Special: 2021 China Tech Trends (with Tech Buzz China)

0:00 Your format on Tech Buzz China is well probably a similar amount of piles of research to acquired, your format is way different. You actually write the whole thing out beforehand, right? Yeah, we actually do. We don't even record uh synchronously at this point. That's the craziest thing. So wait, can you explain how what that means? We just record separately. I record my part and then Ying records her part. It's more like an audiobook each episode. But sort of like it two people reacting to each other who are not in real time in the same room. It's it's wild.

0:33 Yeah, yeah. Welcome to this special episode of Acquired. the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I am the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures. And I'm David Rosenthal and I am an angel investor.

1:03 Based in San Francisco. And we are your hosts. On today's show, we have a crossover episode with Ray Ma and Ying Lu from the Tech Buzz China podcast. Whoa. So excited about this one. Been thinking about doing this for a while. I know. I've been listening to

1:19 Ray and Ying uh for many years and listening many, many times over on repeat while doing research for May Twine and P D and Tencent and Alibaba and Jami and Oliver. China Tech episodes. They are

1:33 The best English language. China Tech podcast out there. And So excited to finally do this crossover. Yeah, no kidding. We wanted to cover a few things. And thought that the best way to do sort of a broad general China episode that's not

1:49 specifically about a company would be to collaborate on one. So today we're gonna talk about trends in twenty twenty one for China Tech. how Ray and Ying do their research given that they both live in the US their views on the China Tech landscape and how those have evolved over the last decade as uh that ecosystem has rapidly developed, as we've covered on the show, and uh a little fun comparing and contrasting our two shows.

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4:46 Yeah, yeah. So totally. We're big fans of acquired. Our goal is to be like the acquired, but for you know, China Texas. Oh my God. That's that's true though. You guys are great. Well why don't we turn it over to you real quick for g give us y your personal backstories, a little bit about the show. Uh both of you live in California, right? Not actually in China?

5:09 Yeah. We live it both in the Bay Area right now. Was born in China, immigrated to the States as a kid when I was eight. And grew up primarily in Silicon Valley, actually. Uh, you know, went to school at Berkeley and then when I graduated went into investment banking, doing technology, uh, because I wasn't good enough to be an engineer. So I study engineering college and then and went into finance. And in two thousand seven, for personal reasons, uh moved to China and then ended up staying there for the next eight years, working in a variety of jobs, but starting first in real estate. uh investing and then going into

5:46 even did some cross border M and A Uh and then media private equity. And then finally really, really early stage startup investing at um five hundred startups, which is Very research accelerator and seed fund. and then moved back to the Bay Area at the very end of twenty fifteen. Didn't think I was gonna do much with China anymore. But was

6:08 You know, so keeping tabs on on things. Uh and then I was like, hey, podcaster all the rage. This is in two thousand seventeen. Should do a podcast on China Tech. Seems like it could be fun. And then w very quickly what I realized is that, you know By the end of two thousand nineteen, I would call it. I was like, wow, some of these companies that I'm just sort of covering for fun and personal passion. for tech buzz are actually really doing really, really well. And I should really

6:38 think harder about whether or not I want to drop the China connection. And then so in twenty twenty decided to really pick it up full time. We took some investors to China with us in twenty nineteen. to visit a bunch of the companies that we talk about on the podcast. And then uh We were gonna do that last year more.

6:58 you know, as part of Tech to Buzz, but then the pandemic cut short all that. So we've pivoted into more of a community now online for uh investors. And then I personally do a bunch of consulting for um funds interested in investing in China Tech. That's great. Well, it comes through on the show. Yeah I can't talk about everything I get, you know, a lot of information is proprietary, but I try to share what I can. There's so much that is happening that is uh reported

7:27 If you are Chinese, but if you're American, you're like I I I just occasionally get this random story about Jack Ma disappearing. Like I would love to I would love to understand thematically what's going on under those headlines uh in China. Yeah. And you know, I think one thing I I should point out when it comes to my personal experience and also this happens to Jive With Ying because we that's where we met. We met when we're both living in Beijing, which is that we were there in retrospect at a very auspicious time in China Tech because prior to let's call it 2013, 14. Chart attack was really, really small. So I was really there when uh the first couple years

8:06 really you could count on your hand the number of people doing angel investments in trida, right? So There there literally was a book called Angel and Masters of China. I think it had like twelve men in it. So it's like the uh the Warren Buffett used to go through uh you know the Moody's manual of companies to like look at all the companies out there. There's like a manual of the angel and here you go, here are all the people. And then so I happen to the enjoying five hundred, which at the time, by the way, a lot of people were like, Why are you doing this? This this is way too early. This is really bizarre. This is not a business model that works in China. And then it's not like I knew what policies were coming, but then two years later, boom, you have a couple thousand accelerators, you have hundreds of early stage funds, and you have a total sea change shift in attitudes around entrepreneurship and startups where people went From thinking that was something honestly only losers did if they couldn't get a real job, to now, oh, all the best and brightest.

9:06 would of course go and create their own startups. And that happened really around 2014 or so. And and I think you can see it in the types of companies that are public today, right? Some of the most popular Companies that are always talked about in media, you know, Pinto do a bike dance. May twin, et cetera, all these companies really start in the last decade and Pink Dodo is a great example of a company that started in the last

9:30 You know, five, six years. This is when it all happened, basically, all the capital sort of flooding in and the social Attitudes changed. Before the pandemic Both of us used to go back quite often, I would say probably quarterly.

9:45 Uh, now because of the travel restrictions, then it it is primarily online, but The good thing is that because of the pandemic, actually everyone in China is also more used to being online. In fact, some of the VC GPs that I talked to, they themselves are not even based in China right now. They're like in Singapore or Taiwan or something. Very cool. Alright, Ying. What's your story?

10:08 So I think Ray brought me into the story when she mentioned that we met in China. It's been like ten years ago when I went to China right after college. And even when we started this podcast, China wasn't a super hot topic in China Tech, even three years ago. was not as appreciated. And I feel like things have just Totally changed and it's interesting to be able to say, Oh, I've seen the rise of different sectors of tech, especially like online to offline um companies going overseas, like the rise of all the digital live streaming and e commerce um happen in China. While like also watching concurrent trends in the US.

