July 31, 2014 12:00 am JST

How Jack Ma's never-say-die spirit led to an online empire

TORU SUGAWARA, Nikkei staff writer

HANGZHOU, China -- With his average grades and two failed attempts to get into college, Jack Ma Yun, 49, hardly seemed like titan-of-industry material while growing up in the eastern coastal city of Hangzhou, Zhejiang Province.

     But he had a spark. Despite being small and skinny, Ma frequently got into fights as a kid due to a combination of a strong sense of justice and a mischievous streak. It is perhaps because of this pugilistic spirit that his company, Alibaba Group, China's largest online retailer, is poised to launch what may be the biggest initial public offering New York has ever seen.

Daydream believer

In February 1999, Ma called 17 of his colleagues to his apartment in Hangzhou. He had something important to say. "We will revolutionize the Internet industry," Ma told them. With those words, Chinese e-commerce giant Alibaba Group was born.

     Many of those gathered were former students of Ma's from his teaching days. His first job after graduating from Hangzhou Normal University in 1988 was teaching English at Hangzhou Dianzi University. He later picked up another teaching job at a night school. It was there that he encountered the future co-founders of Alibaba.

     The teaching gig at the university was the result of a favor from one of Ma's professors. Most of Ma's classmates were assigned teaching jobs at elementary or junior high schools after graduation. Ma was the only one placed at a university, which was considered more prestigious and earned him the envy of his classmates. That he was able to secure such a plum assignment suggests that Ma's knack for English made him stand out.

     His interest in the language took root in junior high. Ma had a teacher who would wax passionately to the class about how wonderful it would be to speak in English with foreign visitors about Hangzhou. The city has many scenic spots, including the West Lake, which Unesco granted Cultural Landscape status in 2011 and has long been a must-see destination for tourists from overseas. The teacher's words resonated with the young Ma, who took to studying English with a passion.

     Not satisfied with limiting his lessons to the classroom, Ma would ride his bike to the high-end Shangri-La Hotel every day to practice English with the foreign guests who stayed there. He would volunteer to guide them around the city, sometimes carrying them on his bike. His English rapidly improved, and it was during this period that a married couple whom Ma had guided gave him the name Jack.

Budding businessman

It was around this time that Ma first visited the U.S. He was sent there as an interpreter for a city-government project. One of his stops on that trip was a venture firm, and it was there that Ma had his first encounter with the Internet. Ma's enterprising spirit was evident in 1995, when, after spending a few years as a teacher, he went into business for himself. At the time, China was pushing ahead with reforms and opening up to the world, and many civil servants were becoming entrepreneurs. Ma established a translation company. Although work only trickled in at first, the business gradually grew as word of his outstanding English skills spread.

     On a whim, he entered the word "beer" in a search engine. While an array of links to websites of U.S., European and Japanese brewers popped up, no Chinese companies appeared on the screen. He added the word "Chinese" as well, but still no luck.

     Ma recalls thinking, "I want people to know more about China through this new tool called the Internet." Immediately upon returning to Hangzhou, he established a Chinese version of the U.S. Yellow Pages online business directory. The Internet had begun to spread in China, and earnings from the new venture grew large enough to enable Ma to open an office in Beijing. But he was not the only person with the idea of offering an online directory service. Pummeled by rivals, Ma pulled the plug on the business.

Eureka moment

Dejected, he retreated to Hangzhou. But he carried with him the seed of an idea that would eventually make him one of China's richest men. Shortly before departing for his hometown, Ma visited the Great Wall with 12 former employees. He was struck by how many messages had been scribbled on the stone. Some were simply notes proclaiming that so-and-so had been there, while others were reflections on how it felt to be at the ancient site.

     Ma recalls thinking: "Chinese like to scribble. We can do something similar on the Internet." Back in Hangzhou, he created a bulletin-board service through which Chinese companies could introduce their products to clients: Alibaba.com.

     The timing could hardly have been better. The global information-technology bubble was about as swollen as it would get, and investors were not hard to find. Leveraging his excellent English and communication skills, he created a solid foundation for growth by attracting talented people and money from investors. Famously, it took Ma just six minutes to convince SoftBank Chairman and CEO Masayoshi Son to invest in Alibaba. The Japanese mobile telecommunications service provider now owns a leading stake of over 30% in the Chinese company.

Way of the warrior

Ma likes to read wuxia, a genre of fiction focusing on the adventures of martial artists. He says he identifies with the heroes in those kung fu novels -- morally upright men who can also unleash a devastating roundhouse kick if necessary. When Ma logs on to Laiwang, Alibaba's chat app, his ID is Feng Qingyang, which the Financial Times reports is the name of a reclusive, sword-wielding character from a kung fu novel who was unpredictable and aggressive. Many other Alibaba founders also use names of characters from wuxia for their Laiwang IDs.

     Ma claims to not be interested in making money. One of his maxims is, "Customers come first, followed by employees and then shareholders." When SoftBank offered to invest $30 million in Alibaba, Ma asked Son to lower the amount to $20 million, reportedly because he did not want the Japanese company's stake to exceed 30%. "Be careful with other people's money," is another favorite saying of the Chinese executive.

     Ma is about to receive a lot of "other people's money." As early as August, the company will launch an initial public offering in New York that could see Alibaba's market capitalization surge to $20 billion. There is speculation that Ma sees the IPO as a way to shed SoftBank, a 34.4% shareholder, and U.S. Internet company Yahoo, 22.6%, as major investors and gain more control of Alibaba's destiny.

     As it has grown, Alibaba has focused on creating its own corporate culture. It has fashioned a mechanism through which a group of carefully chosen executives selects the company's CEO. This arrangement is thought to be aimed at preventing a scenario in which SoftBank thwarts Alibaba's wishes at board meetings.

     Alibaba's first 15 years have been a wild ride. Now that the company has size and momentum on its side, it appears to be seeking more independence in its push to achieve Ma's dream of "revolutionizing the Internet industry."