#40. Ben Cavender: China's New World
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What's up, everybody? Welcome back to The Honest Drink. I'm Justin. You can always reach us at thehonestdrink at gmail.com. And if you've been enjoying the show, go ahead, rate, comment, and subscribe. Now, our guest today helps Fortune 500 companies position their brands in the China market. He is the Managing Director and Head of Strategy at the China Market Research Group, where he focuses on consumer behavior, market analysis, brand positioning, and growth strategies. He's also a member of the China Market Research Group,

He is an expert on a variety of topics related to business in China. He is also a frequent speaker speaking around the world about innovation, technology, future planning, economic and government policy, consumer trends, and a bunch more. His work spans a wide variety of sectors from entertainment to luxury goods to food and beverage.

He has frequently appeared on the Wall Street Journal, Financial Times, New York Times, Economist, Forbes, Business Insider, BBC, CNN, CNBC, and Channel News Asia. We had a really fun time talking to him. He shared a lot of stories and insights with us, and we covered a lot of ground. This one was truly a blast. So, without further ado, please welcome Ben Cavender.

That was a good one. Good start. Cheers. Cheers, guys.

Thanks for having us. Ooh, that is peaty. Oh, that's delicious. You love that peaty stuff, huh? I do love peaty. Yeah, Laga 16 is probably one of my favorites. This is really good. This is what I drink when I'm like, had a bad day and I'm depressed though and I just want to sit by myself and drink. It's like the perfect whiskey for that.

Wow. This is the first time I've had this, so this is delicious. Are you a big whiskey drinker, Ben? Fairly big, I'd say. Yeah. Okay. Yeah, I feel like I'm the only one that likes, you know, peaty whiskey. You like the peaty stuff. Like, I like this, but I prefer not to have the peaty stuff given the option, to be honest. But anyway, Ben, thank you for coming on the show. Thank you for doing this. Yeah, thanks for having me. This was, um, this was, uh...

Really interesting to have you on because you're quite different from a lot of the other guests we have. And I think you have a lot of knowledge to be shared, probably a lot of experiences about, you know, coming from cultural differences and consumer habits. And we never want to get too technical on the show because we're not like an industry specific podcast at all.

But we do want to hear kind of have your insights on a lot of kind of curiosities we have from a cultural standpoint. Right. So you were the for the listeners, you are the managing director of the China Market Research Group. Yes, that's correct. So how did you get started in that?

So, I mean, it's a fairly simple story. I moved to China in the summer of 2005, and I was originally out here for a year, essentially planning on working on the language with the idea that I'd go back to the US and be like everybody else and go to law school and go into a respectable job doing something.

But while I was out here, I realized that there were a lot of opportunities that maybe I wouldn't have necessarily gotten so easily in the US. So when I was first living here, I got really bored with the job that I was sort of doing on a daily basis. And I actually talked my way into a job as a news anchor for a newspaper.

uh local chinese news station without any experience with no experience basically they were looking for somebody that could do international news and could do mostly english so they just saw they just saw a white guy and they're like okay so they saw a white guy and they had me come in and do voice recordings to make sure that i sounded okay on camera they made me actually edit the news as well and to see that i wouldn't say anything crazy and you know made sense and everything

So my job for about eight months was basically going into the news station at seven in the morning and they'd have this giant newsroom, nobody else there picture of the world behind me, behind the news desk. And they'd have a, um,

camera that was basically reading the written news that was laying on the desk that would go to a teleprompter. Okay. And so I'd come in and I would just read off this teleprompter. I'd have jacket and a shirt and tie on top and shorts on the bottom. Underwear on the bottom. Yeah, underwear on the bottom because nobody could tell. And I'd read the news and that was kind of it. And then I had the rest of the data myself. So it was one of these sort of only in China could this ever possibly happen sort of deals. And this is where? In Dalian. In Dalian. Yeah. Okay.

So that was a really fun few months doing that job. And at the end of that, I was kind of like, you know, it's really not time to go back yet. I feel like there's still a lot of things to explore here. You know, I had always liked China and Asia, and it was very clear that China was going through this period of really, really interesting change. And so I started looking at

working in a startup of some kind. And it just happened that I was introduced to my colleague who at the time was thinking about setting up a research company. And originally the idea was that there were a lot of multinationals in China that didn't have very good access to information about the market. So they didn't know on a historical basis every year, every quarter, how are things changing in different cities? They didn't know what consumers were thinking.

And they needed that information. So that's kind of how we got started. And what became very clear very quickly is that's not actually what companies needed. What companies needed was somebody that could look at the market, identify all of the big changes that were happening here.

and then create a strategy that would allow them to tell a very clear story to their headquarters and a very clear story to the consumer market here. So the right product, the right pricing, the right retail strategy, basically anything they needed to do to really understand the market here and be successful here. And so that's actually more what we ended up doing was sort of articulating these strategies that companies could use to be more successful here. And we got very, very lucky.

Our first client was Apple. So that helped us a lot, even though we're a tiny, tiny firm compared to the McKinsey's or the Bain's or BCG's of the world, we were able to kind of get into a good space and that really helped us grow. - So why, you know, like you have, it seems like the company has grown tremendously since its beginning, right? And you guys work with a lot of Fortune 500 companies.

and you just named Apple. That's one of the biggest companies in the world. Why do you think these huge companies need a firm like yours, need a resource like you guys to kind of come into the China market? What do you think it is here? Why is it such an enigma to the foreign world? So I think there are two things going on. I think, one, if you look at the domestic market, the obvious trend here is that,

companies, regardless of if they're domestic or foreign firms, are replacing most of their management with local talent. That's sort of a foregone conclusion that that is going to happen.

The challenge, though, for a lot of these companies is China's economy has grown so much so quickly over the last 20 years that in many cases they can't actually fill roles in their organizations with people who have real operational experience and who really know what they're doing. Because if you look at the market here up until COVID, basically,

If you were somebody who went to a good school and you had a pulse and you were reasonably smart, you could essentially hop jobs every nine months, get a title bump, get a pay raise. The problem with doing that, though, is oftentimes you don't really truly learn functional skills. And you can hide that in a big company when the economy is good. But when the economy is bad and a company is trying to really redo their strategy, build more efficiency into their operations, they run into problems.

So that's one area where companies just clearly need the help. They need somebody who has the skills to come in and make a process easier for them or explain a problem that their team internally can't really articulate well or fix correctly. So that's one thing. I think the other thing is a lot of multinationals that operate in China are still driven very heavily by decisions from headquarters.

And the challenge with that is, in many cases, the people in headquarters sort of only have a superficial understanding of China. They're like, yeah, China's big. Consumers are very sophisticated. They're spending a lot of money. But from a tactical perspective, they don't really understand what's going on here. And so I think we tend to either be hired by headquarters to sort of push the China team in one direction.

Or we're hired by the China team to get headquarters on the same page. And in many cases, when we're hired by headquarters, the Chinese teams are very resistant because they feel like we're coming in to sort of step on them and tell them what to do. Usually what ends up happening if they have good people is by the end of the project, we're pretty aligned with the China team and we've essentially helped them clean up their messaging so they can go to headquarters and get the power they need to actually get something done. So a lot of it is really sort of

being a, you know, a facilitator to kind of get those two sides on the same page. I think that's a lot of it. So are you saying a lot of it you see the issues with is like internal bureaucracy in these big companies? Or cultural differences? It's internal bureaucracy. It's cultural differences. I think the other thing is, you know, if you're an American company,

company and you've been successful in the U.S. for 50 years or five years, 10 years, whatever it is, you have this tendency to think, well, America is still the biggest economy in the world. We're the shit. You know, we're the shit. We don't need to listen to that. Clearly our operational strategy here is right. You know, we're smart people. We've won this market. So why can't we do something similar, tweak it a little bit for China? But I think in many cases, they don't realize that the market here is so much more dynamic than the U.S. market is. It's

constantly changing. There is always a new competitor doing something interesting. The consumer is very fickle. They're hyper aware of trends. They're always changing what they want. And so to be successful here and compete against domestic firms that are sort of seeing this on a daily basis and don't really have anything to lose, so they're willing to innovate more, it's very difficult. And so I think that's the other thing is foreign companies tend to be too slow.

I think I've seen that. For lack of a better word, I think it's like this ego a lot of the successful foreign companies come in with. We've seen that in the past. Best Buy, several years ago, was making a big push in China, especially Shanghai opened up a few stores.

And you know, Best Buy back then in the States was like the shit. Like Best Buy was awesome. But they completely failed here. And you get cases like this over and over again. Like Gap, right? It's not doing very well here at all either. I mean, you have several companies. I'm not going to name all of them, but...

Like, what is it? You think it's just, for lack of a better word, an ego thing? Or it's just they just don't understand? They underestimate the amount of adjustments they need to make or the size of the adjustment they need to make? I think partially it's ego. Partially it's really lacking a fundamental understanding of the market. So I think you can take a few examples. So if you look at Best Buy, for example...

