On April 3rd, the Norwegian sovereign wealth fund released an interview video on its official website between its Chief Investment Officer Nicolai Tangen and Alibaba co-founder and Chairman of the Board Cai Chongxin. As of the end of 2023, the market value of the fund's holdings in Alibaba was $3.5 billion.
Screenshot of the official website of Norway's sovereign wealth fund
In the interview, Cai Chongxin talked about his previous journey of joining Alibaba, as well as the current situation, challenges, and countermeasures taken by Alibaba. In addition, he also talked about China's future development and views on artificial intelligence (AI).
On June 20, 2023, the official official account of Alibaba announced that with the consent of the board of directors of Alibaba Holding Group, Zhang Yong would step down as chairman and CEO of the board of directors of Alibaba Holding Group on September 10, 2023. Zhang Yong will serve as the Chairman and CEO of Alibaba Cloud Intelligent Group, focusing on the development of Alibaba Cloud.
In addition, Cai Chongxin will serve as the Chairman of the Board of Directors of Alibaba Holding Group; Wu Yongming has been appointed as the CEO of Alibaba Holding Group, while continuing to serve as the Chairman of Taotian Group.
On the evening of September 10, 2023, Alibaba Group Chairman Cai Chongxin issued a letter to all employees announcing that the handover of group management positions had been completed as planned on the same day, and he would take over the position of Chairman of the Group's Board of Directors, with Wu Yongming serving as the CEO of the Group.
According to the official website of Alibaba, Cai Chongxin joined the Alibaba Group in 1999 as one of the founders and has been a member of the board of directors since the company's establishment. He served as Chief Financial Officer until May 2013 and Executive Vice Chairman until September 2023, currently serving as Chairman of Alibaba Group. Cai Chongxin is one of the founding partners of Alibaba's partnership system. He is also the Chairman of Cainiao Group, a Director of Taotian Group, and a Director of Ant Group, an affiliated company of Alibaba Group.
From 1995 to 1999, Cai Chongxin worked as a private equity investor in the Hong Kong branch of Investor AB, the main investment company of the Wallenberg family in Sweden. Prior to this, Cai Chongxin served as the Chief Legal Counsel for Rosecliff, Inc., a management acquisition company in New York. From 1990 to 1993, he worked at Sullivan&, an international law firm headquartered in New York; Cromwell LLP serves as a lawyer for the tax department.
Cai Chongxin holds a practicing lawyer qualification in New York State, USA, and holds a Bachelor's degree in Economics and East Asian Studies from Yale University, as well as a Doctor of Law degree from Yale Law School.
Cai Chongxin discusses how to join Alibaba
Host: How did you come to Alibaba?
Cai Chongxin: I work at Investor AB, and I believe this is my fourth year in the industry. I started working at Investor AB in 1995. Then in 1999, my Taiwanese friend and our parents were also friends. He came to me and said, "You must go to Hangzhou to meet this person, Jack Ma.". He is very special. He's a bit crazy, but you should see him. So I boarded the flight to Hangzhou.
At that time, there were only two flights per week between Hong Kong and Hangzhou, on Tuesdays and Thursdays respectively. I took a plane to Hangzhou to meet him. When I walked into his apartment, I found that he owned a second floor apartment in Hangzhou. Right here, I saw several pairs of shoes outside the door, so I inferred that there were many people working inside, including engineers and customer service personnel.
At that time, Jack Ma created a website to provide services to small and medium-sized companies from China, which were exporters who wanted to sell products around the world. You may not believe that our first website on Alibaba was in English because it was aimed at Western customers. Engineers are working, and customer service personnel are also busy. I still remember they had a notebook where they recorded every registered user on the website. At that time, there were 28000 registered users.
About an hour later, Jack Ma and I started chatting. I said, "Jack Ma, I need to go to the bathroom." I walked into the bathroom and found about 10 toothbrushes next to the sink. I think, my goodness, these people live, breathe, and work in this room 24 hours a day, 7 days a week. This is the beginning of culture, it's like a garage, right?
Host: Have you joined that "toothbrush club"?
Cai Chongxin: I did join. Although I didn't bring a toothbrush, I was deeply inspired when I left, not only because of Jack Ma's foresight and charm, but also because many people were willing to follow him. At that time, he didn't have money yet, and the people working there were all his students.
Host: Why did they follow him? What are the characteristics of leaders that people are willing to follow?
Cai Chongxin: I think the most important thing is to let people see what the future looks like.
Host: What kind of scenery did Alibaba bring you at that time?
Cai Chongxin: Well, at that time our business was in the B2B market. He said that at the forefront of China's accession to the World Trade Organization, all these small and medium-sized enterprises hope to conduct business around the world. Alibaba's mission at that time was to ensure that there was no difficult business in the world, and it still remains so today. Our DNA and culture are to help small businesses go global as much as possible. This is the vision. Obviously, we have now developed into a large domestic consumer company as well as a cloud computing company.
