Since the new authorized biography of Warren Buffett, The Snowball by Alice Schroeder, will come out soon (9/29). We should expect to see more Buffett’s articles showing up in the media in the near future, which is good for me :). The book’s name “Snowball” is from the following quote:

“Life is like a snowball. The important thing is finding wet snow and a really long hill.” – Warren Buffett

Warren Buffett probably didn’t pick these 10 tips himself but it’s always good to know more about this living legend.

Content below is directly copied from the source: 10 Ways to Get Rich – Parade Magazine.

1. Reinvest your profits

When you first make money, you may be tempted to spend it. Don’t. Instead, reinvest the profits. Buffett learned this early on. In high school, he and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Buffett used the proceeds to buy stocks and to start another small business. By age 26, he’d amassed $174,000—or $1.4 million in today’s money. Even a small sum can turn into great wealth.

2. Be willing to be different

Don’t base your decisions upon what everyone is saying or doing. When Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. He worked in Omaha, not on Wall Street, and he refused to tell his partners where he was putting their money. People predicted that he’d fail, but when he closed his partnership 14 years later, it was worth more than $100 million. Instead of following the crowd, he looked for undervalued investments and ended up vastly beating the market average every single year. To Buffett, the average is just that—what everybody else is doing. To be above average, you need to measure yourself by what he calls the Inner Scorecard, judging yourself by your own standards and not the world’s.

3. Never suck your thumb

Gather in advance any information you need to make a decision, and ask a friend or relative to make sure that you stick to a deadline. Buffett prides himself on swiftly making up his mind and acting on it. He calls any unnecessary sitting and thinking “thumb-sucking.” When people offer him a business or an investment, he says, “I won’t talk unless they bring me a price.” He gives them an answer on the spot.

4. Spell out the deal before you start

Your bargaining leverage is always greatest before you begin a job—that’s when you have something to offer that the other party wants. Buffett learned this lesson the hard way as a kid, when his grandfather Ernest hired him and a friend to dig out the family grocery store after a blizzard. The boys spent five hours shoveling until they could barely straighten their frozen hands. Afterward, his grandfather gave the pair less than 90 cents to split. Buffett was horrified that he performed such backbreaking work only to earn pennies an hour. Always nail down the specifics of a deal in advance—even with your friends and relatives.

5. Watch small expenses

Buffett invests in businesses run by managers who obsess over the tiniest costs. He once acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only the side of his office building that faced the road. Exercising vigilance over every expense can make your profits—and your paycheck—go much further.

6. Limit what you borrow

Living on credit cards and loans won’t make you rich. Buffett has never borrowed a significant amount—not to invest, not for a mortgage. He has gotten many heartrending letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then, when you’re debt-free, work on saving some money that you can use to invest.

7. Be persistent

With tenacity and ingenuity, you can win against a more established competitor. Buffett acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose Blumkin, did business. A Russian immigrant, she built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator. To Buffett, Rose embodied the unwavering courage that makes a winner out of an underdog.

8. Know when to quit

Once, when Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick—he had squandered nearly a week’s earnings. Buffett never repeated that mistake. Know when to walk away from a loss, and don’t let anxiety fool you into trying again.

9. Assess the risks

In 1995, the employer of Buffett’s son, Howie, was accused by the FBI of price-fixing. Buffett advised Howie to imagine the worst- and best-case scenarios if he stayed with the company. His son quickly realized that the risks of staying far outweighed any potential gains, and he quit the next day. Asking yourself “and then what?” can help you see all of the possible consequences when you’re struggling to make a decision—and can guide you to the smartest choice.

10. Know what success really means

Despite his wealth, Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He’s adamant about not funding monuments to himself—no Warren Buffett buildings or halls. “I know people who have a lot of money,” he says, “and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you’ll measure your success in life by how many of the people you want to have love you actually do love you. That’s the ultimate test of how you’ve lived your life.”

While these numbers seem to be very promising, the Internet business environment in China is actually a bit complicated because there are significant differences between the US and China markets. Let’s look at the China market now.

Demographic structure

Compare to the US, the net population in China is very young – 68.6% of the web users are under 30 years old, while 70% are above 30 in the United States. Currently, the ratio of male to female is 57%:43%, closely related to the real China population. Based on the data from China State Statistics Bureau, the education level of male is higher than that of female but the gap is gradually being narrowed.

In terms of education level, 62.8% of them have high school or secondary school education and only 30% have Junior college or Bachelor’s degree. Not surprisingly, students is the largest group in the net population (30%) and more than half of the internet users (55%) are single.

