#32 Alibaba: The House That Jack Ma Built

**David Senra** (0:00)
I first met Jack in the summer of 1999, a few months after he founded Alibaba in a small apartment in Hangzhou, some hundred miles southwest of Shanghai. On my first visit, I could count the number of co-founders by the toothbrushes jammed into mugs on a shelf in the bathroom.
In addition to Jack, there included his wife, Kathy, and 16 others.
Jack and Kathy had wagered everything they owned on the company, including their home.
Jack's ambition then, as it remains today, was breathtaking. He talked of building an internet company that would last 80 years, the typical span of a human life. A few years later, he extended Alibaba's life expectancy to 102 years, so that the company would span three centuries from 1999 From the very beginning, he vowed to take on and topple the giants of Silicon Valley. Within the confines of that modest apartment, this should have seemed delusional. Yet there was something about his passion for the venture that made it sound entirely credible.
Jack is different from most of his internet billionaire peers. He struggled in math as a student and wears his ignorance of technology as a badge of honor. His outsized ambitions and unconventional strategies won him the nickname Crazy Jack.
In this book, we will explore his past and quirky personality to learn the method to his madness. Okay, so that's from the introduction of the book that I want to talk to you about today and what we're gonna be using as our guide to learn more about Jack Ma. And that book is called Alibaba, The House That Jack Ma Built by Duncan Clark. So I've heard of Jack Ma before and I've seen a couple of his speeches, but I didn't know too much about Alibaba's business. I've read a few articles and heard a few podcasts, but this book really kind of opens up exactly what they do and how they make their money. Next few paragraphs, it kind of describes the scale that we're talking about here. On November 11th, 2015, in Beijing, in the iconic bubble-like structure bathed in blue light known popularly as the Water Cube, the venue for the Aquatics events in the Beijing Olympics held seven years earlier, it wasn't water that flowed, but streams of data. For 24 hours without interruption, a huge digital screen flickered with maps, charts, and news crawls reporting in real time the purchases of millions of consumers across China on Alibaba's websites. In front of hundreds of journalists broadcasting the event across China and around the world, the Water Cube had been repurposed as a mission control for the Chinese middle class and the merchants' marketing to them. A four-hour live TV special called the 11-11 Global Festival Shopping Gala was broadcast to help keep shoppers up until midnight. In the first, now here's the crazy part, in the first eight minutes of 11-11-15, shoppers made more than $1 billion in purchases on Alibaba's sites, and they kept on shopping. 24 hours later, 30 million buyers had racked up over $14 billion in purchases, four times greater than 11-11's US equivalent, Cyber Monday.
So they did $14 billion worth of purchases in 24 hours. Let's find out a little bit about all the products and the websites that Alibaba owns. So the note I left myself was 1001 mistakes and what this author is calling the Iron Triangle. And we're going to see some of Jack's personality right away. Jack likes to say that his company's success was an accident. Quote, Alibaba might as well have been known as the 1001 mistakes. In its early years, he gave three explanations as to why the company survived. We didn't have any money, we didn't have any technology, and we didn't have a plan. But let's look at the three real factors that underpin Alibaba's success today. The company's competitive edge in e-commerce, logistics, and finance.
Alibaba's e-commerce sites offer a variety of goods to consumers. Its logistics offering ensures that those goods are delivered quickly and reliably, and the company's finance subsidiary ensures that buying on Alibaba is easy and worry-free. The e-commerce edge, unlike Amazon, Alibaba's consumer websites, Tabao and Tmall, carry no inventory. So let me just preface the beginning of this podcast. I can barely pronounce most words in English. There's no way I'm gonna get any of these words correctly, so I'm gonna do the best I can, but I'm most likely mispronouncing them. So we're first introduced to their two main sites. So it's Tabao, T-A-O-B-A-O, and Tmall carry no inventory. They serve as platforms for other merchants to sell their wares. Tabao consists of nine million storefronts run by small traders or individuals. Attracted by the site's huge user base, these micro-merchants choose to set up their stalls on Tabao in part because it costs them nothing to do so. Alibaba charges them no fees, but Tabao makes money, a lot of it, from selling advertising space, helping promote those merchants who want to stand out from the crowd. Merchants can advertise through their paid listings or display ads. Under the paid listing model, similar to Google's AdWords, advertisers bid for keywords to give their products a more prominent placement on Tabao. They pay Alibaba based on the number of times consumers click on their ads. The old joke about advertising is, I know at least half of my advertising budget works. I just don't know which half. But with paid performance advertising and a ready market of hundreds of millions of consumers, Tabao commands an enormous appeal to small merchants.