Silicon Hutong

A Clear-Eyed Look Ahead

The Parking Lot of the Heqiao Building

Smog smog blow away, go light on Tianjin today

1007 hrs.

The shelf life of a good China book, especially one that covers business, is short. The pace of change in China is so brutal as to render the best tomes obsolete all to quickly, and often before they even reach the bookshelf.

So when finally sat down to read James Kynge's China Shakes the World last week, I was concerned that I had waited past the book's prime to imbibe its insights.

I needn't have worried.

A clear-eyed look forward

James has been in China for 27 years, but the tone of the book is one of humility. He approaches his subject - the economic rise of China and what it means for Chinese and for the rest of us - as a student, and he takes us along on his journey of discovery.

Thus unlike most books about China, China Shakes the World looks forward rather than back, using the past and an acute understanding of what drives China and its people to attempt to draw some faint lines into the future. The picture he paints is not always comfortable, but he resists the temptation of weaker writers to lapse into alarmism or make sweeping generalizations. His head remains calm throughout, and this makes his conclusions all the more disturbing because they cannot be dismissed.

When the going gets tough

What I treasured most about the book was the distilled insights that he gently placed throughout. My favorite - and, given the times, the most relevant - was his observation that reform moves forward in China at a brisk pace when the nation faces severe challenges, and when times are good the pace of reform slows, stops, and sometimes reverses.

Generalizations are always suspect in China, and it it has been my experience that when dislocations are severe regulation on media actually increases. That said, a review of the historical record bears James out, and if the Hu/Wen administration remains true to form, the next major policy initiative to address the current economic crisis (after the current round of Keynesian pump-priming) may be a liberalization in foreign investment policy.

(As such, this is a very good time for companies operating in highly-regulated industries and the associations that represent them to begin crafting the economic case for greater liberalization, because the opportunity to drive change will come quickly.)

A must-read

Once again, I have yet to read the single book that provides the key to understanding China, despite a quarter-century of looking. When China Shakes the World, however, should be at the top of your reading list of books that offer precious insight into where China is going and how we should prepare for it.

Free Books of the Week: Core marketing texts

In the Hutong

Counting Books

1606 hrs.

If you have an historic point-of-view on your chosen occupation or profession, chances are pretty good that you can point to one book - or several books - that laid out the need for and underlying assumptions of your craft.

For the marketing and communications professions, two of these texts are available for your perusal at no charge. Both were written during a period in which the behavioral sciences - including psychoanalytic theory - were just beginning to have an influence on the way companies communicated.

The first is Propaganda, the most important work of Edward L. Bernays, a man usually grouped with Harold Burson as one of the creators of the public relations craft. Bernays, a nephew of psychoanalysis pioneer Sigmund Freud, did much to incorporate his uncle's theories into a means of influencing public opinion. Bernays was unabashed in his advocacy of the manipulation of publication as a means of governing in a democracy.

Before his ideas could get much public airing, however, they were adopted in significant part by the National Socialists in Germany, and as a result the word "propaganda" leaves a sour taste on the Western tongue.

Bernays' ideas remain provocative, however, and they are worth a review in a day when the marketing craft seems to be going more quantitative and less human.

The other book on the Hutong Free Shelf this week is Claude C. Hopkins' book Scientific Advertising. As wary as I am of overly-quantitative approaches to what is fundamentally a qualitative craft, Hopkins reminds us that we cannot leave it all up to our guts. Hopkins' work was fundamental in the formation of some of the giants of the advertising business, including David Ogilvy.

If you work in or with the marketing side of your business, these two short books should be on your reading pile.

There is no such thing as THE book on China business

In the Hutong

Reading myself to sleep

2217 hrs.

In early May, Forbes' Beijing correspondent wrote a scathing review of Jack Perkowski's book Managing the Dragon.

(Full disclosure: I have met Jack, and I have good friends who work closely with him now or have in the past. I think it would be presumptuous of me to call him a friend.)

Forbes uses Jack's book as an example of a stream of tomes that have emerged from the laptops of businessmen in China over the past several years. The reviewer's issue with this flood of ink and pulp is that the books offer little in the way of original insight. He also believes that the people who really know what they are doing are not writing books about it.

"When it come to the actual business of making money in China, the real problem with today's legions of experts is that the best ones are likely not selling their snake oil on television, the lecture circuit, or the bookshelf. The Masters of the Universe who are making (or losing) enormous sums in China now aren't talking much about how they're doing it; they're too protective of their turf, and they're too busy making the next deal."

The article also suggests Juan Antonio Fernandez and Laurie Underwood's book China CEO and James Kynge's China Shakes the World as being better reads.

Why read?

I agree with Forbes' broader points (and not just because they serve to justify my own failure to write a book.) At the same time, I think the reviewer is perhaps over-dismissive of the body of literature on doing business in China.

The book did suffer from some of the issue the reviewer notes. And as a longtime resident in China, I can sympathize with the reviewer's exasperation: the longer you live here, the more difficult it becomes to find a book on business in China that adds much to your own store of observations and conclusions.

But that does not mean we stop reading those books. Most of us want to hone our understanding of this vastly complicated place, or if nothing else compare our own ideas with those of others. Trust me, even the most jaded of China hands needs the occasional sanity check, some of us more often than others.

Even so, for most of these books are not meant for us, or for people like Forbes' reviewer. They are aimed at the massive majority of business people in the world who know little or less about doing business here, and yet find themselves having to (or wanting to) contend with China in their daily work.

And for that reason this review, like so many others, misses the point: what the reader is - or, should be - looking for in a book about China.

Talkin' bout my edjamication

When it comes to learning about China and doing business here, there is no substitute for actually planting yourself on the ground, struggling through Chinese lessons, and running a local business. Sadly, not everyone either directly or indirectly responsible for their company's China operations is willing or able to do that.

There is also a silent legion of hopeful young people living in the Americas, Europe, and indeed elsewhere in Asia who want to pursue a business career - or part of one - in China.

These two groups want and need every drop of wisdom and experience they can absorb from a distance. And with respect to greats like Orville Schell, Bob Scalapino, the late John King Faribank, and our much admired James Kynge, the "big picture" can only serve as the most basic foundation of such knowledge.

And we need a more robust corpus of literature than a single study like that of Fernandez and Underwood.

Because here is the problem: too many of us in the middle- to upper-ranks of the China operations of multinational companies, in agencies, or in consultancies spend a mind-bending amount of our time explaining the very basics of doing business in China to individuals who lack even a fundamental foundation in the subject (or worse, who don't and think they do). Believe it or not, a book on doing business in China - even a bad book on doing business in China - is a step in the right direction - as long as it is just the first step.

My problem, then, is not with the books, but how they are marketed and reviewed.

