What Worries Me About Alibaba Long-Term (Tech Strategy – Podcast 96)

This week’s podcast is about the recent political issues around China tech and Alibaba in particular.

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Related articles:

From the Concept Library, concepts for this article are:

  • Role of the State
  • Uncertainty Investing Approaches

From the Company Library, companies for this article are:

  • Alibaba


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This content (articles, podcasts, website info) is not investment, legal or tax advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. This is not investment advice. Investing is risky. Do your own research.

——Transcription Below

Welcome, welcome everybody. My name is Jeff Towson and this is Tech Strategy. And the topic for today, what worries me about Alibaba long-term? So this has been a big week for Alibaba, no doubt. For those of you who are holding shares, it was probably a pretty difficult week, a big drop. Everyone’s, you know. sort of wondering what to do, I think. And it’s all obviously related to the role of the state, the role of the government. And people are kind of weighing, what does this mean long-term? What does it mean short-term? Do I hold? Is it time to get out? Am I being dumb? Is this just an opportunity? I mean, you can really see people sort of struggling, at least online, to how to take this apart. And this is not something we haven’t seen a lot this year, which is… people having difficulty quantifying political uncertainty. Now, which is kind of weird, because if you think about it, technology has far more uncertainty, but people kind of know how to approach that and take it apart. But the political aspect, particularly in China, is kind of like a black box to people. And also it’s a bit scary. It also kind of bleeds into the media narrative. I mean, when people talk about the regulations of housing, or utilities or healthcare, it doesn’t have this level of sort of US, China, the future, but once it jumps into sort of Chinese government, it tends to bleed into the media side more than just the financial present. I hate to say it, but the quality of the discussion drops precipitously the more this becomes sort of mainstream media. Anyways, I’m going to give you my take on what I think… matter, specifically what worries me long term. And there are a couple of things that worry me. And this week got my attention. So I’m gonna kinda go into that and I’ll qualify that. I understand, I think my area of expertise is business model strategy, competition of tech companies in Asia. That’s where I have sort of my deep vertical. Okay, when we move over to the role of the state, this is not something I spend my time studying. There are people who do this, who just follow regulations all day long. So I’m a bit out of my wheelhouse on this one, although I think I’m reasonably solid, but obviously I’m not an expert in this, so I’ll qualify that a little bit. Let’s see now for those of you who are subscribers, I sent you out some stuff on Thomas Russo, who is a famous investor. It’s a US investor, but he’s actually one of the first emerging market investors on the consumer side. And that’s a lot of what I talk about. I just come at it from a tech angle as opposed to a branded products, Nestle chocolate sort of thing. But I think the approach is actually quite solid, especially when you start getting away from the big markets like China, India to lots of smaller markets, which is really Southeast I think his approach is quite good. So I sent you a bunch of stuff on that. Coming up next will be, I’m gonna look at Billy Billy and probably Kingsoft coming up this week. So that’s on the way. For those of you who aren’t subscribers, feel free, you can go over to jefftowson.com, sign up there, try it out, free 30 day trial. And last thing, my standard disclaimer, nothing in this podcast or in my writing or on the website is investment advice. The numbers and information from me and any guests may be incorrect. The views and opinions expressed may be incorrect, no longer relevant or accurate. Overall, investing is risky. This is not investment advice. Do your own research. And with that, let’s get into the topic. Now the key ideas for today, sort of the key concepts, and this is sort of me putting on the professor hat. You know, every podcast I like to cover a couple of the major ideas, and then they go into the concept library, which is on the webpage. You can always click there and see lots of articles and podcasts on those subjects. So the two concepts for today, role of the state, which I’ve talked about before, and what I’m just calling approaches to uncertainty. which is something that cuts across all of this. That’s more of an investment question than let’s say a strategy question. So I’m definitely weaker there. But I think that’s a lot of what we’re talking about when we’re talking about the state. We’re talking about uncertainties that we don’t necessarily know how to quantify. There are technological uncertainties, there are uncertainties regarding regulations, role of