How A Remarkable Chinese Company Is Changing The Face Of Global Business (MacMillan)

By Porter Erisman, former vice-president at Alibaba

Today Alibaba dazzles with its size and innovation. But to understand how the world’s largest retailer may act in the future, it’s instructive to read about its formative years.

Porter Erisman’s book walks us through Alibaba’s journey from a scrappy Chinese start-up to its $25 billion initial public offering (IPO) in New York in 2014.

Erisman was not among the team of 18 who set up Alibaba in founder Jack Ma’s apartment in 1999, but he was one of the company’s first American employees, joining in 2000. He stayed until 2008, along the way catching glimpses into the company’s workings at all levels, such as engineers collapsing exhausted into bunk beds in its Hangzhou office.

After he left, Erisman wrote and directed ‘Crocodile in the Yangtze’, a documentary about the firm, and has stayed in touch with the leadership team.

One should bear in mind that the author is skilled in presenting Alibaba in a positive light after running its international press relations and marketing, and clearly does not want to burn bridges with the firm's management. Nonetheless, his unique insight into a Chinese company’s growing pains internationally still has value.

This includes the early rift between the Hangzhou team and the higher-paid staff sat in Citibank Tower in downtown Hong Kong. “Jack is totally off message,” one Hong Kong manager whined to Erisman in 2000.

Erisman himself started on $100,000 per year plus stock options, thinking he would be in a millionaire in three months, prior to the dotcom bust in 2000.

The Kellogg-graduate was paid nearly 50 times more than locals who hired him and he became the highest paid employee towards the end of 2001, at a time when Alibaba was struggling to make money and the founders took a pay cut.

Early attempts by Alibaba to mimic US rivals did not work. It moved its website operations to Silicon Valley in 2000, only to withdraw back to Hangzhou after time-zone issues crippled its strategy. Ma’s awe for US tech giants dwindled further after its acquisition of Yahoo! China in 2005 yielded few new opportunities.

There were victories of course: Alibaba went to war in 2003 with eBay in China with the launch of consumer site Taobao, and won. There were also snubs: Google’s Larry Page at a meeting in Shanghai in 2004 belittled Ma and Joe Tsai. 

Weaved into the text are a few insights into the thinking of Ma, the English teacher turned billionaire. We learn what drives him – creating a local firm that offers jobs to young, gifted Chinese, which is not a state-owned enterprise or a multinational – and what pains him.

“If we set a policy that 99% of the people like but only 1% of the people don’t like, that still means there are four million people angry at us,” Ma is quoted as saying in 2011.  

Despite this, Alibaba’s management has become somewhat inured to investor criticism following the 2007 IPO of its Alibaba.com unit in Hong Kong. The stock was later delisted after crashing from $40 to $4, and a scandal involving salesmen signing up dodgy suppliers. 

All in all, Erisman’s book is a useful, if partial, snapshot for investors looking at the e-commerce giant for the first time. It might prove especially helpful ahead of a potential IPO by Alibaba’s subsidiary, Ant Financial.