They basically are using a retail model that doesn't work in China. You know, running a big box store in Shanghai makes no sense. Why would anybody want to go to that store and pay more money when they can go and use it as a showroom, look at the products, and then order the same thing online from, you know, JD.com for 80% of the price or go to Gourmet or Suning online and order it for a lower price. So Best Buy is sort of misinterpreting what the consumer really wanted.

Another really good example would be the Barbie brand came in and they opened up this six-story flagship store on Hawaii Road. But consumers, people would walk by this and they'd be like, we don't know what this store is. It's got pink lights. It's like this huge pink building. Is it a brothel? They really didn't know what it was. Yeah.

And they missed a couple of things. One is Barbie has a lot of entrenched brand awareness and brand cachet in the US because your parents probably had a Barbie. The grandparents probably had a Barbie. So everybody knows the brand. In China, people have no idea what it is, right? So why would they care? There's been nothing that has happened to make them consider this to be an aspirational brand that they should buy.

The other thing that they did wrong is they tried to make it appeal more to young women, which in some sense was a smart play, but they completely missed on what the market wanted. So they had the lady that did the...

costume design for Sex and the City, basically designed the clothing line that they were selling. And it was all like spaghetti strap tank tops and like short skirts. So not for the Chinese. Which, I mean, you see people dressing a little bit more risque now, but when this store opened, it was just like people wanted Hello Kitty t-shirts. They did not want like sexy, show yourself off stuff. And so it just completely fell flat. You know, Gap is another good example of a different kind of mistake that

they just, you know, they have a very clear or they had a very clear brand position in the U.S. Gap is where you went to get a solid color T-shirt or like a good quality pair of jeans that wasn't too expensive. But nobody knows that in China, right? So they come in with their like 1969 marketing campaign, like middle of the cultural revolution in China with like American sizing and American tags on the product. And people are like,

What is this? Why would we buy this? Meanwhile, you've got Uniqlo sitting here, which does the same thing, but better and is advertising around the technical merits of its clothing and selling full outfits so it's easier for somebody to buy an outfit. So I think that these companies just don't realize how hard they have to work to actually win the consumer over. It's not just like people have money and they're going to buy stuff. You really have to tell a clearly articulated story. Yeah.

Kind of like a tone deafness. Yeah. Yeah. I think there's cultural tone deafness. And I think there's a lack of understanding that, you know, actually Chinese consumers are quite sophisticated. They're just different. You know, they've got, they might have different aspirations. They might have different things that they're thinking about on a daily basis. And you have to really understand all of that in order to be able to build an emotional relationship with them.

I think a big mindset mistake of a lot of people and a lot of businesses, no matter if where you're from, where the business is from, from any country is like,

You get this idea of like, oh, if it can work here, it'll work anywhere kind of thing. You know what I mean? And you can just copy and paste and it can just be the same thing without making too much adjustments. That's never the case. It's never the case. And my favorite is seeing brands that will look at the Japanese market, for example, and say, well, if it works in the Japanese market, it's going to work in China. Yeah, because they're Asian. Because they're Asians and they're kind of like from the same sort of zone in Asia, you know? But it's like that's not the case at all. And those markets have very different needs.

So here's a question. So why do you think...

Like, for example, forget about timing, but like McDonald's and Kentucky Fried Chicken, why were they so successful coming to China? We like both. Because their shit's delicious. Because at the end of the day, fried chicken's really good. So if you look at Yum! Brands and KFC, number one, they got here early. So they were really the first Western restaurant that you could find in most cities in China.

So even when I was living in Dalian in 2005, people were going to KFC because it was almost like a special occasion. It was like a gateway, right? Yeah. If you were a college kid and you wanted to take somebody on a date but you didn't have a ton of money, you'd go to KFC because it was really clean. The lighting was pretty good. The food was novel. And so it was a good choice. Well, just kind of like what Pizza Hut has done. It's like a family restaurant. But in the States, it's like a very low, cheap place. Exactly. It's a very different market positioning. Pizza Hut was like...

In Shanghai, when I used to visit in like late 90s and early 2000s, that was the luxury restaurant. I mean, right? Well, it's like middle tier kind of family restaurant place. Like, you know, like it didn't have the same stigma as it does, especially with KFC as it did in the States. And so KFC is interesting because they got in here so early. They had this sort of premium positioning in the market.

As people have gotten wealthier, that premium position has been eroded. And so the way that they have combated that is they've said, well, we're going to be different than we are in the U.S. We're going to use a lot more technology. We're going to constantly innovate our menu. Constantly. Constantly. They're trying something like every month they launch a new product to sort of have something new. We're going to be willing to move into new spaces. So now if you look at what they're doing, they're very aggressive in the coffee market.

They're trying new formats. So like K-Pro, for example. I don't know if you've been to one of those stores. No, I haven't. So the first one opened in Hangzhou maybe two or three years ago. And that was basically a KFC for...

Like millennials. So what they've done is they've cleaned it up a lot. They've got like plants on the walls. They've got a wall of fresh oranges so you can get fresh squeezed orange juice. And then they put in basically more technology than any other restaurant in China has. So they have the touchscreen ordering kiosks that you sort of see everywhere now. They've got the QR codes you can order off of at the table so you can have the food delivered to you without standing in line. They still got counter ordering, but they were the first restaurant in China to do ordering and payment using facial recognition.

So they're very happy to embrace new tech. And what's happened now is they've been in the market long enough that most Chinese people don't see them as an American brand because a lot of people who are our age now grew up with KFC and it was like a treat that maybe their grandparents took them to. So now it's like they've got nostalgia for their brand. So KFC will actually do marketing around nostalgia and say, look, when was the last time you had some fried chicken? Come on and get some because it's really good. Which is what we went through.

Back in the States, you know what I mean? A bucket of fried chicken, man. That's what you think of, right? Yeah, well, what about when we grew up eating like chicken nuggets? You know what I mean? Like what McDonald's do with chicken nuggets? You know, hitting that little soft spot. Okay, so let me ask the question. All right? We all have to answer. KFC or McDonald's? McDonald's. McDonald's all day? Yeah, easy. McDonald's. All right. What kind of question is that? What about you? You're from Texas, so we can't see. But 3 a.m. in the morning.

McDonald's still McDonald's, man. McDonald's all day, every day. Justin has a great story. Can you tell the story? No, I'm not telling that story right now. It shows that he loves both. I once went into a McDonald's and ordered everything on the menu.

Or like several, like three of everything on the menu. We don't need to. No, it was a good story. It was a good story. No, no, no. Go ahead. What were you saying? No, I was going to say it's good to take your job seriously. You know, you got to commit. Yeah. I mean, I think McDonald's, you know, I, you know, I think as Americans, we're probably a little bit biased towards McDonald's because I think certainly in the U S I, I feel like McDonald's is kind of, you know, the golden arches. That's like the place you go when you,

or like Taco Bell or something, maybe. He's a big Taco Bell fan. I'm not. But, you know, KFC, it's just, they sell chicken. And in China, people like chicken a whole lot more than they like beef. And that's changing a little bit. But if you look at McDonald's menu here, it's like pretty skewed towards chicken as well. They have to adjust somewhat to kind of, you know, be in the market.

But I think that's also why KFC has done better here. Well, with all the changes that you've kind of mentioned in terms of embracing technology, being light on your feet in terms of introducing new food items and tailoring your taste, like you would think KFC, even though it's managed by and owned by a different group here in China than it is in the States, right?

But do you see any lessons or things that they've done here or trends that they worked on here that trickle back to them implementing that in the United States or in other places of the world? Like reverse, you mean? Yeah.

like, Oh, it's working really well in China. Maybe we should try this at home kind of thing. You know, that's an interesting question. So full disclosure, we actually do a lot of work with yum. So I'm, I'm pretty familiar with their China operations. And just to be clear, yum owns, yum owns KFC pizza hut, Taco Bell, chef a young, and they just bought, um, some other local Chinese chain. And they also own a coffee chain called coffee and joy as well. So they have a bunch of different stuff, but it's primarily KFC. Yeah. Um,

I can't think of anything necessarily that they've directly ported over to the U.S. I think that the market is just so different. But actually, the China operations are kind of the odd man out. Because even before the company separated, China was the one market where they actually significantly reduced the oil content used in the fried chicken. And

have to be careful what I say about this, but I think internally there were a lot of discussions about what the right move was. And basically their attitude was, we've got all this consumer feedback from people in China. They like our stuff. Why would we do what

All of our other operations in the rest of the world are doing it makes no sense. People are happy. We know what they like. So we're going to keep doing that. Don't fix it if it's not broken. Yeah. So I think in that sense, they're very region specific. They're really constantly thinking about what to do here. I'm sure that the US ops and the parent company, everything, they're probably looking at the technology that's used here. They're looking at the dishes. They're maybe taking localization lessons.

from here and applying to other markets. So if you go to KFC in Indonesia or something like that, there are a lot more rice sets on the menu that kind of fit well with the local market. But I don't think I've really seen anything yet that they've directly said, we did this in China, now we're going to do it

It's interesting you say that because I was just in the States a couple of months ago and my wife is a big fan of fried chicken, Kentucky fried chicken. And she's like, I want to have American Kentucky fried chicken. So she didn't have that before. So we went there, she ate it and she's like,

Why is it not as good as China? I mean, Chinese fried chicken tastes better. Yeah. Yeah. So do you think for like the original flavor, obviously there's different menus tailored to local taste, but like there's the original, right? The original fried chicken. Do you think, so the recipe is different here than it is there even for the original flavor? I think that the basic recipe is probably pretty close to the same, but I think the cooking method is a little bit different. It was an obvious difference. It was different about it. Less greasy over there.