First, book marketers have got to stop selling their tomes as the "the bible for business people in China." There is no such thing. China is far too large and complex (and doing business in any large country is far too large and complex) to be distilled into something you can comfortably carry through an airport metal-detector.

If you are going to auto-educate on China and not come live here, you had better be working your way through a shelf of books, a stack of really good articles, and a handful of decent blogs.

Second, book reviewers need to help manage the expectations of their readers. Tell people that, jacket copy to the contrary notwithstanding, the best book on China should be the starting point for anyone serious about China, and that any business person who is not sufficiently serious about China to read a half-dozen or ten good books about the place probably shouldn't even bother. Then take the time to dig into every book and come up with where and how that book might find value on an executive's shelf.

Because I can't speak for anyone else, but I often find remarkable pearls in books that smart, knowledgeable, and incisive reviewers have scorched so badly that they wind up relegated to the bargain table, all hope of the paperback destroyed. It makes me wonder if the craft of book reviewing has gone horribly wrong someplace.

The Masters of the Universe Fallacy

Let us turn to the other suggestion Forbes makes, that the real smart guys are keeping their mouths shut, because anybody who REALLY knew anything is going to keep it to themselves and make money off of it.

I'm sure there are a lot of smart people holding fire - especially in the dealmaking side of the business. But there are a lot of wise people in the advisory professions who find it both smart and lucrative to give away some of their wisdom for the price of a hardcover because it is a great way to build up the value of their companies and to gain prestige both inside and outside of their organizations that they can turn into cash.

This is what I call The Heroin Model of Consulting. Give away (or sell at a low price) the first bit of really smart advice, and they'll pay through the nose to hook into a stream of it.

One good example of this is Tom Doctoroff, Greater China Chairman of ad agency JWT, and his book Billions: Selling to the New Chinese Consumer. Tom packs - squeezes - a lot of thoughtful insight into a thought-provoking 217 pages. You can read this book and walk away better prepared to conduct marketing or product development in China, and at the same time feel like "man, if I wanted to build an advertising program to sell to Chinese, I'd sure as hell give Tom and JWT a shot at my business."

Another example is Cyrill Eltschinger, founder of Beijing-based technology outsourcing firm IT United, and his book Source Code China: The New Global Hub of IT Outsourcing. Cyrill could have simply made the case that China was every bit as attractive a destination for IT outsourced work as India. But he didn't stop there. He gives advice on everything from outsourcing strategy to the nuts-and-bolts of outsourcing in China.

These are just two that jump off my shelf, but they are examples of a growing genre of books by businesspeople who are successful in China and who are sharing a decent part of their hard-earned wisdom as a way to enhance their business.

Two real plagues

The business literature on China does face two other significant problems: subject matter and the publishing cycle.

As to subject matter, I think it is time that businessmen who would write books about China follow the lead of Doctoroff and Eltschinger and begin to write books that deal not with China or China business broadly, but take a narrower, more focused approach.

Part of the problem I suspect the reviewer has with the business books he is reading is that they are trying to be all things to all people. Arguably, when the China market was a backwater with more potential than real opportunity, this was probably the safe approach to ensure you would have an audience of sufficient size to justify printing 10,000 copies.

I would argue that the Chinese economy has grown to a size and diversity that will support books that deal with specific functions (human resources), sectors (retailing, fashion, technology, energy), and issues (environmental stewardship, ethics, etc.) in the context of China business. Given the environment on the ground today, this is where the need - and where the opportunities - lie.

The other huge issue is the publishing cycle. The speed at which China is changing and business is developing is simply not compatible with the amount of time it takes to move a book from a lightbulb in the brain of the author to the customers bookshelf. All too often, books that are timely when they are drafted are obsolete before they are available at Amazon.

A wise publisher ready to take a little gamble would do well to explore ways to slice the publishing cycle in half - or by 75% - and use books on China as a test bed for such an approach. Imaging having a book to market 20 days after the finished first draft. And if the book was, say, a Seth Godin-like 40,000 words instead of much longer, there might be a way to deliver something on China that is both insightful and timely.

Books in context

I deliver a training program on reading for young Chinese and foreign executives beginning their careers in China. Rather than teaching them how to read (I take that skill as a given), I try to help them find an answer a question that is incredibly common among the ranks of time-challenged businesspeople: what do I read, why, and how much?

A key takeaway in that course is that in the end, there is no such thing as bad reading - as long as you read critically and read for perspective as well as for content.

The key challenge for those of us in business in China is to stop looking for fast-food answers to perennial problems. Most of us who have read a few general business titles have learned that despite their own claims, at best a business book like Blue Ocean Strategy, Built to Last, In Search of Excellence or any similar "Guru Lit" is a new perspective on challenges that gets our brains thinking about a given subject in a new way.

Every book you read on China will add to your overall store of information, but in the end it is how you swish that soup of facts, insights, and perspectives into your own conclusions that give those books value. Selling or judging a book on its own is a worthy endeavor, and reviews of books by themselves must and should continue. But such reviews should recognize that even mediocre, biased, or bad books are valuable in the context of a long reading list and a wide shelf.

Otherwise, we run the risk of perpetuating this idea that somewhere out there is a bible on doing business in China.

And it just ain't there.

Funny, I thought it was a new kind of herb...

In the Hutong

One month to go

2039 hrs.

There are a lot of terms people use that they do not really understand, and I am as guilty of that as anyone out there. I didn't understand "soft power" until I read Joseph Nye's book. I had no clue about social networking until I actually started doing it.

And even though I deal very rarely with finance, there have been two occasions when I've used the phrase "Basel II requirements" in a conversation about Chinese banking when I realized I only understood a single specific piece (the minimum capital requirement) of the global standards by which banks are increasingly judged. I kept smiling, but I broke into a cold sweat.

You know that feeling, right? That feeling like you are walking happily across a frozen lake, and then you wake from your reverie to realize that you are on thin ice, that you have walked the conversation right up to - and sometimes beyond - your real level of knowledge. And you are about to be exposed for the pretentious idiot that you are for having had the conversation in the first place.

Okay, well, maybe you don't. But I've felt it, and I hate it. Once my internal baloney alarm kicks in, there are only two solutions: never, ever, go there again; or set about learning more.

So I went hunting, and I found this juicy little pdf at the Bank for International Settlements website - the full text of Basel II: International Convergence of Capital Measurement and Capital Standards Revised Framework - Comprehensive Version. At 347 pages of dry text, it was probably more than I needed, but being the finance tyro that I am I kind of get a kick out of reading it. I feel like I'm a fly on the wall at a meeting of central bankers. The wikipedia entry was a little too light on detail anyway.

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 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. 

Teddy White 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’s seminal 1946 book Thunder Out of China. Not only did White write without the benefit of the hindsight we have, he did so before the Red Scare and the McCarthy hearings forever changed the nature of the debate over communism and its alternatives. 

