What can we say for sure about China? Many of us can rattle off some incredible statistics. It is a manufacturing and technology powerhouse. China ran up an astonishing $1 trillion dollar surplus in 2024. China builds more EVs than all other countries combined. And China has enough capacity to supply total global demand for batteries. We know these facts. But what we know much less well is how to engage with Chinese business people in a productive way that leads to successful outcomes. That's been a giant black hole for many Western business people. Fortunately, a giant dose of help is on the way in the form of a tremendous new book by Ken Wilcox called The Chinese Business Conundrum: Ensuring Win-Win Doesn't Mean Western Companies Twice. Mr Wilcox, the former CEO of Silicon Valley Bank, also ran SVB's joint venture bank in China. He shares extremely valuable inside views of realities on the ground.
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Episode Transcript
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Speaker 1 (00:02):
Where top executives and crazy entrepreneurs gathered to talk about
the future of electric vehicles.
Speaker 2 (00:09):
This is the Driving with Done podcast. Hello and welcome
to the Driving with Done podcast. I'm your host, Michael Dunn.
Such a tremendous start to the year, so much ground
to cover, so let me be brief to the point
with a series of quick takes. Number one, Happy Lunar,
New Year today in Chinese Kuila Wan shirt Rui Number
(00:34):
two cees Were you there? Zeker, that subsidiary of Jili,
the all Electric took center stage amazing products, the zero
zero one sedan starting at fifty thousand dollars, the zero
zero nine luxury van one hundred and ten thousand dollars,
not apologizing about the price. Why not because the quality
(00:57):
is there. And then there was a custom built van
to developed for Weaimo Robotaxi fleets. That's right, Zeker and
Weimo have been co developing this. Think of it as
sort of like the modern version of a VW van
Swedish design, Chinese manufacturing American brains in one package. The
(01:17):
idea is that the van would be manufacturing in China,
ship to the United States. Weimo would then wrap it
with its autonomous vehicle technologies and deploy this vehicle in
the United States and around the world. Now, I asked
about one hundred percent tariffs and the ban on Chinese hardware.
People at Zeker remained confident. They said their target was
(01:38):
twenty twenty six and they're sticking with it. Hmm, how
would they get around the terrorits Maybe there's a plant
in South Carolina that currently builds vovos that might just
add a Zeker product to the line. Watch that space
next up. Last week I was in New Orleans for
(02:00):
the annual National Automotive.
Speaker 1 (02:02):
Dealers Association Conference.
Speaker 2 (02:04):
The big banner at the front door said the most
important auto event of the year. Dealers there, the optimism
was just amazing. Dealers were nothing short of jubilant about
the prospect of going back to just sell. Let's sell
our large gasoline powered SUVs and trucks that bring those
giant profits. There was also a lot of curiosity about China.
(02:28):
Gave a keynote there called China Everywhere all at once.
Dealers in the crop probably five hundred standing room only
intensely curious, but also understandably a little bit in denial
because they did not see cars because they do not
see Chinese cars on American roads. Well, now is not
the time to be complacent, because if you step outside
(02:50):
the United States, from Mexico to Brazil, South Africa, to Israel,
to the UK, Spain, Australia, Yeah, a deluge of Chinese
six million cars exported from China to global markets everywhere,
essentially except to the United States and Canada. So cees NADA,
(03:12):
Happy New Year. As we head into twenty twenty five,
here's the big picture. China is coming to your neighborhood.
Whether you put the welcome sign up or not, They're coming.
One in four exhibitors at CS were from China. China
exported six million cars last year, up from just a
(03:32):
million in twenty twenty. BYD's building plants in Thailand, Brazil, Hungary.
Oh you got the picture. After my keynote at NADA
in New Orleans, many people came up and asked, how
do we get smarter on China now? Well, I said,
talk to people who have been there in the trenches
and make sure that they're honest about the experience in
(03:52):
that regard. One of the best people on the planet
to talk to is my good friend Ken Wilcox, former
chairman and CEO of the Civil Valley Bank, Can also
ran the SVB Joint Venture bank in Shanghai for several years.
He's been there, He's done it. Now. He's written a
tremendous new book entitled The Chinese Business Conundrum, ensuring that
(04:14):
win win doesn't mean Western companies lose twice. Ken get
straight to the point with practical and smart advice on
what to know before you go, that is, before you
engage in business inside China or with Chinese companies globally.
Ken Willcox, author The Chinese Business Conundrum. Stepping with confidence
(04:36):
into twenty twenty five with the Driving with Done podcast.
Ken Willcox, Welcome to the Driving with Done podcast.
Speaker 3 (04:53):
Well, thank you very much. Always a pleasure.
Speaker 2 (04:55):
Imagine for me for us, Ken, that you get a
phone call today from a protege at SVB Silicon Valley
Bank and she's headed to China next week, new assignment,
and she asks you, what's the biggest difference between what
I'm going to experience in Shanghai from what I know
here in cozy Santa Clara, California.
Speaker 1 (05:15):
Your answer, Well, the.
Speaker 3 (05:16):
First thing that's wrong with that question is that there
are not only one or two things. There are several things,
and my experience at least are in my perception. And
I've been in a lot of different countries over time.
China is more different from US than almost any other
country that I've been in. So I would list a
(05:38):
whole handful of things, and I'll just touch on them
briefly here. The first thing is the role of government. Government,
and China can control anything it feels like controlling. It
doesn't mean it controls everything. It just means it can.
Speaker 2 (05:54):
It can control that. That's an important distinction. Some people feel, oh,
communist system, one party, they dictate everything everywhere. No, not necessarily,
but they reserve the right to if they so wish.
Speaker 3 (06:06):
That's exactly right. And on the other side of the coin,
a number of people go to China. They are trying
to establish a business that the government isn't particularly concerned about.
The government never bothers them. They go home years later
and they say to themselves, I don't know why people
complain about the CCP. They never bothered me at all.
But of course they were doing something that the CCP
(06:28):
considers somewhat.
Speaker 1 (06:29):
Irrelevant, like hamburgers.
Speaker 3 (06:31):
Yeah, hamburgers are The classic example in my mind was
this guy that was making barbecue equipment, you know, like
spatulas and tongs.
Speaker 1 (06:43):
He's loving things in China.
Speaker 2 (06:45):
Low cost manufacturing, nice profit margin, doesn't have anybody from
the government coming to pay visits exactly, okay.
Speaker 3 (06:53):
And other people have a totally different experience. So there's
not just one potential experience in China. But if you're
doing something that the government really cares about, rest assured
they will be your partner and they will be in control.
Speaker 2 (07:09):
Now, when you say partner, does that mean their equity partner,
they're jointly owning companies with you, or it does?
Speaker 1 (07:15):
It take many forms?
Speaker 3 (07:17):
Takes many forms. It takes many forms. I think Elon
Musk considers himself somewhat of a genius right now because
he's not in a joint venture, but he's being controlled
whether he or not. And I suspect he knows that.
I doubt he'll admit it.
Speaker 2 (07:34):
So that's the single biggest that's your number one. At
least you have a whole list of these. But number
one is know that the government is in charge in China, yes, okay.
Speaker 3 (07:44):
Number two would be the style of negotiation because many
of us, not all of us, Trump being a notable exception.
Many of us are used to a sort of win
win style of negotiation. Of Chinese on average, and particularly
the Chinese Communist Party is onto that they know. That's
(08:05):
what they like to we like to hear, so they'll
talk all day long about win win, but it is
not a win win approach. Their approach is almost always
based on leverage. Whoever has the leverage takes the whole.
Speaker 1 (08:23):
Pot, win or take all.
Speaker 2 (08:25):
It's in your subtitle of your book, which I want
to come now back to Wait, hold on, we'll get
back to. It's in the subtitle ensure win win doesn't
mean Western companies lose twice exactly exactly.
Speaker 3 (08:37):
And we go there often as not the majority of
us uh huh belief that if we just treat the
other party fairly. In other words, we seek a solution
that satisfies both that everything will come out just fine.
But it never works that way.
Speaker 2 (08:55):
To confirm that, you're reminding me the director at when
I was at JD. Power, my director of the Beijing office,
very very impressive woman named FRIEDA.
Speaker 1 (09:04):
Wang.
Speaker 2 (09:05):
She went for studies at Stanford sort of six week course,
came back and said, I just am so confused because
at Stanford they kept telling us whin win is the
future of negotiation globally, that's how it's going to work.
And she raised her hand in class and told the professor,
but you've never been to China. I'm Chinese and this no, no,
(09:26):
it doesn't translate back in China.
Speaker 3 (09:30):
No, in China, it's all about leverage.
