Keynote speech at International Career Fair, San Francisco, February 29, 2008
China has been the fastest growing economy in the 5000 year memory of human history. By quadrupling every 14 years, that’s almost 20 fold since reform began in 1978, China has left most of professional economists breathless in trying to keep up, much less explain why China has been so successful.
China is now a global economic force and has impact on the economic development in all corners of the world. It is a great trading nation, just next to the U.S. in scale and is most likely the third largest economy in the world already, having surpassed Germany sometime last year. In terms of purchasing parity, China has been the second largest economy for a number of years. Purchasing parity, another economic term, is why it is possible to take a salary cut and still thrive in China. A dollar or euro just goes much further there.
China is also fast becoming a major source of foreign direct investment in other parts of the world. Their exercise of multi-lateral and multi-faceted diplomacy, commonly called soft power, has been particularly notable in the 3rd world such as Latin America, Africa and elsewhere in Asia.
Of course, there are always nay Sayers that predict the imminent demise of China or the pop of the bubble, etc. One of these so-called pundits even wrote a book about the coming collapse of China. Since that book was published, China has doubled its GDP and now sits on top of nearly $1.5 trillion of hard currency reserve. If you wish, you can devote your energy criticizing China for human rights problems, official corruption and flimsy banking system, and to varying degrees you’d be right. But it would be hard to make a living at it.
But if you are interested in developing your career where the action is--and will be for a long time to come--China is the arena you should be looking into.
It has been thirty years when I first joined Chase Manhattan Bank and later Bear Stearns to advise American companies on doing business in China. In the early days, we used to try to make business appointments first thing in the morning from our hotel rooms and we’d get a busy signal even before we finish dialing--a most disconcerting experience. Today, China has roughly 500 million cellular phones and equal or more land lines. In some cities, completely wired in glass fibers, one can even order and get a phone installed the same day—not possible in countries with copper wire legacy systems such as America.
In those early days, there were just a handful of us doing this kind of work and one can hardly describe it as a career. Today, with China’s prominent place in the age of globalization, cross border business consulting, which was what I was doing, is a popular career choice and in demand, but it is not the only game in town. Let me simply enumerate some of the careers that have opened up with the emergence of China.
First of all, China has become a magnet for all sorts of professions seeking new and developing opportunities.
Jim Rogers, famous for starting the first mega private equity fund with George Soros, has written several books about China and is putting his money where his mouth is. He is cashing out of America and investing in China. He is also taking his family to live in China—well, not quite, but is moving to Singapore to get closer to where action is.
Dick Kramlich, senior partner of New Enterprise Associates, a major venture capital firm in the Bay Area, has some success investing in China and is so impressed with the potential that he too is moving to China. He will actually live in Shanghai to get even closer to where it is all happening.
One of Kramlich’s investment was Semiconductor Manufacturing International Corporation in Shanghai. SMIC was the first semiconductor foundry to be established inside China, wholly foreign owned with capital from the West and a management team headed by a Taiwanese executive. During the early period of this company, one out of three employees were returnees from the West, many from Silicon Valley. These returnees gladly took a 75% pay cut to get on the ground floor with stock options and subsidized housing and enjoyed the generally much lower cost of living.
Returnees with middle management experience have been able to land senior positions in China. Scientists and professors with their own lab in the U.S. have gone back to become head of research institutes and department heads. China has shown a hunger for talented individuals with valuable experience gained from the West.
But as I mentioned in the examples of Jim Rogers and Dick Kramlich, you don’t have to be ethnic Chinese or even Chinese speaking to find opportunities in China. Let me tell you the story of a French chef in Shanghai.
He was originally the master chef in San Francisco. The owner, a Chinese American, sent him along with the maitre ‘D and a manager to open a new fusion restaurant in the Xintiandi district of Shanghai. Any of you that have been to Shanghai would know that Xintiandi is the high profile, upscale place to be seen.
I had dinner there shortly after the restaurant opened and I asked the three of them how they liked living and working in Shanghai, none of whom speak any Chinese. Their enthusiastically responded that Shanghai is their future, San Francisco is passé. They expect to build their fame and fortune in China’s and for that matter, world’s most cosmopolitan city.
A few weeks later I had a networking breakfast meeting with an investment banker who had just relocated to Shanghai to begin a new career doing deals in China. He was also a non-Chinese speaking white American but he too was really excited about the prospect of working in China.
I told him that he reminded me of this restaurant in Xintiandi and the three founders there. He said, “Yes, yes, I know all about that place, I’ve eaten there many times.” I said, “Well, you know what I mean about your common background and putting a stake on the ground in Shanghai.”
He said, “You know, George, that restaurant is going to fail!” I was surprised since the restaurant had just newly opened. “What do you mean?” I said. The investment banker, with greatest authority declared, “Can’t you see, the fengshui of that place is terrible.” Sure enough, the next time I saw him, he confirmed that the restaurant had indeed gone belly up.
So, as you can see, sometimes a laowai knows more about Chinese customs than even an ethnic Chinese.
Of course, as China is increasingly integrated into the globalization trend, career opportunities are not all in China. Chinese businesses and companies are going to come to the U.S. and Europe and elsewhere to establish their presence for a host of usual reasons. Initially, local Bay Area travel service that caters to Chinese visitors was the first to profit. They know where Chinese visitors like to stay and eat and where to go to buy real Prada and Coach handbags. Investment bankers, lawyers, accountants, tax advisors, consultants, site selection experts, real estate agents are next to line up and offer their services.
Those that are agile and can see the opportunities will be successful. Let me mention one example. Up to now, though the situation in China is constantly changing, privately held companies have difficulty getting financing at home. A popular route has been a so-called PIPE linked to RTO transaction to get a back door listing on NASDAQ. PIPE means private investment into a public equity achieved by reverse takeover (the RTO part) of a shell company. By this transaction, the company ensures raising some capital as part of the exercise. Companies learned through disappointment that simply backing into a shell company without PIPE does not guarantee raising capital because of a lack of investor interest in pink sheet listings.
Once listed the company then worked hard to drum up investor interest, raise secondary rounds and eventually graduate on to the main NASDAQ board. There are private equity and hedge funds that find investing in promising Chinese companies via this route very lucrative.
There are law firms and boutique investment banks that specialize in this kind of financing. What I find particularly interesting is the public relations firm that helps the RTO entity gain traction with the investors. I found one firm that concentrates of serving Chinese companies. The PR firm formed an office in Hong Kong and regularly conducted seminars inside China on the IPO process on the U.S. stock market. The firm accompanies their Chinese client on their road shows and participation in investment conferences and they coach their clients on how to present themselves to investors in the best light.
So, what will it take to participate and establish a career based in China related businesses? There are the usual requirements that would qualify you and there is one specific “watch out” that you have to be sensitive to.
First, the basic attributes to succeed in any cross culture, bi-lingual career is the ability to form empathy with anyone that looks different, talks and thinks differently. If you see yourself as a hard nosed, successful entrepreneur or a fast track, go-getter executive and know everything about international business and you act on your self image, then you are likely to fail. Whatever your self image, you need to show respect and you need to know how to listen. You need to understand where your counterpart is coming from. To do this you need to spend time understanding Chinese culture and how they think, and you need to keep up with recent developments in China so that you know their priorities.
You need to be able to communicate. Knowing how to speak Chinese helps but for those of you in the audience that already know how to speak Chinese, may I remind you that speaking the language is not the same as communicating—the difference is between talking to each other or talking at or past each other.
Now some bad news. Any of you that decide on a career involving China, especially in Silicon Valley, needs to know that you run some risk of going to jail. No, not the Chinese jail, but the American jail. You should be aware that deep seated racial bias still exists with the U.S. government and the FBI. I am not joking. Please do not take this lightly.
Some of you may remember the spy case involving Dr. Wen Ho Lee of Los Alamos Lab. He did not even do any work with China. He was merely ethnic Chinese. At the time the right wing Republican Party was accusing the Clinton Administration of being soft on China and allowing precious missile technology to be stolen and sent to China. The Energy Secretary, Bill Richardson, promptly offered Dr. Lee as the scapegoat and Attorney General Janet Reno looked the other way. The outcome was a farce in which the presiding judge actually apologized to Dr. Lee for government misconduct.
This is no isolated case. There were Chinese American victims of racial profiling before Lee and continues to this day. Some of you may recall the famous double agent (or was it triple agent?) case involving Katrina Leung and her FBI handler, J.J. Smith. Until they were caught in bed together, the FBI LA office had no clue as to how information seemed to be leaking from their office. Their natural reaction was to suspect two of their top ranked agents who happened to be ethnic Chinese and women to boot, Anita Chiang and Denise Woo. They had distinguished careers up to then but suddenly they became the in-house Mata Hari’s. Their careers were abruptly terminated by FBI’s long standing practice of racial profiling and never got compensation by the government for wrongful termination. Later when JJ Smith was apprehended, he got three months probation.
More recently, there was a Bill Chen who was accused to selling shaker tables to a Chinese missile operation which he vigorously denied. Originally his Silicon Valley employer defended him but then the U.S. government told the company that if they expect to do any more business with the government, they need to fire Chen. A few months ago, the government dropped all charges but a disillusioned Chen said that his career is ruined and he is taking his family back to China.
I spoke to a biotech scientist who came to the government’s attention because he was holding a nice job and felt secured enough to buy a house. He needed help with the down payment so his parents and brother wired him $20,000 from China. The Homeland Security folks apparently concluded that something fishy was going on and turned his life upside down. At the time, China was well on its way to holding a trillion dollars of foreign reserve but our government agents can’t seem to believe private individuals from China has $20,000 to send and therefore something nefarious was going on.
I could go on and on. Go to my website, www.georgekoo.com, and pick the heading “Racial Profiling in America” and read more.
Those of you working in technology sector or in Silicon Valley have to be extra careful. The FBI special agent in charge of Silicon Valley has in public interviews proclaimed that the valley is crawling with spies sent from China. That means you and you and you (in the audience) are all potential spies. The agent’s name is Pryzbyla but no one has accused him of being an undercover spy for some Eastern European country.
If you go to China frequently, if you speak Chinese or if you work for a high tech company (and you don’t have to be all of the above, any one of those can put you under surveillance), you need to know about dual use and export license. Dual use applies to technology products and know-how that have civilian use but can also be used in military applications. Such items require export license which is obtained by applying to the Department of Commerce. Of course, export license is required for a lot of products made in Silicon Valley. Typical of bureaucracy, the range of products subject to license seems to only expand, but that’s another story. Go to my blog and you can see why I think the idea of dual use has hampered the competitiveness of American export.
My takeaway to you today is that you need to know the regulations governing export from the U.S., not just products but information as well. Sending your own technical publications to China could get you in hot water as it did in the case of Chi Mak, another miscarriage of justice. On the other hand, just looking at the increased interest in learning Chinese in K-12, you can see that everybody sees the importance of China in the coming century.
This is the best of times to pursue a cross border, cross cultural career and I wish all of you every success.
Showing posts with label speeches. Show all posts
Showing posts with label speeches. Show all posts
Sunday, March 2, 2008
Friday, November 23, 2007
Three Troubling Trajectories
Speech at Kyoto University, Economics Department, November 2007
Ladies and gentlemen,
I am honored to be invited to speak before you at the world renowned Kyoto University and it is a distinct personal pleasure to be here. I have been to Kyoto a number of times but have always treasured my first visit. It was in October 1975, just a little over 32 years ago. I was on business for SRI International and my then colleague and now dear friend, Takaoka-san, took time out to show me Kyoto. He was then the executive director of SRI’s office in Asia. He was obviously proud of Kyoto and proud to be an alumnus of Kyoto U. And his pride made my visit that much more memorable.
I really enjoy traveling around the world. Each time and each place affords so many opportunities to learn about history, culture and the diversity of the people that populate our world. For example, my wife and I just spend ten days in Sicily, our very first visit there. I learned from this trip that Sicily was probably one of the earliest beneficiaries of ethnic diversity. You see, Sicily has rich soil constantly added by active volcanoes, lots of sun shine and a warm climate—a California of the Mediterranean. Many people came to settle there, Phoenicians, Greeks, Romans, Byzantines, Moors, Normans and now young Chinese selling souvenirs at tourist attractions. Each brought their culture and values to enrich Sicily and added to the island’s rich heritage.
I will be coming back to Sicily later in my talk. But I am here today to talk about China, Japan and the U.S. Except for elementary school education in China, I was educated in the U.S. and grew up in America. I have been visiting China regularly on business consulting assignments since 1978. I write commentaries about the sometimes troubled U.S. China bilateral relations. I think I know the two countries pretty well. I have been to Japan less frequently and can not claim to be an expert on Japan. So forgive me, if my presentation today appears unbalanced.
Nonetheless, I would like to take this opportunity to present some personal views that may sound blunt and direct. I hope you will forgive me if some of my statements sound untactful. My American upbringing is urging me to “tell it like it is,” and I would be remiss to pass up this chance to share some very serious concerns with this distinguished audience by obscuring my remarks in polite but ambiguous language. I hope you’ll find my remarks provocative but not offensive.
Some might argue whether China, Japan and the U.S. are the three major powers in the world, but there can be no doubt that they are the most important nations around Asia Pacific. Each shares many common interests but also has important differences in values and priorities. Each faces some ominous dark clouds in the horizon that I would like to discuss with you. The peace and stability of the Asia Pacific region depends on the three countries getting along with each other and staying in good health.
First, let’s talk about China. When I first went to China on business trips, late ‘70s to early ‘80s, just trying to place a phone call to make an appointment was a frustrating experience. There were so few telephone lines in Beijing in those days that I would get the busy signal even before I finished dialing the number. Today there are 500 million cellphone users in China and no bottlenecks at the switch boards.
In 1985, one of my clients, a maker of automotive components, celebrated the formation of a JV in China. That same year, Germany’s VW JV in Shanghai started production. At the time China’s total yearly production of motor vehicles was less half of million, most of them trucks and buses. Only 5000 passenger sedans were produced that year. In 2006, 21 years later, China’s vehicle production exceeded 7 million of which about 4.5 million are passenger cars. So vehicle production has increased more than 14 fold over this period of time while passenger cars grew by a phenomenal 900 times. China is now the third largest auto producing country in the world, after Japan and the U.S.
Today, everybody knows that China’s economy has been doubling every 7 years for nearly the last three decades. For a long time, skeptics found it hard to believe that this kind of unprecedented growth was possible and doubted the official statistics. They would point out that 28 out of 29 reporting provinces report their annual GDP growth as higher than the national average—clearly a mathematical impossibility. It was discovered later that the central government’s calculation for the national average was too low and less precise than the regional reports.
How did China accomplish such phenomenal growth? The full explanation is much more complicated than I can present today but I would like to outline a few highlights that I think were key developments.
In the early 1980’s, China removed the commune system in the rural sector. Farmers were essentially free to plant what they want and to pursue other livelihoods. Many, especially those living south of the Yangtze River became wealthy and even had time and energy to start small businesses. This was the beginning of the township and village enterprises which played an important role in China’s early economic reform.
Shortly after, China began a small experimental step and established a handful of special economic zones, most notably Shenzhen right next to Hong Kong. Hong Kong business took almost immediate advantage and moved their factories from Hong Kong to next door to maintain their competitive cost advantages. The whooshing sound that Ross Perot predicted for the U.S when North America Free Trade Agreement was signed, actually took place in Hong Kong, leaving many multi-storied factory buildings empty.
Following the Hong Kong businesses were business people from Taiwan and Southeast Asia, virtually all of them ethnic Chinese, who began to locate their manufacturing inside China. During this time, there was still much internal debate in Beijing between those wishing to remain with the planned economic model and those wishing to pry the economy wide open. One of the senior leaders was Chen Yun（陈云）who famously coined the term, “bird cage” economics （鸟笼经济）. The nation’s economy, Chen said, must be kept in the cage. Sometime the cage can be loose and other times tight but the economy must never be allowed to fly away.
In 1992, Deng Xiaoping decided to break the debate in favor of the free market proponents. He made the now famous tour of Shenzhen and declared that “to get rich is glorious.” And thus, China opened its doors wide and began to attract foreign direct investments at a rapidly increasing rate, first $30 billion at year, then $40 billion, $50 and now over $60 billion annually. Today, China has become the most open of market economies in the world and the most attractive magnet for foreign direct investment.
In terms of economic policy, China’s approach from Zhao Ziyang to Zhu Rongji to Wen Jiabao has been cautious, step by step and trial and error. “Crossing the stream by groping the stones,” another of Deng’s saying, describes the approach. The policy makers saw what happened to Soviet Union when they quickly adopted the western capitalism without the controls and thus imploded. Beijing looked to Singapore as their template for development and gradually loosened their control as the economy expanded.
In the early 1980’s China approached the World Bank for development loans. Unlike many 3rd world countries, China did not just want the money but also wanted to work with World Bank on the terms and conditions for those loans. Those terms and conditions, Beijing saw as a necessary learning process to establishing rules for internal control and to instilling financial discipline. To transition from a totally planned economy to a market economy, China needed outside guidance on rules, financial process and implementation of controls and they recognized the need and were willing to learn from outside sources. An interesting historical footnote is that the person that led the Chinese team in working with the World Bank was Zhu Rongji.
Subsequently, Zhu Rongji as premier dragged China into WTO over considerable internal opposition. He believed the discipline imposed on WTO treaty nations would be good for China and raise its competitiveness. By having to meet world competition, China would raise the quality of Chinese manufacturing and force inefficient factories out of business. The transition would be painful, as some 30 million or more for the workforce became under employed or unemployed. But give China credit, they have been willing to undergo short term pain for the long term benefits.
Today, China has become or will soon become the world’s third largest economy, amassed a foreign exchange reserve well over $1 trillion dollars, raised hundreds of millions out of the poverty line, and has become skillful in the exercise of soft power and making its presence felt in such places as Africa, South America and of course, the rest of Asia. Unfortunately, this is not the whole picture, but before discussing the dark side of China’s rise, I would like to summarize briefly what I think China has done right.