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

While he must have been tempted to use the power of his pen to vilify Chiang, White strives (and occasionally struggles) to retain a journalists objectivity. His 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, in White’s view, 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 White shows 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, White suggests 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’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. White subtly reminds 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 foreigner of his era, Teddy White yearned for a unified China that took care of its people. Armed with a belief in that future, he wrote Thunder Out of China as a witness to the events that set China on its current course, and his words deliver insights into the national soul of China that after 62 years have lost none of their edge. 

A Wise Word about 210 Million Internet Users

In the Hutong
Downloading music
2126 hrs.

Donald DePalma, author of Business Without Borders: A Strategic Guide to Global Marketing puts CNNIC's recent report on China's Internet market into perspective in an article on Chief Marketer.

He introduces a compelling concept he calls the Online GDP, which basically translates to the buying power of the online population.

According to DePalma, China's 210 million Internet users account for only 1.1% of the world's online GDP. He doesn't give us enough information to check his figures, so it is hard to judge the validity of his claim.

Let us assume for a moment, however, that what he says is true. His point is simply this - don't make a decision about localizing for a market based on the number of people it has, but based on its buying power. All of which is easy to understand and hard to dispute.

Or is it?

I have a couple of problems with using the e-GDP as the sole means to evaluate whether it makes sense to come to China.

The e-GDP figure is static. What we need to understand the value of a given market is both that figure AND its rate of growth. I would bet, given the fact that China's population is slowly aging and becoming more prosperous as it expands AND that China's overall GDP continues to grow at double-digit rates, that the growth rate in China's e-GDP is fairly spectacular compared to other markets. At some point, that 1.1% is going to grow into something much larger.

The e-GDP figure assumes that Chinese users confer the same priority on all goods - or, more correctly, it fails to take into account that some goods and services are better sold online in China.

Similarly, the e-GDP figure does not tell you how badly advertisers on your site want to reach online users in China.

Finally, the e-GDP does not give an idea of what percentage of a country's overall GDP is represented by Internet users. In other words, if you are already IN China and looking to identify places where a certain group of buyers goes, an overall figure is unhelpful.

I like DePalma's analysis, but I think he (and we) need to dig deeper. To rush to China purely on the basis of 210 million users is madness. But to stay away on the basis of a snapshot of the market runs the risk of missing very real opportunities.

Maybe the difference is Star Trek

In the Hutong
Damn if winter isn't finally here
2104 hrs.

In June of this year, Wil Wheaton, who played the teenage nerd-cum-Starfleet officer Wesley Crusher in the science-fiction television series Star Trek: The Next Generation, spoke at a ceremony to induct the late Star Trek creator Gene Roddenberry into the Science Fiction hall of fame.

Whatever your personal feelings about Wil, Wesley, Star Trek, or the citizens of Trek Nation, you have to give credit to Wheaton for hitting what made Star Trek the single most successful science fiction franchise ever (40 years, 11 motion pictures, 5 separate TV shows, and so many books, magazines, stories, conventions, clubs, and fans that they defy counting).

Ensign Crusher Speaks

What struck me was how he captured both the lure and the powerful socio-political value of science fiction as a genre:

"There are countless examples here of the real power that science fiction has to address current events in a way that's safe and acceptable for most audiences, while speaking very seriously about them to those who look beyond the spaceships and rayguns to the ideas behind the stories. Whether it was written one hundred years ago or just published last month, science fiction can give us warnings about the future, hope for the future, or just blissful escape into the future, visiting fantastic worlds that are light-years away – and as close as our bookshelves and televisions."

He then put the 1966 premiere of the original show into its historical context - a nation falling deeper into a war it didn't understand, locked with another rival in a staredown contest with civilization at stake, while the country tore itself apart at home. He then explained what the show did - something the suits at NBC did not expect:

It wasn't a particularly optimistic period for our nation, and there wasn't all that much going on to feel good about. Then, on September 8, 1966, a new show debuted. The network thought they were buying ‘Wagon Train to the stars,' but just two commercial breaks into the show, it was clear that this was something new and different. As episodes aired over the following weeks and months, it was undeniable that this show, set in the future but reflecting so much of the contemporary world, was breaking new ground each week. Like all great science fiction, it held up a mirror and showed us our failings and triumphs – not by beating us over the head with a message, but by making that message easy enough to discover for those who cared to see it. Star Trek dared to do this during an incredibly turbulent time, when it was risky to even acknowledge that the mirror existed, much less hold it up on network television.

Popular science fiction in America found its birth during the nation's most desperate hour - the Great Depression - and has seemed to be most robust when the times have been the most confusing. The genre is infused not so much by powerful optimism as it is a literary haven allowing us to ponder our fears without wallowing in them. What comes out is a belief that the future is ours to create.

Boldly Going

As an avid fan of science fiction and China, it has been a lot of fun watching the growth of Chinese science fiction. There are a half-dozen magazines, probably a half-million hardcore fans, and a growing interest in the genre.

But political overtones are tough to avoid, and a lot of science fiction is a allegorical social critique. In "Sci-Fi Ascendant" in the September 2006 edition of Seed magazine, Mara Hvistendahl wrote:

But this tendency to propose new ways of living—what James Gunn, director of the Center for the Study of Science Fiction at the University of Kansas, calls an "inherent critique of society"—means that the genre's position could still be somewhat tenuous in China. Certain subject matter is off-limits; one of Gunn's novels was translated into Chinese but couldn't be published because it dealt with student protests. The censors have reason to be wary: Much of Chinese science fiction has been inspired by political events, from the Cultural Revolution to the 1978 Democracy Wall to the Tiananmen Square protests.

None of which means that the growth of science fiction in China will slow - on the contrary, I suspect writers will simply use more care in their words. If the Science Fiction World website and the links from it are any indication, there is a lot going on.

But unlike the US, what I suspect will drive interest in science fiction in China will not be film or television, but games.

If you've ever played a game - I mean, really played it to the point where it begins to intrude on the edges of your reality - you find that it begs to be explored in other ways. Books, stories, fan fiction, illustrations, manga, and even the funky new art of machinima (stories told in the context of a game, and recorded as animated shorts - check out Red vs. Blue) grow from such immersion, and have this remarkable tendency to lead one off to explore other areas of "speculative fiction."

Watch what happens when Blizzard drops World of Starcraft II into the gaming world in the coming months. I suspect that will bump Chinese science fiction up another notch.

I don't see the next Star Trek movie making it into China, though. Here in China, the underlying messages of Trek, Star Wars, and much of the western science fiction canon would likely be considered borderline subversive.

Cross-Post: A Lu Xun Archive

In the Hutong 
Better read than dead 
2039 hrs.

