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(upbeat electronic music) [JEREMY] Joe, welcome to View from the Top.
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[JOE TSAI] Thank you, Jeremy. Very happy to be here.
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[JEREMY] Well, it's an honor to have you here.
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And as I was preparing for this interview and trying to wrap my head around just how massive and global Alibaba has become, what really struck me is how you have navigated across cultures throughout your career. [JOE TSAI] Mm-hmm.
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[JEREMY] East and West, law and business, and sports and tech.
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So I actually wanna start with your first cross-cultural major experience.
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You were born and raised in Taiwan, and you moved to the U. S.
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at age 13 to attend the Lawrenceville School in New Jersey.
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What was that like for you? [JOE TSAI] It was scary.
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Well, first, before I went, I never went to seventh grade.
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I was in elementary school in Taiwan and, and then my mother said, "Joe, I'm gonna send you to school overseas, and but you have to learn how to speak English."
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And I didn't know how to speak English.
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So I went to a English cram school for one year and skipped seventh grade.
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So I went into Lawrenceville in the eighth grade.
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During that cram school year, I basically memorized vocabulary, but I couldn't put together a sentence in English.
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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 land, I mean, literally fresh off the boat. [JEREMY] Wow.
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[JOE TSAI] And landing in this very unique environment, you know, boarding school, it's an all-boys boarding school, so that's, has its own sort of pitfalls.
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And you just have to fit in.
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I wanted to be one of the guys, I wanted to conform, I wanted to fit in.
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I looked different, I dressed different, I'd speak a different language, so it's very important for me to feel like get accepted by the rest of the guys.
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And then very quickly, I went into sports I got cut from the baseball team, unfortunately.
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Imagine a kid from Taiwan Little League Baseball and-- (sighs) I didn't make the team.
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Didn't make the swimming team But then I said, "The hell with it, I'm gonna try completely new things."
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Um, I played football, American football, and then got into lacrosse 'cause I couldn't play baseball.
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It's a spring sport, lacrosse, and baseball are spring sports.
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Couldn't make the baseball team, so I went to play lacrosse.
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Um, 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.
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(laughter) So yesterday, we spent an hour to prep for this talk.
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We talked nothing but sports.
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[JEREMY] Yeah, we both love sports.
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(all laughing) And I'm a huge Lakers fan, and obviously Joe is a big sports fan and a Nets fan and a Liberty fan, so we talk-- [JOE TSAI] Yeah, I won't blame you for that, but-- [JEREMY] Yeah.
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[JOE TSAI] But anyway, the Lakers are doing better right now, so congratulations.
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[JEREMY] Thank you so much. [JOE TSAI] Yeah. [JEREMY] Thank you.
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[JOE TSAI] And then we found out that we were both football players in high school.
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[JEREMY] Yeah, undersized linebackers.
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[JOE TSAI] Undersized--um, (laughing) [JEREMY] Found your footing.
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You kind of rebounded from those early sports challenges. You got into lacrosse.
3:30
You went to Yale for undergrad and law school. [JOE TSAI] Right.
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[JEREMY] You found yourself at a tax law firm and ultimately went into private equity.
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But just four years into Joe's investing career, he came across a guy named Jack Ma, who was building a company alongside 17 other co-founders, it was an online marketplace, zero revenue and a few thousand users very early.
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So what convinced you that was the time to make the leap?
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[JOE TSAI] It was not only zero revenue.
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Jack didn't even have a company. It wasn't incorporated.
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And so Jack, all Jack had was a domain name and a fresh website.
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And uh, I still remember the first time I, I went to see him, I climbed up the stairs of the second-floor, second-story apartment.
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There were a bunch of shoes, you know, outside, you, you know, you take off your shoes, you go inside, and uh, you know, like we talked for about an hour, and I thought Jack was fascinating.
4:30
He had just charisma, that leadership quality.
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Jack used to be a teacher, and I think teachers make very good leaders because you have to communicate well.
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You also have to be able to identify good talent, good students, and develop them, like what teachers do.
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So all those quality kind of came through, and that was what I was really, I found very appealing.
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[HUNG] 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.
5:16
It's a wholesale marketplace.
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So Alibaba's first website was actually, actually in English language because it was made for the rest of the world.
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So an hour into the conversation, I said, "Jack, let, you know, I need to have a bathroom break."
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So I go into the bathroom, and there were ten toothbrushes on the sink.
5:35
So I realized people were just sleeping, leaving their sleeping bags all over the place, and it was the early days of the startup culture. [JEREMY] Yeah.
5:47
[HUNG] And I decided, I would say this to young people when you want to switch jobs or when you find a new job and you wanna do something new find the people that you want to partner with, the people you wanna follow, the mentors that you wanna learn and to me, Jack was both a friend, a business partner, and also a mentor.
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He's taught me a lot of things.