the state, changing consumer behavior, lots of things, but that’s kind of the heart of all of this. So I’m gonna give you a little simplistic approach to that, people who are much better at that question than I am. Okay, so role of the state, approach to uncertainty. I always list the concepts in the bottom of the show notes, usually no more than two per day. Okay, so my standard mantra when looking at China, not just tech, but China, is you gotta get a solid read on the demand picture. the competitive barriers, strength picture, and the role of the state. If you don’t know those three, if you don’t have a solid answer to those, you’re really kind of, I think, don’t know what you’re doing because those are major forces. You got to understand what’s happening. People focus on the demand side, customers, long term growth, spending, things like that. Everyone likes that. That’s why they go to China to a large degrees for the size of the market and the growth, particularly private consumption, which is big. Number two factor competitive advantage, that’s obviously my area. Yes China is big, but it’s also ferociously competitive. You need a competitive barrier that’s really strong. And then number three is the role of the state, which I don’t really say government. I kind of say role of the state because it’s yes, it’s the government, but it’s also the party. It’s also certain actors outside of that. It’s all together. That is sort of the role of the state in a market or an industry. Now we have questions for the first two, very standard. You run your checklist, what’s the demand, what’s the user experience, what do they care about? I’ve gone through those a bit, everyone’s got those. And then competitive advantage is kind of where I have my checklist that are really detailed for digital. Take it apart, I’ve been writing about those platforms, network effects, things like that. That’s what my book is coming out on. But the third one, people don’t usually have a checklist, so they just get into sort of fuzzy thinking. Yeah, this seems risky to me, but they don’t have to take it apart. Now that’s where I argue that really what you’re dealing with is uncertainty. Look, there’s future uncertainties regarding the actions of the government, the state, the party, all of that. How do you take those apart? and I wrote a book that covered this a lot called the One Hour China Consumer Book. Nobody really bought it compared to it. It hit the bestseller list but nobody really bought it. I actually thought it was pretty original thinking. But you know my standard question for this one is okay if my question for competition is does this company have a competitive barrier and how strong is it? My question for the state is is the state an active force in this industry and what do they Now, if the answer is no, well, that’s pretty common. That doesn’t mean the state’s not present. It just means that they are an external factor. You know, you’re looking at an industry. Coca-Cola. The state is not shaping the industry. They are not a player on the field. They’re a referee on the sidelines. And they will engage in things like health issues, safety issues, you know, but that’s the role of a government as regulator. We see that all the time. And a lot of industries, that’s the way it is. It’s e-commerce in China has largely been that way. Retail in China has been that way. Beverage companies are that way. Restaurant companies are that way. And you just kind of have to know what the state cares about. And if you read Xinhua or you read China Daily, you’ll very quickly get a sense for what the government cares about. They talk about it all the time. It’s never a surprise what they care about. They telegraph that years in advance, usually before they act. So fine, beer companies in China, even though they are state owned, I don’t think the state, I think they operate like commercial entities. A lot of the food sectors are that way, some are not. But largely e-commerce that has not been an issue. Okay, then we go over to the answer of yes, the state does have an active interest. It’s not just a regulator, it’s not just a referee, it’s a player on the field and it’s the most important player. It is actively shaping the industry and what it’s going to do. And in that case, you know, you got to look at a company and say, what does the government want? There are obviously a player. What do they want? And is this company helping them achieve that? That’s more important than anything else that company’s doing. So that can be positive. It can be negative. Sometimes the government doesn’t want things to happen. It has very active interests, but it doesn’t want things to change. That’s a state hospitals, tons of state hospitals in China. They’re pretty much the same as they’ve been for 20 years. Things are evolving and there are active plans by the government to transform them and upgrade them, but it’s happening slowly and methodically and they do not want anyone running around there moving fast and breaking things. So that would be a clear answer for that one. Consumer credit, which I’ve talked about a