Jack Ma brings Alibaba to the U.S.
The following is a script of "Chairman Ma" which aired on Sept. 28, 2014. Lara Logan is the correspondent. Howard Rosenberg, producer.
By now you've probably heard of Alibaba, the Chinese Internet giant that's able to reach millions upon millions of previously unreachable Chinese consumers. The company went public this month on the New York Stock Exchange and became one of the most valuable in the world and Alibaba is just getting started.
Everything about the Alibaba story is unconventional. Beginning with its founder, Jack Ma, who gained global celebrity status these past 10 days, as his image became ubiquitous on business news channels and media outlets across America. We got to know Jack Ma before the onslaught, beginning over a year ago in China, where he talked with us about his relationship with the Chinese government, and his unorthodox business philosophy, which surprisingly, gives shareholders almost no say over how he runs the company.
Jack Ma: If you want to invest in us, we believe customer number one, employee number two, shareholder number three. If they don't want to buy that, that's fine. If they regret, they can sell us.
Lara Logan: In the U.S., the shareholder is usually first.
Jack Ma: Yeah. And I think they were wrong. The shareholder, good. I respect them. But they're the third. Because you've take care of the customer, take care of the employees, shareholder will be taken care of.
Ma's unconventional view didn't stop Wall Street from pouring $25 billion into his company, now listed on the New York Stock Exchange as "BABA." It's an Internet shopping behemoth, a collection of online marketplaces where buyers and sellers connect to do business. Most of the company's money comes from advertising and small transaction fees. On its most popular website, Taobao, users talk to each other, barter and engage in a way that doesn't happen on American e-commerce websites and Alibaba says there are close to a billion products for sale.
Lara Logan: If I'm buying a house, I can do everything from find an architect to buying doorknobs to furnishing the entire thing from start to finish. What else?
Jack Ma: Yeah. You can buy anything, as long as it's legal. Anything.
Lara Logan: Five, six years ago, you weren't even making a profit. In fact, in 2002, you made $1 in profit. And today you make how much?
Jack Ma: Billions.
Lara Logan: Billions of dollars.
Jack Ma: Yeah. Yeah.
It's now the biggest e-commerce firm in the world, dwarfing the combined sales of Amazon and eBay. And Alibaba has helped create hundreds of millions of Internet consumers, a whole new social class in Communist China, people who never had access to modern commerce before Jack Ma came along.
Lara Logan: And now you have 500 million registered users?
Jack Ma: Yes, yes. It's only, only like a little bit more than 40 percent of China population and we need more. We have over 100 million people visiting the site, shopping every day. Coming. And it's just the beginning.
When Jack Ma dreamed up Alibaba in 1999, the online world looked nothing like it does today. The most popular search engine was Yahoo, not Google. There were no iPods, iPhones or iPads. Only four out of 10 American homes had Internet connections. And the World Wide Web barely reached all the way to China, where retail stores were rare outside the big cities. For most of the country, there was no such thing as package delivery or credit cards. The only way to buy anything was face-to-face and in cash.
Jack Ma: When we started the e-commerce nobody believed that China would have e-commerce because people believed in 'guang-shi,' face-to-face, and all kinds of network in traditional ways. There's no trust system in China.
He had to overcome centuries of tradition by showing Chinese buyers and sellers that they could trust Alibaba with their money in this new virtual world. He did it by guaranteeing the transactions and creating his own payment system, an escrow account where Alibaba holds the buyers' money until the goods are delivered.
Jack Ma: Every day we finish more than 30 million transactions. And that means that there, you are buying things from somebody you have never seen. You are giving products to the person you have never met. And there are some guys you never know that he's going to take your products to that place, to that person. I want to tell the people that the trust is there.
Lara Logan: Because it's all about trust.
Jack Ma: It's all about the trust.
Now anyone, rich or poor, with access to the Internet and something to sell, can connect with hundreds of millions of potential customers on one of Ma's websites. Ordinary people in China, who never had a way to do business with each other before, today have a stake in the online world. That idea was revolutionary. It created millions of jobs and made Jack Ma a hero to millions of Chinese.
Lara Logan: So this is your old stomping ground, right?
Jack Ma: Yeah.
We met Jack Ma in Hangzhou, an ancient city in southeastern China famous for its beauty. This is where he grew up poor in the 1960s, during the chaos of Mao Zedong's Cultural Revolution, when the country was cut off from the West. Then in 1972, Richard Nixon came to his home town. It was the first visit by a U.S. president to Communist China and the city became a mecca for foreign tourists. Through them, 12-year-old Jack got his first glimpse of a world beyond China.
Jack Ma: The name Jack was given by an American tourist.
He told us how he taught himself English, walking up to foreigners and offering free tours in exchange for free lessons. Unlike many successful Chinese entrepreneurs, Jack Ma never studied in the U.S. He also had no status, money or connections. The only other way to get ahead in China was education and he failed the college entrance exam twice.
"I never touch keyboard before. I never using computer before. And I say, 'What is Internet?'"
Jack Ma: My parents do not want me to take examinations again.