How about income? 74% of the net users in China earns less than RMB 2,000 per month. That is US$292, an annual income of US$3,504.

After seeing these facts, I believe US Internet companies understand that in order to succeed in China, they need to adopt a totally different business model there. Needless to say, if you simply plan to translate your site to Chinese language and think you will have the same success in the US, it’s not possible for you to compete against the local leaders.

Internet Access

While most Chinese surf the web at home (74.1%), Internet cafes have become an important places for Internet access in recent years. More than 39% of the users have accessed the net at Internet cafes and most of them are youngsters with a high school and below education.

Unlike the US, mobile phone is a popular surfing equipment in China. Because of convenience, around 76 million people (~30% of total net population) have chosen to access the web through mobile phones. This number is expected to increase rapidly because 41% of the Chinese population, >530 million people, are already using mobile phones everyday. Despite the high cost, desktop PC still has the leading position among all equipments. Home is still the main place for users to get online. In addition, 87% of them have used desktop computers with broadband internet connection (China is the world’s No.1 broadband market).

Current Business Models

Below are the top online applications in China today:

1. Online Music
2. Instant Message
3. Online Video
4. Online News
5. Search Engine
6. Internet Games
7. E-mail

As we can see from this data, the China’s internet market focuses a lot on entertainment rather than the main applications in the western markets – information research, online shopping and e-mail communication. Currently, only 119 million Chinese are using e-mail, with the an application rate of 56.5%. In contrast, the e-mail application rate in the US is 91% and 82.1% in South Korea.

According to the report, the e-mail application rate in China is actually co-related to the education level. The higher the education level, the higher the email application rate is. For example, users with postgraduate and above education have a 94.2% rate. People with lower education mainly use instant messaging to communicate.

Because of this unique characteristic, virtual goods and micro-transactions have become the major money making products for internet companies in China. In the US, online advertising is the big revenue driver for businesses. However, because online shopping is not popular, the web advertising market in China is very small compared to US and Japan.

For example, in 2007, Tencent, the largest internet company in China with market capital of US$14.5B, had a revenue of $523 million and $224 million in operating profits. Online advertising only makes up 13% of their revenue. 87% comes from micro-transactions for digital goods, online games and mobile services. This special business model gives Tencent a huge operating margin (43%). In comparison, Yahoo’s operating margin is 10.4% and Google is around 30%.

In the online gaming areas, many games are designed on a “Free-To-Play” model. Players can access the free game at no cost, but need to pay for virtual products and services within the game.

Below is an interesting analysis I got it from TrendsSpotting.com. We can see the revenue breakdown of most of the major online companies in China.

Company	2008 Q1 Revenue (Million US$)	% of Revenue			Operating Margin
		MVAS	Gaming/ IVAS	Advertising
Sohu	$84.4	10%	49%	41%	40%
Baidu	$81.9	-	-	100%	27%
Sina	$71.3	33%	-	67%	19%
Shanda	$111	-	97%	3%	40%
NetEase	$93	-	86%	14%	63%
Tencent	$204.1	20%	70%	10%	51%
Total	$646	11%	58%	31%	40%
MVAS = Mobile Value-Added Service, IVAS = Internet Value-Added Service Source: TrendsSpotting.com

The Reality in the Wild Wild West

So after all this positive data, does it mean that the China Internet market will easily become 4 times bigger than the US market in the near future? With the current US Internet market size, Americans have already produced huge corporations, like Google (Market Cap:$146B), Amazon.com ($34B), eBay ($32B), Yahoo ($27B)...etc. So China will produce corporations much bigger than those in the near future? Unfortunately, it is not as easy as the numbers suggest. China web companies still have to overcome several local obstacles in order to succeed in this competitive environment.

First of all, the unfavorable urban-rural ratio. There are 767 million people living in the China rural area now. That is 57.7% of the total population. Among the net population, 25% of the internet users are living in rural areas, which means they are probably earning a lot less than RMB 2,000 (US$ 292) per month because people in villages usually have lower education level and lower income. This will be a great challenge faced by companies who want to develop the e-commerce and online advertising market in China.

Also, at this moment, every home Internet-connected PC is shared by 2.7 users in average. This means the Internet users may not be able to use the Internet whenever they want. So they are not maximizing the value of the Internet yet.

