China is all checks and no balances.
One Billion Customers is by James McGregor. The subtitle is “Lessons from the Front Lines of Doing Business in China”.
Overall this isn’t a book that everyone needs to read, but may be of interest to people who are doing business in China (as you might guess from the subtitle). McGregor’s thoughts on Chinese business culture and negotiation generally rang true. Here were some of his main opinions:
1. He was against joint ventures, as they’re more hassle than they’re worth: “The only groups that seem to like joint ventures are the government, and the law firms that rack up endless billable hours…”
2. He says there’s a culture of trying to make guests feel honored to have merely been granted an audience: “Like the emperors who came before them, top Communist party leaders want foreigners to feel grateful when they are granted an audience.”
3. You can be tough, but you absolutely do not want to do something that causes someone to lose face (I believe there was a story with the same theme in The Beautiful Country and the Middle Kingdom): “It is okay to be tough and steadfast, but disastrous to be insulting.”. Don’t embarrass the people you’re trying to work with, and don’t put them in a situation where they can’t back down without being embarrassed. Here’s a little more of what he says about face:
Government officials especially try to avoid making decisions for which they can later be held accountable. Thus they like to diffuse decision making through many layers so that no one person can be blamed. In negotiations, this Chinese preoccupation with “face” can be crippling for them. Foreigners who are not fixated with “face” have a tremendous advantage. If the talks meet an impasse caused by the Chinese side, it is easy for the foreigner to accept blame and move discussions ahead. You also lose nothing by treating even the most obnoxious Chinese negotiator with exaggerated respect. Treat them with the inflated importance they expect, but look out for your own bottom line. Engage in the theatrics, but don’t let it slide over into substance.
4. Everything needs to be about what is best for China, as a country: “your arguments, especially as a foreigner, must be wrapped around what is good for China, not what is wrong with the Chinese government.” And later: “There is a universal fear by government officials that something they do could be criticized for not upholding the country’s interests.” If there’s one thing to not forget from One Billion Customers, it’s this. In a pinch you might try to argue that what you’re doing is good for China but fail to be convincing. But that argument will get you further than appealing to a sense of fairness that’s owed to you.
5. He’s pretty pessimistic (but remember, this book was published 15 years ago) about corruption in China:
“If you are selling your product or services to the Chinese government and state-owned enterprises, you often have to decide how much of your soul you also want to sell. The procurement process in China is usually corrupt at every level.”
And this following line rang true to things I heard when I lived in China: “To preserve their sanity, some foreign executives go out of their way to not know what goes on inside their sales departments.”
One of his anti-corruption suggestions: “Inform your suppliers that they will be eliminated from consideration if they try to bribe your employees. The suppliers appreciate being let off the hook.” Another suggestion was to rotate people in your procurement department to ensure that they’re not in any one place long enough to develop the relationships that make corruption possible.
But the best anti-corruption technique, as always, is git good: “There are many foreign companies that have policies of zero tolerance for corruption in China, and still enjoy good business because their products are the best and in demand.”
6. He says that it is “very often the case in China” that a state-owned enterprise can be both “regulator and competitor” to foreign businesses in the same industry. This seemed interesting to me personally – I guess I’d assumed that regulators favor Chinese businesses, but are separate from them. But sometimes the regulators are the Chinese business (state-owned enterprise).
7. His view is that the letter of the law on business deals is not as important as the relationship built in negotiating them: “Contract details matter less than the personal relationships developed in negotiations.” But there’s no need to go too far in becoming a “friend”:
If you don’t give them what they want, the Chinese will quickly label you “unfriendly” to China. Your goal is to be friendly but not foolish. Don’t be afraid to tell your Chinese counterparts that this is business, not friendship, but that you can do friendly business if both sides get a fair deal.
McGregor says that “The Chinese now understand the outside world much better than the outside world understands them.” This seems pretty much true, even now (and makes me feel better about continuing to learn Chinese and learn about China).
There’s a few places where he criticizes Western governments and businesses. First, he criticizes the US government for putting export restrictions on technology products that Europe or Japan didn’t restrict: “blocking U.S. technology that is freely available from Europe or Asia undermines the global competitiveness of U.S. companies”. This seems like a reasonable complaint (assuming the technology really is equivalent).
