Acquired - Special- 2021 China Tech Trends (with Tech Buzz China)

0:00Your format on tech bus China is well probably a similar amount of piles of research to acquired. Your format is way different. You actually write the whole thing out beforehand, right? Yeah, we actually do. We don't even record synchronously at this point. That's a craziest thing. So wait, can you explain what that means? We just record separately. I record my part and then you record her part. It's more like an audio book each episode, but sort of like it.

0:28two people reacting to each other who are not in real time in the same room. It's wild. Welcome to this special episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I am the co-founder and managing director of Seattle based Pioneer Square Labs in our venture fund PSL Ventures. I'm David Rosenthal and I am an angel investor based in San Francisco. And we are your hosts.

1:07On today's show, we have a crossover episode with Ray Ma and Ying Liu from the Tech Buzz China podcast. Woo, so excited about this one. I've been thinking about doing this for a while. I know I've been listening to Ray and Ying for many years, listening many, many times over on repeat while doing research for Mei Tuan and PDD and Tencent Nellie Baba and Xiaomi and all of our China Tech episodes. They are...

1:33the best English language China tech podcast out there. And so excited to finally do this crossover. Yeah, no kidding. We wanted to cover a few things and thought that the best way to do sort of a broad general China episode that's not specifically about a company would be to collaborate on one and do it together. So today we're going to talk about trends in 2021 for China tech. How Ray and Ying do their research, given that they both live in the US, their views on the China tech landscape and how those have evolved over the last decade, as that ecosystem has rapidly developed as we've covered on the show, and a little fun comparing and contrasting our two shows. All right, listeners. Now is a great time to talk about a new partner of ours here on acquired, LaGora.

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4:17Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com slash acquired, and just tell them that Ben and David sent you. Now onto our conversation with Tech Buzz China. All right, Ray and Ying, great to be doing an episode with you.

4:46Yeah, yeah, so totally big fans have acquired our goal is to be like the acquired but for you know China. Oh my god. That's great. Well, why don't we turn it over to you real quick for give us your personal back stories a little bit about the show. Both of you live in California right not actually in China. Yeah, we live in both in the Bay Area right now.

5:12was boarding China immigrated to the States as a kid when I was eight and grew up primarily in Silicon Valley actually. You know went to school up Berkeley and then when I graduated went into investment banking doing technology Because I wasn't good enough to be an engineer So study engineering college and then and went into finance and in 2007 for personal reasons moved to China and then ended up staying there for the next eight years working in a variety of jobs but starting first in real estate Investing and then going into even did some cross-border M&A and then media private equity and then finally really really early stage startup investing at 500 startups, which is very very early search accelerator and seed fund and then moved back to the Bay Area at the very end of 2015 didn't think I was going to do much with China anymore

6:07but was still keeping tabs on things. I was like, hey, podcasts are all the rage. This is in 2017. Should do a podcast on China Tech. It seems like it could be fun. And then very quickly, what I realized is that by the end of 2019, I will call it.

6:26I was like, well, some of these companies that I'm just sort of covering for fun and personal passion for tech buzz are actually really doing really really well. And I should really think harder about whether or not I want to drop the China connection. And then so in 2020 decided to really pick it up full time. We took some investors to China with us in 2019 to visit a bunch of the companies that we talk about on the podcast. And then We were going to do that last year more, as part of talked about us, but then the pandemic cut short all that. So we've pivoted into more of a community now online for investors. And then I personally do a bunch of consulting for funds interested in investing and trying to tech. That's great. Well, it comes through on the show. Yeah. I can't talk about everything I get. You know, a lot of information is proprietary, but I try to share what I can.

7:22There's so much that is happening that is reported if you are Chinese, but if you're American, you're like, I just occasionally get this random story about Jack Ma disappearing. I would love to understand thematically what's going on under those headlines in China.

7:40Yeah, and you know, I think one thing I should point out when it comes to my personal experience and also this happens to drive with you because we that's what we met we met when we're both living in Beijing which is that we were there in retrospect at a very auspicious time in Chinatack because prior to let's call it 2013-14 Chinatack was really really small so I was really there when the first couple years Really, you could count on your hand the number of people doing angel investments in China, right? So...

8:12their literally was a book called Angel Investors of China. I think it had like 12 men in it. So yeah. It's like the Warren Buffet used to go through the Moody's Manual of Companies to look at all the companies. There's like a manual of them. Here you go, here are all the people. And then so I happened to then join 500, which at the time, by the way, a lot of people were like, why are you doing this? This is way too early. This is really bizarre. This is not a business model that works in China.

8:42And then it's not like I knew what policies were coming. But then two years later, boom, you have a couple thousand accelerators. You have hundreds of early stage funds and you have a total sea change shift in attitudes around entrepreneurship and startups where people went from thinking that was something honestly only losers did if they couldn't get a real job to now, oh, all the best and brightest.

9:06would, of course, go and create their own startups. And that happened really around 2014 or so. And I think you can see it in the types of companies that are public today, right? Some of the most popular companies that are always talked about in media, you know, Pinrodoa by Dance, Maytwin, etc. All these companies really started in the last decade. And Pinrodoa is a great example of a company that started in the last, you know, five, six years.

9:32This is when it all happened, basically all the capital sort of flooding in and the social attitudes changed. Before the pandemic, both of us used to go back quite often, I would say probably quarterly, now because of the travel restrictions, then it is primarily online, but...

9:50The good thing is that because of the pandemic, actually everyone in China is also more used to being online. In fact, some of the VCGPs that I talked to, they themselves are not even based in China right now. They're like in Singapore or Taiwan or something. Very cool. All right, Ying, what's your story? So I think Ray brought me into the story when she mentioned that we met in China.

10:13It's been like 10 years ago, when I went to China right after college, and even when we started this podcast, China wasn't a super hot topic in China Tech even three years ago was not as appreciated, and I feel like things have just...

10:28Totally changed and it's interesting to be able to say oh I've seen the rise of different sectors of tech especially like online to offline companies going overseas like the rise of all the digital live streaming any commerce happen in China while like also watching concurrent trends in the US. But to go back, and I came to the US when I was two from Guangxi, I'm actually a fourth-tier city and a lot of my extended family that I'm very close with are still in like fourth-tier and some third-tier cities and they're all in Guangxi. Except my parents and brother.

11:02So throughout my career, I've been more on the operator side. I've worked with over, I would say over half, so over 50% China-based fully Chinese teams, like embedded as part of the team. I've been an employee. I've been a startup co-founder in China. This was like 2012 to 2014.