10:46 But to go back, I came to the US when I was two from Guangxi. I'm actually a fourth tier city, and a lot of my extended family that I'm very close with are still in like fourth tier and some third tier cities, and they're all in Guangxi. Except my parents and brother. So throughout my career, I've been more on the operator side. I've worked with over, I would say over half, so over 50% China-based, ful Chinese teams, like embedded as part of the team. I've been an employee, I've been a startup co-founder in China. This was like 2012 to 2014. I fell into this niche initially when I moved to the barrier from China in twenty fourteen. And that was the year that a lot of Chinese apps were trying to go overseas. You guys might know about this. And I'd be brought on to help them. With their US business deals or set up an office or like do PR and tell their story. And today I have two partners in China. Most of my

11:39 Deep rooted opinions and like cultural schemas of China have been shaped by a combination of family background and early personal and professional experiences. But I do wanna emphasize that we really have to put in time. to gather current knowledge. So You know, when people use the term like China Expert or refer to tech buzz I do think

12:01 It's not something we just can spit off. It's just like you guys making an acquired episode and you have to Well, you could not have teed us up better. to discussing what is happening now in China in terms of trends uh for entrepreneurship. So uh I'd sort of like to turn it back to you. Feel free to start wherever you want, but for both of our audiences, what are some trends that they should be paying attention to and that we'll be covering

12:26 three to five years from now in the next Ma Toine and the next Pinduo Duo in future episodes. So actually th that's a great question, and at least in the near future what we're focused on, uh our insider community, what I said for this year, what what I think are going to be really interesting are a couple of things. One is consumer brands, and that's specifically on consumer brands being run like internet companies, which we can talk about. There's also community group buying, which is very disruptive and it's a new form of e commerce that's happening now in rural China that really kicked into high gear last year because of the pandemic. And then

13:03 Actually the third thing I I will briefly mention it, but I don't actually have too much to share on the topic at the moment, which is if we think about China tech more broadly than just internet or than even just software, then this whole new thing of electric vehicles and autonomous driving. Is really really interesting in China as well. And actually a lot of experts I talk to think that the US and China are really kind of on par. Or some people even think China is ahead in that sector, and that's definitely something I'm watching. I'm more familiar with the A V front and less with the actual vehicle making. But Those are all interesting things.

13:41 Well, maybe let's first start with that direct to consumer and that brand piece, um, and kick it over to Ying sort of how do you think about that and and what's going on in China there? So at a high level, I think we've always thought that You know In my observation. the level of quality of Chinese consumer brands, like Ray mentioned, is

14:01 Going to go up. And this is totally in parallel with innovation in China continuing, China no longer being a copycat, manufacturing and designing a lot of its own products. Ray, you mentioned consumer companies being run more like tech companies, but I'll delve more into the specifically the DTC side. So direct to consumer Brands. So I think there's a huge market opportunity for domestic Chinese brands to gang market share in China. And that's not just because, you know, again, the media narrative is all about like the youth being very nationalist, but actually it's because if you look at developed countries, right? So for example, the United States,

14:38 We actually have something like a quarter of FMCG products or foreign brands are non US. But if you go to China, what's FMCG? F N C fast moving consumer goods. Ah. So so your basic like consumer staples, et cetera, right? But if you look at China again, the foreign brand penetration is actually north of 40%, very, very high, much higher than that for certain other categories. And so if we assume that China is going to look more like the rest of the world in terms of how strong its domestic economy and brands are relative to foreign ones, then right, there's a there's a huge market share that domestic brands can capture. And this is accelerated by the fact that in recent years, manufacturing, uh design, all these things that go into brand has significantly improved.

15:27 So like I was saying to you, but the OEM of the past, the original equipment manufacturers were, you know, the model is that you go to China, you already have your product spec, you already have your brand, you have your design. you go there just looking for someone to make it for you, those days are long past. OENs are now ODMs, right? They also do a lot of design, where you can just go then with some sort of Much fuzzier, let's call it product spec, and then they'll actually design something for you as well as manufacture it to

16:00 Today I hear people call it, you know, call these factories OBMs, right? Original brand manufacturings, where literally they're doing pretty much everything for you except the final branding. You know, they they even will do a lot of the marketing copy, et cetera, for you as well, because they've just gotten so much better at all these. parts of the entire process. I should caveat with saying That is still, in my opinion, a lot of PR. So not all the So the the quote unquote original brand manufacturing is is basically still, you know, ODMs. But the point is that they're significantly better than before, right? So you will see Uh again, you see this already on like in the US and Amazon, right? You already have a bunch of brands from China like trying to brand themselves, right? Uh on on Amazon selling commodity products. Uh what we're talking about, however, is not, you know, your like no-name unpronounceable brand from China selling like an Apple.

16:59 fire wire or something. Right, iPhone chargers or stuff. Yeah. We're talking more now about like people building real brand IP, right? So I think one of the examples that is very, very popular in China right now. It's probably less well known outside of China as this brand called Genki Forest. And it is right now a six billion dollar valuation company that wants to be the Coca-Cola of China, right? So we already saw last year this company called Yatsen, uh aka perfect diary, wants to be the L'Oreal of China. And then last year we actually already also saw the listing of the PNG of China. So there's all these Brads trying to take over the consumer staples categories. And the newest entrant that I think is really interesting is Genkey Force, which is Coca-Cola of China. And they're just starting off with basically your carbonated beverages. And

17:52 The different thing that they're doing is that the company is actually run by people who come from a social gaming background. So they think about everything in terms of, you know, marketing ROI, right? and doing very, very quick A B testing and very very quick iterations. And are they using OBMs, O DMs to to actually make the soda? They they're just a A brand.

18:15 They're just a brand. They're just slapping on their brand and marketing, right? So they did start With their own factory, but it was Only in mid last year, and that's after. You know, that that's That's like that's a few years after they started, right? So same thing with Perfect Diary, by the way, the cosmetics brand.

18:31 when they went public they had also just started, you know, their own factory. I will say in the beverage in industry, even in the US, that's super common. So like I kn this is gonna sound a little trite, but I know the uh the the the founders of Four Loko and at one point in two thousand and eleven. They had uh a hundred people working at the company. Ninety six of them were salespeople.

18:55 And then they have the founders and a CFO and they work with a contract manufacturer. So I think it's technically a contract brewer. And this is the most common way for any beverage or especially alcoholic beverages in the US to start is to contract out everything but the distribution and the branding. That makes a lot that makes a lot of sense. Um I don't think I don't think Yankee First looks quite that. I mean uh they are doing more R D, but I think what differentiates them is how many SKUs that they're constantly trying. Uh, so they do small batch testing and then they will they will do it on both the marketing front as well as sort of the physical products, of course. And then, you know, according to their founder, only five percent of their products make it into sort of mass channels, right? Because the mass the mass offline channels are actually very hard. To penetrate and also to manage. But so like this isn't like Coca Cola where it's the recipe that has been one soda that's been sold for a hundred and fifty years. It's lots of different products.

19:58 Yeah, it's a lot of like so uh maybe maybe a even a better example is to is to look at Perfect Diary, which is they're doing a lot of collaborations, right? So like all the new brands these days, right? They're doing a lot of collaborations. They're making like very sort of seasonal ish products. So they'll put out something I think their average is one new product a week. And then whatever makes it, you know, quote unquote becomes a bestseller, then they'll put more more resources. around it. And it's the same thing for Genky Forest, right? So they are supposedly coming out with a new product every few days. And then they'll do sort of small batch testing with it. And then a five percent or so of these products will then become, you know. A

20:39 sort of further bestseller that they'll they'll put into more distribution. And that is basically how If you think about it, it's very similar to how you iterate on a internet software product, right? So this is what I mean by companies and brands in China are now trying to do this, applying it to physical products. And they're doing this Because they have such good access to a very, very advanced and flexible supply chain. I think a lot of people, when I talk to them, they're thinking of factories as like, you know, still very manual and you know, people in these like long lines, but I visited uh some of these factories and they're actually quite advanced, right? So there's a lot of automation. Like I said, they're they're they're all running software to manage themselves and they have a lot of design in house talent. And you know.