So it makes total sense. Less greasy in America. Yeah. More greasy here. Yeah. It makes total sense if you say something like that. Like if they're not, like if you say, because it feels like it's less greasy over there. They use a lot less oil here than they do. Here? Yeah. So that contradicts to what you're experiencing. But it feels oilier here than over there. Because I remember when I took a bite of it, I was like, it's not as flavorful as in the States for the original recipe. Yeah.

oh you've heard it here folks we have an oil conspiracy here i don't know i don't know i don't know well eric you're a big fried chicken this guy this man eric is from texas so he's all about his fried chicken what are your thoughts my thoughts are we should go to popeyes after this show oh yeah popeyes just opened so you know so you obviously you've heard ben you've heard of popeyes just opening their first store they've just a few days ago they've opened right but

Is there any obvious things you see them doing well or not well? Or what do you think the future of that chain is here? Well, I think so far they've got a lot of goodwill as a brand. I think that what they have going for them is a pretty passionate expatriate population, as well as returning Chinese who maybe studied in the U.S. or worked in the U.S., who've been to Popeyes, who like the product. And I think that's given them a lot of momentum early on in terms of sort of being a high

hot destination for people to go to. And so what happens here is that you've got apps like DMPing, for example, that are reviewing restaurants. And if the word gets out that there's something good out there, people are willing to line up to go get it. And so I think that's what they've got going for them right now. So the trick is going to be, can they sustain that momentum after that initial two, three months? That initial hype. Hype kind of goes away. I recently just checked the DMPing for Popeyes and it's not that great of a rating. Yeah.

It's weird because I'm only basing this off of the pictures I've seen on WeChat in the groups. But you see a long-ass line around Popeyes. But for the most part, it was all local Chinese. So I was very surprised about that because I was like, local Chinese probably don't know what Popeyes is. They're not familiar with that brand. I think that just the way information travels here, people are always looking for the next new thing. And...

You know, especially right now where, you know, things are mostly normal in Shanghai and in most cities in China, but not everything is open yet. People want something to do. So they're willing to go out and, you know, try that new restaurant. And if they like it, they'll tell all their friends and they'll keep getting good business. They don't like it. You get the sort of the mediocre reviews on Dien Ping. And then maybe six months from now, there isn't going to be that much traffic.

So it's tough. I mean, F&B in general is a really hard business to be successful in. And a market like Shanghai is brutal. It's so competitive. You know, rents are so expensive that you really have to kind of come in and nail it from day one. Otherwise, you don't survive as a business. It's just, it's cutthroat here. Like there's no lead way. There's no wiggle room. No. Really? But it's, sorry, I was going to say, so it's interesting. Like, you know, there's an independent...

restaurant pretty near where I live. Which one? It's called garlic. Yeah. We haven't been talking about that. He's been talking about wanting to go there. Have you been there yet? I've been there a couple of times. How's it? Um, it's actually, it's a pretty good facsimile of like American style barbecue. Really? Yeah. It's not, it's, it's better than it has a right to be for being where it is in Shanghai. Yeah. Like I'm not, you know, it's not like I'm craving it at midnight, but it's pretty good. Um,

And they're interesting because they're also, I would say, predominantly Chinese customers. And the way they have their business set up is they open at like 11 or 1130 in the morning. And by the time you get there at 1140, there's a line kind of around the building for people to get in because their order process is kind of slow.

But they sell their barbecue until they sell out and then they close. So they're open from like 11 to maybe 2, 2.30, 3, and then they're out of stuff. So they're an interesting example of they don't really have very good marketing. Their business operations are horrible, but people really like the product. Locals like the product. And so every weekend we check and they're busy. Do

Do you know what their background is? Who started it? It's like a Turkish guy. I have no idea what their background is, but they're definitely doing something right. It's very strange because on the surface, you would think that there's not a whole lot of connection to this sort of... You mentioned kind of a facsimile, but that's how Texas barbecue works. They open at 11...

They got what they got. It's not super high tech. And once they sell out, it's gone. And if you're good, there's a line. That's Franklin's. There's like 100 places like that in Texas. And in America, Texas is like the homeland of barbecue, right?

That's like the motherland. It's like the Mecca. It is the Mecca of barbecue in America. I can tell we got a Texan in the room here. There's somebody from Kansas or something. He's got two holsters with pistols he's about to whip out right now. It's the Camelot of barbecue. Camelot. So if you don't know, in America, Texas. Why'd you have to translate? I'm stupid. In America. In America.

Yeah, that was bad. That was bad. But in America, right? Texas is like the motherland, the Mecca of... What's Mecca? I don't know. How do you explain Mecca?

Mecca is the religious center for Muslim people. Yeah, but it's obviously, it's used as a term, as like the place for something. Yeah, the original place. And the actual, what's the real translation of it? It's the homeland for like Islamic religion. So when we want to talk about something where something came from originally, then we use it as a metaphor or an analogy. Mm-hmm.

So like Kansas is the homeland of barbecue. No. He's going to get you riled up. Do you have some sort of allegiance to Kansas? No, not at all. Not at all. You just want to. I'm just messing with you. Hold on, hold on. I love it. I love it. Imposter. Imposter, obviously. Imposter. Now, I've been hearing about that place. And actually, it's interesting that you say that because I feel like we really need to go eat there.

And I've been saying that Shanghai doesn't have a good barbecue place. And if it lives up to what you say, then maybe Shanghai finally has a good barbecue place. I don't know. We'll have to try. It's worth a shot. But it reminds me of what you were saying about they go to two or three and they kind of sell out of their stuff and they close. Remember, In-N-Out was here before.

Or like an imposter. It was an imposter. It was a rip-off. It was a rip-off in the menu. It was like a pop-up. And they were constantly selling out of stuff. Senzai. Okay. So that was a copycat. They got basically sued into shutting down. Oh, did they really? By In-N-Out? Yeah. Really? Yeah. So who opened that? I think it was... What I was told is it was somebody who'd worked in operations at In-N-Out in the U.S. for a while. Yeah.

And they were like, this might work in China. I'll just take the menu and all the ops models go there and do it. And the decor, the design, everything. It's crazy. So can't do that anymore. Can't do that anymore. Those days are over. But those days lasted a long time, right? There were a lot of fake subways. I don't know if there still are, but there was a lot of fake Apple stores here. Do you remember when we used to go to some second and third tier cities, if you go to like...

these like walking pedestrian streets with all these like stores and they'd be like blatant copies it would be like the Nike logo flipped upside down yeah and it's an athletic store or like the Jordan logo but instead of like the Jordan dunk it's like some other weird dunk but that they're still around yeah they're still around they're still going strong they're still going strong

But is that kind of being wiped out now here in China from your perspective? I think there's been a pretty big crackdown in that space. So we used to, for example, near my office, we had a subway. And it turned out to be fake. What? And when they got caught... Here in Shanghai. Here in Shanghai. And I work in Lujiazui, which is where the stock market is. It's like the financial center. Financial center. And so we had a subway in the building next to ours. They got caught. Wow.

And so they covered up the U in Subway with a piece of white paper and they were allowed to operate for a while. Just because they covered up the U so they weren't using the exact same name. And then eventually they had to change the name to Starway instead of Subway. And then they finally got shut down.

But like inside was like the food. Did you eat there? Everything was exactly the same. I'm sure they used the same suppliers that Subway did. So it tasted exactly the same. The only thing that was different is, you know how Subway sells those chocolate chip cookies, which are pretty good? They didn't know to put baking soda in the cookies or whatever. So they were just...

flat they wouldn't rise but everything else was exactly the same as the real restaurant same price or cheaper same price same everything if you didn't know you would have thought it was a real subway same uniforms hilarious and i've actually been told that there are people there was one guy that actually interviewed with us for a job a few years ago and he said he

previously had been working at Subway and then he found out after working there for two years that the company he was working for was not actually Subway. It was one of the imposters and they were operating like 300 plus restaurants. Oh my God. So he thought he was working for the real company and it turned out he wasn't. Oh my God.

