Tribal Bias

I visited India last year. In ten days, I traveled in several cities – New Delhi, Bangalore, Mumbai. I was amazed by the country’s incredible culture: wherever I was, people are happy and welcoming. But I was troubled by the underdevelopment and I started to wonder: where is the “next global powerhouse” that we have been talking about? Especially in the U.S., people have been talking for 30 years about India as the “next global powerhouse.” But even in Mumbai, the nation’s wealthiest city, the deprived living standards were shocking.

I like India so I visited it. I read about the great nation and I enjoy hearing people talking about India. Much of my previous knowledge of India came from Western media, so I thought I know the country well: India is the world’s largest democracy and (so) its society and its economy are both well managed and the country is on its way to becoming the next global superpower. However, watching the local impoverishment was surprisingly shocking – the actual on the ground situation was not communicated to me before. After my Indian trip, I embarked on an intellectual journey. I tried to understand and reconcile what I was told in the U.S. with what I actually saw in India. Gradually, I came to the realization – it is tribal bias.

The bias is difficult to voice. “The world’s largest democracy.” This is how India is introduced in the Western context. Naturally, it becomes quite emotionally satisfying to talk about the great success of “the world’s largest democracy.” Recall the last time you hear the news headline “India is the fastest growing economy” versus “India is slowing down.” And try replacing the word India with a dictatorship country, like “Sudan”, and read the two headlines again. Feel the feelings – you get it. Tribal ideology triumphs and fact matters no more. Whether such success has happened or will happen becomes less important. Especially in the U.S., in spite of realities, American investors generally “want” to believe democratic economies would outperform others.

In investing, because of tribal biases investors are doing themselves and their clients a great disservice. Investment decisions are no longer based on solid facts but flimsy ideological preferences. For example, India has one of the world’s youngest populations with a median age of 28. As such, Western investors are excited about India’s upcoming population dividends, considering the country at an advantageous position for economic growth. But careful investors should do their homework: India sees a net increase of 12 million people joining its labor force every year – that is 1 million a month. However, automation is taking away jobs at call centers, IT outsourcing firms and manufacturing plants. Service sectors alone do not usually generate high-paying job opportunities in large numbers. Anti-globalization movements only make things worse. In the best of all times, India only managed to generate less than half of the needed jobs. What would happen if a ripening generation not having enough jobs? Aside from above mentioned joblessness condition, investors choose to turn a blind eye to many other facts. Just to name a few: court efficiency (27 million pending cases backlog in India, as of 2016), climate change (2017 monsoon flooding unfortunately killed 700 people), lack of skilled workforce (fewer than 5% of India’s 487 million workers received any formal training, as of 2015), growing government deficit and high USD borrowing costs. Facts are filtered to fit our preferences, silently.

Tribal bias hurts investors and it also hurts the target country. During my Indian trip, corporate executives often mentioned about outsiders’ high expectation on India: “they demand first world behavior from us but we are running on third world infrastructure.” High expectation also inflates India’s financial markets. For much of the last 15 years and measured by Price-Earnings (P/E) ratio, SENSEX Index almost always swelled faster and further than the rest of the world. From the beginning of 2016 to now, SENSEX rose more than 30%. During the same period, India’s GDP growth has been slowing down from 9.2% YoY to 5.7% YoY. Today, the Indian equity market is among the most expensive ones in the world, trading at 23x P/E, surpassing the already inflated S&P 500 Index by 10%. In addition, as local retail investors tend to buy at the peak when foreign investors are selling, financial markets movement actually deprives local populations by taking away their hard-earned wealth.

Tribal bias is self-inflicted. It can happen for any investors as long as we are not careful about what is behind our thinking process – is our thinking process driven by economic reality or tribal ideology preference? I’m writing here because I like India and I am very concerned about the tribal bias that permeates the Western investment community that does no good to either India or investors themselves. Tomorrow, when you open newspaper, turn on TV, people will talk about India being the next global powerhouse again. Before they write and speak, have the editors and news anchors ever visited India? And how about you? So many has been so wrong for the last 30 years – I urge you to pause and reflect why.

