January 17, 2021: Surfing Pig, Xiaomi, Podcast Subscription, Pinduoduo

Hello Interconnected Readers:

Lei Jun, the founder and CEO of Xiaomi, has one of the most viral pieces of startup advice: “if you stand where the wind blows, even a pig can fly.” I have never quite appreciated both how profound and how misleading this advice is until the last few weeks, when I tried to learn surfing for the first time in my life.

[If you’d like to skip ahead to the six news stories and commentaries – three from English language sources, three from Chinese language sources -- here are this issue’s items:

• “Trump administration adds China's Comac, Xiaomi to Chinese military blacklist” (English Source: Reuters)
• “Apple Plans Podcasting Subscription Service in Threat to Spotify” (English Source: The Information)
• “In IPO Pop, Affirm Doubles In Value To $24 Billion” (English Source: Forbes)
• “China-US tech war: after hitting Huawei, why is Xiaomi suffering now?” (Chinese Source: CSDN)
• “Pinduoduo pulls out of Lunar New Year red packet partnership” (Chinese Source: InfoQ)
• “Lu Qi Speech: Entrepreneurship and Innovation Opportunities in a New World Landscape” (Chinese Source: Miracle Plus)]

Any experienced surfer will tell you, surfing is actually 90% swimming on the surfboard, while waiting, searching, and getting yourself prepared for when a wave shows up. As a super beginner surfer, I don’t even know what I’m searching for 90% of the time. Oftentimes, I would see something that looks like a wave, start swimming, and by the time the wave gets to me, it has lost its energy -- I started too early. Other times, I couldn’t tell if what I was looking at was a wave until it rose up like a statue. I start swimming, tumble over, and get swallowed by it -- I started too late. On the rare occasion that I started swimming at about the right moment, caught the wave, and felt that adrenaline rush of the push, my board would usually not line up in the right direction as the wave and I ended up tumbling into the water anyway -- I wasn’t prepared. After these things happen, I would pull myself back on to the board, swim against subsequent waves to get back to where I was before, and start waiting, searching, and preparing again.

Lei Jun was right. Swimming against a wave is exhausting; riding it to success is much better. However, knowing what a wave looks like is anything but obvious. What Lei Jun’s advice glosses over is even when you do see a real wave, getting prepared to ride it -- swimming hard to gain some initial speed, aligning your board in the right direction, pushing yourself to stand up at the right moment, stay balanced and alert -- is arguably harder. I haven’t even mentioned the other surfers -- if there’s a wave, you would never be the only one trying to surf it. Timing and preparedness is everything. Too early? There’s nothing to ride. Not prepared? You will waste the wave. Too late? You get swallowed.

The “too late” scenario is one I didn’t appreciate enough until my surfing adventures. It’s the worst one in my opinion, because being swallowed then trying to get back up is the most difficult and exhausting. If we fully extend the surfing metaphor to startups, I would choose “too early” or “not prepared” over “too late”.  “Too early” yields some good lessons, because you saw what a full wave looked like, so you can strengthen your mental model to search for the next one. “Not prepared” means you at least got the wave’s timing right but just didn’t have the skills to ride it well -- skills are easier to hone than timing. “Too late” could very well mean getting swallowed and destroyed.

I think Lei Jun understands all this. His career shows it. Even though he often gets ridiculed for silly things like awkward English and mimicking Steve Jobs’s wardrobe, he was prepared and rode more than one wave successfully. Xiaomi is the example everyone knows, but he was very early in the enterprise software company, Kingsoft, part of which has morphed until Kingsoft Cloud (IPO’ed on the NASDAQ in May 2020), a cloud SaaS company long before cloud SaaS was sexy.

Unlike the gentle waters of Waikiki, real life waves are harsher and can come in the opposite direction. As you will read below, Xiaomi is facing one right now as the newest addition to the Pentagon’s blacklist.

As we all search for the next big wave in life -- in entrepreneurship, investing, relationship -- it’s important to keep learning and stay prepared, not just keep looking for the next wave to ride. To ride even the biggest, most obvious wave, a pig still needs to know how to swim.