Host: When did you realize that this company would grow so big?
Cai Chongxin: It wasn't until around 2005, six or seven years after our establishment, that I realized this scale. Yahoo came knocking on the door and they said we wanted to invest. Meanwhile, eBay is also considering investing in this company. We are even considering selling our little treasure Taobao, which is now the largest consumer e-commerce market in China. In the end, we negotiated with Yahoo and this is their investment scale.
They not only invested $1.25 billion in the company, but also acquired some venture capital firms in secondary transactions. The $1.25 billion investment resulted in the company's valuation exceeding $4 billion. I still remember it was summer. I met my parents in the summer and talked about my father. When I said to my dad, "I think I've succeeded," it was a proud moment.
Cai Chongxin: Alibaba has forgotten who its true customers are in the past few years
Host: Several of your current businesses are facing competition. I want to know what the most severe competition you are facing is.
Cai Chongxin: I can list many competitors, and you also know them. You may have invested in some of them.
However, when we examine the internal situation and reflect on the past few years, we find that we have fallen behind because we have forgotten who our true customers are. Our customers are users who use our application for shopping, and we have not provided them with the best experience. So to some extent, we are a bit self reliant and haven't really focused on where value lies and where we can provide it.
Therefore, as part of the restructuring, our new CEO has taken office. I am the chairman, but I work with a CEO who is 12 years younger than me. He places great emphasis on users, focusing on products, interfaces, and user experience, which is the most important for us.
Host: So, how did you correct it? What measures have you taken?
Cai Chongxin: The first thing we do is admit our mistakes. We acknowledge that we may not have paid attention to user experience in the past. The second thing is to reorganize our personnel and change the organizational structure that aligns with the strategy. I think this is a very common problem for large companies. The organizational structure of large companies is fixed, and they will not change because people do not like to change.
They don't want to change jobs, they are afraid of being fired or something like that. Then you start integrating the company's direction into your organizational structure, but the fact should not be like this. It should be the opposite, you should define the direction and then set up the organization of the company. So we actually restructured within Taobao. Our CEO, who is also the direct CEO of Taobao and Tmall, is very different from his direct subordinates three months ago when you look at him today.
Cai Chongxin: In the past three years, Alibaba's morale has not been good
Host: But is there a formation of bureaucracy or what has happened? What prevented you from seeing changes in the market?
Cai Chongxin: I believe it is human nature that people do not like to admit mistakes. True leaders and excellent managers have this feeling, the ability to reflect on themselves and say that I may not have done the right thing. I did this wrong. I need to change. They need to change themselves. But it's human nature for them not to do so. I think we're stuck in this trap, you have to eat some inconspicuous pie. I think a part of leadership is humility. You must be able to admit your mistakes and say, well, let's correct our direction. But this is a new vision, as employees are looking in this direction. This is very, very important.
Host: When these things reverse, what impact does it have on the morale of a company that is developing so rapidly and its stock price is soaring?
Cai Chongxin: In the past three years, morale has not been good. What I mean is, through multiple factors. First, we were infected with COVID-19. Then there is the economy. China's economy rebounded after the COVID-19 epidemic, but then tended to flatten. Competition is another issue. Another issue is regulatory review. We paid a huge fine, but it's all over now. But all these factors combined are devastating for morale. But as I said, the most important thing is that employees are looking for direction. If you can clearly convey the direction, then they will be revitalized.
Cai Chongxin: Vietnam and Mexico can never replace China as the world's manufacturing center
Host: Now, China has been the world's factory for many years. How do you view future development?
Cai Chongxin: I still believe that China will continue to become a world manufacturing powerhouse. Despite a relative decrease in population, China's population is still very large. What you are seeing is an economy with 800 million production workers. Even if this number decreases to 600 million or 650 million, it is still a considerable large-scale productivity. The Chinese people are hardworking and have a very good education system. Therefore, we have a well-educated and skilled workforce.
Relatively speaking, you will see many companies returning or outsourcing their business to those who diversify their supply chains to Vietnam and Mexico. But look at the population. The population of Vietnam is about 100 million, with a labor force of 60 million. The population of China is more than 10 times that of Vietnam. They can never replace China as the world's manufacturing center.
Cai Chongxin: Alibaba is one of the most stable companies in the world
Host: So, what kind of geopolitical factors do you need to consider when running such a company?
Cai Chongxin: I think the first step is to understand all the regulations. We need to ensure that we comply with the laws and policies of the place where we operate. This way, you won't conflict with regulatory agencies and attract the attention of politicians. This is very, very important to us. I believe that in terms of compliance structure, we are one of the most robust companies in the world, not only in China, but also in the world. I think this is very, very important.
