Silicon Hutong

China and the World of Business • China Business and the World

Silicon Hutong - China and the World of Business • China Business and the World

The Limits of Coercion

Persuasion trumps coercion. Even in China. The government has a monopoly on force, but it does not retain that monopoly by employing it without consideration of public opinion.

The days of high-handed government action are over, and this makes the government’s task more complex – and delicate – than ever. Power my grow from the barrel of a gun, but the nation’s leadership cannot ignore that it remains rooted in the people.

Concept of the Week: Urbanizing In Place

Urbanizing in placeconcept – the idea that China’s urbanization is not being driven entirely by migration from the countryside to the cities, but that large areas that Beijing’s statisticians might once have considered “rural” are now considered “urban.”

In-place urbanization could occur in one of three scenarios.

The physical area of a municipality has been expanded to include what was once surrounding countryside.

In the second scenario, a village that was once considered part of the countryside has now grown into a town that a demographer or statistician would now classify as urban.

In the third scenario, a group of villages in a given area are considered to be conglomerated as a single administrative entity and reclassified as a single town.

In these cases, China’s urbanization is taking place without migration, and presents a different set of policy, marketing, and personal challenges and opportunities than classical migration-based urbanization.

The Third Way on Xi

English: "Long live the great Communist P...

English: “Long live the great Communist Party of China” in Xinhuamen, Beijing ‪中文(简体)‬: 新华门左标语“伟大的中国共产党万岁” (Photo credit: Wikipedia)

“Is the Chinese dragon losing its puff?”
Peter Harcher
The Canberra Times
March 16, 2015

Professor David Shambaugh’s recent essay in the Wall Street Journal suggesting that China’s political system is about to hit some very rough times (“The Coming Chinese Crackup“) has provoked intense debate. Peter Harcher’s article written in response offers a neat summary of what makes Shamgaugh’s conclusions so debatable.

I nevertheless absolutely reject his conclusion which I find astonishingly ill-informed. The pervasive sense of dramatic change is, I have found, combined in almost all Chinese minds with satisfaction and confidence that the change is urgently needed–indeed long overdue—and in the right direction.

It also demonstrates that the American academy has powerful competition as a source of cogent analysis on Chinese politics.

Any serious discussion of China’s future must include non-Academics like economist Arthur Kroeber and Australians like Geremie Barmé of the Australian National University and David Kelly of China Policy in Beijing.

Barmé, for his part, writes off Shambaugh’s collapsism as the view of an American deeply anxious about America. Kroeber, an American himself, argues that the Party remains as strong and adaptable as it was in 2008, when Shambaugh wrote his excellent China’s Communist Party: Atrophy and Adaptation.

My problem with both sides is the determinism implicit in the arguments. The Party’s collapse might not be imminent, but neither is its adaptability without real limits, imposed upon it by important groups and individuals within its own ranks. I find it hard to believe that Barmé and Kroeber would argue that point.

We thus must agree that there may be circumstances under which the Party might prove insufficiently adaptable to avert an existential crisis. And before you protest, let us agree that there may be circumstances under which any polity, however strong and adaptable, might face the same limits. In that case, the answer is neither “the Party will collapse” nor “the Party is too adaptable to collapse.” It is, rather “under what circumstances would the Party face the danger of collapse?”

Like most of us, neither I nor my clients can afford to treat China like its future is a game of roulette: bet on Red, the Party stays in power. Bet on black, and it collapses. Creating strategy in business means contending with all possibilities, balancing them, and coming up with a pathway that appropriately addresses them.

We can be neither Cassandra nor Polyanna. We should not overestimate the considerable challenges Xi Jinping faces as he guides the nation through roiling and uncharted waters, but none of us can afford to underestimate them.

Shameless Plug Dept.: New Fast-Food Paper

Hutong West
Contemplating lunch
1253 hrs.

My most recent paper, this one on addressing the challenges facing fast food franchisors in China, “Jumping China’s Great Food Wall (pdf),” is now up on the Allison+Partners website.

