Review: The Man Who Stayed Behind

Deep, Deep in the Hutong

Just finished The Man Who Stayed Behind by Sidney Rittemberg and Amanda Bennett. The book is an account of Rittenberg’s 35 years in China, first as a U.S. Army translator in World War II, then as a U.N. Relief official, and finally, from 1947, as the only American citizen to serve as a member of the Chinese Communist Party. After the communists took China in 1949, Rittenberg chose to remain in China, rising in 16 years from a translator at Radio Beijing to – briefly, during the Cultural Revolution – head of China’s Broadcast Administration. He was imprisoned twice, once for over six years, once for nearly ten.

The one question I asked myself when I finished was “why the hell didn’t I read this sooner?”

Honest Insights

As personal histories go, this one is exceptionally easy to read and enjoyable, due I am sure in no small part to Bennett’s contribution, but also because Rittenberg’s story itself is so engrossing and painfully, blisteringly honest. The very idea of an American at the heart of China’s revolutionary maelstrom is remarkable. The insights and context he is able to put on those events easily rivals in importance the better known works of Harrison Salisbury et al.

But that is almost the least of the book’s merits. In the spirit of the self-criticisms he and all party members had to endure, Rittenberg does a brilliant job at avoiding hindsight, instead taking us on a journey as much mental, emotional, and spiritual as it was geographic, ideologic, and historical. The insight into the mind of a man who could first buy into the promise of Marxist-Leninist-Maoist thought, then subjugate his ego and his conscience to the cause of revolution by itself makes the book worth reading.

We come away from the book understanding, as Rittenberg did, that the Chinese revolution deserves neither to be idealized or demonized. Great horrors were committed in the name of the revolution, to be sure, but China has indeed come a long way since 1949, and we see through his eyes – and are able to juxtapose – the suffering in the neo-feudal chaos that was Republican China before 1949, and the murderous excesses committed since.

Rittenberg could probably get away with passing final judgment on China, but he does not, and the book is better for it. He strives instead to put us behind his eyes through the whole experience, good and ill, and let us judge for ourselves.

It is customary for a reviewer to look for flaws in a book, but to do so in this case would be picking nits. The book does not pretend to be more than it is – an honest memoir of somebody who was there and saw it all. Rittenberg makes no excuses for himself and his behavior – and he comes out in most respects looking no better or worse than those around him.

The book is no substitute for a more academic history of the period, and there is nor shortage of either histories or biographies to provide a broader canvas, more context, or greater analysis. And frankly, the more background the reader has in modern Chinese history the greater the value of this read.

Key Takeaways

I walked away understanding two things: first, there is no excuse, even for those of us who profess to care about China and its people, to either apologize for or vilify the country or the party. Only a balanced perspective on either will give us perspectives on how to help China evolve as a nation. If Rittenberg can avoid those tracks, so should we.

Second, China’s modern history has in its background a constant tug-of-war between internationalism and xenophobia. In most cases, those conflicts are represented by people who are more one or the other: the foreign-hating Empress Dowager vs. her nephew, the Kuangxu Emperor; Yuan Shikai vs. Sun Yat-sen; Mao Zedong vs. Zhou Enlai, and even Li Peng vs. Zhu Rongji. But as The Man Who Stayed Behind points out, that’s an over simplified understanding of the battle. Rittenberg subtly reminds every non-Chinese who lives in or deals with the People’s Republic that China and its people have a schizophrenic love/hate relationship with things and people foreign, and that they seem fated to eternally swing between the two extremes.

If such insights put long-range goals and long-term investments in China in a starker light, That’s probably a very, very good thing.

A must-read.

Nokia’s Grand Strategy: China. Silicon Hutong’s Verdict: Ollila’s Waterloo

In the Silicon Hutong Command Post, Shunyi

Jorma Olilla, prancing around China in a fit of self congratulation that Nokia has managed to be in business in China for 20 years (and please explain why anyone NOT on Nokia’s payroll should care?), is promising his shareholders two things:

1. No more price cuts this year; and

2. Sales growth in China is the key to the company’s future.

There’s a ton of coverage on this, a good example being Alan McEwen’s piece in the Scotsman, one of the few article I’ve seen that is not either a) a dutiful reproduction of Nokia’s press release, or b) a re-print of the Reuters wire story.

There are a couple of problems with both parts of that strategy.

No More Price Cuts? Check Mr. Ollila’s Medications, Please

Jorma admits that price reductions in the industry are going to continue driven by increased competition. He maintains that Nokia will not reduce prices and yet will grow 25% faster than the rest of the industry because Nokia will be focusing on high-end phones.

That’s fine, but how does that explain how Nokia will grow faster than the rest of the industry and grow market share without matching price cuts at the low-end and mid-range, where the majority of sales take place?

Answer: it doesn’t. Nokia will still be in a price war at the low end, because at that level consumers are focused on price, and if Nokia won’t match falling prices, it won’t sell. Their only hope at the low end is market share domination that will allow them to squeeze competitors through superior economies of scale. Want to maintain market share? Cut your price.

