One Billion Customers – Book and Idea review

The wet dream of every retailer – a single market with one billion craving customers – is shredded to pieces by McGregor in his witty account of his own adventures during twenty years as journalist and business leader in China. The concept of a “market” as it is traditionally used implies that it is easy to move goods around at a low cost and that the customers are a somewhat homogeneous group. China is more like a continent with vast cultural, legal and physical differences which makes the unity of the market an illusion – a fata morgana luring at the horizon with uncountable riches.

McGregor experienced from the frontier the intense power struggle between government agencies, the party, market actors and local chiefs. All scrambling to get ahead and to increase their influence. His accounts of his own experiences are the most hilarious and warmhearted parts of the book. However, the many likely hiccups are not explored in great detail. I think it is a difficult dilemma while writing a book like this. On the one hand, including personal weaknesses and failures makes the book more interesting. On the other hand, the author wants to look like a leading expert and resourceful adviser – the book serves as advertisement for his own consultancy services. We all want to believe that the advisers we hire are fault-free and perfect, after all the fees are substantial…

I wonder what I would choose to present in an account of my own adventures near and far? Would I dare to include the intimate shameful moments of my own weaknesses? The mistakes and fiasco’s? Wasted money and time and naivety? I am not so sure. Probably I would pretend that everything was well planned and went smoothly.

One million Chinese visitors at the World Expo in Shanghai the same day as we went.

McGregor weaves into the story the larger sweeps of modern China and a handful of illustrious examples of winners and losers in the wild-east era of the last decades. The story behind famous (in China) brands like Wahaha and Unicom gives a wonderful account how government relations can help and hinder but that the market pull is the real force today. It also shows that the organizational maturity of most companies today are in a similar position as the companies in the west were fifty years ago – completey dependent on the founder/leader. It is a lean and fast way of running a company, but with a single-point-of-failure, it is not robust. It is the startup-model.

An inspiring book and I am excited to experience first hand collisions with bureaucracy and government activities in Shanghai!

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Book Review: Poorly Made in China

Poorly made in China“Made in China” is transforming the world as we know it. When I walk into a hardware store, computer shop or shoeshack anywhere in Europe, more than half of the items are made in China. This was not the case when I was a kid! The export from China to the west is 100 times larger today than when I was a child (http://www.fas.org/sgp/crs/row/RL33536.pdf). Most my toys and clothes were made in Europe. I believe that this shift of production power and knowledge is one of the major events in modern history.

Paul Midler is one of the numerous players who have been enabling China to export their goods in the last decade, and he wrote an entertaining account of his experiences. Speaking Chinese and with an American business degree, he worked on the ground to help American importers to find manufacturers for their various goods. Midler shares hilarious anecdotes and sobering reality checks from encounters with the human traits of greed, naivety, disrespect and short-term thinking, both with the Chinese as well as the foreign partners. The book is written in an unusually open style, exposing the author’s personal impressions, which makes the story stronger and it is a joy to read.

From my own experience, I know that not everything in China is poorly made, so I have my reservations for the title of the book. However, there are structural problems related to short-term thinking due to e.g. unpredictability in the legal system and lack of transparency, which make the temptation to take shortcuts almost irresistible. There is still a lot to do before “Made in China” gets similar connotations as “Made in Japan” has today.

Book Review: The Coming China Wars

Peter Navarro: The Coming china Wars
Where they will be fought and how they can be won

Why is it that men like to read books about war?
When I was a boy, my favourite books were in sequence “Biggles in Finland”, “The Cannons of Navarone”, “The Lord of the Rings” (an epic war story), etc., etc... However, the more I learned in the army, the less inspired I am by the so-called heroes of the battlefield. The most paradoxical book on war I find “The Art of War” by Sun Tzu (Sunzi), which focusses on identifying conflicts and resolving them without battle. It repeatedly makes the point that war is horrible and counterproductive. Nevertheless, what led me to read the book was the title that allured to some primal male driver to learn the secrets to conquer and win.

