The Negotiation

Today on The Negotiation, we speak with Kevin Xu, Founder, and Author of Interconnected.blog, a publication that analyzes businesses and trends from the lens of builders, operators, investors, and regulators, and how they are all interconnected globally. Kevin received his Bachelor of Arts in International Relations from Brown University before studying both Law and Computer Science at Stanford. He then spent a couple of years at the White House in the Obama administration before becoming an entrepreneur in e-commerce and then design strategy. He then became very interested in open source projects, something he invests his money in to this day. His blog is bilingual in both English and Chinese, and he also podcasts.When asked about China’s stance on open-source technology, Kevin says that due to sanctions on technologies from the US, by the US, there has been an official attitude shift towards embracing open-source technology, saying they now know there is always some sort of open-source alternative available instead of relying on the proprietary solution that one would normally buy or license. Kevin goes on to say that he believes open-source is “eating a lot of different parts of the entire technology stack.”Given Kevin’s time at the White House, the conversation inevitably took a turn to politics, and wrapping up part 1 we delved into a discussion around whether Facebook and Twitter should be moderating political ads, which Kevin says no but maybe not for the reason you might think, then discussing why it seemed earlier in the conversation he was perhaps surprised to find so many Chinese that come from a Communist country background seemingly eager to be involved in politics in the US. 

Today on The Negotiation, we speak with Tom Parker, Head of China with the Australian Football League (AFL) and Vice President for the Australia China Business Council. Tom shares his journey in the Chinese business world, beginning in 2007 with the founding of Red Tape Consulting, “a China Advisory business that helped stage the first AFL exhibition match as part of the Shanghai World Expo.” Since 2018, Tom continues to serve a prominent role in the AFL. As Head of China, Tom “drive[s] commercial outcomes from the ongoing engagement and games being played in Shanghai.”Before COVID-19, Tom’s role as Head of China at the AFL was to serve as the bridge between Australian and Chinese brands. As the pandemic reared its head just before the beginning of 2020, Tom had been looking to boost the organization’s social media presence and build on its branding. With both countries currently occupied with their respective challenges heading into the new normal, Tom is optimistic, but at the same time sees the future of the AFL as uncertain. At this point in time, the most they can do is to “ride the ship” onwards and continuously adapt to the situation at hand.Tom describes Australian sports as being a “bottom-up, grassroots”-led part of the culture, while Chinese sports is a “top-down” affair dictated by the state. Traditionally, the Chinese have generally focused on professional sports that are less team-oriented such as diving or table tennis. In recent years where globalization has become more prevalent than ever, ball sports, and the culture of fandom for teams and players have sprung up among the Chinese.

Today on The Negotiation, we speak with Bertrand Schmitt, tech entrepreneur, Co-Founder, and Chairman of App Annie, and co-host of the Tech DECIPHERED podcast alongside Strive Capital’s Nuno Goncalves Pedro.Bertrand has been involved in the mobile industry in China since 1999, through what he refers to as its period of “growing pains”. When the iPhone and the App Store came out in 2007 and 2008, respectively, Bertrand quickly saw that they solved, in one go, three big issues in China’s mobile world: discovery, distribution, and monetization. Bertrand was inspired to bring something to market that could contribute to the industry. This led to the creation of App Annie, which aimed to provide tools to business developers to better understand developments in the mobile space via data and analytics.Mobile-only recently boomed as an industry in the Chinese market following the release of the iPhone (considered a luxury item when it first came out). Up until that point, the Chinese communicated through text, and tech giant Tencent was known for its online gaming services. The past decade has seen much innovation and the rise of new giants like Pinduoduo and ByteDance that were built on a mobile-first foundation.Bertrand shares his experience working as a French entrepreneur in China, how the VC “culture” in China has evolved and how it differs from that of America or Europe, China’s unique mobile-related innovations, and what to expect from Bertrand’s podcast, Tech DECIPHERED. 