Why I Learn a Second Language?

We live in a time when everything seems to be in English: web addresses, flight numbers and programming languages. It is tempting to not see that there are other languages being used in the world, let alone be motivated to learn a second language. It is no wonder that less than 1% of American adults have learned a non-English language and can speak that language “very well”. [1]

I am an English language enthusiast. When I first started to learn English, I considered it a school requirement. But now, I take true pleasure studying it. Behind this transition was my realization in the deeper purpose of learning a second language.

First, learning a second language helps us listen. We do not learn a language by just speaking it. We listen first. To understand a speech, we have to comprehend the nuances contained in that speech. Only by grasping these nuances we will be able to decode its message. As we pay attention to every syllable that is uttered, we listen to the whole message rather than the parts that we like. So, we listen more skillfully. While teaching a friend Chinese, I found one particular “listening” example intriguing: when learning Chinese, English speakers cannot fully pronounce the last Chinese character in a sentence, making them sound as if they have not finished the sentence. In contrast, when learning English, Chinese speakers almost always raise their pitch at the end of every sentence, making them sound not confident. At first, this issue appeared mysterious. However, over time I realized that when speaking their mother tongue, English speakers tend to lower their tone at the end of a sentence while Chinese speakers do the oppose by raising their tone. Because we have listened, we found the cause. Learning a second language makes us a better listener.

Second, it helps us think. As humans, we are animals of speech. As we talk, we form ideas. Every idea is an opinion. Furthermore, what is said will inform how it is said, which sooner or later shapes our disposition. This is why language forms how we think. George Orwell pointed out that if a certain word is removed from our dictionary, we immediately become incapable of comprehending its meaning. For example, before the 19th century, the word “democracy” and “science” did not exist in Chinese. Because they were not there to begin with, these two concepts were not mentioned in ancient Chinese scripts. Therefore, the average Chinese person did not understand what democracy was and what science was. Moreover, language is the medium of our thoughts and the engine to process their meanings. Mastering a second language will make us aware of how language overrides and shapes our own thinking without our being conscious of it. Gradually, language learners come to know the power the language has over them and others. As their awareness grows, they start to broaden their vision and refine the way they analyze, discuss and set forth ideas. Thus, a second language cultivates our minds and helps us think.

Lastly, learning a second language is fun. Learning English has allowed me to build deeper relationships with people who I care about, enjoy a culture I did not come from more fully, and stay informed when ordering food in any non-Chinese restaurant.

Learning a second language means more than learning the language itself. When learning a language, many people take a functional or utilitarian perspective, but I want to argue that we should not confuse the means with the end. A utilitarian view will tell you that it is all about functional communication with the “outside”. However, my experience has shown that it is all about what is happening “inside”. Reading, speaking and writing are by-products, enhanced listening and thinking abilities are the main-products, which eventually lead to a happier life.

In a time when less than 1% of the population in this country has learned and can speak another language fluently, what is needed is the ability to be bilingual.


Two Forgotten Things to Heal a Divided Society

Fall 2008 is when I first came to study in the United States. Joined with other college students at a small town in Indiana, together we witnessed the election of the first African American President. We believed the wheel of history, that of the United States and that of the world, had moved forward. Watching such a progressive social movement was a euphoric experience for many of us.

This year, it was different. After an unprecedented divisive campaign, 60 million American voters spent the night watching the election unfold in horror. Yet at the same time another 60 million voters were elated and thrilled. When I woke up the second day, I felt an unusual quietness in the classroom, disbelief in the air, as if students and professors were in mourning. What had just happened, in many people’s minds, was a move backward.

Let us take a step back. We are in a complex world with many trends going on, such as globalization, technology advancement, massive immigration, civil and women’s rights movement. In much of the developed world, the downside of those trends manifests itself in a painful way – job losses and diminishing economic prospects – making the unprepared segments of the population feel disoriented, angry and forgotten. To many people, the present is vastly different from the past and the future is no longer as bright as it used to be.