21:28 the advancements in fan manufacturing have gotten have really primarily focused on speed. In China. So when you think about manufacturing the minimum order quantity is always a barrier for most people, right? So especially in uh consumer products like clothing and uh well clothing being I think the main one, China has really been able to push forward on having more flexible manufacturing. By what I mean is when we visited Ruhan, who is a

21:59 I don't even know how you say their English name, Mr. Wuhan, but anyways. They're just go about to go private, but they were uh previously you know, we we did an episode on them how they were started by the quote unquote Kylie Jenner of China. So it's basically influencers making their own clothing and branded products. And when you say about to go private, are they public now? They are public now. Yeah. About to go private. Uh haven't done that well. But we when we visited them with we we saw all their, you know, like all their clothing and all the stuff. And then we also visited Mogutia, who is a uh, you know, live streaming shopping app. And you know, both of them told us that like, number one, you know, they had such good access to manufacturing and turnaround times were so fast. It's about seven days, right, from a design to being made and then shipped out the door.

22:49 Right, seven days. That's actually really, really fast. And for a company like Shein Uh which Yin can talk about. That is apparently down to five days. And uh yeah, like a company like Shean is pushing out a thousand new schoes every day. On their website.

23:04 Amazing. Yeah. Yeah, I want to hear about T and Yeah, th I've heard about this. This is crazy. Ying, bring us up to speed here. Okay, so I think that what Ray talked about with marketing and like really flexible supply chains enabling the tech based teams to focus on marketing and online marketing, which is actually like a highly valued skill, just like it is in the US. So so shein Takes five days of designing to ship. This is on average. Um, they're producing a thousand new designs a day. They have ten billion dollars in revenue.

23:38 Um so no it's all women's clothes, right? Yeah. Women's clothes it's kinda like H and M fast fashion. They might have some men's clothes. I feel like they might have some men's clothes. I don't know. We can check. We should check. I can check. Do you want some, David? I I do. I do. It's super cheap too. It's super cheap. I don't know if you want to wear it. Well no, they they do have they have men's and kids and beauty. So I can order something that was designed five days ago. Yes, it might take longer to ship and get to you, but five days, yeah. It will take a long time to ship. Wow. It's like Wish shipping times. Yeah. Slightly better. Have you guys ever ordered from Wish?

24:16 I haven't I've been tempted to, but I never have. I know only of Wish'cause I've seen it on Laker jerseys. Uh Yeah, this does like wish. I do think that's a good comparison. So you order and the quality of clothes, in my opinion, isn't Very high. I think I did an order just to test it, but this was because I was benchmarking to another company. Um, but Shein has As of time of recording, nineteen million fans on Instagram. So note that I'm saying Instagram. This is not

24:43 a Chinese social media platform. Um and we'll get a little bit into that too with some of the cross border DTC happenings. This is amazing. They I'm on I'm on the men's section and get swimsuits for Three dollars and ninety cents. Wow. Oh my god. Yeah. And for reference, you need clothes billion dollars. So We're kind of benchmarking Xiin as the success story of overseas DTC brands coming out of China.

25:15 And then Ray had mentioned we visited Mogutsi in October 2018. And they're also doing small batch designs and producing a lot of new designs. So this is all innovations within the supply chain and shortening the time it takes to get new designs to market. And when people used to refer to fast fashion, you'd look at like a Zara or something. The knock was Oh, they're, you know, busting their ass to get this to customers' hands.

25:41 you know, five weeks after they come up with the concept. And now we've shortened it to f like five days. Is that yeah. Well there's there's the shipping aspect of it, but yeah, if this was happening in China, then you you can get uh think you probably get it shipped the next day. Yeah. That's right. Yeah. Wow. And and there's always been a bunch of people that are concerned about the environmental impact and At least

26:03 I know there's a lot of negative sentiment around fast fashion. How does that play into how all this is developing? I would say at least right now, like for a company like Shein, right? First of all, she is called ultra fast fashion now, I guess. Uh I don't think the environmental impact is probably fulbed into it. And I'm personally not a fan of the model, but I think the point we're trying to make is just that the supply chain is really flexible now and the end goal really is to have it to be so flexible that you can make it. as demand comes in, right? So that it is completely just in time. And then you have zero inventory risk or zero inventory.

26:41 you basically lower your cost so much. Yeah, it's like not even Inventory, but it's not even like just in time manufacturing. It's just in time creation and design of products. So they're like there's no There's not even any Product risk. Yeah, exactly. Well

26:56 That's where people are trying to get to. We're definitely not quite there yet. Yeah. But that is the future. And yeah, we pick these categories. Shean is actually old company. It's over 10 years old. Uh, because again, these supply chain innovations take a long time, right? But the supply chain innovations then can also be extended to other industries. like you were saying, you know, or like we were saying, the drinks as well as cosmetics, et cetera, and all these other categories. There's a growing proportion of Chinese companies that want to sell into overseas markets, including the US, that are DTC fashion brands. Um I've personally seen a number of business plans, including one women's fashion brand that I'm currently working with, and all of themselves benchmark themselves to Shein. So they'll have a graph on their pitchjack of like here's the supply chain process, here's like what she and does, here's what we're doing, pretty much looks the same, or there will be some minor tweaks. Um and then the end product is a little different, but it's usually in fashion. women's clothing, um I haven't seen cosmetics yet, but while their innovation in how they handle the supply chain and how they position themselves to consumers might vary a little bit.

28:04 What what they share with Shein is a commonality of low price, a heavy reliance on social media. So remember when we said Shein had nineteen million Instagram followers? This is something that I personally see as kind of similar to a heavy handed version of the whole utility apps overseas craze of like 2015, 16, or 14, um, in that you can have a domestic based team. really master social media as long as they speak English and get some help with your customer management and then get the right operational skill. So kind of like use labor to make up for what you don't have in either local savvy or necessarily like B2B. Um software technology in order to just like get the performance marketing right and sell purely online straight to consumers.

28:52 And Like there's some tweaks with this, but in general Like investors seem to think it's worth betting on. And she and It's also on Amazon, right?

29:02 Yes. Yeah. I don't think all their stuff is though. Not everything. We're not the target customer here. It's funny because I asked on Twitter, I was like, Hey, have have anyone heard of this app called She'd And then all the people who replied were basically dads who had teenage daughters. We're like, Yes. My daughter orders for this all the time.

29:24 It's just another factor in this overseas expansion, which is that Within China, DTC brands insist on having a gross profit margin of thirty to forty percent. So that's kind of just the benchmark. Otherwise, consumers will think, Oh, your prices are too high and it won't work. But depending on the industry, brands can charge like a roughly 10%. um margin on their costs. But when someone like Saomi enters the same market, then they'll kind of push all of the prices down to to something like five percent and all of the other players will die. So this is kind of another case of like the market in China is so saturated in many categories that some people think it's less vicious to try to sell overseas, even though they don't have the native competitive advantage. Oh, that's fascinating.