Speaker 2 (09:32):
Okay, so big government, government in charge, leverages center crucial.
Speaker 1 (09:39):
What else?
Speaker 3 (09:40):
Communication style is a big deal. It's radically different from
our own. And the best way I can illustrate that
is by mentioning something that my assistant said to me
about six months into my stay. One day, she just
threw her arms up in despair and she said to me,
with a parent disgust in her voice, Ken, you are
(10:03):
never going to succeed here. You have a bad habit.
You say what you mean, and you mean what you say.
We don't do that. In other words, in China, what
people do is more important than what they say. Don't
(10:24):
hang on to their words, watch their actions.
Speaker 2 (10:29):
So to what extent should we discount their words? It
gets tricky there because we say, oh, we can't trust
that person, but then we oh, so how would you?
How should she handle that when she gets there and
she hears something that's different from what they do?
Speaker 3 (10:45):
Oh she I think she should handle it the way
I handled it, and that is I don't trust myself
to interpret what they really mean. So, because I didn't
grow up there, I'm not culturally attuned, least not sufficiently.
So I took because I don't speak the language, certainly
(11:05):
not well enough. I speak at about a ten year
old level. I always took with me two interpreters, two translators,
and they would trade off their roles. One was always
doing the actual in the moment translation and the other
was taking notes. Afterwards, he or she could tell me
(11:27):
what they really meant, okay, And that I found to
be pretty effective. At least it was a lot better
than being confused on my own.
Speaker 1 (11:39):
Ken.
Speaker 2 (11:40):
At this juncture, your former protege is thinking twice about
her trip to China next week, thinking what am I
getting into?
Speaker 3 (11:47):
Well, if she's why she will think twice. The truth
is we need to engage with China. We have to
engage with China. We will engage with China, but sadly
most of us are unprepared to do so. Effectively.
Speaker 2 (12:03):
Can you have written a tremendous book. I say tremendous
because it's authentic, it's courageous, and it's direct, and it's
a book that many other people would not dare to write.
In it you talk about here, I'm reading one night
and it says Western companies entering China should be wary.
(12:24):
How is this different from entering any other market in
the world?
Speaker 1 (12:28):
Why weary?
Speaker 3 (12:30):
Wary? Because let's go back a stef Okay, how do
we face new situations as human beings? We pretty much
all use the same method We carry around in the
backs of our heads, something that I call mental models.
They're based on our experience and they help us predict outcomes.
(12:54):
You know. The obvious one is you touch a stove
that's hot and you burn your finger. You carry that
out around the back of your mind. The next time
you see a stove, particularly if it looks red hot,
you don't touch it because you know that's gonna hurt.
So we take our mental models everywhere we go, and
if we're going to a place like the UK or
(13:17):
Germany and apply those mental models. In other words, we
see what people are doing, we interpret it. They usually
sort of work, not always, but sort of. My contention,
based on my own experience, is that our mental models
don't help us that much. In China, we build a
whole new set of mental models. So the best way
(13:39):
to go to China is to go there and without
trying to do business for a year or two and
acclimate yourself. Meete as many people as you can, try
to understand what they mean when they say things, and
learn to interpret so that you can then maybe in
a year or two, set out to actually do business
(14:02):
with and make fewer mistakes.
Speaker 2 (14:05):
You didn't have that opportunity. You You went right in
to let's go action. Can you take us back to
your very first impressions of China without this two years
of getting acclimated so you allow, Yeah.
Speaker 3 (14:19):
My launch pad was pretty much the same as most people's.
In other words, I started going to China on a
regular basis, you know, a couple of times a year,
for a couple of weeks each time in the year
two thousand. So by the time we I actually moved
there ten years later, I thought I knew exactly what
(14:41):
I was doing. After all, I'd been there around twenty times,
you know, racking up about forty weeks worth of visits.
It's almost a year forty weeks, right, So I figured
I pretty much knew what I was doing. But I
was really kidding myself because the truth is, living there
(15:01):
and getting into the trench shoes is totally different from visiting.
And I think that's that's something that's typical. My experience
is typical. Often as not. You hear people talking about, Oh,
I understand China, I have been there thirty times already. Yeah, today,
have you lived there? B do you know a lot
(15:23):
of people? Have you been engaging with people in a
meaningful way? And see are you actually trying to do business?
Speaker 2 (15:31):
That's a great point I do know. I can share
from my own personal experience. I saw so many times
in meetings where they would ask a visiting executive, how
long are you here when you're going home? The shorter
the visit, the more they were let's just say, really
well treated. Oh it's tremendous to have you here where
wish you could stay longer, but you have to go.
Speaker 1 (15:54):
When will you be back?
Speaker 2 (15:55):
Everything was glorious, and then there's this sort of demarcation
point where oh, you're moving here, you're staying here, You're
going to work alongside with the rest of us. Ooh, okay,
that's a different story than you.
Speaker 4 (16:10):
Because a different story and at the other end of
the experience in China, generally speaking, Americans tend to go
home after two three four years, and in that.
Speaker 3 (16:25):
Two or three four year period they've actually learned quite
a bit, many of them anyway, and that should be
either a staying longer and taking advantage of those hard
earned lessons, or alternatively, they should overlap with their successor
and that successor should be open to learning about what
(16:49):
they themselves have learned in those three or years. But
usually what happens with American companies is the one person
goes home after two three four years, the next person
arrives and they're not particularly interested in hearing from their
predecessor everything they need to know because they well, here's
(17:12):
a good one. When my successor arrived, he told me
that he wasn't the least bit interested in what I
had to tell him. He already understood a place.
Speaker 1 (17:24):
Is that a verbatim? Thanks, Ken, But I'm really not interested.
Speaker 3 (17:28):
Yeah, exactly. And one of his first pronouncements was, you know,
it's just like the US, isn't it. If we follow
the rules, will be just fine. We don't need to
have a government relations function. Well, he sort of headed
upside down backwards, because following the rules is not what
takes you to success in China. First of all, the
(17:52):
rules are squishy and they're constantly evolving. What really is
important is how good is your relationship with the relevant
government entities. And if your relationship is good, you don't
have to pay as much attention to the rules, and
if you inadvertently break one or two, you'll be forgiven.
(18:14):
But if you have a bad relationship or no relationship
and you break rules, God help you.
Speaker 2 (18:22):
That's a really important point.
Speaker 1 (18:25):
Ken.
Speaker 2 (18:25):
So it isn't as if, oh, where's the trip wire?
If I break this rule, I'm going to be in
a lot of trouble. It's the focus our resources, our
attention should be paid to the people making the rules,
and then the rules themselves may be malleable at any
given moment.
Speaker 3 (18:41):
That's exactly right, That is exactly right.
Speaker 2 (18:44):
That's strange territory for us. It almost feels, oh, that's
not comfortable. Wait, I have to go do what with
the tax collector? I'm sorry, what what does that look like?
Speaker 3 (18:55):
Relationship yeah, Well, here's an interesting one. In the US
for most businesses, at least in my experience, if you
require a license, and we don't require a license for
every single business anyway, but if you require a license
in the US, it's generally one license. In banking my industry,
(19:20):
there's such a thing as a bank charter, and there's
one bank charter, and if you apply for it and
are granted, it may be hard to get it. But
if you apply for it and fulfill the requirements and
you get it, that enables you to do what other
banks are doing in China. First of all, if you
(19:44):
apply for it and you get it, and it's not
a question just to fulfilling the requirements because the requirements
are I think somewhat arbitrary and constantly changing in subject
to the judgment of the government, and that would grant
you the license if they feel like. Once you get
(20:04):
that license. In banking, all it entitles you to do
is call yourself a bank. It doesn't title you to
do anything. Every additional discrete activity in banking requires a
separate license. So you get your banking license, it enables
you to call yourself a bank. You want to have
a website, Oh, that requires a website license. You want
(20:27):
to take a deposit, Oh, that requires a deposit taking license.
You want to make a loan, Oh that requires a
loan making license. You want to exchange money, and the
list goes on. A bank like ours requires fifteen twenty licenses.
Speaker 2 (20:43):
What you're describing is so accurate, so consistent with my
own experience over twenty five years in China. And yet
when you when I relate these stories to people back
in America, they sound preposterous. It can't possibly be that
complicated or that difficult separate life licenses for every kind
of business behavior. You've got to be kidding me. No,
(21:05):
this can't be true. So question for you when you
are on your book tour, what's the hardest thing to
get across to your American audiences. What's the thing that
you say, I experienced it. It's unbelievable, but it's real.
What do you do when you're talking to Americans who
haven't been to China and you try to get this
point across or.
