Responsa: Thunder Out of China

Deep under China World Trade Center
Is it me, or is this town getting…quieter?
1257 hrs.

In my recent post reviewing Thunder Out of China, a work I believe belongs on the history reading list of anyone interested in understanding modern China, I incorrectly implied that Theodore White was the sole author of the work. I failed to point out that Annalee W. Jacoby was the work’s co-author and was (in my opinion) instrumental in setting the balanced tone for the book’s critique of Chiang Kai-shek. This was not only careless on my part, it was dumb: Ms. Jacoby’s life could be the subject of at least a movie, if not a miniseries. (I have since corrected the post.)

I am indebted to Professor Jeffrey Wasserstrom at the University of California, Irvine, not only for pointing out my omission, but for doing it with far more collegiality and professionalism than my elementary mistake deserved. Dr. Wasserstrom contributes to the excellent collaborative blog The China Beat, which we have added to our Heroes of the People list.

One of the reasons this book is important is that it helps balance a bit the effects of America’s wartime and Cold War near-canonization of Chiang. Any objective reading of modern Chinese history will find few true heroes among the leaders on either side, yet while The Great Helmsman has been thoroughly muckraked, The Generalissimo has been denied the scrutiny of a scholarly iconoclast. Until that changes, the more balanced contemporary accounts are all the more important to keep on our collective reading lists.

Design that Sells, Please

“China Needs Design that Sells: As the country changes from a manufacturer to a consumer nation, companies must learn how to market to a diverse public” By Patrick Whitney, BusinessWeek, April 25, 2006

Professor Whitney from the Illinois Institute of Technology makes some superb points in this op/ed piece. Among them he notes that companies have to stop thinking about China as a single market; and that standard tools of market research don’t cut it.

Right on, Dr. Whitney.

BTW, Whitney is the Steelcase/Robert C. Pew Professor and the director of the Institute of Design at Illinois Tech. Here’s a guy who is not even focused on China, and he gets it.

Taking the High (Rail) Road

ARTICLE: “Last Stop: Lhasa: Rail Link Ties Remote T1bet to China,” by Joseph Kahn, The New York Times, July 2, 2006

BOOK: Nothing Like It In The World: The Men Who Built the Transcontinental Railroad 1863-1869 by Stephen E. Ambrose, New York, Simon & Schuster, August 29, 2000.

BOOK: Empire Express: Building the First Transcontinental Railroad by David Haward Bain, New York, Viking, November 1, 1999

With no other intention than pure escapism, about six weeks ago I finally pulled off of my shelves two unread books about the building of the first transcontinental railroad across the United States. I’ve finished Stephen Ambrose’s highly readable work, and I’m now deep into David Haward Bain’s well-written, far more scholarly tome on the subject. In retrospect, the timing could not have been better, as global coverage begins on the opening of the final 712 mile section of the Beijing-Lhasa railroad.

The parallels are compelling:

• The Pacific Railroad (as the transcontinental railway was called in the 1860s) was a dream almost as old as the American Republic, having been a matter of discussion for nearly 50 years before it was realized. Similarly, the Lhasa railway has been on and off of the national agenda in China for over 50 years.

• The political reasons given to justify the expenditure in both cases was “to tie the nation together” by linking a remote region with the rest of the country.

• The Pacific Railroad could never have been completed without Chinese help (in particular, the effort to get through the Sierra Nevada mountains of California.) Similarly, the Lhasa railway relied on western help to address some critical challenges.

I could go on, but you get the point.

More important, perhaps, is contrasting foreign coverage of the Lhasa link with the coverage given the Pacific Railway some 140 years ago.

Perhaps in the age of air travel we’ve all grown a bit bored by railroads, but I think that’s because in an age of air travel and truck transport, railroads seem a bit quaint. In regions like North America and Europe, with their wealthy economies and dense populations, freeways, autobahns, and discount airlines railroads seem relegated to hauling coal or commuters. (They aren’t, but that’s the subject of another post.)

What we lack, therefore, is an appreciation of two things: how hard this was to do, and what effect this will have on Xizang.

A Engineering Feat and a Human Achievement

Ambrose and Bain both make visceral the science, craft, and sheer physical effort it takes to build a railroad across a mountain range. You need to find an “alignment,” a course for the road that does not rise more than about 100 feet every mile, but that is as straight as possible because every foot of railroad in terrain like this costs a small fortune.

You then need to dig, chip, and blast the grade through cuts and tunnels through mountains of solid granite. You need to fill or bridge rivers, canyons, gulches, and even little dips and do it in a way that won’t be washed out by floods, avalanches, or made impassible by high mountain winds.

And if you think that’s easy in the 21st century, remember that you need to do all of this in some of the most remote territory on earth, hauling men, machines, material, and the food, energy, and fuel to keep all of them working up a narrow artery of steel.

Oh, yeah, and one other thing. You’ve got to do all of this at an altitude considered too uncomfortable or indeed unhealthy for a sleeping airline passenger, much less a manual laborer.