When China began its reform in 1978, the country had been cut off from the rest of the world for nearly 30 years. I believe their go-slow, trial and error approach to policy changes turned out to be the right approach. One aspect where the Beijing government did not go slow was recognizing early the importance of infrastructure investments. Not only the World Bank financing went toward infrastructure but Beijing even went into deficit spending to improve port facilities, increase power plants, double tracking of rails and construction of a network of superhighways. No other country, certainly not India, has made such a commitment to economic growth.
China is blessed with over 60 million ethnic Chinese living outside of the mainland including Taiwan. Many of these overseas Chinese, even if they are born outside of China, never lost their sense of identity and cultural ties to their motherland. Both the governments of Taiwan and Beijing go out of their way to encourage this sense of affiliation and kinship to their ancestral home. In turn, overseas Chinese including those living in Hong Kong were the first to invest in China. At the beginning of China’s reform before Deng’s southern tour of 1992, overseas Chinese investments were the major source of FDI. Taiwan investments, whether officially approved by their government or not, played a major role not only in job creation but in introducing to the mainland the methodology and approach needed to make consistently good quality products. (Some of you may be thinking, what about the recent rash of faulty products coming from China? Unfortunately, the propensity to take short cuts （上有政策，下有对策）is part of the Chinese character. I have a partial solution to this problem which we can discuss during the Q&A if you the audience is interested.)
For the last ten years, FDI has been coming from all over the world, Japan, S. Korea, the U.S. and Europe. Before then, it was mostly from overseas Chinese. No other country has this kind of diasporas to draw on with the possible exception of Israel. It was Beijing’s deliberate policy to risk letting a few Western flies in order to open its door wide open for foreign investment. Again, no other country has been as open or as successful.
Unfortunately, China followed the Western model of economic development without modification and failed to learn the price paid by all the predecessor nations that developed in that manner. Namely, it was economic growth without any regard to environmental consequences. Factories pollute, the society bears the cost and the common people paid the price in sickness and shortened life expectancy. Because of the size of China and the rapid rate of economic growth, the undesirable side effects are unfortunately magnified. The current generation of leaders is beginning to understand the grave consequences but have not found an effective way to deal with this problem. The more China’s economy expands, the darker is the air, dirtier the land and more toxic become the rivers and stream. The desertification of China has increased by 60% in 12 years. In 1994, 17.6% of China was desert. Now it is 27.5%. For those of us fortunate enough to enjoy fresh air, blue skies, clean water and green parks, this is a very depressing picture.
The reason this has become such a difficult problem for Beijing is their need to continue to expand their economy and create jobs to serve a huge population. The central government has made a deliberate policy to greatly increase college enrollment, an investment in human capital, but now they are faced with the need to find jobs that match with their training and aspirations, along with a range of new jobs over the entire economic spectrum. This drive to maintain economic growth is almost out of control. Local officials are still driven by how quickly their GDP is growing. Beijing has been trying to measure a “green” GDP by subtracting the environment damage and cost of remediation from the reported GDP, but so far they have not been able to find a way of calculating the down side of rampant economic growth and have not been able to convince the local officials to pay equal attention to environmental protection.
Today, any visitor to China, and one does not have to be an environmental scientist, can see the enormity of this problem and challenge. There is a real opportunity for Western technology to go into China and help restore the balance. Whether it’s the power plants or the motor vehicles, China is wasting a lot of energy and throwing off too many pollutants. China is already extremely water poor with only one quarter of the world average per capita and this problem will get worse. These are just a couple of areas where foreign technology can make a difference. Helping China remediate their environmental degradation not only can be profitable but is in our self interest. After all, the consequence of pollution respects no national boundaries.
Part of China’s problem is, of course, that it is not yet a rule based country. Too much latitude and inconsistency can take place when it is dependent on who has the authority. There is too much room for corrupt practices. China’s President Hu Jintao has again proclaimed a systematic crackdown on corruption at the recent People’s Congress. It remains to be seen how successful he will be. I think China is much too big for any central authority to be able to enforce anti-corrupt practices uniformly and effectively.
I do see help coming along in the form of the Internet and the cell phone. China recognized both as important communications tools and encouraged their growth while trying to control its use. I believe the flow of information will always outpace the authority’s attempt to monitor and restrict flow of information. Instead of control, I wish Beijing would find a way to channel the webpages, blogs, emails and sms in such a way as to bring more transparency to the country and allow the general population to shine the spotlight on the corrupt officials and wrong doers. Even if the central government does not encourage such practices, I think the use of these devices will inevitably increase, people’s voices will grow louder and the public will benefit.
Unlike the prevailing American sentiment, I do not believe a democratic form of government is necessarily the solution for China, certainly not the form of democracy that is being practiced in the United States today. In America, democracy is measured by the dollar sign. The likely success of a political candidate depends on the amount of money backing his/her candidacy. The first thing a candidate has to do, even running for the local dog catcher, is to raise money. Should the candidate be successful, the first thing after being elected is to raise more money, to ensure that as an incumbent, the candidate will not face a serious challenge for re-election.
In America, money has trumped all other aspects of the democratic process. The candidates themselves have to have a large war chest for TV ads but they are technically limited by the amount they can raise. Therefore, special interest groups compensate by raising unlimited amounts of money mostly for attack ads against candidates they do not like or issues they are against. These attack ads are unencumbered by facts and truths but deal with innuendos and outright lies. They can get away with lies with impunity, because they hide behind anonymous groups and storefront organizations.
In this environment, it is possible for a petty scam artist to make a lot of money for himself by posing as a big political donor. There is a case going on in America right now, a Norman Hsu who discovered that by giving investors’ money to cash hungry candidates in lieu of making legitimate investments, he became instantly respectable and have no trouble raising more money from others. There will always be con-artists but America’s current climate provides them the arena to make it big, albeit illegally. In short, the American democracy has drifted so far from the original ideals that the founding fathers would not recognize the country they founded.
The state of U.S. China bilateral relations is like a roller coaster riding on the rails of American domestic politics. Periodically, China becomes the convenient whipping boy for aspiring politicians who should know better but cannot resist the temptation to put the blame of American domestic problems on China. Trade deficit is just one example. In 1997, China accounted for 27% of America’s trade deficit while rest of East Asia, including Japan, accounted for another 47% for a total of 74%, almost ¾ of the overall U.S. deficit. In 2006, China accounted for 28% while rest of East Asia accounted for only 17% for a total of only 45%. A reasonable and objective observer would say that much of the manufacturing from East Asia has moved to China and that the ballooning trade deficit is due to fiscal policies of Washington and not because of any alleged predatory practices. However, the American propensity to spend beyond their earnings, the weak dollar, the barriers to export and other domestic causes are too difficult for politicians to tackle and it is just much easier to go on the podium and blame China for everything that is wrong.
For Washington (and for that matter for Tokyo) to feel threatened by China’s military expenditure is even more ludicrous. Former Secretary of Defense Rumsfeld made a fool of himself, when he, figuratively speaking, stood the deck of the American carrier off China’s coast line and accused China of aggressive intentions by daring to develop a navy with blue water capability. It will be years before China’s military firepower can match Japan’s technology and even longer to America. China has too much to do in their domestic agenda to entertain a confrontation with the U.S. However, one can understand China’s desire to continue their domestic agenda unmolested by foreign interference. Best assurance is to make sure they have a credible retaliatory strike capability. I would call it the porcupine defense.
I am absolutely convinced that the September 11 attack on the World Trade Center changed the course of world history. Just April of that year, the world was transfixed by the spy plane incident where a Chinese jet collided with an American air reconnaissance plane off Hainan Island. Thanks to the neoconservatives who had taken over Washington, China and the U.S. were on a collision course. After 9-11, Washington found a real enemy and China became a tenuous ally in the fight against terrorism instead of being the adversary of choice.
I don’t believe bin Laden in his wildest dream could have anticipated the success of 9-11 in unraveling America. Instead of finishing off the military task in Afghanistan, the Bush Administration allowed bin Laden to get away, charged into a war in Iraq and blundered the aftermath in the most appallingly incompetent manner. Thanks to Guantanamo and Abu Ghraib, the U.S. has lost all moral high grounds when it comes to human rights issues. The Bush Administration even invented a new terminology, “enemy combatant” in order to circumvent the Geneva Conventions—not being prisoners of war, the reasoning goes, means it was OK to deprive them of human rights and dignity. America’s message has become “do as I say, and not as I do.” American prestige world wide is at an all time low and Washington is finding out that even the world’s greatest military power cannot solve the world’s problems unilaterally and simply by relying on guns and bombs. Unless the next administration consists of capable, clear-eyed, non-ideologs willing to undo the damage of Iraq, I am afraid history will identify the Bush response to 9-11, not 9-11 itself but Bush response, to be the slippery slope of America’s decline. Of all the trajectories, this is the most troubling to me.
While visiting the city of Syracuse on Sicily, I learned an interesting history lesson. Syracuse was a powerful city state during the Greco period. In 413 BC, the invading Athenian navy was annihilated by Syracuse defenders which led to the decline of Athens and a relative peaceful period for Syracuse. For a brief while, Syracuse experimented with a form of democracy but then the people from Carthage came to invade Sicily. The people of Syracuse quickly elected Dionysius as their tyrant to lead them in the battle against the Carthaginians. Then as now, in times of war, people find comfort in relying on an authoritarian leader. I believe Bush’s advisors understood the psychology which is why he declared war on terror. Only difference is that Dionysius was a brilliant and effective leader.
Despite the gloomy future I see for America because of the self-inflicted injury by the Bush Administration, there are some inherent strengths that America possess that others can only envy. Thanks to a university system that continues to offer quality education, America remains the most desired destination for the best and brightest from all over the world. Right now, we are undergoing some back lash against immigrants, but by and large, America has had its welcome mat out for the best minds of the world. This is very important to America’s future because America’s school system below the college level is failing. Too many of the children born in America are not properly trained to face a future of high technology and globalization, instead they are getting an equal dose of pseudo sciences such as creationism and intelligent design along with biology and evolution.
Silicon Valley remains a beacon of strength for America. Silicon Valley continues to be the center of innovation because it continues to attract the world’s most entrepreneurial and talented people. As you may know, the two founders of Google are from Russia. One of the two founders of Yahoo is born in Taiwan. One of the original founders of Sun Microsystems who has become a high profile venture capitalist is from India. A Chinese who grew up in Vietnam then Hong Kong founded Lam Research a major semiconductor equipment company. A Chinese from Beijing who immigrated to South America, came to the U.S. for education founded Qume, a major printer company in its days. Silicon Valley is unlike any other parts of the United States. About 2% of the U.S. population resides in Silicon Valley and yet every year, around 30% of the all the venture capital is invested there. Why? Because this is where anybody with a bright idea has a chance to form a team and get financing, where failure in starting a venture is tolerated and counted as valuable experience. This tolerance for failure encourages people to take risks and think out of the box because they know that if they fail, it would not be the end of the world.
Can you see how my remarks so far is leading to what I am about to say about Japan? Historically, China and Japan have had a complicated relationship. For a long time, China was the teacher and Japan the student. Then in the 19th century, China became the student as the country began to send many of their brightest minds to Japan for further education and to learn how Japan was able to catch up to the Western powers so quickly. Many of these students such as Chiang Kai-shek became leaders of the revolution that overthrew the Manchu dynasty and led China into the republic form of government.
Then when economic reform began during the Deng Xiaoping era, Japan again became an important partner for China, not only for the loans on friendly terms but the opportunity to learn from Japan’s management style, particularly the just-in-time and continuous improvement manufacturing processes. Japanese trading companies were among the earliest to establish offices in China, not just in Beijing or Shanghai but quickly spread their presence to lower tiered cities. Matsushita established a manufacturing joint venture in Beijing even before China began the special economic zones. Nissan began a long relationship with Dongfeng Motors, at the time China’s largest automotive operation, and eventually formed a 50/50 joint venture. These are just some of the examples of the close economic and business cooperation between China and Japan and Japanese presence in China was generally earlier than the Americans or Western Europeans.
However, tensions between the two countries, and for that matter with rest of Asia, will persist until Japan rid itself of national amnesia concerning what happened in World War II. People of Japan have forgotten about the role of Imperial troops as brutal aggressors and only Hiroshima to remind them of being victims of the war. But other people especially in Asia have not forgotten about the war and will not sympathize with Japan’s self image. I believe it is in Japan’s national interest to face history forthrightly. Only then can other people forgive and begin to forget. Only then can future generations of Japanese travel around world and not be puzzled by the undertone of resentment. Japan has been the most generous nation in dispensing of foreign aid around the world, even more generous than the U.S., not counting American aid in weapons and arms. Surely Japan deserves to be a leading nation in the world and take a seat on the Security Council but I am very pessimistic that this will happen any time soon, not until Japan comes to terms with World War II.
Because of its single child policy to bring the population under control, China is facing a demographic challenge in a few decades when there will be fewer able bodied workforce to support an increasing population of retirees. Japan has a similar but more immediate problem. Japan’s population is already getting older and is the first developed nation to be shrinking. I am not a professional economist or a demographer and have no expertise in this subject area but I do have a remedy that might help reverse the trend. This remedy will be very difficult because it would require a drastic change in Japan’s national character. Here’s what I mean.
For centuries, Japan’s culture is insular, what I would call an island mentality. Only some people living on the islands qualify as Japanese—not the Ainu, for instance, and not ethnic Koreans who have been here for many generations. Even a Japanese national, say a trading company executive who has been posted overseas for a few years, when he returns, his family is often treated as gaijins (外人) by neighbors and schoolmates. In Japan, it seems to be very easy to be gaijins and very difficult to be accepted as Nihonjin. Yet at this juncture in history, Japan’s economy is in need of new blood, new people that can bring new ideas and new vigor. Japan needs to open up and welcome other nationalities to live and work in Japan, needs to create an environment that make these foreigners feel welcome and not feel like gaijins. China actively recruits overseas Chinese to return to China and has programs that invite foreign experts of any ethnicity to teach and work in China. The U.S. and especially Silicon Valley does not have any organized program, just an appealing, multi-ethnic and diverse environment where anybody from anywhere in the world could come and feel at home. In my humble opinion, it would be in Japan’s interest to review whether a systemic change in national attitude is possible and would be in the best interest of Japan. In just the recent memory, Japan transformed from a country that makes shoddy products to one known for the Deming Prize and famous all over the world for high quality, high precision products. Perhaps it’s time for another dramatic transformation.
Before concluding my talk, I have been asked to specifically comment on possible impact of the three trajectories on the tri-lateral economic relationships. To do so, we should first consider where China is heading in the coming decades. The anticipation is that China will:
• Develop a greater consumer oriented economy
• Concentrate on higher valued manufacturing
• Reduce pollution and restore the damaged environment
• Place special emphasis on increasing availability of clean water
• Encourage more inland investments
• Increase regulatory transparency in banking and in securities market
• Improve the enforcement of intellectual property rights
• Improve efficient use of energy in cars, power plants, and others and develop alternative energy and coal gasification
One does not have to be a professional economist to see that each of the above represents opportunities for western technology and businesses and profitable participation while helping China accomplish its objectives. However, compared to the U.S., Japan enjoys certain comparative advantages that are difficult to overlook.
Japan is closer to China than America by about 10 hours in flight time. Common similarities in culture and language are leverage-able for Japan companies in China. I personally believe that many of consumer products developed for the Japanese market enjoy inside track in getting acceptance in China’s consumer markets.
There is a form of “reverse” outsourcing that Japanese companies may have not considered. Japanese companies are already outsourcing some IT related work to China but have they considered outsourcing call center work to young Japanese living in China? Some American companies are already hiring your Americans, Brits and Aussies living in Shanghai or Beijing to handle customer service calls. The advantage of this arrangement is that the expat in China get paid wages considered generous by local standards but still no where near an expat package of compensation. The irate customer gets to complain to someone that sounds right next door and not far away from India. The employer gets a good deal.
In my view, the biggest comparative advantage Japan has over American competition in China is Japan’s lack of a political agenda in dealing with China. Japan does not share America’s invasive zeal to judge how other countries honor human rights. Ordinary business transactions are not subjected to restrictive export control in such a way that it no longer becomes a transaction of equals but between adversaries.
Lastly, Japan is host to a large number of students from China. These students represent a significant resource to the future development of Japan if only Japan can figure out a way to recruit and keep them and let them know that they will be welcome to stay, and not as gaijins.
Since all of you in this audience are professional economists, I am sure you are aware that globalization leads to open markets. In trade, there is a buyer and a seller and the transaction has to be a fair deal for both. In other words, it has to be a win-win deal and such win-win arrangements have no impact and are not impacted by trade surpluses or deficits. There is nothing that says that each country must maintain a balanced trade with each bi-lateral trading partner. In fact, it is downright impossible to do so.
Ladies and Gentlemen, I apologize for prattling on like this. I touch on just some of the challenges of the three troubling trajectories but alas, I don’t have any sure fire solutions to offer. I do feel that these trajectories will keep China, Japan and the U.S. fully occupied for years to come without having to create artificial confrontations. Again I thank you for this opportunity to speak and I look forward to your questions and exchanging ideas with you. Thank you very much.
Ladies and gentlemen,
I am honored to be invited to speak before you at the world renowned Kyoto University and it is a distinct personal pleasure to be here. I have been to Kyoto a number of times but have always treasured my first visit. It was in October 1975, just a little over 32 years ago. I was on business for SRI International and my then colleague and now dear friend, Takaoka-san, took time out to show me Kyoto. He was then the executive director of SRI’s office in Asia. He was obviously proud of Kyoto and proud to be an alumnus of Kyoto U. And his pride made my visit that much more memorable.
I really enjoy traveling around the world. Each time and each place affords so many opportunities to learn about history, culture and the diversity of the people that populate our world. For example, my wife and I just spend ten days in Sicily, our very first visit there. I learned from this trip that Sicily was probably one of the earliest beneficiaries of ethnic diversity. You see, Sicily has rich soil constantly added by active volcanoes, lots of sun shine and a warm climate—a California of the Mediterranean. Many people came to settle there, Phoenicians, Greeks, Romans, Byzantines, Moors, Normans and now young Chinese selling souvenirs at tourist attractions. Each brought their culture and values to enrich Sicily and added to the island’s rich heritage.