Speaker 1 (21:25):
Do you just gid like days dies? What is this
guy talking about?
Speaker 3 (21:29):
Yeah? Well, I think you've you got to do your
best to approach it with a sense of humor. Sounds
like you're whining, people are likely to doubt you. Oh,
then possibly be he just had a bad experience. That's
sound rapes. So you need to be above it all
(21:51):
and within a limit of humor, and then people are
more likely to believe. Won't it must be right. It's
hard to believe, but it must be right. Here's another
thing I want to add to that whole question about licenses, though.
This is something that's utterly astounding for a US banker.
If you don't have every license you need to operate
(22:14):
your bank, there is on occasion the possibility of renting
a license to do the thing you want to do
from another bank that already has that license. Now, that
just does not exist in the American banking system. If
I told the said I know I'm not allowed to
do this, but I'm renting a license from somebody else,
(22:35):
they will think I need a brain transport right now.
That was a real problem for us with our board
in the US, because there was one thing in particular
that we really needed to do to make our business
model work, we did not have a license to do it.
It was fairly apparent that the banking regulators were not
(22:59):
going to give us that life license. But then another
a Chinese bank came along and said, we know you
need this, we'll rent you ours. And I thought, well,
that's ridiculous, you can't do that. We talked to our
board about it, and they thought it was extremely ridiculous.
Speaker 2 (23:16):
Yes, yes, the board back in Santa Clara would say,
what in the world that we talk renting a license
from a competitor bank?
Speaker 3 (23:24):
What what exactly? But as the Chinese members of our board,
everybody on our board in China, it was a joint venture.
Everybody on our board was a quote unquote banking expert,
and there were four Chinese board members four US board members.
The Chinese board members said, first, you can do that.
(23:45):
Of course we knew that kind of thing in China.
And the American board members said, that's ridiculous, you can't
do that.
Speaker 2 (23:53):
We might need to come up with a new name.
License doesn't quite do it because you say license, Oh yeah,
go get the license.
Speaker 1 (24:01):
So a couple examples.
Speaker 2 (24:03):
One is byd in the auto industry, now a powerhouse.
The chairman bought a bankrupt company in Cheon twenty five
years ago for not much money, and everybody said, what
in the world are you doing buying a bankrupt automaker
in Chian with no prospect, no potent. I'm buying the
license to manufacture a car. It's worth gold. They're scarce,
(24:28):
and it's arbitrary. I may or may not be able
to find a license anywhere else. That's so an industry
after industry. It's these licenses are sort of like the
I don't know, there's beyond life. Their gold. They're the
source of oxygen for companies. Yeah, and that's where your
government comes in.
Speaker 3 (24:45):
Yeah. There's one other thing. Well, there's several other things,
But there's one other thing that I would make sure
that the person I was sending to China understood, and
that is China has a a view of the United
States that we wouldn't necessarily guess they would have. And
(25:08):
it's widely believed it's reinforced by more less constant propaganda,
including the education and the primary schools and the high
schools on into the universities. And if you don't understand that,
you're likely to misinterpret and disappoint, and that the particulars
(25:33):
of that are as follows. China believes people in China,
almost everybody in China believes, and maybe rightly so, that
China was the most advanced country on earth. For the
typical phrasing is five thousand years. Whether it's exactly five
(25:53):
thousand or not is another question.
Speaker 1 (25:56):
Most of human history.
Speaker 2 (25:57):
So what we're experiencing now, if China is not number one,
is in aberration in the minds of Chinese people.
Speaker 3 (26:03):
That's exactly right. Okay, they were the most advanced country
until the eighteen forties and the British instigated the Opium Wars,
which vanquished China and set them back, and they went
through what they now refer to as For a while
they called it one hundred years of humiliation. Now they're
(26:24):
more inclined to call it one hundred and fifty years
of humiliation. Having said that, their understanding of that has evolved.
It used to be they blamed it on the British.
Now they tend more to blame it on the Americans,
even though barely involved in the open forty. Now it's
(26:46):
the Americans who are a fault. Another aspect of that
is that, based on what children are taught in school,
the Americans were planning on invading China in the nineteen
fifty fifties and The result was that at the same
time that we I was in elementary school in the
(27:09):
nineteen fifties, we were all afraid that the Soviet Union
was going to invade us, and we had to have
these drills where we hid under our desks, as if
that would make any difference. Well, at the same time
we were hiding under our desks, our counterpart in China
was hiding under their desks because they were worried about
(27:30):
an American invasion and they believe that. So that's another
aspect of the narrative. So what's happened in the past
forty years since dungshaw Ping is that the Chinese Communist
Party has been an effect trading market access to American companies,
(27:50):
in other words, allowing American companies to come into China
and sell goods, and they've for technologlogy ledge.
Speaker 1 (28:02):
There's a reason why they.
Speaker 3 (28:03):
Expect you to forfeit your knowledge when you come over.
You want access to our market, you've got to give
us your knowledge. We tend to think of that as
intellectual property theft. They of it as what they deserve
because a they're granting us market access and B we
(28:23):
have a lot of guilt over the one hundred and
fifty years of humiliation, and that's this is proper retribution.
We're properly paying for what the damage that we did
in the eighteen hundreds. So if you don't understand that
narrative when you go to China, you will not understand
(28:48):
the Chinese Commist Party is treating you the way they're
treating you. And the final part of the narrative is
that when the Chinese Communist Party would have liberated China
in eighteen forty nine, the Chinese Commist Party were the
only ones that were able to correct the situation and
(29:10):
make up for the damage that had been done to
China by Western countries, in particular the US.
Speaker 2 (29:17):
So this makes for a very complex and potentially difficult
arena in which to do business. I returned to the
title of your book, which is the China business conundrum.
Conundrum some question or problem that's difficult to solve. Is
it solvable? What or is it just hanging there. It's
(29:38):
a tough place to do business and win.
Speaker 3 (29:41):
What's your view, Well, it's somewhere in between. I would
never be at one end or the other end. I
would not say that it's solvable because it's really not.
On the other end, I would not say that it's unsolvable,
meaning that you should never go to China and do
business because you can't solve this problem. It's somewhere in between.
(30:01):
We have to learn how to deal with the situation.
All the things that I've already mentioned this morning, you
have to learn how to deal with them. But we
have to because China is big and important, and you
can't ignore the existence of twenty five percent of the
world's population, particularly when they're as advanced as they are
(30:25):
and as productive as they are.
Speaker 2 (30:27):
Most recent numbers suggest one trillion dollar trade surplus in
twenty twenty four alone. China manufactures a third of all
products globally. That could go up to fifty percent by
twenty thirty. So China is a manufacturing machine the likes
of which the world's never seen before, never seen.
Speaker 3 (30:45):
Before in many technologies, they're at least as good as us,
if not better, not all, but in many so.
Speaker 2 (30:55):
From your experience and your knowledge first time experience, if
you're going to do it over again, or you're going
to go to China a new say next year, what
was the number one thing you do differently?
Speaker 3 (31:07):
I would number one. Well, there's number one and two
go together, so I'm gonna have two. One is prepare myself.
Speaker 2 (31:16):
How does one prepare push ups?
Speaker 3 (31:19):
Shit ups?
Speaker 1 (31:21):
Chinese language lessons.
Speaker 3 (31:23):
You know, the Chinese language language lessons would be good,
But preparing yourself is talking to enough people. And you
need to have talk to people who are both experienced
and willing to be honest. To be honest, yeah, because
many people go to China get screwed and then were
(31:46):
not admit it when they come back. So you need
to talk to enough people who are honest and experienced
so that you can prepare yourself. And the biggest thing
to prepare yours for, in my opinion, is understanding what
makes the CCP tick. They're proving that they're protecting the
(32:11):
people that there are an effect extracting from Americans what
Americans really should give give them to compensate for the
damage that Americans have done for one hundred and fifty years.
And they don't feel that win win is a sensible approach.
(32:34):
They feel that it's all about leverage. Might makes right,
and on any given day, if they have more leverage
than you do, it's almost as if they were to
be morally wrong not to use it to expect every
single thing they can from you. And if you have
(32:57):
more leverage than day they do on any given day,
you are a woosie. If you don't use it extract
something from them.
Speaker 1 (33:09):
They expect to say.
Speaker 3 (33:10):
Yes, yeah, it's a sign that you're either stupid or weak.
And I think that if you don't understand those things
and don't appreciate them, they're making a huge mistake and
you're it's a disservice to yourself. Naive naive Okay, And
by the way, contracts are just fun and games, meaning
(33:34):
if you really want to bring on lawyers and negotiate
a contract, contract, they'll do it with you just to
humor you. But they typically take the contract and throw
it in the wastebasket and then they just wait to
see how things evolve. And when they feel they have
more leverage than you do, they'll use.