But with few exceptions (notably Rui Xia’s superb late-2005 Asia Times article) you’ll see very little credit given to China’s engineers and workers for accomplishing this task in the international media. That’s a shame, not only because these hardy souls deserve it, but because the failure to give such credit causes the Chinese and foreign engineers who know how tough it was to build the Lhasa road causes all of them to question the balance of the international media on Chinese topics. In addition, it allows observers to underestimate the innate capabilities of Chinese engineering in spite of the kind of big-ticket-project related shenanigans we’re used to hearing about in China.

The Great Wall Builders are back. All of us should be contemplating the implications.

Linking Lhasa

Joseph Kahn has put forth a yeoman’s effort covering the story from his chair in Beijing, as much as I’m sure he’d have rather been covering it from the train itself. It’s left him taking a more political take on the road, which is a shame. I won’t go into what he wrote – you should give him a read yourself.

Given the sheer volume of hyperbole from both proponents and opponents of the line, it is impossible to capture with any justice the essence of either position, much less debate it. But a few thoughts to contemplate as you weather the barrage of coverage.

Expecting a single rail line passing through a small part of a province larger (and less accessible) than Alaska to bring fundamental economic change to the region stretches the bounds of credulity. Certainly, those living it Lhasa and its environs will experience some quality of life improvements based solely on the fall in the cost to schlep goods up the hill. It also opens the region up to a class of tourist or traveler who cannot afford an air ticket.

For the line to deliver any significant economic benefit (or harm, depending on your point-of-view,) its Lhasa terminus must become the hub of a transportation and communications infrastructure that links all of the cities and villages of the region. That’s the sort of nitty-gritty investment that is difficult to justify when sitting in Beijing, but that will become necessary if the nation is truly serious about including the Xizang province on the benefits of the China’s economic development.

As to whether the road will Sinicize the local culture, that is a far trickier question that in the end is determined more by one’s political and ideological viewpoints than on anthropology. There are some who see Xizang as the Shangri-la of James Hilton’s novel Lost Horizon and thus see any intrusion of modernity as the functional equivalent of genocide. Fair enough.

Yet in no small part, the matter remains in the hands of the locals themsleves. It is instructive to note that in the face of globalization we live in a world where a wide range of distinct cultures and ethnicities have survived or even flourished.

For what destroys cultures is not the coming of railroads, but the departure of relevance. History demonstrates that a culture that is deeply relevant to those who treasure it will survive. As long as a culture remains meaningful, assimilation will be held at bay.

(None of this, of course, is likely to mollify someone (like that deep political thinker Richard Gere) who maintains a canonical belief in the value of turning the Xizang province into an isolated mountain theocracy. For those folks, I’d suggest that a review of the histories and status of Nepal and Bhutan serve as good examples of the direction such an experiment might take. They invite pondering.)

On to India

One last thought about the railroad. Throughout history, railroads have also served to pierce and bridge borders between nations. In my view, the High Road to Lhasa is half a road that will accomplish its greatest historic purpose when it can form the bridge between Delhi and Beijing.

Contemplate that.

History Friday: The U.S. Marines in China

Starbucks Pacific Century Place
Watching the smokers suck cancer sticks
1023 hrs.

One of the forgotten bits of the history of the U.S. in China is the story of the role the U.S. Marine Corps played in the unstable years between the Nanjing Massacre in 1927 and the Japanese bombing of Pearl Harbor that brought the U.S. into the war.

Apart from the guard detachments at the U.S. Embassy in Beijing, there were several isolated detachments around China and a full regiment – the 4th Marines – in Shanghai, all stationed to protect U.S. diplomats and civilians against warlords, bandits, the Japanese Army and Kempei-tai. The thought of large formations of US troops in China is stomach-churning today, but the country was a cauldron in the last decade before World War II, and most of the European powers stationed troops in the mainland to (at least ostensibly) protect their citizens and interests.

The story of the Marines in China during that period is largely unknown. I fancy myself something of an amateur military historian, but I found out about the “China Marines” through my reading of W.E.B. Griffin’s “The Corps” series of novels.

Intrigued, I went looking for other sources. Eric Niderost has a highly readable overview on, taken originally from his article in World War II magazine. The History Department at the University of San Diego posts an article that forms a good companion to the Niderost piece.

If you want to go deeper, there is a superb China Marines section of B.J. Omanson’s Scuttlebut and Small Chow site entitled “History and Lore of the Old Corps.” Apart from some excellent articles, Omanson sports some excellent links and a list of relevant books.

Finally, there is the China Marines site, which is both brilliantly designed and deeply researched. The images and maps alone are worth your time.

What intrigues me about this period of history was the way the Marines and the everyday Chinese interacted. Putting young Americans in strange situations always brings out the best and the worst of us, and watching the way my father’s generation reacted to China is as instructive as sitting here in Starbucks and watching the way our contemporaries manage that stroll across the bridge between two unrelated but intriguingly similar cultures.