I will be coming back to Sicily later in my talk. But I am here today to talk about China, Japan and the U.S. Except for elementary school education in China, I was educated in the U.S. and grew up in America. I have been visiting China regularly on business consulting assignments since 1978. I write commentaries about the sometimes troubled U.S. China bilateral relations. I think I know the two countries pretty well. I have been to Japan less frequently and can not claim to be an expert on Japan. So forgive me, if my presentation today appears unbalanced.
Nonetheless, I would like to take this opportunity to present some personal views that may sound blunt and direct. I hope you will forgive me if some of my statements sound untactful. My American upbringing is urging me to “tell it like it is,” and I would be remiss to pass up this chance to share some very serious concerns with this distinguished audience by obscuring my remarks in polite but ambiguous language. I hope you’ll find my remarks provocative but not offensive.
Some might argue whether China, Japan and the U.S. are the three major powers in the world, but there can be no doubt that they are the most important nations around Asia Pacific. Each shares many common interests but also has important differences in values and priorities. Each faces some ominous dark clouds in the horizon that I would like to discuss with you. The peace and stability of the Asia Pacific region depends on the three countries getting along with each other and staying in good health.
First, let’s talk about China. When I first went to China on business trips, late ‘70s to early ‘80s, just trying to place a phone call to make an appointment was a frustrating experience. There were so few telephone lines in Beijing in those days that I would get the busy signal even before I finished dialing the number. Today there are 500 million cellphone users in China and no bottlenecks at the switch boards.
In 1985, one of my clients, a maker of automotive components, celebrated the formation of a JV in China. That same year, Germany’s VW JV in Shanghai started production. At the time China’s total yearly production of motor vehicles was less half of million, most of them trucks and buses. Only 5000 passenger sedans were produced that year. In 2006, 21 years later, China’s vehicle production exceeded 7 million of which about 4.5 million are passenger cars. So vehicle production has increased more than 14 fold over this period of time while passenger cars grew by a phenomenal 900 times. China is now the third largest auto producing country in the world, after Japan and the U.S.
Today, everybody knows that China’s economy has been doubling every 7 years for nearly the last three decades. For a long time, skeptics found it hard to believe that this kind of unprecedented growth was possible and doubted the official statistics. They would point out that 28 out of 29 reporting provinces report their annual GDP growth as higher than the national average—clearly a mathematical impossibility. It was discovered later that the central government’s calculation for the national average was too low and less precise than the regional reports.
How did China accomplish such phenomenal growth? The full explanation is much more complicated than I can present today but I would like to outline a few highlights that I think were key developments.
In the early 1980’s, China removed the commune system in the rural sector. Farmers were essentially free to plant what they want and to pursue other livelihoods. Many, especially those living south of the Yangtze River became wealthy and even had time and energy to start small businesses. This was the beginning of the township and village enterprises which played an important role in China’s early economic reform.
Shortly after, China began a small experimental step and established a handful of special economic zones, most notably Shenzhen right next to Hong Kong. Hong Kong business took almost immediate advantage and moved their factories from Hong Kong to next door to maintain their competitive cost advantages. The whooshing sound that Ross Perot predicted for the U.S when North America Free Trade Agreement was signed, actually took place in Hong Kong, leaving many multi-storied factory buildings empty.
Following the Hong Kong businesses were business people from Taiwan and Southeast Asia, virtually all of them ethnic Chinese, who began to locate their manufacturing inside China. During this time, there was still much internal debate in Beijing between those wishing to remain with the planned economic model and those wishing to pry the economy wide open. One of the senior leaders was Chen Yun（陈云）who famously coined the term, “bird cage” economics （鸟笼经济）. The nation’s economy, Chen said, must be kept in the cage. Sometime the cage can be loose and other times tight but the economy must never be allowed to fly away.
In 1992, Deng Xiaoping decided to break the debate in favor of the free market proponents. He made the now famous tour of Shenzhen and declared that “to get rich is glorious.” And thus, China opened its doors wide and began to attract foreign direct investments at a rapidly increasing rate, first $30 billion at year, then $40 billion, $50 and now over $60 billion annually. Today, China has become the most open of market economies in the world and the most attractive magnet for foreign direct investment.
In terms of economic policy, China’s approach from Zhao Ziyang to Zhu Rongji to Wen Jiabao has been cautious, step by step and trial and error. “Crossing the stream by groping the stones,” another of Deng’s saying, describes the approach. The policy makers saw what happened to Soviet Union when they quickly adopted the western capitalism without the controls and thus imploded. Beijing looked to Singapore as their template for development and gradually loosened their control as the economy expanded.
In the early 1980’s China approached the World Bank for development loans. Unlike many 3rd world countries, China did not just want the money but also wanted to work with World Bank on the terms and conditions for those loans. Those terms and conditions, Beijing saw as a necessary learning process to establishing rules for internal control and to instilling financial discipline. To transition from a totally planned economy to a market economy, China needed outside guidance on rules, financial process and implementation of controls and they recognized the need and were willing to learn from outside sources. An interesting historical footnote is that the person that led the Chinese team in working with the World Bank was Zhu Rongji.
Subsequently, Zhu Rongji as premier dragged China into WTO over considerable internal opposition. He believed the discipline imposed on WTO treaty nations would be good for China and raise its competitiveness. By having to meet world competition, China would raise the quality of Chinese manufacturing and force inefficient factories out of business. The transition would be painful, as some 30 million or more for the workforce became under employed or unemployed. But give China credit, they have been willing to undergo short term pain for the long term benefits.
Today, China has become or will soon become the world’s third largest economy, amassed a foreign exchange reserve well over $1 trillion dollars, raised hundreds of millions out of the poverty line, and has become skillful in the exercise of soft power and making its presence felt in such places as Africa, South America and of course, the rest of Asia. Unfortunately, this is not the whole picture, but before discussing the dark side of China’s rise, I would like to summarize briefly what I think China has done right.
When China began its reform in 1978, the country had been cut off from the rest of the world for nearly 30 years. I believe their go-slow, trial and error approach to policy changes turned out to be the right approach. One aspect where the Beijing government did not go slow was recognizing early the importance of infrastructure investments. Not only the World Bank financing went toward infrastructure but Beijing even went into deficit spending to improve port facilities, increase power plants, double tracking of rails and construction of a network of superhighways. No other country, certainly not India, has made such a commitment to economic growth.
China is blessed with over 60 million ethnic Chinese living outside of the mainland including Taiwan. Many of these overseas Chinese, even if they are born outside of China, never lost their sense of identity and cultural ties to their motherland. Both the governments of Taiwan and Beijing go out of their way to encourage this sense of affiliation and kinship to their ancestral home. In turn, overseas Chinese including those living in Hong Kong were the first to invest in China. At the beginning of China’s reform before Deng’s southern tour of 1992, overseas Chinese investments were the major source of FDI. Taiwan investments, whether officially approved by their government or not, played a major role not only in job creation but in introducing to the mainland the methodology and approach needed to make consistently good quality products. (Some of you may be thinking, what about the recent rash of faulty products coming from China? Unfortunately, the propensity to take short cuts （上有政策，下有对策）is part of the Chinese character. I have a partial solution to this problem which we can discuss during the Q&A if you the audience is interested.)
For the last ten years, FDI has been coming from all over the world, Japan, S. Korea, the U.S. and Europe. Before then, it was mostly from overseas Chinese. No other country has this kind of diasporas to draw on with the possible exception of Israel. It was Beijing’s deliberate policy to risk letting a few Western flies in order to open its door wide open for foreign investment. Again, no other country has been as open or as successful.
Unfortunately, China followed the Western model of economic development without modification and failed to learn the price paid by all the predecessor nations that developed in that manner. Namely, it was economic growth without any regard to environmental consequences. Factories pollute, the society bears the cost and the common people paid the price in sickness and shortened life expectancy. Because of the size of China and the rapid rate of economic growth, the undesirable side effects are unfortunately magnified. The current generation of leaders is beginning to understand the grave consequences but have not found an effective way to deal with this problem. The more China’s economy expands, the darker is the air, dirtier the land and more toxic become the rivers and stream. The desertification of China has increased by 60% in 12 years. In 1994, 17.6% of China was desert. Now it is 27.5%. For those of us fortunate enough to enjoy fresh air, blue skies, clean water and green parks, this is a very depressing picture.
The reason this has become such a difficult problem for Beijing is their need to continue to expand their economy and create jobs to serve a huge population. The central government has made a deliberate policy to greatly increase college enrollment, an investment in human capital, but now they are faced with the need to find jobs that match with their training and aspirations, along with a range of new jobs over the entire economic spectrum. This drive to maintain economic growth is almost out of control. Local officials are still driven by how quickly their GDP is growing. Beijing has been trying to measure a “green” GDP by subtracting the environment damage and cost of remediation from the reported GDP, but so far they have not been able to find a way of calculating the down side of rampant economic growth and have not been able to convince the local officials to pay equal attention to environmental protection.
Today, any visitor to China, and one does not have to be an environmental scientist, can see the enormity of this problem and challenge. There is a real opportunity for Western technology to go into China and help restore the balance. Whether it’s the power plants or the motor vehicles, China is wasting a lot of energy and throwing off too many pollutants. China is already extremely water poor with only one quarter of the world average per capita and this problem will get worse. These are just a couple of areas where foreign technology can make a difference. Helping China remediate their environmental degradation not only can be profitable but is in our self interest. After all, the consequence of pollution respects no national boundaries.
Part of China’s problem is, of course, that it is not yet a rule based country. Too much latitude and inconsistency can take place when it is dependent on who has the authority. There is too much room for corrupt practices. China’s President Hu Jintao has again proclaimed a systematic crackdown on corruption at the recent People’s Congress. It remains to be seen how successful he will be. I think China is much too big for any central authority to be able to enforce anti-corrupt practices uniformly and effectively.
I do see help coming along in the form of the Internet and the cell phone. China recognized both as important communications tools and encouraged their growth while trying to control its use. I believe the flow of information will always outpace the authority’s attempt to monitor and restrict flow of information. Instead of control, I wish Beijing would find a way to channel the webpages, blogs, emails and sms in such a way as to bring more transparency to the country and allow the general population to shine the spotlight on the corrupt officials and wrong doers. Even if the central government does not encourage such practices, I think the use of these devices will inevitably increase, people’s voices will grow louder and the public will benefit.
Unlike the prevailing American sentiment, I do not believe a democratic form of government is necessarily the solution for China, certainly not the form of democracy that is being practiced in the United States today. In America, democracy is measured by the dollar sign. The likely success of a political candidate depends on the amount of money backing his/her candidacy. The first thing a candidate has to do, even running for the local dog catcher, is to raise money. Should the candidate be successful, the first thing after being elected is to raise more money, to ensure that as an incumbent, the candidate will not face a serious challenge for re-election.
In America, money has trumped all other aspects of the democratic process. The candidates themselves have to have a large war chest for TV ads but they are technically limited by the amount they can raise. Therefore, special interest groups compensate by raising unlimited amounts of money mostly for attack ads against candidates they do not like or issues they are against. These attack ads are unencumbered by facts and truths but deal with innuendos and outright lies. They can get away with lies with impunity, because they hide behind anonymous groups and storefront organizations.
In this environment, it is possible for a petty scam artist to make a lot of money for himself by posing as a big political donor. There is a case going on in America right now, a Norman Hsu who discovered that by giving investors’ money to cash hungry candidates in lieu of making legitimate investments, he became instantly respectable and have no trouble raising more money from others. There will always be con-artists but America’s current climate provides them the arena to make it big, albeit illegally. In short, the American democracy has drifted so far from the original ideals that the founding fathers would not recognize the country they founded.
The state of U.S. China bilateral relations is like a roller coaster riding on the rails of American domestic politics. Periodically, China becomes the convenient whipping boy for aspiring politicians who should know better but cannot resist the temptation to put the blame of American domestic problems on China. Trade deficit is just one example. In 1997, China accounted for 27% of America’s trade deficit while rest of East Asia, including Japan, accounted for another 47% for a total of 74%, almost ¾ of the overall U.S. deficit. In 2006, China accounted for 28% while rest of East Asia accounted for only 17% for a total of only 45%. A reasonable and objective observer would say that much of the manufacturing from East Asia has moved to China and that the ballooning trade deficit is due to fiscal policies of Washington and not because of any alleged predatory practices. However, the American propensity to spend beyond their earnings, the weak dollar, the barriers to export and other domestic causes are too difficult for politicians to tackle and it is just much easier to go on the podium and blame China for everything that is wrong.
For Washington (and for that matter for Tokyo) to feel threatened by China’s military expenditure is even more ludicrous. Former Secretary of Defense Rumsfeld made a fool of himself, when he, figuratively speaking, stood the deck of the American carrier off China’s coast line and accused China of aggressive intentions by daring to develop a navy with blue water capability. It will be years before China’s military firepower can match Japan’s technology and even longer to America. China has too much to do in their domestic agenda to entertain a confrontation with the U.S. However, one can understand China’s desire to continue their domestic agenda unmolested by foreign interference. Best assurance is to make sure they have a credible retaliatory strike capability. I would call it the porcupine defense.
I am absolutely convinced that the September 11 attack on the World Trade Center changed the course of world history. Just April of that year, the world was transfixed by the spy plane incident where a Chinese jet collided with an American air reconnaissance plane off Hainan Island. Thanks to the neoconservatives who had taken over Washington, China and the U.S. were on a collision course. After 9-11, Washington found a real enemy and China became a tenuous ally in the fight against terrorism instead of being the adversary of choice.
I don’t believe bin Laden in his wildest dream could have anticipated the success of 9-11 in unraveling America. Instead of finishing off the military task in Afghanistan, the Bush Administration allowed bin Laden to get away, charged into a war in Iraq and blundered the aftermath in the most appallingly incompetent manner. Thanks to Guantanamo and Abu Ghraib, the U.S. has lost all moral high grounds when it comes to human rights issues. The Bush Administration even invented a new terminology, “enemy combatant” in order to circumvent the Geneva Conventions—not being prisoners of war, the reasoning goes, means it was OK to deprive them of human rights and dignity. America’s message has become “do as I say, and not as I do.” American prestige world wide is at an all time low and Washington is finding out that even the world’s greatest military power cannot solve the world’s problems unilaterally and simply by relying on guns and bombs. Unless the next administration consists of capable, clear-eyed, non-ideologs willing to undo the damage of Iraq, I am afraid history will identify the Bush response to 9-11, not 9-11 itself but Bush response, to be the slippery slope of America’s decline. Of all the trajectories, this is the most troubling to me.
While visiting the city of Syracuse on Sicily, I learned an interesting history lesson. Syracuse was a powerful city state during the Greco period. In 413 BC, the invading Athenian navy was annihilated by Syracuse defenders which led to the decline of Athens and a relative peaceful period for Syracuse. For a brief while, Syracuse experimented with a form of democracy but then the people from Carthage came to invade Sicily. The people of Syracuse quickly elected Dionysius as their tyrant to lead them in the battle against the Carthaginians. Then as now, in times of war, people find comfort in relying on an authoritarian leader. I believe Bush’s advisors understood the psychology which is why he declared war on terror. Only difference is that Dionysius was a brilliant and effective leader.
Despite the gloomy future I see for America because of the self-inflicted injury by the Bush Administration, there are some inherent strengths that America possess that others can only envy. Thanks to a university system that continues to offer quality education, America remains the most desired destination for the best and brightest from all over the world. Right now, we are undergoing some back lash against immigrants, but by and large, America has had its welcome mat out for the best minds of the world. This is very important to America’s future because America’s school system below the college level is failing. Too many of the children born in America are not properly trained to face a future of high technology and globalization, instead they are getting an equal dose of pseudo sciences such as creationism and intelligent design along with biology and evolution.
Silicon Valley remains a beacon of strength for America. Silicon Valley continues to be the center of innovation because it continues to attract the world’s most entrepreneurial and talented people. As you may know, the two founders of Google are from Russia. One of the two founders of Yahoo is born in Taiwan. One of the original founders of Sun Microsystems who has become a high profile venture capitalist is from India. A Chinese who grew up in Vietnam then Hong Kong founded Lam Research a major semiconductor equipment company. A Chinese from Beijing who immigrated to South America, came to the U.S. for education founded Qume, a major printer company in its days. Silicon Valley is unlike any other parts of the United States. About 2% of the U.S. population resides in Silicon Valley and yet every year, around 30% of the all the venture capital is invested there. Why? Because this is where anybody with a bright idea has a chance to form a team and get financing, where failure in starting a venture is tolerated and counted as valuable experience. This tolerance for failure encourages people to take risks and think out of the box because they know that if they fail, it would not be the end of the world.
Can you see how my remarks so far is leading to what I am about to say about Japan? Historically, China and Japan have had a complicated relationship. For a long time, China was the teacher and Japan the student. Then in the 19th century, China became the student as the country began to send many of their brightest minds to Japan for further education and to learn how Japan was able to catch up to the Western powers so quickly. Many of these students such as Chiang Kai-shek became leaders of the revolution that overthrew the Manchu dynasty and led China into the republic form of government.
Then when economic reform began during the Deng Xiaoping era, Japan again became an important partner for China, not only for the loans on friendly terms but the opportunity to learn from Japan’s management style, particularly the just-in-time and continuous improvement manufacturing processes. Japanese trading companies were among the earliest to establish offices in China, not just in Beijing or Shanghai but quickly spread their presence to lower tiered cities. Matsushita established a manufacturing joint venture in Beijing even before China began the special economic zones. Nissan began a long relationship with Dongfeng Motors, at the time China’s largest automotive operation, and eventually formed a 50/50 joint venture. These are just some of the examples of the close economic and business cooperation between China and Japan and Japanese presence in China was generally earlier than the Americans or Western Europeans.
However, tensions between the two countries, and for that matter with rest of Asia, will persist until Japan rid itself of national amnesia concerning what happened in World War II. People of Japan have forgotten about the role of Imperial troops as brutal aggressors and only Hiroshima to remind them of being victims of the war. But other people especially in Asia have not forgotten about the war and will not sympathize with Japan’s self image. I believe it is in Japan’s national interest to face history forthrightly. Only then can other people forgive and begin to forget. Only then can future generations of Japanese travel around world and not be puzzled by the undertone of resentment. Japan has been the most generous nation in dispensing of foreign aid around the world, even more generous than the U.S., not counting American aid in weapons and arms. Surely Japan deserves to be a leading nation in the world and take a seat on the Security Council but I am very pessimistic that this will happen any time soon, not until Japan comes to terms with World War II.