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And I felt like I could learn a lot from him.
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And also at the time, the Internet, that if your business had a dot-com name in it everybody thought that you were going to become a millionaire in six months.
6:30
And but for me, it was Jack, had personality that leadership quality that actually came through from having been a teacher.
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[JEREMY] You clearly struck gold in that partnership with Jack.
6:43
And a lot of our classmates here at Stanford are thinking about starting companies and looking for co-founders.
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So what's the right formula?
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What should they be looking for in their co-founders?
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[HUNG] Well, first, I think they should, it's someone that you can get along with.
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Do you wanna go out and have a beer with this person, you know, after work?
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I think that's the first test.
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I think the next thing is being complementary.
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So something that they're good at, you're not good at, and something you're good at, they're not good at.
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Having that complimentlary mentality, whatever that word is, being able to complement each other. [JEREMY] Yeah.
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[JOE TSAI] Is really, really important, so that the founders are not stepping on each other's feet.
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Um, Alibaba started with 18 founders.
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And I think we all complemented each other well.
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People brought different skill sets to things.
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And I think as you think about starting companies, it's-- you know, it's not like you want to go out and find 18 people to found a company with.
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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 touch-- have touchpoints with employees.
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And having 18 founders, we had that advantage.
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You know, we were able to-- each founder is able to touch more employees of the company.
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So I think that's important.
8:25
Uh-- Well-- 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 gonna go home very much.
8:36
Or this work/life balance is not gonna be something you should be focused on.
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[JEREMY] Yeah, I guess I should ask, did you have a toothbrush in the apartment as well?
8:45
[JOE TSAI] Yeah, I brought my toothbrush afterwards. [JEREMY] Oh, perfect. [JOE TSAI] Yeah, yeah.
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(laughter) [JEREMY] So you I want to touch on this point of having this many co-founders, 18 in total. It's very, very unique.
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Um, and in joining them at Alibaba as CFO in 1999, you were really entering-- [JOE TSAI] By the way, I was not C-- I was COO for three months, and then Jack fired me. [JEREMY] Uh-oh.
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[JOE TSAI] 'Cause I-- He said, "Joe, you have no clue how to do operations."
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So I, I was like-- "All right, fine. I'll, I'll be the CFO." Yeah.
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[JEREMY] Well, yet again, you rebounded from baseball to lacrosse-- Right. Coo to CFO.
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Now, that group of co-founders had some connectivity to each other already.
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And you were kind of the new person coming in.
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You're an American-educated lawyer and investor. You're from Taiwan.
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They were all Chinese mainlanders.
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How did you find a way to bridge-- that cultural boundary?
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[JOE TSAI] I think the first thing is, well, I'm usually more of a listener, and I approach the work with just humility. uh, I'm there to learn.
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I didn't know anything about the internet.
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[HUNG] I had never worked with a company where it's majority mainland Chinese in China, you know, cause all my prior work experience had been either in the United States or in Hong Kong.
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So for me, it wasn't my place to come in and tell people what to do.
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So I listened 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.
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And I think that's helped me a lot.
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I think you have to bring, everything you do, you have to bring a sense of humility to the work, because there's gonna be people, you're gonna find your colleagues, your partners that are smarter than you are, that can teach you a lot.
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And you need to approach your work with that kind of mindset. [JEREMY] Yeah.
10:45
Going in and being a listener and being a humble one at that clearly served you well.
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Now, over time, Jack really became this larger-than-life figure, the face of the Chinese tech industry.
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And you were there for the entire journey, but largely behind the scenes. Why is that?
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[HUNG] Because he's better at being in front on the stage.
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(audience laughing) [JEREMY] I think you're doing pretty great.
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[HUNG] He's a better speaker.
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He's a better inspirational leader, right?
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I think it's very, very important.
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I mean, I would like to think I've improved over the years in terms of communicating to people, but he's a natural.
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For him, just getting on stage, have all the employees in the same room, and just say, you know, "Here's our direction.
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This is why we're doing it."
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And he's very persuasive. So he's better at it.
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(guest laughing) [JEREMY] Well, it's another great example of finding somebody with a complementary skillset and working together toward the same mission.
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Now, your first step with Jack, as I understand it, was flying out here to Sand Hill Road, just a few minutes away-- [HUNG] Right.
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[JEREMY] To pitch investors and raise your seed round.
12:00
How do you remember that trip?
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[HUNG] Didn't go very well.
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We got, well, I think we struck out.
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We had something like 15 meetings.
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We didn't get a single investor interested in investing in our company.
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And that's because, I think at Stanford GSB, you're taught to show up with a PowerPoint or something, right?
12:22
[JOE TSAI] You have to show people something, a demo or something. We didn't have anything.
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We came empty-handed, and people were like, "Jack, what's your business plan?"
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Jack says, "I don't have a business plan."
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He actually said, "I don't have a business plan."