Failing that, you can find the paper on Academia.edu here.

This is more of a practical paper than my last one, giving a quick overview of the uneven success enjoyed by fast food companies in China, and offering a series of prescriptions designed to avoid some of the more serious rocks and shoals, and mitigate the effects of many others.

Get off the plane

English: Business class at grand opening of Be...

English: Business class at grand opening of Beijing–Shanghai (Jinghu) High-Speed Railway. (Photo credit: Wikipedia)

In the Hutong
Watching the pigeon hutches
1011 hrs.

Speaking to a group of students touring China from the UK, I asked how they traveled from Shanghai to Beijing. Their response, of course, was that they flew.

I understand the rationale for flying inside of China. Under the best circumstances it is fast, and other forms of travel are harder to arrange from overseas.

That said, my recommendation to anyone organizing a trip to China for a group of executives, students, or scholars is to do yourself and them a favor: on the leg between Shanghai and Beijing, put them on a high-speed train, in either First or Business Class.

(Be aware that for reasons that escape everyone but the Ministry of Railways, Business Class is the better, more comfortable, and more expensive of the two.)

Even if flights are on time, the elapsed time from downtown Shanghai to Downtown Beijing (or the reverse) is not that much greater, especially if you purchase your train tickets in advance. And if there are flight delays (and there are frequent delays, because of weather, VIP flights, or because the Air Force feels like it), the trip can actually be faster. But that’s not the best reason to take the train.

The best reason to take the train is that the people you are squiring across China will actually get to see out their windows something more than modern cities and clouds. They will see farms, villages, half-completed roads, factories, and the insides of a half-dozen cities of a million souls or more that they had never heard of.

Send them home with visions of modern cities in their heads, and they will get the wrong idea about China, making the same mistake made by instant China experts like Thomas Friedman and Niall Ferguson. Expose them to a bigger slice of China, and they will understand that a large part of the nation is still 40, 70, of 100 years behind Shanghai. Then they will start to understand the forces that drive this Asian Leviathan. And is that not the point of bringing a group to China in the first place?

Case Study: Why You Should Seek Multiple Opinions on China

“Three Things TLD Registries Must Know About China’s Domain Name Regulation”
Chang Jian-Chuan
CircleID
June 18, 2015

I get to talk to groups of businesspeople and business students on a regular basis, and one of the maxims I include in just about every speech or presentation is this:

Don’t get your China advice, whether generally or on a specific issue, from any single individual. China is too large and complex for you to trust the future of your enterprise in this market to the viewpoint of one source, however knowledgeable he/she/they may seem.

The news this week offers a superb example of why this is the case. The Ministry of Industry and Information Technology (MIIT) has had one if its periodic regulatory spasms regarding the Internet. One of the specific areas covered by the current policy outburst is the arcane but important area of top-level domains (TLDs).

The Internet Corporation for Assigned Names and Numbers (ICANN, the international body that, among other things, operates the system that makes it possible for you to type “amazon.com” into your browser and get to a bookstore instead of an error page) has recently presided over an explosion of top-level domains (TLDs), those bits of an site name to the right of the dot, like “.com,” “.net,” and “.org.” Where there was once only a handful (in addition to nation-specific top-level domains,) there are now literally hundreds, if not thousands of these, and we’re all having to adjust to a world that includes “.law,” “.ninja,” “.guru,” and “.me,” and .”porn,” among hundreds of others.

China’s adjustment is coming in the form of a new regulation (“Interpretation (Reading) on Carrying Out the Domain Name Registration Services Market Special Action Policy”, promulgated by the MIIT on May 12) restricting how registries (the companies that own the top level domains and collect fees for domain names that use them) can sell domains to customers in China. This is causing a bit of a panic.