lot, they have, I mean, that’s on the short list of stuff they really care about. Like the shortest of lists. They view credit outside of the traditional state-owned banking sector as a systemic risk. Shadow banking, trust funds, private lending, all of that. Been very vocal about that for 20 years. So what do they want and is the company achieving that? Did Ant Financial go into the consumer credit space trying to help the government achieve what it wants? Not really. They were kind of doing their own thing and the numbers got pretty big. You know, P2P lending was an issue. There’s a lot that’s going. So you can sort of take that apart and the answer can be yes, they have an interest and they want things to go slow. Yes, they have an interest and they don’t want anything to change. Cemeteries, funerals, a lot of the social services. Education in the private sector don’t really want too much to happen. There’s a lot of real serious concerns. The flip side to this coin is, yes, they’re an active player in the industry and they want things to change. That’s an amazing opportunity. That’s like catching a wave on a surfboard. If you’re good at spotting the waves, and a lot of Chinese companies are very good at this, they will ride those waves and these companies get rocketed up. Right now, fortunately in technology, we see a lot of these. Core technology, the government is giving from the highest levels as much support as they can. Semiconductors, operating systems, standards being used in China and globally, chip manufacturing. right? Electric vehicles, AI. I mean, these are major announcements from the very top of the government. Now, one of the problems with these issues, as opposed to high speed rail, which is another priority, the levers that they can pull to help a company are not as direct. If it has to do with real estate and infrastructure, there’s very good levers they can reach for, like having the state banks issue very cheap loans that aren’t ever gonna be called to help companies build. airports, subways. So you have state-owned construction companies and state-owned banks. And when they pull that lever, subways and airports get built very quickly. It’s stunning how fast it happens. Belton Road was a big example of this. Now, when they move into technology, they don’t have as direct of levers. They can give tax credits, which they do. They can allocate parts of town, which to be sort of tech development, business centers, hubs, which they did in Beijing, Tianjin, Hangzhou, other places. But generally, the levers aren’t as direct. If you see construction or real estate and it’s a big government priority, get ready for things to move very quickly. Sports was actually pretty cool in this regard. The government put forward a state council years ago that they wanted sports to be a like 250 billion dollar industry. And that meant a lot of building of basketball courts all over and some stadiums. Man, basketball courts went up everywhere. Like if you go to Ju-Hi, which is across the border from Macau. everywhere. So that’s kind of a good level. And when we looked at Solar and wind, that was an area that also happened very, very quickly. Like Suntech, which I’ve written about. You know, that was cheap government debt, government support, plus basic manufacturing of things like solar cells combined with more advanced technology. And China goes from not a player in solar to being the top players in five to seven years. So it can really happen fast when they pull the lever. Now, for those of you who know the Suntech story, solar panel producer in the world in like six years and then it crashed and burned when those Resources were withdrawn. So that’s a bit more of a dangerous game. Like you got to know when the wave is coming Awesome, write it, you’ll do incredibly well, and then you kinda gotta know when to get off the wave before it crashes. So state-directed development is very powerful, but it’s, yeah, you kinda gotta know what you’re doing. Okay, so that’s kind of how I would look at that, and I’m gonna get to this when we get to Alibaba now, which is does the state have an active interest? What is it? Is the company helping them achieve that? You gotta have a clear answer to that question. Okay. Let me make one sidetrack into uncertainty, and then I will get on to Alibaba. Now, I sent out for the subscribers, look, this is how I think about uncertainty. And it’s pretty, if I have a market, an industry with uncertainties in the future. What do you do? Could be technological change, could be regulatory change, it could be change in behavior. I view this for a lot of the entertainment sector. Like I can’t tell what people are gonna watch on their phones in three to five years. Short video, is that gonna stay or is it gonna fade? Live streaming’s huge. Is live streaming gonna be big and fire? There’s so much, like a lot of media space. I find that the technology and the consumer behavior change so quickly, I have a hard time predicting it. I feel a lot more comfortable in things like people buying milk and bread. Okay, but you can have lots of types of uncertainties