The good cadres over at Marxists.org have put together a decent archive of some of Zhou Shuren's (Lu Xun) works. It is not, of course, comprehensive: his literary legacy exceeds ten million words (figure 110 book-length works), and this collection tends toward the more radical of his writings, but the stories here are excellent.

If you are new to the man eulogized as "the national soul" at his funeral in 1936, stop by and check out this collection. If you pick out one only, I recommend The True Story of Ah-Q, a short book-length work that is superb.

They have additional sections of interest to non-Marxists interested in China (like me,) including Frank Glass,Li Lisan, Lin Biao, Liu Shaoqi, Mao Zedong, and others.

Cross-post: Dell and the Wal-Mart Effect

In the Hutong 
Relieved to be out of October 
1926 hrs.

One of the reasons I review books here at Peking Review and not at some more established venue is my conviction that some books - or movies, or plays, or music, or art - cannot be reviewed on deadline. Or, more accurately, should not be reviewed on deadline.

Simple fact: some works need to be fully absorbed - "grokked," to borrow a phrase from Robert Heinlein'sStranger in a Strange Land - before they can be fully understood and appreciated.

I very rarely get feeling when I read a book about American business. But when I finished The Wal-Mart Effect, Charles Fishman's highly readable endoscopy of the infamous retail leviathan, I found myself unable to write a single word about it. So I passed it across the bed to the Party Secretary here in the Hutong, and I proceeded to meditate.

That was about six weeks ago. And now it is grokked.

Seeds of Destruction

Not that there is anything particularly complex about The Wal-Mart Effect. It is a deeply researched, highly readable, straightforward journalistic examination of Wal*Mart and the effect it has had on the economy, its customers, its communities, and its vendors.

Yet, despite what I thought was a highly balanced treatment of the subject, I walked away feeling like I had just read a modern tragedy. I haven't been able to figure out why. Now I think I know.

Fishman ends the book with an imprecation, urging readers to call upon their solons and regulatory bureaucracies to write an entirely new book of laws to shackle this Beast from Arkansas and prevent it from doing a Godzilla on vast swathes of the US economy. Yet by the time he issues this call to arms, you are already left with the conclusion that it won't be necessary.

What has made Wal-Mart successful, the book teaches us, will eventually kill - or at least cripple - the retailer.

Wal-Mart has grown immense by promising low prices, every day. It has created a business that is structured - financially, operationally, and psychologically - toward the single purpose of driving prices on every item it carries to the absolute lowest level possible, and then going one level lower.

All of which sounds great, until you begin to read about the compromises vendors are having to make to deliver that price. At some point in that spiral, something has to give, and all of the smart design and offshoring to Mexico or China will only get you so far. One is left with the unmistakable impression that if it ever comes down to a question of quality vs. price at Wal-Mart, the system inside the organization dictates that saving the extra nickel will win.

Low Prices...Forever. Bwaahahahahahahahaha!

The only problem with that for Wal-Mart is that it runs the risk of not only becoming the guarantor of low prices, but also gaining a reputation as a purveyor of the cheap. Say what you will about Americans, there are not many people in the world who will be happy trading in their hard-earned for a whole lot of inexpensive junk. Not, at least, when there are alternatives.

That tends to build a pretty high wall that looks set to limit Wal-Mart's organic growth, and limits the cash hoard it can use to change its strategy or acquire a new growth engine. Wal-Mart is stuck with Always Low Prices.

What will happen when Wal-Mart stops growing? When low prices aren't enough anymore? When competitors - in unreasonable defiance of economic logic - prove that people are willing to pay a little more for a noticeably better product and a more fulfilling buying experience?

Ask our friends in Round Rock, Texas. Michael Dell pioneered the idea that good computers could be made cheap and sold cheap. He also found out - the hard way - that a lot of people in the world wanted more out of a computer than just a low price. Now he is trying to turn the ship around and take another tack, and he is discovering that simply changing the way you think about your business - much less the way you do it - is really, really hard.

The Sad Ballad of Bentonville...and Bubugao

What happens when any major listed corporation stops growing? The hounds begin braying for blood. The takeover artists and hedge fund types move in. If you want to look into the Wal-Mart's future - or the future of any major retailer shackled to a stagnant business model - look at what happened to Sears. Store closings. Games with intellectual property. Facelifts. And then the vultures move in.

Personally, I'm ambivalent about Wal*Mart. I get a better experience at other retailers for about the same price, so when I am back in the U.S., I go to Target, Costco, Barnes & Noble, and the Apple Store.

But I feel a bit sad for the company. After all of its promise, after all of the superlatives, the hyperbole, the hope, and the fear, uncertainty, and doubt, the company has peaked, and it's going to be a long, ugly downhill run.

Living in China, one need only look at the host of companies battling each other to offer lower and lower prices, be they retailers, electronics manufacturers, or even online auctioneers, and see fodder for the financial carrion-birds. It is painfully clear that a lot of wealth is set to be destroyed as China's business leaders learn that a race for the basement means your company is pointing straight down at the ground.

Cross-post: Pulp Fiction for Guys, or My Guilty Pleasure

Back in the Hutong 
Dealing with the RSS Nightmare 
1945 hrs.

When I was growing up, I always equated pulp fiction with Harlequin romances and other, similar examples of the type of fiction my mom - only somewhat despairingly - called "bodice-rippers." This was stuff to be avoided, good for little more than some low-brow titillation.

Then, when I went to college, I stumbled upon a book series called "The Brotherhood of War" by an author named W.E.B. Griffin. The book I picked up, The Lieutenants, was the first in the series and had the name of somebody I respected on the cover heartily endorsing it. For the price of a paperback - and being in the need of some cheap amusement - I figured it was worth a try.

A quarter of a century and over two dozen books (in four series) later, I can comfortably say I'm hooked.

The books (W.E.B. Griffin is a pen name, the author is actually William E. Butterworth III) are essentially an easy-to-read form of historical fiction, deftly mixing actual events, historic figures, and a continuing cast of main characters who are usually aggregates of real people, whom Butterworth usually either knew personally or second-hand. Providing a dual-focus on the lives of the characters (the heroes are either career military, police, intelligence, or some combination thereof, and often independently wealthy) and the events both large and small, the narrative rips along, assuring that one of the books can easily be devoured in a single day.

And it's great stuff, filled with well-researched detail and highly likeable (and, in many cased, thoroughly detestable) characters. I have to say, after reading a couple of dozen of the books I'm starting to see some fairly common threads, but most of Butterworth's characters are fun to read about, and the opportunity to read about forgotten chunks of 20th Century History from the eyes of the participants is just too good to miss.

