Joe Tsai, Co-Founder and Chairman, Alibaba: Find Your People

Thank you, Jeremy. Very happy to be here.

It was scary. My first, well, first before I went, you know, I never went to seventh grade. I was in elementary school in Taiwan and then my mother said, "Joe, I'm going to send you to school overseas, but you have to learn how to speak English." And I didn't know how to speak English. So, I went to an English cram school for one year and skipped seventh grade. So, I went into Lawrenceville in the eighth grade. During that cram school year, I basically memorized vocabulary, but I couldn't put together a sentence in English. And that was sort of, so imagine you didn't really know the language, you don't know how to communicate and then you're in a completely new cultural environment, just kind of just land, I mean literally like fresh off the boat, right? And landing in this very unique environment, you know, boarding school, it's an all boys boarding school so that has its own sort of pitfalls. And you just have to fit in. I think I wanted to be one of the guys. I wanted to conform. I wanted to fit in. I look different. I dress different. I speak a different language. So it's very important for me to feel like get accepted by the rest of the guys. And then very quickly I went into sports. I got cut from the baseball team unfortunately. Imagine a kid from Taiwan, little league baseball, and you know, I didn't make the team. Didn't make the swimming team. But then I said, "The hell with it. I'm gonna try completely new things." I played football. American football. And then got into lacrosse. Because I couldn't play baseball. It's a spring sport. Lacrosse and baseball are spring sports. Couldn't make the baseball team, so I went to play lacrosse. So the funny thing is yesterday Jeremy and I, I think he was very worried, you know, so he wanted to have like a prep session. We spent, so yesterday we spent an hour to prep for this talk. We talked nothing but sports.

Thank you so much. Thank you.

Undersized linebackers.

It was not only zero revenue, Jack didn't even have a company. It wasn't incorporated. And so Jack, all Jack had was a domain name and a fresh website. And I still remember the first time I went to see him. I climbed up the stairs of the second floor, second story apartment. There were a bunch of shoes, you know, outside, you know, you take off your shoes, you go inside and we talked for about an hour and I thought Jack was fascinating. He had just charisma, that leadership quality. Jack used to be a teacher and I think teachers make very good leaders because you have to communicate well. You also have to be able to identify good talent, good students and develop them like what teachers do. So all those quality kind of came through and that was what I was really, I found very appealing. I couldn't understand the business plan because the internet was new to everybody at the time and he was talking about using the internet to get all the companies in China that makes stuff and trade stuff to overseas and have foreign purchasers and buyers coming to the website to buy stuff from China. It's a wholesale marketplace. So Alibaba's first website was actually in English language because it was made for the rest of the world. So an hour into the conversation I said Jack, you know, I need to have a bathroom break. So I go into the bathroom and there were like 10 toothbrushes on the sink. So I realized people were just sleeping, living there, sleeping bags all over the place and it was the early days of, you know, kind of the startup culture. And I decided, you know, I would say this to young people, when you want to switch jobs or when you find a new job and you want to do something new, find the people, the people that you want to partner with, the people whether you want to follow, the mentors that you want to learn from. And to me, Jack is both a friend, a part business partner, and also a mentor. He's taught me a lot of things and I felt like I could learn a lot from him. And also at the time, you know, the internet, if your business had a dot com name in it, everybody thought that you were going to become a millionaire in six months. But for me it was Jack, that personality, that leadership quality that actually came through from having been a teacher.

Well, first I think they should, it's something that you can get along with, like do you want to go out and have a beer with this person, you know, after work. I think that's the first test. I think the next thing is being complimentary. So something that they're good at you're not good at and something you're good at they're not good at. Having that complementarity, being able to complement each other is really really important so that the founders are not stepping on each other's feet. Alibaba started with 18 founders. And I think we all complemented each other. People brought different skill sets to things. And I think as you think about starting companies, it's not like you want to go out and find 18 people to found a company with, but I think only two or three founders sometimes is a problem because as you scale the business, your culture gets diluted and there's no founder around to have touch points with employees and having 18 founders, we had that advantage. We were able to, each founder is able to touch more employees of the company. So I think that's important. And then just people that you feel you want to spend 24/7 with and have a good time because as a startup you're not going to go home very much or this work life balance is not going to be something you should be focused on.

Yeah, I brought my toothbrush afterwards.