It’s a sort of geopolitical variant of “Be Nice, At Least Until You Can Coordinate Meanness”. The outcome of the US policies that McGregor criticizes is that America looked like a jerk (or just like it didn’t have its act together), and China ended up with the same technology they would have had anyway. But sanctions against other countries seem to work (citation needed), when there is enough international agreement to make the sanction effective. If Japan and Europe weren’t worried about selling these technologies to China, should the US be?
He also criticizes US companies for not taking ventures in China seriously enough, leading to a talent discrepancy between what the Chinese and American sides in the joint venture are bringing to the table: “Too often, the Chinese side assigns its best and brightest to the joint venture while the foreign partner picks people based on their willingness to live in China, which often brings inexperienced foreign managers.” (I was a foreign worker in China, but I wasn’t a manager, so I guess I don’t need to be offended by this).
Chinese Mindset
Two quotes stood out to me about how McGregor sees Chinese culture and the Chinese mindset. Here’s what he says about what motivates people away from ‘bad behavior’ in the East and West:
China is a shame-based society, very different from the guilt-based West. In the West, with society’s religious orientation, many controls are internalized. Guilt, which is ultimately the fear of sin and eternal damnation, puts a check on bad behavior. In China, it is the fear of exposure and the accompanying shame that tarnishes the entire extended family.
This stood out to me because I’d recently listened to a Brene Brown podcast where she shares some of her views on the differences between “shame” and “accountability”. Here’s an unrelated blog post from her where she talks about shame and guilt:
Based on my research and the research of other shame researchers, I believe that there is a profound difference between shame and guilt. I believe that guilt is adaptive and helpful – it’s holding something we’ve done or failed to do up against our values and feeling psychological discomfort.
I define shame as the intensely painful feeling or experience of believing that we are flawed and therefore unworthy of love and belonging – something we’ve experienced, done, or failed to do makes us unworthy of connection. I don’t believe shame is helpful or productive. In fact, I think shame is much more likely to be the source of destructive, hurtful behavior than the solution or cure. I think the fear of disconnection can make us dangerous.
This is sort of interesting to think about, but I’m not sure whether or not it really means anything. There’s too much going on here: (1) McGregor’s definition of ‘guilt’ is “fear of sin and eternal damnation”, but Americans have consistently been growing less and less interested in religion. (2) Is China really ‘shame-based’ or is that just McGregor’s (possibly incorrect) view? (3) Is Brene Brown even right that shame isn’t “helpful or productive”?
It’s pretty clear that the Chinese concept of “face” can be in conflict with Brene Brown’s conception of the power of vulnerability. (But even that is relative to cultural norms – the concept of “face” could promote vulnerability if there’s a cultural norm that showing vulnerability is good and desirable).
McGregor’s second ‘culture’ related comment that stood out to me was:
China has a survival culture with a “zero-sum” mentality.
Again, I’m not sure he’s right about this (and again, how much has changed since the book was written?). Is this really a difference in cultures? There’s no lack of selfish people in the West. Although it’s cliché, “win-win” (aka non-zero-sum) interactions are maybe one of the driving forces making the world a better place (For an argument supporting this claim, see Nonzero by Robert Wright.) I believe in competition but in cooperation, too. It’s a sort of paradox of Chinese culture that it’s really community-focused inside of your family or people you have relationships with – but very competitive outside of that circle.
A final thought on the Chinese cultural (governmental) mindset: he says “The Chinese media is struggling between shaping the way people think and informing them sufficiently to compete in the global economy.” I finished The Scout Mindset this week, where Julia Galef argues that understanding what’s true and what’s not is a better way to live life, even if the true thing isn’t the one that you wanted to hear. Will the Chinese economy get to the point that it can’t compete successfully without truth being widely available? Or is enough of the economy “non-political” in the sense that censored ideas won’t hurt the economy?
Overall, this is not my favorite “China” book of all time, but I liked the morals/lessons on how to do business in China; he suggests a book called Chinese Negotiating Style that I expect I’ll go read at some point.