The Alibaba ballad.

We should really talk about Alibaba (NYSE: BABA) here, but let’s start with this: “It’s good to make coffee, and sleep, and wake up, and cook food and eat the food that you cook and being well enough to be well enough for people who like it when you’re well enough to be anything,” sings a man in lazy, melancholic jazzy style in L’Orange’s Coffee.

L’Orange — Coffee.

There is something very Asian in that line of text. The self-restraint, acceptance of meaningless and pursuit of perfection for its own sake. Anyway, here is a story of an owner of a tiny sushi restaurant in Tokyo’s subway, making the same sushi every day for decades, perfecting it, and being happy about it.

Western philosophy is about striving for personal perfection in an imperfect world. Eastern philosophy is about accepting personal (illusory) imperfection in a perfect world.” — @naval.

People maybe (?) don’t get this when they are looking at the China’s tech crackdown from the outside. Chinese government has made some very damaging decisions aimed at its own big tech companies, most or all of which you know about, so it doesn’t really make sense to enumerate here, but ok:

  • suspension of the IPO of Jack Ma’s Ant Financial after Ma’s public speech condemning Chinese regulators
  • China’s internet regulator pulled Didi’s app from online stores after Didi’s unallowed IPO
  • (this one is especially good) China’s regulators get annoyed with Chinese education companies and order them to become non-profits
  • China’s regulators imposes rules that restrict gaming .. children can play strictly only from 8 p.m. to 9 p.m. on Fridays, weekends and public holidays
  • .. no sector is spared, it seems, as China’s regulators began looking into Macau’s gambling this week in what is a somewhat more relatable effort to rein in an industry designed for excesses of the super-rich, known also to be used (not to an negligible extent) to avoid capital controls and launder money

And I am sorry but this is great. These are absolutely night-and-day decisions. Like, when a Western regulator is unhappy, they can send a letter or open an investigation. So, for example, you could say that the SEC is not all that happy about the growth of gamified trading on Robinhood. And, at one point, even Congress asks SEC about it, especially in the context of strange things happening in the market (like that some stocks go up 1,000% for no apparent reason). But the SEC, of course, cannot ban retail trading, so it asks broker-dealers to comment on things like the use of behavioral prompts and game-like features in trading. In translation, the SEC is asking: “please comment why did you make the trading so user-friendly, fun and enjoyable?

Not in China.

Billions have been wiped out from market values of some of the largest Chinese companies, while the crackdown continues and extends even beyond the tech sector; a new government measure is announced every week.

Meanwhile, there is no power struggle, no will to fight back but a complete silence and surrender. Alibaba and others have pledged to donate billions to support government’s initiative, which, in the meantime, was re-branded as “common prosperity.”

You could generally say that China is quite good at making public policy decisions in a geopolitical-macroeconomic-sort-of-way. We talk here a lot about U.S. $-supremacy and certainly, China played its cards well, understanding this dynamic and fuelling its own debt bubble domestically in perpetuity, which superpowered its economic rise. But even on a micro level, China has always been clever about things. It didn’t take long for Tesla to learn that the very warm welcome from China was preordained to turn into a kidnapper-hostage situation. Musk might not like it but Tesla’s stock rises and falls on China, and that very much depends on what the Party says.

Reining in your own tech giants — the Alibabas and Tencents — doesn’t seem to make much sense if you’re China. Quite in contrary, big tech companies are the pride of national economies. The complexity and added value that large companies can create is the primary source of wealth of a nation’s economy. U.S. would shield Apple in the very same way that South Korea would protect Samsung. Why is China doing it?

One explanation could be that there was a point when too much is too much. You could say that China has done precisely that type of shielding and nurturing that we’ve talked about. Alibaba has enjoyed preferential treatment for years, as did other China’s tech giants. And, I don’t know, perhaps it comes with the size, but many of them have also developed corporate culture that contains arrogance and misogynism. They are also pushing their employees a bit too much, it seems.

The other reason could be that the Party (and Xi being life ) feels threatened by the rising power of tech. New York Times’s Kara Swisher thinks that the “hot mess” regulation is the evidence of power politics masked by post hoc rationalizations.

But, really, both theories are somewhat hopeful, giving investors the expectation that things are transitory and that the value of their BABA or DIDI stocks recovers.


You know there is a third, less satisfying explanation. China has just started another change of direction — one that has global economic implications.

I like this explanation.

See, China has this unique ability to make these night-and-day decisions and everyone sort of listens, and that is part of its undeniable success. It makes good decisions. You could look at, like, Alibaba and ask what would come of it if you let it grow in this unrestrained almost-guaranteed way, but China’s guess is nothing that makes China a superpower.

Instead, the focus should be on semiconductors, aviation, AI, quantum computing and, you know, things that could make China no.1, .. says Xi.

China has shown many times that it can do this sort of U-turn. And, yes, it could just be my naïve belief that I see a cultural pattern before understanding x-levels of complexity underneath, but I think that the self-restraint, acceptance of one’s place and collectivism in place of individualism that all somehow emanate from the Eastern philosophy are very helpful to China’s government here.

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