Chang Jian-Chuan, a Ph.D. and a research fellow who covers the field for a local registry, offers this piece in a leading industry publication as something of a palliative, and I agree that panic is unhelpful, but he loses me when he writes:

Nowadays a revision of the regulation is under way to reflect the latest expansion of registry operators. However, except for the new requirement that any foreign registry has to establish a legal entity in China, all the other requirements for the license have maintained unchanged. Therefore, it is fairly safe to conclude that there is no “tightened control” or “new move” against New gTLD registries and registrars.

What we have here is a disagreement (to put it mildly) over terms. While a superficial reading of the regulations may suggest no significant change, if you understand both the challenges faced by the companies affected and the knock-on effects of the law, it is clear that the change doe represent a new move that tightens control of the industry and endangers the business of many foreign registries currently selling into China.

From a business standpoint, the regulations throw the business of many registrars into a spin, if for no other reason than they are required to set up and register a local operation in China with $170,000 in registered capital, with local technicians and customer service personnel. Someone familiar with the global registry sector would know that most registries, including some of the larger ones, are not yet operating in China, and for all of those this represents a costly process and significant ongoing expense. For the vast majority of non-Chinese registries the cost will be prohibitive, in effect shutting them out of China.

From a legal standpoint, attorney Allan Marson at Ishimarulaw.com noted in November:

When MIIT promulgates these revisions (and barring any last-minute amendments), they will substantially change the status quo for non-Chinese registries in China. While users in China will continue to be able to access websites outside China (subject to passing through the “Great Fire Wall“), in order to promote and serve Chinese customers, a non-Chinese registry will be required to set up a subsidiary registry or entrust a China-based registry to operate its TLDs in China. Failure to do so will likely result in Chinese registrars refusing to sell domain names under the non-Chinese registries TLDs and preventing resolution of any websites that are already registered under those TLDs.

Contrary to Dr. Chang’s fairly offhanded dismissal, a common sense reading of the regulations from the viewpoint of a foreign registry and from an attorney is that this regulation and its knock-on effects represent a new move and tightened control over the field, one that significantly changes the way most companies in an entire industry must operate in China.

While most of us shy from anything that may seem ad hominem, when seeking advice in China you must consider the provenance and possible motives of any advisor. For example, Dr. Chang is a former official with CNNIC working for a local Chinese registry. This would suggest that, far from being a dispassionate observer, Dr. Chang has some skin in the game. It is worth noting that his company, KNET, stands to gain if the new regulations are enforced to the greatest extent possible. It is also worth noting that his publishing an article in an international industry publication praising an MIIT regulation will not hurt his company’s regulations with its regulatory overlords at MIIT, and that it would have been impolitic – if not commercially suicidal – for Dr. Chang to have written a different opinion.

Let me be clear: the goal of this article is neither to impugn Dr. Chang nor his employer. I am sure Dr. Chang is a wonderful person and an academic of great integrity, and that his company is a fine organization operating in a highly competitive and heavily regulated industry.

The point, rather, is that the advice you receive from anyone about China is often influenced on where the individual comes from, where he or she sits, and the pressures under which he or she operates. The only way to get a true picture of the challenges and opportunities your company faces in China is to reach out to a range of advisors, tapping each for their thoughts, questioning each, and forming a picture based on all of the above.

China: State Multinational or Global Superpower?

America fights, in other words, while China does business, and not only in Afghanistan. In Iraq, where U.S. troops brought down a dictator and are still fighting an insurgency, Chinese oil companies have acquired bigger stakes in the oil business than their American counterparts. In Pakistan, where billions in U.S. military aid helps the government keep the Taliban at bay, China has set up a free-trade area and is investing heavily in energy and ports.

via China succeeds by behaving more like a multinational company than a global superpower.
A
nne Applebaum
Slate
September 27, 2010

This was a clever observation when Anne Applebaum first made it five years ago, and there is still some validity to it. Nonetheless, one cannot help but wonder if things will stay this way much longer. China’s military posture overseas continues to rise, and its companies are beginning to discover that the easy fruit has fallen. We may well have witnessed either the high point of China’s overseas expansion, or, more likely, the end of China’s purely commercial overseas expansion strategy.