That is fucked up, but that is hilarious all the time. I mean, it's pretty funny. What's happened though now is that Chinese companies have realized they can't just compete purely on price anymore. And so as a result of that, they've spent a lot more money on marketing, on building a brand, on product development, and have also started filing their own patents and other IP protection.

And the Chinese courts at the same time have also developed a lot as well. So the problem that China used to have is it literally did not have enough judges in the courts. So it couldn't hear IP cases quickly enough to actually get anything done.

As the market has matured, that's sort of gotten cleaned up. And so now most of the trademark infringements and things like that are actually Chinese companies suing other Chinese companies. And so it's really created a much cleaner operating environment because companies are actually trying to protect what's theirs now. Whereas before it was just like, how do I get that next dollar? It's like the minute it started really hitting home.

You know, everything had to get properly, you know, made proper now. Well, this, you know, brings me to think about like, you know, historically from the Western perspective, you know, like China has always been seen, had this stigma over their heads about like, you know, they like to copy things, right? They're just fake this or fake that.

But I feel like that's an old stigma and doesn't really apply to China today and where it's headed. What do you see are the biggest changes or improvements, even innovations that are being made? Yeah, so I think there are competing themes going on here. I think depending on the industry that you're looking at, you still have situations where companies are...

borrowing liberally of design, for example. Like Xiaomi has released products which are basically like a direct rip of something that a Japanese company won design awards for the previous year, that kind of thing. So that still happens. You see it with a lot of the smaller Chinese automakers that will also take very heavy styling cues from various foreign brands as well.

And you'll see manufacturers that supply people that operate brands on, say, Amazon, for example, basically cutting out the brand owner and then going direct to market and selling their own stuff. So that all still happens. But I think at this point, anybody that thinks China is not innovating is crazy or just is not aware of what's going on here. I think, number one, China is...

hands down better than anywhere else at doing business model innovation. So if you look at how somebody experiences the process of shopping for a good or service, for example, the experience you have in China at this point is going to be light years ahead of anything that happens in the US. You know, the mobile wallets that people use,

all of the online to offline services or offline to online services that people can use here. You mean like the infrastructure? The whole experience. The whole experience. We've been saying that for years. So if I look at the apps that I use on my phone, I could basically...

live within WeChat and do everything I need in my life. Right? Like I can message somebody, I can book a train ticket, I can pay a restaurant bill, I can, you know, figure out my dentist appointment and it's all happening within this one app and then the ecosystem of sub apps that are built into that.

There's nothing even remotely like that in the US or anywhere else. It's like the convenience of it. So the convenience of all. And part of that stems from the need to innovate that because if you go back to China circa 2000 and you guys have spent time here back in the day, going to a department store, for example, to buy something is just like the worst experience ever. You have to go to this counter. Yeah, you got to go to another counter, get a slip, pay here and then go back there to get the goods. Yeah.

Or like, you know, if you had a credit card, it was totally useless to you because to pay it, you had to go physically stand in line at the bank to give them cash to pay off your credit card. So it's like, what's the point of the credit card? If you just have to, you know, walk in somewhere and sit in line for two hours to use this service, like, why do you even bother doing it?

So I think a lot of the business model innovation here stems from the fact that originally it was pretty sort of tough to get anything done here. And so that's where the tech companies have sort of really come on strong and created something quite special. So I think that's one thing. I think the other thing is, you know, China is...

Run very differently than the U.S. is. So the U.S. is nominally a democracy and people can argue about that. That's arguable. Yeah. Yeah. That's arguable. You can argue about that all day long. And there are certainly maybe some pluses to that. There are also some negative aspects to that as well in terms of actually having

Setting objectives and then making them happen China by contrast is very much more directly controlled very much more focused on long-term planning and so you see investment into Long-term gains and what that means for China is you've got 1.4 billion people. You've got like 900 million people ish in the workforce and

You've got eight or nine million college graduates every year looking for a job. China has a problem. They have to create white-collar jobs for people because unless they do that, people are not going to be happy because their quality of living is not going to go up.

The only way that they can create those jobs is by looking at the next 50 years and saying, there are four or five industries that we absolutely have to win at. We have to be the best at building 5G networks. We have to be the best at clean energy. We have to be the best at artificial intelligence and machine learning. We have to be the best at EVs or automated manufacturing.

Because if they're the best at all of those things, then they have tech jobs that pay a lot of money for all of those college graduates. And so from their perspective, it's do or die. They have to win all of those sectors. Whereas in the U.S., people are just not thinking about that from a long-term perspective. Yes, you've got very well-run tech companies that are thinking about the future and how they break into the next big thing.

You've got a great pool of research minds, but there's no national policy. It's more selfish. It's more selfish. It's driven by how is my company going to increase their top line revenues by a billion dollars this year? It's not this is for the good of the country. This is how we stay in a leadership position and remain the world's sole superpower. Yeah.

Also, you have presidents and their term limits are four years, right? And then after their four years, if they don't get reelected, the next person comes in and just kind of tears away everything that was built in those previous four years and starts from zero. Yeah, and the other thing with a four-year administration is you spend the first two years sort of undoing what the last guy did. You spend one year hopefully doing what you want to do, and then you spend one year trying to get reelected. So you don't really get very much done. So it's a system where you can sort of maintain a certain level of stability for people,

a certain amount of time, but you don't really progress at the same speed. Now, in China, it works because you've got people in control who, by and large, are pretty smart. Whether or not you agree with their particular policies, they have a plan, and they know how to execute it. And so China actually gets something done. And that's the big difference.

I think what you said a few moments ago was actually really interesting because I never really thought about it that way because the narrative has been so different in the global race for technology, AI, 5G, things like this, particularly between the United States and China. The narrative, at least from the Western's point of view, which is what I read a lot, is...

Is that, you know, like China is trying to compete with us and trying to take over, you

It's like this threat from China, it's like this active threat that they're trying to take over. But what you're saying is they're just trying to sustain themselves. Their race for technology, their race for innovation, for all these things is really just so that they can sustain their own population. Yeah, I think Americans, and this is probably true of a lot of Western European nations as well, sort of like to frame what's going on in China as threatening, as China trying to establish a more dominant position in the world.

And I'm sure there's some truth to the idea that they would like to have a more dominant position in the world. I think, you know, people look at China here historically and say, well, this was for a very long time the dominant nation on Earth. So why should anybody tell us that we can't again be, you know, one of or the major superpower, you know?

historically, that was the position that we had in the world. Yeah, it's only the past couple of hundred years that it would change. Yeah, I mean, it's almost an anomaly that that's not the case. Now, I don't think it's the case that they're doing it because they have some sort of evil intentions. Yes, they have a very different system of belief than the U.S. does, but different doesn't mean evil. It just means different. And I think what people forget about China, if they haven't, you know, are not aware or haven't studied the history is that

It's not that long ago that China went through the opium wars, massive cultural revolution here, and people grew up very poor, no education, no access to job opportunities, lots of starvation. And so if you're the leadership in China, your primary objective in everything you do is how do you maintain stability? So how do you make sure that the economy is always okay enough? How do you make sure that people always have enough to eat?

How do you make sure that people potentially have a better future? So I don't think it's coming from a place of malice. It's coming from a very pragmatic, we remember when things were really bad. Let's make sure that we do everything we can to make sure that doesn't happen again.

And so I think that's where the fundamental misunderstanding happens is because people ascribe all these negative motives to what the government here is doing. You know, you look at, say, you know, access to, you know, news media or free speech, like whether you can go on Facebook or not. And you say, well, those guys are evil because they're not letting somebody have access to all of this information that, you know, could be negative. Right.

Personally, as an American, I'm very big on free speech and the idea that people should have access to information. But I can also understand why the government has chosen to control things the way they do. I'm not saying it's the right choice or the choice that I personally would make, but there is a very rational logic to what they're doing. And it's not necessarily an evil logic. It's just they're working on a different system for different reasons. Yeah.

I think that's very well put. So what's your, so with the whole, I'm not that knowledgeable. I just kind of read like the headlines and the clickbaits, but like, what's your perspective? Cause this ties right back into companies, brands and consumer products. Um, with the Huawei situation in America, like what is that really all about in your, from your, from your view? I think that's a very interesting topic. I mean, you look at Huawei and Huawei is sort of,

I think kind of a symbol of China becoming truly innovative and taking a leadership position in some, some key tech sectors, you know, certainly with their, their networks and their 5g rollout. Um, and I think that that has scared a lot of foreign companies, especially sort of seeing that, um,

- Scared them how? Like just from a competition level? - From a competition level. So if you look at the US for example, there's sort of a deeper underlying theme here, which is the way the US telcos are set up. They actually had an opportunity to sort of cooperatively invest in 5G probably like 10 years ago.