According to BBC, the whole China’s Internet economy has generated US$5.9 billion in revenue in 2007, while US companies pulled in US$21.2 billion just in online advertising revenue. Even though China companies have an unusual business model in virtual goods and micro-transaction, it seems most of the money are just going to the big local players in China now. Smaller local firms probably couldn’t get a big slice from the small US$5.9 billion market. Tencent alone is projected to earn around US$1 billion in 2008. And you still have other major sites, like Baidu, NetEase, Sina, Sohu, Alibaba…etc.

Another problem is the Great Firewall of China (GFW). Internet censorship in China is well known around the world. It is the government’s effort to neutralize critical online opinion. While I understand the purpose of this system, this will also limit the growth of the China Internet market. They even have virtual cops, JingJing and ChaCha, walk, bike or drive across your screen every 20 minutes to ask Internet users to stay away from illegal content and bad websites. I have to say this is actually a pretty innovative idea. Never heard something like this before.

Future Trend

Younger Target Customers: The Internet market in China is currently dominated by youngsters. Influenced by the one-child policy, local adolescents like to form virtual friendships using Instant Messaging. Their main purpose of getting online is to look for entertainment. This group of users tend to use more Bulletin boards and less emails, probably because IM and BBS are more suitable for leisure chats. So I suggest companies should develop a style and culture more like Disney or Facebook but not LinkedIn.

Learn from Asian Countries: Since teenagers like to consume trendy and branded goods, companies should keep up with the latest trend of the Internet Consumer market in countries, like Japan and South Korea. These three Asian countries have very similar culture and value. More importantly, the internet industry in Japan and South Korea is more well developed than China. China can definitely look up to them.

Mobile Internet Content: 41% of the whole population in China are mobile phone users. That is 533 million people Downloading ring tones on cellphones is already very popular among users. For example, there was a popular ring tone generated over $10M in sales of download few years ago. More and more people will access the Internet through their cell phones. So Mobile Value-Added Services will be a very important business model in the future.

Innovative Technology: In the past, Chinese startups often liked to copy the Silicon Valley models. However, in order to be the major leaders on the Internet, Chinese companies have to be creative and to develop their own brands and new technology.

Open the Market: As the education level of local users increases, the Chinese government will have less control on the Internet. However, China’s Internet is still highly internally referential, with fewer than 6% of China’s websites linking to outside the country. Local firms still have a huge home court advantage at this moment. To improve the condition of the industry, users and businesses have to look beyond the local market for opportunities.

Payment System: A trusting online payment system, which can avoid fraud, can facilitate the growth of the local e-commerce market. However, there is still no ONE dominating payment system, like Paypal, has established in China yet.

Advertising Market: Although the China online ad market is still tiny, it has a YoY revenue increase of 72.5% in 2008. This area is expected to grow rapidly in the near future. Before that, web companies have to educate local businesses about the true value of online advertising because a lot of them still don’t understand the importance of this new digital media. With a healthy ad market, it will encourage people to start more online ventures, create competition and provide better services.

Affiliate Programs: Affiliate program has a crucial role in the US Internet ecosystem. Affiliate Marketing not only help businesses to generate sales lead but also find and retain new customers. Each affiliate partners is an extra sales person working for the advertisers on the Internet. Most importantly, the advertisers only have to pay for the marketing costs if they got additional revenue from these programs. Right now, the affiliate marketing industry in China is still not well developed yet.

Niche and Targeted Market: Since the market in China is so big, it is really hard to compete with the local leaders directly. Startups should focus on a smaller targeted market in the beginning. Wealthier cities with higher education level, like Beijing, Shanghai and Guangzhou, will be good starting points. After all, the net population in these three cities is more than 49 million people, which is already larger than the whole South Korea online market!

The China Internet has its own unique culture and characteristics. Companies have to adapt these differences to fit in and don’t try to ignore them. It is a very difficult task to accomplish but if your company can rise to the challenge, this will be a once-in-a-lifetime opportunity for you to be succeed in the biggest market in the future world.

Additional Resources

China Internet Network Information Center (CNNIC)

Virtual Goods: the next big business model (TechCrunch)

For Chinese IM Portal Tencent, The Money Is In Micro-Transactions (TechCrunch)

China’s Internet User Base Is Growing Faster Than Mobile (Seeking Alpha)

The company is founded by, Dietrich Mateschitz, a former toothpaste salesman. He also had experience selling dishwashing detergents and soap for Unilever, one of the best consumer products brand management companies. It took him 10 years to graduate with a marketing degree in Austria at the age of 28. But that’s not the most surprising part, the surprising part is that “Red Bull” was actually an energy drink selling in Thailand! Also, unlike Coca Cola, the contents of Red Bull are actually not patented. All the ingredients are listed on the side of the can. In other words, this man has turned an ordinary beverage into a billion-dollar brand!

