Run business in China’s cloud industry as a foreign company

China Paradigm Transcript #108: Run business in China’s cloud industry as a foreign company

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Find here China Paradigm episode 108. In this interview,  Steve Mushero tells us about China’s cloud industry and his business China MSP YunChang.

Full transcript below:

Matthieu David: Joining us today is Steve Mushero, CTO founder of China Net Cloud which you founded in 2008. You have been in China since 2005 and you have been in the technology and software industries since the very start of your career, since 1993.  So, you saw the rise of the Internet and technology’s evolution both in Silicon Valley and China. If we talk a little about ChinaNetCloud, in 2012 you were managing 1,200 servers and in 2014 the number was several thousand servers. China Cloud became Yunchang Technology in 2018. You are offering cloud services which is quite well known by the general public, because of companies like Amazon and Ali Baba getting involved. However, most people consider it to be simply an online server, but it’s much more complex than that. I read here that you provide additional services such as troubleshooting, monitoring, and many more services to help developers develop in a safe and fast environment. In 2015 I see you raised 9 million USD. You have a team of about 25 people but you might need to update us on those figures. To talk about the operation on the cloud in China (Know more about Cloud Computing in China)., the market size of China’s cloud industry is estimated to be 84 billion RMB with a growth of 50% every year and actually, the big payers like Alibaba and Baidu have about 75% of the market (Learn more about Expert interview in China). So, there is still 25% for other players and I was a bit surprised that there still is 25% for the other players when you have such big players like them in the game. So, the first question.

Cloud seems to be a very big environment and I assume that there are some niches that you may specialize in. Would you mind telling us precisely what you do?

Steve Mushero: Sure, and thanks for having me on. Broadly, we think of cloud completely in two separate areas. There is sort of the consumer part and the co-creator enterprise part. So, for the casual consumer, this is intact and Cloud is really like iCloud. I can store my documents up there. Maybe I can do backups, maybe I have a box or Dropbox for some documents. It’s basically how you and I can share our files or maybe you’d have music or things like that in the cloud. That is the whole consumer world. We think about cloud computing as the enterprise on the corporate side, which is what Amazon and everybody else does. It’s a point to separate those. It’s sharing servers, computers in the cloud. When we started there was none of this. We were the first cloud provider in China in 2008, but at the time and in the US also, most servers which leave behind applications or websites or mobile apps or anything online are or were physical servers. You went to Dell or IBM and bought a box, you put it in a rack, someplace in a datacentre and have to air-condition.  So, we get a lot of that and then obviously that’s very expensive, it’s very slow if you want to do something you have to go buy servers. You have to wait for 2 weeks for it to be delivered and so, it takes weeks or months to get new servers. The cloud lets you virtualize that and share all of that. So I Can have a new server on Amazon here within the next 5 minutes and so that creates all different kinds of dynamic ways of building things quickly and on top of that you have a lot more servers and if I can rent a server, I can rent a database, networking, and security. I can do all different types of things and that’s where the cloud is focused. It’s taking physical servers and sharing and virtualizing those and now that’s a 100-billion-dollar business, globally. Ten years ago, it was zero. That’s changed a lot and we’ve been lowering the cost for people and making it a lot more flexible. So, our role in that all through this; before and after the cloud world was and now is called “Cloud management service” in China. So, it is designing, building, and operating those things. It is quite complicated. You have physical servers or discs and memory, configuration, networking, security. You have to do this 24/7. So, at 03:00 in the morning users don’t care if you’re not at the office. If something breaks, somebody’s got to fix it. So, we do all operations on the cloud in China based on that. It’s monitoring, security, engineers, screens, and managing and fixing all this stuff. So, that’s what we’re doing. You might own the servers, we might own them, Amazon might own them; it doesn’t matter. Our job is to run all of that and keep it working. That’s what our business is.

Can you share with us some numbers of your company? You have raised $9 000 000 and have a team of about 25 people in 2015, what about now?

Steve Mushero: More or less. We’ve raised a variety of money over the years. We had some angel rounds and then multiple VC rounds and so, different blocks in there. The number of people has gone up and down with our business and economy and so on; the Coronavirus and now things aren’t as great as they were. So, we’re 25 to 30 people now.

