What to make of startup mania in China
The new issue of Bloomberg Businessweek features an article about the 2015 boom in initial public stock offerings on China's stock market. (The article I read in hard copy appears in the February 23 issue. This doesn't seem to be available online, but a video discussion of the topic is.) During the first six weeks of this year, IPO's in China created two dozen new (dollar) billionaires!
With the lure of instant wealth these stock market offerings dangle, it is hardly surprising that startup fever has spread to China.
Almost two years ago, I wrote a blog post about the amazing spread of a startup culture among students in the U.S., who are more and more rejecting the idea of working in large organizations (including, but not limited to, government organizations) in favor of starting something of their own. Now George Chen, the savvy financial columnist for Hong Kong's South China Morning Post, has just written a piece called, "Could start-ups revitalize the Chinese economy?"
This is something new in China. Under decades of Maoist communism, people spent their whole lives toiling in giant state-run companies. But even more recently, with the private sector much more important, large state-owned companies have remained a very popular choice for young people. Such organizations offering job security, an often-leisurely work pace (I once met an investment banker at China's state-owned Agricultural Bank of China who worked 9 to 5), and (sometimes) opportunities for corruption. But this is changing.
Now, Chen writes, "From Chinese Premier Li Keqiang to mainland internet industry tycoon Pony Ma or any college student in a coffee shop, start-ups are one of the most popular topics on people's lips in the world's largest economy today." A number of Chinese universities have now just started allowing students to go on leave to start their own businesses, a la Mark Zuckerberg leaving Harvard, which is a major departure from China's lockstep world. And in a recent poll of Chinese students, Jack Ma, founder of Alibaba (the company that had a huge launch on Wall Street last year), and Robin Li, founder of Baidu (China's Google knockoff that enjoys an overwhelming market share due to the Chinese government's harassment of Google), were named two of the people students most idolized.
So it seems that the latest feature of U.S. culture to hit China -- following in the footsteps of Disney, Starbucks, Gossip Girl, and House of Cards -- is the startup culture.
It was very interesting to see Chen's take on the startup culture. He quoted Premier Li's comment supporting startups, which was made in the context of the country graduating a record number of university students for whom it would be hard to find jobs. The implication was that these people could find employment for themselves by establishing their own mom and pop-type small businesses, a different image from that in the U.S., where the hope is that those startups that succeed will become big employers. And much of the column, somewhat to my surprise, expressed some worry about a startup mania producing a new bubble and crash.
Actually, I think the question of whether innovative startups will be able to play a role moving China's economy forward to anything like the same extent as they do in the U.S. involves a very big-picture question of what conditions in a society encourage innovative new businesses to emerge. How strong is the role of an entrepreneurial culture in the society, and how strong is a climate of freedom?
China scores high as an entrepreneurial culture. But the general view in the United States, expressed in different ways by a number of U.S. presidents as well as by American scholars observing China, is that the exuberant jostling of many opinions and cultures, in an environment that gives individuals plenty of room to do what they choose, to be independent, is the kind of environment where creativity and innovation best flourish.
This feature of the environment in which innovative startups are nurtured is very much part of U.S. culture, but not its Chinese counterpart.
China, with its history of hierarchy and conformism, and its present of Internet restrictions and worries about "sensitive" topics, scores low on freedom. The same Chinese leaders who praise startups are quite worried about instability, disruption, and chaos -- three words that very much describe the startup culture in the United States. Whether startups can transform China is thus importantly a test of whether a country's entrepreneurial culture is enough or whether freedom is essential as well.
Posted by Steve Kelman on Mar 06, 2015 at 4:22 PM