November 22, 2020: Birthday or Birthplace

Hello Interconnected Readers:

Next week is both Thanksgiving week in the US and my birthday week. (Programming note: I will not publish my usual Thursday deep dive analysis due to the holiday.)

[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:

• “SEC Pursues Plan Requiring Chinese Firms to Use Auditors Overseen by U.S.” (English Source: Wall Street Journal)
• “Chinese Self-Driving Startups Plus and Hesai Considering Going Public” (English Source: The Information)
• “The once obscure, derided financial product that just might transform deep tech venture capital” (English Source: Lux Capital blog)
• “Alibaba Cloud’s Difficult ‘Peak’” (Chinese Source: Leiphone)
• “Ant’s Fallout Unfinished; Alibaba Getting Class Action Lawsuit Across the Ocean” (Chinese Source: Interface News)
• “Escape from Foxconn: Left 18 times, but had no choice but to return” (Chinese Source: Phoenix Weekly Financials)]

I have never been a big birthday celebration person. Living in the US and having it generally overlap with Thanksgiving helps me simply wrap my birthday anonymously inside a big national holiday. I’m not sure why though. Perhaps it’s my natural shyness, immigrant self-consciousness, or overall aversion to attention-seeking in spite of its transactional utility from time to time.

Instead of birthday, I’ve been thinking a lot more about birthplace. I find it more deterministic in pondering how a person’s life eventually gets lived. Birthday seems to be overemphasized, while birthplace is overlooked.

I thought about my maternal grandfather. He was born in 1934 and died of cancer in 2014. Growing up, my memory of him was mostly of his bad temper. In 2013, I took a gap year between leaving the White House and starting law school. I was planning on doing some cool, entrepreneurial stuff (and I did some of it), but I also ended up spending a lot of time with my maternal grandparents in my hometown of Shenyang -- my birthplace. Grandpa and I hung out a bunch. In between marathon mahjong sessions and watching TV dramas, he would tell me bits and pieces about his life that I never knew and few others knew.

His birthplace was a town in Anhui province that, historically, had a reputation for producing scholars and academics. He started college when he was 16, which was unheard of, and became one of the first few academics to be sent to the US to study. For him, it was UPenn. His field was genetics. He reveled in details of him and his other fellow study abroad friends taking a road trip once from Philly to Florida in a beat-up old car. He didn’t know how to drive, so he was in charge of directions and entertainment.

Because of his raw intellectual horsepower, he also spoke his mind a lot, during a time and at a place where that type of behavior got you into serious trouble. He didn’t share all the gory details, but for a period, he was made to scoop feces in public as a form of punishment and shaming. He ended up becoming a tenured professor at our city’s medical university and founded its genetics department. For a while, he also led the university’s external affairs as a Vice Dean, so he traveled a lot on scholarly exchanges, primarily to Japan, Germany, and Russia, during a time when few Chinese traveled abroad. There were rumors that he would’ve become Dean, the top job, if he didn’t speak up so much when he was younger. He probably would’ve been a Senator or something, if he was born somewhere (anywhere) in the US.

He was already battling cancer in 2013 when we were hanging out. In between cooking, teasing my grandma, and fooling around (he loves pranks), he would tell me his hope for me -- be some kind of bridge or linkage between cultures, particularly between the US and China. How he came up with this hope, I don’t know for sure. Perhaps he wanted me to continue laying down the bricks of connection and exchange he started doing at UPenn.

He is the spiritual reason why I write Interconnected.

I love reading biographies. I’m currently working on “Jesse Livermore Boy Plunger” by Tom Rubython, the definitive biography of one of the most famous stock traders in American history. I’m not done with the book yet, but I suspect that Jesse’s birthplace and station -- the accidental third son of a poor farming family in a well-off, blue-collared town of Acton in Massachusetts -- had some influence on his precociousness, talent in “reading the tape”, tendency to gamble big, and eventual tragic ending (suicide).

While the birthdays of most people are readily available with a quick Google search, their birthplaces, and the story behind those places, are much harder to find. Maybe that’s why we don’t think about it as much, though I’m sure when Warren Buffett talks about the “Ovarian lottery”, he’s thinking about both the time and place.

Later in this issue, you will see a story I share about the life of workers at Foxconn, many of whom leave the factory due to its grueling work environment but return later, multiple times. For many Chinese born where they did, being uneducated and unskilled, working at Foxconn is a top choice to make a living and support a family.

I will be pondering the deterministic influence of birthplace a lot during my birthday week.

Kevin

The news summary below covers the period between November 16 - 22, 2020 of six news stories – three from English language sources, three from Chinese language sources. Disclaimer: all translated article titles are done by me, not official translations from the media outlets.

Before you go on, please check out last week's deep dive post: "Building a Bilingual Newsletter: 2020 Edition"

“SEC Pursues Plan Requiring Chinese Firms to Use Auditors Overseen by U.S.” (English Source: Wall Street Journal)

My Thoughts: This new regulation by the SEC is a reasonable action, especially in the absence of further progress on the Holding Foreign Companies Accountable Act from Congress. The Act had a lot of momentum earlier this year. Now, it’s completely stalled as Congress could barely get its act together to pass another coronavirus relief bill during Trump’s lame duck period. It's anybody’s guess what will happen to this bill when Biden becomes president, but the spirit of it -- holding Chinese companies listed in the US to the same accounting auditing standards as all other foreign companies -- seems completely justified. As I noted in “Wall Street Blunts the ‘Delisting’ Hype”, I don’t think any regulatory change, from either Congress or the SEC, would force all Chinese companies to delist. There are ethical, ambitious entrepreneurs from China (and everywhere) who would welcome such scrutiny, because their mission is to build a global, world-changing business and would crave the trustworthiness that comes with meeting a higher standard. And the ones who do have problematic financial practices and shady connections will delist. It’s a self-selecting process.