By the way, I was not CFO, I was COO for three months and then Jack fired me because he said, "Joe, you have no clue how to do operations." I was like, "All right, fine. I'll be the CFO."

I think the first thing is, well, I'm usually more of a listener. And I approached the work with just with humility. I'm there to learn. I didn't know anything about the internet. I had never worked with a company where it's majority mainland Chinese in China. You know, because all my prior work experience had been either in the United States or in Hong Kong. So for me it wasn't my place to come in and tell people what to do. So I listen a lot. And just try to, again, that Lawrenceville experience, try to blend in, try to be one of the crowd, one of the person in the community. And I think that's helped me a lot. I think you have to bring, everything you do, you have to bring a sense of humility to the work because there's going to be people, you're going to find your colleagues, your partners that are smarter than you are that can teach you a lot and you need to approach your work with that kind of mindset.

Because he's better at being in front on the stage. He's a better speaker. He's a better inspirational leader. I think it's very very important. I mean, I would like to think I've improved over the years in terms of communicating to people, but he's a natural for him, just getting on stage, have all the employees in the same room and just say, you know, here's our direction. This is why we're doing it. And he's very persuasive, so he's better at it.

Not, didn't go very well. We got, I think we struck out. We had something like 15 meetings. We didn't get a single investor interested in investing in our company. And that's because I think at Stanford GSB, you're taught to show up with a PowerPoint or something, right? You have to show people something, a demo or something. We didn't have anything. We came empty-handed. And people are like, "Jack, what's your business plan?" Jack says, "I don't have a business plan." He actually said, "I don't have a business plan." But the trends at the time in China was, I mean in hindsight you could have seen it. It was the intersection of internet technology and also China coming into the WTO, which meant trade between China and the rest of the world was going to explode. And today you go to China, China is a manufacturing powerhouse. Everything is made in China and they're getting better and better, higher and higher quality, higher and higher tech technology. But the seeds were sown back then. That was just on the cusp of entering into the WTO and imagine getting all these manufacturers and trading companies bringing all their products online for the rest of the world to see. That was the business idea. But Jack didn't just talk about the business. He said, "My mission is to make it easy to do business anywhere." That was our mission at the time. That's what we told investors. And today that is still our mission. And you can go on our website, Alibaba website says to make it easy to do business anywhere.

Not really. Because the investors just looked very baffled. They didn't give us a lot of feedback. They were kind of reticent. They were just, I think they just wanted to reject us outright. But that experience was important. Because we came back and we said we have to do what we believe in rather than have investors tell us what we should do. And I think that was a very important lesson. And then fortunately we were able to, you know, raise some capital. Some investors finally very skeptically bought in. I still remember our series A round. We actually had Goldman Sachs come in. I mean you think, you know, you went to Sand Hill Road and you got Goldman Sachs. They at the time Goldman was investing like large private equity deals and then they had sort of a, you know, emerging technology investment business. And I happen to know the, have a friend who is a partner who was running that business and then she calls me up and she said, "Joe, you know, I've got good news and bad news." And at the time, you know, by then I was so, you know, disappointed with all the rejections. I was like, I can't stand any bad news. So tell me the good news first. And she said, well, we have our investment committee have approved the investment in Alibaba. I was like, that's great. I was about to hang. She said, wait, wait, you know, you want to hear the bad news? And I said, fine, what's the bad news? And she said, "Well, we also decided to back five other companies that's very similar to your business model and, you know, we're just going to see, you know, you guys compete."