11:19I fell into this niche initially when I moved to the barrier from China in 2014. And that was the year that a lot of Chinese apps were trying to go overseas. You guys might know about this. And I'd be brought on to help them with their US business deals or set up an office or like do PR until their story. And today I have two partners in China, most of my deep rooted opinions and like cultural schemas of China have been shaped by a combination of family background and early personal and professional experiences. But I do want to emphasize that we really have to put in time to gather current knowledge. So you know when people use the term like China expert or refer to tech buzz, I do think it's not something we just can spit off. It's just like you guys making an acquired episode and you have to put in a lot of the time to do the research.

12:08Well, you could not have teed us up better to discussing what is happening now in China in terms of trends for entrepreneurship. So I'd sort of like to turn it back to you. Feel free to start wherever you want. But for both of our audiences, what are some trends that they should be paying attention to and that we'll be covering three to five years from now in the next Maytwan and the next Panduoduo in future episodes? So actually, that's a great question. And at least in the near future, what we're focused on at our insider community, what I said for this year, what I think are going to be really interesting are a couple of things. One is consumer brands, and that's specifically on consumer brands being run like internet companies, which we can talk about. There is also community group buying, which is very disruptive, and it's a new form of e-commerce that's happening now in rural China that really...

13:00kicked into high gear last year because of the pandemic. And then actually the third thing I will briefly mention it, but I don't actually have too much. to share on the topic at the moment, which is if we think about China tech more broadly than just internet or than even just software, then this whole new thing of electric vehicles and autonomous driving is really, really interesting in China as well. And actually a lot of experts I talk to think that the US and China are really kind of on par.

13:30or some people even think China is ahead in that sector. And that's definitely something I'm watching. I'm more familiar with the AV front and less with the actual vehicle making. But those are all interesting things. Well, maybe let's first start with that direct to consumer and that brand piece and kick it over to Ying sort of, how do you think about that and what's going on in China there? So at a high level, I think we've always thought that, you know, in my observation, the level of quality of Chinese consumer brands like Ray mentioned is going to go up and this is totally in parallel with innovation and China continuing China no longer being a copycat manufacturing and designing a lot of its own products. Ray mentioned consumer companies being run more like tech companies but all delve more into the specifically the DTC side so direct to consumer brands.

14:21So I think there's a huge market opportunity for domestic Chinese brands to gain market share in China. And that's not just because, you know, again, the media narrative is all about like the youth being very nationalist, but actually it's because if you look at developed countries, right? So for example, the United States, we actually have something like a quarter of FMCG products or foreign brands are non-US. But if you go to China, what's FMCG? FMCG fast-moving consumer goods.

14:50Yeah. So you're basically consumer staples, etc. But if you look at China again, the foreign brand penetration is actually north of 40%, very, very much higher than that for certain other categories. And so if we assume that China is going to look more like the rest of the world in terms of how strong its domestic economy and brands are relative to foreign ones, then right, there's a huge market share that domestic brands can capture. And this is accelerated by the fact that in recent years, manufacturing, design, all these things that go into brand has significant So like I was saying to you, but the OEM of the past, the original equipment manufacturers were, you know, the model is that you go to China, you already have your products back, you already have your brand, you have your design, you go there just looking for someone to make it for you. Those days are a long past. OEMs are now ODMs, right? They also do a lot of design where you can just go then with some sort of

15:51much fuzzier. Let's call it products spec and then they'll actually design something for you as well as manufacture it. Today, I hear people call it, you know, called these factories OBMs, right? Original brand manufacturers were literally doing pretty much everything for you except the final branding. You know, they even will do a lot of the marketing copy, etc, for you as well because they've just gotten so much better at all these parts of the entire process. I should caveat with saying That is still, in my opinion, a lot of PR, so not all of them. So the quote-uncourage and old brand manufacturing is basically still ODMs. But the point is that there are significantly better than before. So you will see, again, you see this already in the US and Amazon. You already have a bunch of brands trying to brand themselves on Amazon selling commodity products. What we're talking about, however, is not.

16:54You know, you're like, no name, unpronounceable brand from China selling like an Apple Firewire or something. Right. iPhone Charger is this stuff? Yeah. We're talking more now about like people building real brand IP, right? So I think one of the examples that is very, very popular in China right now is probably less well known outside of China as this brand called Genki Forest. And it is right now a six billion dollar valuation company that wants to be the Coca-Cola of China, right? So we already saw last year this company called Yatsun, a.k.a. perfect diary, wants to be the laureale of China. And then last year we actually already also saw the listing of the PNG of China. So there's all these brands trying to take over the consumer staples categories. And the newest intranet I think is really interesting is Genki Force, which is Coca-Cola of China. And they are just starting off with basically your carbonated beverages.

17:53The different thing that they're doing is that the company is actually run by people who come from a social gaming background. So they think about everything in terms of marketing ROI, right? And doing very, very quick AB testing and very, very quick iterations. And are they using OBMs of DMs to actually make the soda? They're just a brand. They're just a brand. They're just slapping on their brand and marketing, right? So they did start with their own factory, but it was.

18:22only in mid last year and that's after, you know, that's a few years after they started, right? So same thing with perfect diary, by the way, the cosmetics brand, when they went public, they had also just started, you know, their own factory. I will say in the beverage industry, even in the US, that's super common. So like I know this is going to sound a little trite, but I know the founders of Foreloko and at one point in 2011, They had 100 people working at the company 96 of them were salespeople and they had the founders and a CFO and they work with a contract manufacturer. So I think it's technically a contract brewer and this is the most common way for any beverage or especially alcoholic beverages in the US to start is to contract out everything but the distribution and the branding.

19:14That makes a lot that makes a lot of sense. I don't think I don't think Yankee first looks quite that I mean They are doing more R&D, but I think what differentiates them is how many skews that they're constantly trying So they do small batch testing and then they will they will do it on both the marketing front as well as sort of the physical products of course And then you know according to the founder only 5% of their products make it into sort of mass channels right because the mass of the mass offline channels are actually very hard to penetrate and also to manage But so like this isn't like Coca-Cola where it's the recipe that has been one soda that's been sold for 150 years. It's lots of different products

19:58Yeah, it's a lot of like, so maybe even a better example is to look at perfect diary, which is they're doing a lot of collaborations, right? So like all the new brands these days, right? They're doing a lot of collaborations. They're making like very sort of seasonal-ish products, so they'll put out something. I think there are averages one new product a week, and then whatever makes it, you know, quote-unquote becomes the best seller, then they'll put more resources.