Today on The Negotiation, we speak with Jesse Chester, Category Leadership Director at Mars who leads the category leadership organization in Guangdong, China, and in Arkansas, USA. Jesse’s role was to create strategic plans around category growth by working with retailers to help grow the marketplace as a whole. He also contributed to the reinvention of Mars’ innovation strategy.The snack industry in China “runs the full gamut” compared to that of North America. According to Jesse, the Chinese see food such as corn or bread rolls in the same category that they do chocolate bars or gum. Also, the health angle towards confectioneries and sweets in China is not as prevalent as it is in North America simply because consumption is much lower among the Chinese.It is clear that what works for the sweets industry in the west does not work the same in the east. Marketing is much more reliant on Key Opinion Leaders and capitalizing on events to sell these sorts of products. Also to be taken into account are cultural differences in the presentation and experience of sweets. For the Chinese, it is important to hone in on popular flavors unique to the country, but attention should also be put on the texture and packaging of the sweets.Jesse relates his experience working in China as a foreigner and having to adapt not only to the business environment but the cultural environment as well. His greatest strengths were his determination to focus on key tasks, but he also came to appreciate the power of taking initiative rather than leaving his Chinese business partners to take the lead every step of the way. He also was able to gain trust in an environment known to be rather impersonal and emotion-free by making it a point to build relationships with his partners, many times over baijiu.

Today on The Negotiation, we speak with Kimberly Kirkendall, founder and President at International Resource Development, on adjusting to the business environment in China as a Westerner.Kimberly discusses the foundational cultural differences in doing business with the Chinese as opposed to Westerners. She had an advantage getting her start in China when she was in her early 20s, as she was able to quickly adapt to the implicit and analogous manner of speech that is characteristic of the locals. She and Todd both agree that a foreign professional in their 30s would have a much more difficult time making this adjustment as they would already be hardwired to interact with others in a particular way according to their own cultural norms.In the early 2000s, Kimberly was told that the China she had experienced in the late 1980s had completely changed and that the culture she had so familiarized herself with no longer existed. Her reply was that the so-called new, modern, Capitalist China was just an observation “at the veneer level”. Beneath this, China was still fundamentally the same as it was in the 1970s and 1980s, with the Communist Party apparatus completely intact. However, in the last five years, some of the veneer had begun to crack and is being replaced by a new one, namely, a “more muscular Communist Party engagement in the world and in business.” To Kimberly, this is simply proof that China’s attitude and worldview as a country never really changed.“China and many high-context language countries are relationship-driven,” says Kimberly. The first thing to understand in any negotiation is that the Chinese are looking to you as a partner, even if you do not yet see it that way yourself. That is, to the Chinese, you are perceived as someone who is either selling or buying, and this perception will remain throughout the negotiation. It is a relationship that is rooted in human nature, taking the emotionality and relative unpredictability of human beings seriously. They do not simply look at a company as a soulless, paint-by-numbers entity.

Today on The Negotiation, we speak with Aynne Kokas, Associate Professor of Media Studies at the University of Virginia, where she teaches students about U.S.-China media and technology relations. She is also a Senior Faculty Fellow at the Miller Center for Public Affairs at the University of Virginia where she does work related to U.S.-China policy, particularly around how corporations and the governments of the U.S. and China interact in the space of media and tech.Aynne is the author of the award-winning book Hollywood Made in China. The big studios in China include the China Film Group, the Shanghai Film Group, Alibaba Pictures, and Tencent Pictures. These studios are “getting into the cinema game” in much the same way that tech companies in the U.S. are. That is, by producing a large amount of high-budget content, these cash-rich companies are able to drive traffic to their platforms.Netflix’s China strategy is to enter the market in any way it can. While it has been difficult for them to enter as a platform, they have been able to distribute content more successfully. These shows are streamed on Chinese platforms such as Iqiyi. By improving the content on these platforms, they can pull in more subscribers.Analysis has shown “clear colorism” in both Chinese and Western films released in China. Aynne suggests that this might be due to “a lack of great roles for people of color” in Hollywood. That being said, a lot of Indian films have done well in China. So have many Korean and Japanese productions. A lot of the gatekeeping decisions regarding the distribution of foreign media have very much to do with the geopolitical relationships that China has with these different countries.

