HANGZHOU, China -- Alibaba Group Holding commands a vast share of China's rapidly expanding online retail market. The company presents a serious challenge to foreign companies trying to find a foothold in China's consumer market.
The company remains something of a mystery. In an interview with The Nikkei, Jack Ma Yun, founder and chairman of the e-commerce leader, talked frankly about the company's relationship with the Chinese government and finding someone to succeed him.
Q: Alibaba started out with a staff of 18 in 1999. Your company has become a giant in the Internet retailing business, hasn't it?
A: Alibaba has become a big company compared with 15 years ago, but we are still a small company compared with where we will be 15 years from now. We have studied two organizations that endure for a long time. One is churches, the other is universities. Both retain strong values, and cultures, and empower others. So we studied how they sustain themselves. NGO(Nongovernmental organizations) are nonprofits, but we are a for-profit organization -- an organization that helps small business and empowers innovation will be an organization we can believe in.
In that way, we will be able to live longer and healthy. Of course, there is a lot of challenges. Normally, big companies are no match for small companies in terms of speed and innovation because when you have lots of rules to manage, it's difficult to innovate.
But Alibaba is not a company that is run by rules. We focus on managing the company by culture. Big companies have problems in innovation. That's very natural. But for us, we are always changing our structure; we always improve our culture to make sure that we keep our innovative spirit and culture. Alibaba believes that our size enables small businesses to be more creative.
Q: What is your take on China's recent slowdown?
A: It's a golden time for China. Many big companies grow in crises. In the U.S. there are hundreds of big companies, like IBM, Cisco Systems, Microsoft. In Japan, Europe, there are like 30 or 40 of that size. In China, there are almost none, apart from the SOE(state-owned enterprises). In the private sector, we might be in the top one or two. So China -- with the world's second-largest economy -- we definitely should have 30-40 companies of that size. Since we are the first, the world is not ready -- China is not ready, we are not ready -- to accept it when such a giant suddenly appears. In the next three to five years, people will get used to it. Not only Alibaba, but lots of big companies will be coming up in 10-20 years. The market is there.
Q: People outside China are familiar with the name Alibaba but few know much about the company. What is your company like?
A: We are not a normal company. That makes it hard for many people to understand us. We are a company that operates economy, which I call economy. We are building a virtual economy. Its size is $500 billion. We have millions of people working inside [that economy]. We have payments, logistics, a marketplace, an import-export system, cloud computing. We are building up the world's largest virtual economy. We are operating it. So using any company standard, it's difficult to measure us. In the U.S., there is no such a virtual economy. Although eBay and Amazon.com sell and deliver things, they are not such an economy. The Alibaba economy helps small business, creates jobs, creates innovation. We have almost everything, so we call it an ecosystem, a platform. So it's almost impossible for American people to understand such a creature. But someday they will use us and understand.
Q: In the U.S. stock market, where Alibaba went public in 2014, the stock price briefly fell by half. Are you disappointed?
A: I agree there is a problem, there are difficulties. But it's only one year after our IPO(initial public offering). In our first year, we had this kind of problem; it's understandable. It was China's first time to have a private company this big -- the first Internet company in China to go public in the U.S. I think there was misunderstanding and not enough communication between us and the investor community in the U.S. That's very understandable. We are reviewing that. Next year or the year after next, we will do better. Because we have been focusing on the China market for such a long time, our original plan was to go public in China or Hong Kong, but not in the U.S. But since we went there, we want to be a global company. We want to be transparent. We want all the shareholders, users in other nations to know us. We have challenges. We understand. We have confidence that we can improve. We are better than investors thought.
On the other hand, I would say we have lots of different thoughts about our business, because our business is pretty unique. We grew up in China, and our philosophy is the customer is No. 1, the employees are No. 2 and the shareholders are No. 3. That is totally different from Wall Street's shareholder-first model. Also, U.S. investors or Americans would rather judge a Chinese company by whether America has this model or not. Our model is so unique. We are so big, and we don't have a service in the U.S. People there don't understand what the difference is between Alibaba, Tmall and Taobao. What is Alipay, what is Cainiao Network Technology? But shareholders are smart, and they know a good company needs time to build itself up. A good model needs time to prove itself. I'm confident we are making progress, and will make more progress.
Q: Many Chinese companies that were once listed in the U.S. have pulled out and returned to markets in mainland China or Hong Kong. Will Alibaba do the same?
A: If we had listed in China, we might have been the world's largest company by market capitalization because everybody knows and uses Taobao, Tmall. But unfortunately, we could not list in Asia. So we have so many requests from China -- come back. It's because Americans use them. Chinese people use us, but they cannot buy our shares. Americans buy our stocks, but don't use us. So I understand, but someday they will use us.
We are pretty open about everything. Because for us, as long as it's good for business or for our customers, we will do it. But we are not in a hurry. I believe American shareholders, global shareholders, they are smart. It takes time for them to get it. We are not in a hurry. We are still focusing on how we can make our economy.
Right now, there are four main economies in the world, the U.S., Europe, China and Japan. But in the future, there could be a virtual economy. And in five to 10 years, we will be the largest economy in China. This is something people never think about. People still think that this is a company.
Q: Is Alibaba trying to cultivate closer ties with the Chinese government?
A: When we were young and small, we were focusing on the market. We hated to have too close a relationship with the government. We are a company that relies on the market. We did everything to help by focusing on small businesses. And the government was happy with what we were doing.
But today, we are so big. Everywhere we go -- the way of governing the Internet -- there are conflicts. Some people like it, some don't like it. There is conflict. But I believe there is an opportunity for us to talk to the government, to communicate with them, to educate them. We have to know what they are worried about. They have to know what we want, what we worry about. It's a sort of partnership. Both the government and us -- we always want the economy to be good. We all want to create jobs. We all want every family to be happy. So how can we work together in a better way? It's not easy because in the past 16 years, we never knew how to work with the government in a businesslike way. Now we are learning that.
Q: Appointing a successor to the founder of a rapidly growing company is a major challenge. How do you intend to go about this?
A: I want to tell you one thing. I've never seen a company in China that had a better succession plan than we do. We are executing a wonderful succession plan. I started my retirement planning 10 years ago. The first thing you have to prepare when you want to retire -- the crucial thing -- is succession. I talked with young leaders who joined the company a month ago. Yesterday I told them you're done with your work when you find three people who can do a better job than you. [As soon as you do that,] you can leave anytime. If you don't find those three people, you haven't finished your task yet. So I am preparing for my retirement every day, not because I want to enjoy my life, but because I know young people can do better. I think I came into this world not to work. I came into this world to enjoy my lifetime. Too much work, too much pressure, will make me die sooner, honestly.
Interviewed by Nikkei staff writer Wataru Kodaka