Welcome to the Facebook Desert

In the Hutong

Being odd on an even day

1316 hrs.

Kaiser beat me to posting on the superb post over at O’Reilly Radar by Ben Lorica that describes how Facebook is doing worldwide. (Full disclosure: I do some advisory work for Facebook’s rival Friendster.)

There is a lot of speculation in blogs (see the comments on Kaiser’s post) and on Twitter about why this is the case. Some suggest it is because Facebook is occasionally blocked in China, and almost always painfully slow to load. Or maybe because they haven’t done much marketing here, or because they were slow to localize.


But what I have observed suggests that Facebook’s challenges in China are no different from those facing other foreign websites – social networking sites or otherwise.

If I can make it there, it don’t mean squat

Most American online companies suffer from the understandable conceit that if a site and its formula work in the United States, it will work around the world. A decade of history has proven this is not the case, but that has not prevented executives from assuming that Chinese will flock to a site in their own language simply because it has succeeded elsewhere.

Chinese users are almost cussedly picky. They want a site that was created for them, that addresses their concerns, their online culture, and the way they live. They don’t like the feeling of getting something fed to them that was created for someone else. And if you feed it to them, they will either laugh at you – or just ignore you.

Any international online company that has lasted more than 24 months in this market (Google jumps to mind) has figured that out, and is working to recreate themselves as reflections of the Chinese culture, rather than Chinese adaptations of American culture.

The (Online) World is (Mostly) Flat

There are large and growing chunks of China’s landscape – especially here in Beijing and down in Shanghai – that look increasingly global. You can fly into Beijing on United Airlines, stay at a Hilton, eat at Hooters, drink at the Hard Rock, ride a Buick into your gleaming office tower, do a day of meetings (with Subway and Starbucks brought in for you), and shoot back to the airport and hop on United to head to your next destination.

After an experience like that, it is little wonder that the Silicon Valley crowd starts to spout long chunks of Thomas Friedman, and even begins believing that the only real difference between building a website for kids in Austin and kids in Anhui is the language. So they hire a bunch of Chinese students from San Jose State to translate their site. They launch, do no promotion, and wait.

And they get numbers like Facebook’s. China is a pimple on a flea on an elephant’s tuchas for Facebook.

Everything’s possible. Nothing’s easy.

Finally, most CEO’s throw up their hands and say “forget it, China is too hard.” They shift focus to other “easier” markets, the Chinese site dies a slow death of malignant neglect, and executives at Chinese online companies crow about how the foreigners will never get China.

They’re both half right. It is a downright bitch to make your business work in this country. But this is also a place where everything is possible if you understand the rules, the people, and the culture. (Knowing the language helps, too, but the first three are the most critical.)

A wise man once told me that low-hanging fruit was rarely the best fruit on the tree. China is not going to be low hanging fruit for the Facebooks of the world any more than it was for the Volkswagens, KFCs, Hewlett-Packards, P&Gs or Motorolas. All of these companies learned this place the hard way, and found out that they had to create products and services that were attuned to the way people live and work here.

That’s the bad news.

The good news is that companies today can learn from the experience of those who have gone before. There is a lot of experience out there in the form of people who have been through it. They’re actually not that hard to find. But when you have found a few good ones, listen to them.

Unless you’re not really that serious about China, and you’re only looking at the place because some guy on your board read about how important the Chinese online market is. In that case, go ahead and make your token effort and be done with it. Just don’t plan on coming back when the economy in your core markets falls into the toilet and you need China to boost your numbers. It won’t be here.

Figuring Out Sustainable Development

In the Hutong
Waiting for the rain
1212 hrs.

The phrase “sustainable development” has become a buzzword, which means that a lot of people are talking about it without being quite sure what it means.

That is starting to change. The prestigious Commission on Growth and Development (chaired by Stanford’s Michael Spence and including such luminaries as Governor Zhou Xiaochuan of the People’s Bank of China, Singapore’s Senior Minister Goh Chok Tong, former Mexican president Ernesto Zedillo, Citigroup chairman and former U.S. SecTreas Robert Rubin, and Nobel economics laureate Robert Solow,) last month released a report titled Strategies for Sustained Growth and Inclusive Development.

It’s fairly readable as these things go, but it points out very early on that there are no pat answers – only some lessons learned and a framework for asking the right questions. It is nice to see such a report deviate from the kind of preachy prescriptions we tend to hear from the IMF, World Bank, and other big international non-governmental organizations (BINGOs).

Download the PDF here.

China’s War for the Soul of Online Corporate Communications

In the Hutong
It’s a wet wet wet wet wet wet world

1913 hrs.

Last week BusinessWeek ran an article on the way some companies and their agencies try to deal with bloggers and BBS posters in China, a piece that was unfortunately titled “Inside the War Against China’s Blogs.”