 

Making Crepes is Not Cultural Theft

US Jianbing Maker Accused of “Stealing Chinese Culture” | The Nanfang.

A young American goes to China. She finds out how to make jianbing, a popular local street food. She goes home to Portland, and she opens up a shop to make it.

And is promptly excoriated by Chinese netizens for “stealing Chinese culture.”

Leave aside unfathomable presumption (or cultural chauvinism) that would prompt someone to suggest that only Chinese should be allowed to make Chinese food (or that only French should make French food, or that only Italians should make Italian food.)  Those who have issues with Alisa Grandy making her living on making Chinese crepes miss the bigger point:

This is exactly the kind of cultural diffusion that the Chinese should be applauding as a natural result of China’s rise. The world is discovering Chinese culture, and in the process more and more aspects of China will wind up woven into the world’s cultural fabric.

If Chinese chefs can make hamburgers, pizzas, and fajitas (and I know more than a few who do, and some very well), American chefs should be allowed to adopt – and extend – Chinese cuisine.

New York’s Transparent Buildings

Full Bank Accounts, Empty Storefronts: The Economics Of High-Rent Blight.

Fascinating little story that somehow brings to mind places like Kings Garden Villa in Beijing, and much of the city of Ordos.

I would wager that at least some of the money that has found its way to Manhattan is coming from Chinese investors who would rather wait for tenants who can afford their desired rents than rent out at less and undermine the likely ridiculous sums they paid for the properties.

This is not a uniquely Chinese behavior, but it is a practice that is notably common among property owners in China. What is more, the sources of cash flowing out of China and into North American investment properties are certainly not limited to giant, high-profile developers like Wanda. So while it would assume far too much that Chinese money is the cause of High Rent Blight in New York, it is likely a contributing factor.

 

Shameless Plug Dept: New Paper on Strategic PR in China

 

Hutong West
The cool before the heat
1855 hrs.

 

Public relations people have a word fetish. We invest the aphorism “words have meaning” with an almost scriptural infallibility. Yet when it comes to terms we use to describe our own capabilities, we become maddeningly imprecise, if not deceptively hyperbolic. The best (or perhaps worst) example of that is the word “strategic,” as in “strategic public relations.” In fact, we use it so much when referring to so many different things that the phrase has almost lost its meaning.

 

In a new paper published last month by Allison+Partners (“Strategic Public Relations in China: Actions, Behavior and Communications”,) I ask the PR industry generally and in China specifically to take a step back. I argue for a definition of strategic public relations that steps completely outside of the communications function: as it was originally intended by the founders of the public relations craft, PR begins with the actions and behaviors of a company, and the obligation of PR counsel to guide them. My point: it is time for all of us to become more strategic, and in no place more so than in China, where so many brands consistently fail to understand, much less live up to, the expectations of their publics.

 

For my fellow PR practitioners and anyone else who oversees a PR function, the paper is available for free download and review on academia.edu. It’s a fairly quick read.

 

 

 

The Confucius Institute Question

To: Dr. Gene Block, Chancellor, University of California, Los Angeles
From: David Wolf, California taxpayer, UCSD alumnus, UC Davis alumnus UCLA extension alumnus, and son of a UCLA alumnus

Dear Dr. Block:

I know that you are busy, so please pardon my intrusion into your holiday week. I have a concern I need to raise with you.

You have enough money in the campus budget to teach Afrikaans, Ancient Near-Eastern Languages, Arabic, Armenian, Czech, Dutch, French, German, Greek (Ancient and Modern), Hausa, Hebrew, Hungarian, Quechua, Iranian, Italian, Japanese, Korean, Latin, Polish, Portuguese, Romanian, Russian, Swedish, Norwegian, Danish, Serbian/Croatian/Bosnian, Hindi, Vietnamese, Thai, Tagalog, Indonesian, Spanish, Portuguese, Swahili, Turkish, Uzbek, Azeri, Ukrainian, Yiddish, Yoruba, and Zulu.

