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

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