Economy

Shi Yuzhu vs. Steve Jobs: How Apple Chief's Death Exposes China's Innovation Gap

Shi Yuzhu is Chairman of Giant Interactive, one of China's most successful online game companies. One of China’s richest men, he knows tech, understands customers, and is a genius at applying powerful marketing tactics. Still, he is no Steve Jobs

Steve Jobs
Steve Jobs
Jiang Ruxiang

BEIJING - As in the United States and elsewhere, the death of Steve Jobs has also been an occasion for regret and reflection in China. Most pointedly, it has revealed widespread dissatisfaction with Chinese entrepreneurship.

The Chinese discover that their country, "The Savior of the World's Economy", lacks a spirit of innovation among its entrepreneurs. Collectively, the Chinese business community has woken up to find that apart from money, they actually possess very little.

To better understand the contrasts between the Chinese and Western cultural and business contexts, it's worth comparing Jobs with one particular entrepreneur: Shi Yuzhu, one of China's most successful and richest men, who is perhaps the most representative entrepreneur with "Chinese characteristics'.

The difference between Jobs and Shi is the difference between innovation and speculation. While the former believed in the logic of the authentic American market economy, the latter is convinced of the Chinese-style market economy, that is, the logic of opportunism.

What is innovation? It's the ability to disrupt the current market structure of vested interests, to discover the new needs of customers, to identify opportunity in order to gain a business edge.

When I was studying at Columbia University in New York, I found that US business schools attach great importance to a course called Innovation. Yet in the numerous, outrageously expensive classes available for business students in China, no such a subject exists. Instead, Chinese business schools boast in their enrollment publicity how many senior governmental officials have studied there and use these "corporate family connections' as their selling point.

This is the logic of "business with Chinese characteristics' that Shi Yuzhu represents. Whether selling the Chinese character card, a memory expansion card for Chinese digital systems, the "Brain platinum", a Melatonin supplement which made his fortune, developing online games, or profiting from his stake in the disintegration of the financial system, he is a master at exploiting the weak points of Chinese culture. In brief, he is a "Mao-style genius' who understands the people to the bone, which enables him to manipulate the masses.

Another point that distinguishes Shi from Jobs is the difference between the elite and the common man. Some might say Jobs followed an elitist line. His products are expensive and he charges for absolutely everything. Whereas Shi's Melatonin is sold for old people, the online games are sold to penniless young players.

This is the biggest misconception of business logic and herein lies the very difference between Shi and Jobs. The distinction between China and the world's largest power does not lie at an economic level, but rather in a deep-seated commercial culture gap. For instance, most Chinese will support government regulation of home purchasing, the large-scale construction of social housing, the raising of minimum wages, or even the various government offices assigned with solving "the contradictions among people". All these actions by the authorities would generally be opposed in a developed country, yet work well in China. This offers an idea of what creates the kind of governmental officials and entrepreneurs we have in China.

After understanding this, it's not difficult to come back and look at the two figures at hand.

Jobs believed that public benefit does not lie in the low-cost subsidy of weakness, but in enhancing the design of market trading systems. The iPhone and iPad value chain was built for profit; its biggest contribution lies in its destruction of the logic that things should be free. In Apple's system, all software, all knowledge creation are to be charged for. In other words, they have a price.

Inspiring others

Is this really hurtful to the low-income customers? On the contrary, Apple's system supports a large number of small software companies. Each company can upload their products to Apple. It's said that the amount of fees that Apple has paid to the third-party developers has reached tens of billions of dollars. Many are inspired to start their own businesses, and others are supported by Apple in other ways along the value chain. The more small firms are created the more growth is generated, and this enables more companies to cater to the mass market which is in the real interest of those with lower incomes.

Imagining if Shi had owned Apple, he would have forced the telecommunications firm China Unicom to reduce its service price, or even make it free, so as to drive its competitor China Mobile out of business to obtain a monopoly. After that, he could hit the jackpot by launching premium services - "Director's mobile," "the Gold Partner's mobile" and so on.

From the consumer's perspective, they would first enjoy free Apple, feeling like the master via the Shi-style sales tactic (which in fact comes from Mao's philosophy), and then fighting among themselves to finally discover that they are but the tools of the real master. Such a farce has been repeated over and over in China's history.

Sidney Hook, the American philosopher, pointed out in his book "The Hero in History" that the greatest contribution of a hero is that they save us from numerous difficulties in critical moments, therefore we entrust our choice of the future to them. When one day, the hero becomes malicious, we still believe that he is saving us.

Jobs' death is regrettable on a personal level. Yet from the perspective of heroes and history, he has departed at an auspicious moment, leaving us with the still open task of interpreting what is greatness in entrepreneurial innovation.

Read more from E.O. in Chinese

photo - Sip Khoon

Jiang Ruxiang is the chairman of CN Management Consulting Co., Ltd

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
Future

7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.


But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

commons.wikimedia.org

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