Loud Thoughts

Senior talents, those with 10+ years of relevant experience, are so hard to find in China.

Cultural Revolution

From 1966 to 1976, China suffered the famed cultural revolution. The ferocious intensity on thought control stopped the country from anything else. The society regressed, decades of hardwork wiped out, a whole generation of people forsaken.

Schools closed during the cultural revolution. Kids graduated from high school found no possibility for higher education. During the 1st few years when schools reopened, the government made exception to the rule of prescribed age for college entrance. They came in droves and became the 1st batch of college educated elites of modern China. Chinese call them LaoSanJie (老三届, the three old classes). They are in their late-50s today.

The first uninterruptably educated batch entered college around 1980. At that time, there were only about 300 universities in the country. From 1980 to 1985, these schools produced graduates that are less than 0.1% of the population. For the country, only less than 2% of the population were college educated or better. If you found one of them today, he or she is most likely managing a big government agency already.

Around 1985, numbers of universities and students started to grow and exploded started 1995 during the 9th 5-year planning cycle. Nevertheless, it is hard to fight against time. The oldest of them would have graduated only 17 years and barely 40 years old today.

A typical silicon-valley senior engineer job description will include the requirements of “10+ years of relevant experience with an advanced degree.” To hire in China, “fluent in English” is also a requirement. You will be searching in the pool of statistical zero.

Every companies that need senior talents must solve this problem.

Solutions

The easiest solution is to force growth — making junior people do senior works. This “sink or swim” practice is highly problematic. People crash and company suffers from inexperienced leadership. But, for many, there is no alternative. They are the only ones we got.

Companies can also import talents. Taiwan and Hong Kong are two ready sources. These regions share the same history and culture. The talents are ethnically Chinese, differing only in Mandarin accents and the degree of exposure to western ways of life. They have the much needed senior leadership, market-based management style, willingness to coach and mentor, and the all important blood kinship.

China could also import talents from US or other developed countries. First target those sea turtles (in Chinese, “returnee from abroad” sounds like sea turtle). China enterprises covet sea turtles for their western education, relevant work experience, and the ease of integration culturally and linguistically. They understood how things are really done here, and also knew how could thing done differently.

The last choice is use westerners. They face three main barriers for their success: language, culture, and trust. Although many westerners have mastered Chinese, most stopped after few working phrases. Chinese culture is conservative, family-centric, conformative, hierarchical, and contextual (it is really how it was said), hugely different for those new-age, silicon-valley “can do” cowboys. Lastly, the near colonization (think Hong Kong and Macau) about 100 years ago left deep wounds that are not fully healed yet.

MNC's Advantage

MNCs, like Sun Microsystems, have an enviable option of partnering with their US establishments. They can get senior leadership easier and less expensive. They are in good position to leverage China's youthful energy and capture the market with speed.

This is the “offshore to grow” recipe.
Recruit young talents, abundant in China. Choose carefully for those with open minds and relatively fluent English. Find a leader in charge of talent cultivation and organization growth. Forge partnership between the energetically young and the experienced wise with the right incentives and organization structure. Leverage the agility to capture the market. Win for China employees, win for US employees, win for the company.

Xi'An (西安) is the most ancient capital in China. Way back in 250BC, Emperor Qin (秦) united China and made this city its capital. He had a great plan. He will be the 1st and the beginning of generations of emperors who are his descendants. The 1st part was historically factual. The 2nd part did not quite work out. Qin dynasty lasted only 42 years and ended with his son. Two rivals, Liu and Xiang, toppled Qin dynasty and fought for the throne. Their uprising and battle was widely written and worked into numerous stories and dramas to this date. Mr. Liu eventually won and started Han (汉) dynasty. Han and future dynasties mostly had their capital in Xi'An. This tradition changed in the Yuan dynasty (1209~1370AD) that moved the capital to Beijing. Xi'An, in terms of history, is way richer than Beijinig. It all started with this 1st emperor.