But when it comes to teaching Chinese, the language spoken by more people on the planet earth with the exception of English, you find it necessary to go begging to the Chinese Communist Party – via the Confucius Institutes – to adequately fund and staff instruction in that language.

This is, at best, a misallocation of priorities. If there are three languages that should be taught at your institution, they are English, Spanish and Mandarin Chinese. All of those should be funded as a matter of necessity. Choosing to fund staff in French, German, and Norwegian over Chinese suggests that the university might be losing touch with its core mission.

At worst, this compromises the independence of a public institution of higher learning. The Chinese government official charged with the oversight of the Confucius Institutes is not shy about her goals.

May I respectfully suggest that the university seek a way to fund instruction in the Chinese language and literature that does not entail a dependence on the funding of a foreign government with complex motives? And may I further suggest that such alternate funding not come paired with implicit leverage that might be used to undermine the political, philosophical, and behavioral freedom of the UCLA community?

Many thanks,

David Wolf

Lu Wei’s Facebook Gambit

Hutong West
Writing the Book
0935 hrs.

In all of the brouhaha around Facebook founder Mark Zuckerberg’s pandering comments to Chinese Internet czar Lu Wei recently, the China commentariat are lining themselves up on both sides. One side is morally outraged at what Jimmy Sonni at the Washington Examiner called “Zuckerberg’s efforts to ingratiate himself with an authoritarian regime – a regime that Facebook has an enormous incentive to placate…” The other side rejects the moral outrage. They believe that Zuckerberg should be applauded for attempting to position Facebook as a means to give Chinese more access to the global Internet.

Both sides (ostensibly) share a disgust with the regime in Beijing. One seeks to undermine it via isolation, another by assimilation. Yet both are naive; isolating China’s internet, thus compelling China to develop its own social media will no more back China into a corner than did compelling it to develop its own newspapers and television networks; similarly, the belief that the Party will sit back and allow foreign social media to undermine its position belies history and underestimates the efficacy of the Party’s methods.

If Mark Zuckerberg wants to help Facebook make a fortune in China, all while serving the interests of the Chinese people over those of the Party, he start by asking himself a hard question. Why did Lu Wei really come visit Facebook?

Because it is entirely possible that Beijing needs Facebook almost as badly as Facebook needs China. Lu Wei is a good poker player, and he is surely not showing any of his cards, but it may be that in order to accomplish the Party’s goals, it needs Facebook’s cooperation and assistance, willing, witting or otherwise.

Zuck needs to pull his best, smartest people together and think this through. Because if they figure it out, they may not have to behave like lickspittles, handing over the keys to the empire in return for a handful of vague promises. Instead, they can improve their negotiating position and either stroll into China with heads high, or walk away knowing that it was the best alternative to doing so.

There is much more too all of this than meets the eye. Facebook’s fonder has the wherewithal to suss this out. He should do so, and soon, before the company finds itself a pawn in somebody else’s game.

 

Wanda Arrives Arrives in Beverly Hills

“China Developer Buys Robinsons-May Site in Beverly Hills”
Julie Makinen
Los Angeles Times
August 8, 2014

The Times scored a win in picking up this story about how Chinese development giant Wanda is raising its bets on US real estate. Based in Beijing, Makinen can be forgiven, though, for not addressing what the real story is likely to be: the challenges the company is likely to face in gaining approval for its project.

Wanda has yet to reveal plans for the site, but the location has some particular challenges familiar to locals. Traffic is already very heavy going into the area on both Wilshire Boulevard and on Santa Monica Boulevard, which border the site, and during large parts of the day the proximity of Century City makes Santa Monica Boulevard a parking lot for several miles of its length. The development of a high-density complex on the eight-acre site would only exacerbate the problem.

That issue alone is likely to provoke public opposition to a sizable development. The NIMBY factor in the area is high. I know: I grew up three blocks away, and worked at the recently-demolished department store between college and grad school.