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(audience laughter) But but the trends at the time in China was, I mean, in hindsight, you could have seen it.
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Uh, it was the intersection of internet technology and also China coming into the WTO.
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Uh, which meant trade between China and the rest of the world was going to explode. [JEREMY] Mm-hmm.
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[JOE TSAI] Uh, and today you go to China, China is a manufacturing powerhouse.
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Everything is made in China, and they're getting better and better, higher and higher quality, higher and higher tech-- technology.
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But the seeds were sown back then.
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There was a, you know, just on the cusp of entering into the WTO.
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And imagine getting all these manufacturers and trading companies bring all their products online for the rest of the world to see.
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That was the business idea.
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Um, but Jack didn't just talk about the business.
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He said, "My mission is to make it easy to do business anywhere."
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That's, that was our mission at the time, that's what we told investors, and today that is still our mission.
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You can go on our website, Alibaba website, it says (speaking in Chinese) "To make it easy to bus-- uh, to do business anywhere."
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[JEREMY] That's incredible.
14:01
So, a mission-first leader with no business plan.
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Did you guys come back from that trip, incorporate feedback from those investors? [JOE TSAI] Not really.
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(laughter) Because the investors just looked very baffled.
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They didn't give us a lot of feedback.
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They were kind of reticent.
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They were just, I think they just wanted to reject us outright.
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But that experience was important because we came back.
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And we said, "We got, we have to do what we believe in rather than have investors tell us what we should do."
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And I think that was a very important lesson.
14:44
And then, fortunately, we were able to, you know, raise some capital.
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Some investors finally, very skeptically bought in.
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I still remember our Series A round, we actually had Goldman Sachs come in.
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I mean, you think, you know, you went to Sand Hill Road and you got Goldman Sachs?
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They at the time, Goldman was investing like large private equity deals, and, and then they had sort of a, you know, emerging technology investment business.
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And I happened to know the have a friend who was a partner who was running that business.
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And then she calls me up, and she said, "Joe, you know, I've got good news and bad news."
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And at the time, you know, by then I was so up, you know disappointed with all the rejections, I was like, "I can't stand any bad news.
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So tell me the good news first."
15:41
And she said, "Well, we have our investment committee have improved and invest, the investment in Alibaba."
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I was like, "That's great."
15:50
I was about to hang when she said, "Wait, you know, you want to hear the bad news?"
15:53
And I said, "Fine, what's the bad news?"
15:56
And she said, "Well, we also decided to back five other companies that's very similar to your business model."
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And you know, we're just going to see, you know, you got, let you guys compete.
16:08
[JEREMY] Well, compete you guys did, and you rose to the top.
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You guys raised the round from Goldman Sachs, then another round from SoftBank, and then it was really off to the races.
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Over the next 10 years, you guys launched payments, messaging, a consumer to consumer marketplace, a business-to-consumer marketplace, advertising, and a cloud infrastructure offering, which is now the fourth largest in the world and has 40% market share in China.
16:34
So Alibaba became a super app.
16:37
Now, one of those major in-house wins was Taobao, Alibaba's consumer to consumer marketplace.
16:42
Can you take us back to the moment of launching Taobao against what was at the time, a real monopoly from eBay China?
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[JOE TSAI] It was back in the early 2000s, eBay had acquired a company called EachNet.
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So immediately they had a large market share, and at the highest point they had like 90% market share of consumer e-commerce.
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And we were the new player coming in.
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And so one day, well, going back, I mean, I think I was talking to the dean here.
17:22
[HUNG] And she said, mentioned someone Jane Sun, who is the CEO of Ctrip, and her husband was the first CTO John Wu, first CTO at Alibaba. He came from Yahoo!
17:36
So sorry, this is a long-winded story. [CATHERINE] Please.
17:39
[HUNG] And when Jack decided to launch a consumer marketplace, Taobao he was very excited.
17:49
He had talked to Masa at SoftBank, and Masa was very supportive.
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And because it's a big idea, Masa would support anything that's big, anything that costs a lot of money, he would support.
18:00
(laughter) And Jack's very excited.
18:04
He said, "I got the money from Masa. I'm gonna do this."
18:08
And he goes to John Wu, our CTO, and John said, "No way in hell. Over my dead body." We gonna do this.
18:15
And that's because John was-- John had worked on Yahoo Shopping and it was, it was not successful, so he didn't have a very positive view of us going into the consumer e-commerce space.
18:30
But then, obviously, Jack overruled everybody And I didn't know.
18:35
I, strategically, I couldn't make that judgment But I decided that we were gonna to structure it so that financially we weren't gonna get totally hurt.
18:45
So actually, from, from day one, Taobao actually was a joint venture between a 50/50 JV between Alibaba and SoftBank.
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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 big, the best decision we've ever made.
19:09
Otherwise, today, Taobao would still be half-owned by SoftBank, right?