Because of its single child policy to bring the population under control, China is facing a demographic challenge in a few decades when there will be fewer able bodied workforce to support an increasing population of retirees. Japan has a similar but more immediate problem. Japan’s population is already getting older and is the first developed nation to be shrinking. I am not a professional economist or a demographer and have no expertise in this subject area but I do have a remedy that might help reverse the trend. This remedy will be very difficult because it would require a drastic change in Japan’s national character. Here’s what I mean.
For centuries, Japan’s culture is insular, what I would call an island mentality. Only some people living on the islands qualify as Japanese—not the Ainu, for instance, and not ethnic Koreans who have been here for many generations. Even a Japanese national, say a trading company executive who has been posted overseas for a few years, when he returns, his family is often treated as gaijins (外人) by neighbors and schoolmates. In Japan, it seems to be very easy to be gaijins and very difficult to be accepted as Nihonjin. Yet at this juncture in history, Japan’s economy is in need of new blood, new people that can bring new ideas and new vigor. Japan needs to open up and welcome other nationalities to live and work in Japan, needs to create an environment that make these foreigners feel welcome and not feel like gaijins. China actively recruits overseas Chinese to return to China and has programs that invite foreign experts of any ethnicity to teach and work in China. The U.S. and especially Silicon Valley does not have any organized program, just an appealing, multi-ethnic and diverse environment where anybody from anywhere in the world could come and feel at home. In my humble opinion, it would be in Japan’s interest to review whether a systemic change in national attitude is possible and would be in the best interest of Japan. In just the recent memory, Japan transformed from a country that makes shoddy products to one known for the Deming Prize and famous all over the world for high quality, high precision products. Perhaps it’s time for another dramatic transformation.
Before concluding my talk, I have been asked to specifically comment on possible impact of the three trajectories on the tri-lateral economic relationships. To do so, we should first consider where China is heading in the coming decades. The anticipation is that China will:
• Develop a greater consumer oriented economy
• Concentrate on higher valued manufacturing
• Reduce pollution and restore the damaged environment
• Place special emphasis on increasing availability of clean water
• Encourage more inland investments
• Increase regulatory transparency in banking and in securities market
• Improve the enforcement of intellectual property rights
• Improve efficient use of energy in cars, power plants, and others and develop alternative energy and coal gasification
One does not have to be a professional economist to see that each of the above represents opportunities for western technology and businesses and profitable participation while helping China accomplish its objectives. However, compared to the U.S., Japan enjoys certain comparative advantages that are difficult to overlook.
Japan is closer to China than America by about 10 hours in flight time. Common similarities in culture and language are leverage-able for Japan companies in China. I personally believe that many of consumer products developed for the Japanese market enjoy inside track in getting acceptance in China’s consumer markets.
There is a form of “reverse” outsourcing that Japanese companies may have not considered. Japanese companies are already outsourcing some IT related work to China but have they considered outsourcing call center work to young Japanese living in China? Some American companies are already hiring your Americans, Brits and Aussies living in Shanghai or Beijing to handle customer service calls. The advantage of this arrangement is that the expat in China get paid wages considered generous by local standards but still no where near an expat package of compensation. The irate customer gets to complain to someone that sounds right next door and not far away from India. The employer gets a good deal.
In my view, the biggest comparative advantage Japan has over American competition in China is Japan’s lack of a political agenda in dealing with China. Japan does not share America’s invasive zeal to judge how other countries honor human rights. Ordinary business transactions are not subjected to restrictive export control in such a way that it no longer becomes a transaction of equals but between adversaries.
Lastly, Japan is host to a large number of students from China. These students represent a significant resource to the future development of Japan if only Japan can figure out a way to recruit and keep them and let them know that they will be welcome to stay, and not as gaijins.
Since all of you in this audience are professional economists, I am sure you are aware that globalization leads to open markets. In trade, there is a buyer and a seller and the transaction has to be a fair deal for both. In other words, it has to be a win-win deal and such win-win arrangements have no impact and are not impacted by trade surpluses or deficits. There is nothing that says that each country must maintain a balanced trade with each bi-lateral trading partner. In fact, it is downright impossible to do so.
Ladies and Gentlemen, I apologize for prattling on like this. I touch on just some of the challenges of the three troubling trajectories but alas, I don’t have any sure fire solutions to offer. I do feel that these trajectories will keep China, Japan and the U.S. fully occupied for years to come without having to create artificial confrontations. Again I thank you for this opportunity to speak and I look forward to your questions and exchanging ideas with you. Thank you very much.
Tuesday, October 10, 2006
Leveraging one’s ethnicity in a flat world
Keynote delivered at the Haas School “Diversity in Business Conference” on October 13, 2006
We all know that the United States of America was founded by immigrants. Indeed this has been one of the unique but frequently overlooked strengths of this country. By and large, this country continues to keep its doors open, not just to the poor and downtrodden but also to the best and brightest other countries have to offer. As a consequence, the U.S. continues to be renewed by new blood, new ideas and new energy. In turn, people continue to migrate to the U.S. because this is the land of opportunity, where by dint of ability, dedication and willingness to work hard, anyone (at least virtually anyone) can realize the American dream.
Certainly no where else is this more true than here in the Bay Area or Silicon Valley and I will be using the two terms interchangeably. While the U.S. might be unique among nations, I submit Silicon Valley is unique within the U.S. It is this uniqueness that has made Silicon Valley the technology Mecca of the world. Let me offer just one of many indicators as to why Silicon Valley is unique. The Bay Area represents roughly 2% of the total population of the U.S. but takes in about 35% of all the venture capital invested in this country every year; in other words, anywhere from 15 to 20 times their fair share of risk capital.
Why is Silicon Valley unique? I believe there are two major reasons. It is by far the most diverse region in the world. Talented and motivated people from all over the world come to the Bay Area, perhaps first to attend school such as you folks and then stay because this is one of the best places to live. Secondly, this area has great tolerance for failure. Entrepreneurs know if they fail here in Silicon Valley, they can still hope to secure funding for the next idea they cook up. The venture investors here give credit for the experiences gained in starting a venture. Not so in most other places. In most places, failure means seppuku or at least having to skedaddle out of town. To know that it’s OK to fail is to give entrepreneurs courage to take on the risks of starting a venture. After all, the probability of failure of a new venture is about 4 out of 5.
One of the secrets of Silicon Valley’s success is the presence of immigrants. In fact, your professor Annalee Saxenian, Dean of School of Information, was the first to study and report on the phenomenon of the role of ICs; in her lexicon IC stands for Indians and Chinese. Her study showed that approximately 30% of the new ventures were started up by Chinese and Indo-Americans. This study dates back to 1998, the last year she studied, and I believe the proportion of start-ups by ICs has only gone up since her study. Among some of the more famous start-ups, Sun Microsystems and Exodus Communications had Indo-Americans as co-founders, Yahoo had a Chinese American co-founder and of course you all know the most successful start-up, Google, was founded by two Russian immigrants.
Mind you it wasn’t always like this. This morning you had the director of culture and diversity from HP as your leadoff keynote speaker. It is most appropriate that she should be the lead off speaker. After all, HP is the granddaddy of Silicon Valley and the HP Way continues to exert its influence on the business culture of Silicon Valley—recent pretexting adventure notwithstanding. However, even HP was not free from glass ceilings. The best known case involved a then young PhD from MIT who was a Chinese American and was the leader of a group in R&D. He was surprised one day, when a junior white engineer, who was assigned to him for training, suddenly got promoted over him and became his boss. That Chinese American was David Lam, who promptly resigned and went on to found Lam Research, one of the more successful semiconductor equipment companies in the valley.
Parenthetically, since I am myself a Chinese American, I am going to draw from my experiences with an ethnic Chinese point of view. But I think, and I hope, you will find that my experience and observations are reasonably valid for all immigrants that have landed in the Bay Area.
Even before David Lam was David S. Lee. Lee started his first company in 1969 called Diablo Systems, a company that made daisywheel printers. He sold the company to Xerox in 1972 for $28 million. One of the first things Xerox did was to replace David as the executive in charge, so David resigned and started Qume the following year. Qume continued to make refinements in the daisywheel printer and the company was sold to ITT in 1978 for $165 million. This sale returned 93 times original investment for the investors. David made his first million in 1972 when he was 34 and his sale of Qume was the first Silicon Valley company to be sold for over $100 million.
When David was raising venture funding for Qume, despite his track record with Diablo Systems, the investors insisted on the right to put in a CEO over David as a condition for their investment. When ITT bought the company, they made David the number one executive and then later made him a corporate vice president in charge of three divisions. At that time, ITT was in the top ten of Fortune 500 companies and David was undoubtedly the highest ranking Chinese American executive in Corporate America from Silicon Valley. He repaid ITT for their confidence in his management ability by staying with ITT until his division was sold to Alcatel, the French telecomm equipment company.
By the time David left ITT in 1984 he was already a legend in Silicon Valley. While he continued to acquire and run high tech businesses, he also began to think about –as he put it—working for future generations. He became politically active as a fundraiser. Being a Republican he supported most Republican candidates at all levels but he also supported Asian American candidates regardless of political affiliation. He encouraged all Asian Americans whatever their political persuasion to be active and get involved. To David, participating in the political process and having a place at the table was more important than the political affiliation. When Bill Bradley ran for the Democratic nomination for president, he was a visiting scholar at Stanford. David was among the first to host a dinner party for the senator so that some of the notable Chinese Americans in Silicon Valley could meet him.
David has served on presidential commissions for three successive presidents from George Bush Sr. to Bill Clinton to George W. He had been on the board of regent for the University of California system since 1995 and just recently stepped down having served his term. He was very aware of his responsibility as the only Chinese American regent to serve in a system where Asian American students represent more than 40% of the enrollment. He has been president of Chinese American associations, visible supporter of many Asian American causes and a tireless speaker at functions to encourage others. Even though public speaking is not his strongest suit, he accepts invitations that come his way because he believes in making a difference by example.
Pauline Lo Alker was born in China and grew up in Hong Kong. She came from a “traditional” Chinese family where she was told that her mission in life was to support her brothers. Her parents enter her to school a year early so that she could keep an eye on her older brother. Her dream was to attend Northwestern University, but her parents kept the acceptance letter and scholarship notification from her. In the end she and her brother left Hong Kong to attend Arizona State where Pauline took on a double major of music and mathematics. During her senior year she was introduced to the computer, which she took on with complete enthusiasm. After graduation in 1964, to her chagrin the only job open to her was to be a bookkeeper at Sears & Roebuck.
Pauline’s first break came a year after graduation when she met someone in the computer department of General Electric who offered her a job as a manuscript typist. Not exactly a plum job but at least it was in the right department. She rented an IBM Selectric, learned to type on it and took the job. A month a half later, a programming job opened and she applied and was selected over four others. Her high tech career was finally launched. By 1972, Pauline had moved to Silicon Valley to become the 37th employee of Amdahl Corporation, then a start-up computer company. She then moved on to mid-level management positions at Four Phase Systems and Intel.
Pauline came to prominence in 1980 when she joined Convergent Technologies, a computer workstation company, as their vice president of marketing. In four years she oversaw sales of half a billion dollars worth of workstations. Convergent was an early high flyer and she was the frequent spokesperson for the company. In 1984, Pauline started Counterpoint Computers, a builder of high performance computers, which was sold to Acer of Taiwan in 1987. She stayed on to run the U.S. business for Acer for a while. In 1990, she was recruited to run and turn around a small company, Network Peripherals, which she did turn around and got it ready for public offering in 1994. The company won the recognition as the most successful IPO from Silicon Valley in 1994. Since 1998 Pauline has continued to lead Internet related start-ups in Silicon Valley.
In the recent fifteen years or so, Pauline received many honors and awards. She wasn’t just the most visible Asian American women in Silicon Valley but was one of few pioneering women executives who have established their credentials in heretofore a mostly male high-tech industry. She was a popular and widely admired role model and she relished her position and took her responsibility seriously. She became the first woman to become the president of AAMA, then standing for Asian American Manufacturers Association. AAMA was and continues to be one of the best-known professional organizations for Asian Americans in Silicon Valley. When it was first formed, it was to serve as a networking and mutual aid organization for Asian Americans. Today, the organization is known in China, Hong Kong and Taiwan as the bridge to Silicon Valley. When Pauline stepped in to lead this organization, the energy level of the entire organization went up, there were more programs put together by more volunteers and attended by more people. Pauline called herself the “self-appointed champion of the young.” She organized and led workshops to teach young engineers about leadership and communication skills and other attributes necessary in order to become successful managers and executives. It was invariably the most popular and best-attended event.
David Lee and David Lam and Pauline were among the first wave of Chinese Americans that not only helped built Silicon Valley but made the statement that Chinese Americans were not just good technicians but can also be successful entrepreneurs and business executives. Contemporaneously, there were others that climbed the ladders of Corporate America such as Bob Lee who retired as the executive vice president of PacBell, Albert Yu the Sr. VP now retired from Intel who led the development of the microprocessors and Lee Ting who was a corporate VP of global logistics for HP who has gone on to become a senior executive of WR Hambrecht, an investment bank and currently serving on the board of Lenovo. Other than being successful in their profession, what they have in common is that they all believe in giving back and they have done this in various ways.
Of course, so long as we are talking about the early leaders, we must not overlook our own Chancellor Chang-lin Tien. How many of you have heard of the late Chancellor Tien? Here he was a short Asian guy, wore glasses and spoke with an accent, but he was a giant of a chancellor. He inspired students and faculty alike and he raised the profile of UC Berkeley throughout Asia. I won’t go into his life here, because all of you should already know all about him and his legacy on the Berkeley campus.
Why am I talking about the lives of all these people? Because these people went against the stereotype and broke through the glass ceiling. They were the pioneers and pave the way for others to follow and made it easier for all of you to succeed. Instead of being an advantage (which is the subject of today’s talk that I will get to) their ethnicity, accent, and physical appearance were held against them. They had to overcome the handicap imposed by the society’s stereotype and beat the odds. Because of their success, other entrepreneurs that followed them were able to obtain funding more easily and were more accepted as the CEOs and senior management of Silicon Valley companies. Today, at least in the Bay Area, seeing an Asian or an Asian woman as the CEO doesn’t raise eyebrows anymore. Virtually all the major venture capital funds now have one or more partners that are of Asian ancestry. Ten, fifteen years ago, an Asian partner was rare but today, so many business plans are coming from Asian entrepreneurs and having an Asian partner is an advantage when the venture capital firms are looking for deals.
While I am suggesting that the playing field is now more or less level here in the Bay Area for Asian Americans and other ethnic minorities, this is still far from being so elsewhere in the U.S. But what I want to suggest today is that with the globalization trend, or as Tom Friedman claimed in his best selling book, “the world is flat,” that it is possible for the multi-cultural, multi-lingual person to enjoy an edge over the mono-cultural and mono-lingual person. The person who can move easily around the world and who can establish rapport across language and cultural barriers is the person who can succeed in this flat world. Increasingly the person who will succeed is someone who can just as easily live and work in China or India as they can in the U.S. or Europe. This is what I mean by leveraging your ethnicity.
I have been going to China regularly since 1978 helping and advising American corporations on doing business in China. I would like to conclude my talk by sharing with you what I think are the essential skills in order to be successful in a cross cultural career.
One is to take careful notes. Basically it is never a good idea to rely solely on one’s memory on important matters, such as the date of your Mom’s birthday or your wedding anniversary, but it is even more important when you are jet lagged. When the brain is jet-lagged, it is amazing as to how easy it is to get order of events, people seen, nature of discussion and decisions made all mixed up in just a few weeks after it all took place. Make it a practice to write everything down in real time and review them before you get on the plane to return home.
Another important characteristic is careful and active listening, or listening with empathy. This means listening in such a way that the speaker feels assured that he/she is being understood, not feeling the pressure from a listener who is anxious to interrupt and get a word in. An active listener is learning from the conversation and meeting, absorbing and digesting and understanding. Most of us leave a lot on the table because we have never paid enough attention to becoming a good listener. Active listening is a part of effective communication. Effective listening is important in our daily lives but even more critical and challenging in a cross cultural situation, because it requires the person to be constantly switching the contextual background. A Chinese may be saying certain things that have certain significance while an American might be saying similar things but mean quite something different. A bicultural person has to have the ability to pick up the culturally derived nuances, put the remarks in context and be able to explain one side to the other.
There are many occasions when I have been called upon to assist with the interpreting between Chinese officials and American business executives. My command of the Chinese language is never good enough for me to act as a professional interpreter. But ironically, because I cannot be a word for word interpreter, I concentrate on making sure that the meaning and intent is accurately conveyed. For this, I get expressions of appreciation from both sides of the conversation.
To be a truly bicultural person is someone who can explain what one side is saying in the context such that the other person from the other culture can understand it. While I take a great deal of satisfaction in being able to help bridge the cultural gap between the Chinese attitude and the American one, sometimes the line seems blurred between explaining a position and taking a position. Sometimes one has to be able to distinguish between explaining China’s policy versus defending China’s policy. As an American citizen, I have an interest in helping Americans understand China’s policy, but I am not sure that I should not be in the business of defending China’s policy.
For example, China has been criticized for their one child policy and their sometimes rather draconian ways of enforcing such a policy. I would point to the alternative, namely that without the policy there would be 300 million more Chinese today than there already are. Certainly, I would not defend or even try to explain the extreme lengths some officials in the countryside have gone to enforce the one-child policy.
On the matter of protection of intellectual property, I would explain to my American client that this is a big headache and needs serious attention. I might indicate that lack of respect for software is a part of Asian culture endemic throughout Asia, that the solution will take a long time and require not only enforcement and prosecution but a great deal of education to promote understanding and respect. Again I would not defend or even condone piracy. In fact every chance I get when I am in China I would point out that protection of IP is in China’s self interest and is crucial to China developing a serious software industry. I am pleased to report that China is beginning to seriously address the IPR problem, as witnessed by the joint training program China is entering with Berkeley.