"The Brotherhood of War" series, for example, follows the careers of a half-dozen U.S. Army officers from the rout at Kasserine Pass in 1942 through the raid on the Hoa Loa Prison (Hanoi Hilton) nearly four decades later. In the course of the books, we get to look not only World War II, Korea, and Vietnam, but also at the occupation of Germany, Truman's forgotten (but effective) intervention in Greece in 1946, the Marshall Mission in China, the development of the helicopter, the French rout at Dien Bien Phu, the preparations of an invasion of Cuba, the creation and growth of the U.S. Army Special Forces, the Simba rebellion in the Congo, and a host of other events large and small that are of interest to history buffs and people with somewhat elevated testosterone counts.

"The Corps" series covers a similarly-sized group of career Marine officers who are all connected by their pre-World War II service in Shanghai, then move into the Intelligence and aviation establishment when the war begins. Focused largely on the Pacific, the books were my first introduction to the "China Marines," the politics around MacArthur's headquarters that often insulated him from the truth, wartime Washington D.C., Colonel Mike Edson and the Marine Raiders, Marine intelligence, the anti-Japanese insurgency on Mindanao in the Philippines led by an unknown U.S. Army colonel named Wendell Fertig, the Australian and American coastwatchers in the South Pacific, and a host of equally obscure but incredibly fascinating events and personalities.

"Honor Bound" is a somewhat shorter series, but focuses on a single OSS mission in World War II: the effort to try to pull Argentina out of its neutral-and-leaning-toward-Nazi Germany status and into the war as one of the Allies. Apart from a superb introduction to Argentina, the book opens the door on some of the more hare-brained of the OSS' missions in World War II, and the kind of people - good and bad - it pulled in to execute them. On the balance, it makes the OSS look somewhat less like keystone cops than the successor agency, the CIA, but it gives some clues as to why Harry Truman disbanded the OSS at the end of the war.

"Men at War" is a somewhat more thorough study of the OSS and some of the work it did both in Europe and on the Home Front in World war II.

"Badge of Honor" is a fascinating look at the Philadelphia Police Department in the early 1970s, when former cop Frank Rizzo was in the mayor's office.

These are Butterworth's main series. If you are a fan of Tom Clancey, Dale Brown, Herman Wouk, or Leon Uris, pick up the first title in any of these series. I can guarantee you'll enjoy the airplane read, and chances are you'll learn something to boot.

Cross-post: An American Library

Fourth Ring Road, 3.5 klicks from the Siyuan Bridge, Beijing 
Marvelling at the truly legendary traffic 
1937 hrs.

Not too long ago I realized that my appreciation of books went somewhat beyond what is considered normal. I guess the light went on when I designed my home office to hold 2,000 volumes, then filled it up three-quarters full as soon as it was complete.

Hello. My name is David, and I'm a biblioholic.

American Penguin

Despite having what I would consider a pretty decent education, I realized that I've missed more of the classics than I care to admit. I considered the idea of going to a foreign languages bookstore here in Beijing and scooping up handfuls of Penguin Classics, but then realized that Beijing's harsh climate would ensure that by the time my five-year-old was ready to enjoy them, they'd be falling apart.

My mom went to town on her collection of classics, and the walls of her study in Los Angeles are covered with the elegant volumes of Easton Press. Easton does a great job - the leather covers and binding, gold-edged acid-free paper, and carefully varied sizes and cover textures to give the feel of a library filled with heirlooms.

Easton Affection

I hovered for years on the verge of buying Easton Press volumes, but I kept holding back. The prices are high, to be certain, and that was part of it. On my last trip to visit my mom in July, thumbing through Easton's Jules Verne, I realized what was bothering me: the books are almost self-conscously beautiful, as if their primary purpose is decorative, or indeed designed to impress the visitor with the culture and literacy of the owner. They look, in short, ostentatious, the literary equivalent of the kind of Louis XIV-Whorehouse-Modern gilt-edged overwrought style that passes for decor in many of the restaurants and residences here in Beijing.

So I was stuck between the biodegradable Penguin paperbacks on one end and the effete and expensive Easton volumes on the other.

Just Right

Then, about a week before my return, I was cruising the bargain racks at the front of the new Barnes & Noble at the Westside Pavilion and I came across a competitively priced volume of Philip K. Dick books. It was shrink-wrapped and had a black paper dustcover with Dick's photo and a list of the four novels included therein. I bought it, along with a handful of other necessities, took it back to my hotel room, and set it alongside the three dozen other books I'd purchased on the trip. (See? I told you I'm a biblioholic.)

And promptly forgot it.

When I got back to Beijing, I catalogued and shelved my new books (yes, I know), and finally came to the P.K. Dick volume. I removed the cellophane and was awestruck. The binding was cloth-covered hardcover, but the cover was flexible enough (and the volume small enough) to be held comfortably in the hand. The paper was acid-free, and there was one of those little ribbons for marking your place (no dog-ears, please.) The spline was tastefully and elegantly embossed with the author's name.

All for the retail price of around $13.

There's more.

Inside the dust jacket there is a long list of volumes of American authors offered by the publisher, TheLIbrary of America (LoA), stretching from the earliest days of the colonies to more modern fare, all delivered in LoA's trademark elegant but affordable packaging. This was it. An American library for someone of modest budget that would outlive me and possibly even make it to my grandkids. What is better, LoA is a non-profit, doing their bit to keep classics in heritage formats and charging just enough to support the effort.

If you are building or fortifying your library of American authors, there can be no better source. As for me, the P.K. Dick volume is no longer alone: I just ordered an LoA volume of Jack London and four volumes of John Steinbeck from Amazon.

Before you buy, though, check out the LoA website for subscriptions. After ordering the entire Steinbeck library from Amazon, I found that LoA was offering it for about 85% of what I paid for them through Amazon. I harbor no resentment - the money is going to a good cause - but I'll check the website first next time.

Cross-post: The Disasters we don't see coming

 

The Rift by Walter J. Williams, Harper Torch/Eos, April 4, 2002, 932 pages

You need not read much about China to get your fill of the disasters that are waiting to befall the nation. The government is doing all it can to prepare for calamity, but what we all know down deep inside - but never talk about - is that preparation is beyond the government. If Hurricane Katrina taught us anything, it is that even the U.S. government never adequately prepares for the dangers they know.

All the more so the dangers that lie hidden in memory.

Life along Old Man River - the Mississippi/Missouri river complex that bisects the United States - is focused on the water. People worry about the floods that imperil the region on a painfully regular basis, and on the occasional hurricanes that roar up the river from the gulf of Mexico.

But dormant beneath the heart of that region lies an earthquake fault which, when it last twitched in 1812, produced the most massive series of earthquakes in recorded history on the lower 48 states. Those tremors, collectively called the New Madrid earthquakes for the town in southern Missouri near the epicenter, shook a half-million square miles. At the time, the region was sparsely populated, and the human effects were moderate, but the quakes changed the course of the Mississippi River and the geography of Missouri, Arkansas, and Tennessee.