And they just essentially didn't do it the way the market was regulated. Because certain networks can just own a certain like regions of the United States and they just like stay within their own boundaries. Yeah, the way that the way they sell the bandwidth and just the way some of the antitrust laws were set up in the US, these companies were sort of prevented from doing the things they needed to do or chose not to make the investments that they should have made to sort of invest in the next generation. So America essentially said,

"Screw it, we're not going to bother with this. We'll just buy it from somebody." I think they were just hoping it was like Ericsson or somebody from Europe that they were going to be buying from. Meanwhile, Huawei spent a lot of money on R&D and basically beat all these guys at the punch and came up with something that was cheaper and worked pretty well. And so the dialogue is essentially, well, okay, it's great that Huawei has this stuff, but how closely are they tied to the Chinese government? And does that mean that they're going to be sharing information? Does it mean that they had unfair competitive advantage?

And I'm not sure that anybody is ever going to get to the real truth of that. I mean, it could be true.

Might not be true. I don't really know because I'm not, you know, I'm not sitting in those board meetings at Huawei, you know, figuring out like what's going on behind closed doors. But I think a lot of this is looking at a dominant Chinese competitor that one way or another has the opportunity to sort of take over an entire sector and saying, well, we don't want that to happen because if they are the ones that are winning all the 5G network contracts, what are the next things they're going to win? And so I think that's a big part of it.

But also, I mean, go another step above that, not just only from the technological sector because this particular technological sector is also about communications, it's about information.

So it's like if Huawei is in bed with the Chinese government, then of course Western governments are like, well, we can't have them all up in our space. But it seemed like they took really aggressive measures against Huawei. Like what? The daughter of Huawei was in Canada. She was on house arrest or something. What was all of it? It seemed like they were really aggressively. And I don't know if it was warranted or not. I don't know what. Again, I don't know the details. Yeah.

But it seems like they were treating Huawei as almost criminal, what they were doing. Well, I think that they were basically using subcompanies to sign contracts with entities that they were by law not allowed to sign contracts with. And so that's where she got in trouble. It was basically, it turned out that...

those companies were very clearly directly linked to Huawei and they were doing something that was expressly forbidden by the US. And so they were trying to flout specific laws. But I think from the Chinese perspective, again, it's, you know, pragmatic. Like, why can't we do a deal with Iran? Just because the US, you know, happens to be on bad terms with them. So, you know, it's kind of a, that's the tricky situation is, you know, how do you decide who is morally right in all of those instances?

I think Huawei long-term is in a very difficult position now because one of the areas where China is significantly behind the U.S., especially, is in chip development. And so most of the consumer electronics that are made in China still rely on various semiconductors and other computer chips that are coming from U.S. companies.

And so if Huawei doesn't have access to those, all of a sudden they can't make anything that's sort of new or cutting edge because they lack the underlying tech to make that stuff. So one of the things that China as a national policy has said is that over the next five years, China wants to dominate the semiconductor space. So you've got a ton of government money.

money going to smaller companies right now trying to build up a presence in that space. Accelerate it. It's just accelerate as fast as possible and Huawei's basically said look if we have to suck it up and suffer for five years we will but five years from now it's not going to matter anymore because we'll have all that stuff too.

So in a sense, the U.S. is kind of shooting itself in the foot. It's like delaying the inevitable. Yeah, you're delaying the inevitable and you're kind of ensuring that there isn't going to be particularly good cooperation going forward as well. There's no option two now. Yeah. You're not building that relationship. You're antagonizing. Exactly. And so I think a lot of the U.S. policy, frankly, is damaging because it's all these short-term solutions.

And it doesn't actually build a long-term working relationship. And people can talk about the decoupling between China and the U.S. and their economies all day long. But the reality is you can't have two big economies like that existing in the world that aren't one way or another trying to work together. It just can't happen. And so it's a very fraught situation right now because I think people are all looking to sort of see, like, what's that going to mean going forward? Yeah.

Well, with this trade war, too, like how does that impact your field of research in terms of the future of consumer goods, brands? Like even if we look at it from a macro perspective, this sort of cross pollination, I guess, of products and brands between countries, like how does this affect all that? So, I mean, I think one thing is Chinese consumers, frankly speaking, are much more sophisticated now than the average American consumer.

in the sense that they are much more aware of different brands. They're much more aware of emerging trends. They have much higher expectations for a company in terms of developing new product or doing something experiential that's going to get the consumer to actually go into a store. And so if you look at the future of apparel, for example,

If I was running a big apparel brand and I was headquartered in the US, I would be making sure that I had a local design team in China or that my US design team was spending like a month a year sitting in China watching what consumers are doing. Because it used to be the case that you kind of borrow from what you were selling in the US or Europe or whatever, and then you'd sell it here. Now, when you look at what the cool trends are, what people want, it should be going the other direction.

is China's accelerated so much that the cool stuff is happening here. I don't know if any of you guys have been in a, like a leaning streetwear store anytime recently. Not recently. No, but I've been in there. Yeah. So you should go in and check one out. They are crushing it right now.

And what, you know, I don't know for the audience, I guess if you're Chinese, you know what Li Ning is. But if you're not, Li Ning is sort of a Chinese athletic apparel brand that grew quite quickly and then about five years ago almost died. Basically, they were sort of seen by a lot of Chinese consumers as selling something

that was kind of like a rip off of Nike design or Adidas design, a little bit less expensive. But it's like, if you could afford the leaning shoes, you probably could spend a little bit more and buy the Nikes. So you just buy the Nikes. And so they fell apart. They took some private equity money. They spent a lot of time thinking about their strategy and they decided, you know what? We actually better be a streetwear brand. That's how we're gonna win. And so now they do these really cool collections. They've got,

with like Ming Dynasty porcelain like blueprint on the jackets. They've got all these sort of historical Chinese design themes they put into their clothes. And it's actually really, it's like I can find more stuff to buy in a leaning store that I would wear than I can find if I go into a Nike store. Really? Absolutely. Wow. It's just, it's more interesting.

I got to go check it out. You should check it out. It's kind of cool. And so I think now there's a very real case to be made that a lot of the interesting stuff that's happening is happening here. It's not happening in the U.S. or some other market. Because many of those markets, they're designing for a much more sort of like conservative middle class demographic that doesn't change that much. Whereas here, it's young people that are buying all the stuff.

And they're changing really quickly. So I think companies have a lot to learn from that. So basically what you're saying is you think China is setting the trends globally? I think so, yeah. So I think you see it with apparel.

Though, I mean, that's really just starting. If we were to talk to a big-time Italian fashion designer, they'd probably laugh at me. Now, I would argue with them and might disagree with them, but they probably would feel different than I do. They would take it to their grave. They would take it to their grave. They would hate me forever. But the reality is money talks. This is where people are buying. This is where people are sort of thinking about their business.

sense of personal identity and what they want to be. And so this is where the themes are emerging. So you see it with retail. You see it with retail experience as well because

It's very expensive to open a mall here, for example, or open a single brand store here. As a company, you've got to spend a ton of money to rent that space. And so if you're going to spend that money, you have to make that space really interesting and get people to come in and spend time there. And so you have a lot more use of digital media, a lot more use of creative displays and other things to get people to actually sort of form an emotional attachment to your brand. It's not like going to...

know, JC Penney when it existed in the US or whatever, and you go to the section that sells Dockers pants or whatever, that just doesn't that doesn't work or exist here, because people have much higher expectations. And then you see it in tech as well. So I think the difference between tech in China and the US is also that if you look at Google, or Amazon, or Facebook, they're all great companies. But when they innovate, they innovate slowly, they work on like one thing, they make sure it's perfect, and then they roll it out.

If you look at what Alibaba or Tencent or any of these guys do, it's much more, let's throw 20 things at the wall. Maybe like 18 of those are going to suck and nobody's ever going to use them. But two of those things are going to work. People are going to like it. Then we make it better. And then all of a sudden we've got 800 million users. And so I think the pace of innovation here is just quite a bit faster because of that. I also want to add in, because one thing I've definitely noticed is

is the general, like, I guess, pride level of the general Chinese consumer has risen exponentially in the past couple of years. I mean, I work in, like, commercials and my partner does print, like, advertising and stuff like that. And,

- Ah, Pau is the commercial director here. - Yeah, and what we found within a span of like five years, let's say, right? We went from every time doing like a print ad, any brand that's local that's trying to be an international, have an international feel, they always want like foreign models, of course, right?

And, but now it's not necessarily the case anymore. It's like literally they're like, you know, we don't need foreign. You can get, you know, Asian faces or a mix, you know, and even just having that combined with major international brands doing crossovers with Chinese elements in it, which totally makes sense with now you're saying leaning has been owning up with like, there's like more Chinese characteristic or culturally relevant design, um,

And there's a lot of streetwear is huge now in China. And there's some local streetwear brands that are leading the way, you know, here. And so, yeah, it makes sense that it's all, you know, together. Yeah, absolutely. I mean, you know, if you look at the market again, if you go back to like 2000, you know, that's like when people sort of first started having some money.