By the way, as a side bar, I want to tell you about my recent vacation in Europe that took me to Amsterdam. When my wife and I visited the Rijksmuseum, I noticed an impressive collection of blue and white Delft porcelain. Looking at the plates and bowls more closely, I noticed that the drawings showed some strange looking human beings and activity. They wore funny looking head gear and surrounded by strange looking buildings. I found out on closer reading of the explanatory notes that the porcelain wares were developed to replace the export porcelain from China. The Chinese ware already had some strange looking paintings that depict Chinese landscape and activity in accordance with what the Chinese thought the Europeans imagined as genuine exotic Cathay. The Delft ware was simply copying the bogus Chinese landscape as a way of offering a cheaper version of the highly prized good. So why am I telling this story? Because the next time someone accuse China of rampant knockoffs, I can at least point out that the Europeans invented the knockoff idea hundreds of years earlier.
In explaining China, it’s important to avoid using the party line from China for the simple reason that words from China tend to be doctrinaire and sound more like slogans than are persuasive. For example, I think it is less persuasive to label the Falun Gong a dangerous evil cult, than it is to simply describe some of the teachings of their founder. Describing such concepts as levitation through meditation, believing in the power of a spinning wheel to ward off bodily harm, and viewing sickness as punishment for sins that cannot be cured by medication do a lot more to show the cult aspects of this movement than just name calling.
As I said, in a flat world, the world belongs to those who can be comfortable anywhere. Most of you are already ahead of the game being from somewhere else than the U.S. If you feel that your background is not sufficiently broad, then I hope you will actively seek to broaden it, whether it’s learning another language, seek employment in another country or travel more out of the country.
I hope you will see yourselves as launching into careers where diplomacy, at least business diplomacy, is an essential part of your occupation. In a globalize world, executives with global reach are needed. You folks are born at the right time to take advantage of this opportunity and I wish you success in the exciting times ahead of you. As you become successful in your career I hope you will remember success isn’t just measured in net worth and making the Forbes 400 list. I hope you will also believe that success in life is to make a difference, be a role model for others to follow and give back to the society that gave you the original opportunity.
We all know that the United States of America was founded by immigrants. Indeed this has been one of the unique but frequently overlooked strengths of this country. By and large, this country continues to keep its doors open, not just to the poor and downtrodden but also to the best and brightest other countries have to offer. As a consequence, the U.S. continues to be renewed by new blood, new ideas and new energy. In turn, people continue to migrate to the U.S. because this is the land of opportunity, where by dint of ability, dedication and willingness to work hard, anyone (at least virtually anyone) can realize the American dream.
Certainly no where else is this more true than here in the Bay Area or Silicon Valley and I will be using the two terms interchangeably. While the U.S. might be unique among nations, I submit Silicon Valley is unique within the U.S. It is this uniqueness that has made Silicon Valley the technology Mecca of the world. Let me offer just one of many indicators as to why Silicon Valley is unique. The Bay Area represents roughly 2% of the total population of the U.S. but takes in about 35% of all the venture capital invested in this country every year; in other words, anywhere from 15 to 20 times their fair share of risk capital.
Why is Silicon Valley unique? I believe there are two major reasons. It is by far the most diverse region in the world. Talented and motivated people from all over the world come to the Bay Area, perhaps first to attend school such as you folks and then stay because this is one of the best places to live. Secondly, this area has great tolerance for failure. Entrepreneurs know if they fail here in Silicon Valley, they can still hope to secure funding for the next idea they cook up. The venture investors here give credit for the experiences gained in starting a venture. Not so in most other places. In most places, failure means seppuku or at least having to skedaddle out of town. To know that it’s OK to fail is to give entrepreneurs courage to take on the risks of starting a venture. After all, the probability of failure of a new venture is about 4 out of 5.
One of the secrets of Silicon Valley’s success is the presence of immigrants. In fact, your professor Annalee Saxenian, Dean of School of Information, was the first to study and report on the phenomenon of the role of ICs; in her lexicon IC stands for Indians and Chinese. Her study showed that approximately 30% of the new ventures were started up by Chinese and Indo-Americans. This study dates back to 1998, the last year she studied, and I believe the proportion of start-ups by ICs has only gone up since her study. Among some of the more famous start-ups, Sun Microsystems and Exodus Communications had Indo-Americans as co-founders, Yahoo had a Chinese American co-founder and of course you all know the most successful start-up, Google, was founded by two Russian immigrants.
Mind you it wasn’t always like this. This morning you had the director of culture and diversity from HP as your leadoff keynote speaker. It is most appropriate that she should be the lead off speaker. After all, HP is the granddaddy of Silicon Valley and the HP Way continues to exert its influence on the business culture of Silicon Valley—recent pretexting adventure notwithstanding. However, even HP was not free from glass ceilings. The best known case involved a then young PhD from MIT who was a Chinese American and was the leader of a group in R&D. He was surprised one day, when a junior white engineer, who was assigned to him for training, suddenly got promoted over him and became his boss. That Chinese American was David Lam, who promptly resigned and went on to found Lam Research, one of the more successful semiconductor equipment companies in the valley.
Parenthetically, since I am myself a Chinese American, I am going to draw from my experiences with an ethnic Chinese point of view. But I think, and I hope, you will find that my experience and observations are reasonably valid for all immigrants that have landed in the Bay Area.
Even before David Lam was David S. Lee. Lee started his first company in 1969 called Diablo Systems, a company that made daisywheel printers. He sold the company to Xerox in 1972 for $28 million. One of the first things Xerox did was to replace David as the executive in charge, so David resigned and started Qume the following year. Qume continued to make refinements in the daisywheel printer and the company was sold to ITT in 1978 for $165 million. This sale returned 93 times original investment for the investors. David made his first million in 1972 when he was 34 and his sale of Qume was the first Silicon Valley company to be sold for over $100 million.
When David was raising venture funding for Qume, despite his track record with Diablo Systems, the investors insisted on the right to put in a CEO over David as a condition for their investment. When ITT bought the company, they made David the number one executive and then later made him a corporate vice president in charge of three divisions. At that time, ITT was in the top ten of Fortune 500 companies and David was undoubtedly the highest ranking Chinese American executive in Corporate America from Silicon Valley. He repaid ITT for their confidence in his management ability by staying with ITT until his division was sold to Alcatel, the French telecomm equipment company.
By the time David left ITT in 1984 he was already a legend in Silicon Valley. While he continued to acquire and run high tech businesses, he also began to think about –as he put it—working for future generations. He became politically active as a fundraiser. Being a Republican he supported most Republican candidates at all levels but he also supported Asian American candidates regardless of political affiliation. He encouraged all Asian Americans whatever their political persuasion to be active and get involved. To David, participating in the political process and having a place at the table was more important than the political affiliation. When Bill Bradley ran for the Democratic nomination for president, he was a visiting scholar at Stanford. David was among the first to host a dinner party for the senator so that some of the notable Chinese Americans in Silicon Valley could meet him.
David has served on presidential commissions for three successive presidents from George Bush Sr. to Bill Clinton to George W. He had been on the board of regent for the University of California system since 1995 and just recently stepped down having served his term. He was very aware of his responsibility as the only Chinese American regent to serve in a system where Asian American students represent more than 40% of the enrollment. He has been president of Chinese American associations, visible supporter of many Asian American causes and a tireless speaker at functions to encourage others. Even though public speaking is not his strongest suit, he accepts invitations that come his way because he believes in making a difference by example.
Pauline Lo Alker was born in China and grew up in Hong Kong. She came from a “traditional” Chinese family where she was told that her mission in life was to support her brothers. Her parents enter her to school a year early so that she could keep an eye on her older brother. Her dream was to attend Northwestern University, but her parents kept the acceptance letter and scholarship notification from her. In the end she and her brother left Hong Kong to attend Arizona State where Pauline took on a double major of music and mathematics. During her senior year she was introduced to the computer, which she took on with complete enthusiasm. After graduation in 1964, to her chagrin the only job open to her was to be a bookkeeper at Sears & Roebuck.
Pauline’s first break came a year after graduation when she met someone in the computer department of General Electric who offered her a job as a manuscript typist. Not exactly a plum job but at least it was in the right department. She rented an IBM Selectric, learned to type on it and took the job. A month a half later, a programming job opened and she applied and was selected over four others. Her high tech career was finally launched. By 1972, Pauline had moved to Silicon Valley to become the 37th employee of Amdahl Corporation, then a start-up computer company. She then moved on to mid-level management positions at Four Phase Systems and Intel.
Pauline came to prominence in 1980 when she joined Convergent Technologies, a computer workstation company, as their vice president of marketing. In four years she oversaw sales of half a billion dollars worth of workstations. Convergent was an early high flyer and she was the frequent spokesperson for the company. In 1984, Pauline started Counterpoint Computers, a builder of high performance computers, which was sold to Acer of Taiwan in 1987. She stayed on to run the U.S. business for Acer for a while. In 1990, she was recruited to run and turn around a small company, Network Peripherals, which she did turn around and got it ready for public offering in 1994. The company won the recognition as the most successful IPO from Silicon Valley in 1994. Since 1998 Pauline has continued to lead Internet related start-ups in Silicon Valley.
In the recent fifteen years or so, Pauline received many honors and awards. She wasn’t just the most visible Asian American women in Silicon Valley but was one of few pioneering women executives who have established their credentials in heretofore a mostly male high-tech industry. She was a popular and widely admired role model and she relished her position and took her responsibility seriously. She became the first woman to become the president of AAMA, then standing for Asian American Manufacturers Association. AAMA was and continues to be one of the best-known professional organizations for Asian Americans in Silicon Valley. When it was first formed, it was to serve as a networking and mutual aid organization for Asian Americans. Today, the organization is known in China, Hong Kong and Taiwan as the bridge to Silicon Valley. When Pauline stepped in to lead this organization, the energy level of the entire organization went up, there were more programs put together by more volunteers and attended by more people. Pauline called herself the “self-appointed champion of the young.” She organized and led workshops to teach young engineers about leadership and communication skills and other attributes necessary in order to become successful managers and executives. It was invariably the most popular and best-attended event.
David Lee and David Lam and Pauline were among the first wave of Chinese Americans that not only helped built Silicon Valley but made the statement that Chinese Americans were not just good technicians but can also be successful entrepreneurs and business executives. Contemporaneously, there were others that climbed the ladders of Corporate America such as Bob Lee who retired as the executive vice president of PacBell, Albert Yu the Sr. VP now retired from Intel who led the development of the microprocessors and Lee Ting who was a corporate VP of global logistics for HP who has gone on to become a senior executive of WR Hambrecht, an investment bank and currently serving on the board of Lenovo. Other than being successful in their profession, what they have in common is that they all believe in giving back and they have done this in various ways.
Of course, so long as we are talking about the early leaders, we must not overlook our own Chancellor Chang-lin Tien. How many of you have heard of the late Chancellor Tien? Here he was a short Asian guy, wore glasses and spoke with an accent, but he was a giant of a chancellor. He inspired students and faculty alike and he raised the profile of UC Berkeley throughout Asia. I won’t go into his life here, because all of you should already know all about him and his legacy on the Berkeley campus.
Why am I talking about the lives of all these people? Because these people went against the stereotype and broke through the glass ceiling. They were the pioneers and pave the way for others to follow and made it easier for all of you to succeed. Instead of being an advantage (which is the subject of today’s talk that I will get to) their ethnicity, accent, and physical appearance were held against them. They had to overcome the handicap imposed by the society’s stereotype and beat the odds. Because of their success, other entrepreneurs that followed them were able to obtain funding more easily and were more accepted as the CEOs and senior management of Silicon Valley companies. Today, at least in the Bay Area, seeing an Asian or an Asian woman as the CEO doesn’t raise eyebrows anymore. Virtually all the major venture capital funds now have one or more partners that are of Asian ancestry. Ten, fifteen years ago, an Asian partner was rare but today, so many business plans are coming from Asian entrepreneurs and having an Asian partner is an advantage when the venture capital firms are looking for deals.
While I am suggesting that the playing field is now more or less level here in the Bay Area for Asian Americans and other ethnic minorities, this is still far from being so elsewhere in the U.S. But what I want to suggest today is that with the globalization trend, or as Tom Friedman claimed in his best selling book, “the world is flat,” that it is possible for the multi-cultural, multi-lingual person to enjoy an edge over the mono-cultural and mono-lingual person. The person who can move easily around the world and who can establish rapport across language and cultural barriers is the person who can succeed in this flat world. Increasingly the person who will succeed is someone who can just as easily live and work in China or India as they can in the U.S. or Europe. This is what I mean by leveraging your ethnicity.
I have been going to China regularly since 1978 helping and advising American corporations on doing business in China. I would like to conclude my talk by sharing with you what I think are the essential skills in order to be successful in a cross cultural career.
One is to take careful notes. Basically it is never a good idea to rely solely on one’s memory on important matters, such as the date of your Mom’s birthday or your wedding anniversary, but it is even more important when you are jet lagged. When the brain is jet-lagged, it is amazing as to how easy it is to get order of events, people seen, nature of discussion and decisions made all mixed up in just a few weeks after it all took place. Make it a practice to write everything down in real time and review them before you get on the plane to return home.
Another important characteristic is careful and active listening, or listening with empathy. This means listening in such a way that the speaker feels assured that he/she is being understood, not feeling the pressure from a listener who is anxious to interrupt and get a word in. An active listener is learning from the conversation and meeting, absorbing and digesting and understanding. Most of us leave a lot on the table because we have never paid enough attention to becoming a good listener. Active listening is a part of effective communication. Effective listening is important in our daily lives but even more critical and challenging in a cross cultural situation, because it requires the person to be constantly switching the contextual background. A Chinese may be saying certain things that have certain significance while an American might be saying similar things but mean quite something different. A bicultural person has to have the ability to pick up the culturally derived nuances, put the remarks in context and be able to explain one side to the other.
There are many occasions when I have been called upon to assist with the interpreting between Chinese officials and American business executives. My command of the Chinese language is never good enough for me to act as a professional interpreter. But ironically, because I cannot be a word for word interpreter, I concentrate on making sure that the meaning and intent is accurately conveyed. For this, I get expressions of appreciation from both sides of the conversation.
To be a truly bicultural person is someone who can explain what one side is saying in the context such that the other person from the other culture can understand it. While I take a great deal of satisfaction in being able to help bridge the cultural gap between the Chinese attitude and the American one, sometimes the line seems blurred between explaining a position and taking a position. Sometimes one has to be able to distinguish between explaining China’s policy versus defending China’s policy. As an American citizen, I have an interest in helping Americans understand China’s policy, but I am not sure that I should not be in the business of defending China’s policy.
For example, China has been criticized for their one child policy and their sometimes rather draconian ways of enforcing such a policy. I would point to the alternative, namely that without the policy there would be 300 million more Chinese today than there already are. Certainly, I would not defend or even try to explain the extreme lengths some officials in the countryside have gone to enforce the one-child policy.
On the matter of protection of intellectual property, I would explain to my American client that this is a big headache and needs serious attention. I might indicate that lack of respect for software is a part of Asian culture endemic throughout Asia, that the solution will take a long time and require not only enforcement and prosecution but a great deal of education to promote understanding and respect. Again I would not defend or even condone piracy. In fact every chance I get when I am in China I would point out that protection of IP is in China’s self interest and is crucial to China developing a serious software industry. I am pleased to report that China is beginning to seriously address the IPR problem, as witnessed by the joint training program China is entering with Berkeley.
By the way, as a side bar, I want to tell you about my recent vacation in Europe that took me to Amsterdam. When my wife and I visited the Rijksmuseum, I noticed an impressive collection of blue and white Delft porcelain. Looking at the plates and bowls more closely, I noticed that the drawings showed some strange looking human beings and activity. They wore funny looking head gear and surrounded by strange looking buildings. I found out on closer reading of the explanatory notes that the porcelain wares were developed to replace the export porcelain from China. The Chinese ware already had some strange looking paintings that depict Chinese landscape and activity in accordance with what the Chinese thought the Europeans imagined as genuine exotic Cathay. The Delft ware was simply copying the bogus Chinese landscape as a way of offering a cheaper version of the highly prized good. So why am I telling this story? Because the next time someone accuse China of rampant knockoffs, I can at least point out that the Europeans invented the knockoff idea hundreds of years earlier.
In explaining China, it’s important to avoid using the party line from China for the simple reason that words from China tend to be doctrinaire and sound more like slogans than are persuasive. For example, I think it is less persuasive to label the Falun Gong a dangerous evil cult, than it is to simply describe some of the teachings of their founder. Describing such concepts as levitation through meditation, believing in the power of a spinning wheel to ward off bodily harm, and viewing sickness as punishment for sins that cannot be cured by medication do a lot more to show the cult aspects of this movement than just name calling.
As I said, in a flat world, the world belongs to those who can be comfortable anywhere. Most of you are already ahead of the game being from somewhere else than the U.S. If you feel that your background is not sufficiently broad, then I hope you will actively seek to broaden it, whether it’s learning another language, seek employment in another country or travel more out of the country.
I hope you will see yourselves as launching into careers where diplomacy, at least business diplomacy, is an essential part of your occupation. In a globalize world, executives with global reach are needed. You folks are born at the right time to take advantage of this opportunity and I wish you success in the exciting times ahead of you. As you become successful in your career I hope you will remember success isn’t just measured in net worth and making the Forbes 400 list. I hope you will also believe that success in life is to make a difference, be a role model for others to follow and give back to the society that gave you the original opportunity.
Wednesday, October 26, 2005
China perspective on Pacific Time, KQED Public Radio
“Never in the history of mankind have so many been lifted out of poverty in so short of time. This accolade about today’s China has been said so often that I‘ve lost track of who said it first. No matter who said it first, much of the credit for China’s accomplishment should go to America’s consistent policy toward China.
For more than 30 years, America’s worked to cajole China out of isolation and into the world community. Tentative at first, China has since adopted some of the principles that have made America great--principles such as freeing trade, opening markets, welcoming of foreign investments, and unleashing entrepreneurialism. China’s undeniable success should be a cause of celebration because China is a confirmation that the principles we hold dear really do work. China’s success should not be a cause of anxiety nor rueful envy.