Speaker 1 (33:55):
It and the advantage.
Speaker 3 (33:57):
Yes, yes, And if they think you have more leverage
than they do and you don't press the advantage, that
you must not be.
Speaker 2 (34:06):
Very smart, must be a dummy. We shouldn't be partners
with you.
Speaker 1 (34:11):
Hey, Ken.
Speaker 2 (34:12):
At the top of your book, there's a quote here
from Jim McGregor, author of One Billion Customers and one
of the guys out there who really really knows China.
He writes, I couldn't put down this engrossing tale of
Chinese government partners manipulating and milking Silicon Valley Bank to
create local competitors. What a great quote from one of
the most solid guys out there when it comes to China.
(34:34):
And it reminds me that in early in your book,
you wrote that if you've read one hundred and fifty
books on China to prepare you for China, about five
percent of those six I think you said were on target.
So first question, what do the other ninety five percent miss?
What's missing out? How are they getting it wrong so consistently?
Speaker 3 (34:57):
I would say that there are big problem. There are
two problems. One of them is that people either understand
China and don't describe it accurately, or they don't understand
it in the first place.
Speaker 1 (35:11):
Okay.
Speaker 3 (35:12):
The other thing I would say is that books ten
toward extremes, meaning if you set up a spectrum and
at one end where the so called panda hards, and
at the other end where the where the solled China bashers.
No matter which end of the spectrum you operate from,
(35:33):
you're not going to get it right. That is, if
you want to do business in China, you want to
be in the middle somewhere. You have to understand China
is a certain way. Don't take yourself into thinking it's
not or not going to change it. Nobody has ever
been successful in changing China. You're going to have to
(35:54):
understand it, accept it, and learn to work with it. Means,
first and foremost, understanding your leverage. If you don't have any,
don't go there. If you do have leverage, apply it
and seek to maintain it.
Speaker 2 (36:13):
That's deep wisdom right there. If you don't have leverage
in the first place, don't just go to China because
everyone else is going there and then you're just gonna
get beat up anyway. Yeah, yeah, I'm curious. I don't
think you cited the books in your book. I didn't
see the titles. But of those five percent of books,
is there one in particular that your go to you say, oh,
this person just nailed China.
Speaker 3 (36:34):
I reckon, Well, I still think Jim McGregor, even though
his book is it's not a brand new book, it's
been a own since what was it, two thousand and nine,
two thousand and eight, Yes, that that book does among
the best. Another book that is really good, but hardly
anybody reads anymore because it was written in nineteen eighty
(36:57):
two by Sinology Mit at the time a very famous man,
Lucian Pie, and the book is on Chinese negotiation styles.
If I read that book before I went to China,
and I said to myself, this guy is so jaded.
(37:18):
Nobody could possibly negotiate the way he describes the Chinese
purty negotiating in his book, I said, that can't possibly be.
He's just a jaded old man. And within a year
I experienced every single thing that he describes in the book.
Speaker 1 (37:35):
Wow, Lucien Pie. What's the name of the book.
Speaker 2 (37:38):
It's something like Chinese Negotiation Styles.
Speaker 3 (37:45):
Chinese Commercial Negotiation, because it is the official title. It's
a great book. It's only one hundred pages. And there
are a couple of other books that I would read.
There are obviously some I would read Kevin Rudd's newest
book on jen Ping, and I would read a Kissinger's
(38:05):
book called on China. And then there are a few
books that have come out just in the past couple
of years that I think give us insights not so
much into what you will experience when you go to China,
but there insights into the extent of which the Chinese
Communist Party is active in the United States and influences
(38:27):
the course of evavents in the United States, which most
people I think are unaware of. Having said that, I
think these books are really good books and that they're
accurate and objective. And one of those would be Bethany
Allen called Beijing.
Speaker 1 (38:45):
Rules, Yes, very good book.
Speaker 3 (38:47):
And another one I've forgotten the authors, but it's a
two author book and it's called Hidden Hand. Came out
about two three years ago.
Speaker 1 (38:58):
Hidden It's a very good book.
Speaker 3 (39:01):
And of course I'm missing some others, because there must
be a few others. But out of the at this
point it's more like one hundred and sixty books that
I've read about in the past twenty years, I think
that there still are only about five percent that I
(39:21):
would consider helpful.
Speaker 2 (39:24):
Well, let's absolutely add yours to your own list, because
it's a phenomenal book from start to finish. You write
in a way that's concise, direct to the point. People
get it, even if they haven't been to China. I
did want to pick up on the last point you made,
and I know, yeah, we're out of time. Maybe this
is a sequel, but you mentioned Chinese coming this way now.
(39:46):
So much of your book focus is naturally on your
experience inside China, but the reality is that China is
going global across industries and politically too. If you have
one piece of advice for the new administration coming in
with regards to how to handle confront whatever China, what
would that be.
Speaker 3 (40:07):
You know, this isn't going to sound very helpful, but
I would say, and it sounds, you know, a little
bit plain vanilla. But I don't think there are that
many people in our government that actually understand China. So
number one, understand China and don't swing to the extremes
(40:27):
that I think would be.
Speaker 2 (40:29):
The extremes meaning China, bad Guy, China Angel.
Speaker 1 (40:34):
No. Neither one is accurate, Okay.
Speaker 3 (40:36):
Neither one is accurate. Man. Neither one will enable us
to adequately work together with China. You don't want to
be unnecessarily.
Speaker 2 (40:50):
Aggressive, otherwise that feeds the narrative of one hundred and
fifty years of humiliation. And here they go again. They're
trying to put us down.
Speaker 3 (40:58):
Right, which you hear all the time now China, in China, China,
the US is trying to hold us back, trying to
keep us down. The other side of the coin is, though,
take off your roadse colored glasses, forget your win win,
understand your leverage, and calmly and with strength apply it.
Speaker 1 (41:25):
And don't get tired.
Speaker 3 (41:27):
And don't get tired.
Speaker 1 (41:28):
It's going to be it's going to be a battle.
Speaker 3 (41:30):
It's going to be a battle, and it wears you out.
Speaker 1 (41:35):
Ken.
Speaker 2 (41:36):
What's the easiest way to find your book? They should
immediately get it this week. Great way to start the
new year. Get smart about China because it's even if
you're not going to China, China's coming to your neighborhood
in one form or another very soon.
Speaker 3 (41:50):
I think the fastest way is Amazon, but it's beginning
to show up in bookstores now. It's only been out
for a short time. So if you prefer bookstores, go
to bookstores. If it's not there, it's always there on
Amazon on Amazon.
Speaker 1 (42:06):
Thank you, Ken.
Speaker 2 (42:18):
What sets Ken Wilcox apart from most people you talk
with on China is that he's candid, straight shooter, honest.
This is how things work, and he puts it in
terms that everybody can understand. Now, his executive assistant scolded him,
gave him a lecture and said, don't do that. Don't
(42:38):
be so transparent and honest and open. Don't say exactly
what you're thinking. That won't play here in China, but
we here in the West. Yeah, and we absolutely appreciate
and admire a straight shooter, especially smart ones. That's Ken Wilcox.
So here my three takeaways from our conversation. Really they're
just essentially highlighted Ken's own words. Number One, never forget
(43:03):
that China is a certain way. No one has ever
been successful changing China. You'll see what looks like an
opportunity to change things for the better, you'll want to
change it. Don't go there. Two Contracts, Ken reminds us,
are just fun in games. Right after the ink is dry,
the Chinese side will begin to track and measure leverage.
(43:25):
If they have more, they'll press the advantage. If you
have more, they'll expect you to do the same. Otherwise
you're just a dummy. It's all about leverage all the time.
Get ready for that grind. And three, leave your mental models.
What can cause mental models at home. Your experiences in
America or elsewhere in the world will not help you
(43:47):
predict behavior in China. Learn by doing. Yeah, keep an
open mind, but most important, pay attention to what they do,
not what they say. That make no judgments different cultures.
Watch what they do. Sounds like a lot of work, right, Well,
here's a way to think about it. Think about doing
business with the Chinese as a super new video game
(44:10):
that will test the limits of your brain power and
your patients and your imagination. The reality is in twenty
twenty five, we now must learn to play that video
game well or we risk getting tossed aside or run over. Hey,
I hope you enjoyed this episode of the Driving with
Done podcast. I certainly did. Thank you so much for joining.
(44:32):
We will see you next time on the Driving with
Done podcasts.
Speaker 1 (44:38):
Where you meet the experts creating the technologies that will
power tomorrow's cars electric autonomous software.