This is not a war

The article itself, and specifically the way it associates by proximity the thoughtful and highly ethical work of Sam Flemming‘s CIC with the rather seedier efforts at online manipulation practiced by some other agencies, underscores how complex the topic is. It can be quite difficult for even the most intelligent and dedicated business journalists to miss the critical nuances separating different tactics and techniques that are emerging to help companies conduct marketing and communications on the Wild, Wild Web, all the more so for company executives who spend far less time looking at the matter.

For his part, Sam has written an intelligent, measured clarification in his blog. In addition to a reasoned defense of the more wholesome parts of the online word-of-mouth business, he takes powerful exception to the use of the “war” metaphor in the title (likely the work of some hard-pressed editor.)

Failing the smell test

Paul Delinger on his excellent The China Vortex explores the particulars of one company mentioned in the article, and notes in his conclusion:

“I find the whole practice of hiring Chinese and paying them to post favorable comments on a per-posting basis to be an unethical PR practice. According to the BW article, this is common practice.”

Imagethief notes in his post about the article that:

“Imagethief has been doing PR in China long enough to know that the ethics of Chinese media, including online media and therefore of the PR industry that surrounds it are still pretty grey. But that’s not the whole picture…”

There are some morally questionable things happening out there, to be sure. But not everyone does them.
What concerns me is that well-intentioned executives of respectable companies, desperate to address some of the unsavory (and therefore viral) things that are being said about them online, may fall prey to the contention of their agencies that “hey, everybody does this in China, and if you don’t, you are going to have real problems here.”

A warning to corporate executives of all flavors. When your agency says that, begin questioning immediately.

Often, such contentions are born of a lack of sophistication that can rear its head in an agency populated by account managers with less experience than time in a classroom. Possibly they are born of institutional laziness, a desire to do things in a certain way because that is the kind of service they are set up to deliver. At worst, such bold statements come from agencies who have a vested interest in getting the client to think that way.

Trust your instincts. If something sounds like it is wrong and feels like it is wrong, it probably is. Ask hard questions, and do not settle for pat answers.

Zubin Mehta, meet Charlie Parker

Next to newspaper editors, there is probably no group of people on the planet more confounded by the explosion of blogs, social networks, and (in China) bulletin-board systems (BBSs) that public relations folks.

Clients come to us desperate for answers. Some of us counsel patience, principles, and parley. Not all clients are happy with those answers – they are type-A, take charge folks who demand “solutions.” This opens the door for agencies who feel the need (or see the opportunity) to respond with something that looks like a concrete solution, even though it is really meringue.

But the ugly truth is that we as marketing communicators are all still figuring this out.

We don’t have a toolkit of time-honored techniques and practices to address what is going on in the way we do for advertising, direct marketing, media relations, crisis management, government affairs, or any of the dozen or more sub-crafts in the industry. All of this is as new to us as it is to everyone else, and while some agencies are further along in finding answers than others, it is all still experimentation right now.

Agency folks don’t want to admit that – they are used to selling something clear, definable, and proven. It is kind of like getting a great symphony conductor comfortable with the improvisation of jazz. It is hard. It demands rewiring the very way you think.

So the best agencies, the really smart ones, start with a set of principles that guide them in the process. (The World of Mouth Marketing Association – WOMMA – has come up with some good ones.) They look at the specific challenges a client faces, they listen to the audience and start improvising. And that is what happens. Great online PR – indeed any great PR in an age where participation increasingly trumps Big Media – is like jazz, not a symphony.

Beyond just wrong

Unfortunately, not everybody gets this. As the BusinessWeek article points out, there are agencies who are far more, um, utilitarian in their approach. Principles are for suckers, they think. The client wants solutions, we have got a solution here that will make their problem go away, and they are willing to pay for it. What is wrong with that?

What is wrong, they ask, with a company paying an agency not only to pose online as fictitious people who love the client and their products, or pose as someone who hates their competition and their product, but also to arrange to delete negative comments already posted?

(And how dare anyone attempt to impose their foreign/western/judeo-christian-islamic values on the people of China!)

If the contention that such behavior is evil, wrong, and contrary to the unwritten rules that govern the Internet is not convincing, here is why, in enlightened self-interest, you should perhaps consider that it is in your enlightened self interest to steer clear.

First, and most important, the audiences companies are trying to reach in China via online word-of-mouth value one thing above all else: credibility. If a company wants to build credibility and support among China’s netizens, it is essential to come across as a company that understands – and lives by – their values. Creating fictitious personas or paying to delete their comments betrays their values and runs the risk of undermining if not permanently damaging a company’s reputation with this valuable audience.

Second, engaging in such tactics suggests to China’s online population that the only way anyone is going to say something positive about the company in question is to pay them to say it. That is hardly the way to build confidence in a brand.

Third, if a company gets caught doing this in China, anyone who does say positive things online about that company will be instantly suspected of doing so only for the payola. In short, a company impugns by association the credibility of its best evangelists, and betrays their trust, ultimately eroding their support.

Fourth, as the BusinessWeek article demonstrates, there is global interest in this topic. If a company’s actions on this score were to be made public, there is the risk of global online backlash against the company.

