don't know. it's a canary in the coal mine. any comments? >> i think we should say we were in high school together but -- [inaudible] basically in the marketplace you are saying that essentially it's selling plastic bins originally and it is selling more and more stuff than they are trying to build a consumer-based model and everything.

do you see the emergence of the major brand is emerging in china that makes whatever problems they may have do you think that the emergence of global brands or at least the powerful brands, are there very powerful brands within china and do you think that as a model that could be expanding and could play a part in this expansion of the consumer-based society?

>> more chinese companies will have to come out because there are already very established western brands in china. and a lot of chinese brands have to go overseas to buy talent, the buy markets. you're right, the internet may create a new base for them to develop. that's been the case with one that uses scarcity marketing and fan clubs to take on the nokias and the apples, whatever, even though they're a lower price point. that's a very good question. chinese are frustrated that, you know, name a chinese car, right? volkswagen. [laughter] what's that? >> [inaudible] >> and what -- you're right. they bought volvo, but they're keeping the volvo name. this is the smart thing or, hopefully, i don't know that the situation right now, i know that you can't really create a global brth