Through its productive and low cost labor, China has become the factory for the world. The benefit to American consumers is consistent quality goods at low and constant prices. China has taken most of its trade surplus and invested in U.S. treasury bills. Both factors keep inflation at bay in America.
China can’t be blamed for not buying from America. Even as China’s global trade increases by leaps and bounds, its imports and exports are in relative overall balance. China buys roughly twice as much from Japan and from EU than they buy from America. The question should be why are we not selling more, not why are they not buying from us.
China should not be blamed for our deficit either. Year in and year out, China has accounted for roughly 25% of our total trade deficit. Sure, our trade deficit with China has been growing at a phenomenal rate, but so has our total national deficit. Again, we should be asking what is wrong with our national policy, not what China is doing to us.
The accusation that makes no sense whatsoever is currency manipulation. China pegged their renminbi to the dollar about a decade ago. The dollar was strong then. Surely the critics are not suggesting that China could have looked long into the future and anticipated the downward slide of the dollar. Today, even if China were to float its currency, the cost differential is so large that it’s not going to bring back jobs that have long gone offshore.
On a recent public television program about China, the spokesman from Wal-mart said that only in China does he see the possibility of replicating their success of another U.S. China’s economy is doubling every 7 to 10 years and there is ample opportunity for the two major powers to develop a win-win relationship. To denigrate China, to accuse China of evil intentions and to drive China toward to a lose-lose arrangement is a tragic outcome we all should avoid. For Pacific Time, this is George Koo.
For more than 30 years, America’s worked to cajole China out of isolation and into the world community. Tentative at first, China has since adopted some of the principles that have made America great--principles such as freeing trade, opening markets, welcoming of foreign investments, and unleashing entrepreneurialism. China’s undeniable success should be a cause of celebration because China is a confirmation that the principles we hold dear really do work. China’s success should not be a cause of anxiety nor rueful envy.
Through its productive and low cost labor, China has become the factory for the world. The benefit to American consumers is consistent quality goods at low and constant prices. China has taken most of its trade surplus and invested in U.S. treasury bills. Both factors keep inflation at bay in America.
China can’t be blamed for not buying from America. Even as China’s global trade increases by leaps and bounds, its imports and exports are in relative overall balance. China buys roughly twice as much from Japan and from EU than they buy from America. The question should be why are we not selling more, not why are they not buying from us.
China should not be blamed for our deficit either. Year in and year out, China has accounted for roughly 25% of our total trade deficit. Sure, our trade deficit with China has been growing at a phenomenal rate, but so has our total national deficit. Again, we should be asking what is wrong with our national policy, not what China is doing to us.
The accusation that makes no sense whatsoever is currency manipulation. China pegged their renminbi to the dollar about a decade ago. The dollar was strong then. Surely the critics are not suggesting that China could have looked long into the future and anticipated the downward slide of the dollar. Today, even if China were to float its currency, the cost differential is so large that it’s not going to bring back jobs that have long gone offshore.
On a recent public television program about China, the spokesman from Wal-mart said that only in China does he see the possibility of replicating their success of another U.S. China’s economy is doubling every 7 to 10 years and there is ample opportunity for the two major powers to develop a win-win relationship. To denigrate China, to accuse China of evil intentions and to drive China toward to a lose-lose arrangement is a tragic outcome we all should avoid. For Pacific Time, this is George Koo.
Monday, August 5, 2002
Chinese Americans Contributing to Silicon Valley
Current economic malaise notwithstanding, Silicon Valley has earned universal recognition as the Mecca of high technology. After all, Silicon Valley was where semiconductors were reduced to commercial practice, leading to the development of integrated circuits and microprocessors, which in turn created the personal computer revolution and followed by the proliferation of the use of Internet. Many of the leaders of the high tech industry call Silicon Valley home including such household names as Hewlett Packard, Intel, Apple Computer, Cisco, Netscape, 3Com, Oracle, and Sun Microsystems to name a few. Much of the biotechnology revolution also took place in and around Silicon Valley with such industry leaders as Genentech, Chiron and numerous others. Government and business leaders from all over the world wishing to replicate the success of Silicon Valley have made the obligatory trek to Silicon Valley to see and observe and hopefully capture some of the magic to take home.
The one magic ingredient that is surely unique to Silicon Valley is the diversity of the people living and working there. Nowhere else epitomizes America, a place that has room for everybody, better than Silicon Valley. The one distinction between the America as symbolized by the Statue of Liberty and Silicon Valley is that Silicon Valley attracted very few of the downtrodden but many of the best and brightest from Taiwan, China, Hong Kong, Singapore, Malaysia, India, Pakistan, Iran, Russia, Israel, Palestine, Slovenia, Hungary, Czech Republic and not a few from developed economies such as France, Germany, UK and Canada.
Today of all the people working and living in Silicon Valley, one out of four is an Asian and nearly one third of those are ethnic Chinese, and more than one sixth is a South Asian from India or Pakistan. If all the ethnic Asians were to suddenly disappear from Silicon Valley, most of the high tech companies would implode and the economic shock wave would be felt worldwide.
Annalee Saxenian, a UC Berkeley professor, whose research interests include the contribution of immigrants on America’s technology concludes that in Silicon Valley, IC stands not for integrated circuits but for Indians and Chinese. Indeed her study showed that by 1998, the last year of her study, one out of five high tech start-ups in Silicon Valley were led by Chinese Americans. My guess is that today, 5 years later, the number of companies started by Chinese Americans would make up an even higher ratio. I don’t have hard numbers but my reasoning is based on the following considerations:
(1) There are more Chinese Americans in Silicon Valley now than ever. It is not unusual for any of the many professional associations formed by Chinese Americans to hold a conference on a Saturday and get a room full of people, anywhere from 500 to over 1000 in attendance. I don’t have an exact count, but my guess is that in Silicon Valley there are at least 2 to 3 dozen Chinese American organizations according to professional interests each with at least 100 members. By the way, even though mainstream associations such as the American Electronics Association have many more members, they would be hard pressed to routinely turn out 500 for a conference on a Saturday.
(2) There are also many more venture investors willing to invest in start-up companies headed by Chinese Americans now than ever before. Taiwan capitalists have found lucrative deal flows by investing in Silicon Valley and more than 100 of these venture capital firms have set up branch offices in Silicon Valley. Mainstream venture capitalists that used to not look at deals with Chinese American CEOs now realize that they are missing out. They even have Chinese American partners in their firms and now they do not hesitate to invest in start-ups headed by Asians.
The Silicon Valley today is far different from the San Francisco Bay Area I moved to in 1971. In the old days, Santa Clara valley south of San Francisco was a valley of vanishing fruit orchards waiting for the high tech revolution to be recognized and for someone to coin the term, Silicon Valley. Today, every town and city in the bay area tries to lay claim to being part of the mythical Silicon Valley. Then we planned our Sundays for a trek to San Francisco Chinatown to enjoy a dim sum lunch and a load of Chinese groceries to cart home. Today we don’t go to San Francisco for food anymore, just about every city in the greater bay area has at least one shopping mall, developed and owned by Chinese Americans, full of Chinese restaurants and one major grocery store that carries goods from greater China. Thirty years ago, venture capital was just getting started as an investment vehicle and venture capitalist recognized as a profession. Today, anywhere between $20 to 60 billion of venture capital are invested annually in the U.S. and 35 to 40% of all that risk capital have been invested in the San Francisco bay area, an area representing less than 2% of the total U.S. population. For some time now, Silicon Valley has been soaking up more than ten times their fair share of risk capital.
The status of Chinese Americans in Silicon Valley has also changed dramatically over this period of three decades. At Deloitte & Touche, every year we conduct a survey of 50 fastest growing companies in Silicon Valley. In one recent year, 5 of the 8 fastest growing companies had Chinese American as the CEO except for Yahoo, whose Jerry Yang was a founder but not a CEO. If I remember correctly, his title then was “chief proselytizer.” In the old days, Chinese Americans were automatically presumed to be excellent scientists and engineers but incapable of being a manager much less a senior executive. Today not only do we have Chinese CEOs in small to medium size companies, but we have senior executives in major multinationals such as Applied Material, Hewlett Packard, Intel and others. John Chen has a graduate degree from Caltech so you would expect him to be smart and head some R&D lab. But he is the Chairman and CEO of Sybase, a major software company he is credited with pulling it out of a death spiral and restoring to strong financial health.
Silicon Valley today is about as level a playing field irrespective of race or national origin as one can find anywhere. It rightly should be considered a model for the rest of America to emulate. But, it was not always this way and it didn’t change overnight. John Chen and other young successful executives owe a debt to those that blaze the trail for them. I am fortunate to be living in Silicon Valley during this time and privileged to being an eyewitness as some of the Chinese American pioneers made history and changed basic attitudes toward Asian immigrants.
Without a doubt, the first pioneer to come to mind is David S. Lee. David started his first company in 1969 called Diablo Systems, a company that made daisywheel printers. He sold the company to Xerox in 1972 for $28 million. One of the first things Xerox did was to replace David as the executive in charge, so David resigned and started Qume the following year. Qume continued to make refinements in the daisywheel printer and the company was sold to ITT in 1978 for $165 million. This sale returned 93 times original investment for the investors. David made his first million in 1972 when he was 34 and his sale of Qume was the first Silicon Valley company to be sold for over $100 million.
When David was raising venture funding for Qume, despite his track record with Diablo Systems, the investors insisted on the right to put in a CEO over David as a condition for their investment. When ITT bought the company, they made David the number one executive and then later made him a corporate vice president in charge of three divisions. At that time, ITT was in the top ten of Fortune 500 companies and David was undoubtedly the highest ranking Chinese American executive in Corporate America from Silicon Valley. He repaid ITT for their confidence in his management ability by staying with ITT until his division was sold to Alcatel, the French telecomm equipment company.
By the time David left ITT in 1984 he was already a legend in Silicon Valley. While he continued to acquire and run high tech businesses, he also began to think about –as he put it—working for future generations. He became politically active as a fundraiser. Being a Republican he supported most Republican candidates at all levels but he also supported Asian American candidates regardless of political affiliation. He encouraged Asian Americans that were Democrats to be active and support their candidates. To David, participating in the political process and having a place at the table was more important than the political affiliation. When Bill Bradley ran for the Democratic nomination for president, he was a visiting scholar at Stanford. David was among the first to host a dinner party for the senator so that some of the notable Chinese Americans in Silicon Valley can meet him.
David has served on presidential commissions for three successive presidents from George Bush Sr. to Bill Clinton to George W. He has been on the board of regent for the University of California system since 1995. He is very aware of his responsibility as the only Chinese American regent to serve in a system where Asian American students represent 40% of the enrollment. He has been president of Chinese American associations, visible supporter of many Asian American causes and a tireless speaker at functions to encourage others. He makes a difference by example.
Pauline Lo Alker was born in China and grew up in Hong Kong. She came from a “traditional” Chinese family where she was told that her mission in life was to support her brothers. Her parents enter her to school a year early so that she could keep an eye on her older brother. Her dream was to attend Northwestern University, but her parents kept the acceptance letter and scholarship notification from her. In the end she and her brother left Hong Kong to attend Arizona State where Pauline took on double major of music and mathematics. During her senior year she was introduced to the computer, which she took on with total enthusiasm. After graduation in 1964, to her chagrin the only job open to her was to be a bookkeeper at Sears & Roebuck.
Pauline’s first break came a year after graduation when she met someone in the computer department of General Electric who offered her a job as a manuscript typist. Not the plum job but at least it was in the right department. She rented an IBM Selectric, learned to type on it and took the job. A month a half later, a programming job opened and she applied and was selected over four others. Her high tech career was finally launched. By 1972, Pauline had moved to Silicon Valley to become the 37th employee of Amdahl Corporation, then a start-up computer company. She then moved on to mid-level management positions at Four Phase Systems and Intel.
Pauline came to prominence in 1980 when she joined Convergent Technologies, a computer workstation company, as their vice president of marketing. In four years she oversaw sales of half a billion dollars worth of workstations. Convergent was an early high flyer and she was the frequent spokesperson for the company. In 1984, Pauline started Counterpoint Computers, a builder of high performance computers, which was sold to Acer of Taiwan in 1987. She stayed on to run the U.S. business for Acer for a while. In 1990, she was recruited to run and turn around a small company, Network Peripherals, which she did turn around and got it ready for public offering in 1994. The company won the recognition as the most successful IPO from Silicon Valley in 1994. Since 1998 Pauline has been the CEO of Amplify.net, a privately held company in Silicon Valley.
In recent fifteen years or so, Pauline received many honors and awards. She wasn’t just the most visible Asian American women in Silicon Valley but was one of few pioneering women executives who have established their credentials in a mostly male high-tech industry. She was a popular and widely admired role model and she relished her position and took her responsibility seriously. She became the first woman to become the president of AAMA, then standing for Asian American Manufacturers Association. AAMA was and continues to be one of the best-known professional organizations for Asian Americans in Silicon Valley. When it was first formed, it was to serve as a networking and mutual aid organization for Asian Americans. Today, the organization is known in China, Hong Kong and Taiwan as the bridge to Silicon Valley. When Pauline stepped in to lead this organization, the energy level of the entire organization went up, there were more programs put together by more volunteers and attended by more people. Pauline called herself the “self-appointed champion of the young.” She organized and led workshops to teach young engineers about leadership and communication skills and other attributes necessary in order to become successful managers and executives. It was invariably the most popular and best-attended event.
David and Pauline were among the first wave of Chinese Americans that not only helped built Silicon Valley but made the statement that Chinese Americans were not just good technicians but can also be successful entrepreneurs and business executives. Others during the early days of Silicon Valley included David Lam, Lester Lee, Stanley Wang and Ken Fong. David Lam was working at H-P when the white engineer he was training suddenly became his boss. He left to form Lam Research, which became one of the major equipment companies for the semiconductor industry. Subsequently, he went on to lead and/or founded a series of high tech companies. David also served as president of AAMA and on a presidential commission during the Bush Sr. administration.
Lester Lee started a company based on his magnetic media expertise which later evolved to become a supplier of ruggedized industrial PC’s, a profitable and not hotly competitive niche market so that he can devote his energy to social activism. He was involved in the founding of several professional Asian American organizations including AAMA. His opinions and letters to editors are particularly noticeable in the ethnic Chinese newspapers. He and David Lee and Stanley Wang were active Republicans behind many fundraisers in Silicon Valley. In fact he was the first Chinese American to be appointed to the University of California board of regent and he was also the first to serve for a year and then did not get confirmation to serve out the term. He was a victim of political battle between a Democratic legislature and a Republican governor. This failed confirmation was so extraordinary and raised such a stink from the Chinese American community that when David Lee’s nomination came up for confirmation, no one thought to use him as a political football.
Stanley Wang along with his brother started Pantronix, a small company providing the service of assembling and packaging integrated circuits with emphasis on serving companies that supply devices to the military and space agencies. This company has been growing steadily over nearly 30 years and now has plants in Philippines and Kunshan, China as well as Silicon Valley. At Stanley’s company conference room on prominent display are photos of him with every U.S. president from Reagan to the current one. Stanley serves on the board of trustee of the California State University system. The UC system has more glamour and prestige but the state university system serves more students. Stanley has personally made a number of $1 million dollar contributions to the state universities to encourage the improvement in the quality of higher education.
Ken Fong founded Clontech, a biotech company, which he sold to Becton Dickenson in 1999 for undisclosed hundreds of millions. Ken and his wife Pam are known for their generosity to philanthropic causes including endowed chairs and scholarships and for their unfailing support to Asian American political candidates and Asian American issues in need to financial support. Ken has opened a venture investment firm and travels frequently to China to look at developments of biotechnology there.
David Lee, Pauline Lo Alker, David Lam, Lester Lee, Stanley Wang, and Ken Fong are arguably the most prominent of the first wave to grow and prosper and contribute to Silicon Valley becoming a modern legend. At the same time other Chinese Americans also made in roads in Corporate America. Bob Lee was an executive vice president at PacBell, Albert Yu a Sr. VP who led the microprocessor development at Intel and Lee Ting a corporate VP of global logistics for H-P. This group paved the way for others to follow by being role models, community leaders and by giving back to society.
When the Committee of 100 decided to hold the conference in Silicon Valley this year, we felt that it was important to talk about giving back. We wanted to correct any impression that Chinese Americans only take and not give back and we also wanted to stress to our young people the importance of giving back. At the conference, we organized panels to discuss giving back via philanthropy, via not-for-profits and via public service. At our gala banquet, we asked Charles Wang, Chairman and CEO of Computer Associates to talk about his personal approach to giving. Charles is a member of C100 but Computer Associates is based on Long Island in New York and not from Silicon Valley, an easy concession to the recognition that Silicon Valley has no monopoly on giving back.
Charles Wang talked about “The Circle of Giving.” He believes in giving back not only for himself but to involve those around him. To encourage the employees of his company to give, his company matches $2 to every $1 dollar the employees donate to a worthy cause. He personally supports the National Center for Missing and Exploited Children. The Center uses the software provided by Computer Associates to track and quickly retrieves files of missing children and software to help predict facial changes of a missing child, as the child remains missing over years. Charles funds the Smile Train that operates on children with cleft mouths so that they can smile and take on a normal life. The train operates on 25,000 kids per year and has helped 40,000 children in China in just the last 3 years.
On the one hand, we Chinese Americans need to be vigilant over situations where we are being treated as foreigners and where our citizen’s rights are withheld from us. On the other, we need to show that we belong and that we are as American as the next. Americans are famous for their big heart and generosity of spirit; the Chinese Americans can do no less.
I would like to conclude my presentation with a little story about Su Dongpo, arguably one of the best known and best loved poets of China. I did a little research in preparation for the C100 conference and found out that this Song Dynasty poet/government official also started a charity for the specific purpose of helping peasant parents bond with newborn girl babies to reduce infanticide in the countryside. This showed that the Chinese cultural bias favoring male heirs ran deep and hard to overcome. More importantly, I found out that giving back has always been a part of the Chinese culture for those that enjoyed privileged lives.
____________________________________
Based on the keynote address given at the 20th anniversary banquet of Chinese American Forum, 8/3/02, in St. Louis, Mo. Dr. Koo is Director of Chinese Services Group, Deloitte & Touche, a member of Committee of 100 and a board member of Chinese American Forum.