Now, specifically speaking of China US relations, if you look at Alibaba, we will do a lot of business. We represent American companies and sell over $60 billion worth of American products to Chinese consumers annually. And this kind of trade is two-way, right? In Europe, approximately 14 billion euros of French products are sold to Chinese consumers, and 7 billion euros of German products are sold to Chinese consumers. These are great stories that people truly cannot understand. It has played a positive role in promoting global trade and the development of the world economy.
In this context, people can have a deeper understanding of Alibaba and not just see it as a company trying to flood the market with cheap Chinese products. I think it is very important to make the world aware of this. Alibaba has always been committed to conducting business globally.
Host: Besides price competition, are there any other geopolitical tensions that have affected your business operations?
Cai Chongxin: Generally speaking, as a Chinese company operating in the United States, we must be very cautious. For example, we don't have much consumer oriented business in the United States due to concerns about data privacy and cybersecurity. These are all problems that we must solve in the future.
How to view artificial intelligence? Cai Chongxin's response
Host: Now, we are in the second year of the artificial intelligence revolution. As a company, how do you approach artificial intelligence?
Cai Chongxin: We are one of the largest cloud computing companies in China, so artificial intelligence is essential. Having an excellent large-scale language model developed internally is very, very important because it helps our cloud business. If we have a great LLM that others or developers are developing on top of, they will use our computing services. Therefore, we believe that artificial intelligence is the left and right hand of our cloud business.
On the other hand, e-commerce is one of the areas where you can achieve this goal, and it is also the most diverse use case of artificial intelligence. Therefore, you can develop many very cool products on top of our own models or even other people's open-source models. We are currently working on multiple development tasks. In these scenarios, for example, you can try using a virtual fitting room. Merchants doing business in our market will be able to use artificial intelligence to generate photos, product descriptions, and more on their own.
Host: Is this because you have fewer GDPR (referring to data regulations) and more personalized data?
Cai Chongxin: I don't think this is because there are fewer GDPR. I don't think regulation is the problem. We have collected a large amount of data and have a wealth of consumer data. In addition, we also have a large amount of open source data. The entire premise of a large-scale language model is that you can crawl the network and obtain open-source data to train your model, whether in the United States or China. However, by utilizing our own data and understanding of consumers and businesses, we can further utilize artificial intelligence to develop vertical applications. Therefore, using artificial intelligence to improve user experience is a wonderful combination.
Host: What do you think is China's position in the development of artificial intelligence compared to American companies?
Cai Chongxin: I think China is now lagging behind. It is obvious that American companies like OpenAI are indeed ahead of all other companies. But China is working hard to catch up.
Host: How much do you think you are lagging behind?
Cai Chongxin: I think China may fall behind for a long time. This is not because China's development speed is slow, but because other countries are also developing rapidly. But if we were to be specific about the time, I think we might be two years behind the top model.
Cai Chongxin: One of the most valuable things is watching my 17-year-old son play basketball games
Cai Chongxin: I will spend time with my children. One of the most valuable things is watching my 17-year-old son play basketball, it's just a high school game. He is the starting point guard of the basketball team. I am very happy to see him perform well on the field.
Host: Are you reading?
Cai Chongxin: Yes.
Host: What are you reading?
Cai Chongxin: Well, I enjoy reading spy novels. I am a loyal fan of John Le Carre. I still remember when I was in my teens, one of the first books I read was "Pot Maker, Tailor, Soldier, Spy". I immediately developed a strong interest in it. Therefore, all of this, I believe the author Le Carre has successfully transformed some of his real-life experiences into readers' reading experiences. This experience is almost desirable, and you would hope to become one of the characters in the book. Therefore, I really enjoy this reading experience. In addition, I also try to read current affairs news as much as possible.
What suggestions do you have for young people? Cai Chongxin's response
Host: What advice do you have for young people?
Cai Chongxin: I suggest learning one or two very basic skills so that you can stand out among others and become one of the top 10%.
For example, if you want to learn how to program, or if you want to learn a specific academic field, I think you must develop some professional skills. My professional skill is actually tax law. I worked as a tax lawyer for three years. I know that when people talk about tax structures, I can walk into the room and at least act smart. This is still very helpful for me.
We are studying some international issues, among which building the correct corporate entity, tax structure, and licensing structure is crucial. Therefore, I am very committed to it. You cannot just walk into a room and expect yourself to become a generalist in all fields. You must be able to tell others that I am an expert in something, and that is how you gain respect.
Another thing I want to say to young people is that you need to learn various things. Especially, I believe that in the future, data science will be very important. You should take a data science course. It used to be called statistics, but data science is a more modern and flashy way of naming. Meanwhile, you should also study psychology. I think there are some fascinating aspects to human thinking and how it operates, which are very different from machines.
Therefore, if you have some programming skills, just like young people nowadays, they will learn how to program using Python, Java, or other languages. Understand data science and psychology. I think you have all the tools you need to succeed in life.
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