19:14
And we wouldn't know where it would go.
19:16
So but when we started Taobao, it was a secret project.
19:23
And 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.
19:38
So we took away a team of seven people into this apartment.
19:44
They all had to sign NDAs.
19:47
They couldn't tell their colleagues or spouses or anybody.
19:51
So one day, you person that you're sitting next to the cubicle next door disappeared, and people were did they go?"
20:00
So the first seven people seeded the Taobao business.
20:04
They went to the Jack, the Jack original apartment to do the work create that marketplace.
20:11
And then our first when we launched it, the first items being sold on Taobao came from everybody's closet.
20:22
Everybody just went to their closet (audience laughs) And said, "What do we have?
20:26
What can we find to, to sell it on Taobao?"
20:29
We seeded that marketplace with a lot of junk.
20:33
That's how this thing started. [CATHERINE] Incredible.
20:35
[HUNG] I remember, it was for almost a year, we kept it a secret project.
20:41
I mean, the website was launched, so people knew Taobao existed, but nobody knew it was connected to Alibaba.
20:47
[CATHERINE] It's really quite remarkable when you think about how it combines what has made Alibaba so successful, the complementary skill sets between Jack the visionary, your CTO at the time, who had had a more conservative mindset, and then you structuring the joint venture, and then the focus that you guys applied to get this off the ground.
21:05
And you guys had a lot of success with Taobao, obviously.
21:08
Within two years, Alibaba took back the market.
21:11
You guys took 60% market share and eBay China ultimately closed down.
21:17
Now today, Alibaba is one of the most successful and important companies in the world.
21:21
One in six people on this planet interacts with Alibaba's ecosystem regularly.
21:26
Now-- [HUNG] Is that right?
21:28
I think I need to put-- (audience laughs) I think I need to put that into our investor presentation.
21:31
[CATHERINE] You would fact-check me on that?
21:32
(audience laughs) Yeah, if you want me to join, I'm happy to hop in.
21:36
(audience laughs) So now you're in a different position.
21:39
You are the incumbent, like eBay once was, and you're facing up-and-coming challengers. [HUNG] Yes.
21:44
[CATHERINE] So how do you guys continue to innovate from that incumbent position?
21:49
[HUNG] Well, we don't always do it right.
21:52
We've gone through periods where, when we stopped innovating and we suffered from it.
22:02
As a large company, by definition, I mean, we have 120,000 employees.
22:10
It's very difficult to have people in such a large place.
22:19
Everybody has their role, right?
22:23
[JOE TSAI] 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 plan, you have to set established goals, you have revenue projection that you need to meet.
22:37
And all of those things get preoccupied and take you away from an innovative mindset.
22:43
So, 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?"
22:53
That doesn't work either, because those people tend to get lost, and also you're not gonna allocate the best talent to that, you know, because the Innovator's Dilemma basically, by definition, means that what your core business is the most important thing, that you're gonna develop, allocate the most resources to it, because it generates revenues and profits and value, enterprise value for the business. How do you address that? How do you deal with it?
23:27
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.
23:41
They're not just working for their boss.
23:43
Everybody should work for their customers.
23:46
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.
23:55
You are, if you're the owner of the business, then you care about the customers, right?
24:00
And then you have to, 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?
24:13
Like, you know, in our business, a different way to engage with the platform.
24:18
You know, we started with a listing, then a search, now it's short video.
24:23
Like, different ways of engaging with the platform.
24:25
You have to start thinking about these things, 'cause your customer's not gonna stay with you forever if you don't innovate. [CATHERINE] Yeah.
24:31
[JOE TSAI] So I think sense of ownership, worrying about what the customers will want in the future, and you have to be a step ahead.
24:39
Almost like what Steve Jobs says, you need to just invent something and then tell the customers that's what they need.
24:45
I think that's the mindset you need to have.
24:48
The other thing is you have to make decisions very quick.
24:53
[HUNG] 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.
25:05
And so you have to be able to tolerate not having full information and then just making a decision and commit to it.
25:14
And then, if you find out you're wrong, pivot fast in a different direction.
25:20
So having that agility is also key to being innovative. [CATHERINE] Yeah.
25:27
That agility, that sense of ownership has, has clearly worked for Alibaba.
25:31
You guys went public in the US in 2014 in what was at the time the largest IPO in history, and it marked Alibaba's arrival as a truly global company in in line with Jack's original vision, and this was a global company with access to now global investors. Why was that important?
25:53
[HUNG] Being global, why is that important?
25:55
[CATHERINE] Access to global investors, specifically.
25:58
(laughing) [HUNG] Well, I think having investors in your company and being a public company, they're one of your constituencies.
26:19
And you know, of course, I started this talk by saying, you know, we do what we believe in, 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?
26:43
We're in a globally competitive industry, especially talking about AI, cloud, you know, that's a global business.
