Stanford Summit: Is China a friend or foe?

Joe Schoendorf recently got to speak at Tsinghua University to discuss innovation. His talk here incorporates some of the same things he said to the students there.

Joe goes to China every 5 or 6 weeks. He's done this now for about the last 4 years. He says China is a friend, not a foe. In the past 40 years, Moore's law was the driver. In the future, globalization will be why China will succeed. For globalization, price is the driver. How does this play out? The last billion customers purchased 1 trillion dollars of products. The next billion customers will be very different. They will not spend 1 trillion on stuff. These consumers are from China, India, and Brazil, and they earn much less money than US consumers. Therefore, the core driver becomes: can you make a profit by selling your products at a much lower price? That's key.

Joe tells people in China 4 things about Silicon Valley, but his SV friends don't like these points very much:

(1) There is a great amount of intelligence in SV, but there is no real difference in native intelligencve as compared to China. (2) There is a great work ethic in SV, but there's no difference in work ethic in China. (3) In SV, we pay a lot more for the work. China has much cheaper work force. This is an issue where there is an important difference between SV and China. (4) In SV, we have an ethic of trust for businesses. This is something that is very important. China doesn't have this trust (yet). This is the baggage that China carries. Joe knows they'll figure it out because they want to win, and they will want to do the right thing. The US should not be complacent about this at all.

Joe offers a personal prediction - by 2008 China will be in full transparency in two areas: the curency in China will be transparent/market floated; the stock market will also be as transparent as the NYSE or the London Stock Exchange.

Joe recommends these books on China:

The Genius of China by Robert Temple
Guanxi by Buderi & Huang (Personalized Networks of Influence) - big lesson is that relationships take time.

Q&A with Tony Perkins:

Bottom line advice about China for innovations: You have to have China as part of your business plan from day one. You can skip Europe for now.

Do you need Chinese developers to translate a web business? Yes. Do that early on. If you don't the Chinese will take your good idea and do it themselves over there.

Is there a military confrontation in our future? Joe doesn't know!

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