and the five that I suggested to you were as an investment approach is like, look, number one, just stay out. If you feel the terrain is too uncertain, the landscape changes too fast, just stay out. Which is pretty much what a lot of people are weighing as an option with China Tech right now. Do I just need to stay out? You see this on Twitter all the time. Another option is okay. Stay in, but demand a larger margin of safety. If the company’s worth 100, I’m not buying in at 60, I’m buying in at 30. That way, I have a bigger cushion. That’s a way to do it. Just get a bigger margin of safety. That’s how kind of Ben Graham did it when he was investing in companies in the 1930s during the Great Depression of the US. He had a huge margin of safety against quantitative things like cash. Option number three, just go short term. If you think things might change in the future, just don’t be exposed for very long. Get in, get out, get in, get out, buy, sell, buy, sell. Again, that’s Ben Graham. That’s not a bad way to do it. Number four, which is kind of where I tend to focus, is okay, I think there’s a lot of uncertainty. I’m gonna buy the best companies with the best long-term secular trends and I’m just gonna cruise over the storm clouds. Yes, things may be good, things may go bad, but this company is such high quality in terms of its competitive strength, its long-term demand trends, that I’m just gonna fly the airplane above the storm clouds. And in five to ten years, it’ll be fine. That’s Philip Fisher, who’s the other guy who invested in the Great Depression. He bought Motorola, these highest quality of companies, and ten years later it turned deal. That’s kind of the a lot of what you hear people weighing online this week is do we just get out option number one too much uncertainty or do we just have to go really long term. That’s option number four. Option number five, which I don’t really talk about on this podcast, is what my boss, the Saudi billionaire Walid was so good at, is he would just structure the uncertainties out of the deal. He would do private deals, and he would just identify the uncertainties, and he would just structure them out. If A happens, you have to cover me here. If B happens, we shift that to the LP. Then he would just eliminate them in the deal terms. Now in theory, if you’re good at equity stuff, you can do that with options and other things, but just structure them out. You know, so those are kind of five options. That’s a really simplistic way. I’m sure all the, those of you who manage portfolios, that’s really simple, but anyways, that’s just a way to do it. So I’ll put that in the show notes. It’s just a, in a way to do this stuff. Okay. But with that, let me, so those are the two concepts for today. Role of the state approaches to high uncertainty environments. With that, let’s do Alibaba. What worries me about Alibaba over the long term? Which is obviously that sort of approach number four. Okay, Alibaba. Now, I mean, I just used the same approach I said. Do I understand the secular long-term trends? Yes, I do. For their e-commerce business. Now, there’s a lot of businesses here, so we have to kind of tease it apart. Do I understand the competitive structure? I’ve written like a gazillion articles about that. Okay, the role of the state. Those are my three forces I just mentioned. This is where you kind of have to tease Alibaba apart. Does the state have an active role in Alibaba’s business? Well, you kind of tease it apart. What is their business? Do they have an active role in e-commerce? For Alibaba, that would be Fresh Hippo, SunArt, Taobao, T-Mall, Ulema. I mean, does it have an act of interest beyond just standard regulations? And I would say no, I don’t think it does. I think it’s buying and selling shoes. I think it’s people delivering stuff on scooters. I think there’s some issues there with regard to normal regulation, but I don’t see them shaping that industry actively. Do I think they have an active role in logistics? No, I don’t. Okay, what about their other businesses? Do they have an active role in Ant Financial, which is payment, credit, and to a much lesser degree, insurance and wealth management products? Absolutely they do. It is the highest, it’s on the short list of the things they care most about. So yeah, what does the government want in those spaces? It’s clear, they’ve basically shown their hand. They’ve sort of said, this is what we want. Consumer credit is gonna have to be done through banks. And Alibaba can help placement of consumer credit, but it’s gonna have to hold 30% of the bank balance. It can’t pass it all off to the banks. So they’ve already kinda said this back in October when they halted the anti-PO, and they kind of laid out what they thought should happen. Now payment is a little more unclear. I don’t have a clear read on what they really wanna do within payment. AliPay’s payment mechanism. WeChat Pay payment mechanism. But we have the digital UN being rolled out in various cities. What the government wants to do in payment is not clear to me. I don’t know. So that’s a question mark. So when I