26:52
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 gonna go list in Hong Kong, but we ended up not doing that. We went to New York.
27:12
There were a lot of considerations that went into it.
27:15
Um, 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.
27:31
Most global investors I think still as today are American or have American roots, So so it was natural for us to sort of tap into the uh, capital markets in the United States.
27:46
[CATHERINE] Well, after the IPO, you stepped down as CFO and stepped into the role of vice chairman, and Alibaba went through a 10-year period, which you discussed earlier was on the less innovative side, a, a 10-year period of challenge.
27:58
And you returned as chairman in 2023.
28:02
You talked about quick decision making.
28:04
So can you walk us through the quick decisions you made when you returned as chairman?
28:11
[HUNG] Number one, I wouldn't say I made the decision.
28:18
We collectively, as a new management team, including our CEO Eddie Wu, we decided what we were gonna focus on.
28:28
We were gonna focus on our core business of e-commerce and we were gonna focus on AI and cloud. We were doubling down.
28:36
I mean, we had a cloud business, but it's a CPU-based compute business that we decided that AI is gonna drive future need for cloud GPU-based cloud computing business.
28:47
And so you pick those two lanes where we're gonna be extremely good at, we're gonna be extremely competitive, and then the rest of the assets or businesses that we have are just less important, and you have to decide what's important, and what's not.
29:11
So deciding what's important, first decision.
29:14
The second decision is, okay, in the lanes that we want to be very good at, what kind of resources we want to allocate to, whether it's capital or people, you want to put the best resources into it.
29:28
The third decision is, on the rest of the stuff, let's sell them or get rid of an exit or whatever.
29:33
Somehow manage them in a way so that it's not distracting to the management team. It's very important.
29:40
Management team has limited bandwidth.
29:42
You only have 24 hours a day.
29:44
You're not gonna be able to watch eight different businesses.
29:48
I mean, we used to go to investors and say, "Alibaba has six different divisions and this here, this segment and that segment." That's stupid.
29:56
You know, if I was an investor start listening to a guy, you know, that says, "I have six businesses," then they're gonna say, "What are you gonna really focus on?"
30:06
You know, there's no focus.
30:07
So we actually streamlined a lot of that.
30:10
We sold unimportant assets or non-strategic assets.
30:16
But then there's some businesses that are in the gray area.
30:20
They are not core—however, they have strategic value.
30:25
One example is our food delivery business.
30:27
It's a business called Ele. me.
30:29
We were getting killed by our competition.
30:32
We had, you know, like, only 20% market share.
30:36
Our competition had, like, 70% market share.
30:39
And every investor is like, "When are you gonna exit this business?
30:43
Just get out of food delivery."
30:45
And I told people, "You're right."
30:50
Food delivery itself, we may not want to be in the food delivery business per se, but the whole delivery infrastructure was going to be important for e-commerce because it's an instant commerce delivery infrastructure.
31:02
If you want to buy stuff, you order meals, they'll come to you in 30 minutes or even shorter period of time.
31:09
But what if in the future people want to buy clothing, luggage, their cell phones, whatever, they want it in 30 minutes.
31:17
If I sold that business, I would have lost that quick delivery infrastructure.
31:22
And so even though that business itself was not core to us, it has strategic importance.
31:30
So we had to sort of decide in the gray area what to do with those.
31:35
There were a lot of businesses where a lot of the management teams of those gray area businesses came to us and say, "We're, oh, we're strategic and important," and we're like, I'm like, "You're not."
31:43
(laughter) [CATHERINE] I would hate to be one of those folks. Yeah.
31:47
[HUNG] Then you have to be a little bit direct.
31:51
You have to say, "I'm sorry.
31:54
I know you've worked very hard and you've done a very good job, but you're just not gonna be core to our business-" And we kind of have to find some way to either find a partner for you to, you know, take on the risk or do something different."
32:08
[CATHERINE] Yeah, that clarity and focus on the strategy has served you well over the last few years, you and the team.
32:14
You brought up doubling down on cloud computing and AI.
32:17
So I want to talk about that.
32:19
AI is really the newest arena for a race between the world's two largest economies, the United States and China.
32:27
[JEREMY] How do you see the race playing out?
32:30
[JOE TSAI] I think AI is a race among companies, but AI shouldn't be a race between countries. It's a technology. It's electricity.
32:39
I describe AI as having access to AI as having access to water and air.
32:47
And can you imagine if a country denies another country something that's essential to life?
32:53
So I don't see this race as a race between two countries.
33:01
I think there's a lot of areas where people can cooperate and benefit the world.
33:09
AI today has achieved a lot in the medical area.
33:16
We've been able to, you know, have AI tools that could detect early stages of pancreatic cancer.
33:24
And, I mean, you know, a lot of these positive benefits should be available to everybody. [JEREMY] Yeah.
