Book review: Alibaba—The House That Jack Ma Built

Jack Ma, the founder of the Alibaba group, was never a techie. He was bad at math, failed twice in high school, and got his first computer only at 33. Ma’s route to becoming the billionaire founder of one of the world’s largest technology companies came through English.

In the book Ali Baba: The House That Jack Ma Built, author Duncan Clark, a former Morgan Stanley investment banker and fluent Mandarin speaker, traces Ma’s story from his early days, through his first Internet venture, Chinapages.com, and then Alibaba. He has had a ringside view of much of this, having lived and worked in Shanghai, and even consulted for Alibaba.

Clark is clearly in awe of the billionaire, telling us in the introduction that a “meeting (and a selfie) with Jack is coveted by presidents, prime ministers and princes, CEOs, entrepreneurs, investors and movie stars. Jack regularly shares the stage with the world’s political and corporate elite. A masterful public speaker, more often than not he outshines them”.

Growing up in the Chinese province of Hangzhou, Ma used to cycle to the Shangri-La hotel as a teenager just to speak to foreigners and improve his English. Once he became fluent in the language, Ma got his first job as an English teacher at the Hangzhou Institute of Electronic Engineering at the age of 24.

For an assignment, Ma travelled to Seattle, US, in 1995 and was introduced to the world of the Internet, where he famously typed in a search query for “beer”. There were no entries for Chinese beer. Ma then searched for “China” and found no entries for the country either. “Why don’t I make something about China?” he asked his friend Stuart Trusty, who worked in Seattle as an Internet consultant. And that’s how Chinapages.com was born in 1995.

The website did well, but the lack of a revenue model meant the company was short of cash and vulnerable to takeovers. In 1996, a state-owned enterprise, Zhejiang Telecom, took over the company. Ma lost control of his pioneering enterprise, and had to move back to Beijing to take up a job in the ministry of foreign trade and economic cooperation, where he built trade websites for the government. Buried under layers of bureaucracy was frustrating, and in 1999, Ma left the ministry to start his new Internet venture, Alibaba, which would cater to small businesses, and go on to become one of the world’s largest e-commerce companies.

But it was hard to begin with. Describing the situation, Clark writes: “The reality was that Jack, late to the portal game now dominated by Sina, Soho, and NetEase, had to find his own niche in the China Internet market. The portals were trying to capture the growing number of individual users coming online, but Jack was going to stick with what he knew best: small business. In contrast to the business-to-business sites in the United States that were focused on large companies, Jack decided to focus on the ‘shrimp’. He found inspiration from his favourite movie, Forrest Gump, in which Gump makes a fortune from fishing shrimp after a storm.”

Alibaba earns from advertising, and unlike e-commerce firms like Amazon, it works on a marketplace model where it doesn’t invest in warehousing. In the days following its initial public offering in New York, its value soared to $300 billion (around ₹ 20 trillion now), making it the second most valuable Internet company in the world after Google. Today its valuations are lower, but it now calls itself “the world’s largest retail economy”, far surpassing Amazon, and overtaking even Walmart with a higher gross merchandise value.

The rise of Alibaba, amid the booms and busts of the last two decades, makes for gripping reading. There are the early funding stories with their own cast of characters—the deals with Shirley Lin of Morgan Stanley, who invested $5 million for 50% of the company, and Masayoshi Son of SoftBank, who, only a few weeks later, pushed Alibaba’s valuations even higher by paying $20 million for 30% of the company.

In the most fascinating chapter of the book, we read about Alibaba’s battle with eBay. Even as Alibaba launches a website—developed in complete secrecy and called Taobao.com, with the tag line “There is no treasure that cannot be hunted down, and there is no treasure that cannot be sold”—eBay goes on to make one tactical blunder after another. It gets the culture wrong, sending in an American Chinese from San Jose in California, US, to occupy key positions, leading to demoralization among the local management. The website is migrated to a host in the US—a big error. EBay now has to contend with the “Great Firewall of China”, which means that websites hosted overseas are slower to load, going through a series of choke points where access to the site is screened. All of which makes the story of eBay versus Alibaba in China a great primer in multinational competitive strategy.

The book revolves around Alibaba’s founder Ma, but he remains an elusive figure. Clark makes up for this by using extracts from previously published speeches quite effectively.

Ultimately, the book works because it tells a business fairy tale, set in a little-known land that everybody wants to know more about, where the young hero, rejected several times by Harvard, creates such an admirable enterprise that he is invited years later by the same American institution as a speaker.