Fifth, as proven by codes like those promulgated by WOMMA, the International Public Relations Association, and the International Association of Business Communicators, engaging in this type of deceptive behavior defies public and government expectations that companies abide by generally accepted industry standards. At worst, this leaves you open for investigation. At best, it gives your competition an opportunity to look cleaner than you.

If the above is not enough reason for you to avoid this kind of behavior, good luck and zai gezunt.

No excuse

There will be those who protest that I know not of what I speak.

Some will say “you don’t understand. You are a foreigner. This is China, and China is different.”

Even granting everything else suggested in those remarks, China is different, but it is not so different that company behavior that does not hold up under the light of exposure somehow becomes right. If the public, or even a large part of it, would be outraged at a corporate practice, it is unsafe (if not pernicious, dangerous, or downright evil) to continue or countenance, . As such, it is our ethical duty as advisors to our clients – or as corporate executives – to steer clear of such practices.

Others will suggest that “everybody else is doing it,” so they have to as well.

With respect, that line hasn’t held water with the public since the Nuremberg trials. All it does is prove that those following the herd lack the imagination and creativity to come up with a better way to defend a company’s reputation.

So often in China I am reminded of H.L. Mencken’s words: “For every problem there is a solution that is simple, workable, and wrong.”

Doing the right thing here is often difficult and fraught with complexity. But as experience continues to prove, it is the only course that truly pays off.

New Word of Mouth Manual

In the Hutong
Prepping for a photo shoot

0928 hrs.

Dave Balter, creator of Boston-based marketing firm BzzAgent, co-founder of the Word of Mouth Marketing Association, and author of The Grapevine, has just released a new book called The Word of Mouth Manual: Volume II.

For those of us in the business of actually getting people to notice, desire, buy, and talk about cool products, or even those of us who want to figure out how to build our own brands – especially in Asian cultures where word-of-mouth is so intrinsically powerful – this book is a must read.

What makes it better is that the book is a quick, easy read.

What makes it a no-brainer is that Dave is giving away PDF copies of the book to anyone inclined to click here.

Download it and give it a read – for those of us in China it is a heck of a lot easier than ordering from Amazon, paying the freight, and waiting two weeks.

America’s Latest Tool of Public Diplomacy

In the Hutong
I feel an iTunes jag coming on
1908 hrs.

In the global battle for hearts and minds, countries employ a growing arsenal of weapons in their efforts to build support among citizens of other countries. Leaflets, airborne radio stations, satellite news channels, and even celebrities contribute to the efforts of their home countries to build influence and soft power.

The ever-innovative U.S. Navy has decided to employ a culturally appropriate device in its effort to head off potential protests as it plans to base its first nuclear aircraft carrier in Japan:

That’s right, America’s latest tool of public diplomacy is the graphic novel, targeted at Japanese adults and delivered in your choice of English or Japanese.

Whenever I think my job as a business communicator is tough, I think about the men and women engaged in the thankless task of making their countries more attractive to people around the world. Most of them are poorly paid (relative to their skills), put up with a ton of bureaucracy, and have to fight to get any remotely creative idea approved.

Whoever got this little device approved deserves an industry award for excellence public affairs.

Check it out – unfortunately, I can’t, given the U.S. Department of Defense is a little prickly about allowing access to their sites from URLs in China. Wonder why?

China’s Coming E-tail Rennaissance: Shereck’s Five Logistical Challenges

In the Hutong
Updating OS X
1706 hrs.

There are many commonly accepted myths as to why electronic retailing has had such a hard go of it in China to date. Of those, perhaps the most persistent myths revolve around the logistical issues of actually getting something to the customer – logistical issues that do not exist in, for example, an America with pervasive credit cards, FedEx, UPS, and DHL.

The best summary of the issue comes from my old boss Bill Schereck, who led the creation of TVSN as a Sydney-based Asia-Pacific clone of QVC International back in the mid-1990s. Even though he was originally thinking of television shopping, the Five Logistical Challenges he isolated apply neatly to electronic retail.

Schereck’s Five are:

1. Reaching the Customer – the first challenge is actually building a channel to the customer so he or she can find you and find the merchandise you are selling. That seems like a non-issue for electronic retail, until you realize that a) creating a decent, trustworthy-looking site is harder than it looks, b) most Chinese don’t have Internet access, c) even if they do, how are they going to find you?

2. Taking the Order – in the case of e-tailing, this means creating a system to take orders, actually getting someone to stick something in their shopping cart, then having them actually place the order. This is a challenge no matter where you do business, not just China.

3. Getting Paid – getting the customer to promise to pay, and then actually collecting on that payment. This is usually the first issue people jump on about China – how do you get paid for an order when a tiny fraction of the populace even has debit cards, much less credit cards, and the banking infrastructure to clear online payments is not up to global standards?