Negative feeling is infectious. The result of this election sent the other segments of the population into an emotional black-hole that is also painful. Moreover, in this volatile situation with complex problems that frequently out-run our abilities, it is now increasingly tempting to seek simple and quick solutions, such as populism, nationalism, xenophobism, political extremism, sexism or racism, hoping to undo the changes in the world.

As the Chinese proverb goes, “good medicine tastes bitter;” right solutions cannot be that simple. Though we feel angry and forgotten, we should not forget the importance of two things: empathy and liberal arts education.

Empathy should be cultivated. Technological advancement has made the world increasingly judgmental: within a millisecond we can produce and spread judgement by simply swiping right or left on the screen or pressing the like or unlike buttons. Technology connects us but also lets us feel disconnected. What really connects us on a heart-to-heart basis is empathy. With empathy, we listen to both ourselves and to others, acknowledge the time and space that we live in, promote pluralism rather than extremism, and make compromises when needed. Here at school, empathy is one of the most frequently mentioned words by professors and business leaders, yet unfortunately in today’s civil society and political arena what we have is the opposite – voters and politicians are increasingly militant, combative and unwilling to compromise.

Liberal arts education should be championed. Unlike vocational training which mechanically molds students into generic and homogeneous workers, through the teachings of history, political science, art and philosophy, liberal arts education imparts civic values and transforms any person to a disciplined citizen. By engaging in critical thinking, speaking and writing, a person can develop an enduring framework to think through things, a noble set of principles to live by, and a proper degree of decency to express him or herself. This is why liberal arts education fosters both humility and humanity which endows a person with appropriate pride – so even in bad times when things get tough, a person can still take the high road.

As much as we all feel angry and forgotten, we should not forget empathy and liberal arts education. Negativity has a function in that it makes us seek what is right. Sometimes, what is right is just not obvious. Let us not choose simple solutions (if these simple solutions were right, they would have been implemented and the problems would have already been solved.) History is less a straight line than a zigzag: whenever there is significant movement forward, there is significant backlash. Not every social movement is a movement – some social movements are in fact counter movements against earlier social movements that are already well under way. Education matters for it is why we are here today. Today’s problems should be solved in a civil and educated approach, driven by empathy and powered by liberal arts education, rather than through incivility and downright hatred. We should draw on lessons learned and not re-live them again.

Searching for the Path to Professional Excellence

As an MBA student, I admire successful bankers, consultants and asset managers and more importantly I admire the organizations that they lead. I hope that one day I will do something as great as they have. Yet sometimes I struggle to understand what it takes to be there – why are these organizations so successful? What are the traits that they uniquely possess? How have they managed their business and their people? Or simply put, how have these organizations achieved “Professional Excellence”?

My interest in this topic stems from the growing feeling in me about the tension between being good at what we do for our clients – the “Professional Excellence” and being good at making profits for our investors – the business goals. Professional Excellence is usually what an individual wants while business success is what a firm wants. For job prestige and other obvious reasons, sometimes I feel the impulse to direct myself or advise others that getting a job in a global professional services firm and working really hard is the obvious path to mundane success. However, increasingly I realize that what is obvious is not what the truth is.

Enlightened by a professor at my business school, I started to see that the influx of incredible talent into professional services field has fundamentally changed the industry. Changes are happening in a way that is profound but very concerning. For each and every firm that offers professional services – banks, consulting firms or asset management institutions – the chance to win has become slim and success has become temporary and easily replicable. In other words, the talent in this business is so great that there is no reasonable hope that any one of these talented groups could beat the other. Just look around: consulting firms struggle to differentiate themselves and therefore compete on the basis of “loss leader” – they compete for client mandates by out-offering upfront free services to prospect clients. Asset managers, specifically the ones practicing active stock-picking, failed across the board to deliver the performance results that they wished for and many have no choice but to merge with each other or just close their businesses. Investment banks find themselves operating in a market where the fee level is running to zero, both in its sales-and-trading operations and in its corporate finance business, which leads to the upsurge of cost-cutting activities and business consolidation events. In essence, professional services are now largely commoditized. Commoditization makes it extremely difficult for a professional services firm to stay true to Professional Excellence – to do what is good for their clients. And commoditization kills.