Here is the kicker: the fault, known to geologists as the Reelfoot Rift, has a 90% chance of delivering a magnitude 7 or stronger quake in the next 50 years. And the region - the nation - is painfully unprepared for such a cataclysm.

What would happen the next time is the subject that drives Walter Williams' superb and epic novel The Rift. Told entertainingly around the stories of characters that parallel those in Mark Twain's Huckleberry Finn,The Rift delivers a picture of the worlds most prosperous nation brought to its knees by a sucker-punch disaster it should have seen coming.

Quakes followed by floods when levies broke, followed by toxic disasters, building collapses, nuclear emergency, systemic breakdown, civil unrest, and worse. It was a compound disaster, a confIuence of horrors that Williams made all too real. I couldn't put it down.

And when I turned the last page, I thought about China.

For all of the derision we heap atop the Department of Homeland Security, the Army Corps of Engineers, the Federal Emergency Management Agency, and the collective governments of New Orleans, Louisiana, Mississippi, and George Bush for their mishandling of the preparations for and aftermath of Hurricane Katrina, we have to believe that somehow the US government is far better prepared to alleviate human suffering in the wake of calamity that the Chinese government.

And those of us living in China have to hope we are wrong, hope that the Chinese watched the effects of Katrina, the tsunami, and similar natural system perturbations and took some hard lessons.

Cross-post: Winning the unwinnable

The Village by Bing West, Pocket Books, December 31, 2002, 400 pages

As we sit each day and have pumped to us still more images of Iraq descending into civil conflict, we are tempted to throw up our hands and say that America has no business trying to intercede in - and end - a civil war. We point knowingly to Vietnam, nod our heads sagely, and foreswear any future military venture unwinnable by sheer kinetic brute force.

And then we read a book like The Village, the true story of a team of 15 U.S. Marines who, without any special training or indoctrination, lived for two years in a village of 6,000 peasants in South Vietnam and for all intents and purposes ended the Viet Cong reign of terror in their district.

West (a Marine in Vietnam, later an Assistant Secretary of Defense and most recently a war correspondent in Iraq) could have been reading from the works of Mao when he noted that a revolution has to be fought among the people. Every counter-revolution or counterinsugency, West notes, must be fought the same way. It's not just about "hearts and minds." It's about "I'm going to put my ass on the line alongside you, every day, 24/7, because I understand that you trusting me is more important than any weapon I could bring to bear."

The book is an incredible read, a page turner, and with the end of every chapter you ask yourself "why didn't they tell us we could do this? Why, for seven years after the successes in Binh Nghia village, did America choose to pursue the failed strategies of the French and not the strategies we knew would - and could - work?"

You can read this book, understand it, and still argue that America had no business supporting the corrupt, detached regime in Saigon. But you cannot argue that the war was tactically a lost cause because an organized military cannot successfully fight insurrection. Follow that line of inquiry, and I guarantee that you will find reasons for the collapse of South Vietnam that are far more complex - and disturbing - than any of the oversimplified platitudes of either the "Vietnam was a bad war" Left or the "we could have won if if only the politicians had let us" Right.

And what about today?

If, one asks oneself, there were successes like this in Vietnam that have been forgotten both by the public and the military at large, what lessons are we failing to learn on the ground in Iraq (if any) that could change that situation. And what lessons from our past have we forgotten that would provide us insight into the situation we face today?

You might say this is all irrelevant, because Iraq is a lost cause and Afghanistan will surely follow.

But if you have a sense of history and of the direction the world is taking, you cannot help but realize that we will find ourselves facing more Iraqs, more Afghanistans more Vietnams in the future. It is not going to be a matter of "if." Rather it is a matter of "when" and "whom."

We failed to learn the lessons of Vietnam the first time, and it has landed us in Iraq today. In The Village,Bing West reminds us that perhaps it's time we realized that our defeats have far more to teach us about ourselves and our future than our victories.

Cross-post: Risk: why I now get it

Against the Gods: The Remarkable Story of Risk, by Peter L. Bernstein, Wiley, 1998, 383 pages

This is one of those books that I put on my Amazon wish list something like five years ago, ordered about two years ago, and finally got a chance to get through it thanks to some abnormally regular travel over the last couple of months. Picking up a book about the world of finance is not something I normally do, if for no other reason than I buy books to learn about stuff rather than as a homeopathic cure for insomnia.

But author Peter Bernstein, a lifelong "quant" with superb credentials, rises above both his profession and the subject matter with the grace of a historian-storyteller, and makes the history of risk and risk management so powerfully engaging I found myself searching online for the back stories of some of his characters. In fact, at one point, I told Gizmo that as a result of the book, for the first time in my life I was interested in mathematics beyond simple spreadsheet functions.

Against the Gods is that good, and a command of the meaning of "risk" is probably no more important anywhere in the world than right here in China, where we live with uncertainty every day, regardless of your profession. Reading through the book and occasionally staring out my hotel room window at Mt. Fuji in the distance late in December, I realized that in China we are so accustomed to doing business amid great uncertainty that we come to take it for granted.

Which, I guess, is fine if you're simply turning up the "squelch" knob on your mental radio to drown out the ongoing static and to keep yourself sane. Unfortunately, if you keep drowning out that static you wind up numbed to how bloody risky it is to do business of any kind here. That's not good, especially if you're putting your money into China, and arguably even more so if you've been charged to watch somebody else's. Read Tim Clissold's Mr. China, and you get what I mean.

Meantime, I've developed a taste for books about the history of the finance industry, and my order to Amazon last night included a couple of titles along those lines.

Originally posted 29 January 2007

Cross-post: Childhood's End

China Dawn: The Story of a Technology and Business Revolution by David Sheff, Collins, New York, March 2002

In these heady days of high-speed telecommunications development in China, all eyes are looking forward.

But sometimes it's worth taking a look back.

China Dawn is a chronicle of the early days of the Internet and broadband boom in China. While there are similarities with the Boom/Bust in the west, there are distinct differences, and David Scheff covers the early days with the wide-eyed, breathless hyperbole that is almost endearing.

A friend and San Francisco area neighbor of youthful venture capitalist Bo Feng, Sheff became a fly-on-the-wall for the emergence and growth of companies like AsiaInfo, Sina.com, and China Netcom (the latter in its original incarnation) and the creation of Chengwei, a venture fund focused on China tech startups and run by Feng and partner Eric Li.

Sheff takes us on a journey that has its cast of characters bouncing back and forth between China and California so much that my biggest problem in reading this book is sympathetic jet lag. What is most striking about the book are three issues that Scheff overlooks, but that come out in the narrative.