Matthieu David: The cloud or internet business is usually a very Chinese business, For instance, I think Baidu is listed on NASDAQ but its equity is not listed on it. Foreigners cannot own shares of Baidu, but there is a VRE interest equity, meaning that it is regulated and restricted for foreigners.

How did you manage to get a foothold in  China’s cloud industry comsidering you are a foreigner?

Steve Mushero: It’s changed over time. It’s not only sticks in the cloud and is more about value-added telecommunications services and data centers. A lot of things in China are a bit murky. We started in the management operations and we have not owned a lot of things. Essentially, the customer owns it and we just manage it. We are a consulting business in that sense. We are managing your stuff for you as if we manage your office or your car. Then when we started offering cloud services ourselves and various hardware, we used third parties to do that. So our clients would sign multiple contracts. They will sign a contract with us for management and another contract with a provider, usually for bandwidth and so on. This is exactly how the AWS got started here. Earlier on you signed multiple contracts with the AWS in the same way with Amazon, to work with these regulations. Over time, this has become more strict and you have to be more local. Microsoft has already started locally with local partners. We have become more local also so there’s a variety of issues around that, but we are still very focused on the Cloud management service in China and not so much on the cloud. The real issues are around sort of who is responsible for the content, so-called ICP licenses, and buying the bandwidth. You need the license and responsibility when you start to transmit data out to the world. New customers usually talk about that. These are the license, these are the issues, this is what we can do before you have a license which you can do after. Local entities, what are you doing because if you are protected areas like news or video if you are doing APIs and  SaaS….there are all complicated regulations. We do a lot of that.    

Is that the niche market you are going after, providing cloud management services in China to foreigners? Or are you also providing cloud management services in China to Chinese companies?

Steve Mushero: Most of our customers are Chinese. So, we have a bulk of Chinese customers and also have a lot of global fortune labour 500 companies, usually coming into China and so they are coming here and upgrading things here. Like Swatch, they are structured here and usually not much interacted with the outside world. It is more about what they are doing here. But most of our companies are local companies. So, it’s local internet games, news, lots of different things, applications and so on. You do have to know their natural components and international connections, Great Firewall, VPN connections and so on that are necessary to run commercial businesses. So, we do all operation on the cloud in China.

How do you position yourself and differentiate yourself from those big players: Alibaba, Tencent, Baidu and AWS who are well-known and easy to get access to. What is your segment?  

Steve Mushero: We are partner with a lot of them because they provide the actual infrastructure. We used to provide public clouds and servers way before all of them in China’s cloud industry. But renting servers and running clouds is not good business in a lot of ways. So, we were happy when they finally got here because then we could use all their stuff. We are their partners. Typically, often you will go to them or you will want to run something on the cloud, you will then come to us and we will work with you or sell you AWS, Ali, Ten Cent or whatever,  we manage the operation on the cloud in China. Again, those are quite complicated services and so we help you deal with that, but we are all partners and all work together. Generally, for example, Alibaba, they sell you the cloud, but they don’t help you very much. They might tell you how to architect a little bit, but once they sell it to you it’s yours. It’s like a car. You’ve got your car and you’re driving it. That’s it. They don’t drive it for you. It is kind of the same here. We can drive it for you. That’s kind of how it works. 

We are in a world where the words SaaS, PaaS, IaaS are very common. Would you describe your company as a service company or still as a platform? Would you classify yourself as SaaS, PaaS, IaaS or do you provide tailormade services and use SaaS services from Alibaba, Tencent and Baidu?

Steve Mushero: We are primarily a service company who provides cloud management service in China. We do have our SaaS system but it is mainly about managing services. So, we offer both, but for most of them, we are using their infrastructure as a service so we don’t use much else, but we are a mini-service-provider (MSP). You on top of all of them if you will. We have our tools and technology to help us with that, but in the end, it’s still service.

Matthieu David: I see. You have your tools and you use it to provide a service to your clients.

Steve Mushero: Correct and we also sell those tools separately to customers that want to do their own and so, we have both of that, but it’s about management and operations.

You would assume that coronavirus would have been a positive development for internet companies,  has your company done better during the virus with people spending more time online?