If Wanda is wise, it will embark on a campaign to woo local residents, most of whom live in homes with values far in excess of $3 million (and who are accustomed to wielding political clout with the local government,) as well as the Beverly Hills City Council. It will have architects focus on creating a site that integrates elegantly with the Century City, downtown Beverly Hills, with the Hilton, and with the elementary school and neighborhoods to the north.

If the project is clearly woven into the broader fabric of Beverly Hills, seeking to update an enhance rather than just plonking another Chinese multi-use center like it created in Beijing, Wanda will wind up with a flagship property and the respect of the business community in Southern California.

That costs money, of course. But Wanda has plenty of money, and it has every reason to make nice in the US as it diversifies its portfolio beyond China’s increasingly uncertain real estate market.

China’s Hidden Health Crises

Hutong Forward
Contemplating Anacostia
1940 hrs

I have done a lot of work over the past several years with companies in different parts of the healthcare industry, each seeking a way into the China market. Almost every first meeting entails the client bringing up China’s current Five-Year Plan, and trying to figure out how to capture opportunities around the nation’s healthcare priorities as laid out in the plan.

Unfortunately, everyone does that, so the result is that the entire industry is chasing the same set of opportunities. In healthcare, that’s shortsighted. The best opportunities lie outside the stated government priorities, in part because the field is less crowded, and in part because those are usually the problems that the government finds most embarrassing and is anxious to address quietly.

An example is the scourge that diabetes has become in China. Before Johns Hopkins and the China Center for Disease Control and Prevention released their report last week, few had an idea of how large diabetes had become in a relatively short period of time. China now has 114 million diabetics, a third of the world’s total and representing 11.4% of the adult population – a higher rate than the US (11.3%). What is more, Chinese are developing diabetes at a lower body mass index than the US, so the rate of growth of the disease is not likely to abate soon.

China’s problem with diabetes: medications and treatment are more expensive than the average patient can afford. The obvious opportunity, then, a less expensive treatment regimen aimed at China’s massive population.

The upshot is this: global healthcare firms are going to find their best success not in chasing the obvious opportunities with remedies created for developed markets, but in addressing the health challenges that remain largely hidden from public view, and doing so with drugs and regimens that fit China’s local conditions.

Yahoo! China According to Susan Decker

An Insider’s Account of the Yahoo!-Alibaba Deal
Sue Decker
HBR Blog Network
August 6, 2014

American businesswoman Susan Decker, president...

Susan Decker at employee all hands meeting in Sunnyvale, California. (Photo credit: Wikipedia)

If you have not yet stumbled across Sue Decker’s article in the Harvard Business Review blogs, please read it. Decker, who left Yahoo! in 2009 after being passed over for the CEO post in lieu of former Autodesk CEO Carol Bartz, delivers her view of the investment that effectively saved Yahoo!, and her role in it.

First person accounts are always suspect: one is never certain about how much of the history so presented is objective and how much is subjective. Thus, it was reassuring that the editors of the Harvard Business Review chose to publish it as an interesting curiosity rather than a definitive account or a case study. Still, the article made me a bit uncomfortable, for a few reasons.

The “Everyone Failed” Gambit

First, the author frames an eloquent but ultimately unconvincing defense of Yahoo!’s failures in China (in essence, everything the company did except the investment in Alibaba) that can be summarized in as “yes, we failed badly, but so did everybody else.”

That’s partly true: the list of US Internet companies that tried to make a go of it in China and failed is long and distinguished. But the ledger is not quite as one-sided as Decker implies that it is. 

Google had a viable business in China before it chose to stare down the Chinese government. Amazon has a business and is still in the game, despite having to go head-to-head with China’s 900 lb. e-commerce gorilla, Alibaba. Evernote and LinkedIn are making headway with tightly defined value propositions that make sense for China and the rapid refresh cycles that local users demand. And let’s not forget little South African NASPERS, a firm largely unknown to Valleywags that somehow managed to run circles around everyone else, making a brilliant early investment in Tencent that may ultimately outshine even Yahoo!’s windfall on Alibaba.