So how did he find out this drink which has changed his whole life? During his sales trip in Thailand in 1982, he learned from a local toothpaste distributor, his future partner, that energy drinks were hot products among people who need to stay awake at night. After Dietrich tried that drink, it totally cured his jet lag.

Since he loved the drink so much and always expected more out of his life, he came up with the idea to create his own business. At the age of 40, he quit his job and started the comany with the local toothpaste distributor. Each invested $500,000 of savings.

Tough Part

However, his entrepreneurial Journey is not as smooth as he expected. Dietrich tried to apply for a license to sell the high-energy drink in Austria but it took him three years and many sales calls to get the license to sell the product.

Moreover, the result of the initial marketing research is not very promising. People hated the taste and thought the drink was too sweet. After losing a million dollar in two years, he still fully believed his company will be successful. Dietrich financed everything without outside capital. He finally realized that the Austria’s market was not big enough for the company to grow. So he decided to expand the business to Hungary, Germany and UK.

Buzz Marketing

After this tough period, the company didn’t have much money left to spend on advertising. Therefore, Dietrich found out that only buzz marketing can increase their sales. He hired students to drive cars with a big Red Bull can strapped on top and asked them to walk around college campuses and gave away free samples at parties and bars.

Red Bull also sponsored exclusive and exciting events that got high and FREE media coverage around the world. It supports around 500 extreme sports athletes who compete in special and often record-breaking events.

So far, it seems his strategy is working pretty well. The energy drink company has 70-90% market share in over 100 coiuntries. In the US, Red Bull enjoyed a 47% share of the energy drink market in 2005. Another surprising fact is that the company only has around 1,800 employees worldwide making the sales volume per employee close to a million dollars. Not bad for a $1.6 Billion company.

Dietrich, the only billionaire in Austria, is ranked #260 in the 2008 Forbes’ World’s Billionaires list , with net worth US$4.0 billion. He is an extraordinary entrepreneur “who got rich not by inventing a new product but by selling an ordinary one inventively”. I like the following quote from him a lot:

“If we don’t create the market, it doesn’t exist.”

I think Red Bull is truly a real brand with soul, hisotry & substance.

Sources

The Soda With Buzz – Forbes.com
The Powerful Sales Strategy Behind Red Bull – SellingPower.com

Currently, LegalZoom is the nation’s leading online legal document preparation service. They started the company with five UCLA interns in 2000 and quickly grow the business into a company with revenue more than $6.5 million and around 350 employees.

Very Early Stage

Brian Liu and Brian Lee knew each other when they attended the UCLA School of Law. Although both of them have worked as attorneys at some of the most prestigious law firms after graduation, they believed that there should be something better than a 90 hours job.

So they quitted their high-paying jobs and tried to raise fund from Venture Capital for their online legal document service startup. Unfortunately, the whole stock market crashed on the day they went to the Venture Capital office. The VC simply asked them to come again in the future.

Usually people will just give up in this situation, right? But these two founders decided to continue their venture because they believed in their idea so much. Eventually, they got the business off the ground using their own money and funding from family and friends. (Site note: their first office is actually in one of the founders’ condo and they didn’t pay any salaries to themselves for one and a half year. Talk about bootstrapping your startup.)

Credibility

For an online legal related company, they understood that TRUST is the most important part for their business. If the customers didn’t trust your site, no one is willing to give his/her personal information to you.

Therefore, Liu and Lee tried to find a high-profile attorney to be their partner so people will recognize and trust their company right from the start. Not surpisingly, they aimed for the best possible target they could find: Robert Shapiro, who is most notable for being part of the defense team which successfully defended O.J. Simpson from his murder charges. Everyone in the US knew about Robert at that time. However, how can they connect with such a famous person?

They thought calling 411 is the best way to do that. So they called 411, got the home phone number of Robert Shapiro and called him at night. For some reasons, Robert really picked up the phone himself. Amazing! After Brian told Robert that they was planning to pitch him a business idea, the famous attorney planned to hang up immediately. But they asked him to give them 2 more minutes. Robert agreed. And Two minutes later, he likes their business ideas so much and finally becomes their business partner and co-founder of LegalZoom.