Standing above the Terra Cotta Warriors excavation, I felt awed, proud, and disbelief. How many of these they made? What resources, logistics, planning, management, and determination were dispensed making them. It took roughly 35 years to build his tomb and we have excavated only a small fraction — the outer perimeter that was the soldiers' quarters.

My trip to Xi'An copied Mike's itinerary. It started with an overnight train-ride. My cabin of four was clean and comfortable. Each ticket costs slightly more than 400rmb. The train pulled in XiAn station around 8am. We checked into the hotel around 9am and were in Terra Cotta site around 10:30. After the lunch, we went to HuaQingChi (华清池).

Tang (唐) dynasty people built elaborate bath houses here, with natural hot spring, for their emperors. Poet BAI JuYi (白居易) wrote a tragic romantic long poem set in this palace. It described the love story between Emperor LI LongJi (唐玄宗 李隆基) and his concubine YANG YuHuan (杨玉环), known to be one of the 4 most beautiful women in Chinese history. She died during a coup attempt and he spent the rest of his life missing her. The verses went through my head as I tour her bath house and the balcony they spent winter days watch the snow flakes falling into the hot spring pond.

The day ended with a magnificent dumpling feast and a world-class dance and music show. The next day, we visited the Big Goose Tower and the Forest of Stelae (stone tablets).

Those stelae were the official versions of various books used for tests and the calligraphic practices. Some of them are maps or even tombstones. Stelae were collected from around the country to ease the effort of making rubbing, an exact duplicate of what was engraved.

Here I found an unique art for the region, the horse hitch. In this region, it became fashionable to have fancy stone horse hitches. The wealthy commissioned thousands until the fad faded away. The stelae museum collect more than a hundred and line them up. We walked among them and get surprised at how lively and adorable they are.

It was said that a goose sacrificed itself to testify the truth spoken by a Buddha. As such, many Buddhist towers were named such. This one was where XuanZang (玄奘) spent 19 years translating the Buddhism scriptures. He walked 4 years, from Xi'An to India and studied Buddhism there for 17 years. His trip inspired the fiction 西游记 (Journey to the West) that became one of the most popular fictions in China. I stayed up many nights reading that book when I was a teenager. In fact, I read it about 3 times in different parts of my life. It is a bit like visiting universal studio and remembering Jaws, only XuanZang really lived here.

It was a well packed two day trip, but also possible in one. If you have a spare weekend, Xi'An is not a bad escape from Beijing.

How much can you really do to get ahead? What does it take to be promoted to next level?

Like many of my colleagues, I choose people for jobs based on skills, or subject matter expertise. Practice and perfect the skills for your current job. Then, invest the time and effort to prepare for the next level. Once the skills are well honed, the opportunities will come knocking on your door.

As you move up the level, skills gradually blend into character and mentality. They become harder to describe or acquire. You should think about them right now. They are not easy and take time to acquire.

At Sun, a strong senior engineering manager generally exhibit few common traits.

• Strong sense of right and wrong

  Things usually have their own intrinsic logics or ethics that cannot be manipulated — the fundatmental truth. From an engineering's point of view, there is always an optimal solution, given the constrains and the objectives. A strong engineering manager tries to understand the constrains and objectives, then evaluates if the current solution is the optimal one. If not, he or she does not hestitate voicing his or her opinions, sometime to very senior executives.

  A junior manager does not review the list of constrains and the objectives carefully. He or she does not speak up afterward either.

  The flip side of this management style is the less emphasis on personal elements and execution details. After all, engineers are trained to design, not implement. Engineers also easily overlook factors that cannot be measured and manipulated easily, such as synergy, motivation, etc. There are also tendency to not having “plan B.” This comes from the natural confidence of everything has been considered and this is the best solution.

• Fast learning, curious

  Senior managers are likely to be fast learners. They grasp the concepts and familarize with the terminology quickly. They stay current. They change courses easily. How?

  One simple way is to stay curious. Do not stop when things work. Pursue dogmatically until you have grokked.