20:24around it, and it's the same thing for Genki Forest, right? So they are supposedly coming out with a new product every few days, and then they'll do sort of small batch testing with it, and then of 5% or so of these products will then become a sort of further bestseller that they'll put into more distribution. And that is basically how If you think about it, it's very similar to how you iterate on a internet software product, right? So this is what I mean by companies and brands in China are now trying to do this, applying it to physical products. And they're doing this because they have such good access to a very, very advanced and flexible supply chain. I think a lot of people, when I talk to them, they're thinking of factories as like, you know, still very manual and, you know, people on these like long lines, but

21:13I visited some of these factories and they're actually quite advanced, right? So there's a lot of automation. Like I said, they're all running software to manage themselves. And they have a lot of design in-house talent. And, you know, the advancements in manufacturing have gotten, have really primarily focused on speed in China. So when you think about manufacturing, the minimum order quantity is always a barrier.

21:40for most people, right? So especially in consumer products like clothing and while clothing being I think the main one, China has really been able to push forward on having more flexible manufacturing by what I mean is when we visited Wuhan, who is a...

21:59I don't even know how you say their English name is Ruhaan. But anyways, they're just about to go private, but they were previously, you know, we did an episode on them how they were started by the quote-unquote Kylie Jenner of China. So it's basically influencers making their own clothing and branded products. When you say about to go private, are they public now? They are public now. Yeah, about to go private.

22:22I haven't done that well. But when we visited them, we saw all their clothing and all this stuff. And then we also visited Mokwutia, who was a live streaming shopping app. And both of them told us that number one, they had such good access to manufacturing and turnaround times were so fast. It was about seven days from a design to being made and then shipped out the door.

22:49Right? Seven days. That's actually really, really fast. And for a company like she and which Ian can talk about, that is apparently down to five days. And yeah, like a company like she and is pushing out a thousand new skews every day on their website. Amazing. Yeah. Yeah. I want to hear about she and yeah, I've heard about this. This is crazy. Ying, bring us up to speed here. Okay. So I think that what Ray talked about with marketing and like really flexible supply chains enabling the tech-based teams to focus on marketing and online marketing, which is actually like a highly valued skill, just like it is in the US. So she in takes five days of designing to ship. This is on average. They're producing 1,000 new designs a day. They have $10 billion in revenue. It's all women's clothes, right? Yeah.

23:41Well, women's clothes. It's kind of like H&M fashion. They might have some men's clothes. I feel like they might have some men's clothes. I don't know. We can check. We should check. I can check. Do you want some, David? I do. I do. It's super cheap too. It's super cheap. I don't know if you want to wear that. They do have men's and kids and beauty. So I can order something that was designed five days ago. Yes. It might take longer to ship and get to you, but five days. Yeah. It will take a long time to ship. Yeah.

24:11It's like wish shipping times. Yeah, slightly better. Have you guys ever ordered from wish? I haven't. I've been tempted to, but I never have. I know only of wish because I've seen it on Laker jerseys. Yeah, this has like wish. I do think that's a good comparison. So you order in the quality of clothes, in my opinion, isn't very high. I think I did an order just to test it. But this was because I was benchmarking to another company, but she and has As of time of recording 19 million fans on Instagram. So note that I'm saying Instagram. This is not a Chinese social media platform. And we'll get a little bit into that too with some of the cross-border DTC happenings. This is amazing. I'm on the men's section and get swimsuits for $3.90. It's true. Wow. Oh my god. Yeah.

25:03And for reference, Uniqlo's at $26 billion. So we're kind of benchmarking she in as the success story of overseas DTC brands coming out of China. And then Ray had mentioned we visited Moguzia in October 2018. And they're also doing small batch designs and producing a lot of new designs. So this is all innovations within the supply chain and shortening the time it takes to get new designs to market.

25:31And when people used to refer to fast fashion, you'd look at like a Zara or something. The knock was, oh, they're, you know, busting their ass to get this to customers hands, you know, five weeks after they come up with a concept. And now we've shortened it to like five days. Is that? Yeah. Well, there's the shipping aspect of it. But yeah, if this was happening in China, then you can get, I think you probably get it shipped the next day. Yeah. That's right. Wow.

25:57Wow, and there's always been a bunch of people that are concerned about the environmental impact and at least I know there's a lot of negative sentiment around fast fashion. How does that play into how all this is developing? I would say at least right now like before a company like she and right first of all she is called ultra fast fashion now, I guess. I don't think the environmental impact is probably fully baked into it and I'm firstly not a fan of the model, but I think the point we're trying to make is just that the supply chain is really flexible now. And the end goal really is to have it to be so flexible that you can make it as demand comes in, right? So that it is completely just in time. And then you have zero inventory risk or zero inventory. You basically lower your cost so much. Yeah, it's like not even

26:46Inventory, it's not even just in time manufacturing. It's just in time creation and design of products. There's not even any product risk. Yeah, exactly. Well, that's where people are trying to get to. We're definitely not quite there yet, but that is the future. We picked these categories. Shoot is actually an old company. It's over 10 years old because, again, these supply chain innovations take a long time, right?

27:10But the supply chain innovations then can also be extended to other industries, like you were saying, you know, or like we were saying the drinks, as well as cosmetics, et cetera, and all these other categories. There's a growing proportion of Chinese companies that want to sell into overseas markets, including the US, that are DTC fashion brands. I've personally seen a number of business plans, including one women's fashion brand that I'm currently working with.

27:36all of themselves benchmark themselves to she and so they'll have a graph on their pitch deck of like here's the supply chain process, here's like what she and does, here's what we're doing pretty much looks the same or there will be some minor tweaks and then the end product is a little different but it's usually in fashion, women's clothing, I haven't seen cosmetics yet but while they're innovation in how they handle the supply chain and how they position themselves to consumers might vary a little bit.

28:04what they share with shein is a commonality of low price a heavy reliance on social media so remember when we said shein had 19 million Instagram followers this is something that I personally see as kind of similar to a heavy-handed version of the whole utility apps overseas craze of like 2015, 2016 or 2014 in that you can have a domestic-based team, really master social media as long as they speak English and get some help with your customer management and then get the right operational scale. So kind of like use labor to make up for what you don't have in either local savvy or necessarily like B2B software technology in order to

28:47just like get the performance marketing rights and sell purely online, straight to consumers. And like, there's some tweaks with this. But in general, like investors seem to think it's worth betting on. And she and it's also on Amazon, right? Yes. Yeah. I don't think all their stuff is though, not everything. We're not the target customer here. It's funny because I asked on Twitter, I was like, Hey, have anyone heard of this app called she and And then all the people who replied were basically dads who had teenage daughters. They're like, yes! My daughter orders for this all the time. So there's another factor in this overseas expansion, which is that...