During this summer I had the luck and the luxury of working among brilliant people at several professional services firms: two consulting firms in the U.S. and one investment bank in Hong Kong. They are all great firms and I learned a great deal of things. I saw the payoff of painstaking work but I also felt the conflict of deciding what is good for the firm and what is good for individuals. It is really easy to claim that Professional Excellence and business success are inherently in conflict, yet this is not entirely true. I believe they are two distinctively different affairs and I argue that being good at the former will bring you to the latter. So, why Professional Excellence?  And what should an organization do in order to maintain Professional Excellence?

Professional Excellence is making sure the team, eventually the firm, is placed above its individuals. Individual success is easy to achieve and easy to be replicated, but a skillful team is not. Developing a skillful team demands well-targeted recruitment efforts and good leaders. At recruitment, candidates should be evaluated primarily by their commitment to team-success rather than by their drive towards individual-excellence. Successful candidates understand they are part of a team and commit to it. When leading teams, good leaders should delicately empower rather than mechanically control team members. Successful leaders use the right people and put them on the opportunities rather than on the problems. Because everyone can copy almost any product and no individual can outperform a team, a skillful team supplies the gigantic unfair advantage that helps a professional services firm differentiate itself from its competitors.

Professional Excellence is putting people ahead of projects. This is because professional services are all about people and excellence. Good people are nice to work with, are incredibly relational and can manage themselves horizontally and vertically in and out of an organization. They invest in themselves wisely and they protect themselves from their own weaknesses. They know what not to do and they do the rest with integrity. They exert a proper degree of self-control and they exude a profound level of positive energy. They drive for performance while they do not “perform” in their job. (Note this difference.) They are sensitive to office politics thus they frequently conduct checks-and-balances. Having achieved great things in their life, the talented do not come from a place that is exhausting and insecure but they dispense personal joy to others and turn others on. Therefore, the best thing that a professional services organization can have is these wonderful talents, because there is really nothing much that needs to be done after that. So the natural question to ask ourselves is this: are we giving enough time and attention to the first-rate people in our organization?

Professional Excellence is prioritizing long-term relationships over short-term transactions. Too often we see corporate management push for quick completion of transactions and turn a blind eye against developing relationships. People are blind towards their blindness, however, it is exactly these kinds of transaction-driven motives that are jeopardizing businesses. For example, sending out emails at a high-frequency does nothing but transfer emails directly into the clients’ junk inbox. Moreover, prioritizing relationships encompasses the idea of staying customer-focused. In my five years at the professional services firm, it became clear to me that active listeners bring themselves closer to clients thus selling better in the long-run, while aggressive sellers simply irritate clients. Putting emphasis on completing transactions comes at the expense of long-term relationship and will eventually hollow out an organization. So, stay laser-focused on building long-term relationships.

To be as successful as those people and organizations who I admire is not all that easy. For both individuals and organizations, staying true to Professional Excellence is critical so they can continue to be relevant and competitive in this din of commoditization. Across the Pacific Ocean, the Chinese economy is maturing and institutionalizing. Surely it will ask for more – more professional services in particular. For those organizations that do not get Professional Excellence right, they will find themselves getting commoditized, under pressure to consolidate or even close. For those that get it right, however, the reward will be substantial.

(Big thanks to Charley Ellis and Nina Scherago whose teachings brought me to this level of understanding.)

What does Uber gain by entering China?

Before leaving Hong Kong for graduate school, I spent some time in Shenzhen helping a friend with their startup. Every morning, I commuted to Shenzhen from Hong Kong and at around 9 am I would try to hail a taxi on the street, but morning was the time when it was impossible to hail a taxi by just standing there. The only way to get a taxi or a private car was through a mobile transportation app. This is why millions of consumers in China, including me, use Didi and Uber.