Today on The Negotiation, we speak with Hendrick Laubscher on current and future developments around shipping, warehousing, and logistics networks in China.At first glance, distribution in China may appear more or less similar to the networks and processes of other countries, particularly in the West. However, Hendrick explains that China, by virtue of its 1.3 billion-strong population and well-known penchant for speed, operates at a scale unrivaled by other markets. He points to eCommerce giants JD and Tmall as prime examples of companies that embody this level of speed and scale.Another reality that sets China’s economy apart from much of the West is the same level of respect that people give to every worker, regardless of whether they are a street cleaner, delivery truck driver, or C-suite executive. This is because the country is so reliant on eCommerce that they understand that every person who contributes to the process is someone to be equally valued. It is a unique culture that helped China to become a $1.3 trillion market. “There’s nothing that you can’t buy on the internet in China,” says Hendrick. “You can find repossessed ships, airplanes, flats, and cars. Think about that and compare that to what we see in the West.”China’s speed is unmatched due to the speed of innovation and the demand of Chinese consumers for lightning-fast speeds to be the norm. Also, the Chinese “have almost no influence from outside logistics companies”, with JD, Alibaba and the like having built themselves from the ground-up and, therefore, have only their own data to rely on and learn from.In the near future, Hendrick sees more warehouses using 5G technology so that the data transferences between various parts of the business will be made quicker. This means movement between 15% to 25% quicker among these warehouses compared to warehouses relying solely on human beings to manage them. There will also be more usage of blockchain as consumers demand more security when making purchases. Other investments will be made to bolster distribution, from autonomous vehicles, planes, logistics partners, and international facilities.

Today on The Negotiation, we speak with Xin Yi Lim, Senior Director of Corporate Development at Pinduoduo and former Technology Analyst for GIC in Singapore and New York.Xin Yi discusses some of PD’s latest developments, including founder Colin Huang Zheng’s recent move into an executive chairman role and news on the company’s agritech initiatives, which include its Smart Agriculture Competition to encourage innovation in both AI and traditional strawberry planting methods. She then goes into the role of live streaming in PDD’s marketing efforts and defines the relationship that the company has with its various types of vendors and other strategic partners.“Live streaming is probably the number one industry buzzword this year as well as last year,” says Xin Yi. COVID-19, of course, had a big impact on the popularity (and necessity) of live streaming. For Pinduoduo, the key was to find the value in a live streaming product as opposed to releasing one for the sake of having a product. In particular, one of the goals in using live streaming is to drive conversion which, at its root, is a matter of building trust. According to Xin Yi, “Live streaming should be part of the shopping experience and not a distraction from it.”An MCN is a third-party service provider that has a collection of content providers, akin to such platforms as YouTube. These are intermediaries that brands turn to if they need ready-made solutions for content since every content creator has their own following or fanbase.C2M shortens the distance between consumers and manufacturers. “In essence,” says Xin Yi, “it is a differentiated way of thinking about how products are designed, made, and sold to consumers.” Traditionally, manufacturers do not have a direct connection to consumers and have inefficient systems for getting feedback on their products. Usually, focus groups are used when creating new products, and this process oftentimes causes quite a bit of delay. The concept of C2M takes advantage of the fact that much of the retail world has gone digital in the form of eCommerce, allowing for that direct interaction between consumers and manufacturers.“Longer-term, the momentum behind eCommerce penetration is still very strong. In terms of PDD’s strategy, it has always been squarely focused on, ‘What do our users need and how can we provide the right products that they need for each category? How can we provide value as well as an interactive shopping experience to our 600+ million users?’”