30:09 It's very similar to what we were talking about, David, on the Ma To one episode, where You have to move so quickly and grow so quickly because there's like ten times the number of people at any given time trying to do the same company that you're doing, and there's enough consumers to sort of like Support several different companies at once. And if there is any winner take all dynamic, then it's just gonna accrue very quickly to whoever gets out ahead the fastest. And otherwise there's just like a massive race to the bottom on who will be willing to compress their margins the most. Yeah. I totally agree with that.

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32:38 So For She and all these other brands. And China, how is offline playing into this? Is Are they also doing physical

32:47 Retail In China or or or overseas. Uh or are these purely online brands. Yeah, so so for she had that's actually a purely online brand selling exclusively outside of China, but for a lot of the new innovations that we're seeing inside of China.

33:04 it's actually a merging of online offline, right? So it depend there it's happening at two levels. The earlier we were talking about primarily at the brand level. There's also innovation happening at the channel level. And by channel I basically mean like retail stores, right? So I think one thing that China definitely leads in that gets lost a little bit in in all the coverage is that yes, China leads in e commerce, but China actually also leads in digital retail. By digital retail, what I mean is actually an offline experience that is highly digitized, right? So that's very, very different from the US. And I actually I you this is something you can sort of intuitively understand when you go shopping in China. But I think the uh w we did an episode with um Jordan Burke, who is the former head of Walmart e-commerce and digital experience in China. And I think the way he breaks it down is really smart.

33:57 And during the pandemic we saw US stores, right? Use Their shop says pickup. Points for e commerce, right?

34:05 But in China, actually, that's something that's been happening for the last ten years, where shops are designed that way from the get-go because e commerce has such a high penetration. So it's totally normal for people to, you know, shop online and go pick up at their local store. So the way the stores laid out is even different, right? Like where the warehouses it are, how much, you know W what the the flow of the store, et cetera. And this is because You know, if you ask Gen Z here in the US, like they'd see less and less difference between online and offline. Well, I think in China, because the ex the society is so highly digitized, that's that's actually the typical experience for many, many consumers. They just think of it as shopping. They don't think of it as necessarily like online shopping versus yeah.

34:49 Go into the story, huh? Yeah, the stores have, like I said, n number one, their outfit for um picking being able to be picked up. They're also much more integrated with their apps, right? So how many times do you go to Costco and Or at least I go to Costco and I I'm asking for some help and they're like we can't help you because that's Costco.com, right? And you're in the store, right? But but in China, like a lot a lot of these experiences are fully integrated. And then the app is also something people use when they're inside the store. And then there's also a lot more personalization. Right, because again, personalization is very important to the average Chinese consumer. But it's been shown that um Asian consumers in general actually require a lot a lot higher personalization or want a lot higher personalization than Western consumers.

35:38 And what's an example of that when you say personalization? Like who what's a company that's done it well? What's a a example of personalization. Well, what I mean is like the actually all the e commerce I I would say all the e commerce uh companies in China do it fairly well, like in the sense that The user behavior on some platforms, especially like Ping Dual Duo, is much more of a feed based and recommendation pushed experience. It's in like the merchandising that you're seeing in your shopping experience is.

36:06 Like versus, you know, you walk into a target and literally everybody who walks into that target gets the same merchandising experience. Yeah, that's a big part of it. It's but basically getting recommended. what the store thinks you want based on your past purchases, right? Based on your, you know, experiences, but also getting very personalized promotions, right? So um I think something that I don't know if this is too much of a tangent, but In China, like there's a huge team called operations.

36:35 Uh that's really hard to find a analog in the you know in Silicon Valley companies. But All the e-commerce platforms actually have huge operations teams that are constantly working through promotions and working with merchants so that every time you log on as a user, you're seeing You know, different.

36:54 content than you when you logged on, you know, the day before or this morning or whatever. Yeah, because people expect like You know, people expect, you know, new content and new things to be offered to them constantly. It's funny that while this is not really a big thing in e commerce in the US. Uh I'm sure some companies do it well, but to your point, much more common in China. It's actually very common in gaming companies in the US to have a live operations team. You you'll see I I spent a year working in the gaming industry and you'll frequently see people whose background includes live ops.

37:25 And that basically means they were running the in game stores promotions for, you know, a live period of time with a lot of personalization built in. Oh my gosh. That's the I she's a gamer of gamer. I didn't realize that, but that makes a lot of sense now that I think about it. First of all, gaming was basically how like I would say ten years ago, most people were working on some sort of gaming company. Or if they weren't working on a gaming company, their ultimate monetization was gaming, right? So they could be working on XYZ, but they were basically trying to funnel people into games because that was the only like Th that was basically the only business model that worked in China. Yeah. Yeah. So a lot of people have this. We got a tangent here for a sec. What kind of gaming are we talking? Are you like like legal like League of Legends or like mobile gaming? Ying thinks I gave her just because like I played more games than she did. But yeah, my in college she was like I played games all through school. Yeah. I did. Yeah, exactly. In college I played a lot of StarCraft and you know EverQuest and this is very this is very much dating myself.

38:34 EverQuest is like setting the bar. Well we I mean the way that uh when we had uh Rahu Alvara from Superhuman on the show. I mean he really like yeah, Superhuman is great and all, but he really like one cred with me when he was like Oh yeah, like uh I was as uh as a game designer and we're like, Wait, uh, I did the research thing You were like an original game designer on RuneScape. Yeah. Wow, that's crazy. Th that was one of the deals I worked on at uh Rain actually. Oh wow. Rain invested in Jagex, which was a company of RuneScape. Yeah, yeah.

39:09 That's hilarious. But I think I think You know, that what you said is is just a really good point that uh I think actually that's a lot of where Chinese companies get their inspiration. But to to this day, right, operations remain really, really important. And you know Everything is quote unquote operated on, by the way, even the bullet comments on Billy Billy. uh have operators, right? Like getting special promotions or planting comments.

39:38 Oh yeah. We we haven't covered uh Billy Billy yet on the show, so introduce us to that company. What is Billy Billy? Philly Billy likes to call the YouTube of Trida, but it's basically the stickest platform for Gen Z to create and watch videos. I mean that's not really how they make money. They have a more diverse set of revenue sources, but what they're really known for is this platform. Much like YouTube where people are uploading

40:03 Creative videos. generally between I think five and twenty minutes. So longer, not short videos. Oh, so not not like Do Yee, like TikTok type. Exactly. And more much, much more like YouTube. That's why they c do compare themselves to YouTube. Except their business model is different, right? They don't make much money off of advertising. They have

40:23 Also a gaming platform, they have live streaming, e commerce. Uh, it's actually pretty diverse at this point. Yeah. Huh. I mean that's just so that is so much more common in China than the US where Like it's just not an advertising driven economy. It's yeah. Yeah, you're right. Yeah. W with the exception of Bite Dance, who has made huge strides in

40:44 advertising, yes, that I would say, you know, well actually Alibaba as well is is really an advertising based company in in many senses, but yes. You're correct. Yeah, and I and I guess I should clarify when I say that too, because I don't know like GDP figures spin on advertising, but in China it seems like it never really was the default answer that so many people are like, Oh, we'll put games in or we'll steer you toward commerce. Like there will be a more direct way to create and capture value. That's absolutely right. I mean, it has a lot to do with the fact that it was just kind of early, right? Like China just cross like ten thousand dollars in GDP per capita. I don't know if you guys know the US number, but it's over sixty five thousand. Right. There's a pretty big gap.