33:31
[JOE TSAI] So I don't subscribe to this view that there should be a race between two countries.
33:40
I can understand that there's a school of thought that says if the military gets a hold of AI, that whoever runs faster or develops AI faster for military use will have supremacy.
33:58
But let's just limit that to the military field and let the AI capabilities proliferate around the world.
34:09
And that's the way to go, I think.
34:12
[JEREMY] Yeah, I think most people today would agree that AI has this potential to be hugely transformative globally. [JOE TSAI] Yeah.
34:19
[JEREMY] But yet there are two very different strategies between Chinese companies and American companies.
34:23
Chinese companies have access to very low cost of energy.
34:26
They're pursuing mass distribution, open source, like Alibaba is.
34:30
And American companies have a hardware semiconductor advantage.
34:34
So maybe we don't call it a race, but which approach do you think will win?
34:39
(audience laughing) [HUNG] We have to define what winning means.
34:46
I think for me, winning means it gets proliferated.
34:53
I hate the word diffusion.
34:55
I wanted to say proliferation, but then people bring in kind of the analogy of nuclear weapons, whatever.
35:00
So AI should be used by the most number of people, and in whichever society where they have most people use AI and benefit from AI is gonna be the winner.
35:12
[JEREMY] Well, Alibaba has pursued that strategy.
35:15
Qwen, Alibaba's model, recently surpassed 700 million downloads globally.
35:20
It's the leading open source model in the world.
35:23
How much of Qwen's success, your success in building Qwen as a product, comes from prior successes scaling other products like Taobao? [HUNG] A lot.
35:35
If you think about these large-scale internet companies with hundreds of millions or even billions of users the problems that we try to solve is the problem of scale, the problem of concurrent users coming in, so the problems of parallel computing.
35:59
So, you know, so having that experience really helped us in developing the right algorithms, ultimately, that turned into AI.
36:13
And you know, the modern AI as we know it is based on the transformer architecture.
36:22
So we had development efforts dating back to 2019.
36:29
And remember, this is like three years before OpenAI publicly came out with ChatGPT But we didn't put enough resources into it, right?
36:39
Back then people were still debating whether that's the right technology path versus something different.
36:45
But once back, you know, in 2022, when ChatGPT came out, I think everybody woke up and said, "We need to double down.
36:53
We need to put those investments in."
36:54
But by then, we had already, you know, at least three years of development in transformers, but also large-scale computing.
37:06
[JOE TSAI] That's all, you know, we had invested in our cloud infrastructure, back 17 years ago, when we decided that our e-commerce business was getting so large in terms of users and also the data that we have to manage, we have to develop proprietary software to manage computing clusters.
37:32
And basically, you know, my layman's way of thinking about it is your software enables clusters of, you know, 50,000 computers, 100,000 computers to work and think like one brain, even though they're located in different data centers, right?
37:48
So that's the technology that we developed proprietary that formed the basis of our cloud computing business today.
37:59
So we went into cloud computing out of necessity, not because it was a hot thing.
38:05
Back 17 years ago, nobody has heard about cloud computing, nobody really thought it was a business.
38:14
So yeah, So basically, we had a lot of good foundational work that's done before, sort of the current craze about the current version of AI. [JEREMY] Yeah. [JOE TSAI] Yeah.
38:32
[JEREMY] Well, will be interesting to see how this competition plays out.
38:38
I wanna return to a lifelong passion of yours on this point of competition, sports.
38:43
You acquired a majority ownership of both the NBAs Brooklyn Nets and the WNBA's New York Liberty in 2019.
38:51
And together they were recently valued at nearly double what you acquired them for.
38:56
How did you know these were great investments and not just passion projects? [JOE TSAI] I didn't.
39:01
(audience laughing) I thought they were safe investments in the sense that the value was not gonna go down.
39:11
I think a few years ago, I gave the analogy of if you you know, live in New York City, you see a you know, rooftop apartment, Park Avenue apartment, that's you buy into it, you're not gonna lose money, because it's in a good location, it's a prized asset that everybody wants.
39:29
[HUNG] Once, so I thought the downside was gonna be protected, but I did not anticipate how much value the valuation of these professional sports teams have increased over the last few years.
39:44
There are two leagues in, in the United States, the NFL and the NBA, where you know, there's tremendous amount of value being created.
39:55
And that's because of the media rights meaning broadcast rights, you know, streamers and TV networks pay a lot for these media rights to be able to broadcast your games, and that's supported the increase in valuation. Yeah.
40:14
You applied that investor mindset assessing risk in becoming an investor in these two amazing franchises.
40:21
Now you turned a true passion, sports, into an investment strategy and business school advice on passion is somewhat mixed.
40:29
Some say avoid turning it into a career, and others say you gotta do what you love. Where do you stand?
40:39
I can't imagine if you woke up every morning, and you went to work, and you hated your job.
