Alibaba's World

by Porter Erisman

  It seemed so simple, even a bit naive. I looked around the room and wondered, Is this really the right team to stand up to the US Internet titans? Yet their optimism was somehow infectious. It made you want to believe.

  The next day we drove two hours to Alibaba’s new Hangzhou offices, stopping along the roadside to uproot bamboo shoots, which the staff wanted to bring back to their families for dinner that night. The office was housed in a drab building on the outskirts of Hangzhou, but inside it was popping with activity. With Justin in tow we strolled around the busy halls. It wasn’t quite clear whether people knew exactly what they were doing, but they certainly seemed to be having fun.

  At one end of the office we came to a solid door. Curious, we opened it, revealing a dark room of bunk beds filled with napping engineers. The stench of bad breath and dirty socks filled the air, punctuated by periodic snoring. Brian had told me that it was common for Alibaba’s team to sleep on the floor at the Alibaba apartment, and it looked like this quirk of company culture had carried over. It seemed a good indicator of just how hard the team had been working.

  I parked Justin outside Jack’s office and went in to brief Jack before the interview. This was my first time prepping him, and I wanted to make sure he recognized the significance. “Jack, this is Forbes magazine. It’s the oldest and one of the most influential business magazines in the US. So it’s pretty important. They are doing a big story about B2B companies. And they are even considering making Alibaba the cover story.”

  “Oh, really?” he seemed surprised. “Sounds pretty important. What do you think I should say?”

  I thought for a second about the team in Hong Kong and their request to keep Jack out of the spotlight—or at least keep him “on message.” And then I looked at Jack and thought about the team that I had just seen at the retreat.

  “Just be yourself, Jack—it’s gotten you this far.”

  Justin came in. Jack jumped around from topic to topic, sharing his life story and vision for Alibaba. Rather than rambling on about boring MBA frameworks and business models, Jack spoke in metaphors: In the Internet era, he explained, “one must run as fast as a rabbit but be as patient as a turtle.”

  Justin ate it up. Jack sounded nothing like a CEO. But that’s what made him so fascinating.

  Around the World with Jack

  The May sunshine broke through the clouds, hitting the trees in full bloom. This was Berlin at its best. Coming off a cold, dreary winter, Berliners and tourists alike lined the city’s outdoor cafes and beer gardens to celebrate the arrival of spring. Soaking up the scene, I marveled at my luck in working for a Chinese company but spending a few weeks in the spring of 2000 traveling in Europe.

  I strolled through the city with Jack and Abir Oreibi, the recently hired head of Alibaba’s new European operations. Born in Libya, raised in Switzerland, and a former resident of Shanghai who was fluent in five languages, Abir was the perfect guide to introduce Jack and me to Europe. Jack bounced along, asking Abir questions about Berlin with a cheery curiosity. With a common interest in foreign languages and cultures, the three of us quickly bonded.

  Beyond exploring Berlin, our European tour had a serious business purpose. This was our big PR assault on Europe. We had set up a three-city media tour for Jack to generate some publicity for Alibaba as a way of attracting importers and exporters in Europe to use Alibaba.com. With Barcelona, Berlin, and London on the agenda, we had high hopes that our Europe trip would generate significant awareness of the website through a series of high-level events and media interviews.

  We arrived at the massive Messe Berlin convention center, greeted by Internet World 2000 banners and rows of corporate flags flapping in the wind. As we picked up our name badges, thousands of attendees and exhibitioners streamed in and out of the venue. It was just as we’d imagined it. The largest Internet conference in Europe, Internet World was the place to be. With high hopes we zipped through the conference hall to the main keynote area, where Jack was set to give his speech.

  Determined to make a grand entrance, we burst through the doors to a venue packed with 500 seats. But wait—only three were filled.

  Was this the right room? We rechecked the conference hall’s floor plan. It was. But apparently the Alibaba revolution had not yet reached Europe.

  An Internet World staff member stepped to the podium and leaned into the microphone. “Our next speaker is the founder and CEO of Alibaba.com. Please welcome to the stage Jack Ma.”

  The hollow sound of six hands clapping echoed through the conference hall.

  Jack jumped on stage, put on a brave face, and with an impassioned spirit began his speech to the room of empty seats. His speech was just as much about his life as it was about Alibaba. And, as with the other two times I had heard him speak in public, it was highly entertaining. Jack was a great storyteller, and Abir and I stood at the back of the room laughing.

  The applause was enthusiastic, even if it was from just three people. So maybe we hadn’t conquered Europe. But our trip to Berlin had attracted at least three new revolutionaries.

  Jack walked off the stage and said to Abir and me, “So, what did you think?”

  “Great speech, Jack. We just wish there were more people here to hear it.”

  With a mischievous smile Jack leaned over and whispered, “Don’t worry. When we come back here, this place will be totally full.”

  Alibaba’s Falling Carpet

  Despite our failure in Berlin, our stops in London and Barcelona went better, and the international media were beginning to take a greater interest. In July 2000 we received a major boost when Forbes put Justin Doebele’s story about Jack Ma on the cover of the magazine’s “Best of the Web: B2B” edition. The coverage helped push Alibaba’s global recognition to a new level and gave us the credibility we needed to attract businesses to the site.