First, it is a sad statement about China that people like Feng and Li had to live on two sides of the world to do get capital into Chinese startups. In a country with trillions of dollars in savings and hundreds of billions in foreign reserves, two guys who wanted to start a venture capital fund had to go to San Francisco, New York, New Haven, and points between to pull together a comparatively paltry $60 million. It should have been possible to tap global financial markets from Shanghai, but the minimal importance institutional investors attached to China and the PRC's lack of decent financial infrastructure made necessary a process that is maddening in its wastefulness of time and money and in the personal toll it took on investors.

Of course, less than a decade later, it's all changed - there is now so much money coming into China that your average entrepreneur trips over it.

Second, one gets the feeling that China's powers-that-be treated Edward Tian a bit shoddily. That someone like Tian with some pretty obvious business and management skills was largely sidelined when China Telecom and China Netcom were restructured confirm power, not money, drive the decisions around China's telecom sector.

Caveat investor.

Finally, raising money on China's infobahn was never quite the walkover it was in the States. Bo, Li, and many of the entrepreneurs they backed (including Tian in his AsiaInfo days) didn't just write business plans and wait for the dumb foreigners to dump cash on them. Most of the characters we meet in the course of the book were living on almost no sleep, no family life, and jetlag, all while silently praying that Wu Jichuan didn't do something to bring the whole show down on their heads. Plenty of dumb business got funded, but you can't help but feel Web 1.0 in China was far more the product of sweat and blood than its American counterpart.

The unique perspective of the fly-on-the wall that Sheff brings to this story ensures that many other important stories are not told. There was far more to the growth in the Internet in China than what Bo Feng and Eric Li dealt with. But for this book, that's almost beside the point. His point of view may deny Sheff journalistic detachment, but it provides us with the closest thing to an "I was there" viewpoint available in the English language today. 

Originally posted 9 October 2006

Cross-post: To have a lever long enough

Race to the Bottom: Corporate Complicity in Chinese Internet Censorship by Rebecca MacKinnon, Human Rights Watch vol. 18, no. 8(C), August 2006

If nothing else, Rebecca MacKinnon has done a superlative job in pulling together into a single volume a treatment of the issue of Internet censorship in China as allegedly assisted by major U.S. companies, specifically Yahoo!, Microsoft, Google, and Skype. And for that, all of us should be grateful, because it provides us all with an opportunity to evaluate the position taken by activists working to change the behavior of these companies.

If for no other reason, this is a work that must be read and considered by everyone with an interest in the issues. Ms. MacKinnon is never bashful about stating her position or that of the publisher of the report, and there is no attempt to balance the discussion, but frankly I wouldn't expect that. This is an advocacy document, not a piece of journalism, and it's a damned good piece of advocacy.

To her credit, the report is a good read, and she articulates the positions more clearly than most have in the past. Frankly, I'm in general agreement with part of her premise - that there is more companies can and should be doing about this issue. After that, however, I'm afraid we part ways.

I have two major issues with the report that I think draw from its credibility and need to be addressed.

Simple Recommendations. Or, Not...

First is the contention made in the executive summary that:

"Human Rights Watch does not believe that the choice for companies is to either continue current practices or to leave China. Rather, we believe companies can and should make ethical choices about what specific products and services they will provide to the Chinese people––and the manner in which they are provided––without playing a pro-active role in censorship or collaborating in repression."

In the cases of none of the four companies singled out in the report are specific recommendations made about which "specific products and services" should or should not be offered. What is provided at the end of the report is a series of seven recommendations to Internet companies operating in China, which boil down to:

1. Lobby the Chinese government to end censorship of the Internet. (See my next point below)

2. Refuse to participate in or facilitate infringements of the right to free expression, information, privacy, association, or internationally recognized human rights.

3. Never turn over personal user information if it could be used to prosecute a user. To ensure this happens, pull your servers with this data out of China.

4. Never censor any material unless required to do so in writing. Stop any proactive effort immediately.

5. Use all legal means to resist demands for censorship.

6. Document all censorship cases

7. Encrypt all email.

All of which sounds perfectly reasonable. What never happens in the course of the report is an analysis of whether or not it is possible to follow these practices and be allowed to operate in China. With all of the resources available to her, Ms. MacKinnon and her assistants never take the time to analyze with the kind of microscope an investment analyst would use is whether or not it is actually possible for Microsoft, Google, Yahoo! and Skype to do business in China under these requirements.

So We Lose a Few Internet Companies. We Have More.

"The display of politically objectionable content can result in reprimands to company management and employees from the MII, the State Council Information Office, the Communist Party’s Propaganda Department, and/or various state security organs, accompanied by warnings that insufficient controls will result in revocation of the company’s license."

A somewhat knowledgeable reader can see the issue quite clearly - HRW requires that Internet companies refuse to "participate in or facilitate" infringements on free speech. And yet the report itself acknowledges that this kind of behavior could result in the revocation of a business license.

The question, of course, is whether the government would actually shut down these companies. Unfortunately the only way to test that is to have one or more companies step up and actually operate according to HRW's recommendations. Since nobody wants to be the sacrificial chicken, Ms. MacKinnon proposes the modern equivalent of Russia's political kommissars standing behind ranks of soldiers ordered into battle with orders to shoot if they try to retreat. She proposes legislation to force companies to challenge the will of the Chinese government.

(Worse, she suggests that U.S. companies would only be able to hand over user data to the Chinese government in cases determined acceptable by the U.S. Department of Justice. Under no circumstances would the Chinese government find this acceptable - it is redolent of the sort of extra-territoriality provisions forced on the Chinese during the period of unequal treaties and would invite an unequivocal response.)

Here is the question: how long would any Internet company, Chinese or foreign, be allowed to operate in China if it encrypted all email, refused to turn over personal information, moved its servers offshore, and demanded a writ each time it had to block a site or filter a word?

Does anyone with experience running a real business in the PRC, Chinese or foreign, doubt that taking such actions would be perceived by the Chinese government as the electronic equivalent of aiding, abetting, and harboring criminals? Is there any question that such actions would likely irritate some fairly senior people in government? Because in a land where rule of law is in its infancy, it would not require a court order to shut the doors of even the largest Internet company. All it would take is for a small number of well-placed regulators or police officials to lose their patience with a company and the axe would fall.

Something, again, that Ms. MacKinnon does not deny. She merely implies "HRW believes" it to be possible to act according to their requirements and still operate in China.

Fair enough. I "believe" she and HRW are wrong. And nether of us will be proven right or wrong until somebody does it. Any volunteers?

Moving the Immovable

My second objection to the report is the document's implicit conviction that if U.S. companies make a principled stand, somehow they will change the nature of the Chinese government. From the recommendations:

"Lobby and attempt to convince the Chinese government and its officials to end political censorship of the Internet."