Pressure at the mid-range won’t be quite as intense, but let’s understand something: there is little evidence to suggest that consumers are going to stop looking for the best combination of price and relevant features. While there is some brand premium in this segment, it won’t hold up if prices drop precipitously in this region.

China is the Future? Be Afraid…

Nowhere in the world is pricing pressure more intense than in China. Local manufacturers – and there are close to 20 of them now, not counting those doing exclusively contract assembly – continue to drive prices down. And they’re not doing it for fun – they’re doing it because they have to.

Which brings us to the core of Nokia’s strategy to drive growth in China – break out of the major cities and into the lower-tier cities and rural areas. These are regions where the competition is strongest, where the price pressure is the highest, and where Nokia and its global pedigree mean the least. Taking market share in these regions is going to be about cutting price.

The news gets worse. Prices in the mid- and upper range are dropping rapidly as well, and China’s carriers are starting to pressure Nokia for special treatment, like coming up with exclusive models with distinct software and hardware. Interesting as this sounds, this will increase Nokia’s costs, and you can bet the operators will be cutting the same deals with everyone, neutralizing the marginal value of the deal and squeezing profits even further in the critical mid-range.

China’s dirty little secret is how bloody small the high-end is. So don’t count on the high end.

Expect 3G to be the savior for margins? Think again. Most experts see the potential of a $50 retail price on a color W-CDMA phone within 1218 months, driven in no small part by Chinese manufacturers, and possibly even a sub-$30 GSM phone in China.

So Nokia doesn’t want to cut prices, but it’s primary growth in its most important market is going to require extreme pricing competition.

Hello…?

This kind of unconscionable denial is why Nokia’s troubles are just beginning, and will not end until the company wakes up, discards Ollila, and navigates itself onto a course that is more in keeping with the current realities of the industry, rather than those of ten years ago.

The U.S. Patent System is Broken. One Wonders About China

The War Room
Silicon Hutong Plaza

In an outstanding article in IEEE Spectrum in December, Adam Jaffe, Dean of Arts and Sciences at Brandeis University, and Josh Lerner, a professor at Harvard Business School, explained in pithy, easy-to-understand terms why something is horribly wrong with the U.S. Patent System. So sick is this system, it appears, that we are on the verge of enabling the tort bar to all but strangle a hell of a lot of day to day business in America, and an even larger chunk of innovation.

Having just finished the article, I am navigating with great haste to Amazon to order their book Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What To Do About It.

What is bothering me so much is NOT that the world’s largest and most respected system of intellectual property protection is broken – stuff breaks all the time, and the Master of the Universe has given us the wherewithal to fix things like this.

What is deeply disturbing when you read this is: if this is how messed up the best system in the world is, how much worse is the system here in China? I mean, every abuse of the system taking place in the U.S., where small companies are being bullied by giant firms with lots of lawyers and some patents, could happen here – and worse. Not only is there no decent system of enforcing patent judgements, there is no independent judiciary to try cases of patent abuse and to protect small innovators.

People look around China and they see big companies like Lenovo and they think “look, China has a robust tech sector.”

Ugly truth #45: until China has a system that enforces intellectual property rights and an independent judiciary to ensure that those rights are used in an effort to sustain a system that encourages innovation, China’s tech sector will continue to be about knock-offs, copycats, and other such derivative effort that simply seeks to steal somebody else’s idea and sell it for less money.

There are, and will always be, exceptions to this, but they will be notable in that they buck – not represent – the broader national trend.

In a Land Full of People, Not Enough People

Snow Desk in the Hutong

One thing we’re hearing more and more of in the Hutong is how China is still not turning out enough people with the right kinds of skills to support high-tech industries. Most recent example of this was in today’s Wall Street Journal, in a big page one article about how Baguio, in northern Luzon in the Philippines, is somehow a better place to assemble and test semiconductors than China.

Of course, Intel would probably beg to differ, given that they are well along the way in building their second assemble and test facility in China.

I’d have to agree that the toughest damned thing to find in China today is good local managerial talent. Oh, sure, you can find folks from Taiwan, Hong Kong, and a host of returnees. But for a whole lot of reasons these guys aren’t the best solution to the management problem.

This issue also plagues China on the outsourcing and offshoring front. The country is finding it increasingly difficult to compete with other Asian nations when the need is for quality – not quantity – human resources. And if China is going to capitalize on its huge population, the nation needs to be able to field a growing skilled workforce, rather than try to keep winning investment and business on the basis of cheap labor.

Nokia in Trouble: One Less Enemy? Guess Again…

In the Hutong
Under half a foot of snow

So Nokia seems to toss up a white flag in its holy wars, agreeing to license Microsoft e-mail and music software for use in some of its phones. Viewed alone, one would see this as a smart move for Nokia. One of the core “challenges” facing the Espooians is that in attempting to own the industry standard at each link in an ever-lengthening value chain, they are in severe danger of both spreading their resources too thin, and of winding up with a bunch of expensively-wrought technologies that, when compared to the competition, are third-rate at best.