The one magic ingredient that is surely unique to Silicon Valley is the diversity of the people living and working there. Nowhere else epitomizes America, a place that has room for everybody, better than Silicon Valley. The one distinction between the America as symbolized by the Statue of Liberty and Silicon Valley is that Silicon Valley attracted very few of the downtrodden but many of the best and brightest from Taiwan, China, Hong Kong, Singapore, Malaysia, India, Pakistan, Iran, Russia, Israel, Palestine, Slovenia, Hungary, Czech Republic and not a few from developed economies such as France, Germany, UK and Canada.
Today of all the people working and living in Silicon Valley, one out of four is an Asian and nearly one third of those are ethnic Chinese, and more than one sixth is a South Asian from India or Pakistan. If all the ethnic Asians were to suddenly disappear from Silicon Valley, most of the high tech companies would implode and the economic shock wave would be felt worldwide.
Annalee Saxenian, a UC Berkeley professor, whose research interests include the contribution of immigrants on America’s technology concludes that in Silicon Valley, IC stands not for integrated circuits but for Indians and Chinese. Indeed her study showed that by 1998, the last year of her study, one out of five high tech start-ups in Silicon Valley were led by Chinese Americans. My guess is that today, 5 years later, the number of companies started by Chinese Americans would make up an even higher ratio. I don’t have hard numbers but my reasoning is based on the following considerations:
(1) There are more Chinese Americans in Silicon Valley now than ever. It is not unusual for any of the many professional associations formed by Chinese Americans to hold a conference on a Saturday and get a room full of people, anywhere from 500 to over 1000 in attendance. I don’t have an exact count, but my guess is that in Silicon Valley there are at least 2 to 3 dozen Chinese American organizations according to professional interests each with at least 100 members. By the way, even though mainstream associations such as the American Electronics Association have many more members, they would be hard pressed to routinely turn out 500 for a conference on a Saturday.
(2) There are also many more venture investors willing to invest in start-up companies headed by Chinese Americans now than ever before. Taiwan capitalists have found lucrative deal flows by investing in Silicon Valley and more than 100 of these venture capital firms have set up branch offices in Silicon Valley. Mainstream venture capitalists that used to not look at deals with Chinese American CEOs now realize that they are missing out. They even have Chinese American partners in their firms and now they do not hesitate to invest in start-ups headed by Asians.
The Silicon Valley today is far different from the San Francisco Bay Area I moved to in 1971. In the old days, Santa Clara valley south of San Francisco was a valley of vanishing fruit orchards waiting for the high tech revolution to be recognized and for someone to coin the term, Silicon Valley. Today, every town and city in the bay area tries to lay claim to being part of the mythical Silicon Valley. Then we planned our Sundays for a trek to San Francisco Chinatown to enjoy a dim sum lunch and a load of Chinese groceries to cart home. Today we don’t go to San Francisco for food anymore, just about every city in the greater bay area has at least one shopping mall, developed and owned by Chinese Americans, full of Chinese restaurants and one major grocery store that carries goods from greater China. Thirty years ago, venture capital was just getting started as an investment vehicle and venture capitalist recognized as a profession. Today, anywhere between $20 to 60 billion of venture capital are invested annually in the U.S. and 35 to 40% of all that risk capital have been invested in the San Francisco bay area, an area representing less than 2% of the total U.S. population. For some time now, Silicon Valley has been soaking up more than ten times their fair share of risk capital.
The status of Chinese Americans in Silicon Valley has also changed dramatically over this period of three decades. At Deloitte & Touche, every year we conduct a survey of 50 fastest growing companies in Silicon Valley. In one recent year, 5 of the 8 fastest growing companies had Chinese American as the CEO except for Yahoo, whose Jerry Yang was a founder but not a CEO. If I remember correctly, his title then was “chief proselytizer.” In the old days, Chinese Americans were automatically presumed to be excellent scientists and engineers but incapable of being a manager much less a senior executive. Today not only do we have Chinese CEOs in small to medium size companies, but we have senior executives in major multinationals such as Applied Material, Hewlett Packard, Intel and others. John Chen has a graduate degree from Caltech so you would expect him to be smart and head some R&D lab. But he is the Chairman and CEO of Sybase, a major software company he is credited with pulling it out of a death spiral and restoring to strong financial health.
Silicon Valley today is about as level a playing field irrespective of race or national origin as one can find anywhere. It rightly should be considered a model for the rest of America to emulate. But, it was not always this way and it didn’t change overnight. John Chen and other young successful executives owe a debt to those that blaze the trail for them. I am fortunate to be living in Silicon Valley during this time and privileged to being an eyewitness as some of the Chinese American pioneers made history and changed basic attitudes toward Asian immigrants.
Without a doubt, the first pioneer to come to mind is David S. Lee. David started his first company in 1969 called Diablo Systems, a company that made daisywheel printers. He sold the company to Xerox in 1972 for $28 million. One of the first things Xerox did was to replace David as the executive in charge, so David resigned and started Qume the following year. Qume continued to make refinements in the daisywheel printer and the company was sold to ITT in 1978 for $165 million. This sale returned 93 times original investment for the investors. David made his first million in 1972 when he was 34 and his sale of Qume was the first Silicon Valley company to be sold for over $100 million.
When David was raising venture funding for Qume, despite his track record with Diablo Systems, the investors insisted on the right to put in a CEO over David as a condition for their investment. When ITT bought the company, they made David the number one executive and then later made him a corporate vice president in charge of three divisions. At that time, ITT was in the top ten of Fortune 500 companies and David was undoubtedly the highest ranking Chinese American executive in Corporate America from Silicon Valley. He repaid ITT for their confidence in his management ability by staying with ITT until his division was sold to Alcatel, the French telecomm equipment company.
By the time David left ITT in 1984 he was already a legend in Silicon Valley. While he continued to acquire and run high tech businesses, he also began to think about –as he put it—working for future generations. He became politically active as a fundraiser. Being a Republican he supported most Republican candidates at all levels but he also supported Asian American candidates regardless of political affiliation. He encouraged Asian Americans that were Democrats to be active and support their candidates. To David, participating in the political process and having a place at the table was more important than the political affiliation. When Bill Bradley ran for the Democratic nomination for president, he was a visiting scholar at Stanford. David was among the first to host a dinner party for the senator so that some of the notable Chinese Americans in Silicon Valley can meet him.
David has served on presidential commissions for three successive presidents from George Bush Sr. to Bill Clinton to George W. He has been on the board of regent for the University of California system since 1995. He is very aware of his responsibility as the only Chinese American regent to serve in a system where Asian American students represent 40% of the enrollment. He has been president of Chinese American associations, visible supporter of many Asian American causes and a tireless speaker at functions to encourage others. He makes a difference by example.
Pauline Lo Alker was born in China and grew up in Hong Kong. She came from a “traditional” Chinese family where she was told that her mission in life was to support her brothers. Her parents enter her to school a year early so that she could keep an eye on her older brother. Her dream was to attend Northwestern University, but her parents kept the acceptance letter and scholarship notification from her. In the end she and her brother left Hong Kong to attend Arizona State where Pauline took on double major of music and mathematics. During her senior year she was introduced to the computer, which she took on with total enthusiasm. After graduation in 1964, to her chagrin the only job open to her was to be a bookkeeper at Sears & Roebuck.
Pauline’s first break came a year after graduation when she met someone in the computer department of General Electric who offered her a job as a manuscript typist. Not the plum job but at least it was in the right department. She rented an IBM Selectric, learned to type on it and took the job. A month a half later, a programming job opened and she applied and was selected over four others. Her high tech career was finally launched. By 1972, Pauline had moved to Silicon Valley to become the 37th employee of Amdahl Corporation, then a start-up computer company. She then moved on to mid-level management positions at Four Phase Systems and Intel.
Pauline came to prominence in 1980 when she joined Convergent Technologies, a computer workstation company, as their vice president of marketing. In four years she oversaw sales of half a billion dollars worth of workstations. Convergent was an early high flyer and she was the frequent spokesperson for the company. In 1984, Pauline started Counterpoint Computers, a builder of high performance computers, which was sold to Acer of Taiwan in 1987. She stayed on to run the U.S. business for Acer for a while. In 1990, she was recruited to run and turn around a small company, Network Peripherals, which she did turn around and got it ready for public offering in 1994. The company won the recognition as the most successful IPO from Silicon Valley in 1994. Since 1998 Pauline has been the CEO of Amplify.net, a privately held company in Silicon Valley.
In recent fifteen years or so, Pauline received many honors and awards. She wasn’t just the most visible Asian American women in Silicon Valley but was one of few pioneering women executives who have established their credentials in a mostly male high-tech industry. She was a popular and widely admired role model and she relished her position and took her responsibility seriously. She became the first woman to become the president of AAMA, then standing for Asian American Manufacturers Association. AAMA was and continues to be one of the best-known professional organizations for Asian Americans in Silicon Valley. When it was first formed, it was to serve as a networking and mutual aid organization for Asian Americans. Today, the organization is known in China, Hong Kong and Taiwan as the bridge to Silicon Valley. When Pauline stepped in to lead this organization, the energy level of the entire organization went up, there were more programs put together by more volunteers and attended by more people. Pauline called herself the “self-appointed champion of the young.” She organized and led workshops to teach young engineers about leadership and communication skills and other attributes necessary in order to become successful managers and executives. It was invariably the most popular and best-attended event.
David and Pauline were among the first wave of Chinese Americans that not only helped built Silicon Valley but made the statement that Chinese Americans were not just good technicians but can also be successful entrepreneurs and business executives. Others during the early days of Silicon Valley included David Lam, Lester Lee, Stanley Wang and Ken Fong. David Lam was working at H-P when the white engineer he was training suddenly became his boss. He left to form Lam Research, which became one of the major equipment companies for the semiconductor industry. Subsequently, he went on to lead and/or founded a series of high tech companies. David also served as president of AAMA and on a presidential commission during the Bush Sr. administration.
Lester Lee started a company based on his magnetic media expertise which later evolved to become a supplier of ruggedized industrial PC’s, a profitable and not hotly competitive niche market so that he can devote his energy to social activism. He was involved in the founding of several professional Asian American organizations including AAMA. His opinions and letters to editors are particularly noticeable in the ethnic Chinese newspapers. He and David Lee and Stanley Wang were active Republicans behind many fundraisers in Silicon Valley. In fact he was the first Chinese American to be appointed to the University of California board of regent and he was also the first to serve for a year and then did not get confirmation to serve out the term. He was a victim of political battle between a Democratic legislature and a Republican governor. This failed confirmation was so extraordinary and raised such a stink from the Chinese American community that when David Lee’s nomination came up for confirmation, no one thought to use him as a political football.
Stanley Wang along with his brother started Pantronix, a small company providing the service of assembling and packaging integrated circuits with emphasis on serving companies that supply devices to the military and space agencies. This company has been growing steadily over nearly 30 years and now has plants in Philippines and Kunshan, China as well as Silicon Valley. At Stanley’s company conference room on prominent display are photos of him with every U.S. president from Reagan to the current one. Stanley serves on the board of trustee of the California State University system. The UC system has more glamour and prestige but the state university system serves more students. Stanley has personally made a number of $1 million dollar contributions to the state universities to encourage the improvement in the quality of higher education.
Ken Fong founded Clontech, a biotech company, which he sold to Becton Dickenson in 1999 for undisclosed hundreds of millions. Ken and his wife Pam are known for their generosity to philanthropic causes including endowed chairs and scholarships and for their unfailing support to Asian American political candidates and Asian American issues in need to financial support. Ken has opened a venture investment firm and travels frequently to China to look at developments of biotechnology there.
David Lee, Pauline Lo Alker, David Lam, Lester Lee, Stanley Wang, and Ken Fong are arguably the most prominent of the first wave to grow and prosper and contribute to Silicon Valley becoming a modern legend. At the same time other Chinese Americans also made in roads in Corporate America. Bob Lee was an executive vice president at PacBell, Albert Yu a Sr. VP who led the microprocessor development at Intel and Lee Ting a corporate VP of global logistics for H-P. This group paved the way for others to follow by being role models, community leaders and by giving back to society.
When the Committee of 100 decided to hold the conference in Silicon Valley this year, we felt that it was important to talk about giving back. We wanted to correct any impression that Chinese Americans only take and not give back and we also wanted to stress to our young people the importance of giving back. At the conference, we organized panels to discuss giving back via philanthropy, via not-for-profits and via public service. At our gala banquet, we asked Charles Wang, Chairman and CEO of Computer Associates to talk about his personal approach to giving. Charles is a member of C100 but Computer Associates is based on Long Island in New York and not from Silicon Valley, an easy concession to the recognition that Silicon Valley has no monopoly on giving back.
Charles Wang talked about “The Circle of Giving.” He believes in giving back not only for himself but to involve those around him. To encourage the employees of his company to give, his company matches $2 to every $1 dollar the employees donate to a worthy cause. He personally supports the National Center for Missing and Exploited Children. The Center uses the software provided by Computer Associates to track and quickly retrieves files of missing children and software to help predict facial changes of a missing child, as the child remains missing over years. Charles funds the Smile Train that operates on children with cleft mouths so that they can smile and take on a normal life. The train operates on 25,000 kids per year and has helped 40,000 children in China in just the last 3 years.
On the one hand, we Chinese Americans need to be vigilant over situations where we are being treated as foreigners and where our citizen’s rights are withheld from us. On the other, we need to show that we belong and that we are as American as the next. Americans are famous for their big heart and generosity of spirit; the Chinese Americans can do no less.
I would like to conclude my presentation with a little story about Su Dongpo, arguably one of the best known and best loved poets of China. I did a little research in preparation for the C100 conference and found out that this Song Dynasty poet/government official also started a charity for the specific purpose of helping peasant parents bond with newborn girl babies to reduce infanticide in the countryside. This showed that the Chinese cultural bias favoring male heirs ran deep and hard to overcome. More importantly, I found out that giving back has always been a part of the Chinese culture for those that enjoyed privileged lives.
____________________________________
Based on the keynote address given at the 20th anniversary banquet of Chinese American Forum, 8/3/02, in St. Louis, Mo. Dr. Koo is Director of Chinese Services Group, Deloitte & Touche, a member of Committee of 100 and a board member of Chinese American Forum.
Wednesday, October 10, 2001
A bicultural professional--divided loyalty or best of both worlds?
Speech: Silicon Valley Chinese Engineers Association Annual Conferenc, October 6, 2001
Despite recent tragic events, we are lucky to be living in America. This is a country of generosity, in space and in spirit. This is a country that has room for everyone and anyone. Anyone with the desire and the drive has the opportunity to succeed here in America. As previous speakers have already recounted, nowhere exemplifies this fact more than here in Silicon Valley.
According to latest U.S. census figures, more than one out of four persons living in Santa Clara County is an Asian American and one out of every fourteen is a Chinese American. Walk through any high tech company in Silicon Valley, and one would meet engineers, managers and executives from all over the world. If America is the land of opportunity, then Silicon Valley the source where opportunities originate.
Silicon Valley is the living proof that diversity is the strength of America. All of us that live and work in Silicon Valley have become to varying degrees multicultural professionals. We have to develop multicultural sensitivities in order to communicate with each other, to work as effective teams and therefore to be successful. Tragically, it is the lack of diversity and cultural sensitivity that kept our intelligence gathering agencies from detecting and preventing the recent acts of terrorism but that’s a topic of discussion for another day.
Today however, I would like to talk about the merit of being a bicultural professional rather than multicultural. More specifically, I would like to talk about being a professional person that takes advantage of being a Chinese and at the same time being an American.
In 1978, more than twenty years ago, I joined Chase Manhattan Bank to help American corporations do business in China, thus making use of my Chinese background as well as my consulting experience and my technical education. At that time, China was just opening its doors to the west and I took the job with Chase Bank with a sense of adventure and it did not occur to me that being bicultural could serve as a basis for a professional career. In fact, many people I met in China and not a few in the U.S. had trouble understanding what a person with a doctorate degree in polymer science was doing in an intermediary role of uncertain calling.
Today is very different. China has become the sixth largest economy in the world, the only major trillion-dollar economy expected to double within ten years, and has become a major trading partner of the U.S. and of California. Today opportunities abound for those who can move comfortably and get things done on both sides of the Pacific and who can function as a bridge between the east and west.
For the twenty some odd years that I have been going back and forth to China, I find certain practices and ways of doing of things essential to a successful career. One is that I take careful notes. Basically it is never a good idea to rely solely on one’s memory on important matters, such as your wedding anniversary, but it is even more important when you know you are jet lagged. When you are jet-lagged, it is amazing as to how easy it is to get order of events, people seen, nature of discussion and decisions made all mixed up just a few weeks after it all took place.
Another important characteristic is careful and active listening, or listening with empathy. This means listening in such a way that the speaker feels assured that he/she is being understood, not feeling the pressure from a listener who is anxious to interrupt and get a word in. An active listener is learning from the conversation and meeting, absorbing and digesting and understanding. Most of us leave a lot on the table because we have never paid enough attention to becoming a good listener. Active listening is a part of effective communication.
To be an effective listener in a cross cultural situation is even more challenging because it requires the person to be constantly switching the contextual background. A Chinese may be saying certain things that have certain significance while an American might be saying similar things but mean quite something different. A bicultural person has to have the ability to put the remarks in context and be able to explain one side to the other.
There are many occasions when I have been called upon to assist with the interpreting between Chinese officials and American business executives. My command of the Chinese language is never good enough for me to be a professional interpreter. But ironically, because I cannot be a word for word interpreter, I concentrate on making sure that the meaning and intent is accurately conveyed. For this, I get expressions of appreciation from both sides of the conversation.
To be a truly bicultural person is someone who can explain what one side is saying in the context such that the other person from the other culture can understand it. To be honest, I think I am pretty good at this and I do it naturally and do not really think about what I am doing. In that environment, my brain is constantly switching back and forth from the Chinese context to the American context, to the point that I am not even aware of what I am doing.