4. Delivering the Order – ensuring that the right product is delivered to the right customer at the right place in the promised time frame. This is usually called “fulfillment.” FedEx, UPS, and even DHL have limited rights to deliver products from one part of China to the other, and direct shipping from overseas is complicated (thank you, Customs) and prohibitively expensive for your average Chinese. Not only does actual delivery pose a challenge, but you need an onshore warehouse as well.

5. Processing the Return – people in the trade euphemistically refer to this issue as “reverse logistics.” This is what happens when something is broken, is the wrong size, wrong color, or when the customer just changes his or her mind. How do you refund the money, get the product back to warehouse, restock it, and put it into a condition to resell or dispose of without incurring a financial loss? Surprisingly few novice e-tailers think this bit through, or even get it right, and it entails such issues as “what IS our return policy?” It is especially tricky in China.

I would add one more that actually belongs between the #1 and #2 that has proven especially sticky in retail in China:

6. Stocking stuff people actually want to buy
– merchandising – the art and science of choosing which products to sell in a store and how to stock, display, and promote them – is in its infancy in China. Most retailers are actually in the real estate business, leasing space to manufacturers or manufacturers reps who handle the merchandising functions. What that means is lots of look-alike stores with salespeople who are pathetically uninformed about their product. It also means that China lacks people who understand how to turn consumer trends and local preferences into a winning combination.

So there you have the challenges.

Challenges 1, 2, and 6 are perceived as largely micro issues: they can be solved by the individual company. Payments and delivery, on the other hand – and the related issue of reverse logistics – are seen as systemic deficiencies in China, and thus the most serious barriers to electronic commerce.

Our next installment will demonstrate that these aren’t really issues at all in China – and haven’t been for over a decade.

Boeing, Helicopters, Corporate Conduct, and China

Starbucks Pacific Place
Where people are to caffeine like dolphins are to anchovies
1355 hrs.

Longtime readers of this blog know that I am a longstanding Boeing partisan. Apart from having flown on just about every model of Boeing jet ever made (save the military ones), they were an important customer for my dad when he was an aerospace subcontractor in the 1960s and 1970s, and I’ve always admired them for their endurance and the core role they have played in the creation and growth of the aviation and space industries.

Things Are Getting Better

The last few years have been hard on us BA fanboys, watching Airbus emerge from a niche player to a real competitor to a contestant with Boeing for the leadership of the business, and standing by as Boeing proposed then withdrew a sequence of interesting commercial aircraft that didn’t make it beyond the drawing boards.

On the upside, Boeing has significantly improved its internal processes, created the economical 787 and an updated 747 just in time to catch $150/barrel oil, and has slowed (if not ceased) developing a 737 successor because it still has a huge backlog in 737 orders, all as China and the rest of Asia discover the wonders of air travel and start expanding their fleets.

Or Are They?

But recent news implies that the internal problems that brought about Boeing’s eventual loss of a critical USAF tanker project have not yet been exorcised. is running the first in a series of articles from Aviation Week’s Defense Technology International that suggest that in the selection of Boeing to supply a new combat search-and-rescue helicopter (the the kind of helos that yank soldiers, sailors, airmen, and Marines out of dangerous situations) the interests of contractors have been placed ahead of the needs of the people in the field:

The story that emerges from this study reveals how the acquisition was skewed in favor of certain helicopters from the very beginning by lawmakers and Pentagon officials, regardless of the requirements set forth by the Air Force’s own CSAR experts.

If true, Boeing is going to take some heat, and rightfully so. Nothing comes before passenger safety in commercial aviation, and nothing should come before the needs of the people in uniform in defense procurement.

But if these charges have some value, I would hope that the “lawmakers and Pentagon officials” involved in the process get skewered at the same time.

We will learn more about the veracity of these allegations soon, but it does not take someone imaginative to think that at the very least hearings are in the offing. Congressional and Defense Department Inspector General reviews are apparently already under way.

China and the Corporate Social Contract

This lends some perspective to the challenges businesses face in China. Collusion between the regulators and the regulated to distort what should otherwise be clear commercial and technological choices is by no means unique to the PRC. It also underscores that simply pointing to the competition and saying “but everybody does it” is morally bankrupt.

There are foreign-invested companies in China who seek to do good via acts of philanthropy or corporate social responsibility. The reaction from multinational enterprises in the wake of the Sichuan earthquakes has been huge, rapid, heartfelt, and highly commendable.

But one has to question the value of corporate community largesse when it is but a fig-leaf on a company’s failure to operate by its implied social contract, which begins with its responsibility to “first, do no harm.”

A number of government officials in China have publicly reacted to the queries of enterprises and CSR consultants about what civic acts of kindness are most appropriate in China by noting that CSR misses the point. The first and most important obligation of companies in China is to hire lots of people, pay them well, and pay their taxes, all while behaving in a way that benefits society rather than damages it.

Simply put, if we seek a more open, more transparent China, our obligation as foreign enterprises is to lead the way. Don’t come to Rome and do as the Romans. It may demand some sacrifices. It may mean you lose some big contracts. But in the end, it is better both for your company and for China.