I empathize with Nokia, even though I lambaste them, because I understand what it must be like to go from being the dominant handset, base station, software, and technology supplier to an industry to finding one’s entire business model turned on its ear.

The Boys in the Glass House seem to understand that the old vertical model of the mobile telecommunications industry (manufacturer to carrier to subscriber) has gone away, perhaps forever. Their response, however, is to try do do everything. And they can’t – not if they are going to remain a credible supplier to carriers who are desperately trying to reinvent their businesses, and not if they are going to satisfy the needs of an increasingly demanding group of users.

What Nokia needs to do if it hopes to retain its market share leadership, its profits, and indeed to continue to exist is to make some hard choices. It needs to cede significant chunks of the value chain and focus on a few that it can do really well and quite profitably.

This is especially the case in China. One of the reasons the government and industry are paying attention to mobile telecoms now is that they see the horizontalization of the industry as a huge opportunity for not-so-large Chinese enterprises to begin building global businesses in the niches that are opening up as the model matures.

Which brings us back to today’s news – how smart of them to agree to use some Microsoft technology rather than keep trying to reinvent the wheel. One almost sees hope.

Unfortunately, Mary McDowell, head of Nokia’s enterprise division, chimes in and says “It doesn’t mean swords have been turned into plowshares,” meaning that the war with Microsoft will continue on most other fronts.

No, folks, unfortunately for Nokia fans and shareholders everywhere, the Finnish Navel-Gazers are no closer to recognizing the mistakes in their approach to the business now than they were a year ago.

Short Nokia.

Games in for a Rough Ride in China

In The Hutong,
Supercomputing

The Chinese government’s recently issued list of 50 banned video and computer games is going to grow, and I wouldn’t rule out the possibility of more aggressive moves against this genre of entertainment.

The problem with games goes beyond this current banning, which primarily content and anti-piracy focused. (I mean, come on – anybody who has played Command & Conquer: Generals can understand why the content nannies in the Beijing government might have a tiny problem with it.)

The real problem is that there is a growing sentiment in the market among parents, teachers, policymakers, and journalists that games are little more than an addictive, anti-social form of time wastage, like gambling without the cash, and that they have no redeeming social value. This sort of perception makes it difficult to build any kind of opposition to these sorts of administrative action, and they make the lives of game manufacturers uncomfortable.

The industry can either say “hey – parents, teachers, and policymakers: bite my game controller,” and deal with the results of that kind of approach, or they can take a more proactive approach to improve the image of gaming among those groups.

Guaranteed, if the industry DOESN’T do anything, these problems will grow. Soon.

You read it here first.

Salespeople in Short Supply in China

In the Hutong
Watching the Sun Set

This article on Xinhuanet notes that salespersons are the most wanted professionals in China. Extending that logic, clearly companies are recognizing the value of an effective sales force.

No brainer of the week:

CRM and sales-force automation (SFA) companies take note: they’re this )( close to getting it in the boardrooms of China, Inc. I would guess 2005 would be a good time to redouble efforts in the Middle Kingdom. Hmm?

You’ll Be Happy to Know

In The Hutong,
Prior to Sunset on Friday

While I am professionally constrained from making any form of comment about the departure of Carly Fiorina from H-P, I will say that I had a good laugh at this Dow Jones piece quoting Kevin Rollins suggesting that there was “probably” an opportunity for Dell in the H-P turmoil.

In other words, we can’t really see one, but now that you mention it, we’ll do all we can to sow fear, uncertainty, and doubt in the marketplace, and thanks for your help.

Not that it will make any difference here. As far as consumers are concerned in China, Dell is in headlong retreat, regardless of their worldwide market share numbers. And consumer sentiment tends to be pretty catching in these parts.

Intellectual Property Circus

In the Hutong.
Chinese New Year. Day 3.
Late Afternoon

The part of me that genuinely believes that Linux will actually amount to something like a mainstream operating system joined Penguins the world over celebrating the judicial ass-kicking that SCO took from U.S. Federal Judge Dale Kimball yesterday for not coughing up any evidence to support its IPR violation claims so far in its legal action against IBM.

What increasingly concerns me, however, is what the Chinese may make of this. Here we are trying to make the case to the Chinese to protect our intellectual property, even taking it to the WTO, and at the same time showing them how IPR can be used by a frustrated, pissant company to stifle the growth and development of an important technology.

If I were a Chinese judicial or technology official watching this from afar, I would say “these sorts of legal piff-paffs are fine for a developed economy, but we cannot afford to have every opportunist and his brother tying down the development of our most critical sectors because they think their rights have been violated.”

And even though that’s obviously a single-factor view of the issue, it has its points for China.