Speaker 2 (44:46):
To find this is a Driving with Done podcast.
Speaker 1 (44:49):
Thank you for joining this episode of the Driving with
Done podcast.
Speaker 2 (44:53):
To connect with Michael Donn, visit Doneinsights dot.
Speaker 3 (44:56):
Com or find Michael on x or LinkedIn.
Speaker 2 (45:00):
This is the Driving Done Podcast.
Where top executives and crazy entrepreneurs gathered to talk about
the future of electric vehicles.
Speaker 2 (00:09):
This is the Driving with Done podcast. Hello and welcome
to the Driving with Done podcast. I'm your host, Michael Dunn.
Such a tremendous start to the year, so much ground
to cover, so let me be brief to the point
with a series of quick takes. Number one, Happy Lunar,
New Year today in Chinese Kuila Wan shirt Rui Number
(00:34):
two cees Were you there? Zeker, that subsidiary of Jili,
the all Electric took center stage amazing products, the zero
zero one sedan starting at fifty thousand dollars, the zero
zero nine luxury van one hundred and ten thousand dollars,
not apologizing about the price. Why not because the quality
(00:57):
is there. And then there was a custom built van
to developed for Weaimo Robotaxi fleets. That's right, Zeker and
Weimo have been co developing this. Think of it as
sort of like the modern version of a VW van
Swedish design, Chinese manufacturing American brains in one package. The
(01:17):
idea is that the van would be manufacturing in China,
ship to the United States. Weimo would then wrap it
with its autonomous vehicle technologies and deploy this vehicle in
the United States and around the world. Now, I asked
about one hundred percent tariffs and the ban on Chinese hardware.
People at Zeker remained confident. They said their target was
(01:38):
twenty twenty six and they're sticking with it. Hmm, how
would they get around the terrorits Maybe there's a plant
in South Carolina that currently builds vovos that might just
add a Zeker product to the line. Watch that space
next up. Last week I was in New Orleans for
(02:00):
the annual National Automotive.
Speaker 1 (02:02):
Dealers Association Conference.
Speaker 2 (02:04):
The big banner at the front door said the most
important auto event of the year. Dealers there, the optimism
was just amazing. Dealers were nothing short of jubilant about
the prospect of going back to just sell. Let's sell
our large gasoline powered SUVs and trucks that bring those
giant profits. There was also a lot of curiosity about China.
(02:28):
Gave a keynote there called China Everywhere all at once.
Dealers in the crop probably five hundred standing room only
intensely curious, but also understandably a little bit in denial
because they did not see cars because they do not
see Chinese cars on American roads. Well, now is not
the time to be complacent, because if you step outside
(02:50):
the United States, from Mexico to Brazil, South Africa, to Israel,
to the UK, Spain, Australia, Yeah, a deluge of Chinese
six million cars exported from China to global markets everywhere,
essentially except to the United States and Canada. So cees NADA,
(03:12):
Happy New Year. As we head into twenty twenty five,
here's the big picture. China is coming to your neighborhood.
Whether you put the welcome sign up or not, They're coming.
One in four exhibitors at CS were from China. China
exported six million cars last year, up from just a
(03:32):
million in twenty twenty. BYD's building plants in Thailand, Brazil, Hungary.
Oh you got the picture. After my keynote at NADA
in New Orleans, many people came up and asked, how
do we get smarter on China now? Well, I said,
talk to people who have been there in the trenches
and make sure that they're honest about the experience in
(03:52):
that regard. One of the best people on the planet
to talk to is my good friend Ken Wilcox, former
chairman and CEO of the Civil Valley Bank, Can also
ran the SVB Joint Venture bank in Shanghai for several years.
He's been there, He's done it. Now. He's written a
tremendous new book entitled The Chinese Business Conundrum, ensuring that
(04:14):
win win doesn't mean Western companies lose twice. Ken get
straight to the point with practical and smart advice on
what to know before you go, that is, before you
engage in business inside China or with Chinese companies globally.
Ken Willcox, author The Chinese Business Conundrum. Stepping with confidence
(04:36):
into twenty twenty five with the Driving with Done podcast.
Ken Willcox, Welcome to the Driving with Done podcast.
Speaker 3 (04:53):
Well, thank you very much. Always a pleasure.
Speaker 2 (04:55):
Imagine for me for us, Ken, that you get a
phone call today from a protege at SVB Silicon Valley
Bank and she's headed to China next week, new assignment,
and she asks you, what's the biggest difference between what
I'm going to experience in Shanghai from what I know
here in cozy Santa Clara, California.
Speaker 1 (05:15):
Your answer, Well, the.
Speaker 3 (05:16):
First thing that's wrong with that question is that there
are not only one or two things. There are several things,
and my experience at least are in my perception. And
I've been in a lot of different countries over time.
China is more different from US than almost any other
country that I've been in. So I would list a
(05:38):
whole handful of things, and I'll just touch on them
briefly here. The first thing is the role of government. Government,
and China can control anything it feels like controlling. It
doesn't mean it controls everything. It just means it can.
Speaker 2 (05:54):
It can control that. That's an important distinction. Some people feel, oh,
communist system, one party, they dictate everything everywhere. No, not necessarily,
but they reserve the right to if they so wish.
Speaker 3 (06:06):
That's exactly right. And on the other side of the coin,
a number of people go to China. They are trying
to establish a business that the government isn't particularly concerned about.
The government never bothers them. They go home years later
and they say to themselves, I don't know why people
complain about the CCP. They never bothered me at all.
But of course they were doing something that the CCP
(06:28):
considers somewhat.
Speaker 1 (06:29):
Irrelevant, like hamburgers.
Speaker 3 (06:31):
Yeah, hamburgers are The classic example in my mind was
this guy that was making barbecue equipment, you know, like
spatulas and tongs.
Speaker 1 (06:43):
He's loving things in China.
Speaker 2 (06:45):
Low cost manufacturing, nice profit margin, doesn't have anybody from
the government coming to pay visits exactly, okay.
Speaker 3 (06:53):
And other people have a totally different experience. So there's
not just one potential experience in China. But if you're
doing something that the government really cares about, rest assured
they will be your partner and they will be in control.
Speaker 2 (07:09):
Now, when you say partner, does that mean their equity partner,
they're jointly owning companies with you, or it does?
Speaker 1 (07:15):
It take many forms?
Speaker 3 (07:17):
Takes many forms. It takes many forms. I think Elon
Musk considers himself somewhat of a genius right now because
he's not in a joint venture, but he's being controlled
whether he or not. And I suspect he knows that.
I doubt he'll admit it.
Speaker 2 (07:34):
So that's the single biggest that's your number one. At
least you have a whole list of these. But number
one is know that the government is in charge in China, yes, okay.
Speaker 3 (07:44):
Number two would be the style of negotiation because many
of us, not all of us, Trump being a notable exception.
Many of us are used to a sort of win
win style of negotiation. Of Chinese on average, and particularly
the Chinese Communist Party is onto that they know. That's
(08:05):
what they like to we like to hear, so they'll
talk all day long about win win, but it is
not a win win approach. Their approach is almost always
based on leverage. Whoever has the leverage takes the whole.
Speaker 1 (08:23):
Pot, win or take all.
Speaker 2 (08:25):
It's in your subtitle of your book, which I want
to come now back to Wait, hold on, we'll get
back to. It's in the subtitle ensure win win doesn't
mean Western companies lose twice exactly exactly.
Speaker 3 (08:37):
And we go there often as not the majority of
us uh huh belief that if we just treat the
other party fairly. In other words, we seek a solution
that satisfies both that everything will come out just fine.
But it never works that way.
Speaker 2 (08:55):
To confirm that, you're reminding me the director at when
I was at JD. Power, my director of the Beijing office,
very very impressive woman named FRIEDA.
Speaker 1 (09:04):
Wang.
Speaker 2 (09:05):
She went for studies at Stanford sort of six week course,
came back and said, I just am so confused because
at Stanford they kept telling us whin win is the
future of negotiation globally, that's how it's going to work.
And she raised her hand in class and told the professor,
but you've never been to China. I'm Chinese and this no, no,
(09:26):
it doesn't translate back in China.
Speaker 3 (09:30):
No, in China, it's all about leverage.
Speaker 2 (09:32):
Okay, so big government, government in charge, leverages center crucial.
Speaker 1 (09:39):
What else?
Speaker 3 (09:40):
Communication style is a big deal. It's radically different from
our own. And the best way I can illustrate that
is by mentioning something that my assistant said to me
about six months into my stay. One day, she just
threw her arms up in despair and she said to me,
with a parent disgust in her voice, Ken, you are
(10:03):
never going to succeed here. You have a bad habit.