Peter Navarro continues in this ancient Chinese tradition to explain in great detail where potential conflicts are likely to arise in the coming years, where China will be involved. Just like Sunzi, (but contrary to the official sub-title printed large on the cover), Navarro suggests way to resolve the issues to avoid war.

The conflict areas are too many to recount, but they range from environmental issues (water scarcity, pollution, land degradation and desertification) to social tension induced by demographics, income distribution and urbanization. Some darker sides include the growing HIV epidemics, international drug trade and counterfeited medication finding its way around the globe.

Navarro has chosen to research the problematic issues one by one, with numerous details and facts, which makes the book very convincing.
However, I think he misses the systemic structural problem in China today – the disfunctional feedback mechanisms in society. Due to the nature of the current political system, information is sometimes hidden behind layers of secrecy and distorted by propaganda.
Democratic societies have the advantage of transparency – many eyes look at issues and feedback mechanisms are in place to identify problematic areas and address them. It often works, but not always, of course.
In centrally controlled regimes, the well-intentioned planners only have access to part of the information and become a bottleneck in the dynamics. Even though they can act with more force and momentum, they are locked down by their relatively small numbers and the time delay in the feedback.

Some of the problems described in the book are related to resource depletion, which can be described by a typical first order differential equation with delay. The longer the delay, the larger the probability of catastrophic failure. One very readable book that describes the dynamics of resource depletion is “Limits to Growth”, by Donnela Meadows, published initially by the Club of Rome, which takes on a global perspective. I am sure that the same type of analysis can be done on China, and quantify the detrimental effect of the delay and distortion of the available information.

This year, the prices on grocery soar, to which the party officials react by blaming speculators. I doubt that is the root cause.

By knowing what is going on and increasing transparency, I think China will be able to tackle most of the issues raised by Navarro. )They could start by removing the block on the PeterNavarro.com website.) But not all can be handled by China alone. For the future of our planet it seems again that we have to collaborate and act on information!

Book review: … business in China

How to Manage a Successful Business in China
by Johan Björksten and Anders Hägglund

Despite the pretentious title, this book is a well-researched low-key introduction to one way of building businesses in mainland China. Maybe it is the Swedish-Chinese way. Both the authors have first hand experience from what they are talking about, which they generously share through examples and anecdotes. Both of them have been very successful in building profitable organizations, one from scratch and one as a dependence of a multinational corporation.

One of the authors is a renowned expert on Chinese, and teaching Chinese to foreigners. Therefore, it comes as no surprise that one of the main recommendations is to learn Chinese if you want to be successful in China. Still today, most foreigners coming to work in China do not learn more than a handful phrases and a most basic vocabulary. Chinese is considered impossible to learn. On the other hand, imagine going to the US without speaking English – what is the probability of establishing a successful business? It is almost ridiculous.
I am sure that Chinese is a “learnable skill”.

The most startling part of the book talks about guanxi – “connections”. The authors demystify this concept and show the equivalent concepts in the Western business tradition. Sometimes the cultural differences are smaller than we imagine.

Another myth of the one-billion-customer-dream that is debunked by the authors is that China is one homogeneous market. It is not. The vast area, the poor communications and logistics and the cultural differences makes China a difficult terrain to conquer. In many ways, China is like the European Union, with the same legal basis but different consumer preferences and with bureaucratic and practical problems for each sub-market to penetrate. Shanghai is as different from Kashgar as Paris is different from Vilnius.

The book is written in a classic schoolbook manner, which makes it slow to read and slightly boring at times. Nevertheless, it is a good counterweight to the abundant extatic China Fever literature.

After a Beijing brunch with one of the authors, I start to get the feeling that China is not so easy to describe in a book because of all the paradoxes. Speed is one example; some things are extremely fast in China, but other things are excruciatingly slow. They can build a house in a week, but it can take months to get the right stamp. How can I ever “understand” this? Maybe it is like quantum physics – you can never understand, only “get used to” how things work.