Perhaps it is something in our psyche as Americans that believes that we can change anything if we work hard enough. I was raised to believe that this is an admirable trait. I have come to realize that there is a fine line between conviction and hubris.

With all of the government relations activity that companies engage in, the single most important aspect of that activity is developing an understanding of the broader policy agenda. Despite the misperception that MNC public affairs staffs, agencies, and industry associations actually help form policy in China (suggesting that Beijing operates the same way Capitol Hill does,) the reality is quite different. The only occasions on which companies are able to influence policy is when they are able to align themselves with or help direct politically powerful local interests in their lobbying efforts.

Despite the considerable aggregate value of foreign investment in China, the marginal value of any one company to the nation's future in 2006 is in decline, and its political power with it. No longer do the nations leaders spend considerable parts of their schedules meeting with CEOs. The nation is awash in foreign cash. It boasts an economy that is growing beyond the most optimistic projections of its reformers. And it is coming to grips with a sobering reality - it has arrived at this place by selling off its best assets, it has created powerful competitors for its own nascent companies, and it still faces intractable economic issues.

Against such a background, the traditional levers wielded by foreign firms in their relationship with the government - the carrot of more investment, greater employment, and technology transfer vs. the stick of taking it all to India or Southeast Asia - are proving too short to move policy. What is worse, the element within government that sees foreigners as increasingly unwelcome interlopers and opportunists is growing. While it is unlikely that such sentiment will spill over into an outburst of anti-neocolonialism, it means that until rule of law is firmly established in China, companies operate in the PRC on the good graces of the government, and whatever levers remain to companies are used sparingly and in the interest of survival.

Can Companies Incite Social Change? Do We Even Want Them To?

This is by no means an issue unique to China or to this moment in history. In his book Empires of Profit: Commerce, Conquest, and Corporate Responsibility, Daniel Litvin debunks the myth that "Multinationals....ruthlessly [manipulate] governments and entire countries in the single-minded quest for profits."

The myth dies hard, given that it is one of the Great Beliefs of our generation. But in a well-researched, carefully documented analysis that touches on ten cases, Litvin makes a cogent case that corporate influence even in the most corrupt of governance is more illusory than real, a misperception best banished from either NGO analysis or corporate strategy to someplace where it can do some good - pulp fiction.

Litvin's primary conclusion is that compelling companies to become instruments of social change in the countries in which they operate vastly overestimates the abilities of these companies to bring about change. Social change is not brought about by brute force, whether it is the arms and armaments of the United States armed forces, the petrodollars of Shell Nigeria, or the vast media empire and soft power of News Corporation.

If China must change its ways in censorship, leaving it to the companies would be at best ineffectual, and at worst precipitate unintended consequences that would redound to the detriment of all - conceivably including a backlash against any foreigners and the Internet as a whole.

The burden of proof, as it were, appears now to lie with Ms. MacKinnon and HRW. Before embarking on a campaign to compel companies to change their ways, she is at least obliged to proffer some level of proof that the effort (and likely significant attendant commercial costs) have some chance for success.

To do any less would be disingenuous, as at present in the historical record as well as in the minds of the well-intentioned leaders and shareholders of the four companies she discusses, the likely end result of following her recommendations would be to force U.S. Internet companies out of China. I will give her the benefit of the doubt and assume that this is not her end goal.

Alternative Recommendations

It would be disingenuous of me to conclude without offering up my own solution to the situation. As such, I offer my own preliminary set of recommendations.

I. Companies

A. I agree that every company should operate under a clear code of conduct - what I dispute is a universal code. While there must be common values that underlie all codes of conduct, any code of conduct must be specific to its business, reflecting the fact that every business is unique and each faces its own unique ethical challenges and traps.

B. Companies need to be absolutely transparent with all of their audiences about the ethical challenges they face in China, and should be upfront about how they plan on addressing them. This means being upfront with investors, customers, regulators, and the community at large. At the same time, a company is obliged to be honest about the nature of the challenges it faces in China so that all of its publics are clear about what the company cannot change, what it can, and what it would cost the company to make those changes.

C. Seek coalitions with Chinese companies and entities who for their own reasons share the goals of limiting censorship.

II. Investors - Investors are the most critical force to guide company behavior. Investment in a firm doing business in China cannot be passive - it must be active and all of the hard questions need to be asked. If a company does not behave according to its own code of ethics, an investor is obliged to do all in his power, up to and including divestiture - to convince a company to act according to its own broader interests.

III. Activists and NGOs - Add capable business people to teams developing recommendations to companies to ensure that recommended courses of action are commercially practical as well as ethically correct.

IV. Foundations and Think Tanks - Study ways for the full range of groups and entities to build comfort among policy makers in China with the idea of a free and open Internet.

V. Users, including users in China - Make it clear to the company exactly how much the company's policies really affect you.

VI. Governments - Provide companies with every opportunity to govern themselves in these matters, stepping in with legislation only when self-governance has failed. When stepping in, ensure that the companies that have made a good faith effort are not penalized along with those who have not.

VII. Business Associations - Provide companies with assistance in establishing codes of conduct, and in supporting the development of independent bodies to assess corporate behavior and compliance.

VIII. In addition, there are recommendations in the HRW report that are worth following, so.

A. Investors should press for ethical company practices and respect for users' human rights, and should ensure that the company is doing all that is practical to ensure this.

B. Investors should press for a code of conduct and for companies to comply to it.

C. International organizations should study - and monitor - the ways in which non-transparent censorship in China contributes to the lack of a level business playing field and the extent to which censorship should be considered a barrier to trade.

D. Activists should work in concert with socially responsible businesses to develop technologies that will maximize privacy, ensure anonymity, and enable Internet users around the globe to circumvent Internet censorship, filtering, and blocking.

E. NGOs should conduct independent research and documentation of the ways in which companies are or are not complying with legislation and/or codes of conduct.

F. Foundations and NGOs should provide clearing houses of information through which users can better inform themselves about the ways in which the products and services they use may be limiting their universally recognized right to free speech and privacy

The Last Word

Creating a free Internet in China will not happen overnight, and in the end will not be driven by forces from outside of China. Foreigners have but an opportunistic, supporting role to play in the process, a process that is yet unfolding as the domestic news media becomes more assertive in its relationship with the government.

But the first indication that the drive to a free and open Internet is driven by forces outside of China will throw the issue into the laps of the state security apparatus, an event that will destroy the progress made to this point and thrust us back into the dark ages of the early 1990s.

Ms. MacKinnon and HRW should be commended on their report for giving their point of view an articulate outlet, and for keeping this issue on the corporate agenda. Now that they have done so, it is time for the debate over solutions to begin.

Originally Posted 14 August 2006

An exemplary China biography

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.