Steve Mushero: I think I’ve seen a little bit, but what you have kind of missed here is they are not spending more online. I mean, they are spending more on e-commerce, but the advertising market and more markets, in general, has fallen off. So, our customer who is advertising based are really in trouble, it appears and so that affects their ability to pay us and that’s a significant problem. I think you have seen that globally (Check about Daxue’s Crisis management services). I mean people can’t pay their rent, they can’t pay a lot of stuff and they can’t pay their service providers. So, we have a big customer and we don’t know when they can pay us. So, that is a problem. In theory, you are getting more of certain industries in certain cases, more gaming and that kind of stuff, but it isn’t necessary to generate more business for us. In some cases, we had some brands that we’re scaling up to do more stuff and do more at-home sales and e-commerce and things like this, we had a customer ordered more servers yesterday. But the question is, how do you bail us out, they might die? So that is always a problem for us and for start-up’s, the beauty of that is they start small and have one server, but then get ten and then a hundred and then a bunch more, but also sometimes they go 1, 10, 100, 10, 1, 0. So, they also die and they can’t pay you. That’s the problem. You can have enterprises. They’re much better about paying, but they also take forever to fix issues. So, both have their challenges.

How is the current situation? Do you feel that the market has bounced back to normal?

Steve Mushero: No, definitely not. We are just seeing now more challenges than we thought. We thought we were generally more insulated than other people. If you’re restaurant business and other stuff, person to person businesses are slowly coming back here in China. Up here it’s the car services, airlines, travel or tourism; nothing is happening. These are serious challenges and we are not out of the woods by a stretch.

Have you set up any action to cope with the crisis during the lockdown or after the lockdown?

Steve Mushero: First of all, if customers can’t pay you, you have to work on cost and things like this and being careful. Beyond that, if you can work remotely; you know, we have staff around the country and the world and during the lockdown that was not a big issue(Learn more about the development of video conferencing market in China). Our office was closed for a month and we worked normally. So, we didn’t have any significant issue other than that people were trapped everywhere at home and working out of their grandparent’s basement. No, it hasn’t affected the way we do things and what we do. That’s good. It’s fortunate. The problem is just the economy. People pay and people invest in things like this.

What are the main differences you have witnessed between the West and China in terms of technological development, management technology, development of the Internet beyond firewall and regulations, such as languages used and ways of operating?

Steve Mushero: Yeah, there are differences. Things are mostly the same. They are different in a few ways. The biggest one is – you call it phasing or timing –for cloud computing here is several years behind the West. It could be behind Amazon. It started several years later, it is still much smaller than the rest of the world. Although there are investors, new services, and things that you see outside the country, although that is changing and catching up, It is broadly true. There are areas where China is doing well or even ahead. For example, financial services, obviously payments and stuff like this and AI; a lot of work with all the AI chips and you can argue that there is more investment in video and a lot of other things going on here, that are ahead of the world but broadly that kind of stuff is delayed. It’s catching up quickly though, but that doesn’t make it a lot of difference so things like Docker or some hot technology is not as common here. As for languages, China is still pretty much PHP and Java oriented. That’s pretty common in the West too, but we are seeing a lot more Python go and new advanced things like Rust and so on. There are some differences, but probably it’s the same. Things in China tend to move faster. There are broad differences like that; move quicker, a little bit more haphazard and less planning, much more dynamic than I think in Silicon Valley. So, those are the main differences. It’s also growing very quickly and so, a lot of people in the U.S with 10, 20, 30 years of experience in technology; those people don’t exist here. It’s a bit different in terms of seniority. In Amazon all the senior people have been doing this kind of stuff since the eighties, sometimes the seventies. If all mainframe guys are still doing networking on Amazon today and there are a lot of people, they are doing their chips and that kind of wealth of technological experience doesn’t exist anywhere else. It has to be expected and that has changed over time.

Matthieu David: That’s a bit surprising, I think some people listening to us because China is seen as now a tech giant and very developed, however you say that China’s cloud industry seems to be a bit slower in terms of development and size. In terms of size, China is smaller, 12, 13 billion USD and the market is one hundred billion as you mentioned.

What made you say that China’s cloud industry is less developed? In which aspect?  