41:25 And you know, for I would say the first couple of years I was in China, I had a lot of friends in advertising and they could tell you that it was really difficult to sell advertising. Well, why? Because At the time you really you should just invest your profits into growing distribution. That you got way more Bang for your buck out of just organically growing you know, distribution points than trying to advertise because advertising, if you think about it, it's really for a kind of saturated economy where all the distributions are already built out, right? And you're just trying to compete with each other, but at the

41:57 You know, with China, uh until recently at least, it really was just like, just get your products in front of the customer. Yeah you know, versus like trying to say I'm better than the other guy. It's like no, no, you win just by being there. So this is this is a great Transition point to um The next big Trend I think we wanted to discuss

42:18 Which is community group buying. which we discussed a good bit with Lillian on the Mayton follow up on the L P show, but for everybody else, I mean d to me like this is the uh like a perfect example of this the focus on distribution in China. Like this that's what it's all About, right? Of distribution. Yeah. This this is exactly a distribution play. Yeah.

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44:29 So yeah, what what is community group buying? Community group buying is very simple. People are applying a group buying mechanism to buying fresh groceries to start with, but now also moving into other goods to parts of rural China where there isn't a lot of choice and isn't great logistics for such products. And then so what they're doing is they're collating demand, right? And they're aggregating it. And then the platforms basically send it to you the next day. for your own self pickup, thereby saving money on the last mile logistics. And these are like

45:04 To the you know. previous discussion about advertising and not needing to differentiate your products. Like these are the ultimate unbranded like th these are Products from rural farmers, right? Like like vegetables and stuff, right? Like that that people are buying through community.

45:20 Group buying platforms and The platforms. Are Ma Toon, PDD, you know, uh Alibaba, like Enormous tech companies, right?

45:31 Yeah, although although actually if you look at community group I, we just did a call with an alternative data firm on this, and you can see that people are so so while fresh food is sort of like the way to get people hooked onto your platform. So like in China, for example, like everyone sells eggs because I don't know why like eggs are just People just love cheap eggs. And then I I I heard that nowadays actually they're trying to get people to get vaccinated by gifting you free eggs along with your vaccination. So eggs are just like don't think it's eggs are eggs are like Eggs are like one of the best sellers on on all these platforms, actually. But you can also see from some of these platforms are shifting into more branded and non perishable products as well. So like boxed milk, right? Uh juices, you know, and then there was one platform. I think they're just trying to brush their GMV. I won't say their name, but they're actually their best seller was actually the iPhone. So Wow.

46:31 Yeah, that doesn't quite seem like the same thing. So so there's a platform that's selling iPhones. Yeah. Via this community group buying model in rural ch in rural China. It's one of the yeah, it's one of the top ones that are Well funded. Yeah. So

46:48 What I'm saying is that this is a model, but you can see like while it's starting off with groceries, you can see pretty clearly that this is really just rural e-commerce. And the group buying aspect is uh, you know, if if you consider group buying as something like the order only happens when enough people order it. That's not really happening right now. uh anymore either, right? So like even the group buying aspect. I I always say Everything About these words.

47:14 is kind of up for debate. I would just call it hyper local rural e commerce. Which by the way, Alibaba, their new initiative, that's what they're calling it, they're calling it hyper local e commerce. And the way this all works is Fascinating, right? Like the platforms are pushing so much of the Logistics work on to

47:37 Users. And leaders of these group buying platforms themselves, right? So it's not Like P D or Ma Toin or whomever is

47:48 Actually doing very little to get these products in the hands of customers. Well That's not strictly correct. You are correct in that they're not doing the last mile, but they have to do the entire procurement, which in the past in China would be, you know, you go to the farms or There were two or three layers of distribution before you as a final and customer, you know, got it from a grocery store or the wet market or or whatever. But now then May Toine or Pin d'Odua has to do this entire thing, which requires actually a lot of culture logistics.

48:25 for perishable foods that Most of them don't have, right? So we did an episode on e grocery in China and I don't remember the exact stat, but you can compare the, you know, per capita, I guess, cold storage uh sort of capacity. And it China's like a fraction of what's here in the US. Uh so so that is actually a really, really good sector for you to invest in. Interesting. So they're doing all of the They are doing all the things that we're going to do. It's the last mile that they're pushing. Down onto users.

48:55 Yeah. And you know, it's arguable whether or not it's really, really all that much cheaper because the Pin double does CEO, Chen Le has actually said In agricultural e commerce, it's not the last mile that's expensive, it's the first mile. Huh. And why is that? Because getting it from the farmer, I guess, to the warehouse and then doing all that is actually um, you know. That

49:18 Part of the supply chain isn't as well developed as if you think about it, sort of the same day, same city courier system. Oh, like a lot of the e commerce actually already accommodates that. They've already built that out. Yeah. Well and just the refrigeration and cold storage. Yeah. I assume none of that is happening.

49:36 During the last mile. No, no. So it yeah, the way it works right now for all the platforms'cause we we actually like took some deep dives into the warehousing because that that is really where you're gonna understand if If this platform is doing it. correctly or sustainably and and can make it, right? So they actually franchise out the warehouses. So you can go, for example, and become like a meteor and CGP warehouse pickup point, I guess. And then you just you need to have like a you need to have a certain number of capital. You need to have this building that fits the requirements And then you need to have like uh cars or cer like some type of vehicle that fits their requirements, et cetera, and this number of laborers, and then you can go and become a franchisee.

50:21 Of of the system. Yeah. Wow. So I think to frame this, this is One of the areas that I'm personally really excited about seeing up close and in person when we can travel again, because again, a lot of the content that we're seeing around this is reported on, and it's not people that Ray and I talk to on a daily basis, because they're usually in first or second, maybe second tier cities, but this is really about

50:48 Like we said, digital penetration into rural China. It is also about micro entrepreneurship. So the community leaders who are taking a cut of the total sales within their community are essentially, you know, being contracted and get like a nice partial. salary every month for playing that role. And it's a way for the large platform. So you mentioned Pindal Doa PDD, but also Alibaba and JD of putting almost I would say almost billions of dollars um US. Yeah, no, no, not almost. Yeah. They are billions of dollars. Over bil like billions of dollars into

51:25 their own platforms or into their investments. And sort of like uh at a high level to what we talk about a lot on tech buzz is The whole What was it? Tickle up con uh consumption in What was that phrase, right?

51:38 It's hard to translate, but Consumption upgrade is when people in China talk about the first and second tier cities. you know, increasing in their consumption and basically being like developed Economy consumers.

