3 Thoughts On Business In China

Tyler Cowen interviews Ben Thompson.

Snip:

COWEN: Many Americans have never heard of the company ByteDance, which is from China. By many estimates, it’s the world’s most valuable start-up. How can it possibly be worth, say, $75 billion?

THOMPSON: …All things with China start and end with the size of the market and the potential there. And you add on to that . . . This is beyond ByteDance specifically, but Chinese cities are so large and so dense that the level of services and possibilities there are a lot higher than they are in the US, where things are more spread out.

Also, there’s so much labor in China, generally, available that you can do more labor-intensive offerings. So the potential upside is just so massive that that drives, frankly, a lot of pretty crazy investing evaluations in China, but it’s just because the upside is so tremendous.

Snip:

COWEN: Should Google develop a censorship-laden search engine for China? As a business decision, not morally separate, but should they do it?

THOMPSON: I don’t know. It’s hard to say. The thing people don’t remember about Google leaving China the first time is that, yes, they took a moral stand about it, but also they were getting their rear ends kicked in the process. Their share had decreased from around 33 percent to something like 17 percent when they pulled out, in part because they weren’t very strong on local results in particular, which Baidu had really focused on.

Snip:

COWEN: How bullish are you on India’s tech sector and software development?

THOMPSON: I’m bullish. You know, India — people want to put it in the same bucket as, “Oh, it’s the next China.” The countries are similar in that they’re both very large, but they’re so different.

Probably the most underrated event — I don’t want to say in human history, but in the last hundred years — is the Cultural Revolution in China. And not just that 60, 70 million people were killed, or starved to death, or what it might be, but it really was like a scorched earth for China as a whole. Everything started from scratch. And from an economic perspective, that’s why you can grow for so long — because you’re starting from nothing basically. But the way it impacts culture, generally, and the way business is done.

Whereas China — it’s much more bare-knuckled competition and “Figure out the right answer, figure it out quickly.” The competition there is absolutely brutal. It’s brutal in a way I think is hard for people to really comprehend, from the West. And that makes China, makes these companies really something to deal with.