Steve Mushero:  First, you have to be careful with those numbers if you can’t compare them. Whatever the 83 billion number is; those are not apple to apple numbers. I usually focus on Amazon clouds. LUN is the biggest player. I haven’t looked at the recent numbers, but I think it’s 3 or 4 billion US dollars, maybe 5 and they are the biggest market and so that market is not 12. It’s like 5 or 6,  and the global market or Amazon is on a track to 180 billion. The global market is probably 200 or 250. China is about 2 or 3% of the world.  You have got the largest country and the second-largest economy. Norway has more technology and cloud use. The other question is why. It’ growing quickly, people have a chance to scale to the rest of the world and it’s enormous. Part of this software market in China is also very small, for me are historical reasons. The software cannot be commonly used. People are arguing that it is expensive. In the West, you use software whether it’s ERP or HR or finance to save on people. Those things have never been priorities here and I remember when I first got here, Walmart was trying to get factories and kind of suppliers off of blackboards and whiteboards and I am not sure if they fully succeeded in that. It’s a lot of reasons why manufacturers don’t want to pay for software. They are not used to paying for software, they don’t want to invest in it, it doesn’t pay off in any way, it provides good records, which not everybody wants in these small companies because maybe things are not as legitimate. So, you look at the SaaS markets and HR markets, finance; these things are tiny compared to… I’m pretty sure Norway has more ERP than China. You can compare the markets where it’s software development tools, marketing automation, ERP’s, financial systems and China is not even in the top 10. That’s going to change, but we saw a big investment in 4 or 5 years ago and most of those companies are gone. They just went nowhere, CRM systems and no SalesForce here, the sales force is going to do 50 billion dollars of sales this year. There might be a 50-million-dollar player here, maybe. There is a 1000:1 ratio and that’s true in development tools and in other things too. That is a bigger issue is that technology and sort of corporate use and enterprise software are 10:1, if not 100:1 to the U.S. That drives enterprise vending, datacentre spending and cloud spending. It’s a complicated dynamic.

There are no Chinese solutions which are stable and adapted to the Chinese market: No need for VPN and have a connection with WeChat. What’s your explanation for this and why the software market is so small in China?

Steve Mushero: Yeah, I think most players do exist. There are certainly copies of everything here. So, there were dozens of salesForce or CRM systems and there are many local ARP system. They are small and you can argue it’ll be your investment and the reality are, customers don’t buy, first are larger customers. The money is in bigger companies. You might have GE or somebody in the U.S or General Motor who maybe you know, a million-dollar-a-month sales force or ten million dollar a month or just huge, huge pharmacies, right; pharmaceuticals may just massive spending on these types of tools but here it just doesn’t exist.  Companies won’t spend that or don’t spend that or don’t see the value in it or can’t get the users to use it. A lot of things are still relatively rudimentary in terms of spreadsheets and there’s also like there was in the States a long time ago, people don’t want to use systems like end-users. Sales guys don’t want to put their information into a system. They want to control it. Nobody wants to share it. Your information is share as much you might like it to be. So, there are a lot of dynamics, but yeah, many customers don’t buy. They like to buy hardware or physical stuff. They like to see things. Cloud services and kind of, you know a virtual sort of… that’s a little bit of a hard thing. The software doesn’t pay off in the next few months is really hard to justify and then all the training costs and all that, so you see that with ERP and SAP and so on, but it’s still slow going. First, you’ve got a big-ticket, big dollar or, you know, billion-dollar things; they’re driving all the business in the West. It’s still not so much. I think it’s changing, but it’s hard to tell. Lots of companies died. Lots of people are SaaS funded and very few of them survived and so now, we sort of still need them. So, they’ve got to come back and get re-done or whatever.

How big companies manage their ERP or CRM? Are they building internally so they are not using enterprise software’s, that may be the difference?