29:29Within China, DTC brands insist on having a gross profit margin of 30 to 40%, so that's kind of just the benchmark. Otherwise consumers will think, oh, your prices are too high and it won't work. But depending on the industry, brands can charge roughly 10% margin on their costs. But when someone like Xiaomi enters the same market, then they'll kind of push all of the prices down to to something like 5% and all of the other players will die. So this is kind of another case of like, the market in China is so saturated in many categories that some people think it's less vicious to try to sell overseas, even though they don't have the native competitive advantage. Oh, that's fascinating. It's very similar to what we were talking about David on the May 21 episode, where

30:13You have to move so quickly and grow so quickly because there's like 10 times the number of people at any given time trying to do the same company that you're doing. And there's enough consumers to sort of like support several different companies at once. And if there is any winner take all dynamic, then it's just gonna accrue very quickly to whoever gets out ahead the fastest. And otherwise, there's just like a massive race to the bottom on who will be willing to compress their margins the most. Yeah. I totally agree with that.

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32:38So for she and all these other brands in China, how is offline playing into this? Are they also doing physical retail in China or overseas? Or are these purely online brands? Yes, so for she and that's actually a purely online brand selling exclusively outside of China, but for a lot of the new innovations that we're seeing inside of China.

33:04It's actually emerging of online offline. So it's happening at two levels. The earlier we were talking about primarily at the brand level, there's also innovation happening at the channel level. And by channel, I basically mean retail stores. So I think one thing that China definitely leads in that.

33:22gets lost a little bit in all the coverage is that, yes, China leads an e-commerce, but China actually also leads in digital retail. But digital retail, what I mean is actually an offline experience that is highly digitized, right? So that's very, very different from the US. And I actually, this is something you can sort of intuitively understand when you go shopping in China.

33:45But I think the, we did an episode with Jordan Burke who is the former head of Walmart e-commerce and digital experience in China. And I think the way he breaks it down is really smart. And during the pandemic, we saw US stores, right, use their shops as pickup points for e-commerce, right?

34:05But in China, actually, that's something that's been happening for the last 10 years, where shops are designed that way from the get-go because e-commerce has such a high penetration. So it's totally normal for people to shop online and go pick up at their local store. So the way the stores laid out is even different, where the warehouses are.

34:26what the flow of the story, et cetera. And this is because, you know, if you ask Gen Z here in the US, like they'd see less and less difference between online offline. Well, I think in China, because the society is so highly digitized, that's actually the typical experience for many, many consumers. They just think of it as shopping. They don't think of it as necessarily like online shopping versus going to the store, huh? Yeah, the stores have Like I said, number one, their outfit for picking being able to be picked up. They're also much more integrated with their apps, right? So how many times you go to Costco and or at least I go to Costco and I'm asking for some help. And they're like, we can't help you because that's Costco.com, right? And you're in the store, right? But in China, like a lot of these experiences are fully integrated. And then the app is also something people use when they're inside the store.

35:21And then there's also a lot more personalization, right? Because again, personalization is very important to the average Chinese consumer. But it's been shown that Asian consumers in general actually require a lot higher personalization or want a lot higher personalization than Western consumers. And what's an example of that when you say personalization? Like what's a company that's done it well? What's an example of personalization? Well, what I mean is like the actually all the e-commerce.

35:48I would say all the e-commerce companies in China do it fairly well, like in the sense that the user behavior on some platforms, especially like Pinduoduo, is much more of a feed-based and recommendation pushed experience. Isn't the merchandising that you're seeing and your shopping experience is versus you walk into a target and literally everybody who walks into that target gets the same merchandising experience? Yeah, that's a big part of it. It's basically getting recommended.

36:18what the store thinks you want based on your past purchases, based on your experiences, but also getting very personalized promotions. I think something that I don't know if this is too much of a tangent, but in China, there is a huge team called Operations that's really hard to find an analog in Silicon Valley companies, but All the ecommerce platforms actually have huge operations teams that are constantly working through promotions and working with merchants so that every time you log on as a user, you're seeing different content than when you logged on the day before or this morning or whatever. Because people expect new content and new things to be offered to them constantly. It's funny that while this is not really

37:08A big thing in e-commerce in the US. I'm sure some companies do it well, but to your point, much more common in China. It's actually very common in gaming companies in the US to have a live operations team. You'll see, I spent a year working in the gaming industry and you'll frequently see people whose background includes live ops. And that basically means they were running the in-game stores promotions.

37:30for, you know, a live period of time with a lot of personalization built. Oh my gosh, that's, I, she's a gamer, that makes a lot of, yeah, I didn't realize that, but that makes a lot of sense now that I think about it.

37:42First of all, gaming was basically how, like I would say 10 years ago, most people were working on some sort of gaming company or if they weren't working on a gaming company, their ultimate monetization was gaming, right? So they could be working on XYZ, but they were basically trying to funnel people into games because that was the only, like, that was basically the only business model that worked in China. Yeah, yeah. So a lot of people have this thing. We got a tangent here for a sec.

38:07What kind of gaming? Like League of Legends or like mobile gaming? Yeah, I think so. I gave her just because like I played more games than she did. But yeah, my call is she was like I played games all through school. Yeah.

38:24I did yeah, exactly and college I played a lot of starcraft and you know every west and this is very this is very much dating myself ever quest is like setting the bar. Yeah, that is well we I mean the way that when we had Rahul Bora from superhuman on the show I mean he really like yeah superhuman is great now but he really like one cred with me when he was like oh yeah like a I used to say I was a game designer. I'm like, wait, I did the research thing. You were like an original game designer on runescape. Oh, wow. Wow, that's crazy. That was one of the deals I worked on at, right? Actually, right and invested in Jagax, which was a company of runescape. That's right. That's hilarious.

39:12But I think, you know, Ben, what you said is just a really good point that I think actually that's a lot of where Chinese companies probably get their inspiration. But to this day, right, operations remain really, really important. And, you know, everything is quote-unquote operated on by the way, even the bullet comments on Billy-Billy.

39:32have operators, right? Like getting special promotions or planting comments. Yeah. We haven't colored Billy Billy yet on the show. So introduce us to that company. What is Billy Billy? Billy Billy likes to call itself the YouTube of Trida, but it's basically the stickiest platform for Gen Z to create and watch videos. I mean, that's not really how they make money. They have a more diverse set of revenue sources, but what they're really known for is this platform.

40:00much like YouTube where people are uploading creative videos generally between I think five and 20 minutes. So longer, not short videos. Oh, so not not like do you like to talk to exactly.

40:14and much, much more like YouTube. That's why they do compare themselves to YouTube, except their business models differ. They don't make much money off of advertising. They have also a gaming platform. They have live streaming e-commerce. It's actually pretty diverse at this point. Yeah. Huh. I mean, that's just so much more common in China than the US, where it's just not an advertising driven economy. It's, yeah.

40:39Yeah, you're right. Yeah. With the exception of bike dance who has made huge strides in advertising, yes, that I would say, you know, well, actually, Alibaba as well as is really an advertising based company in many senses, but yes, you're correct.