What Happens in Seattle Doesn’t Stay in Seattle

Boeing may be completely innocent of the allegations covered in the story in DTI. As a Boeing fan, I hope so. (It is worth pointing out, in the spirit of fairness, that Airbus parent EADS has come under scrutiny in Europe for a series of alleged offenses, most recently for alleged stock trading improprieties on the part of senior executives.)

But if it is not, company executives must recognize that its modus operandi in its home country will affect the way it is perceived overseas. Eventually its conduct in China would come under scrutiny, by authorities either in China or elsewhere: surely, the thinking will go, a company that engages in improper collusion with government officials in its own country would feel free to do so elsewhere, right?

Perceptions matter. In a country that will need over 2,000 commercial aircraft in the next two decades, Boeing cannot afford such headaches. The company needs to do everything possible to clear up the matter of CSAR helicopters as soon as possible, lest it damage its prospects at home and abroad.

Aloha Airlines, RIP: Your Customers May Kill You

In the Hutong
Party Secretary on the piano
1056 hrs.

The death of Aloha Airlines can be used as an allegory for many things, but the lesson I take from it is that we as consumers need to rethink the role we play in the world.

It’s all fine and good to say “hey, I’m going to go over here and buy stuff because it is cheaper.” That’s the way we’ve been taught, and for many of us the need to save money is a matter of life and death.

But a large and growing number of consumers around the world aren’t going for “everyday low prices” because it means the difference between eating and not eating, or between having new clothes and going naked. For many, the issue is a matter of being able to buy what we need, and being able to buy a whole lot of things that we don’t really need.

When we were in Honolulu a month ago, we wandered over to the Wal-Mart behind Ala Moana Center, about two kilometers from our hotel in Waikiki. Prices were, frankly, really low, and when you walk into a place where decent quality is available at an irresistible price, a little gland in the back of your head fires and suddenly you are filling the cart with a ton of stuff that you don’t really need. Think impulse buying on a grand scale that continues right up to the checkout line.

The Party Secretary then did a triage on the cart, and we wound up “restocking” a significant chunk of the items that we had grabbed that we did not have on our list when we walked in the store. But we still bought stuff that frankly, we didn’t need.

And that is the upside to everyday low prices. We buy stuff we don’t need because it is cheap, and we not only institute the Wal-Mart Effect, we also bring about unintended consequences in the form of waste, environmental damage, questionable labor practices, and businesses of all types driven into hardship, bankruptcy, or dissolution.

So long, and thanks for the trips

And such was the case with Aloha Airlines. People saw the near term benefit of $29 interisland airfares that on the U.S. mainland would have undercut Southwest airlines by 65%. They ignored the long-term problem of destroying a business upon which much of the Hawaiian economy depends. And they were warned.

Oh, sure, there are still plenty of planes flying around Hawaii, but they are smaller (meaning more flights to carry the same number of people) and have no belly space (meaning the island lost critical cargo capacity to support not only its businesses, but that would drive up prices on everyday goods to everyone in the islands.)

Time for Consumerism 2.0?

And service quality will decline. How many Californians old enough to remember the days of Pacific Southwest Airlines and AirCal would love to have those two airlines back, instead of USAir and United Shuttle? And how many of us would be willing to pay an extra $30 on a round-trip to have it?

I’ve always been something of a Milton Friedman laissez-faire capitalist. I am all in favor of creative destruction wreaked by the market.

But I’m starting to realize that when we enable creative destruction, we have to use a little more foresight and understand exactly what it is we are destroying. The hidden hand will not ensure that creative destruction will not destroy something worth saving – we will, as consumers.

Consumers in Hawaii are learning this the hard way.

All of us had better. And soon.

History for Geeks (Like Me)

In the Hutong
Trying to keep the TV off
1947 hrs.

Apart from being an all-around fan of things technological (geek), I have over the past few years become fascinated by the history of computing and information technology. You may guffaw, given that so much of all of this has come to pass during our lifetimes, but I’ve always been a history buff (I was one course short of making the national history honor society in university), and I’ve always found that a mashup of two of my interests is usually worth exploring.
I started by adding the quarterly Annals of the History of Computing to my IEEE membership each year, and was amply rewarded. Not only are there some incredible stories from the past 50 years that can only now be told, we are now able to look at the evolution of information technology from an historical perspective.
There is also a growing library of books on the topic, like ENIAC, the Triumphs and Tragedies of the World’s First Computer, Fire in the Valley: The Making of the Personal Computer, Revolution in the Valley: The Insanely Great Story of How the Mac was Made, and Tracy Kidder’s superb The Soul of a New Machine, which was written as journalism but now serves as excellent history.
So I was interested when I got an invitation a couple of days ago from the IT History Society to join their ranks. I took them up, even though it looks like it is still early days for the organization. If you are the least interested, membership is free and it looks quite cool. The organization is supported by corporate members like Intel, HP, Symantec, Microsoft, IBM, and Applied Materials, and counts among its institutional members some of the leading lights of the Internet, like the Association for Computing Machinery, the IEEE History Center, the Internet Archive, and the Smithsonian.
Check it out – the membership form is here.