51:54 And then there's also the consumer quote unquote downgrade, which is when all the brands are now discovering that rural China. Is where it's at. Exactly. Yeah. Mm. And is this race pouring billions of dollars into the tier three and tier four cities, is that just because

52:12 They're out of growth in Tier One and Tier Two cities and this is where they need to go to grow, or or why is there a capital battle going on there? Yeah, huge. Because if you look at China, the growth has slowed down for all of China. But if you look at rural China, it's actually still something like ten percent GDP growth per capita year on year, right? So and this is about depending on how you slice it, but I generally like to take just the first and second tier cities out. the rest of China quote unquote rule, China third tier and below is it's still a billion people. Yeah, this is, you know, for Western audiences

52:47 Just to give a sense of scale. Like Tier One and Tier Two cities in China are like Bigger than any cities in the West, right? Right. Yeah. Like tier three and tier four are two. They're sometimes thicker, especially San Francisco. SF is Really small. It's like a town. Yeah.

53:03 Ha. So we're still talking about yeah, uh as you say, a b a billion people. And Tier three and tier four cities in in China. Yeah, yeah, and below. And even, you know, again, tier five, it's it's really interesting because

53:16 China has really good infrastructure in some sense, but then and not a lot of people. But when you think about like retail distribution, think about like in the US, right? We have access to really good. You know, grocery stores, supermarkets, because It's been over a hundred years that people have been investing in these logistics, real estate, cold chain, et cetera. And in China, it's just gonna take some time, right? Like they're already growing really, really fast. But to give you an example of what a fifth tier city looks like, a fifth tier city, because I was trying to explain to an African entrepreneur exploring CGB. I was like I was like oh well the w you know and China really works well in these types of cities and fifth tier cities. She's like, what does that look like? So anyways, I found some stats and pictures for her. It's about a million people usually. So Which is the size of San Francisco. Yeah, exactly. It's about a million people typically. I I looked up like ten cities, they're all about a million. And You know, if you look at the skyline.

54:13 They don't have like necessarily a ton of skyscrapers, but they have some tall buildings. Uh the the main thing is that you'll find I thought this was like Hilarious is that. All of'em have either a Starbucks about to open or just opened. So that that is like the level of GDP that you can think about. So and by the way, Starbucks is about three to four dollars per cup in China, right? So it's not Cheap. It's premium.

54:37 in China. So uh when Starbucks is opening, I think it's a great indicator of this this City being on the up and up and being able to consume more. Well this explains too, I think. You know, one of the things Lillian really

54:50 Talked about on On the L P episode about Oh C B. In the question of why Why is this so important and why are all these big platforms investing billions of dollars into it?

55:02 It's not about selling groceries to people. It's about capturing Behavior for all of these. New people coming on to tech platforms, right? And so if If they start Transacting for their staple everyday goods on PDD or on Maiton or on J D or on Alibaba.

55:19 And there's a really good chance that they're gonna keep doing more stuff on those platforms, especially as they're Disposable income goes up, right? Yeah, these are high frequency purchases and then, you know Even the disposable income, I think you can't just look at the the pure

55:36 like income level, right? Because it's the same thing as in the US where If you live in a quote unquote tier one urban center, you might have a high salary, but your real estate costs are super high as well. So your final like lifestyle purchases could actually be less in China, if you live in Shanghai or something, versus if you live in a quote unquote tier two. city like Chengdu or a, you know, where Ying Ying's family's from like a tier four city, people there might actually have more money to spend. Yeah. It's like it's unintuitive, but it is true, right? Because The income disparity might be a factor of like two, three times, but the real estate prices might be a factor of ten times. Yeah. Right. It's very like like Shanghai, when I when I left, I I bought an apartment there and I sold it and it was like already. more expensive than most districts in in San Francisco. Wow.

56:28 I I this is five years ago, yeah. Um, so Ray mentioned my family, and I just looked up the population of the fourth tier city that I was born in, and it's fourth tier, but there's five point seven. Seven million people. And and what you were saying with disposable income and folks having more to spend discretionary in general, that's true. I I feel like my aunt compared to my mom, she will spend hundreds of US dollars on clothing and her salary is probably like not to out her, but probably like one or two thousand. US dollars a month. So we just don't know. Sometimes my mom's like, where is she getting the money for this? But it's because everything else is so cheap, or if you're working kind of a government job, you get a ton of benefits, including housing. And also I want to just ingrain in listeners' minds when we do say rural China, like we've already described.

57:19 We're not talking rural areas, we're talking cities like the one I just gave you. We're talking like these are yeah, it's not like some field in the middle of nowhere. The reason this works in community group buying, like it's not just oh, people traveling ten miles to deliver one bag of groceries to the final outlier. It's like They're in neighborhoods that are stacked. like more densely than San Francisco. And so you have like the gatekeeper of the neighborhood taking the bulk orders and it's right downstairs before you go out. So what do we call like people farming in China. If rural China means five million person cities in dense

57:56 Farmers. Compact department. Farmers. Okay. Huh? I think they're still called farmers. Yeah.

58:05 All right, well, I wanna transition us to to one other big topic that I think we wanna hit in talking through China trends today, and that is Electric vehicles. I think this is something that a lot of people have seen in the news, both because of spACs that are happening, because of new battery technology companies, because of Tesla competitors, because of Tesla, you know, building a a very large factory in China. Like what the heck is going on with electric vehicles in China? So first of all it's just like a big priority right now, I think. If you look back ten years ago, China probably didn't care that much about environmental damage or

58:42 or climate change, at least not at the expense of economic developments, but in recent years you've really seen China take a lead on climate change. And part of it is because, you know, they realize that Reliance on oil and just you know, all the devastation from climate change is actually bad for national security, right? It's destabilizing. So now uh electric vehicles has become huge. priority in China and every brand is jumping into it. So

59:08 In the past month alone, we've seen Huawei. announced that they're gonna put in the software into E Bs. We've seen We've seen Xiaomi announce that they're gonna invest$10 billion over the next 10 years into EVs. We've seen DJI, the drummaker, say they're gonna participate in EVs. And you know, the BAT and you know companies like So Baidu is now effectively basically a striving company, actually, if you just look at their Really. Yeah, basically like they're that's really the that's really the main story now for that company. My and our unacquired sort of perspective on the BAT and

59:44 I do specifically is like Th they've just fallen off the map and it's just Alibaba and Tencent are the big players in in China now. But w I at least haven't known anything about what's actually happened with Baidu. Yeah, basically like investors like I talked to are basically like oh You're basically investing if I do

1:00:04 as a autonomous driving company and you're getting the search business for free. Wow. That's what it is. So it's like investing in Waymo and getting Google for it. Exactly, exactly, right? So it's like if you and you know, again, like When Baidu introduces itself now, I know a l a lot of the PR people there, it's basically uh we're an AI company. That's accurate, yeah. Yeah. And they've made they've made, by the way, a lot of progress in autonomous driving. So no knock on them.

1:00:29 But If you look at Alibaba, they also have a bunch of JVs. In EB, we don't know what they're exactly what they're doing because they've only announced the JVs, but no specifics. Tencent, of course, has invested in I f I think they invested in Neo, Alibaba also invested in X Pung, and then Mae Twan invested in Li Auto, which are the three publicly listed Chinese EV companies. And then they all made significant money, I guess, at least on paper on these investments because they're all up significantly in the last year. Which is hilarious because when we visited Neo in October 2019, I remember our meeting got canceled that last minute because

1:01:08 This was the period when People weren't sure if they were gonna be in business. So Their stock price was like hovering around. And are they are they making cars? Like are these companies cars on the road? Yeah. Yeah.