40:55Yeah, and I guess I should clarify when I say that too, because I don't know like GDP figures spend on advertising. But in China, it seems like it never really was the default answer that so many people are like, oh, we'll put games in or we'll steer you toward commerce like there will be a more direct way to create and capture value.

41:11That's absolutely right I mean it has a lot to do with the fact that it was just kind of early right like trying to just cross like $10,000 in GDP per capita I don't know if you guys know the US number but it's over 65,000 right there's a pretty big gap and you know for I would say the first couple of years I was in China I had a lot of friends in advertising and they could tell you that it was really difficult to sell advertising well why because at the time you really you should just invest your profits into growing distribution that you got way more bang for your bug out of just organically growing.

41:45distribution points than trying to advertise because advertising if you think about it's really for a kind of saturated economy where all the distributions are already built out right and you're just trying to compete with each other but at the you know with China until recently at least it really was just like just get your products in front of the customer yeah versus like trying to say I'm better than the other guy it's like no no you win just by being there so this is this is a great transition point to The next big trend, I think we wanted to discuss, which is community group buying, which we discussed a good bit with Lilian on the Mayton follow up on the LP show, but for everybody else, to me, this is a perfect example of this, the focus on distribution in China. That's what it's all about, right? Distribution, yeah. This is exactly a distribution play, yeah. All right, listeners.

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44:31Community group by is very simple. People are applying a group buying a mechanism to buying fresh groceries to start with but now also moving into other goods. Two parts of rural China where there isn't a lot of choice and isn't great logistics for such products. And then so what they're doing is they're collating demand, right? And they're aggregating it and then the platforms basically send it to you the next day.

44:57for your own self pick up thereby saving money on the last mile logistics. And these are like to the you know previous discussion about advertising and not needing to differentiate your products like these are the ultimate unbranded like these are products from rural farmers right like like vegetables and stuff right like that that people are buying through community group buying platforms and the platforms are Maituan, PDD, you know, Alibaba, like enormous tech companies, right?

45:32Yeah, although, although actually if you look at community group, we just did a call with an alternative data firm on this and you can see that people are. So while fresh food is sort of like the way to get people hooked onto your platform. So like in China, for example, like everyone sells eggs because I don't know why like eggs are just people just love cheap eggs. And then I heard that nowadays actually they're trying to get people to get vaccinated by gifting you free eggs.

45:59along with your vaccination. So eggs are just like, we don't know. I think it is. Eggs are like one of the best sellers on all these platforms, actually. But you can also see from some of these platforms, they're shifting into more branded and non-perishable products as well. So like boxed milk, right, juices, you know, and then there was one platform.

46:23I think they're just trying to brush their GMV, I won't say their name, but they're actually, their best seller was actually the iPhone 12. So. Wow. Yeah, that doesn't quite seem like the same thing. So, so there's a platform that's selling iPhones via this community group buying model in rural in rural China. It's one of the, yeah, it's one of the top ones that are well funded. Yeah. So.

46:48What I'm saying is that this is a model, but you can see, like, while it's starting off with groceries, you can see pretty clearly that this is really just rural e-commerce. And the group buying aspect is, you know, if you consider group buying as something like the order only happens, what enough people order it, that's not really happening right now anymore either, right? So, like, even the group buying aspect, I always say, everything about these words.

47:15is kind of up for debate. I would just call it hyper-local rural e-commerce, which by the way, Alibaba, they're new initiative. That's what they're calling it. They're calling it hyper-local e-commerce. And the way this all works is fascinating, right? Like the platforms are pushing so much of the logistics work onto users and leaders of these group buying platforms themselves, right? So it's not like PDD or Maytwan or whomever is actually doing very little to get these products in the hands of customers. Well, that's not strictly correct. You are correct in that they're not doing the last mile, but they have to do with the entire procurement, which in the past in China would be, you know, you go to the farms, there were two or three layers of distribution before you as the final

48:11and customer got it from a grocery store, or the wet market, or whatever. But now, then, Maitoan, or Pindodoro, has to do this entire thing, which requires actually a lot of culture and logistics for perishable foods that most of them don't have. We did an episode on egressory in China, and I don't remember the exact stat, but you can compare.

48:35the per capita, I guess, cold storage sort of capacity and it's trying as like a fraction of what's here in the US. So that is actually a really, really good sector for you to invest in. Interesting. So they're doing all of the... They are doing all very housing. I love the supply chain. It's the last mile that they're pushing down onto users. Yeah. And, you know, it's arguable whether or not it's really, really all that much cheaper because the Pindledos CEO Chenle has actually said, in agricultural e-commerce. It's not the last mile that's expensive. It's the first mile. And why is that? Because getting it from the farmer, I guess, to the warehouse and then doing all that is actually, you know, that part of the supply chain isn't as well developed as if you think about it sort of the same day, same city, career system. Like a lot of the e-commerce actually already accommodates that. They've already built that out. Yeah. What ended the refrigeration and cold storage? Yeah.

49:34I assume none of that is happening during the last mile. No, no. So yeah, the way it works right now for all the platforms was we actually like took some deep dives into the warehousing because that is really where you're going to understand if if this platform is doing it correctly or sustainably and can make it, right? So they actually franchise out.

49:56the warehouses. So you can go, for example, and become like a Meitwa and CGP warehouse pickup point, I guess. And then you need to have like a you'd have a certain number of capital. You have this building that fits the requirements. And then you need to have like a cars or like some type of vehicle that fits the requirements, et cetera, and this number of laborers. And then you can go and become a franchisee of the system. Yeah. Wow.

50:25So I think to frame this, this is one of the areas that I'm personally really excited about seeing up close and in person when we can travel again because again, a lot of the content that we're seeing around this is reported on and it's not people that Ray and I talked to on a daily basis because they're usually in first or second maybe second tier cities, but this is really about like we said, digital penetration into rural China. It is also about micro entrepreneurship, so the community leaders who are taking a cut of the total sales within their community are essentially, you know, being contracted and get like a nice partial salary every month for.

51:07playing that role. And it's a way for the large platform. So you mentioned Pindledua PDD, but also Alibaba and JD of putting almost, I would say almost billions of dollars, US. Yeah, no, no, not almost. Yeah, they are billions of dollars over like billions of dollars into their own platforms or into their investments and sort of like at a high level to what we talk about a lot on tech buzz is the whole, what was it, trickle up?

51:35consumption and what was that phrase, right? It's hard to translate, but consumption upgrade is when people in China talk about the first and second tier cities, you know, increasing in their consumption and basically being like developed economy consumers. And then there's also the consumer quote unquote, downgrade, which is when all the brands are now discovering that rural China is where it's at. Exactly. Yeah.