  This comes with a price. You need to work harder and the effort may not seem worthwhile. Why waste time and energy on trivialities? You have better things to do.

  Consider every project that comes your direction a learning opportunity. You would have learned 90% when you have completed the requirements. Do not stop there. Learn the extra 10%. It may, or may not, pay off. But if the same kind of projects come your way once more, you would be able to do better than those who did not.

• An energy source

  Energy makes everyone around you want to do more. The most common form of energy is motivation. It is not, however, the only form. Vision, charisma, love, loyalty, friendship, passion, determination, or even greed and hatred, all provide energy.

  Energy is infestious. It feeds on itself, circulates, and multiply. Are you an energy source?

• Know when to drill down

  Micro-managing is not evil, it is actually necessary. The art is in choosing when to delegate and, more importantly, when not to. No manager can afford to get back to his boss later. An “elevator opportunity” will not come again. Decisions must be made now. A strong senior manager is always ready. How?

  Focus, be prepared, and control the agenda. Whatever you choose (yes, it is your decision) to do. Do it well. You will naturally have all the answers on your finger tips. Be in tuned with your boss's agenda and the company's priorities. Whatever in those area, you should be prepared to respond quickly. Lastly, you are always prepared if you are in control. Ask questions, propose ideas, raise issues, and suggest alternatives.

What does it take to get promoted? The answer is exactly the same question turned around. “Do you have what it takes?”

The full moon of the 7th month is the Chinese holiday for the dead. This year, it is on August 8th. In Daoism, hell opens on the 1st day of this month (July 25th). All those lost spirits and ghosts roam out of hell to finish whatever they have to. This is also the month for them to feed, if they died hungry. Mortals everywhere offer fruits, meats, incenses, or whatever to appeace them. On the last day of this month (August 23rd), all of them go back to hell and the gates close.

The 7th month “leaps” this year. The 2nd 7th month starts on August 24th (new moon) until September 21st. I don't know whether the hell gets to stay open one extra month or not. Probably not.

During this month, it is not lucky to marry or made major purchases. Ghosts get jealous when mortals enjoy themselves too much and may ruin it with whatever ghosty tricks.

I found this tradition not much observed in mainland China. I am quite curious on why.

Or not.

China is to slow down. She must. The inability to do so will bring dire consequences, including a Great Depression like social disaster that topples governments.

The eye-catching number is the 10.9% GDP growth this 2nd quarter of 2006. Exceeding the target irked the central government. They ordered slowing down. Every local governments seem to be doing exactly the opposite — accellerating growth.

Consumption of key natural resources – oil, iron ores, copper, and soy beans – did not go as planned either. Per GDP unit, China today consumes more energy than US by a large amount. Granted, a growing kid must eat more, but obesity also takes painful years to fix. China accounts for the majority of increased demands for these commodities. She is also the primary reason for the global sky-rocketing prices. Mother earth cannot seem to catch-up.

More pundits predict the coming collapse of the China bubble recently. The theory goes: the growth attracts investments; the investors pursue the same fastest and biggest returns; over-build becomes over-capacity that leads to price wars; loss of profits bankrupt few companies; small collapses panicked the investors and they withdraw their money; decreased capital heightens interest rate and send more companies to bankruptcy court; spiral down and total collapse. History has seen so many of these cycles. Why would China be different?

Worst-case Scenario

What if the worst-case scenario happens?

China has a historically unique economical structure. Investments on fixed assets accounts for almost half of GDP, exportation and internal consumption for 40% and 37%, with exportation growing twice as fast as consumption. Saving rate is among the highest in the world. Citizen income is still low. And, stating the obvious, it has a large population base. This structure makes the bursting, if happens, different than that of, say, USA or Japan.

The fixed asset investments — buildings, factories, roads, public works, etc. — simply become under-utilized. During the internet bubble, companies installed huge amount of basic connectivity such as high-speed fibre cables. Those cables stay buried long after the burst and became part of the social infrastructure. We love it. Innovations spawned to exploit the excessive capacity and the society rejoices.