1:01:19 All of them have all of them have uh delivered vehicles. Of course they're a fraction of Tesla, but They've all delivered vehicles. In fact, I think Neo now is a I wanna say yeah, fifty nine billion dollar company. Wow. Yeah. Literally a year and a half ago we weren't sure if they would be survived. Which is what Tesla was two years ago.

1:01:41 Yeah. Well it's funny, uh is the Tesla sales multiple being applied to all of these companies too? Is that what's happening? Yeah. I think so. The the exuberance is has lifted the entire sector. Yeah, and when you consider, of course, that China's, you know, largest car market and there's government a push towards E Bs. That

1:02:04 Yeah. There's a lot of excitement. And is it fair to say that the car market in China is probably four to five times as large as the car market of the US, just by population? Yeah, I actually don't know. I did an episode on this, but I don't remember the exact numbers. But I do remember it's the largest. Yeah.

1:02:22 Huh. Cause I have heard this from other sources sort of talking about the growth of electric vehicles, people saying, Oh, well, the real growth is in China. J just from a consumption perspective. Yeah. Yeah. And I think that's people betting on the continued development of the economy and the the incredible demand and probably government incentives to be driving an electric car in the next few years. Definitely government incentives. Yeah. Yeah. I mean it's complicated. It's a complicated story. The government is tamping down incentives. But I think the overall demand is still gonna be there. Yeah. And then but there's a lot of there's a lot of competition, as you can see. Basically every internet company we've listed a bunch. I'm just waiting for Pindua now to announce that they're gonna do some like discount car. Yeah. EVs are the new games for Chinese companies. No, for sure, for sure. Yeah. And then the uh pretty much everyone's announced one, and then

1:03:13 Uh separately in autonomous driving, which I think is also really interesting, but all of these companies are private. So so we don't know as much about them, but have I've talked to a bunch of people who have invested in this space and I've talked to a few of the companies I think that this is a space we should definitely be watching because China is going about it in a different way. So Baidu, for example, was working with the government on autonomous driving solutions that aren't just the software, but also include remaking the infrastructure on the road, right? So So we'll see if that works. And then there are just, yeah, a a bunch of players that are

1:03:49 really like teams actually that came out of Baidu, also Google. just really, really top notch AI talent and The word on the ground is that it's anyone's game. Like who's gonna get to level five first? It's not clear that it would be the US winning. I think China has a really strong chance. And this is like the first uh this is what I would say is like the first sort of deep tech, right? Not like consumer internet lightweight app, but really deep tech that we see this uh competition play out that will be that will have really, really Interesting lasting effects, right?

1:04:22 The first country to get to level five is gonna experience tremendous efficiencies. Yeah. Yeah. Well and the the you know, the infrastructure point is a An interesting one too because You know, I remember not that I've spent a ton of time

1:04:37 in the autonomous space, but You know, a few years ago people were thinking, Oh, well if you know, there's gonna be new roads built or roads upgraded in the US that are going to be integrated with A Vs and this is going to be great. The reality is, like, that's not going to happen in the US anytime soon. But China could actually do this. Right. The US is at a huge disadvantage for this, both because of the sort of like uh reliance on the existing system, whereas China will just make a government mandate and say, Nope, we're building an all new system and people will snap too. But also because of the federal system. The the idea that we're a whole bunch of states that are all gonna pass laws independently.

1:05:15 I think the ability to require that people stay at home uh during the coronavirus is a a very similar example where i if something is declared by fiat, uh it is much more likely to be followed than uh, you know Please, please, population, do something. Very different strategies that that both have their trade offs. Yeah, yeah. I mean it it it is not that centralized in China either, but I think there are Yeah, the the local governments. who I've worked with some of them, uh definitely have a lot more power, a lot more budget than you know, than here in the States. I can't I can't imagine.

1:05:52 some of the cities I've lived in in the Bay Area, for example, really being able to remake the entire, you know, traffic light system or Leg markers or whatever it is that's needed. Yeah. Probably it's just impossible to even imagine. I know, right? It's like The potholes aren't even filled yet, and you're gonna make this a smart road? I I don't know. All right listeners.

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1:06:43 The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next. This is where StatSIG comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed. to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. All right, one one more lightning topic here before we close, because I know it's on a lot of people's minds uh who who follow China Tech. What is going on with antitrust in China right now? And is it a good thing? Is it a bad thing? I will say it's definitely affecting asset prices and stock prices. So what's happening there?

1:07:32 So I think the antitrust. caught some people off guard. But actually if you look at the history, this was pretty much inevitable and it's actually been in play for quite a few years. Right. So I talked to people who were been working on antitrust in China and at least three or four years in the making. If you look at the history, Chinese antitrust law, the first version was passed in two thousand eight, which is really late, right? Because in the US it was like in the eighteen nineties that there was the first version. Sherman Act, I think was Yeah, yeah, exactly. Exactly. And so and then nothing was done for the next twelve years. So

1:08:09 specific to tech, we had one case that was Chi Hu 360 and Tencent. They got into a fight where it was actually very similar to what's happening right now where they They're they basically told their users that the other software program was malware and that if you wanted to use my program, you had to uninstall the other program, right? Forcibly. Like and then um Tencent actually won that case, but but it actually had ramifications in that it really changed how they Thought about. their strategy going forward. This is this is actually the time

1:08:41 After which they stopped making a lot of products internally and started investing. So this is when they built their empire, uh, so to speak. But uh after that case, the no cases were heard for like the next ten years. Wow. So literally zero antitrust cases in China for ten years. Yeah, yeah. Well In tech, in tech. There were plenty of antitrust cases, but I mean for internet, for internet. So so let's make that clear. Then in January 2020. In an effort, honestly, to catch up with the rest of the world, right? So if you look at all the state media and the government proclamations, this is all about trying to catch up with the rest of the world. They issued the first draft.

1:09:18 And then A lot of the things were very reasonable. uh and then they issued more uh of course towards the end of last year uh specifically around platform companies. But really you've seen movements towards this direction for a while now and All of the things are meant to really protect consumers as well as vendors who deal with these platform companies because let's face it, some of them Like Alibaba who

1:09:44 recently received the massive$2.8 billion fine were really abusing their positions. Yeah, they were telling people that you could only do promotions or sell products on my platform and not JD. Right. So this is like this is very egregious if you if you think about it. Yeah. And then um the pl the laws also protect consumers against various other things, which is like discriminatory pricing. So a lot of the platforms were discovered by the public to be discriminating against users. And in fact they were doing it against their most loyal customers, right? Because They're gonna be happy to pay more. Yeah, exactly. They're like we know you're really sticky and you're very loyal, so we're gonna actually charge you more for the same thing than for a new user. So this was

1:10:29 This is obviously really not cool. Oh, so so really I think the proper takeaway is that China is really trying to catch up to the rest of the world. And this is something that is going to be in play. This is Not something that's going away. China is very adamant about this. It's not going to go back to the days of the Wild Wild West, which I agree with. And if you talk to investors on the ground and consumers on the ground, they're all cheering these resolutions. In fact, they're like, why didn't this happen earlier? Right. And why is that?