52:05And is this race pouring billions of dollars into the tier three and tier four cities? Is that just because they're at a growth and tier one and tier two cities? And this is where they need to go to grow or why is there a capital battle going on there? Yeah, huge because if you look at try to the growth has slowed down for all of China, but if you look at rural China, it's actually still something like 10% GDP growth per capita year on year, right? So and this is about Depending on how you slice it, but I generally like to take just the first and second tier cities out. The rest of China, quote, unquote, rule, China, third tier and below is still a billion people. Yeah. This is, you know, for Western audiences, just to give a sense of scale, like tier one and tier two cities in China are like bigger than any cities in the West, right? Right. Yeah. Like tier three and tier four are two. They're sometimes bigger, especially some in Cisco. SF is really small. It's like a town. Yeah.

53:03So we're still talking about, yeah, as you say, a billion people in three and tear four cities in China. Yeah, yeah, and below. And even, you know, again, tear five, it's really interesting because China has really good infrastructure in some sense, but then, and then a lot of people. But when you think about like retail distribution, think about like in the US, right? We have access to really good, you know, grocery stores, supermarkets because It's been over a hundred years that people have been investing in these logistics. Real estate.

53:37cold train, et cetera. And in China, it's just going to take some time, right? Like they're already growing really, really fast. But to give you an example of what a fifth-tier city looks like, a fifth-tier city, because I was trying to explain to an African entrepreneur exploring CGB, I was like, I was like, oh, well, you know, in China, it really works well in these types of cities and fifth-tier cities. She's like, what does that look like? So anyways, I found some stats and pictures for her. It's about a million people, usually. Which is the size of San Francisco.

54:06Exactly, it's about a million people, typically. I looked up like 10 cities, they're all about a million. And if you look at the skyline, they don't have necessarily a ton of skyscrapers, but they have some tall buildings. The main thing is that you'll find, I thought this was hilarious, is that all of them have either a Starbucks about to open or just open. So that is the level of GDP that you can think about. And by the way, Starbucks is about $3 to $4 per cup and try that, right? So it's not.

54:35cheap. It's premium in China. So, when Starbucks is opening, I think it's a great indicator of this city being on the up and up and being able to consume more. Well, this explains, too, I think. One of the things Lillian really talked about on the LP episode about CGB, the question of why is this so important and why are all these big platforms investing billions of dollars into it?

55:02It's not about selling groceries to people. It's about capturing user behavior for all of these new people coming on to tech platforms, right? And so if they start transacting for their staple everyday goods on PDD or on Mayton or on JD or on Alibaba, and there's a really good chance that they're going to keep doing more stuff on those platforms, especially as their disposable income goes up, right? Yeah, these are high frequency purchases. And then, you know, even the disposable income I think you can't just look at the pure income level right because it's the same thing as in the US where if you live in a quote-unquote tier one urban center you might have a high salary but your real estate costs are super high as well so your final like lifestyle purchases could actually be less in China if you live in Shanghai or something versus if you live in a quote-unquote tier two city like Chengdu or a you know we're Ying Ying's families from like a tier four city

56:02People there might actually have more money to spend. Yeah. It's like, it's unintuitive, but it's true, right? Because the income disparity might be a factor of like two, three times, but the real estate prices might be a factor of 10 times, right? It's very like, like Shanghai, when I left, I bought an apartment there and I sold it. And it was like already more expensive than most districts in San Francisco. Wow. This is five years ago. Yeah.

56:30So Ray mentioned my family and I just looked up the population of the fourth tier city that I was born in and it's fourth tier, but there's 5.77 million people. And what you were saying with disposable income and folks having more to spend discretionary in general, that's...

56:50true. I feel like my aunt compared to my mom, she will spend hundreds of US dollars on clothing and her salaries probably like not to out her, but probably like one or two thousand US dollars a month. So we just don't know. Sometimes my mom's like, where is she getting the money for this? But it's because everything else is so cheap, or if you're working kind of a government job, you get a ton of benefits, including housing. And also I want to just ingrain and listeners minds when we do say rural China, like we've already described.

57:19We're not talking rural areas. We're talking cities, like the one I just gave you. We're talking like, yeah, it's not like some field in the middle of nowhere. The reason this works in community group buying, like it's not just, oh, people traveling 10 miles to deliver one-bagger groceries to the final outlier. It's like they're in neighborhoods that are stacked like more densely than San Francisco. And so you have like the gatekeeper of the neighborhood taking the bulk orders and it's right downstairs before you go out.

57:49So what do we call people farming in China? If rural China means 5 million person cities in dense, dense, compact apartments. Farmers? I think they're still called farmers. Wow. I want to transition us to one other big topic that I think we want to hit in talking through China trends today. And that is electric vehicles. I think this is something that a lot of people have seen in the news.

58:17both because of spacks that are happening because of new battery technology companies, because of Tesla competitors, because of Tesla building a very large factory in China. Like what the heck is going on with electric vehicles in China? So first of all, it's just like a big priority right now. I think if you look back 10 years ago, China probably didn't care that much about environmental damage or...

58:42or climate change, at least not at the expense of economic development. But in recent years, you've really seen China take a lead on climate change. And part of it is because they realize that it relies on oil and just all the devastation from climate change is actually bad for national security. It's destabilizing. So now electric vehicles has become a huge priority in China, and every brand is jumping into it. So in the past month alone, we've seen Huawei.

59:11announced that they're going to put in the software into EVs. We've seen, we've seen Xiaomi announced that they're going to invest $10 billion over the next 10 years into EVs. We've seen DJI, the drone maker, say they're going to participate in EVs. And you know, the BAT and, you know, companies like, so by do is now effectively basically a, I thought I was striving company actually if you just look at there. Yeah, basically like they're, that's really the, that's really the main story now for that company.

59:40My and R on acquired sort of perspective on the BAT and by do specifically is like that they've just fallen off the map and it's just Alibaba and Tencent are the big players in China now, but I at least haven't known anything about what's actually happened with by you. Yeah, basically like investors like I talked to are basically like oh, you're basically investing a by do as a autonomous driving company and you're getting the search business for free.

1:00:08Wow. That's what it is. So it's like investing in Waymo and getting Google for free. Yeah, exactly. Exactly. Right. So it's like, if you, and you know, again, like when I do introduces itself now, I know a lot of the PR people there is basically where an AI company. That's accurate. Yeah. Yeah. And they've made, they've made by the way, a lot of progress and autonomous driving. So no knock on them. But if you look at Alibaba, they also have a bunch of JB's.

1:00:34in EV, we don't know what they're exactly what they're doing because they've only announced JVs, but no specifics. Tencent, of course, has invested in... I think they invested in Neo, Alibaba also invested in X-Pong, and then made one invested in Li-Auto, which are the three publicly listed Chinese EV companies, and then they...