Decker suggests that the relative success of each of Yahoo!’s moves in China can be explained by the degree of control exercised over the China venture by Sunnyvale. The less control Sunnyvale tried to wield, the more successful that venture became. If that explanation seems a bit too neat and simplistic for you, join the club. I’ll come back to it shortly.

The False Management Paradigm

Second, the author skims over the fact that the joint venture with Alibaba failed to produce anything of value aside from Yahoo’s partial ownership of its partner. The joint venture did not save Yahoo!’s China business: the company’s China operating unit, valued in negotiations at $700 million, sank quietly beneath the waves soon after the agreement that handed operational control to Alibaba was signed. If anything, the Alibaba agreement destroyed Yahoo!’s operating business in China, or, perhaps more generously, sacrificed it in the name of a harmonious relationship between the parties.

Given the outcome, one might be inclined to say that the sacrifice was worth it. Perhaps. But neither we nor Decker should harbor any illusions about what this means for Yahoo!: that the company failed as an operating business three times in China, and that despite her assertions to the contrary, the degree of control exercised by Sunnyvale had no influence on the final outcome. Tight control, loose control, or no control, all three models failed. The one management lesson she tries to deliver in the article is a canard.

The Forgotten Brand Problem

Third, there is no mention in the article about what happened to Yahoo! and its family of brands in China. The brands that Yahoo! owned during Decker’s tenure – including the “Yahoo!” brand itself, each represented a repository of goodwill. The Yahoo! brand in particular initially occupied a position of great respect among Chinese netizens, both because of its success and because of Jerry Yang‘s Chinese heritage. In the process of thrice failing to make a go in China, Yahoo! squandered that goodwill, and thus destroyed the value of its brand in the largest online market in the world.

As a senior finance officer, Decker certainly understands the value of goodwill, as does Yahoo!: much of what they paid for their acquisitions was based on the goodwill and the brand value of the firms acquired. Any reckoning of the net value of Yahoo!’s investments in China must therefore take into account not only the sunk costs and the book value of the assets written off, but also the brand value it destroyed in its largest addressable market.

That this issue remains unmentioned in Decker’s article is, to a marketer like me, a final though perhaps unnecessary indictment of Decker’s narrative. In the end, her piece is not the full account of the deal from the inside promised in the title. It is, rather, an effort both to stake a claim of some credit for Yahoo!’s Alibaba windfall and to exonerate Yahoo!’s leadership – including herself – for the company’s poor operating record in China during her tenure.

Decker richly deserves her share of the credit for the deal: in the end, it saved the company. What she cannot claim for herself or her colleagues any credit for operational success in China. Porter Erisman, a former Alibaba Vice President who recently released a documentary about his time working inside the company called Crocodile in the Yangtze offers this thought on how to assess Decker’s legacy and her account of Yahoo!’s success:

How Yahoo! performed as an operator and how they performed as an investor are two different questions. If we evaluate Yahoo! as an operator (both inside China and outside,) I think we can all agree that their performance was poor. If we evaluate Yahoo! as an investor, we should take into account their entire history of investments and not just cherry-pick one investment that paid off. On the whole, Yahoo! did well as an investor over the years (due to Alibaba) despite some obvious failures. But people investing in Yahoo! didn’t do so because they believed it was a private equity fund. Luckily, the Alibaba investment turned out well and made up for Yahoo!’s failures on an operating level.

Erisman makes a superb point: Yahoo! did brilliantly as a private equity fund and poorly as an operating company. Nowhere was either more true than in China, so I suspect that if we – or Marissa Mayer – are ever to understand what makes Yahoo! tick, we will find the answers in a thorough, unbiased, and balanced account of Yahoo!’s China odyssey.

We will have to wait for someone else to write that account. In the meantime, please read Ms. Decker’s article. If nothing else, it is a valuable contribution to the oral history of American business in China.