Steve Mushero: That’s part of it. Spreadsheets… it’s just nothing I mean it used to be all these factories that were… you know, my wife used to work for a company,  a 50-million-dollar company and I think there were some whiteboards and you have mid-sized, German companies that are 10, 20, 50 million-dollar companies. There’s a lot of them right here, usually run by a boss. Everything is in his head and maybe some spreadsheets. They control information and don’t want to share a lot of stuff. There’s not a lot of middle managers and surely there is production in factories, but it’s pretty simple and all the stuff on the paper. People are a cheap and especially low-end admin, tracking, clerky type people. They’ve gotten more expensive, but are still relatively cheap. You can use all of that and if you write it all down someone might steal it, might sell it or worry about tax payments. There are a lot of issues that are not intuitive about how some of this works where a 50-million-dollar chemical company in the U.S would have a lot of systems to do a lot of stuff and I think that isn’t true here. I’m not sure, but I think that’s part of it and it’s cultural issues.   

Indian businesses have difficulty to pay for those enterprise services with high tickets. Is it similar in China but for different reasons?    

Steve Mushero: I don’t have a great sense of Indian side as to my impression that the Indians will pay more for software and technology, perhaps they are more exposed to the West. I think also that we have WeChat apps and you’re seeing a lot of companies do more interesting things and it is quick and easy to build stuff in a WeChat app. You can even track your products and inventory in a very simple way. So essentially not unlike a cell phone or mobile phone kind of LeapFrog layered lines from no phone to a mobile phone, especially India, but in China, especially the young people, you may see sort of WeChat and super mini-app things, sort of LeapFrog, more traditional SaaS and enterprise software, particularly where security and accuracy and a lot of other things are not that important. I don’t think you’d see that in the West as much. If you are a factory and you want to track stuff, the WeChat app that some guy makes on the weekend might be alright.  Everybody can follow it, everybody can do this, you can draw up phat stuff or this disease stuff for the Corona Virus, you know, they’ve created a lot of stuff very quickly. So, you may see this as sort of a lightweight, very mobile, very interactive, but also innovative and flexible stuff come in as a new layer. So, they replace the things that didn’t work. But it’s different from what you’ve been seeing in the west. It’s going to be interesting because we all need to do something. Costs are getting higher and the economy isn’t doing well, everybody’s got to think of efficiency and start thinking about how we do stuff more automated because WeChat is part of it, but I think you will see more of that automation. There are robots, right? They’ve always had a lot of people to sew clothes and do whatever; screw things together. Now robots have become more important. That’s physical, but the non-physical part, like assistant accountants and HR, you see some of that and a lot of automation and stuff. I believe that’s going to be an interesting platform; very simple, but it is useful and it is completely free.

Yes, perhaps the current crisis is pushing businesses to use more enterprise software to rationalise, optimise and communicate better and more efficiently with other teams?

Steve Mushero: Yeah, I think it might be that way.

You raised $9 000 000 in 2015. Would you mind telling us what was it for? Was it to buy servers or it was to build up the team?

Steve Mushero: The latter. Building the team was the main thing and to expand our cloud management service in China and sales and we had raised some money; a million or so and for many years we were living from hand to mouth. Every new person you add or everything you buy, you had to be very careful about cash flow and all that. So, it is really to try to expand higher sales and also develop a product with this management platform we used and grow much larger and drive all of that and taking over the management market in China’s cloud industry was our vision. So that was the goal. This is in China, this was never going to be raised which had its own set of complications because we were a WOFE (Wholly Owned Foreign Enterprise), so we have a lot of legal and structural stuff to deal with. This was the hight of investing, which has gone down a lot and also the height of the IPO market here being super-hot, which helped us. Everybody’s like, “Well, we are gonna raise money now, can we go IPO by the end of the year?” A year from now is so far away. It’s a lot of bubbling about investing or investors and so on around that time, so that’s what helped us to raise a lot of money. Through that period, there have been a lot of challenges since then.      

Comparing raising money in the west and China, I feel Chinese investors were looking for a short-term win especially in 2015, 16 and 17 while in the U.S it’s more long term,. Do you confirm the difference and what other differences you have seen?