Most of those fixed investments are made by foreign companies in the form of FDI (foreign direct investments). When Japanese snapped up trophies properties like Rockefeller Center and Sears Tower, US citizens felt their heirlooms lost. Few years later, they can hardly hide their snickers when the recession rendered those investment much less.

The export industries will suffer slightly and temporarily, if that. This industry compete on price and quality. The excessive domestic infrastructure capacity will hold the manufacturing costs at bay. The population base supplies unlimited cheap labor. The imported machineries in the factories maintain quality. Raw materials are the same everywhere — the definition of commodity. I don't see how China export industry losing its competitiveness. Burst or not.

How about that 1.3 billions, or more, people. Wouldn't the collapse hurt them, turn them into rebels, and topple the government?

Remember how China was founded. Soon after 1911, Mao mobilized the poor and hungry to fight against Chang Kai-Shek's well-trained army. He won in 1949 — less than 60 years ago. This is the government (actually the culture) that wrote the book on controlling large number of people. No social disorder will occur.

The worst-case scenario is for 老外 (LaoWai: foreigners) only. It seems.

Possible Administrative Actions

Even that, the government will try not to bruise the friendly foreigners. (Don't kill the goose.) Here are some obvious and well discussed measures:

• Appreciating RMB:

  No, it is not a good idea to invest in RMB, or any foreign currency. Everything I have thought of has been studied by Wall Street. You have no information advantages, none what-so-ever, against the professional currency investors. Doing so will guarantee you losing your shirts.

  Appreciating RMB will make so many happy. (For reasons befuddling some economists, US government is among them.) A stronger RMB reduces the huge foreign exchange reserve, decreases the value of foreign investments, and eases the current balance pressure. It also makes those oil, iron, copper, soy beans, and whatever China needs from abroad cheaper. This is too easy and obvious that government will certainly do it. The only question is how fast.

• Tightening Money Supply:

  Raising interest rate can certainly do it effectively by making money costs more. Government can print less money, or increase the reserve ratio.

  Banks make money by accepting deposits and lending out money. They can actually lend more than what they have, as long as the depositors do not all thdraw at the same time. To avoid catastrophic “bank runs,” the government requires banks to keep some cash to cover normal withdrawals. The percentage of cash, relative to total deposits, to keep is the reserve ratio. Since most people deposit the money they loan from one bank right back to the bank. The reserve ratio has a multiplying effect.

  If the reserve ratio is 5%, a 1,000 dollar deposit allows the bank to loan out 950. If the 950 get deposited back to the same bank, it can then loan out 95% of that, or 925 dollars. The cycle continues until it reaches zero. At the end, the bank would have lended out 20,000 dollars from that original 1,000 deposit. If the reserve ratio increases just 1%, the bank would lend out 17% less money.

  In July, 2006, China raised its reserve ratio to 8.5%, up 0.5%. (USA has currently 10% reserve requirement. This makes US banks less competitive than their China counter-parts.)

• Investing Abroad:

  Remember foreign exchange reserve? It is the accuminated difference between export and import. China has the whopping 941.1 billion dollars as of June of 2006. Something must be done to digest this big pile of foreign money. They can purchase large ticket items, such as nuclear power plants for airplanes. They can acquire companies such as IBM's PC division. They can also loosen the decades long tight control on investment abroad. Soon, Chinese may be able to buy SUNW stock, or the Rockefeller Center.

• Raisig Taxes:

  Hiking the tax rates weed out weaker companies and achieve the slow-down objective. This is, however, very unlikely. Taxes are burden to the society in general and historically hard go down, once raised. The long-term social consequences are difficult to predict. Most governments approach taxation very cautiously and I have not seen many discussions here.

  There are, however, talks to level the playing field for domestic and foreign businesses. That's beyond the scope of this blog entry.

China's government officials have impressed me, at least economically. I found them well-educated, well-informed, thorough in planning, and decisive in execution. My confidence is high that they have not taken the doomsday prediction lightly and would have established an effective plan for aversion.