You say what you mean, and you mean what you say.
We don't do that. In other words, in China, what
people do is more important than what they say. Don't
(10:24):
hang on to their words, watch their actions.
Speaker 2 (10:29):
So to what extent should we discount their words? It
gets tricky there because we say, oh, we can't trust
that person, but then we oh, so how would you?
How should she handle that when she gets there and
she hears something that's different from what they do?
Speaker 3 (10:45):
Oh she I think she should handle it the way
I handled it, and that is I don't trust myself
to interpret what they really mean. So, because I didn't
grow up there, I'm not culturally attuned, least not sufficiently.
So I took because I don't speak the language, certainly
(11:05):
not well enough. I speak at about a ten year
old level. I always took with me two interpreters, two translators,
and they would trade off their roles. One was always
doing the actual in the moment translation and the other
was taking notes. Afterwards, he or she could tell me
(11:27):
what they really meant, okay, And that I found to
be pretty effective. At least it was a lot better
than being confused on my own.
Speaker 1 (11:39):
Ken.
Speaker 2 (11:40):
At this juncture, your former protege is thinking twice about
her trip to China next week, thinking what am I
getting into?
Speaker 3 (11:47):
Well, if she's why she will think twice. The truth
is we need to engage with China. We have to
engage with China. We will engage with China, but sadly
most of us are unprepared to do so. Effectively.
Speaker 2 (12:03):
Can you have written a tremendous book. I say tremendous
because it's authentic, it's courageous, and it's direct, and it's
a book that many other people would not dare to write.
In it you talk about here, I'm reading one night
and it says Western companies entering China should be wary.
(12:24):
How is this different from entering any other market in
the world?
Speaker 1 (12:28):
Why weary?
Speaker 3 (12:30):
Wary? Because let's go back a stef Okay, how do
we face new situations as human beings? We pretty much
all use the same method We carry around in the
backs of our heads, something that I call mental models.
They're based on our experience and they help us predict outcomes.
(12:54):
You know. The obvious one is you touch a stove
that's hot and you burn your finger. You carry that
out around the back of your mind. The next time
you see a stove, particularly if it looks red hot,
you don't touch it because you know that's gonna hurt.
So we take our mental models everywhere we go, and
if we're going to a place like the UK or
(13:17):
Germany and apply those mental models. In other words, we
see what people are doing, we interpret it. They usually
sort of work, not always, but sort of. My contention,
based on my own experience, is that our mental models
don't help us that much. In China, we build a
whole new set of mental models. So the best way
(13:39):
to go to China is to go there and without
trying to do business for a year or two and
acclimate yourself. Meete as many people as you can, try
to understand what they mean when they say things, and
learn to interpret so that you can then maybe in
a year or two, set out to actually do business
(14:02):
with and make fewer mistakes.
Speaker 2 (14:05):
You didn't have that opportunity. You You went right in
to let's go action. Can you take us back to
your very first impressions of China without this two years
of getting acclimated so you allow, Yeah.
Speaker 3 (14:19):
My launch pad was pretty much the same as most people's.
In other words, I started going to China on a
regular basis, you know, a couple of times a year,
for a couple of weeks each time in the year
two thousand. So by the time we I actually moved
there ten years later, I thought I knew exactly what
(14:41):
I was doing. After all, I'd been there around twenty times,
you know, racking up about forty weeks worth of visits.
It's almost a year forty weeks, right, So I figured
I pretty much knew what I was doing. But I
was really kidding myself because the truth is, living there
(15:01):
and getting into the trench shoes is totally different from visiting.
And I think that's that's something that's typical. My experience
is typical. Often as not. You hear people talking about, Oh,
I understand China, I have been there thirty times already. Yeah, today,
have you lived there? B do you know a lot
(15:23):
of people? Have you been engaging with people in a
meaningful way? And see are you actually trying to do business?
Speaker 2 (15:31):
That's a great point I do know. I can share
from my own personal experience. I saw so many times
in meetings where they would ask a visiting executive, how
long are you here when you're going home? The shorter
the visit, the more they were let's just say, really
well treated. Oh it's tremendous to have you here where
wish you could stay longer, but you have to go.
Speaker 1 (15:54):
When will you be back?
Speaker 2 (15:55):
Everything was glorious, and then there's this sort of demarcation
point where oh, you're moving here, you're staying here, You're
going to work alongside with the rest of us. Ooh, okay,
that's a different story than you.
Speaker 4 (16:10):
Because a different story and at the other end of
the experience in China, generally speaking, Americans tend to go
home after two three four years, and in that.
Speaker 3 (16:25):
Two or three four year period they've actually learned quite
a bit, many of them anyway, and that should be
either a staying longer and taking advantage of those hard
earned lessons, or alternatively, they should overlap with their successor
and that successor should be open to learning about what
(16:49):
they themselves have learned in those three or years. But
usually what happens with American companies is the one person
goes home after two three four years, the next person
arrives and they're not particularly interested in hearing from their
predecessor everything they need to know because they well, here's
(17:12):
a good one. When my successor arrived, he told me
that he wasn't the least bit interested in what I
had to tell him. He already understood a place.
Speaker 1 (17:24):
Is that a verbatim? Thanks, Ken, But I'm really not interested.
Speaker 3 (17:28):
Yeah, exactly. And one of his first pronouncements was, you know,
it's just like the US, isn't it. If we follow
the rules, will be just fine. We don't need to
have a government relations function. Well, he sort of headed
upside down backwards, because following the rules is not what
takes you to success in China. First of all, the
(17:52):
rules are squishy and they're constantly evolving. What really is
important is how good is your relationship with the relevant
government entities. And if your relationship is good, you don't
have to pay as much attention to the rules, and
if you inadvertently break one or two, you'll be forgiven.
(18:14):
But if you have a bad relationship or no relationship
and you break rules, God help you.
Speaker 2 (18:22):
That's a really important point.
Speaker 1 (18:25):
Ken.
Speaker 2 (18:25):
So it isn't as if, oh, where's the trip wire?
If I break this rule, I'm going to be in
a lot of trouble. It's the focus our resources, our
attention should be paid to the people making the rules,
and then the rules themselves may be malleable at any
given moment.
Speaker 3 (18:41):
That's exactly right, That is exactly right.
Speaker 2 (18:44):
That's strange territory for us. It almost feels, oh, that's
not comfortable. Wait, I have to go do what with
the tax collector? I'm sorry, what what does that look like?
Speaker 3 (18:55):
Relationship yeah, Well, here's an interesting one. In the US
for most businesses, at least in my experience, if you
require a license, and we don't require a license for
every single business anyway, but if you require a license
in the US, it's generally one license. In banking my industry,
(19:20):
there's such a thing as a bank charter, and there's
one bank charter, and if you apply for it and
are granted, it may be hard to get it. But
if you apply for it and fulfill the requirements and
you get it, that enables you to do what other
banks are doing in China. First of all, if you
(19:44):
apply for it and you get it, and it's not
a question just to fulfilling the requirements because the requirements
are I think somewhat arbitrary and constantly changing in subject
to the judgment of the government, and that would grant
you the license if they feel like. Once you get
(20:04):
that license. In banking, all it entitles you to do
is call yourself a bank. It doesn't title you to
do anything. Every additional discrete activity in banking requires a
separate license. So you get your banking license, it enables
you to call yourself a bank. You want to have
a website, Oh, that requires a website license. You want
(20:27):
to take a deposit, Oh, that requires a deposit taking license.
You want to make a loan, Oh that requires a
loan making license. You want to exchange money, and the
list goes on. A bank like ours requires fifteen twenty licenses.
Speaker 2 (20:43):
What you're describing is so accurate, so consistent with my
own experience over twenty five years in China. And yet
when you when I relate these stories to people back
in America, they sound preposterous. It can't possibly be that
complicated or that difficult separate life licenses for every kind
of business behavior. You've got to be kidding me. No,
(21:05):
this can't be true. So question for you when you
are on your book tour, what's the hardest thing to
get across to your American audiences. What's the thing that
you say, I experienced it. It's unbelievable, but it's real.
What do you do when you're talking to Americans who
haven't been to China and you try to get this
point across or.
Speaker 1 (21:25):
Do you just gid like days dies? What is this
guy talking about?
Speaker 3 (21:29):
Yeah? Well, I think you've you got to do your
best to approach it with a sense of humor. Sounds
like you're whining, people are likely to doubt you. Oh,
then possibly be he just had a bad experience. That's
sound rapes. So you need to be above it all
(21:51):
and within a limit of humor, and then people are
more likely to believe. Won't it must be right. It's
hard to believe, but it must be right. Here's another
thing I want to add to that whole question about licenses, though.