Keep the Cusomters Happy

So what’s the reasons for LegalZoom’s success? I believe it’s because both founders always focus on what make the customers happy. Lawyers in general have earned a bad reputation for their ambiguous charges. Customers often have to pay for a ridiculous amount of money for simple legal document preparation services. Liu and Lee saw this huge opportunity of providing low-fare online services which are fast and affordable. They thought that some legal services can actually be processed automatically online with much lower costs.

Since they understood that lawyers are bad at customer services, they knew LegalZoom had to change that perception and to take customer services very seriously. That’s why more than half of their 350 employees are dedicated customer service representatives. They believe entrepreneurs should always think in the customers’ standpoint because that’s the key to customer satisfaction.

Start Small

Many entrepreneurs consider VC funding as the only way to get funding, yet Brian reminds us that we shouldn’t be scared to start small and make the business pay as it goes. It doesn’t take that much money to start a web business nowadays. Because they didn’t get any VC money, they could slowly build their business for long term and didn’t have to worry about when the VC will cash out.

Although LegalZoom is in a very competitive industry now, they aren’t afraid of startups with a lot of funding from VC as they tend to overspent, especially on marketing, and can’t stay small in the early period. This kind of startups usually won’t stay long. The competitors that they are afraid of are the ones that are similar to LegalZoom: start slow and smart.

Build the Right Team

LegalZoom only hired when they need. They never overhire. When doing business with wrong people, nothing can get done. Therefore, they like to pick business partners who are different from themselves. They look for people who have different personalities but still can work together.

Originally, they didn’t want middle managers but when LegalZoom became bigger and bigger, they realized that they need to hire professional managers to help them manage a large group of employees. When the office has more than 20-25 people, they just can’t do everything on their own. At the same time, they don’t want to micromanage their employees. They want to find ways to empower people so that they can do things independently.

Competitive Advantage

Liu and Lee believe competitor advantages are more important than barrier to entry in their business. Their competitors are lawyers and most of them are not good business people. They don’t know how to provide good services. As a result, their superior customer services set them apart from competition.

Also, they have built a strong local relationship as they are so close to customers. A lot of their customers are entrepreneurs who need legal services. They are entrepreneur themselves so they fully understand what their customers want. They are honestly trying to help their customers. Meanwhile, they believe LegalZoom is able to do better in every services they come out so they are not scare of big players in the industry.

The goal of LegalZoom is to become a brand name of law. And it seems they are not that far away from that goal.

My friend recently recommended a very good video of a Warren Buffett’s talk at University of Florida in 1998 (video length around 1 hour 20 mins). Yes, it was a long time ago but it is always a pleasure to listen to his advices. We should be gratified that he is still so healthy and willing to share his knowledge with all of us. How often can you listen to a living legend on your computer screen anytime anyplace you want? With all the modern technology, we can easily spread his words and wisdom to all future generations of human beings. It is so amazing!

Every time you see Warren Buffett on the screen, you expect he talks about business and investment. However, in this video, my favorite part is when he talked about personal qualitative factors. He said that companies should hire people with all of the following 3 characteristics: Integrity, Intelligence and Energy. If one doesn’t have integrity, you don’t want him to have intelligence and energy (e.g. if not…). You want him to be dumb and lazy.

Long Position

Then Warren asked all the students to play a game with him. He asked if every students had to BUY 10% of a classmate as a future investment, who would you choose? He said that they shouldn’t choose someone with the highest IQ and school grades in the class. And they probably shouldn’t invest in the person who has the highest paying job or the best looking. Warren said they should look for someone who has Generosity, Honesty and Leadership. The one who will give credits to others even for his own ideas, the one who has the ability to carry out other’s interests, the one they can communicate the best to. Because he thinks that these are the keys to successful people, companies and investment.

In this game, he said people usually will end up choosing the one they admire the most in the class. So if you want to be admired, you should behave like the one you admired. Since you already own yourself 100%, you are stuck with it, you better be one that people choose to invest in.

Short Position

After that, Warren told them to choose a classmate that they would SHORT SELL. The one they expect his/her value will decrease over time. In this case, you shouldn’t choose the one who has the lowest grades, the lowest IQ or the worst job. Warren believes they should choose the person that turn them off. The one that they don’t want to be around with. It should be the person who is greedy, dishonest, likes to cut corner and always looks for shortcuts. These people will eventually suffer and fail to succeed.