“Chinese Self-Driving Startups Plus and Hesai Considering Going Public” (English Source: The Information)

My Thoughts: A group of highly valued, pre-revenue (or barely any revenue) self-driving startups from China is trying to go public. The one piece of information that caught my eyes was that two of the three startups profiled in this article, Plus and TuSimple, are considering SPAC (special purpose acquisition company) as a possible avenue. I’m still learning about SPACs, so I have no opinion worth sharing on the vehicle itself. I did make an observation, again in “Wall Street Blunts the ‘Delisting’ Hype”, that SPAC’s recent rise is mostly an American phenomenon, and there are plenty of private companies in the US to target. Thus it will be a long time, if ever, before American SPACs look for foreign companies to take public. What I overlooked was that Chinese funds can raise SPACs too, such is the case with the CITIC Capital Acquisition Corp. Money is cheap, everywhere.

“The once obscure, derided financial product that just might transform deep tech venture capital” (English Source: Lux Capital blog)

My Thoughts: I found this blog post by Peter Hébert, who co-founded the VC firm Lux Capital, quite useful in my learning about SPACs. Aside from the self-promoting element of the post (Lux raised its own $345 million healthtech-focused SPAC), he provided an interesting historical angle: analogizing the rise of “junk bonds” from the 1960s that fueled the leveraged buyout kind of private equity to the re-engineering of SPACs that is now fueling late-stage VC-backed companies to go public. Peter made a nuanced argument in that SPACs aren’t for all types of company, but can be a good option for “deep-tech” companies, where the technology is potentially revolutionary, requires a long timespan, and may generate little revenue for many years before the technology matures with market demand. That’s why his firm’s SPAC is focused on healthtech. Many others are focused on space tech, electric vehicles or biotech. I would put self-driving technology in this “deep-tech” category too. Of course, there are successfully listed SPACs that targeted gaming and fantasy sports -- hardly “deep tech.”

“Alibaba Cloud’s Difficult ‘Peak’” (Chinese Source: Leiphone)

My thoughts: Every Singles’ Day, as others wait for topline GMV from Taobao and Tmall, I wait for the peak transactions per second processed on Alibaba Cloud. This year, the peak traffic is an astounding 583,000 transactions/second -- reached 26 seconds after midnight on November 11, according to this article. Not all transactions are created equal in infrastructure technology. A transaction can be as simple as an INSERT/UPDATE/DELETE operation in a single database, or wrapped up in many transactions behind the scenes, like shopper’s account, warehouse inventory, loyalty program, delivery logistics, and payment processing. One transaction on Taobao is definitely not the simple kind. After the first line of code was written in the Spring of 2009, Alibaba Cloud has come a long way. It’s now fully cloud-native -- meaning all workloads are fully containerized and likely managed on Kubernetes. The business unit now generates about 10% of Alibaba Group’s total revenue, placing it solidly in second place within the company. To put that in context, AWS generates about 12% of Amazon’s total revenue. One of my earliest posts on Interconnected was titled “Alibaba Cloud: The Ignored Cloud.” The peak traffic “report card” from this year’s Singles Day strengthens my opinion that Alibaba Cloud, as a business and a technology stack, is underappreciated. (If you are interested a English version of this whole article, go check out Jeff Ding’s translation.)

“Ant’s Fallout Unfinished; Alibaba Getting Class Action Lawsuit Across the Ocean” (Chinese Source: Interface News)

My thoughts: While Alibaba Cloud is “crushing it”, the aftermaths of Ant Group’s suspended IPO continue to reverberate. One of the consequences is a looming class action lawsuit from investors, who were set to make a killing on the IPO and by being invested in Alibaba as another way to be exposed to Ant. Neither route panned out. Alibaba’s stock price had the largest single day drop in five years when the Ant IPO suspension was announced. In “Jack Ma, P2P Lending, Responsibility, Legacy”, I shared my relatively positive view of the whole ordeal -- positive from the vantage point of Ma and Alibaba. But should he have given these investors a heads up before giving that fiery speech though? Probably.

“Escape from Foxconn: Left 18 times, but had no choice but to return” (Chinese Source: Phoenix Weekly Financials)

My thoughts: This is a detailed and humanizing exposé of the workers in Foxconn. A short commentary here doesn’t do its justice, so I will likely write a longer post later. For many uneducated and unskilled people in China, working at Foxconn is still a good option to make a living and support a family, despite its grueling shifts and environment. In fact, Foxconn is a top choice for many. As one of the workers interviewed in this article shared, he stuck with Foxconn for more than a decade, because it at least pays its workers on time and doesn’t have a habit of owing salary. This same worker, being a veteran of the factory, has also honed his efficiency so much that he only goes to the bathroom twice during his 10-hour shift. The human experiences of workers at a place like Foxconn is also worth thinking about in the context of America’s own path to regaining some advanced manufacturing capabilities. This dilemma was captured well in the documentary, “American Factory”, and “Foxconn workers” even made their own brief appearance in American pop culture in this Saturday Night Live skit in 2013, talking about the iPhone 5. Not much has changed since then.

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