Today on The Negotiation, we speak with Wei Liang, Professor of International Policy Studies at Middlebury Institute of International Studies at Monterey. She discusses the current state of the Belt and Road Initiative in-depth, as well as China’s current reputation on the world stage amid a variety of crises, not least of which are COVID-19 and the country’s strained relationship with Hong Kong.The Belt and Road Initiative was first announced in 2013 by President Xi Jinping with the ambitious (and ever-evolving) plan to connect Asia, Europe, the Middle East, and Africa. The belt begins in the northwest part of China and connects to Central Asia through to Europe. The road refers to the 21st Century Maritime Silk Road which connects China to Southeast Asia, the South China Sea, the Indian Ocean, all the way through to the Middle East and Africa.China’s goal is to connect with regions that it never had much economic influence in previously, while at the same time trying to bypass the influence of the United States by going through the “backyard” of Russia and India. China is intentionally keeping the BRI a “vague concept” striving to make it “open and inclusive”. One thing that has remained constant since its inception is that the United States has not been included thus far and does not seem likely to participate in any capacity any time soon.China’s relations with other powerful countries has been unsteady for a variety of reasons. China’s exponential rise as a global exporter in Asia is one factor. The language and cultural barriers are others. Recently, certain issues have influenced China’s image for the worse, two of the biggest being the impact of COVID-19 and the country’s turbulent relationship with Hong Kong.China’s focus is on infrastructure investments, which is why it put a tremendous amount of resources into the BRI. Its current relationship to the US, particularly after the trade war and the COVID-19 outbreak, is a confirmation to many scholars who have been following the unique relationship between the two countries: China has always sought to remain prepared with alternative markets to do business in.Regardless of which party wins the US presidential election in November, China will continue to have to deal with the profound mistrust between the two countries. Economic issues are one thing. Geopolitical and security considerations are another, and the two nations have continually stoked the embers of conflict throughout the past few years.

Today on The Negotiation, we speak with Gen Kanai, Director of Strategic Partnerships at Animoca Brands and Mentor at Chinaccelerator.Regarding the challenges of entering the Japanese market, Gen says that Japanese customers generally do not pirate software and content. Japan “can be a very profitable market if you can crack the market.” At the same time, it is a challenging market, with many non-Japanese companies having failed in Japan. eBay is a prime example of a failure, while Google, Twitter, and Snapchat fared better due to a number of factors that Gen enumerates.Sales cycles and establishing stakeholder trust are generally much longer processes in Japan, but the payoff is the incredible loyalty that Japanese consumers have for successful companies in the country. On the other hand, during his five years working in China, Gen has found that it is particularly difficult for foreign entities to enter the consumer segment “for a whole host of reasons”.Asked about his experience working with Mozilla and expanding to other markets, Gen says that the best part about his involvement was interacting with users. Community is incredibly important for Mozilla since it is a non-profit organization with a fraction of the budgets of Google, Apple, Microsoft, and other companies that provide competing browsers. Mozilla enjoys a user base made up of Firefox fans who not only love the product, but also the company’s non-profit mission and the fact that Mozilla does not make money off of its users directly.On the other hand, the most challenging part of Gen’s job was dealing with countries that were completely closed to Firefox such as South Korea, thanks to technical decisions made by the Korean government around internet banking, stock trading, and any other kinds of secure transactions. During Gen’s time, online technologies in Korea only worked with Internet Explorer.Mozilla’s open-source, non-profit business model can still be emulated today, with some caveats. Mozilla rose “out of the ashes of Netscape” when the latter company failed. Sergey Brin struck a deal to feature Google as the default search engine with a fraction of the ads from its search results being paid to Mozilla. Things changed when Google opted for more ownership with the creation of Chrome, but Firefox remains a lucrative product that is able to make “north of $100 million a year” for as long as it can navigate the ever-evolving trends and standards established by the top internet companies of the day.