According to Warren Buffett:

Good Qualities Bad Qualities Honesty Dishonesty Generosity Greedy Leadership Like to Cut corner Give credits to others even for his own ideas Always turn people off Ability to carry out other’s interests Egotism Treat everyone equally Look down on people

The Benefit of Young Age

Warren Buffett thinks that we can get rid of those bad behaviors in a young age but a lot of his old friends can’t change anymore. They have a self destructive pattern and always turn off other people.

Treat Everyone Equally

Personally, I really hope I can treat everyone equally. I think I have done a pretty good job so far but I know I can do it better. There is a side story I would like to share. Although I didn’t pay much attention to NFL professional football, I recently know that the New England Patriots QB Tom Brady just gets the MVP award after a historical 16-0 season. When I read that article, I found something very interesting. Below are some of the quotes by the team owner:

“And the thing that I’ve found most interesting is if you talk to role players or backups how he talks to them and motivates them. He treats them like they’re going to the Pro Bowl, with that kind of respect.”

“He treats everyone in that locker room the same way he treats me or the coaches.”

It seems that all the successful person would have this quality, not only in the business world.

Moat of the Castle

When people asked what kind of company he would like to invest in, he talked about the concept of Economic Moat. If a business is a castle, he wants the castle has a wider moat to protect it. In business terms, it is talking about the importance of branding. A successful branding will help a business become a share of mind. When people think about happiness and dream, we will think of Disney. You won’t think of anything when we are talking about Universal Pictures or Warner Bros. This is something that will protect the company FOREVER. It is something that is very hard to get rid of in people’s mind. This is an idea I should pay attention to when I build my company in the future.

However, the ex-Paypal team was much smaller than the current size of Google. So I don’t think every ex-Googler has learned what it takes to build a successful startup. It’s amazing when you look at the companies that the Paypal Mafia has founded in recent years. For example, YouTube, LinkedIn, Slide, Yelp, Geni, SpaceX and Kiva.org. Paypal is not the only successful story on the Internet. I wonder why their people can build up successful businesses in such a consistent way…I really want to know what they have learned in their venture and why almost everyone in their team has become serial entrepreneurs. We are not only talking about the founders of Paypal. Even their early employees have become great entrepreneurs now.

If you want to get some insights into Paypal’s early period, I highly recommend you to listen to this podcast by the founder of LinkedIn, Reid Hoffman, one of the early members in Paypal. I am really surprised when I know that none of the members in their team had experience in the banking or financial industries. Somehow, someway, they are able to create the online payment and transaction services that have changed the course of the Internet.

One of the reasons why their new ventures are so successful is because they are still super-connected after leaving Paypal. They will help each other using their own network, even though they are not working together anymore.

Recently, I have read an article written by a famous business writer in Hong Kong. He talked about one of the weaknesses of Chinese is envy and jealousy. People are always worry about others trying to steal their ideas. If China really wants to become an international powerhouse, their local companies should hire more people from around the world so that they can learn how to operate a business in the western world. Also, it would be great if someone can create similar business Mafias in China, Hong Kong or Taiwan. There are really no role models that young people can look up to at this moment.

More about the Paypal Mafia:

on Fortune Magazine

on Inc Magazine

The writer believes international tourism is increasing because the US dollar is on sale. Also, “wealthy Asian players are risking — and losing — money in record numbers inside the city’s most exclusive V.I.P. lounges”. I totally agree with this point as I always know that Chinese like to gambling (or lose money). Chinese love to dream about winning BIG in the lottery or casino. I am lucky that I don’t have this trait at this moment. When can we understand that most lottery winners will declare bankruptcy eventually?

I am really surprised The Venetian is adding another 3,200 suites in Las Vegas after building one of the biggest casinos in Macau. I wonder how well they have controlled their cost on these projects. The world economy is not very stable at this moment and the stock market in China is not healthy either. Many of them are just wealthy on paper. What will happen if the stock market crashes in China after Beijing Olympic?

Anyway, based on this example, we can understand the huge potential of the online gambling market in Asia. Online gambling is always one of the most profitable categories in the Internet. But, of course, it will take forever to get approval from the government. Let’s see who will be the first-mover in this market.

Before the IPO, everyone in the industry knew that the founders of Blackstone wanted to cash out from the highest point of the private equity hype. But, apparently, the Chinese Government or the one who recommended this deal (Antony Leung) thought it was a good deal. It is hard to believe a government is chasing some trendy investment products… They really thought that Private Equity firms can leverage all their deals forever? Come on…

The Chinese government invested $3 billion in this deal and Blackstone’s stock price has already dropped around 35%. I believe this quote on TIME magazine summarize the whole incident very well: “A classic case of selling at the top to the suckers”... what can you say…Of course, you are only a loser if you don’t try it again. Hopefully, they have learned a very valuable lesson this time.