This is something that's utterly astounding for a US banker.
If you don't have every license you need to operate
(22:14):
your bank, there is on occasion the possibility of renting
a license to do the thing you want to do
from another bank that already has that license. Now, that
just does not exist in the American banking system. If
I told the said I know I'm not allowed to
do this, but I'm renting a license from somebody else,
(22:35):
they will think I need a brain transport right now.
That was a real problem for us with our board
in the US, because there was one thing in particular
that we really needed to do to make our business
model work, we did not have a license to do it.
It was fairly apparent that the banking regulators were not
(22:59):
going to give us that life license. But then another
a Chinese bank came along and said, we know you
need this, we'll rent you ours. And I thought, well,
that's ridiculous, you can't do that. We talked to our
board about it, and they thought it was extremely ridiculous.
Speaker 2 (23:16):
Yes, yes, the board back in Santa Clara would say,
what in the world that we talk renting a license
from a competitor bank?
Speaker 3 (23:24):
What what exactly? But as the Chinese members of our board,
everybody on our board in China, it was a joint venture.
Everybody on our board was a quote unquote banking expert,
and there were four Chinese board members four US board members.
The Chinese board members said, first, you can do that.
(23:45):
Of course we knew that kind of thing in China.
And the American board members said, that's ridiculous, you can't
do that.
Speaker 2 (23:53):
We might need to come up with a new name.
License doesn't quite do it because you say license, Oh yeah,
go get the license.
Speaker 1 (24:01):
So a couple examples.
Speaker 2 (24:03):
One is byd in the auto industry, now a powerhouse.
The chairman bought a bankrupt company in Cheon twenty five
years ago for not much money, and everybody said, what
in the world are you doing buying a bankrupt automaker
in Chian with no prospect, no potent. I'm buying the
license to manufacture a car. It's worth gold. They're scarce,
(24:28):
and it's arbitrary. I may or may not be able
to find a license anywhere else. That's so an industry
after industry. It's these licenses are sort of like the
I don't know, there's beyond life. Their gold. They're the
source of oxygen for companies. Yeah, and that's where your
government comes in.
Speaker 3 (24:45):
Yeah. There's one other thing. Well, there's several other things,
But there's one other thing that I would make sure
that the person I was sending to China understood, and
that is China has a a view of the United
States that we wouldn't necessarily guess they would have. And
(25:08):
it's widely believed it's reinforced by more less constant propaganda,
including the education and the primary schools and the high
schools on into the universities. And if you don't understand that,
you're likely to misinterpret and disappoint, and that the particulars
(25:33):
of that are as follows. China believes people in China,
almost everybody in China believes, and maybe rightly so, that
China was the most advanced country on earth. For the
typical phrasing is five thousand years. Whether it's exactly five
(25:53):
thousand or not is another question.
Speaker 1 (25:56):
Most of human history.
Speaker 2 (25:57):
So what we're experiencing now, if China is not number one,
is in aberration in the minds of Chinese people.
Speaker 3 (26:03):
That's exactly right. Okay, they were the most advanced country
until the eighteen forties and the British instigated the Opium Wars,
which vanquished China and set them back, and they went
through what they now refer to as For a while
they called it one hundred years of humiliation. Now they're
(26:24):
more inclined to call it one hundred and fifty years
of humiliation. Having said that, their understanding of that has evolved.
It used to be they blamed it on the British.
Now they tend more to blame it on the Americans,
even though barely involved in the open forty. Now it's
(26:46):
the Americans who are a fault. Another aspect of that
is that, based on what children are taught in school,
the Americans were planning on invading China in the nineteen
fifty fifties and The result was that at the same
time that we I was in elementary school in the
(27:09):
nineteen fifties, we were all afraid that the Soviet Union
was going to invade us, and we had to have
these drills where we hid under our desks, as if
that would make any difference. Well, at the same time
we were hiding under our desks, our counterpart in China
was hiding under their desks because they were worried about
(27:30):
an American invasion and they believe that. So that's another
aspect of the narrative. So what's happened in the past
forty years since dungshaw Ping is that the Chinese Communist
Party has been an effect trading market access to American companies,
(27:50):
in other words, allowing American companies to come into China
and sell goods, and they've for technologlogy ledge.
Speaker 1 (28:02):
There's a reason why they.
Speaker 3 (28:03):
Expect you to forfeit your knowledge when you come over.
You want access to our market, you've got to give
us your knowledge. We tend to think of that as
intellectual property theft. They of it as what they deserve
because a they're granting us market access and B we
(28:23):
have a lot of guilt over the one hundred and
fifty years of humiliation, and that's this is proper retribution.
We're properly paying for what the damage that we did
in the eighteen hundreds. So if you don't understand that
narrative when you go to China, you will not understand
(28:48):
the Chinese Commist Party is treating you the way they're
treating you. And the final part of the narrative is
that when the Chinese Communist Party would have liberated China
in eighteen forty nine, the Chinese Commist Party were the
only ones that were able to correct the situation and
(29:10):
make up for the damage that had been done to
China by Western countries, in particular the US.
Speaker 2 (29:17):
So this makes for a very complex and potentially difficult
arena in which to do business. I returned to the
title of your book, which is the China business conundrum.
Conundrum some question or problem that's difficult to solve. Is
it solvable? What or is it just hanging there. It's
(29:38):
a tough place to do business and win.
Speaker 3 (29:41):
What's your view, Well, it's somewhere in between. I would
never be at one end or the other end. I
would not say that it's solvable because it's really not.
On the other end, I would not say that it's unsolvable,
meaning that you should never go to China and do
business because you can't solve this problem. It's somewhere in between.
(30:01):
We have to learn how to deal with the situation.
All the things that I've already mentioned this morning, you
have to learn how to deal with them. But we
have to because China is big and important, and you
can't ignore the existence of twenty five percent of the
world's population, particularly when they're as advanced as they are
(30:25):
and as productive as they are.
Speaker 2 (30:27):
Most recent numbers suggest one trillion dollar trade surplus in
twenty twenty four alone. China manufactures a third of all
products globally. That could go up to fifty percent by
twenty thirty. So China is a manufacturing machine the likes
of which the world's never seen before, never seen.
Speaker 3 (30:45):
Before in many technologies, they're at least as good as us,
if not better, not all, but in many so.
Speaker 2 (30:55):
From your experience and your knowledge first time experience, if
you're going to do it over again, or you're going
to go to China a new say next year, what
was the number one thing you do differently?
Speaker 3 (31:07):
I would number one. Well, there's number one and two
go together, so I'm gonna have two. One is prepare myself.
Speaker 2 (31:16):
How does one prepare push ups?
Speaker 3 (31:19):
Shit ups?
Speaker 1 (31:21):
Chinese language lessons.
Speaker 3 (31:23):
You know, the Chinese language language lessons would be good,
But preparing yourself is talking to enough people. And you
need to have talk to people who are both experienced
and willing to be honest. To be honest, yeah, because
many people go to China get screwed and then were
(31:46):
not admit it when they come back. So you need
to talk to enough people who are honest and experienced
so that you can prepare yourself. And the biggest thing
to prepare yours for, in my opinion, is understanding what
makes the CCP tick. They're proving that they're protecting the
(32:11):
people that there are an effect extracting from Americans what
Americans really should give give them to compensate for the
damage that Americans have done for one hundred and fifty years.
And they don't feel that win win is a sensible approach.
(32:34):
They feel that it's all about leverage. Might makes right,
and on any given day, if they have more leverage
than you do, it's almost as if they were to
be morally wrong not to use it to expect every
single thing they can from you. And if you have
(32:57):
more leverage than day they do on any given day,
you are a woosie. If you don't use it extract
something from them.
Speaker 1 (33:09):
They expect to say.
Speaker 3 (33:10):
Yes, yeah, it's a sign that you're either stupid or weak.
And I think that if you don't understand those things
and don't appreciate them, they're making a huge mistake and
you're it's a disservice to yourself. Naive naive Okay, And
by the way, contracts are just fun and games, meaning
(33:34):
if you really want to bring on lawyers and negotiate
a contract, contract, they'll do it with you just to
humor you. But they typically take the contract and throw
it in the wastebasket and then they just wait to
see how things evolve. And when they feel they have
more leverage than you do, they'll use.
Speaker 1 (33:55):
It and the advantage.
Speaker 3 (33:57):
Yes, yes, And if they think you have more leverage
than they do and you don't press the advantage, that
you must not be.
Speaker 2 (34:06):
Very smart, must be a dummy. We shouldn't be partners
with you.