look at Valuing Ant, I really put a big question mark on those numbers. Okay, fine. Last business. What does the government, is the government an active player in cloud? Absolutely they are. They have deep interest in the development of China’s cloud business. And that is all good news for Alibaba. there are not going to be 20 little cloud companies. There’s going to be a handful of giants. And they’re going to work closely with the state to build one of the largest cloud markets in the world. Oh, and by the way, they’re going to keep the major Western players, Google, Microsoft, Amazon Web Services, out of China. So in this case, yes, the government is playing an active role. And it is a tremendous benefit to Alibaba. Absolutely. You can kind of see when they have these sensitive industries, the way the pattern tends to emerge is you don’t see one player, but you don’t see 20. You see three to five. How many state banks? Four. How many telco companies? Three. I mean, it’s always sort of that where there’s competition, but it’s a managed competition scenario. I think we’re going to see three to four cloud companies in China. Alibaba is out front and the government is going to be there. You know, this is riding the wave. where this is building infrastructure, technology infrastructure. I mean, do you really think the government is gonna let Chinese companies run on Amazon Web Services given what happened with Huawei and others? Absolutely not. No, this is a closed market for three or four players. So that’s all good. In that case, I think this is actually a benefit. So in those areas, do I have worries? No, I understand what’s going on with Ant. I can… basically discount the value. I understand what’s going on with cloud. I think it’s actually quite attractive. And the other areas, I don’t think they have an interest. So I don’t have worries there. Other things that have been in the press regarding government actions in the last six months, privacy, cybersecurity, antitrust. Those are kind of the levers you hear. Education. Well, Alibaba is not in education. Antitrust, privacy, cyber security. I think these are just mechanisms to achieve what it wants to achieve. So you ask the question, what does the government want? And then it uses these to achieve that. It’s kind of like when Trump did this, like Trump said, we’re going to use tariffs. to address the trade situation with the US and China and other countries. But then he immediately applied it to areas of technology that had nothing to do with trade. He was using the tariff as a mechanism to achieve his objectives in technology. Antitrust, privacy, cybersecurity, these are gonna be, there are concerns in their own right, but they’re also gonna be mechanisms used to achieve other goals. Within those things, I basically don’t have too many concerns. Okay. So what does worry me over long-term phenomenon? Number one, that I’ve been talking about what the government cares about from an industry perspective. There’s another dimension. When a certain company gets big enough, I think it starts to become a government interest just by virtue of its size. And I think that’s what’s happening with Alibaba and Tencent. I think they are so large that the government has an active interest in what they do just because of their size, in a way that they wouldn’t in e-commerce in smaller companies. And I think I probably underestimated this over the last six months, that I think they have an active interest in these three to four giant companies just because of their size. And therefore, what worries me in that regard is I worry that there will be moves to limit their size and market share because of their size. And they could use any mechanism to do this. They could use antitrust. They could use privacy. They could use any of these levers. But the goal is, are they gonna try and limit, let’s say Alibaba, and I’d say the same thing about Tencent, are they gonna limit their market dominance just because of their large size, which would pull them down, maybe stay the same, maybe get a little smaller? That’s a concern for me now. And that could alter the long-term trajectory of those companies. What if Taobao is limited to 30 to 40% of the market from now on? JD is 20 plus percent, Tmall is smaller, but Taobao has been over 50%. What if that is limited? That’s a concern. So I’m worried about that. In the last week, the thing that sort of changed a lot of the share prices was these announcements about the president of China talking about sharing the wealth and this large check that Tencent wrote to the government to share to the common good. And that freaked out the market. What does that mean? Is this just a big one time tax? If so, okay, that wouldn’t worry me. But we’re gonna see over the next five years every year, a big percentage of the earnings just transferred from the company to, I don’t know, whoever the government wants. Well, that would impact owner’s earnings. That would impact valuation. So that worries me that this is an ongoing thing and not a one-off. So I’m worried about that. Third thing I’m worried about within the, so