The author talks about how Japanese took apart US products, like cars and TVs, to learn how to make them better. Now Japanese want to use the same formula to develop their financial industry.

To be honest, I bet many young folks in this generation think that cars and TVs are actually invented by the Japanese because the quality of their products are superior than those in US. It’s amazing that they are so successful that no one really cares about who the original pioneers of those products are. But, actually, Japanese is not the only one who has overtaken the forerunner in the hisotry of business. Microsoft Windows > Mac OS, Internet Explorer > Netscape, Google > Overture/Yahoo, Toyota > GM/ Ford…etc. According to the article, Japanese is not doing a good job on this project currently.

No matter what the outcome of this project is, I really admire the way they have approached this problem. At this moment, Chinese is pretty well known of copying stuffs (e.g. we can copy the whole Disneyland in Beijing). By the time they learn how to STEAL something from other countries, the country will become a real power house in the world. However, at this moment, I can’t see any promising companies doing that. For example, for Lenovo, besides changing the IBM logo of their laptop, what did they do to improve their products? They acquired the PC and laptop division of IBM because of the branding value but now they decided to change the logo back to Lenovo. I agree that they have to do this in the future but not right now because Lenovo is still not a household name in the US. Hopefully, they don’t have to change the logo back to IBM in the future…

I really like the following quote in the article, “if Japan did not open its markets, it will just be a small Asian country”. This can definitely apply to Hong Kong and China. After living in the US for 5 years, I realize DIVERSITY is one of the most important reasons contributing to their economical success. So if other countries want to duplicate the success of the United States, they better find out how to attract talent from all over the world. It’s not a secret. It’s a reality. If we can’t do that, no matter how hardworking we think we are, we have no way to emulate the US success.

I bet most Chinese big companies have their own ideology and core values in their business culture; however, they don’t have the ability to show them to the people around the world. In the list of “The 100 Top Brands 2006“, there are only 10 Asian companies on the list, 7 from Japan and 3 from Korea.

I never had any doubt that Chinese know how to earn money. If we take a look of “The World’s Billionaires list“, you can easily find many Chineses on the list. For instance, there are 17 Hong Kong billionaires but none of their businesses are really famous in the world. Although Li Ka Shing is the No.10 richest people, I wonder how many Americans have ever heard of his companies “Cheung Kong Holdings” and “Hutchison Whampoa”, which is on the Fortune Global 500 list. I understand the industries of his companies are not so common but still, if you said you are a global corporation, at least I should see them in the Fortune magazine from time to time, right? Some people, if they are lucky, may hear of “Li & Fung” and “Esprit” but you can’t compare them with companies like Toyota, Canon, Samsung, Sony…etc. Does that mean Chinese don’t have the ability to succeed in the global economy? This is probably not the reason as I have seen so many Chinese playing important roles in many US huge corporations. Then why?

Cultural Difference

One of the reasons for this phenomenon is that those companies place their main emphasis on profits. The primary objective of those Chinese companies is to help the owner and shareholders earn more money. That’s the instinct of Chinese: working hard and making more profits. Therefore, it’s very hard to find out the ideology of a Chinese company. Without that, we don’t know why that company exists in the first place. Some of the Chinese real estate companies said that their goal is to build a comfortable home for their customers. However, when you look at their brands or their promotional materials, you can never have that feeling. On the other hand, you can easily find out the objective and vision of a US company on magazines, newspapers or internet. For example, when you look at Disney, I am sure everyone will feel that the company wants to bring us happiness. Since many Chinese companies didn’t put much effort into preserving their core ideology, they usually can’t build up a good global brand. In other words, they cannot build up a motivating factor in the company besides money.

Hong Kong people always feel a great sense of pride for their entrepreneurial spirit because of their past success in 80’s and 90’s. Nonetheless, if you look at the age of those Hong Kong billionaires, you know that there are no new bloods following their successful path. Moreover, most of the Hong Kong big corporations are family-run businesses. Once the founder retires or past away, the successor usually cannot maintain the same good performance. In my opinion, only a brand with a great business culture can help a global company last forever.

After I read a Guy Kawasaki’s article “How to Kick Silicon Valley’s Butt“. I find out more reasons why Chinese companies didn’t succeed.