So it's very logical what they did. They went out and they went to an LV store, Gucci store, and they bought that LV bag or the LV wallet or belt because it had the logo. You could display it. You could get a lot of functional use out of it every day. People would recognize it and it'd be like, yes, I made a safe purchase. So that was sort of step one. Step two was I'll buy these other more sophisticated foreign brands to show I've got even more money and even more taste. So people went through that.

Now, I think people have finally gotten to the point where it's like, I don't need to act like a foreigner. Like China's pretty cool. China's got great history. China's clearly in a more powerful position in the world. Why do I have to be like a foreigner? They should be learning from us as well. And so I think, yeah, you've seen that shift. And we've definitely seen that in all the research we do, that people are much more interested in.

you know, local elements, local design designed in China designed for China. Uh, and that's no longer a negative stigma anymore. Even leadership in, in businesses, right? Absolutely. Have been transitioning to a lot of locally educated, you know,

- Management. - What you guys are talking about, I see that happening in both places. Let's say back in America, there's this new kind of movement in terms of made in America, American made, and they're very proud of that. And a lot of consumers in America want things that are made there as opposed to made in China. But then here, you have the same thing going on, but here domestically, they're very proud of things made in China. They want to support their own Chinese brands.

So, like, I don't know. I don't know where the future is headed with that, but it seems like it's more not divisive, but it's more like... It's more nationalism, but there's, like, less... Again, I'll say the word. Like, there's less cross-pollination now because, like, people want made in America in America and people want made in China in China. I think... So, I mean, this is very interesting, right? What you see is that...

In China, you talked about some of this cultural influence and this rich heritage that China has. So China is one of the most historically relevant and powerful countries in the world, nations in the world. And then, of course, the U.S. in the last few hundred years has made its mark as well. And so what you then have is this sort of notion of

you know, Americanism, Chineseism, et cetera, right? And then people start thinking with this bias. So like I put a China lens on everything. I put an American lens on everything. But if you zoom out a little bit, these are two very culturally sort of deep countries that have a lot to draw on.

But it's they're in kind of in parallel, right? I mean, it's just it's like different flavors It's like Thai food versus Chinese food or something like that and and and when you zoom out a little bit China has the advantage of this notion of experimentation that you kind of alluded to because you have such a large population that What you can do is you can throw shit at the wall and because you can sort of a/b test on a lot of this stuff then you can find out and you can quickly innovate and it's one model that works and

The US model is more, I feel like it's very value centric. It's like I'm going to make the highest quality thing. I'm really going to make something that I would love using myself. It's a little bit of a different model, but that's worked very, very well for companies like Apple and all kinds of companies because there's this design aesthetic. There's this notion of putting...

you know, like your own values and sensibilities into the product and then connecting to that consumer. It's just different. Right. But I think, um, when we put too strong of a China lens or a U S lens, um, then we kind of get caught up in that game a little bit, but really if you zoom out and if you're really like kind of looking at it from a meta perspective, they're just different sort of methods. And if you could combine all these things or mix them, um,

and integrate them, you could come up with a really great strategy. The other thing is that we had this conversation earlier about why all these US companies specifically, but probably Western companies come and have a hard time adapting. I mean, that one seems pretty... I mean, it was some great conversation. It also seems pretty obvious. It's like, imagine Chinese companies going to America. Their whole frame of reference, the narratives they're telling themselves...

are Chinese-based, potentially. And they've achieved an enormous amount of success in that realm. What got you here is not going to get you forward. And so I think maybe it's ego, hubris, and maybe it's just a lack of frame of reference because you've been so successful and you've built up this massive infrastructure of processes and methodologies and strategies that got you to be a $50 billion company. And then you go into another region. It's ignorance, but it's not really sort of like...

you know, intentional ignorance. I think you're absolutely right with, with all of that. And, you know, when I look at the U S and I look at China, essentially they're both countries that are extremely sort of commercially oriented and,

And they're both countries that are sort of framed around the idea of if you work hard and you're aggressive, you can create something and get something done. And so I think in that sense, they're very similar. They're both very capitalistic. They're both very capitalistic. At the end of the day, I mean, the Chinese are the greatest merchants ever anywhere. You know, it doesn't matter what country you go to. There's a Chinese merchant class, which is kicking butt, you know, buying and selling stuff. Yeah.

I think there is a cultural difference in the sense that I think you're right. The U.S. is very focused on let's engineer things the right way. Let's make it perfect. Create that excellent value. And that's kind of where they win. And that's traditionally what has made the U.S. very strong versus most other economies. I think China, it's a little bit more like a river. It's like stuff might get done to what I as an American would consider to be like –

85% of the perfect standard. But you know what? It works. It still gets the job done. And so they're just different approaches, but you still kind of get to the same place at the end of the day. And those approaches just work better in different contexts.

- And then the question, I think that's very well put. The question is can you integrate the two approaches or can you situationally adapt so that there's a new sort of breed of companies, whether it's, so it's not so much like-- - Is there a balance between the two? - Yeah, and it's not like China versus the US. Are there companies in the US that can adopt an integrated approach that can lead the world and are there companies in China, and in fact they're more in common with these two companies,

versus two companies within China versus each other or two companies in the US compared to each other. Do you see as many companies, Chinese companies, setting up shop in America as you see American companies or Western companies trying to come into China?

I think if you look at the last 15 years, there have been a lot of attempts to do that. Typically, the way those attempts work are through M&A. So big Chinese company X will try to buy a smaller U.S. firm and then do something with it. Most of those attempts don't work very well. And I think it goes in many cases down to...

a lack of understanding of what management skills work in China versus what management skills work in the US because they're very different workplaces with very different needs.

And so the Chinese companies tend to struggle. You know, when I talk to senior leadership at most Chinese firms, what they end up saying is, yes, we would like to expand internationally. The Holy Grail used to be the US and Western Europe. We're not so sure that's what we should be doing anymore. So number one is we have to keep winning the Chinese market because it's a big market. This is where we're going to make most of our money.

But if we look at the next 20 years, what's really important for us is to establish a really strong position in the emerging markets that have young populations that are going to be consumers.

So that means Southeast Asia, India, Africa. So if you look at where all the investment is going now, virtually any startup in any one of those countries is taking funding from Alibaba or Baidu or Tencent because that's where they see the future really being. And that's also where they feel like they can innovate more appropriately. So if you look at the African market, for example, and you look at a really boring category like white goods, like refrigerators and washing machines, stuff like that,

It's actually the Chinese companies that are doing well. So brands like Media, for example, they do well because...

They understand how to innovate products for a country where people don't necessarily have a lot of money or a lot of access to continuous electricity. So they'll design a refrigerator that works in like a fifth-tier city in China that can stay cold if the power turns off for five hours. Guess where else that works great? Africa, right? That's really interesting. So there are foreign markets where the Chinese firms are just crazy.

crushing it because they really understand what the consumer wants. But media is going to always have trouble selling in the US because you've got these entrenched brands that people have been buying for like three generations. And why go there? You know, what's the payoff? So I think that's the question that we have to ask is like, what's actually the best growth strategy for them going forward? - Well, talking about going forward, what are the changes, the biggest changes you see will happen after COVID?

I'm sure there's going to be a lot of way, a lot of changes in the way people live, the habits in terms of the way they consume things. Like, do you see that? I mean, I think the most obvious change, at least in the short term, you know, from an investment perspective and looking where people are going to spend money in China certainly is I think we're going to see a real rebirth of domestic travel this year.

Because people either can't get flights to other countries or they're a little bit cautious about going to these other places because they don't necessarily believe that those countries have maybe taken the precautions that China has to sort of slow the virus down. And so I think you're going to see a huge boom in development here, actually, in sort of pretty rural areas that are close to major metropolitan hubs, particularly.

you know, building eco resorts or spas or things like that, specifically for the domestic tourism markets. I think that's certainly one thing. I think the other thing is there has been some behavior change in terms of how consumers behaving. So one thing I noticed in China is that the average millennial or Gen Z consumer doesn't really know how to cook.

it's pretty easy to order food here. It's cooking show. I said, I was talking, I will always talk to Howie about doing cooking show. We need to talk about that. Actually. I have a really good idea for that. Um, we can do that after the podcast. Uh, yeah. Uh,

But now because of COVID, people started getting in the habit of ordering some groceries from home and being like, I'll just like cook a simple dish at home. And so there's actually been a big shift and people actually sort of getting in touch with their roots a little bit more as a consequence of that. And just showing it off. They're like, I know how to cook now. So like the big thing on TikTok or whatever, Doyin is showing off, you know, I made this really cool dish and here's how you can do it. So I think you're going to see a lot more of that kind of,

Thinking about like, what are the one or two hobbies that are really meaningful to me in my life? And then spending more time and money on that. I think that's the other big change that is coming out of COVID here as well.