It is a well-known fact that many American tech companies have tried to enter the China market but few have been successful in a sustainable way. Like many of its predecessors, Uber has entered China. But what makes Uber stand out is that Uber has already surpassed its predecessors by capturing 30% of the China market – something that almost no other American tech company has ever accomplished. At the same time, the China market has become Uber’s biggest market, contributing 30% of Uber’s overall business and dwarfing its business in the U.S. market.

It is easy to be optimistic about Uber’s success in China. However, it leads me to think whether the current situation is really something that could benefit Uber in the long-run.

The China market for taxi service is huge. Mobile transportation ventures, like most other businesses, are not insulated from the allure of the China market. China has an urban population of 742 million growing at a speed of 20 million per year. With 44 megacities (i.e. cities with more than a population of 2 million), China has 8 cities that are larger than New York City. In contrast, the urban population in the U.S. is 259 million and is increasing by 2 million per year (comparing to 20 million in China). Moreover, the U.S. has only four cities with a population larger than 2 million. (source: World Bank)

In addition, Chinese cities, more than other cities in the world, need mobile transportation services: for every 1,000 people in China, only 79 owns a car, but in the U.S., the number is 4.5 times higher.

The China market has proved its potential through Didi’s performance: it took Uber 5 years to book one billion rides globally. In contrast, Didi, in 2015 alone, has booked 1.43 billion rides in China.

So, Uber has entered China. In early 2015, Didi dominated the market with 95+% China market share. By the end of 2015, Didi’s market share had dropped to 70-80%. At the same time, Uber China claimed a market share of 30% with just one-year of effort in China.

It is easy to be suspicious of Didi’s ability to defend its home field and to be optimistic about Uber’s achievement. However, this is not entirely the true situation.

Because of low user loyalty, both companies are spending a lot of money getting riders and drivers on board. In other words, both companies are burning their share-holders’ equity to maintain and grow their market share in China. Neither one of these companies is making a profit now – they live on venture capitalists’ money. So, let us take a look at their funding status.

Sponsored by both Tencent and Alibaba, Didi is one of the most well-financed tech startups in China – not only financially financed, but strategically financed. Tencent and Alibaba each holds more than 10% in Didi with the rest held by all top 25 venture capital firms in the world. Uber, in contrast, has been on a fund raising tour since its birth.

The access to funding differentiates Didi from Uber. Because of the strategic relationship with Tencent and Alibaba, Didi’s service can be accessed via both WeChat app and Alipay App. WeChat app has registered average MAU of about 700 million and the latter sees about 400 million MAU. In China, Uber relies on its mobile app and on Baidu’s map service with the latter registered only about 250 million MAU.

Didi has a stronger distribution network in China than Uber. But in this game, more importantly, the China market means different things to Didi and to Uber.

Uber, as an international technology company operating in China, is challenging the track record: in recent history there has been no international technology company who was able to build a sustainable success in China: Google, Microsoft, Amazon, you name it. As we celebrate Uber’s success in China, we should be very conscious of the repercussion of this success: the present success positions Uber on a weird pivotal point. On the one hand, Uber is drawing more rides from China than from the U.S. making China the biggest market for Uber, and on the other hand, given all the preceding failures of international tech companies in China, Uber is highly unlikely to succeed in China in a sustainable way.

For a loss-making technology company who sustains its operations via venture capitalists’ money, losing its biggest market (i.e. China) will jeopardize its ability to raise the next rounds. Without the next round of funding, Uber will not be able to sustain its operations in its homeland (the U.S.). Uber’s founder, Travis, spent 75 days in 2015 in China just because Uber cannot afford a failure in China.

To put it nicely, Uber’s decision to enter the China market leaves much to be answered. To be straight-forward, Uber’s decision to enter China is a strategic long-term mistake that can end up killing it. I expect senior management at Uber will re-consider its China strategy seriously – what really has Uber to gain by entering the China market?