Steve Mushero: Well, I think that’s true. I think just broadly that the Chinese investment market has been more short-term focused, you know, investors in the U.S might be ten years or around seven years on average(Learn more about the venture capital market in China). Now it’s become longer. That may be the reality here, but it’s not the expectation, especially in those periods when the frothy IPO market is seven months or seventeen months with a long time out. Partially because you had a lot of new investors coming in the market, a lot of capital; a huge amount of capital especially when RMB became more popular and also the limited experience folks do that. The market grew, it was double for a year or whatever. Even if you did that in the U.S you wouldn’t have experienced people to manage all that. So, that was an issue, especially on that side because people were doing that and not being so exposed to international sort of VC practices and market and so on. I think it was definitely frothy or bubbly, in general, and then look focused more on the short-term and that means partially also not much due diligence for the organization and other things and understanding the market as you’d think because obviously, you’re going to have 1000 VC’s and SaaS businesses and nobody’s ever done SaaS before and they had to know what to do and ask for. You also had businesses; like bike businesses and before that you had Groupon and all these types of businesses that were just piled on; P2P lending was big at that time. We had 4 or 5 of these waves of just massive investment in a bunch of areas that probably hadn’t been very helpful. Now we are doing it, maybe can help solve that problem.

How do you feel about raising money in China compared with the West? Do you feel it’s easy to get access to investors? Are they communicating a lot on the fact that they are looking for companies to invest in, or it is more on the personal level(networking关系), as it used to be?

Steve Mushero: I think it’s the same. I think all that’s true and in the sense that in Silicon Valley, especially it is very important, also because investors won’t talk to you unless you come through somebody else (Know how to leverage Guanxi for business in China). So, talking about people about Chinese 关系Guanxi (networking in Chinese). It is just networking in the valley. That’s just the same thing. That’s true here. However, given that a lot of the investors are new, you know, perhaps are more accessible than they would otherwise be. In China though, you see the FA; the financial advisor, the investment banker in the Western world very common at low-dollar values. Even a few million dollars or $1 000 000 or 5 or 10, which should be kind of very rare in Silicon Valley, but maybe more common elsewhere because you can’t pay for them or afford them and this value perspective of the sort of, “Hey, if you need a banker or need someone introducing, then you are not very good yourself” kind of idea. Here, they’re almost expected or common and they help manage the deal, they collect investors and they help work on terms. They do a lot of things that lawyers might do kind of in the west. They negotiate on your behalf for some of the issues, but here, the lawyers tend to take a back seat and just kind of process the docs more. The FA not only does the upfront sort of marketing and signing the investor’s discussions and also negotiating. This is what entrepreneurs are expected to do in the west and here, you have a third party that does it. You choose that based on who they know, China renaissance and some of the people are starting that way and they are now becoming investment banks. The industry has a lot of small blocks, small players and a lot of individuals in that role, raising money for other people and call themselves this. The U.S kind of stopped that and you have to become more registered because the U.S had a big problem with people doing this, years ago, too. So, we are still in that mode here.

Have you identified the equivalent of Sequoia Capital or those big players in China?

Steve Mushero: Well, Sequoia is here and I know Sequoia and I went to Sequoia when I first came here or a similar company. So, yeah, they’re an international firm, Sequoya, but a bunch of top Chinese funds like Zhen Fund who invested in us and some other people that are sort of, you know, tier-one or class A. There are smaller ones that other people, less experienced or less size or so on.  Those are maybe a dozen global or American firms here and then the half dozen or a dozen top Chinese firms, a lot more. So, the whole perspective is different. Different history, different issues. 

What are the books that have most inspired you in building and managing your business?         

Steve Mushero: Yeah, I read a lot of books. They’re all kinds of pieces and parts and useful here and there and some of the Silicon Valley books are good. Ben Horowitz, that’s a good one. The truth of the one that I wanted to mention that I think are unusual or are trying to make their rounds in Silicon Valley are both books out of the U.S Navy and there’s a book called ‘It’s Your Ship’ and another book called, ‘Turn the Ship Around’ and they’re actually both about leadership and they’re about how to lead, inspire and manage large numbers of new people, organizations and middle management and especially like in our business we have a lot of junior staff in each year, so it’s very much like the military, right? You suck in a lot of new people and you have to mold them, build the culture and all that and both, ‘It’s Your Ship’ and ‘Turn the Ship Around’ are about that. They are both about Navy captains that come into situations that are challenging and problems and how they dealt with that and their philosophy and I found both of those to be extremely good and I recommend them to everybody. They’re just very practical.  For example, in one of them, they left a most junior sailor on the ship to do the tour. Normally the captain does the tour, but they had the most junior sailor do it and tell you all about the ship. So, we adopted that. So, a customer or people come to our office, we let junior employees do the tours. They have to learn about our company and they have to learn everything. We had tour qualifying processes. So, if you want to lead the tour you had to be qualified to lead the tour and that’s very much what they did in the book too and it inspires people and it’s all like the history of why we did it and what we do and we are very impressed with the tour process. Two similar books form two authors, but similar.