It was back in the early 2000s eBay had acquired a company called Eachnet. So immediately they had a large market share and at the highest point they had like 90% market share of consumer e-commerce and we were the new player coming in. And so one day, well going back, I mean I was talking to the dean here and she mentioned someone, Jane's son who is the CEO of C-RIP and her husband was the first CTO, John Wu, first CTO at Alibaba. He came from Yahoo. So, sorry, this is a long-winded story. And when Jack decided to launch a consumer marketplace, Taobao, he was very excited. He had talked to Masa at SoftBank and Masa was very supportive and because it's a big idea. Masa will support anything that's big, anything that costs a lot of money, he will support. And Jack's very excited. He said, "I got the money from Masa. I'm going to do this." And he goes to John Wu, our CTO, and John said, "No way in hell, over my dead body are we going to do this?" And that's because John had worked on Yahoo shopping. And it was not successful. So he didn't have a very positive view of us going into the consumer e-commerce space. But then obviously Jack overruled everybody and I didn't know, strategically I couldn't make that judgment. But I decided that we were going to structure it so that financially we weren't going to get totally hurt. So, actually from day one, Taobao actually was a joint venture, a 50/50 JV between Alibaba and SoftBank. And it wasn't until like six, seven years later when Yahoo invested in us, we took the opportunity to fold in the rest of Taobao into Alibaba to own 100%. And that was the best decision we've ever made. Otherwise, today Taobao would still be half owned by SoftBank, right? And we wouldn't know where it would go. So, but when we started Taobao, it was a secret project. And if you guys know Alibaba a little bit, pretty much almost all the startup new businesses went through this apartment, the Jack original apartment, you know, with the shoes and the toothbrushes. So we took away a team of seven people into this apartment. They all had to sign NDAs. They couldn't tell their colleagues or spouses or anybody. So one day, you know, you're the person that you're sitting next to the cubicle next door disappeared and people are like, where did they go? So the first seven people seeded the Taobao business. They went to the Jack original apartment to, you know, do the work, create that marketplace. And then our first, when we launched it, the first items being sold on Taobao came from everybody's closet. Everybody just went to their closet and said, "What do we have? What can we find to sell it on Taobao?" We seeded that marketplace with a lot of junk. That's how this thing started. And for, I remember it was for almost a year we kept it a secret project. I mean the website was launched so people knew Taobao existed but nobody knew it was connected to Alibaba.

Is that right?

I need to put that into our investor presentation.

Yeah. If you want me to join, I'm happy to hop in.

Well, we don't always do it right. We've gone through periods where when we stopped innovating and we suffered from it. As a large company, you know, by definition, I mean, we have 120,000 employees. It's very difficult to have people in such a large place. Everybody has their role, right? It's very difficult to get people to think about new things about the future, innovate. Because when you have an established business then you have to set business plans, you have to set established goals, you have revenue projection that you need to meet and all those things get preoccupied and take you away from an innovative mindset. And then some people will say, well, you know, why don't you just set up a division called the innovation division and have those people innovate. That doesn't work either because those people tend to get lost. And also you're not going to allocate the best talent to that because the innovator's dilemma basically by definition means that your core business is the most important thing and you're going to allocate the most resources to it because it generates revenues and profits and enterprise value for the business. How do you address that? How do you deal with it? I think it's always, there's no perfect answer, but I think the one thing that you need to do is to instill in people some sense of ownership. They're not just working for their boss. Everybody should work for their customers. And a lot of people want to make their boss happy but I think the most important thing Jack would say is to make your customer happy. If you're the owner of the business then you care about the customers right and then if you care about the customers then you start to worry, all right, my customers are using, they're used to using the product this way but what if someone else comes in with something different, like, you know, in our business a different way to engage with the platform, you know, we started with a listing then it's search now it's short video, like different ways of engaging with the platform. You have to start thinking about these things because your customer is not going to stay with you forever if you don't innovate. So I think sense of ownership, worrying about what the customers will want in the future and you have to be a step ahead almost like what Steve Jobs says you need to just invent something and then tell the customers that's what they need. I think that's the mindset you need to have. The other thing is you have to make decisions very quick. And in our business, in a high growth technology business, you are always living with a deficiency of information that allows you to make the perfect decision. And so you have to be able to tolerate not having full information and then just making a decision and commit to it. And then if you find out you're wrong, pivot fast in a different direction. So having that agility is also key to being innovative.

Being global, why is that important?

I think having investors in your company and being a public company, they're one of your constituencies. And of course I started this talk by saying we do what we believe in and we don't listen to investors. But now as a large company we have very smart investors that give us feedback about the industry, about what our competitors are doing. Not just competitors in China but competitors around the world, right? We're in a globally competitive industry, especially talking about AI, cloud, you know, that's a global business so you get a very good perspective from global investors. But of course at the time when we decided, when Alibaba went IPO in 2014, we were going to go list in Hong Kong but we ended up not doing that. We went to New York. There were a lot of considerations that went into it. I would like to tell you, you know, there was some intricate reason and we analyzed everything but the simple reason was the New York Stock Exchange is, you know, well known and there was a lot of market liquidity. Most global investors, I think still is today, are American or have American roots. So it was natural for us to sort of tap into the capital markets in the United States.