1:00:53All made significant money, I guess, at least on paper on these investments because they're all of significantly in the last year, which is hilarious because when we visited NIO in October 2019, I remember our meeting got canceled but last minute because this was the period when people weren't sure if they were going to be in business. So their stock price was like hovering around. And are they making cars? Like are these companies cars on the road? Yeah, yeah.

1:01:20All of them have delivered vehicles. Of course, they're a fraction of Tesla, but they've all delivered vehicles. In fact, I think Neo now is a, I want to say, yeah, $59 billion company. Wow. Yeah. Literally a year and a half ago, we weren't sure if they would be survived. Which is what Tesla was two years ago. Yeah, I know.

1:01:42Well, it's funny. Is the Tesla sales multiple being applied to all of these companies, too? Is that what's happening? Yeah. I think so. The exuberance has lifted the entire sector. Yeah. And what you consider, of course, that China's, you know, far just car market and there's government push towards EVs that, yeah, there's a lot of excitement.

1:02:08And is it fair to say that the car market in China is probably four to five times as large as the car market in the US just by population? Yeah, I actually don't know. I did an episode on this, but I don't remember the exact numbers, but I do remember the largest. Yeah, because I have heard this from other sources sort of talking about the growth of electric vehicles, people saying, oh, well, the real growth is in China just from a consumption perspective. Yeah. Yeah.

1:02:34And I think that's people betting on the continued development of the economy and the incredible demand and probably government incentives to be driving an electric car in the next few years. Definitely government incentive. Yeah. Yeah. I mean, it's complicated. It's a complicated story. The government is tamping down incentives. But I think the overall demand is still going to be there. Yeah. But there's a lot of there's a lot of competition as you can see basically every internet company.

1:02:59We've listed a bunch. I'm just waiting for it. Pindo the one now. Two announced. I'm going to do some discount car. EVs are the new games for Chinese companies. No, for sure. For sure. Yeah. And then the pretty much everyone's announced one. And then separately in autonomous driving, which I think is also really interesting. But all of these companies are private. So, so we don't know as much about them. But I've talked to a bunch of people who have invested in the space. And I've talked to a few of the companies.

1:03:26I think that this is a space we should definitely be watching because China is going about it in a different way. So, Baidu, for example, was working with the government on autonomous driving solutions that aren't just the software but also include remaking the infrastructure on the road. So, we'll see if that works. And then there are just a bunch of players that are really like teams actually that came out of Baidu. Also, Google.

1:03:54just really, really top notch AI talent. And the word on the ground is that it's anyone's game, like, who's going to get to level five first? It's not clear that it would be the US winning. I think China has a really strong chance. And this is like the first, this is what I would say is like the first sort of deep tech, right, not like consumer internet lightweight app, but really deep tech that we see this competition play out that will be that will have really, really interesting lasting effects, right? The first country to get to level five is going to experience tremendous efficiencies. Yeah. Yeah. Well, and the, you know, the infrastructure point is it an interesting one, too, because, you know, I remember not that I've spent a ton of time in the autonomous space, but, you know, a few years ago, people were thinking, Oh, well, if, you know, there's going to be

1:04:45New roads built are roads upgraded in the US that are going to be integrated with a V's and this is going to be great. The reality is like that's not going to happen in the US anytime soon, but China could actually do this. Right. The US is at a huge disadvantage for this, both because of the sort of like.

1:05:03a reliance on the existing system whereas China will just make a government mandate and say nope we're building a new system and people will snap to but also because of the federal system the idea that we're a whole bunch of states that are all going to pass laws independently. I think the ability to require that people stay at home during the coronavirus is a very similar example where if something is declared by fiat it is much more likely to be followed than you know please please population do something.

1:05:32Very different strategies that both have their trade-offs. Yeah, yeah. I mean, it is not that centralized in China either, but I think there are, yeah, the local governments who I work with some of them definitely have a lot more power, a lot more budget than, you know, then here in the States. I can't imagine some of the cities. I've lived in the Bay Area, for example, really being able to remake the entire, you know, traffic light system or like markers or whatever it is that's needed. Yeah. Probably. It's just impossible to even imagine. I know, right? It's like the potholes aren't even filled yet. And you're going to make this a smart road. I don't know. All right, listeners. Now is a great time to talk about one of our

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1:07:05So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. All right, one more lightning topic here before we close because I know it's on a lot of people's minds who follow China tech. What is going on with antitrust in China right now? And is it a good thing? Is it a bad thing? I will say it's definitely affecting asset prices and stock prices. So what's happening there? So I think the antitrust.

1:07:34caught some people off guard, but actually if you look at the history, this was pretty much inevitable and it's actually been in play for quite a few years, right? So I talked to people who've been working on antitrust in China and at least three or four years in the making. If you look at the history, Chinese antitrust law, the first version was passed in 2008, which is really late, right? Because in the US, it was like in the 1890s. Yeah. It was the first version. The Sherman Act, I think was. Yeah, yeah.

1:08:04Exactly. And so, and then nothing was done for the next 12 years. So, specific to tech, we had one case that was Chihu 360 and Tencent, they got into a fight where it was actually very similar to what's happening right now where they basically told their users that the other software program was malware and that if you wanted to use.

1:08:25My program, you had to uninstall the other program, right? Forcibly. And then Tencent actually won that case, but it actually had ramifications in that it really changed how they thought about their strategy going forward. This is actually the time after which they stopped making a lot of products internally and started investing. So this is when they built their empire, so to speak. But after that case, then no cases were heard for like the next 10 years.

1:08:53Wow. So literally zero antitrust cases in China for 10 years. Yeah. Yeah. Well, in tech, in tech, there were plenty of antitrust cases, but I mean for internet, for internet. So, so let's make that clear. Then in January 2020, an effort, honestly, to catch up with the rest of the world. Right. So if you look at all the state media and the government proclamations, this is all about trying to catch up with the rest of the world. They issued the first draft and then a lot of the things were very reasonable and then they issued more of course towards the end of last year specifically around platform companies but really you've seen movements towards this direction for a while now and all the things are meant to really protect consumers as well as vendors who deal with these platform companies because let's face it some of them like Alibaba who

1:09:45recently received the massive $2.8 billion fine. We're really abusing their positions. Yeah, they were telling people that you could only do promotions or sell products on my platform and not JD, right? So this is like, this is very egregious if you think about it. Yeah. And then the laws also protect consumers against various other things, which is like discriminatory pricing. So a lot of the platforms were discovered by the public to be discriminating against users. And in fact, they were doing it against their most loyal customers, right? Because they're going to be happy to pay more. Yeah, exactly. They're like, we know you're really sticky and you're very loyal. So we're going to actually charge you more for the same thing than for a new user. So this was, this is obviously really not cool.