A Blogger’s Eye View of Tech in Asia

In the Hutong
Honorable mention is more than good enough
1849 hrs.

If you are looking to get a feel for what is happening in Asian technology generally and the region’s online world specifically, do check out OpenWeb.Asia.
It’s just getting going, but it’s already on my Daily Scour list. Kaiser likens it to an site focused Asian technology news and blog resources.

Chiang and Modern China

Jingshun Road, Bridge on the River Wenyu
Give a man a car, he thinks he’s Michael Schumacher
1426 hrs.

Whether in writing or over an adult beverage, at some point or another each of us who live in, study, or frequently deal with China find ourselves in a conversation that focuses on China’s faults. I have heard these conversations take tones that range from the respectful to the patronizing, and from people who have motives ranging from a genuine desire to build a better China to those who seem to have made a hobby of gratuitious panda-slugging.

The common thread running through each of these conversations is a focus on things as they are, and usually how they compare to some other place. They are rarely infused with a perspective on China’s own history and conditions.

In the passion of such moments remarkable things are said, but one thing I hear with numbing regularity from people who have never lived in Asia is the suggestion that perhaps China would have been better off under the Guomindang, or KMT. The sole support offered to this argument is usually someone saying “after all, look at Taiwan.”

The Last Warlord

Regardless of where one might fall in one’s leanings on that issue, such an assertion begs for some context, and I usually recommend Theodore “Teddy” White and Annalee Jacoby’s seminal 1946 book Thunder Out of China. Not only did White and Jacoby write without the benefit of the hindsight we have, they did so before the Red Scare and the McCarthy hearings forever changed the nature of the debate over communism and its alternatives.

White and Jacoby did, however, write with the benefit of years in China dealing with and around the Nanjing (later Chongqing) government. They had the kind of access granted to reporters working for a publisher – Henry Luce – who was among Chiang Kai-Shek’s most vocal and dedicated overseas supporters. The pair’s insights are biting.

While they must have been tempted to use the power of the pen to vilify Chiang, White and Jacoby strive (and occasionally struggle) to retain a journalists objectivity. Their descriptions make clear that while Chiang had clearly cobbled together a polity of sorts, China even before World War II was not so much a nation as a loosely unified confederation of local warlords and special interests. Herding such a band of cats could not have been simple. Chiang’s first mistake, from the perspective of White and Jacoby, was that he saw himself and the tentative order he imposed as the only viable solution for China.

If history – both Western and Eastern – has proven anything, it is that hubris bordering on a messiah complex is not a formula for successful leadership, and the authors show Chiang a man blinded by his indomitable self-confidence.

The Generalissimo believed he knew China better than the Americans. Granting that most Americans in China offered little, those that offered genuine insight – the Army’s General Joseph Stillwell and the State Department’s Jack Service among them – were systematically ignored, then banished.

Worse, the authors suggest that Chiang believed that he knew China better than any other person in China. As events bore out, in this he was patently – and fatally – wrong.

Caught in a Landslide

What pervades White and Jacoby’s descriptions of Chiang and his government is a view of a man whose ability to govern had been overtaken by events – not just the war, but the pace of change inside of China.

Indeed, through the narrative we see a Chiang who was so overwhelmed by the speed and scale of China’s own internal developments that he had no idea that the political ideas and social programs formed in the crucible of the 1911 revolution were, a mere thirty years later, obsolete. The authors subtly remind us that in the course of two decades Chaing himself had migrated the breadth of China’s political spectrum, starting as a leftist revolutionary and ending as a conservative on China’s far right, as clear an indicator as any that he had not only lost political initiative, he had also lost touch with the country.

Nobody living in China today – or even visiting periodically – can help but sympathize with Chiang’s plight. Keeping ahead of the pace of change in China is a brutal race for any government, party, agency, bureaucrat – or merchant. But to govern at all demands a means of governing that is attuned to change, and White paints a picture of a government in pre-revolutionary China that had ossified some years before.

Chiang lost, to use a phrase from von Clausewitz, his fingerspitzengefuhl, his finger-tip feel for the actual situation on the ground, and as a result presided over a bureaucratic apparatus that was incapable of either caring for the welfare of the Chinese people, holding his coalition together, or fighting the Japanese, much less all three at once.

A Picture in Time

Regardless of where you stand on the matter of the Chinese Revolution, you will probably agree that among the great tragedies of the millennial changes that began in 1911 was the long line of missed opportunities for a more harmonious ending than the national bifurcation that is still called “the Wound of History.”

More vocally than any other foreigners of their era, Teddy White and Annalee Jacoby yearned for a unified China that took care of its people. Armed with a belief in that future, they wrote Thunder Out of China as witnesses to the events that set China on its current course, and their words deliver insights into the national soul of China that after 62 years have lost none of their edge.