What book, publications or movies opened your eye on China?

Steve Mushero: I separate China stuff into old China and new China. Staring with old China, I’m quite a student of sort of all you know, late 19th century, early 20th century China or let’s say 100 years ago where people just like us are here doing the same things, maybe not on the computer, but where we have entrepreneurs running stuff here in China trying to make money, trying to do things and a lot was written about that and I find it all extremely interesting. It was right on these very streets that we’re on. Carl Crow, the famous American and there were books here like the Old China Hand, which was about him and the whole time, newspapers and publication and wars are starting and a lot of things haven’t changed and so a lot of people’s interest and hype and frustrations and challenges all around China, he writes about these like literally a hundred years ago and so I find that very interesting. Yes, he wrote a book called, ‘Four Hundred Million Customers’ which was about the Chinese market in 1935 or so. So, one of the books I found cool about China more recently was, ‘One Billion Customers’ written about ten years ago, which talked about the China market and kind of growth. More recently I haven’t read that much. So, book-wise I think some of the stuff today is more about trade wars and politics and that’s interesting, but not a lot helpful. I pay attention more to like CaiXin, you know, and sort of the newspaper and sort of Tech Note and tech stuff. It’s a little more political, but also economic and policy issues. So, service matter things on like new China. Keizer Kuo has a good podcast that I catch up on occasionally.  So, there’s a few that are nice. He and Jeremy, I think to do one and they are all China and they do politics and stuff, too. You subscribe and it’s pretty expensive and they do good work on, especially the business side of things and they focus more on the politics, which is important of course, but if you want to know more about numbers and what’s going on in jobs and these issues, then it has always been the leader there. Tech Note is useful for tech stuff and it is also in English.  So, it is Chinese stuff, too.

What productivity tools do you like to use in China?

Steve Mushero: We still use Google Docs and that is not easy to use, but it has helped us a lot, actually in terms of sharing files and so on. I use Evernote a lot also which works pretty well. I am an old e-mail guy. And so, my e-mail is still my main tracking or productivity tool as the calendar. I am not good at to-do lists. I end up with 100 to do and then I have to-do lists and it doesn’t help me. So, it’s pretty basic stuff. I use Evernote more actually for writing and documents and recording meetings and you know, notes to do and stuff like that. The more boring stuff. My calendar is still the key productivity thing and my e-mail. My browser, I have 100 tabs open for B2B stuff. I put on a list and it happens.

If you had some extra time, what would you work on? 

Steve Mushero: I am always working on new things, working on new products, trying to write more blogs and posts and trying to think about different things like new technology products and thinking about making a wine collection management tool because I hate all the ones that are out there. Things like that. It is time versus money. Money and time can do that. I’d be much more in the U.S focused on stuff like prison reform and blue-collar education. I read a book 15 years ago about offshore and blue-collar, white-collar, middle class and all that kind of stuff so I am interested in labour economics, labour education and elected on a lot of those issues of the blue-collar and middle America. I love thinking about those sorts of things and be focused on how to improve those folks’ life. They are people of colour and prisons and other things; it is all related. We have to be better in those areas.  So, we put a lot of work in those areas. The offshore and middle class, so it is about, you know, this is right after Thomas Freeman’s world is a flat thing. It is about offshore, blue-collar and manufacturing because I used to be in manufacturing in Japan in the ’80s and I was concerned about offshore, which are seen in an engineering county and that sort of stuff. Maybe not as much as we thought it would and maybe now it’s coming back, but what happens when we start losing middle-class jobs and white-collar jobs and then how do you prepare for that, how do you help blue and white-collar folks become more educated compared to the twentieth century? Also, how do you reduce exactly the things we see, which is the fear of foreigners, fear of the rest of the world, isolation and all these things that caused us problems 100 years ago? Recent elections also are still rising problems. That is travel issues, education, workforce and this stuff is hard. I have a lot of exposure to some of these challenges and I have a lot of ideas about this stuff, so you have to do it, obviously all over the world. People are disaffected and are losing jobs and are electing people who aren’t going to do a great job for any of us, so that’s true in Europe and the U.S right now. We need to spend more time on that, but what’s his name – they wrote about West Virginia – I can’t remember the book, but it’s poor impoverished areas, you know, and real challenges that are there. 