China is a worthy challenge!

The Corporation

Corporations are designed to be evil. At least that is the main point of Joel Bakan, the law professor at UBC, Vancouver. He published the book and the film “The Corporation” a couple of years ago, and now I got the opportunity to read it.

Bakan takes an interesting stand against the legal position as “person” that a corporation currently enjoys. At the same time, a corporation is similar to you and me in the sense that it can own things, but on the other hand it is strangely inhuman; There are laws (in most of the world) regulating that corporations _must_ go for profit instead of charity if there is a choice.
Corporate Social Responsibility is legally subordinate to Corporate Profitability, i.e. CSR is ok as long as it contributes to the bottom line – otherwise it must be ignored.
This creates a level of temptation to do immoral profitable activities that is too strong to resist, at least for the extensive list of colourful examples presented in the book.

The personality of the legal “person” of a corporation is therefore designed to be quite pervert – something that Bakan describes with sharpness, wit and disappointment.
And it is something I did not realize before.
Most of business books are written with a naive positivism regarding the powers of corporations, often spiced with idealistic values, see e.g. “Good to Great” by Jim Collins or “The 5th Discipline” by Peter Senge.

The insights of Bakan are unfortunately also consistent with my own experiences in multinational corporations. Immoral and illegal activities that increase profit do happen.

The question I am left with is – can I continue working in a corporation which is stimulated by legal requirements to be destructive?
Can I negotiate the counterforces and manage my parts of the operations in a positive and constructive way?
I sure will do my very best.

Book Review: Sustainable Energy without the Hot Air

Professor David MacKay, University of Cambridge, wrote a brilliant book last year about Sustainable Energy to get more numbers and less adjectives into the public discourse.
It is the best book I have read in a decade.

The contents are described in exquisite detail on the book’s website www.withouthotair.com. (Indeed, the whole book is available for free as a .pdf download!) However, it is worth mentioning the elegant buildup of the book: MacKay shows how much energy we use today, broken down into the ten major categories. This is compared with the possible power output of the possible sustainable energy sources like wind, solar, wave, tide, biomass,…

The buildup is very pedagogical and it is at once easy to understand the relative importance of various energy sources and sinks.

The book is written from a UK perspective, but the same calculations can be done for a country of your choice. MacKay has even setup a public wiki where people already started to do this for countries over the world.

I got inspired by the visualization techniques and the tools to get all numbers into a comparable format. It is not trivial how to compare a laptop computer with a bicycle commute, but MacKay has chosen a device that works all the way, see the columns to the right.
Since I read the book I have monitored our home energy consumption (gas and electricity) to better understand the energy impact of our family (kWh/day):

The book is written from a UK perspective, but the same calculations can be done for a country of your choice. MacKay has even setup a public wiki where people already started to do this for countries over the world.

Visual Control – Cash flow at home

I love graphing and plotting data. A visual comparison makes it much easier to understand the relative importance of different things. I wrote a small Python script (using matplotlib) to visualize home (ex)spenditure based on transactions on our bank account. By bundling all transactions by keywords, I could get Albert Heijn, Boni and Hoogvliet under one name “Supermarket”. This way, it is easy to see where the large chunks go and the relative importance of holidays vs home improvement vs car vs insurances over time. (a.k.a. Pareto analysis )

Expenses 2009 (click on image to see all of it)

This way, we can select smarter where to economize and in which domains of our family life we can afford some slack.  (For privacy reasons, I removed all numbers from these plots, but you can imagine or try out on your own transaction data!)

How to use the script: (leave a note here, and I can send you the .py file)

1. Download .csv of the transactions for the period of interest. At least from our on-line bank (Rabobank.nl – a cooperative and still well-run bank in Holland).

2. Adjust the script to categorize in your favourite way – and type in your exclusions. For us, transactions to and from our savings account do not constitute cash flow, so those were filtered out.

3. Generate graphs of your incomes and expenses!

Now you can use visual control for your own cash flow. If you want, you can even make run-charts!