Lara Logan: Because they didn't want you to fail again.
Jack Ma: They believed I would fail again.
Lara Logan: How did that affect you?
Jack Ma: That's a good question. Nobody ever asked me how that affected me before. It really affected me a lot. I failed for the first time, and then I ask for looking for jobs. I went to interview jobs for about ten or 15 times and all reject by people.
Lara Logan: Why did everyone reject you?
Jack Ma: I was not the standard, that normal people like...
Lara Logan: Because you were small?
Jack Ma: Normal. I was small.
Lara Logan: And skinny?
Jack Ma: Skinny, not handsome and, terrible, the way I talk. And they probably just don't like it.
Ma made it into college on his third try and became an English teacher. With no computing or engineering background, he's an unlikely tech titan but he says he was captivated by the Internet from the moment he first saw it in 1995 when he came to the U.S. as a translator.
Jack Ma: I never touch keyboard before. I never using computer before. And I say, "What is Internet?" He say, "Jack, you know, search whatever you want on the Internet." I say, "How can I search? What does search mean?" He said, "Just type." I say, "I don't want to type." Computers so expensive in China, I don't want to destroy it. He said, "It's not a bomb. Just type." So, I typed the first. Word called "beer." At that time, very slow, come on the American beer, Japan beer and the German beer but not China beers. So, I was curious. And I type, "China." No China. No data. Came back to Hangzhou with $1 in my pocket, scared, worried. And I came back and I said, "I want to do something called Internet."
"I tell the government, if people have no jobs, you are in trouble. Government will be in trouble. My job is to help more people have jobs."
His first two ventures failed. Four years later, he convinced some friends and former students, most of whom had never used the Internet, to invest in him and his vision for Alibaba. With just over $50,000 in seed money, the company was born. Today, it is valued at $231 billion and is headquartered in Hangzhou on a sprawling state-of-the-art campus that rivals any in Silicon Valley. Ma's personal fortune makes him the richest man in China and one of the most influential. It's impossible to run a business on Alibaba's scale without official blessing.
Lara Logan: You were quoted saying, "When you have millions of small companies using your site and billions of dollars in transactions every day, the government cares." So what do they care about?
Jack Ma: They care that I can stabilize the country. I tell the government, if people have no jobs, you are in trouble. Government will be in trouble. My job is to help more people have jobs.
Lara Logan: So usually when people succeed in China, they either have connections, political connections, or they come from a wealthy family. You had neither.
Jack Ma: No.
Lara Logan: And you've done this without interference from the government?
Jack Ma: Well, I never got one cent from the government. I never got one cent from China banks. So I'm very independent.
That was true when Alibaba began and most of its capital still comes from abroad. But more recently, some of its smaller investors have included institutions with ties to China's ruling elite. Alibaba has also benefited from Chinese government policies that make it difficult for foreign competitors to operate there. Ma explained how he walks a fine line with Beijing.
Jack Ma: I have a very strict talk to my teams. Never, ever do business with government. In love them. Don't marry them. So, we never do projects for government. If they come to us and say, "Jack, can you help with this?" Good, I will introduce friends to you who are interested in doing that. Or if you wanted me to do it, I will do it free for you. Just next time don't come to me again. Don't. Because of that, we keep very good love-relationship with the government.
When we pressed Ma, he acknowledged there are times he has to bow to Chinese authorities. Though he was surprisingly frank about a subject that is also sensitive among U.S. Internet companies, including Google, Facebook and Yahoo.
Lara Logan: You gather more information on Chinese citizens than anyone else in the country.
Jack Ma: You mean me.
Lara Logan: Yes.
Jack Ma: Yeah.
Lara Logan: So when the Chinese government comes knocking on your door asking for that information, how do you handle that? What do you do?
Jack Ma: Okay. We have a very strict process working with the government. If they want to do it, it's related with the national security, we'll work together. Any country, any citizen, anywhere, you have to work. I believe Google has to if the national security of the U.S.A. Facebook has to do it. Alibaba would definitely have to do it.
What worries some investors is the possibility that China could take control of the company and all of its assets at any time. And then there's Alibaba's unusual corporate structure, which puts all the power in the hands of Jack Ma and a small group of insiders.
[Arnold Schwarzenegger: First of all, I want you to put on this.]
But there's another side of him that's little known outside of China, where he's a celebrity. A cult of Ma reaches across the country and inspires almost fanatical loyalty among his employees and their families, who record his speeches and quote his sayings.
Here, he is dressed as a punk rocker performing for an enthusiastic audience of 20,000 Alibaba workers at a company anniversary celebration.
[Jack Ma (singing): You are so beautiful to me.]
The Chairman Ma show is now playing here in the U.S., bringing with it the potential of hundreds of millions of Chinese consumers for products made in America.
Lara Logan: So this is not Jack Ma's American invasion. This is not Google, Amazon, eBay, be afraid.
Jack Ma: We come to help, not invade. For example, bring the U.S.'s small bus business come to China, this is something that we can do better, because we have 100 million buyers today, every day. We don't know, three years, 300 million?