Education

I totally agree with Guy that engineers are very important to a country or a city success. They are the one who will really build new products and think about new ideas. Similar to Jack Welch, Guy Kawasaki also thinks that MBA is not very important as most of MBAs only “care about how to get interviews at multi-nationals and consulting firms”. In Hong Kong, the education system is really bad. It overemphasizes the result of exams and doesn’t care whether the students really learn the materials or not. I have never heard about anything related to innovation or creativity while I was studying in Hong Kong. But in the US, most teachers really care whether you understand the materials and they encourage innovative solutions. One of the professors of Jim Collins once said, “The best students are those who never quite believe their professors.” I bet many of the Chinese teachers won’t agree with that.

Immigration

Many Chinese are afraid of competition. When Hong Kong first introduced to import experts and skilled workers from Mainland China few years ago, many people are so afraid and worry that they will lose their jobs but not many people will think about how to improve so as to be more competitive in the new environment. In the US, when you apply for a job, you always compete against people from 50 states AND countries around the world. That’s really TRUE competition. The United States is so successful mostly because of immigration. In the past, people in the US are all immigrates. They brought in different points of view and new ideas to improve the whole society. The situation is the same in American businesses. Most US big corporations put great emphasis on diversity. It’s impossible for you to find a big corporation that only hires white employees. US corporations always want to hire the best and brightest, disregarding nationality. Competition and diversity constantly help you to improve. Why do you avoid them?

Heroes

Youngsters need role models. Like Guy said: Kids need heroes, so that they can say, “When I grow up, I am going to be the next Steve Jobs.” However, if you want to start your business in Hong Kong, the only role model is Li Ka Shing. It has been the same person in the past 20 or 30 years. Something is WRONG here. Do you agree? But in the US, you have all kinds of different role model, Bill Gates (richest), Steve Jobs (innovation), Warren Buffett (intelligent & thrifty), Larry Page & Sergey Brin (make money without doing evil)...etc. When you ask HK youngsters that why they want to be the next Li Ka Shing, they will just answer you, “em…because he is the richest guy in the country”...is it a good and healthy answer for the next generation?

A Different Look at Mistakes

Many famous people always said schools discourage you to make mistakes. But in Asia, the situation is even worse. Everyone dislikes mistakes, no matter they are parents, relatives, teachers, friends, schoolmates or bosses. Failure can create massive successes in the future but it seems not many Chineses have learned that lesson.

I just read the following in Fortune magazine:

A vice president recently committed an error that cost Google several million dollars. When she walked a cross the street to inform Larry Page, Google’s co-founder and unofficial thought leader, Page accepted her apology. And he said, “I am so glad you made this mistake. Because I want to run a company where we are moving too quickly and doing too much, not being too cautious and doing too little. If we don’t have any of these mistakes, we’re just not taking enough risk.”

Dream and Vision

Many Chinese youngsters are afraid of dreaming. If you tell people you want to start a business, many people will just advise you to find a stable job. Or even if people already built up a business, many Chinese entrepreneurs will be satisfied to be a local small company. Why? I couldn’t find an absolute answer but I can say Chineses are good at finding excuses. They will find a million reasons to convice themselves not to do something but won’t spend any time to find out how they can achieve the goal. They will say that the local market size is so small or the China economy is just starting to grow, what do you expect? It is so sad that their vision is so narrow. They never look at the successful stories in other countries. I believe a lot of people never heard of any Finnish companies before Nokia thrives. So why none of the Chinese company can represent China, Taiwan or even Hong Kong? Also, many people don’t understand the power of a dream. They think that dream only appears in novels, comics and movies. This is probably due to lack of successful Heros in the local economy. Most of the Chinese companies on the Fortune Global 500 list are still government operating corporations. It’s almost impossible to find a business hero from all of them. Even you can find one. That hero can never say something like “I build this company because of my dream”...

Conclusion
If we look at the list of visionary companies in the book “Built to Last”, you will find that most of the visionary companies are on the list of the Global Top 100 Brands 2006. If Chinese wants to build a long lasting global company, branding is a must. We should not only learn the technical skills from other countries. We also have to learn their entrepreneurial spirit and managerial skills. I really think that Chinese don’t always have to be hard-working employees or managers. They can be a hard-working entrepreneur, too. Anyway, all the things I have talked about here are reasons for the past failure. We should look forward and not use them as excuses. The future of Chinese companies is still on our hands. The sky’s the limit!