While I take a great deal of satisfaction in being able to help bridge the cultural gap between the Chinese attitude and the American one, sometimes the line seems blurred between explaining a position and taking a position. Sometimes one has to be able to distinguish between explaining China’s policy versus defending China’s policy. As an American citizen, I have an interest in helping Americans understand China’s policy, but I am not sure that I should be in any way defending China’s policy and be labeled an apologist for China.
For example, China has been criticized for their one child policy and their sometimes rather draconian ways of enforcing such a policy. I would point to the alternative, namely without the policy there would be 300 million more Chinese today than there already are. Certainly, I would not defend or even try to explain the extreme lengths some officials in the countryside have gone to enforce the one-child policy.
On the matter of protection of intellectual property, I would explain to my American client that this is a big headache and needs serious attention. I might indicate that lack of respect for software is part of Asian culture endemic throughout Asia, that solution will take a long time and require not only enforcement and prosecution but a great deal of education to promote understanding and respect. Again I would not defend or even condone piracy. In fact every chance I get when I am in China I would point out that protection of IP is in China’s self interest and is crucial to China developing a serious software industry.
China, of course, has been severely castigated over their so-called human rights record. Usually, this matter does not come up in my business assignments but does come up when the overall bilateral relationship is the issue. Again, I do not feel that it is my duty to defend China’s practices, especially since I have no way of gaining enough expertise to say anything authoritative about many of the practices. What I can say and have said to my American clients and political leaders is that human right condition in China is better now than ever in recent history. I have on occasion while in China with my clients and as we stroll along the Shanghai Bund to quietly ask first time visitors if the China they see is what they expected. Did China seem like a police state to them as portrayed by the American media? Of course, I have no respect for those individuals who go the other extreme, i.e., those who fabricate and distort the situation in China to increase bilateral tension in order to make a living from it.
In explaining China, it’s important to avoid using the party line from China for the simple reason that words from China tend to be doctrinaire and sounds more like slogans than are persuasive. For example, I think it is less persuasive to label the Falun Gong a dangerous evil cult, than it is to describe some of the teachings of their founder. Such concepts as levitation, power of spinning wheel to ward off bodily harm, and sickness as punishment for sins that cannot be cured by medication do a lot more to show the cult aspects of this movement than all the name calling.
As a member of the Committee of 100, I am very proud to be part of the team who has been engaged in preparing and updating a position paper on the U.S. China relations, entitled “Seeking common grounds while respecting differences.” We’ve been issuing this paper about every two years and the intended audience for this paper is The White House and Congress. In this paper we claim the advantage of bicultural perspective in pointing out that China is different from the U.S. in many ways. We encourage frequent interactions between government leaders to promote understanding and mutual respect. We argued that hectoring and lecturing and making highly public demands of China to modify their behavior to suit our American standard is not productive and not useful. Every year, we organize a conference and part of the program is to promote greater understanding between our land of origin and our adopted country. [Next year this conference will be held in San Jose and I look forward to seeing you there.]
As a bicultural person, I also devote efforts the other way, that is helping China better understand America. In the days of late 70s and early 80s, my efforts were mainly trying to convince people in China that the streets of America are not paved with gold and that everybody works hard for the admittedly high standard of living. That the image of a matronly woman in fur walking down 5th Avenue of New York with a poodle wearing a cute cashmere sweater and dainty booties does not typify America.
Today, I don’t have to do that anymore. China has largely caught up and in general understands the U.S. better than the other way around. Now, we talk about high tech development and ways of attracting foreign investments. Everybody is interested in the secrets of Silicon Valley’s success. Every chance I get, I explained that Silicon Valley’s success is in the people. When they ask what should the government do to create another Silicon Valley. My answer is that the government should do nothing other than creating an open environment. How to create a venture capital industry to breed successful high tech start-ups? I say first get the stock market up to international standards, let the market conditions, rather the government, decide on who should go public and who should not and do not limit how much windfall profit a venture capital firm can make on a successful investment. Of course to really attract foreign capital and venture capitalists the Renminbi needs to be freely convertible.
Of course, we Americans love to think that democracy is the best form of government and the right one for everybody. I happen to think a democratic government is one that I would prefer to live under but I do not presume to think that it necessarily is the only form of government nor necessarily the best one under all circumstances. In any case, I do not believe unsolicited lectures on the superiority of democracy is a very effective way to convincing anyone. One the other hand, when appropriate I wouldn’t mind explaining to my friends from China about the concept of democracy by using actual real life situations.
Let me give you an example. A few years ago, I was driving some visitors from China along route 280. Suddenly, I had an idea and pull into a rest area that featured a real ugly sculpture of Father Junipero Serra. “See this garden and flowers in this rest area,” I said to my visitors, “That’s the work of a homeless priest.” I then told them the story of this priest who was homeless and spent his time beautifying the rest area and sleeping there. The authorities found out about it and wanted to evict him. The public found out about what the authorities planned to do and raised uproar in sympathy with the homeless priest. In face of the public pressure, the authorities relented and allowed the priest to stay. Somebody, I don’t know who, even provided the priest with a small camper trailer so that he did not have to sleep in a tent anymore. Today if you go by this rest area you will see even more elaborate garden as well as the camper in the back. End of a beautiful story.
Why did I tell the story? Because of its human interest and because it is a good illustration of the benefits of a democracy where public opinion counts. In my view, telling the story is a way of making some points without being obnoxious about it.
Hopefully I have demonstrated and convince you that in acting as a bridge between China and America, in speaking about China to help Americe better understand China, you do not have to defend China. For sure, you should not feel any sense of divided loyalty. As a citizen of this country, you owe your allegiance to the United States. Period. This is not negotiable. As we know well from the recent experiences of Wen Ho Lee, there will be plenty of people that will suspect you of divided loyalty anyway. You must not give them cause and you must fight back when they discriminate and practice racial profiling.
As I alluded to at the beginning of my presentation, to be a bicultural person is to have the best of both worlds. As China grows in preeminence on the world stage, there will be a growing need for people that can communicate, facilitate and motivate on both sides of the Pacific. But the opportunities are even broader than just those that can go back and forth.
China is now actively recruiting those that have been trained and working in the U.S. to go back to China, much like Taiwan did about 10-15 years ago. Why? Because these people have the kind of training, experience, skill set and mindset and network of contacts of value to China. When China completes their reform of the securities market and open up the venture capital market and make the Renminbi convertible, the trickle of people returning to China to live and work there would become a torrent.
Opportunities in Silicon Valley are also growing for the bicultural person as well. For every new ethnic shopping center that opens means more jobs from chefs and waiters to clerks and shop owners to managers and small business operators.
The venture capital industry used to be virtually an all white business. Thanks to more and more high tech companies successfully started up by Chinese American and other Asian American entrepreneurs, the VC firms now realized that they are the ones missing out on deal flow if they do not have some partners who can interact with the Asian American founders.
Same with us here at Deloitte & Touche. We recognize the opportunity to serve increasing number of companies founded by Chinese American entrepreneurs as well as companies coming to Silicon Valley from China, Hong Kong and Taiwan. Thus we have formed Chinese Services Group with bi-lingual and bi-cultural members to provide an array of services.
My friends, we are facing tough tough times right now. When it’s the gloomiest, it’s most difficult to see the light at the end of the tunnel. But inevitably the economy will turn the corner. The long-term future for Silicon Valley, for China and for those of us that can live and work in both environments is bright and exciting. I wish all of you the best for the coming era, an era where multiculturalism and multilateralism will triumph.
Despite recent tragic events, we are lucky to be living in America. This is a country of generosity, in space and in spirit. This is a country that has room for everyone and anyone. Anyone with the desire and the drive has the opportunity to succeed here in America. As previous speakers have already recounted, nowhere exemplifies this fact more than here in Silicon Valley.
According to latest U.S. census figures, more than one out of four persons living in Santa Clara County is an Asian American and one out of every fourteen is a Chinese American. Walk through any high tech company in Silicon Valley, and one would meet engineers, managers and executives from all over the world. If America is the land of opportunity, then Silicon Valley the source where opportunities originate.
Silicon Valley is the living proof that diversity is the strength of America. All of us that live and work in Silicon Valley have become to varying degrees multicultural professionals. We have to develop multicultural sensitivities in order to communicate with each other, to work as effective teams and therefore to be successful. Tragically, it is the lack of diversity and cultural sensitivity that kept our intelligence gathering agencies from detecting and preventing the recent acts of terrorism but that’s a topic of discussion for another day.
Today however, I would like to talk about the merit of being a bicultural professional rather than multicultural. More specifically, I would like to talk about being a professional person that takes advantage of being a Chinese and at the same time being an American.
In 1978, more than twenty years ago, I joined Chase Manhattan Bank to help American corporations do business in China, thus making use of my Chinese background as well as my consulting experience and my technical education. At that time, China was just opening its doors to the west and I took the job with Chase Bank with a sense of adventure and it did not occur to me that being bicultural could serve as a basis for a professional career. In fact, many people I met in China and not a few in the U.S. had trouble understanding what a person with a doctorate degree in polymer science was doing in an intermediary role of uncertain calling.
Today is very different. China has become the sixth largest economy in the world, the only major trillion-dollar economy expected to double within ten years, and has become a major trading partner of the U.S. and of California. Today opportunities abound for those who can move comfortably and get things done on both sides of the Pacific and who can function as a bridge between the east and west.
For the twenty some odd years that I have been going back and forth to China, I find certain practices and ways of doing of things essential to a successful career. One is that I take careful notes. Basically it is never a good idea to rely solely on one’s memory on important matters, such as your wedding anniversary, but it is even more important when you know you are jet lagged. When you are jet-lagged, it is amazing as to how easy it is to get order of events, people seen, nature of discussion and decisions made all mixed up just a few weeks after it all took place.
Another important characteristic is careful and active listening, or listening with empathy. This means listening in such a way that the speaker feels assured that he/she is being understood, not feeling the pressure from a listener who is anxious to interrupt and get a word in. An active listener is learning from the conversation and meeting, absorbing and digesting and understanding. Most of us leave a lot on the table because we have never paid enough attention to becoming a good listener. Active listening is a part of effective communication.
To be an effective listener in a cross cultural situation is even more challenging because it requires the person to be constantly switching the contextual background. A Chinese may be saying certain things that have certain significance while an American might be saying similar things but mean quite something different. A bicultural person has to have the ability to put the remarks in context and be able to explain one side to the other.
There are many occasions when I have been called upon to assist with the interpreting between Chinese officials and American business executives. My command of the Chinese language is never good enough for me to be a professional interpreter. But ironically, because I cannot be a word for word interpreter, I concentrate on making sure that the meaning and intent is accurately conveyed. For this, I get expressions of appreciation from both sides of the conversation.
To be a truly bicultural person is someone who can explain what one side is saying in the context such that the other person from the other culture can understand it. To be honest, I think I am pretty good at this and I do it naturally and do not really think about what I am doing. In that environment, my brain is constantly switching back and forth from the Chinese context to the American context, to the point that I am not even aware of what I am doing.
While I take a great deal of satisfaction in being able to help bridge the cultural gap between the Chinese attitude and the American one, sometimes the line seems blurred between explaining a position and taking a position. Sometimes one has to be able to distinguish between explaining China’s policy versus defending China’s policy. As an American citizen, I have an interest in helping Americans understand China’s policy, but I am not sure that I should be in any way defending China’s policy and be labeled an apologist for China.
For example, China has been criticized for their one child policy and their sometimes rather draconian ways of enforcing such a policy. I would point to the alternative, namely without the policy there would be 300 million more Chinese today than there already are. Certainly, I would not defend or even try to explain the extreme lengths some officials in the countryside have gone to enforce the one-child policy.
On the matter of protection of intellectual property, I would explain to my American client that this is a big headache and needs serious attention. I might indicate that lack of respect for software is part of Asian culture endemic throughout Asia, that solution will take a long time and require not only enforcement and prosecution but a great deal of education to promote understanding and respect. Again I would not defend or even condone piracy. In fact every chance I get when I am in China I would point out that protection of IP is in China’s self interest and is crucial to China developing a serious software industry.
China, of course, has been severely castigated over their so-called human rights record. Usually, this matter does not come up in my business assignments but does come up when the overall bilateral relationship is the issue. Again, I do not feel that it is my duty to defend China’s practices, especially since I have no way of gaining enough expertise to say anything authoritative about many of the practices. What I can say and have said to my American clients and political leaders is that human right condition in China is better now than ever in recent history. I have on occasion while in China with my clients and as we stroll along the Shanghai Bund to quietly ask first time visitors if the China they see is what they expected. Did China seem like a police state to them as portrayed by the American media? Of course, I have no respect for those individuals who go the other extreme, i.e., those who fabricate and distort the situation in China to increase bilateral tension in order to make a living from it.
In explaining China, it’s important to avoid using the party line from China for the simple reason that words from China tend to be doctrinaire and sounds more like slogans than are persuasive. For example, I think it is less persuasive to label the Falun Gong a dangerous evil cult, than it is to describe some of the teachings of their founder. Such concepts as levitation, power of spinning wheel to ward off bodily harm, and sickness as punishment for sins that cannot be cured by medication do a lot more to show the cult aspects of this movement than all the name calling.
As a member of the Committee of 100, I am very proud to be part of the team who has been engaged in preparing and updating a position paper on the U.S. China relations, entitled “Seeking common grounds while respecting differences.” We’ve been issuing this paper about every two years and the intended audience for this paper is The White House and Congress. In this paper we claim the advantage of bicultural perspective in pointing out that China is different from the U.S. in many ways. We encourage frequent interactions between government leaders to promote understanding and mutual respect. We argued that hectoring and lecturing and making highly public demands of China to modify their behavior to suit our American standard is not productive and not useful. Every year, we organize a conference and part of the program is to promote greater understanding between our land of origin and our adopted country. [Next year this conference will be held in San Jose and I look forward to seeing you there.]
As a bicultural person, I also devote efforts the other way, that is helping China better understand America. In the days of late 70s and early 80s, my efforts were mainly trying to convince people in China that the streets of America are not paved with gold and that everybody works hard for the admittedly high standard of living. That the image of a matronly woman in fur walking down 5th Avenue of New York with a poodle wearing a cute cashmere sweater and dainty booties does not typify America.
Today, I don’t have to do that anymore. China has largely caught up and in general understands the U.S. better than the other way around. Now, we talk about high tech development and ways of attracting foreign investments. Everybody is interested in the secrets of Silicon Valley’s success. Every chance I get, I explained that Silicon Valley’s success is in the people. When they ask what should the government do to create another Silicon Valley. My answer is that the government should do nothing other than creating an open environment. How to create a venture capital industry to breed successful high tech start-ups? I say first get the stock market up to international standards, let the market conditions, rather the government, decide on who should go public and who should not and do not limit how much windfall profit a venture capital firm can make on a successful investment. Of course to really attract foreign capital and venture capitalists the Renminbi needs to be freely convertible.
Of course, we Americans love to think that democracy is the best form of government and the right one for everybody. I happen to think a democratic government is one that I would prefer to live under but I do not presume to think that it necessarily is the only form of government nor necessarily the best one under all circumstances. In any case, I do not believe unsolicited lectures on the superiority of democracy is a very effective way to convincing anyone. One the other hand, when appropriate I wouldn’t mind explaining to my friends from China about the concept of democracy by using actual real life situations.
Let me give you an example. A few years ago, I was driving some visitors from China along route 280. Suddenly, I had an idea and pull into a rest area that featured a real ugly sculpture of Father Junipero Serra. “See this garden and flowers in this rest area,” I said to my visitors, “That’s the work of a homeless priest.” I then told them the story of this priest who was homeless and spent his time beautifying the rest area and sleeping there. The authorities found out about it and wanted to evict him. The public found out about what the authorities planned to do and raised uproar in sympathy with the homeless priest. In face of the public pressure, the authorities relented and allowed the priest to stay. Somebody, I don’t know who, even provided the priest with a small camper trailer so that he did not have to sleep in a tent anymore. Today if you go by this rest area you will see even more elaborate garden as well as the camper in the back. End of a beautiful story.
Why did I tell the story? Because of its human interest and because it is a good illustration of the benefits of a democracy where public opinion counts. In my view, telling the story is a way of making some points without being obnoxious about it.
Hopefully I have demonstrated and convince you that in acting as a bridge between China and America, in speaking about China to help Americe better understand China, you do not have to defend China. For sure, you should not feel any sense of divided loyalty. As a citizen of this country, you owe your allegiance to the United States. Period. This is not negotiable. As we know well from the recent experiences of Wen Ho Lee, there will be plenty of people that will suspect you of divided loyalty anyway. You must not give them cause and you must fight back when they discriminate and practice racial profiling.
As I alluded to at the beginning of my presentation, to be a bicultural person is to have the best of both worlds. As China grows in preeminence on the world stage, there will be a growing need for people that can communicate, facilitate and motivate on both sides of the Pacific. But the opportunities are even broader than just those that can go back and forth.
China is now actively recruiting those that have been trained and working in the U.S. to go back to China, much like Taiwan did about 10-15 years ago. Why? Because these people have the kind of training, experience, skill set and mindset and network of contacts of value to China. When China completes their reform of the securities market and open up the venture capital market and make the Renminbi convertible, the trickle of people returning to China to live and work there would become a torrent.
Opportunities in Silicon Valley are also growing for the bicultural person as well. For every new ethnic shopping center that opens means more jobs from chefs and waiters to clerks and shop owners to managers and small business operators.
The venture capital industry used to be virtually an all white business. Thanks to more and more high tech companies successfully started up by Chinese American and other Asian American entrepreneurs, the VC firms now realized that they are the ones missing out on deal flow if they do not have some partners who can interact with the Asian American founders.
Same with us here at Deloitte & Touche. We recognize the opportunity to serve increasing number of companies founded by Chinese American entrepreneurs as well as companies coming to Silicon Valley from China, Hong Kong and Taiwan. Thus we have formed Chinese Services Group with bi-lingual and bi-cultural members to provide an array of services.
My friends, we are facing tough tough times right now. When it’s the gloomiest, it’s most difficult to see the light at the end of the tunnel. But inevitably the economy will turn the corner. The long-term future for Silicon Valley, for China and for those of us that can live and work in both environments is bright and exciting. I wish all of you the best for the coming era, an era where multiculturalism and multilateralism will triumph.
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