Kevin

Before you read on, please check out last week's deep dive post: "Google, Alibaba, Global Antitrust Standard"

“Trump administration adds China's Comac, Xiaomi to Chinese military blacklist” (English Source: Reuters)

My Thoughts: The “Lame Duck Delisting” that I discussed in-depth just a couple of weeks ago continues to accelerate. Adding Comac, a commercial aircraft manufacturer to the “Communist Chinese military companies” list is not that surprising. Xiaomi’s addition is. It’s difficult to tell if Xiaomi is being added to actually protect US national security or simply to influence the competitive landscape of the smartphone industry to benefit Apple (Xiaomi sold more phones than Apple in Q3 2020, making it the world’s 3rd largest). It would be useful for investors and the market to have a clear definition of what constitutes “military ties''. Lastly, it’s worth remembering that the Pentagon is compiling this blacklist to comply with a 1999 law -- something the agency has never bothered doing until this year.

“Apple Plans Podcasting Subscription Service in Threat to Spotify” (English Source: The Information)

My Thoughts: Not only do I write the Interconnected newsletter and actively invest in startups with global potential, I also make a podcast on the Asian American political experience (the Model Majority Podcast) that now has close to 200 episodes. Thus, as a podcast creator, Apple’s intention to roll out a podcast subscription service caught my attention. Most podcasts are still distributed via RSS, a content description and distribution format that’s one of the few remaining open protocols on the Internet that does not have any corporate influence. Because of this openness, most podcasts are free to listen to and ad-supported. Spotify has aggressively  tried to bring podcasts inside its paid subscription product. Apple looks to do the same. This trend eerily resembles the streaming entertainment landscape -- Netflix, Disney Plus, Amazon Prime, HBO Max, Hulu, YouTube Red, and more. The total amount of a family’s streaming subscription bill is already piling up, just like cable TV bills in the past. Will people be willing to have bills for podcasts too?

“In IPO Pop, Affirm Doubles In Value To $24 Billion” (English Source: Forbes)

My Thoughts: The first-day IPO pop continues to happen in the US stock market with two last week -- Affirm and Poshmark. Affirm’s almost 100% pop is especially notable, because the fintech company delayed its planned IPO last December, and one of the rumored reasons was to avoid the large pop that Airbnb and Doordash experienced on their respective first day. Affirm raised its IPO price since, but that clearly didn’t not avoid the pop. In fact, the price-raising may have only stoked more demand and FOMO in a zero-interest environment.

“China-US tech war: after hitting Huawei, why is Xiaomi suffering now?” (Chinese Source: CSDN)

My thoughts: As the latest victim in the US-China tech war, how Xiaomi’s business operations and supply chain will be impacted and impacting other companies will be important to analyze. There’s some important contrasts to draw with Huawei. As this article noted, almost all of Xiaomi’s mobile chips come from Qualcomm; it does not develop its own chips like Huawei. Xiaomi’s software and IoT ecosystem, much of it based off of Android, is also quite advanced. The company is aggressively expanding into Europe, LATAM, India, the Middle East, and Africa -- basically everywhere. Will hurting Xiaomi hurt Qualcomm? Will hurting Xiaomi reduce its market share, dampen its 5G ambition where marketshare is key, and benefit Apple or Samsung?

“Pinduoduo pulls out of Lunar New Year red packet partnership” (Chinese Source: InfoQ)

My thoughts: I was quite interested in observing how Pinduoduo’s payment product, Duoduo Wallet, will get launched at this year’s Lunar New Year gala. Looks like I’ll have to wait for at least another year, as the launch was canceled and Douyin is now the official red packet partner. This cancellation may be related to China’s fluid fintech regulatory environment after Ant’s suspended IPO, as a payment product in China is usually a gateway to other financial services.

“Lu Qi Speech: Entrepreneurship and Innovation Opportunities in a New World Landscape” (Chinese Source: Miracle Plus)

My thoughts: Lu Qi is a legendary figure in the US-China tech ecosystem, so his thoughts and outlooks are worth paying attention to. This speech was made in December 2020; the link I’m sharing here contains the full text. Apparently the speech lasted close to two hours, so I’m not even going to try to summarize it all here. I’d like to highlight two points Lu Qi made: 1. Open source is recognized as the best technology development model -- a point of view I’ve been writing about profusely on Interconnected, so it’s good to see the Miracle Plus team also seeing the same thing; 2. The global center of gravity for economic development and innovation will shift from the West to Asia.

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