40:48
That's, you know, that's not a recipe for success.
40:54
But you don't, you know, you could be passionate about a lot of things, but at least you have to be interested in what you do, and you want to do it better.
41:08
Whether you call it a passion or something different, or dedication or interest, you know, there's gradations.
41:20
You know, if one of you says you know, "I'm passionate about cooking."
41:26
And then you go out and try to open up a restaurant, that's great, but that's probably not why you went to Stanford Business School for.
41:34
You know, so my advice is find the people first.
41:42
Find the people that you want to spend time with, and then obviously the mission of the company and the stuff that you do is something that you have an inherent interest in.
41:54
Whether you call that passion or not, you should be passionate about your colleagues, about your coworkers.
41:58
That's what I call passion.
42:02
[MODERATOR] Well, with that, Joe, I'd like to turn it over to a few of my classmates who have prepared questions for you. [JOE TSAI] Great. [CATHERINE] Hi, Joe.
42:10
Thank you so much for coming over and speaking with us today.
42:14
My name is Catherine, I'm a current MBA Two student, and before GSB actually spent three years working at JP Morgan Hong Kong as a coverage banker for Alibaba Group.
42:25
So working across many business units and then ecosystem players such as AliCloud, Hema, Ali Picture, Ali Health cetera, what really amazed me is Alibaba's capability of pioneering very sophisticated business structuring and capital allocation.
42:46
Looking back, what are some decisions that you've made or the group have made are misunderstood by the market, but is really critical for the growth of the company?
42:58
[JOE TSAI] Well, I would like to think we're very sophisticated in technology in products.
43:07
And this you know, I mean, I think we do a pretty decent job in terms of managing the capital markets and, I guess so confidential in financial engineering um, I'm sorry, your question is? [CATHERINE] Yeah.
43:22
What are some decisions on business structuring and Capital allocation that are potentially misunderstood by the market, yet to be very critical for Alibaba's growth today? [JOE TSAI] Yeah. [CATHERINE] Yeah.
43:36
[JOE TSAI] Look, I think today everybody is worried about the amount of capital that's being allocated to AI at the different layers. Right?
43:47
In our company, AI means a full stack of things.
43:51
You know, how much money we put into developing our LLN.
43:55
How much CapEx we make into our cloud infrastructure.
44:00
You know, in order to sort of test your, how good your AI is, you have a consumer application, right?
44:11
So we now have the Qianwen app, which is our consumer application.
44:16
So, how much money do you allocate to promoting marketing to promote the consumer application?
44:21
So along the full stack, you have to allocate capital.
44:26
And I think every company that's serious about AI is doing all these things.
44:32
And perhaps that's the part that investors are trying to figure out, whether you're allocating correctly to different parts of the stack.
44:47
I don't think there is the right-- I don't even have the right answer for you.
44:52
But I do think that these three things that I've mentioned, a consumer AI application, the large language model that's backing up, that's supporting the application and also the infrastructure that's, you know, supporting everything, those are equally important.
45:12
And you kind of have to anticipate that-- You just have to believe that there's gonna be demand.
45:20
Like, infrastructure, you know, the infrastructure investments, you have to be very forward-looking.
45:25
Securing data center capacity, securing the energy.
45:30
You know, buying the equipment.
45:33
There is a lead time to it.
45:36
But I think that your judgment of whether there's gonna be demand should be based on what ultimately, you know, the users, the enterprises that are going to meet the demand as opposed to some philosophical pursuit of AGI.
46:03
There is a lot of philosophical pursuit of AGI right now that's driving the demand, but then at the end of the day, you need to kind of look at what the market can bear. [HUNG] Hi, Joe. My name is Hung.
46:20
I'm an MBA one currently at GSB.
46:23
I was also a coverage banker at Credit Suisse in Hong Kong.
46:26
(audiences laughing) And I wanted to ask you a question on Alibaba's culture.
46:31
People often describe Alibaba's culture as having a very strong Ali flavor, AKA Ali-ber in Chinese, with its own language, systems and expectations.
46:42
While this has helped drive performance, it can potentially also create pressure and bureaucracy.
46:48
How do you think about the trade-off between maintaining a strong corporate culture and ensuring openness, inclusiveness and innovation as Alibaba continues to mature in the future?
47:01
[JOE TSAI] Like I said, you have to like the people you work with.
47:03
So I think if I were to define what is the essence of Ali-ber, it is, you want to have a beer with your coworker after work, or it's not even after work because it's also part of work, because you're spending time with your coworkers.
47:20
And I think that's important.
47:24
And you know, like the culture, how do you avoid bureaucracy, right?
47:31
Well, you have to define what's important, what is not.
47:35
And be able to tell people that their division is not important.
47:41
You have to have the guts to tell them.
47:42
I think a lot of companies make mistakes because they don't want to hurt the people.