  At the same time Alibaba’s website traffic continued to grow, as small businesses decided to try e-commerce. Each day we added thousands of new members as the website’s reach extended globally. Manufacturers posted their product listings on the site. And buyers from around the world were sending inquiries to the sellers. Although the site was little more than a message board for companies to post trade leads, it offered a cost-effective new way for importers and exporters to find each other. The company wasn’t generating any revenues, but the marketplace was growing along with Alibaba’s reputation both inside and outside China.

  But while Alibaba’s growing reputation and traffic gave outsiders the impression we were on an upswing, the truth was that the organization faced a dangerous period of disarray. With Jack constantly on the road speaking at conferences and media events, and no chief operating officer to manage the company’s day-to-day functioning, there was a leadership vacuum. The company had grown too quickly, and chaos was beginning to pull it apart.

  Routine meetings included as many as 30 people, each shouting louder than the next to get their voices heard. Staff members were free to set their own schedule, making it impossible to coordinate decisions. It was not uncommon for new employees to arrive at the company for their first day of work only to find they had no defined responsibilities or clear reporting lines. This created awkward situations, such as when one new employee sat at a desk for a week pretending to be working, too afraid that asking who his boss was might result in the elimination of his job.

  As these operations spun out of control, Alibaba’s strategy was also in disarray. With growing pressure to develop a viable business model, the company launched a new initiative each day, trying to find a product idea that would generate revenues and cover the company’s growing costs. We tried banner ads. Revenue-sharing partnerships. Website development for small businesses. We tried everything, but nothing stuck. It was a race for revenue. And a race we were losing.

  After watching the team in Hangzhou fail t
o find a product that customers would pay for, the international management team in Hong Kong decided we needed to do the next best thing—build what investors were looking for. As the Internet industry’s decline snowballed and Internet companies struggled to attract investors, the overwhelming consensus of the analysts at the leading investment banks was that, if you wanted to build a successful B2B marketplace, you had to build a platform that allowed buyers and sellers around the world to do end-to-end transactions. So, for example, if you were a sporting goods retailer in the United States, you could buy 10,000 tennis racquets from China with just the click of a button. Or, if you were an importer of kitchenware in Uzbekistan, ordering 2,000 coffee mugs from Vietnam would be as easy as ordering a book from Amazon.

  In mid-2000 the heads of strategy for the Hong Kong team convinced Jack that, to create this all-encompassing platform for global trade, Alibaba would have to move its website operations from Hangzhou to Silicon Valley. “It’s where all the global Internet companies are located, Jack,” he was told. “If we want to build an English-language website for the whole world, we have to go where the skilled employees are.”

  It seemed a valid argument. After all, there was no precedent for a global website to be run out of China. And, looking at his own team in Hangzhou, even Jack must have questioned its ability to compete with Silicon Valley talent. So he announced to the team that he would move Alibaba’s English website from China to California. “That’s the decision we have to make. Maybe it’s the wrong decision. But I always remember one thing: a wrong decision is better than no decision in Internet time.”

  Soon thereafter a group of Alibaba’s core management positions were relocated to the United States. John Wu, the recently hired chief technology officer who had come over from Yahoo! US, was to head the US engineering team. Within months Alibaba had hired about 30 new staff members in the US office, working out of Fremont, California. The decision was portrayed to both staff and outsiders as a sign of Alibaba’s increasing globalization, but it ultimately proved to be a disaster, sending the company into a tailspin. Time, distance, and language differences made communication between teams highly inefficient. Just as the China team was waking up, the US staff was leaving the office. And before long Alibaba had grown into a two-headed monster, with each head going in a different direction. With a large advertising budget, growing staff costs to support the Silicon Valley office, and a lack of revenues to make up for it, Alibaba was running out of money. The company was in crisis. Something had to be done.

  Back to China

  The morning sunlight broke through the blinds, casting slices of shadow across the wall. Jetlagged and disoriented, I looked around the unfamiliar room, trying to remember exactly where I was. From outside the bedroom door I heard muted voices speaking in an unfamiliar dialect, and it all came rushing back. Keen to avoid the inevitable, I pulled the covers over my head and, for the next few hours, floated in and out of sleep.

  But nothing could stop the clock. The house was coming to life. First it was the banging of shower doors. Then the clanging of pots and pans. When the TV came on, blaring the Chinese news, I knew I could hide no longer. The team would be waiting. I dreaded seeing them.

  I pulled on my pants, tossed on a shirt, and stumbled downstairs. In the living room I found a scattered mess of used chopsticks, dirty dishes, and crumpled pillows and blankets. Against one wall were a few flimsy card tables holding desktop computers. Next to them were half-eaten bowls of instant noodles that must have been there for days, judging by the crusty masses hardening at the bottom of the bowls. The curtains were closed, adding to the stuffiness of a room dominated by a stale cloud of morning breath.

  Had I been in China, the scene would have been all too familiar. But I wasn’t in China. I was in Fremont, California. And this was the Alibaba House.