1:10:59 Because again, some of the uh practices that were that these big tech companies were doing that were really, really unfair to both consumers and vendors. And there was just no recourse because the Antitrust. authorities weren't really even hearing any cases, right? So all of the judgments also were Oh, I shouldn't say the antitrust. Th they were hearing cases, but I would say the judgments were very small. So prior to the draft laws changing this, I think the upper cap for violations was like a million R and B. Right, or five hundred thousand R and B might have been even lower, which is like seventy thousand dollars. It's like a small tax you're gonna pay. Yeah, exactly. Like imagine imagine you're uh, you know, two hundred billion dollar company.

1:11:44 This means nothing. So if you're a s a startup investor or a startup founder or an employee, this is great news for you because you know this is gonna force, you know, China big tech to play fair. Exactly. So and that's exactly what's happened if you talk to VCs on the ground, if you uh talk to entrepreneurs on the ground. Um, one VC actually says something, this is more specific to fintech. He was like, Oh yeah, I was previously not interested in consumer fin tech at all, but now that all these rules came out, I think I'll start looking at it. Right. So Fascinating. All right, well As we close here, l let's look with an eye toward the future. What should people

1:12:18 Sort of think about as what's next for China Tech through twenty twenty one, twenty twenty two. So I think it's really hard to sum up. what we should be looking at because as you've heard throughout our entire discussion, there's So much going on in China Tech and so many sectors that are experiencing innovation and You have like people who used to start

1:12:39 Internet companies going and making electric cars and raising a bunch of money for that. So that's happening domestically. But I think in my purview, there's a lot of increased internationalization that we kind of thought stopped last year because of COVID, but I actually see signs of it. starting up again and accelerating and this whole trend of Chinese companies not just coming to the US and Europe, but also going to Southeast Asia, to Brazil, to other emerging markets, India. uh that's again been ongoing and I feel like having honed their chops at home, that's only going to accelerate. Um and there's certain sectors like e commerce that are very well positioned for that. And there's companies that have already started to take advantage of those trends and I think capital kind of in a cycle recognizes that as well. So definitely internationalization. I think from a talent point of view too, founders who have found either success at home or success in a different sector, or have had global education. And I know you guys have seen this too with probably all the founders that you're meeting with.

1:13:41 they take that knowledge and return home and, you know, it's like more comfortable to have a great lifestyle and to be well funded and well supported in the China market and from there kind of take on the rest of the world because you're you know how to hire teams in other places. So I think that that's going to continue. There's Definitely continued innovation. I think where you wrote. Mackenzie's head of China said no China. No country were the main thing. Yeah. So and I think the uh this is more of a meta point because I think we covered the sectors that we think are really interesting to look at for this year. The meta point is that I think for Chinese companies, don't expect them to impose any

1:14:19 boundaries on themselves, right? So For example, we see that Bike Danis is now going into local services and trying to move May 10's cheese, right? We see, of course, like Xiaomi going into E Vs, but all these companies are going wherever the opportunity is next because The amount of change that's really happened in the last 30 years in China, uh, GDP went up 30 times in China in the last 30 years, right? That's the highest, like far, far higher than any other country, which makes both the customers in China hyperadaptive, but also makes the entrepreneurs. they're hyper adaptive as well. No one really takes anything for granted. They're looking for the next thing all the time.

1:15:04 And Today it's, you know, the largest travel player and a huge community group buying platform and you know, all sorts of stuff. Yeah, exactly. May twine is May Twine is a perfect example, like uh you know basically Wang Xing like I think it really embodies this, but so does Jiang Y Mi at Bite Dance, et cetera, right? There they've just made a four billion dollar um acquisition of a gaming studio. And then three weeks later they made another acquisition, which I think is also billions of dollars. It was undisclosed, but just looking at the company, it's definitely it's definitely up there. Yeah. I mean if I had to describe this trend, I think it would be

1:15:41 US companies think that they're core competency is something like E commerce or ride sharing. or social networking and Chinese entrepreneurs think We have lots of competencies. We have a lot of capital. We have a lot of users. Yes.

1:15:57 Let's do whatever let's do lots of things with that. Yeah, exactly. We'll do whatever makes money. Our core competency is making money. Either making money or if we're losing money, then raising money. So something like that. Yeah. So um I I I I definitely Uh there's this basically I think existential anxiety that people have because they've seen so much change over the last, you know, during their lifetimes that they can't take anything for granted. Right. So people don't hold on to their laurels for too long and they're always investing. Yeah. Like did you guys know, for example, Bite Dance has invested big into fin tech and even into hospital?

1:16:34 Right? Wow. No. Who no. And then and then of course there are rumors they're making their own EV as well. Like Who knows, right? Everyone everyone you get an E V, you get an E V, everyone gets one. And it's still a private company. Yeah. Yeah.

1:16:50 Wow. Well, that's a great place to leave it. Ray and Ying, this was super fun. Thank you for doing this with us. Yeah, thank you for having us. All right, well That wraps up our crossover episode with Tech Buzz China. If you liked what you heard and you want to listen to more, there are loads of great episodes from Ray and Ying. Just search Tech Buzz China in any podcast player and you'll be able to find it. If you want to talk about this episode, uh the goings on of the tech world, or just talk to genuinely smart

1:17:19 people about what's going on in uh in in tech and business. You should join acquired Slack at acquire dot fm. Slash Slack. If you love acquired and you want to be a deeper part of what David and I do here, you should become an acquired limited partner. We have obviously the loads of things that we normally talk about, the library of content, the V C fundamentals episodes, the interviews, uh the monthly Zoom calls.

1:17:42 But this month we have a special announcement about our next book club. David. What are we doing? The triumphant return of the book club. We are uh So excited to bring it back. We are having Brad Stone.

1:17:55 Back. Unacquir to hang out with all of our LPs and talk about his new book. Dropping this month. Amazon unbound. I can't wait.

1:18:06 Uh Ben and I both have a pre ordered. Um The uh uh Brad's first book on Amazon was just like A classic. That's uh the Everything Store was the first. Everything store, yep. Yeah. I learned. so much from that book and Brad is just such a

1:18:20 Sensational reporter. And so much has happened since Completely since he laughed last left Jeff. Uh this is gonna be Awesome. So

1:18:31 Brad is gonna join us for live discussion. with our LPs and we can't wait to see everybody there. Yeah, and for ULPs, uh, you'll get this in your email in an announcement with all the details of how to join, but uh read the book by May twenty first, because that's when we'll be uh we'll be doing the d discussion and um Many of you may actually remember listening to Brad uh when he was on our Uber and Didi episode as a guest back uh when he wrote his other book, The Upstarts from from the history of Uber and Airbnb. So

1:19:02 Join us, become an L P uh tune in live and and join us on the Zoom and and ask Brad some questions too on May twenty first. Well, with that. Uh, David, I think that's all we've got. So folks, we will see you Next time. We'll see you next time.

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