Do you think AI is stealing the jobs from humans? (Learn more about the AI ecosystem in China)

Steve Mushero: Well, no in the sense of well, yes, I am an automation guy. I started in factories in robotics and automation, so I’ve seen that since the 70’s or 80’s and the reality is that automation in whatever form it is, has taken ten or a hundred types of jobs that offshoring does or those sorts of things. It is similar, but it will be the dynamic again of this middle class. Robots and other things take jobs from guys doing tyres on cars; AI can begin to reduce some of these jobs that white-collar or office people did and that’s where you will see some of this backlash – I wrote that in my book –the accountant or the designer or the professional jobs we’re going to have more trouble, but it’s hard. All these jobs create more jobs and robots create more stuff. The challenges are how do you transfer the workforce and how do you give them hope. All this Trump stuff, Europe and all that is all about the future of hope, right and where am I going? I see my job and I’m fearful and all that and financial this is all redacted. So, how do you transition those folks into whatever the future is for all of these things and I think we don’t know. Anyway, it’s going to limit all the kinds of stuff you couldn’t do before. So, it is very interesting. Drones with AI looking at farms and telling you where to apply crops, that raise the income of farmers, which helps rural areas. Is that bad? It’s a really good thing. So, it’s the same in a whole bunch of areas. Having AI on your phone, you can do a bunch of stuff that you couldn’t do before. Medicine and all this kind of stuff. So, it is just how do we leverage that and it requires smart thinking, policy and other stuff that isn’t happening. How do you re-train people? How do you give them hope and a lot of stuff? That’s important. Sadly, recent elections all over the world show that this is still a problem.

What unexpected success or failure you witnessed in China’s society or business in the last 15 years?

Matthieu David: The reason why I am asking this question is that it’s a way to see changes at stake. Peter Drucker, the founder of Strategy in Busines said that if you want to assess changes, you may look at successes or failures you were not expecting but happened. 

Steve Mushero: Alright, interesting. I didn’t realise he said that. It makes sense. The unexpected success in the big picture over the last years has been the online payment. So, how quickly China has gone from paper money to digital payments, the success of Alipay and so on. They did it very quickly; over a year and it took massive investment. They flooded the market with all these devices and it took a lot of things coming together, bandwidth, digital and cheap Android devices. Every street and the whole country with a billion people suddenly had a payment system and did that within 6 months or a year. It worked brilliantly and worked well. You wouldn’t have expected that. You’d think other places would do that and a lot of things relate to that and I think it’s pretty impressive. Related to that is there are a lot of Chinese companies that have a lot of problems and are even worse, but also, we should look for and celebrate Chinese companies that do well in a bunch of ways; like global players whether it’s like DJI, Drone people. I like the Anker. They make batteries and other things and they’re the best in the world with this stuff and it’s a local Chinese company. You just don’t expect that to take over the world. Failure-wise, I think unexpectedly just in terms of industry-wise, the whole bike-sharing mess. So, it’s surprising that it’s something we need, we still have, we really use and we see just how this stuff piles on and then destroys the whole industry and you know, I guess DiDi and car share escaped that when Uber left and the only blew about ten million dollars, but the sharing industry failed. I think that was pretty surprising because that market should have been pretty good and now it’s a wasteland. Besides that, other failures I am not sure. I try to focus on the future and success, so I try to not remember all the failures.    

Where can we ready your blog?

Steve Mushero: It’s on Medium, which unfortunately not available in China, but you can search for my name on the blogs that are out. Most of my stuff goes to Medium now or on Twitter. I publish on Twitter and everything links. Both are probably hard to get in China. That was my name stevemushero.com works too, but that’s not updated very much.   

Matthieu David: Thanks so much, again. I enjoyed it. I hope you enjoyed it, too and I hope everyone enjoyed listening to the show. Thanks, everyone and stay safe.

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