  Just three days earlier I had been sitting at my desk in Hong Kong and looking forward to a weekend boat cruise. But then Joe Tsai called. We were cutting the staff for our newly opened Silicon Valley office. He wanted me to go with Jack to California to deliver the message. And, oh yeah, I’d be staying at the Alibaba House.

  The Alibaba House, it turned out, was the American version of the Alibaba apartment in which the company was founded. Within the company the Alibaba apartment was already as legendary as Apple’s garage or Yahoo!’s trailer. It had also become a symbol of Alibaba’s frugal, waste-no-renminbi culture. The same culture had apparently been applied to the United States, and to save hotel costs the company had rented a house in the middle of the Fremont suburbs to accommodate team members sent over from Hangzhou. The company had rented the house in the spring of 2000, when our US expansion seemed boundless. Now, just six months later, and with many of the employees sent from China already recalled back to the China headquarters, the Alibaba House seemed haunted by their ghosts.

  I looked around, wondering what my Kellogg classmates would think if they could see me in a group house with my colleagues; I was living like a foreigner in my own country. Surely my classmates were brunching on lobster in a five-star Silicon Valley hotel somewhere nearby. Meanwhile I was rummaging through the refrigerator for any food with a readable label.

  Perched in front of the television set were two Chinese men wielding chopsticks and slurping bowls of noodles, catching up on the latest Chinese news. They seemed surprised to see me walk down the stairs. Apparently nobody had told them that they would have an additional housemate for the week. The awkwardness was heightened when I greeted them in English, to which they responded with puzzled looks. When I slid into Mandarin, it put them at ease.

  “Hi, I’m Porter. I’m in charge of our international PR.”

  “Oh, hi, we’re engineers,” one said. “We’ve been working on moving the English site to the US.”

  They had been in the United States only a few weeks and were still excited about being there. Living and working in the world’s Internet epicenter was a dream few engineers in China would ever realize. The two Alibaba engineers told me that at one point the house had been crammed full of engineers from Hangzhou. During the last few weeks the numbers had shrunk, as engineers were pulled back to China. When they asked me what I was doing in the United States, I didn’t know what to say. How was I supposed to tell them that I was there to lay off their colleagues?

  The doorbell saved me for the moment. It was Tony Yiu, an Alibaba founder who had arrived to drive me to the office. “You ready?” he asked. Not really, I thought, but let’s go anyway.

  Stepping through the front door of the house was like leaving China and entering America. The crisp color of freshly cut lawns, fluorescent street signs, and a cloudless blue sky reminded me I was back in California. As we drove through the suburbs, I wondered how anything new was ever invented in Silicon Valley. It was so polished, so mature, with every possible convenience. Even the Jamba Juice outlets were perfectly positioned so one never had to go a stretch without a berry boost of some kind. Compared to China, which felt like one large unfinished construction site, Silicon Valley seemed finished—like everything that needed doing had been done. I wondered if one day everyone would just quit work and Rollerblade into retirement.

  We drove past a few remaining dot-com billboards, turned into a small office park, and pulled up to a glossy one-story office building surrounded by a parking lot. “We’re here,” Tony said.

  We walked into the office, and Tony took me around to meet the staff. There was a mix of Westerners, Chinese Americans, and Chinese nationals, most of whom had studied and lived in the United States for several years. Ordinarily meeting new staff members would be a happy affair, but I felt somewhat like the grim reaper. I wore a strained smile, knowing that in a few minutes I’d be laying off many of them.

  I was taken to an office where Jack was reading his email. He was visibly concerned about the meeting ahead.

  “I don’t know what
to say today,” he said. “This whole time we’ve been growing, I’ve only been hiring people. This is the first time we’ve ever had to fire people. How do we do this?”

  I felt bad for Jack. Although many of the foreign staff members didn’t view him as a credible manager, I knew that only his good intentions and optimism had brought us this far. For a Chinese company, opening a Silicon Valley office was a huge source of pride. For the last several months we’d been traveling around China boasting about our growing US staff, holding it up as a sign of Alibaba’s global importance.

  After discussing the best way to handle it, we called the employees into a large meeting room. There was a tangible pall, as people sensed bad news was coming. Some were meeting Jack for the first time, and I hoped that the session would not become hostile.

  After the seats around the table filled up, another row of colleagues formed behind them, filling the room to the walls. Once everyone was settled, we closed the door and Jack began to speak.

  “I want everyone to know how much we appreciate how hard everyone is working. But I’m afraid that I’m here with some bad news. We are going to have to cut some of our staff.”

  Around the room eyes dropped. Jack continued:

  “A few months ago we thought it would be best to move our operations to Silicon Valley. Everyone thought that if you are going to run an English-language website, this is where you have to be. The engineers are here, the English speakers are here, and the Internet people are all here. So it really seemed like the right decision at the time.

  “But since we did that, it seems we created more problems in the company than ever before. Everyone here has been working so hard on different projects, but the communication is very difficult between here and our Hangzhou office. When you guys come into the office, it is the end of the day in Hangzhou. When we come into the office, you are all leaving. It seems it’s been impossible to communicate, and I know you’ve all been frustrated when projects were started and then canceled.