47:47
I mean, you used the word inclusive. I'm sorry.
47:49
We're running a business.
47:50
We can't include everybody in the enterprise if they're not gonna be contributing to where you want to go.
47:58
You have to let them know.
48:03
[LUCIA] Thanks, Joe, for all the great sharing.
48:05
So I'm Lucia, second-year MBA.
48:07
Sadly, I'm not a coverage banker for Alibaba.
48:09
(laughing) But I actually work as a product manager in China and also build partnership with Alibaba Cloud and broader ecosystem.
48:16
So I was wondering, since Alibaba's ecosystem and also full-stack AI strategy, as you mentioned, really fascinated me.
48:24
So from your perspective, what has been the most challenging and most difficult step to make, but is really crucial for the company, in term of AI transformation?
48:37
[JOE TSAI] I think what is difficult is, every part of the stack that I mentioned that we have to invest in costs a lot of money.
48:49
And then invariably, people ask, "What's the ROI?"
48:55
But like I said, you have to have a certain belief that it is strategically important, and you're not gonna focus today on on a lie.
49:07
And the other thing is, it's not like we came to this with a well-designed grand plan that these are the layers of the AI stack that we have to, they all come sort of in different moments And if they didn't have their own individual success.
49:33
At their layer, then they wouldn't have gotten attention. Right?
49:38
So it was a very bottoms-up process.
49:43
And then when you look back in hindsight, you think, "Well, that's kind of haphazard because there was no grand design to begin with."
49:53
What if your LLM development was unsuccessful?
49:55
Then you would not have put any more resources into it, and it turns out that having a really good large language model, a large foundational model is really, really important in the AI race.
50:09
I'm not talking about race between countries, I'm talking about race among companies.
50:13
So those are some of the difficulties, and in a way there's a little bit of luck involved but then at the end of the day, I go back to the people.
50:24
You have to work, identify the right people to work on these projects.
50:30
[JEREMY] Thank you, Joe, and thank you to my classmates for those thoughtful questions.
50:34
Joe, before we wrap up we're gonna do a View From The Top tradition, the rapid fire segment. Are you ready? [JOE TSAI] Yeah.
50:41
(audience laughing) [JEREMY] Alright, let's do it.
50:46
City that feels most like home to you. [JOE TSAI] Taipei. That's where I was born.
50:52
[JEREMY] Favorite sports arena food?
50:54
[JOE TSAI] Barclays Center, for sure.
50:56
[JEREMY] Okay, well, but what item at Barclays Center?
51:01
[JOE TSAI] I can not, for some reason I'm thinking of the Vietnamese Banh Mi pork sandwich. [JEREMY] Alright. [JOE TSAI] Yeah.
51:07
[JEREMY] I'm a hot dog guy, but that's great too.
51:09
(audience laughing) Best purchase you've ever made through Taobao?
51:17
[JOE TSAI] Oh, a pair of gym shorts, Under Armour. [JEREMY] Nice.
51:21
[JOE TSAI] I think I bought them 10 years ago.
51:23
I'm still wearing them when I exercise.
51:25
[JEREMY] That's a great endorsement for Under Armour.
51:27
(audience laughing) The app on your phone that you use most?
51:32
[JOE TSAI] I have two apps that I use a lot, most.
51:37
One is the Quinn app because that's now it's an assistant for me.
51:41
When I do research, whatever, I wanna know something I go to the Quinn app.
51:47
The other one is Twitter. I get all of my news.
51:51
If I wanna know what's going on in the world, I can get it instantaneously from surveying, Twitter, I mean, now the algorithm is so good, so they know what I'm looking for.
52:02
It's basically subjects on AI and sports.
52:05
Those are the two things.
52:07
[JEREMY] Well, last rapid fire question on sports, would you rather win an NBA title with the Brooklyn Nets or become a professional lacrosse player?
52:15
[JOE TSAI] Oh, that's a tough one.
52:16
(laughter) I'll both have low probability, but I'll (laughter) I'll take the NBA title. [JEREMY] All right. NBA title it is.
52:30
(laughter) And to close, one final question, and this one isn't rapid fire.
52:35
What's your best piece of advice for those in the crowd today hoping to build a global company?
52:47
[JOE TSAI] I don't think you should think about global, building a global company from day one, because you have to win local.
52:58
It's if you have a grand plan, I mean, the world is a large place.
53:05
To build a global company, you have to have a lot of infrastructure that starts with small pieces, so you have to win, have small wins.
53:15
So think about small wins and win locally where you start.
53:20
You have to win the market where you started, and then you think, you can think about going overseas, going global you, because with those winning local battles, you're training your team, you're developing talent that enables you to be a global player.
53:42
So you gotta start somewhere.
53:44
[JEREMY] Ladies and gentlemen, Joe Tsai.
53:46
(applause) (upbeat instrumental music)