And I think also because COVID has also coincided with this sort of utter destruction of the relationship between the U.S. and China is that there is going to be more nationalism and more support for Chinese brands or Chinese services, you know, partially as a result of that. More division. More division. I mean, that's sort of.

That's just an unfortunate consequence of this. I think that's global though, right? This whole nationalism. Oh, it's global. It's almost everywhere. I mean, we've been in the unfortunate position of a lot of major nations having very, you know, populist nationalistic leaders in power over the last couple of years. And what COVID has done has just sort of essentially amplified that to a degree which...

makes for very tense situations and it makes it very hard to kind of come back from. And so it's gonna be very interesting to me to see how that plays out over the next couple of years. - No one thought this was gonna happen, right? So yeah, exactly. - But like going along with that, like you tell me if I'm taking this analogy too far. - You're taking it too far.

Fuck you, Howie. You let me know. But like historically, if we go back to the kind of economic rise of America, you trace it back to the end of World War II where Europe was completely devastated, right? The whole, like basically the whole world was completely devastated and America had this window of opportunity to kind of like rise because like they had like really zero competition globally. And that gave kind of like the economic rise to a modern day America, right?

Do you kind of see like parallels to that kind of playing out now with COVID in terms of like a lot of the world economies are really, really suffering? And who knows how long it's going to take for countries like America and other countries to kind of recover from this?

Meanwhile, we're here in China and things have pretty much gone back to normal. And what you were alluding to before, you see a lot of people are going to be spending, like you go into malls now and like everyone's out like buying, like the malls are packed now.

People are shopping. People are going to be traveling domestically. I can add a note to that. I'm not going to be specific, but I was recently on a project that is a platform for shopping and financial services and all that stuff. And originally, we had this plan to do this type of commercial. And then we had to delay the shoot and the release of it.

because of COVID, not because of the actual COVID, you know, how it's affecting the people, but because, you know, the government was really trying to push the agenda of spend money. And our topic was don't need to spend all this money. Like, you know, you can, you know, be tasteful. It's all about like buying the things that you really want as opposed to, you know, spending, spending, spending. But they're like, no, no, hold on for a second. There's this little period and pocket of time that we're going to be really promoting for

buying like you know support the economy buy buy buy well like my point is like i feel like the chinese economy is going to recover a lot faster than other global economies and so do you do you see that as kind of like maybe helping china the same way it kind of helped america after world war ii

So a couple of things. One, just to expand on what Howie was saying. So one of the things for listeners outside of China, if they don't know that the government here has done or that local governments have done is instead of giving out stimulus checks like in the US, what these cities have done is basically said, look, if you go out and shop, right?

and you spend $100, we'll give you $20 into your digital wallet back. So that's how they've sort of encouraged spending is rather than just giving people money because then people just save the money. They're saying, we're going to tie this to spending. Yeah.

So there's been this bump coming out of COVID where people are very much incentivized to go out and have a meal, see their friends, go buy some clothes, whatever it is. And it's really smart because it has sort of gotten people over that sort of fear bump of, is it safe to go out and go shopping? And so China really has recovered much more quickly than I think a lot of other markets are going to recover as a result of that. Long term, I mean, I think China is definitely...

going to take advantage of this. I mean, they see a window where, you know, everybody else is distracted. So the U S is distracted. Japan's got its own problems. Western Europe's got its own problems. India's got its own problems. So given that context,

if you were in charge of a country and your job was to improve the position of that country and improve the position of people's lives, why would you not take advantage of that? I mean, from a rational perspective, that's what they should be doing. And so I think it's their job to do it. It's literally their job to do that. And as an American, I

I would want my president to also, you know, make sure that the U.S. is in a solid place to continue to grow and prosper and move forward. So, I mean, people can talk about it as like a, you know, good versus evil scenario or whatever it is. But the reality is, yeah, China is going to take their shot. They're going to they're going to press as much advantage out of this as they can to, you know,

change the dynamics of the world order. You know, you look at the WHO and the US pulling out of that. Well, you better believe China's going to be finding ways to invest more money there because then they'll take over and they'll have a much more important seat at the table when these global discussions are being had. And so Trump, what he's done is essentially sort of

isolate the U.S. and put it in a position where it doesn't get to be part of that conversation. And that's very dangerous for the long-term sustainability of, you know, any country or any government. And so that's, that's my, you know, my personal feeling. And it makes sense. You know, it makes sense. Yeah, that's very interesting. So, yeah,

I mean, part of what we've been talking about today is kind of like a tale of two systems, you know, whether it's like how innovation happens or how governments work. And you mentioned, you know, China is going to take its best shot. And I love what you said, Justin, about sort of these moments in history where, you know, it's an inflection point where things kind of change the, you know, the competitive landscape.

you know, um, kind of gets reset based on some sort of external event. Um, I'm curious, Ben, to kind of combine some of the things we talked about. So, um, China wants to win these four or five industries, um, for its longterm success. It has a, uh, stronger planning ability because, um,

in terms of the way the interests are aligned, maybe they have a longer term kind of perspective. Whereas in the U S we've gotten to a point where the interests are so fragmented. And so you can't really have a 50 year picture just because you've got so many people fighting, um, you know, every four years or so to speak, um, given China's,

I guess, competitive position right now in those four or five top industries, given that COVID happened and it's sort of disrupted a lot of the way the world order works. I guess, what's your prediction? Maybe just rephrasing Justin's question a little bit, like, you know, how much, um,

I guess how far can kind of China kind of advanced probably in the next five or 10 years based on where it is now, based on some of the technology assumptions and the strategies the companies are, the countries are taking. And if, you know, let's say Trump continues or does not continue.

I mean, the succinct way to answer that question would be... There's a lot to unpack there. Everybody better be teaching their kids Chinese. Hell yeah. That's the short answer to the question. I mean, I think they're going to be in a much stronger position, assuming something utterly crazy doesn't happen. I could see a coordinated effort by the US and Europe and Japan and India to put economic sanctions in place or do something to try and slow down China's rise. Slow it down.

But at that point, it's sort of self-destructive. Like what's really the point of that? I mean, in the society that we live in today where everybody is basically a plane flight away or, you know, is, you know, instantly on a zoom call. Why would you do that? I mean, we need to be thinking about how to, uh,

you know, find cooperative opportunities and sort of build together because the alternative is very, very messy and is frankly not going to be good for anybody. So I think at the end of the day, if you look at, you know, the U S China relationship, for example, people need to remember that historically the two countries are very friendly towards each other. And if you go back to world war two and the,

you know, the U S military allies at one point, they were, they were very, very tight allies. U S you know, had a strong military presence here trying to keep the Japanese out of the country. Um,

So historically, they've been quite close. And there's no reason that there cannot be two superpowers that exist in this world. They might have different viewpoints. They might have different ways of thinking about things or thinking about what the future should be. But there is room for both, and both have their own strengths. So they should be complementing each other versus trying to rip each other apart. Agreed. I mean, especially with this world getting... You were talking about, I mean, connectivity, right?

right the way technology is is now with zoom and in a flight away right i mean it's only going to get even more i mean the way technology is running right yeah um i mean we're just going to be so close so how could you not right be friendly with your neighbor like how could you not have a community right because that's that's the future right i think the world benefits everybody right global community is literally going to be like neighbors on the street i mean but historically i mean i had a

I hate to be like Debbie Downer over here. But like historically, have we ever seen two superpowers coexist peacefully ever in like the history of the world? Can you compare though? I mean, we're in different times. But every time is going to be different times. I mean, but like if you don't learn from history, where else are you going to learn from? Well, we've seen two superpowers, Justin Yang and Howie Lamb coexist on this podcast. So, you know, I think it's possible. Yeah.

Well, do you think, Ben, I want to ask you a question here. Do you think an example of, we're talking about coexisting peacefully and cooperating

Do you think an example of that is maybe in Hollywood where a lot of the Chinese like Wanda and everything like are really funding a lot of like the Hollywood movies? There's a lot of co-collaboration with Hollywood movies and actors. They bought like a huge stake in AMC. I mean, you know, like, well, do you see that as a successful way of- It's interesting. You brought that up as cooperation. It would be very easy for somebody to ascribe ulterior motives to that. So if you look at what makes the US great,

The number one thing that makes the U.S. great is its ability to export culture. So people listening to American music, watching American TV shows. And sort of building that image of America as this. Americana. You know, amazing place that has all this stuff.

I think what China belatedly realized was if you want to sort of put your worldview out there is that you have to have a stake in exporting entertainment. And so that's why there's been so much heavy investment into exporting

you know, various media companies. So that's why China is invested into a lot of like the like VFX and like after production companies here. So like almost any Hollywood film that gets made now, they're probably doing some post-production work in China because it's just cheaper to do it here. And there are tons of people that have those skills.