1:10:32Oh, so really, I think the proper takeaway is that China is really trying to catch it for the rest of the world. And this is something that is going to be in play. This is not something that's going away. China is very adamant about this. It's not going to go back to the days of the Wild Law West, which I agree with. And if you talk to investors on the ground and consumers on the ground, they're all cheering these resolutions. In fact, they're like, why did this happen earlier, right? And why is that?

1:10:59Because again some of the practices that were that these big tech companies were doing that were really really unfair to both consumers and vendors and there was just no recourse because the antitrust authorities weren't really even hearing any cases right so all of the judgments also were I shouldn't say the antitrust they were hearing cases but I would say the judgments were very small so prior to the draft laws changing this I think the upper cap for violations with like a million RMB, right? Or 500,000 RMB. You might have been even lower, which is like $70,000. It's like a small tax you're gonna pay. Imagine your, you know, $200 billion company.

1:11:44This means nothing. So if you're a startup investor, startup founder and play, this is great news for you because, you know, this is going to force, you know, trying to big tech to play fair. Exactly. So and that's exactly what's happened. If you talk to VCs on the ground, if you talk to entrepreneurs on the ground, one VC actually says something, this is more specific to Fintech. He was like, oh, yeah, I was previously not interested in consumer Fintech at all. But now that all these worlds came out, I think I'll start looking at it. Right? So fascinating. All right. Well, As we close here, let's look with an eye toward the future. What should people sort of think about as what's next for China Tech through 2021-2022? So I think it's really hard to sum up what we should be looking at because as you've heard throughout our entire discussion, there's so much going on in China Tech and so many sectors that are experiencing innovation and you have like people who used to start

1:12:39internet companies going and making electric cars and raising a bunch of money for that. So that's happening domestically. But I think in my purview, there is a lot of increased internationalization that we kind of thought stopped last year because of COVID, but I actually see signs of it.

1:12:56Starting up again and accelerating and this whole trend of Chinese companies not just coming to the US and Europe but also going to Southeast Asia to Brazil to other emerging markets India That's again been ongoing and I feel like having honed their chops at home. That's only going to accelerate and there's certain sectors like e-commerce that are very well positioned for that and there's companies that have already started to take advantage of those trends and I think capital kind of in a cycle recognizes that as well. So definitely internationalization. I think from a talent point of view to founders who have found either success at home or success in a different sector or have had global education. And I know you guys have seen this too with probably all the founders that you're meeting with.

1:13:41They take that knowledge and return home and, you know, it's like more comfortable to have a great lifestyle and to be well funded and well supported in the China market and from there kind of take on the rest of the world because you know how to hire teams in other places. So I think that that's going to continue. There's definitely continued innovation. I think where you wrote McKenzie's head of China said no China, no country were the main thing. Yeah. So and I think the this is more of a meta point because I think we covered the sectors that We think are really interesting to look at for this year. The meta point is that I think for Chinese companies, don't expect them to impose any boundaries on themselves. So, for example, we see that bite-dance is now going into local services and trying to move May-to-N's cheese. We see, of course, like Xiaomi going to EVs, but all these companies are going wherever the opportunities next because

1:14:36The amount of change that's really happened in the last 30 years in China, GDP went up 30 times in China in the last 30 years, right? That's the highest, like far, far higher than any other country, which makes both the customers in China hyper-adaptive, but also makes the entrepreneurs their hyper-adaptive as well. No one really takes anything for granted. They're looking for the next thing all the time. Right. Well, like the story of Maituan is that you started as a Groupon clone and Today, it's you know the largest travel player and a huge community group buying platform and you know all sorts of stuff. Yeah exactly. May 20 is May 20 is a perfect example like you know basically what won't you like I think you really embodies this but so does Johnny me a bite dance etc right there. They've just made a four billion dollar acquisition of a gaming studio and then three weeks later they made another.

1:15:30acquisition, which I think it's also billions of dollars. It was undisclosed, but it's just looking at the company. It's definitely up there. Yeah. I mean, if I had to describe this trend, I think it would be US companies think that their core competency is something like e-commerce or ride sharing or social networking and Chinese entrepreneurs think we have lots of competencies. We have a lot of capital. We have a lot of users. Yes.

1:15:57Let's do whatever let's do lots of things. Yeah, exactly We'll we'll do whatever makes money our core competency is making money Yeah, you're making money or for losing money than raising money So something like that. Yeah, so I definitely there's this basically I think existential anxiety that people have because they've seen so much change over the last you know during their lifetimes that they can't take anything for granted right so people don't hold onto their laurels for too long and they're always investing yeah like did you guys know for example by dance has invested big into fintech and even into hospital right wow no whoa yeah and then of course there are rumors they're making their own EV as well like

1:16:41Who knows, right? Everyone, everyone, you get an EV. You get an EV. Everyone gets one. And it's still a private company. Yeah. Yeah. Wow. Well, that's a great place to leave it. Ray and Ying, this was super fun. Thank you for doing this with us. Yeah. Thank you for having us. All right. Well, that wraps up our crossover episode with Tech Buzz China. If you liked what you heard and you want to listen to more, there are loads of great episodes from Ray and Ying. Just search Tech Buzz China in any podcast player and you'll be able to find it. If you want to talk about this episode, the goings on of the tech world, or just talk to genuinely smart people about what's going on in tech and business, you should join the acquired Slack at acquired.fm slash slack. If you love acquired and you want to be a deeper part of what David and I do here, you should become an acquired limited partner.

1:17:33We have obviously the loads of things that we normally talk about, the library of content, the VC fundamentals episodes, the interviews, the monthly Zoom calls. But this month, we have a special announcement about our next book club, David. What are we doing? The triumphant return of the book club. We are so excited to bring it back. We are having Brad Stone back.

1:17:57unacquired to hang out with all of our LPs and talk about his new book dropping this month. Amazon Unbound. I can't wait to read this book. I've been and I both have a pre-ordered. The Brad's first book on Amazon was just like a classic. That's the everything store was the first one. Everything store. Yep. I learned so much from that book and Brad is just such a sensational reporter.

1:18:22And so much has happened since since he laughed last left Jeff. This is going to be awesome. So Brad is going to join us for live discussion with our LPs. And we can't wait to see everybody there. Yeah. And for you LPs, you'll get this in your email and an announcement with all the details of how to join, but read the book by May 21st because that's when we'll be we'll be doing the discussion and.

1:18:50Many of you may actually remember listening to Brad when he was on our Uber and DD episode as a guest back when he wrote his other book The Upstarts from the history of Uber and Airbnb. So join us become an LP tune in live and join us on the zoom and ask Brad some questions to on May 21st. Well, with that, David, I think that's all we've got. So folks, we will see you next time. We'll see you next time.