21 February 2020

Jack Ma shows that thinking big matters more than technical knowledge

By Rainer Zitelmann

“We don’t want to be number one in China. We want to be number one in the world,” said Jack Ma shortly after he founded Alibaba.

Building one of the world’s largest e-commerce companies doesn’t require specialised or technical knowledge, genius-level math—or even a business plan. So what does it take? Here’s the story of Jack Ma, the richest man in China and, with about $35 billion in assets, one of the richest people in the world.

Ma was born in 1964. As a boy, he did everything he could to learn English. He was an avid reader of Mark Twain and used every opportunity to get better at English. Aged 12, he had an idea of how he could improve his English skills: Every morning at five o’clock he rode his bicycle for 40 minutes to an international hotel in his hometown and waited there for tourists. When he approached them, he proposed a deal. He would show them around the city as a travel guide and they would teach him English in return. Even in rain and snow, he waited outside the hotel day after day, morning after morning, year after year. One day he met an Australian family and soon became friends with them. They ended up inviting him to Australia, where he was impressed by the high standard of living that people enjoyed compared with China.

Ma Failed His University Entrance Exam

His English was improving constantly, but he was so weak in math that he failed the standardised university entrance test—he only achieved one out of 120 possible points. He tried again, and this time he scored 19 out of 120. His overall results were so bad that the university turned him down. Still, he persevered and eventually managed to get into Teachers’ College—although he admits that it was the least respected university in his city. In 1988, he obtained a bachelor’s degree in English and found a job as an English teacher.

A trip to Seattle in 1995, where a friend showed him the internet for the first time, proved to be decisive in shaping his future. He was immediately smitten and intuitively recognised the role the internet would play in years to come. That same year, he founded a company, China Yellow Pages, which struggled to eke out an existence. He had spent almost all of his money on registering the company and had little left for anything else. The company’s office consisted of a single room with a workstation and a very old PC in the middle.

The biggest problem was that it was not possible to access the internet in his hometown of Hangzhou at that time. Anyone else would have given up on the idea of setting up an internet company in such circumstances. But Ma was different. He told all his friends about the incredible potentials of the internet and convinced some of them to commission him to design websites for them. He asked them to send him information about their companies, which he translated into English and sent by post to Seattle, where the websites were actually created. His friends in Seattle took screenshots of the websites they were working on and sent them back to China, where he showed them to his clients. The fact that he actually managed to find companies in his hometown who were willing to spend the not insignificant sum of 20,000 renminbi (about $2,400) on their new homepages is testament to his enormous persuasiveness. “I was treated like a con man for three years,” is how Ma remembers those early days.

Over the next few years, Ma repeatedly changed his business model—combining experimentation with perseverance. In 1999, he founded the Alibaba Group as a business-to-business, e-commerce platform. Things were by no means easy at first. Ma later remembered: “First week, we have seven employees. We buy and sell, ourselves. The second week, somebody started to sell on our website. We bought everything they sell. We had two rooms full of things we bought for no use, all garbage, for the first two weeks—in order to tell people that it works.”

From the outset he thought big and set himself very ambitious goals. Shortly after founding his company, he told a journalist: “We don’t want to be number one in China. We want to be number one in the world.” He was so convinced of his future success that he even had a meeting filmed in his modest apartment in February 1999—to document the moment for his company’s later history. During the small meeting, he posed the question: “In the next five or ten years, what will Alibaba become?” Answering his own question, he said that “our competitors are not in China, but in Silicon Valley…We should position Alibaba as an international website.”

Ma tried to raise money from venture capitalists in Palo Alto, Silicon Valley. The investors he met expected him to present a fully developed business plan. But, much like Bloomberg, the Google founders and so many other successful company founders, Ma did not have a business plan. His motto was: “If you plan, you lose. If you don’t plan, you win.”

Unfortunately, the investors had a hard time understanding Ma’s approach. “We don’t really have a clearly defined business model yet,” he conceded. “If you consider Yahoo! a search engine, Amazon a bookstore, eBay an auction center, Alibaba is an electronic market. Yahoo! and Amazon are not perfect models and we’re still trying to figure out what’s best.” Thanks to his charisma, he nevertheless managed to persuade the employee responsible for China at Goldman Sachs to invest $5 million in his company.

Intuition is more important than book knowledge

Ma’s example shows that entrepreneurial intuition and, above all, the willingness to be open to new ideas, and to always be ready to adapt a business model, are much more important than book knowledge of the kind taught in business administration courses around the world. In a lecture, Ma said: “It is not necessary to study an MBA. Most MBA graduates are not useful … Unless they come back from their MBA studies and forget what they’ve learned at school, then they will be useful. Because schools teach knowledge, while starting a business requires wisdom. Wisdom is acquired through experience. Knowledge can be acquired through hard work.”

What Ma says is confirmed by entrepreneurial research: entrepreneurial success is not the result of explicit, academic learning and book knowledge–it is the product of implicit learning processes that manifest themselves in intuition and gut feeling. However, this is not something irrational or mystical; it is accumulated experience, which in turn is the result of a combination of perseverance and the willingness to experiment.

“I’m Not Good At Technology”

As far as Ma was concerned, even technological knowledge was not necessary as he strived to achieve exceptional success as an internet entrepreneur: “I’m not good at technology,” he declared in 2014. “I was trained to be a high school teacher. It’s a funny thing. I’m running one of the biggest e-commerce companies in China, maybe in the world, but I know nothing about computers. All I know about computers is how to send and receive email and browse.”

Ma, who first started as a website designer and then went into business-to-business e-commerce, continued to develop his business in new directions. In 2003, he founded Taobao, the largest Chinese business-to-consumer shopping website. He was met with scepticism when he unveiled his plans for Taobao, both within his company and from investors. After all, Alibaba’s business-to-business operations were not yet turning a profit. Plus, at this time, it was proving increasingly difficult to raise new funds from venture capital companies.

Should the company really open a new front before it had won the business-to-business battle? Many of the people he spoke to were wary. But Ma was right. In 2007, he even managed to beat his fiercest competitor, eBay, which had far greater financial muscle. In the end eBay was forced to wind up its business in China because it never managed to understand the Chinese market, including the mentality of the large numbers of small retailers who use Taobao. In 2004, Ma went on to found Alipay, the world’s largest internet payment service.

Ma was and is always open to new ideas. “From day one,” he explained in 2004, “all entrepreneurs know that their day is about dealing with difficulty and failure rather than defined by ‘success’. My most difficult time hasn’t come yet, but it surely will. Nearly a decade of entrepreneurial experience tells me these difficult times can’t be evaded or shouldered by others—the entrepreneur must be able to face failure and never give up.”

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Dr. Rainer Zitelmann is a historian and sociologist. He is also a world-renowned author, successful businessman and real estate investor. His most recent book - Dare to be Different and Grow Rich was released in 2019