But the long-term objective is how do you send China's message out to the world? So if you look at almost any big Hollywood movie that's been made in the last five years, it's going to have at least one Chinese actor in the movie. They probably don't say very much, but they're there. You're probably going to have product placement from at least one Chinese brand.

And it's very, very uncommon to see a Chinese villain in those movies. They're almost always the good guy. And it's not an accident that any of that happens. So I do think it is potentially a good cooperation model, but that's a stickier model to kind of like sort of say is like really good or really bad because the Chinese government does have so much control over what the messaging is and what the story is.

Well, that's something we frequently talk on this show, you know, is the control of media, right? And how we form, we as in most people, most normal people, we form all our beliefs, our biases, our stereotypes, all around our views of the world, all by media. Now, whether that's entertainment media or news media or any other form of media or social media, this completely shapes our outlook on everything, right?

And to have control of that is the biggest weapon that any nation or group can have. And it's interesting. There are two sides to that, right? Because the big complaint that an American audience would have towards China is that the media is heavily censored, that all of the newspapers are one way or another state-owned or have to get clearance for the stories they write.

And so the average reader who's not trying to get other sources of information is basically seeing a set of stories that are endorsed by the government. So they don't necessarily get the opposing views that maybe they should have, even if those views are wrong, just so that they're seeing a whole spectrum of views. And then in the US, you have this other option, which is lots of media choice. You can read whatever you want. Most of that media is owned by one family, right?

So, you know, you either like what Rupert Murdoch has to say or you don't. But people are also very antagonistic. So I think the interesting thing that happened earlier this week was the New York Times publishing an op-ed by Tom Cotton. Cotton, yeah. And people were just incensed by that because he's, for people who don't know, is a conservative governor, right? And so he said some things which were basically...

not very complimentary towards the whole black lives matter movement and the, the protests that are going on right now. And my view is that, you know, even if people disagree with that, the whole idea behind the U S is there's this freedom of speech. So it's an, it's an op-ed. This is not the paper putting it out. So why can't people read it and disagree with it? Um,

But now that I've said that, I'm sure I'll get angry mail from somebody telling me that I'm a horrible person for saying that. So, you know, it's like...

it's two different versions of they're not actually being totally true freedom of speech, you know? So it's kind of, it's just, it's. Yeah. Don't worry. Most of our audience is here in China. They love you. It's like freedom of speech based off of your own convenience. I mean, I think that it's interesting and going back to this theme of the tale of two cities or two, two cultures or whatever. Um,

explicit censorship, which is the pre-processing of information before it goes out. And it's like implicit reader censorship, the kind of the post-production of the message, you know? So, um, you know, some parts of the world, there's this kind of, uh, editing that happens before anything ever goes out. So you only see a small subset of the overall sort of range of opinions. And then in other places, um,

you self-censor in a way so that stuff that does come out is implicitly censored by you because of social expectations. Yeah, or your own

business interests, right? If we go look at the big corporations. Or societal expectations. You cannot read certain things. And I'm not taking a position one way or another because it's such a complex issue. But there are certain things that cannot be written in the U.S. Oh, yeah, sure. Right? So it's an implicit censorship. You cannot write this. And when you do, you get vilified. And then it reinforces the notion that this is not okay. Yeah.

Yeah, exactly. So is it really true freedom of speech if you get crushed for even saying that? Whether it's like you get crushed by the public or whatever. It's explicit freedom of speech, meaning that I can explicitly... And you notice this in kind of Western versus Eastern culture. Western culture is very precise. It's very kind of like, okay, this is exactly how things are. Things are very...

you know, kind of written down and transparent in a way, you know, and then Eastern culture is much more fluid. You know, some things are unsaid. It's more flexible, but the ultimate sort of outcome of that freedom of speech or that notion is actually much more complex than the explicit right to be able to print something. Yeah. 100%. Yeah. Like, I think like if you say anything like pro Trump right now in America, like you get completely attacked and crushed. You get censored, but even worse, like,

Right? Yeah. Like, you get bashed. Well, like, you might even lose your job or your reputation. Totally. You know, like, people, like, you know, like, it's that bad. So, like, that is another form of censorship, like you're talking about. Well, there are examples of that, right? People who have taken some of the... Okay, so people who have seen some of the slogans from some of the movements now, which I think...

In many ways, I would support or I do support being a minority and seeing a lot of the injustices, taking that, modifying it in a way that kind of represents their background and then instantly needing to quit their job or resign.

And so, you know, was it the smartest thing to do? Maybe not. But did they, you know, does that really represent what they're thinking? Are they really a racist? And did they need to resign for that? That's kind of questionable. So it's this pendulum that you talked about, right? And it's like, the question is, are you able to shape long term change in incremental ways? Or do you need to have revolution?

And that pendulum kind of goes back and forth. But was the pendulum on one side so long that we needed to create revolution to get it to the other side?

Who knows? It's very difficult to say. At least right now. This whole conversation got very deep for me very quickly. I was like, wait, what happened here? You must answer that question, Ben. You must know the answer to that question. I'm not sure I have enough of a background in philosophy to be able to do that justice. But

But I mean, I agree. It's a very complex situation. And I think at the end of the day, we need to think about what kind of world do we want to live in? And then what's the best way to get there? And I wish I knew what the best way to get there was. If I did, maybe I'd run for president or something. As it stands, I would never want that job because I think it's a very complex issue. It's very hard to affect the kind of change that

that we need to affect in a way that helps people versus just creating more problems. So absolutely. I think, I mean, to wrap it up, I think, you know, one of the personal lessons that I've learned, um, just by the mere fact of my situation of having being raised in the United States and having lived in China for so long and having traveled abroad to so many places is, um,

you think globally. And for people who, I think a lot of us, we tend to get trapped in this mindset of thinking locally, thinking domestically, thinking in our tribe. We always go back to tribalism, right? In our own tribe, we think about this. But if we all thought a little bit more globally, and even if it's for our own self-interest, selfishly, but if you think globally...

Even your self-interest will end up aligning with global interests, if you think that way, I feel. Because it benefits everybody. Like we were saying, what is the benefit of antagonizing another superpower? What is the benefit of that? It doesn't benefit anybody. Cooperation benefits all in the long run, maybe. I don't know. Justin, can I...

I have a small request. You want to read another quote? Eric, we're going to read another quote. Can I? Yeah, you don't need that. Why do you always ask my permission to read quotes? We always read quotes anyway. And so just go ahead and read the fucking quotes. I want you to be comfortable with the ending to support your message. So I want to ask for your permission. I want to read a quote. I want to play a song. Can I? You want to literally play a song? Can you sing it? No, please sing it. I'm going to read a quote. Please sing it.

I'm going to read a quote and I'm going to play a song. Please sing it acapella. Can we end like this? All right. Yes, please. Okay. All right. I've been quoting this book all week and I've talked about it off and on. I think Howie is actually the one that introduced this book to me. Nicholas Christakis blueprint. Okay. I'm going to read the quote and then I'm going to do something by MC gin and

So the quote is from the book Blueprint, and it talks about how you build good societies and what are the characteristics of good societies. And Nicholas says, imagine studying two hills while standing on a 10,000-foot-high plateau. Two hills, right? Like two nations. Seen from your perch, one hill appears to be 300 feet high, the other 900 feet.

this difference may seem large. After all, one hill is three times the size of the other. And you might focus your attention on what local forces, such as erosion, accounts for the difference in size. But this narrow perspective misses the opportunity to study the other more substantial geological forces that created what are actually two very similar mountains

Actually, one is 10,300 feet high, the other 10,900 feet high. So in other words, what you see depends on where you stand. And very often when it comes to human societies, people have been standing on a 10,000 foot plateau altogether, but letting the differences among societies mask the more overwhelming similarities.

That is beautiful. It's so beautiful. I know. That is really, really good. Like, I will never give you shit for reading quotes again. Like, that was fucking beautiful. Okay, now you're going to give me shit. Please don't say that. Because I'm going to play. You have to keep giving him shit. Because I'm going to play a song. Okay? Are you ready? You go from that to MC Jin? Yeah. Like, that's just like. Are we listening to the whole song?

And then the Chinese be like, you're going to learn Cantonese. No, you're going to learn Sichuanese. All the different dialects. You're going to learn Shanghainese. It somehow becomes controversial.

Alright, thanks for sharing, Eric. That was fucking, that was strong, Eric. That was really strong. Good finish. Alright, cheers. Cheers. Ben, thank you for coming on. Thank you for taking time. Yeah, thanks for having me. We gotta do this again sometime. Absolutely. Alright, that was good whiskey. That was a great guest. That was Ben Cavender, everybody. I'm Justin. I'm Howie. I'm Eric. Alright, guys. Peace. See ya.

Bye.