Speaker 1 (34:11):
Hey, Ken.
Speaker 2 (34:12):
At the top of your book, there's a quote here
from Jim McGregor, author of One Billion Customers and one
of the guys out there who really really knows China.
He writes, I couldn't put down this engrossing tale of
Chinese government partners manipulating and milking Silicon Valley Bank to
create local competitors. What a great quote from one of
the most solid guys out there when it comes to China.
(34:34):
And it reminds me that in early in your book,
you wrote that if you've read one hundred and fifty
books on China to prepare you for China, about five
percent of those six I think you said were on target.
So first question, what do the other ninety five percent miss?
What's missing out? How are they getting it wrong so consistently?
Speaker 3 (34:57):
I would say that there are big problem. There are
two problems. One of them is that people either understand
China and don't describe it accurately, or they don't understand
it in the first place.
Speaker 1 (35:11):
Okay.
Speaker 3 (35:12):
The other thing I would say is that books ten
toward extremes, meaning if you set up a spectrum and
at one end where the so called panda hards, and
at the other end where the where the solled China bashers.
No matter which end of the spectrum you operate from,
(35:33):
you're not going to get it right. That is, if
you want to do business in China, you want to
be in the middle somewhere. You have to understand China
is a certain way. Don't take yourself into thinking it's
not or not going to change it. Nobody has ever
been successful in changing China. You're going to have to
(35:54):
understand it, accept it, and learn to work with it. Means,
first and foremost, understanding your leverage. If you don't have any,
don't go there. If you do have leverage, apply it
and seek to maintain it.
Speaker 2 (36:13):
That's deep wisdom right there. If you don't have leverage
in the first place, don't just go to China because
everyone else is going there and then you're just gonna
get beat up anyway. Yeah, yeah, I'm curious. I don't
think you cited the books in your book. I didn't
see the titles. But of those five percent of books,
is there one in particular that your go to you say, oh,
this person just nailed China.
Speaker 3 (36:34):
I reckon, Well, I still think Jim McGregor, even though
his book is it's not a brand new book, it's
been a own since what was it, two thousand and nine,
two thousand and eight, Yes, that that book does among
the best. Another book that is really good, but hardly
anybody reads anymore because it was written in nineteen eighty
(36:57):
two by Sinology Mit at the time a very famous man,
Lucian Pie, and the book is on Chinese negotiation styles.
If I read that book before I went to China,
and I said to myself, this guy is so jaded.
(37:18):
Nobody could possibly negotiate the way he describes the Chinese
purty negotiating in his book, I said, that can't possibly be.
He's just a jaded old man. And within a year
I experienced every single thing that he describes in the book.
Speaker 1 (37:35):
Wow, Lucien Pie. What's the name of the book.
Speaker 2 (37:38):
It's something like Chinese Negotiation Styles.
Speaker 3 (37:45):
Chinese Commercial Negotiation, because it is the official title. It's
a great book. It's only one hundred pages. And there
are a couple of other books that I would read.
There are obviously some I would read Kevin Rudd's newest
book on jen Ping, and I would read a Kissinger's
(38:05):
book called on China. And then there are a few
books that have come out just in the past couple
of years that I think give us insights not so
much into what you will experience when you go to China,
but there insights into the extent of which the Chinese
Communist Party is active in the United States and influences
(38:27):
the course of evavents in the United States, which most
people I think are unaware of. Having said that, I
think these books are really good books and that they're
accurate and objective. And one of those would be Bethany
Allen called Beijing.
Speaker 1 (38:45):
Rules, Yes, very good book.
Speaker 3 (38:47):
And another one I've forgotten the authors, but it's a
two author book and it's called Hidden Hand. Came out
about two three years ago.
Speaker 1 (38:58):
Hidden It's a very good book.
Speaker 3 (39:01):
And of course I'm missing some others, because there must
be a few others. But out of the at this
point it's more like one hundred and sixty books that
I've read about in the past twenty years, I think
that there still are only about five percent that I
(39:21):
would consider helpful.
Speaker 2 (39:24):
Well, let's absolutely add yours to your own list, because
it's a phenomenal book from start to finish. You write
in a way that's concise, direct to the point. People
get it, even if they haven't been to China. I
did want to pick up on the last point you made,
and I know, yeah, we're out of time. Maybe this
is a sequel, but you mentioned Chinese coming this way now.
(39:46):
So much of your book focus is naturally on your
experience inside China, but the reality is that China is
going global across industries and politically too. If you have
one piece of advice for the new administration coming in
with regards to how to handle confront whatever China, what
would that be.
Speaker 3 (40:07):
You know, this isn't going to sound very helpful, but
I would say, and it sounds, you know, a little
bit plain vanilla. But I don't think there are that
many people in our government that actually understand China. So
number one, understand China and don't swing to the extremes
(40:27):
that I think would be.
Speaker 2 (40:29):
The extremes meaning China, bad Guy, China Angel.
Speaker 1 (40:34):
No. Neither one is accurate, Okay.
Speaker 3 (40:36):
Neither one is accurate. Man. Neither one will enable us
to adequately work together with China. You don't want to
be unnecessarily.
Speaker 2 (40:50):
Aggressive, otherwise that feeds the narrative of one hundred and
fifty years of humiliation. And here they go again. They're
trying to put us down.
Speaker 3 (40:58):
Right, which you hear all the time now China, in China, China,
the US is trying to hold us back, trying to
keep us down. The other side of the coin is, though,
take off your roadse colored glasses, forget your win win,
understand your leverage, and calmly and with strength apply it.
Speaker 1 (41:25):
And don't get tired.
Speaker 3 (41:27):
And don't get tired.
Speaker 1 (41:28):
It's going to be it's going to be a battle.
Speaker 3 (41:30):
It's going to be a battle, and it wears you out.
Speaker 1 (41:35):
Ken.
Speaker 2 (41:36):
What's the easiest way to find your book? They should
immediately get it this week. Great way to start the
new year. Get smart about China because it's even if
you're not going to China, China's coming to your neighborhood
in one form or another very soon.
Speaker 3 (41:50):
I think the fastest way is Amazon, but it's beginning
to show up in bookstores now. It's only been out
for a short time. So if you prefer bookstores, go
to bookstores. If it's not there, it's always there on
Amazon on Amazon.
Speaker 1 (42:06):
Thank you, Ken.
Speaker 2 (42:18):
What sets Ken Wilcox apart from most people you talk
with on China is that he's candid, straight shooter, honest.
This is how things work, and he puts it in
terms that everybody can understand. Now, his executive assistant scolded him,
gave him a lecture and said, don't do that. Don't
(42:38):
be so transparent and honest and open. Don't say exactly
what you're thinking. That won't play here in China, but
we here in the West. Yeah, and we absolutely appreciate
and admire a straight shooter, especially smart ones. That's Ken Wilcox.
So here my three takeaways from our conversation. Really they're
just essentially highlighted Ken's own words. Number One, never forget
(43:03):
that China is a certain way. No one has ever
been successful changing China. You'll see what looks like an
opportunity to change things for the better, you'll want to
change it. Don't go there. Two Contracts, Ken reminds us,
are just fun in games. Right after the ink is dry,
the Chinese side will begin to track and measure leverage.
(43:25):
If they have more, they'll press the advantage. If you
have more, they'll expect you to do the same. Otherwise
you're just a dummy. It's all about leverage all the time.
Get ready for that grind. And three, leave your mental models.
What can cause mental models at home. Your experiences in
America or elsewhere in the world will not help you
(43:47):
predict behavior in China. Learn by doing. Yeah, keep an
open mind, but most important, pay attention to what they do,
not what they say. That make no judgments different cultures.
Watch what they do. Sounds like a lot of work, right, Well,
here's a way to think about it. Think about doing
business with the Chinese as a super new video game
(44:10):
that will test the limits of your brain power and
your patients and your imagination. The reality is in twenty
twenty five, we now must learn to play that video
game well or we risk getting tossed aside or run over. Hey,
I hope you enjoyed this episode of the Driving with
Done podcast. I certainly did. Thank you so much for joining.
(44:32):
We will see you next time on the Driving with
Done podcasts.
Speaker 1 (44:38):
Where you meet the experts creating the technologies that will
power tomorrow's cars electric autonomous software.
Speaker 2 (44:46):
To find this is a Driving with Done podcast.
Speaker 1 (44:49):
Thank you for joining this episode of the Driving with
Done podcast.
Speaker 2 (44:53):
To connect with Michael Donn, visit Doneinsights dot.
Speaker 3 (44:56):
Com or find Michael on x or LinkedIn.
Speaker 2 (45:00):
This is the Driving Done Podcast.
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