basically there’s three. point five things I’m worried about within the role of the state as a factor. The third one would be that these companies are listed in the US and this one I’m actually the first two I just gave you I put under the question of maybe. I’m not sure but I’m worried about it and I think maybe. This third one I’m putting in under the column of I think this is absolutely gonna happen. I think The government does not want the major tech companies of China to be under the authority of U.S. regulators. I think they want them listing in Shenzhen, Shanghai, and Hong Kong in order to access political capital. Not political, to access international capital. So I’m not totally sure what that means. And this is a question to you. And I’ve been reaching out to lawyers and people who understand stock markets better than I do. What would that mean? Do I need to swap my shares? from the US to the Hong Kong exchange. Or if they’re ADRs and they’re fungible with Hong Kong and the US, does that matter? I don’t know the answer to that. I’m really putting that question out. What do you think? Is there someone who understands that situation? Because I would be, I mean, my baseline assumption is five years from now, these companies are going to be listed in Hong Kong. And Do I think they’re gonna get delisted? I don’t know, I don’t think so. I think the most likely thing you’ll see is what we’ve already seen with accounting, which is the US regulators tell these companies, you must provide this data. And then the Chinese government tells the same companies, it is illegal for you to provide that data. And these companies are just stuck in the middle. they don’t know what to do, especially the big four auditing firms don’t know what to do. But the government says you can’t give that data, that’s illegal. I think we’ll see stuff like that where it’ll just be kind of a standoff. But I think they’re, you know, we’re going to see this scenario where they’re told not to comply. Because I don’t necessarily think that’s a terrible position to have. It’s like, why are these major tech companies that are so central to life of China under the authority of the US government’s regulations, especially given the actions of the US government in the last couple years? That’s a totally reasonable point of view. So anyways, under the political rubric, what worries me long term? Number one. that the market share of the big companies because they’re so dominant might be limited. Number two, that these one-off transferring of wealth, tax, shared prosperity thing may be a regular thing. Number three, that these companies are gonna be removed from the authority of US regulators and end up in Hong Kong. And I’m still trying to figure out how to manage that, but that’s what’s worrying me. And then I said 3.5, that the third one would be, the 0.5 would be Ant Financials credit situation, payment situation, I think. But I already kind of discounted that six months ago, so that wasn’t a big issue for me. Okay, so that’s kind of my list, under the role of the state as a force impacting the long-term trajectory of Alibaba. I have one other. One other which is under the realm of competition, not the role of the state that worries me, and that’s WeChat mini programs. That worries me as a serious competitor to Alibaba’s core engine, which is e-commerce. You know, Alibaba marketplace platform, we all understand that business model. What WeChat mini programs is, is it’s Shopify plus Facebook. It’s, you know, you can own your own store. You’re not gonna have to live in the shopping mall that’s run by Alibaba. You can have your own shop that you own on the side street. That’s Shopify. That’s basically what many programs are. And I think that’s half the equation for the business model. You can open a store on a side street. It’s a difference between, hey, I’ve rented a space in a popular shopping mall, but they keep raising the rent on me every year. That’s living under the Alibaba marketplace. Or I’m gonna buy my own store on a side street and I own it and I don’t have that problem anymore, which is what Mini Programs is, which is what Shopify is. That’s half the equation of that business model. The other half of that business model is, look, this is still a game of you have to go where the people are and the people are in marketplaces and they’re on social media. So yes, you’ve got your own Shopify store, your own mini store, mini program store, but you’re gonna still have to be very good at social media and live in that world, and they’re gonna charge you as well. Right, so these direct to consumer companies said, we’re not gonna be in Amazon, we’re gonna go direct to consumer. And then, you know, their cost structure dropped, but then their marketing expense that they paid a Facebook went through the roof. So you still have the demand side of the equation in addition to the supply side. Now, if you’re doing Shopify, you’re gonna end up spending a ton of money on Facebook and you’re gonna have to be really good at digital marketing. Tencent is different because they own both parts of the equation. They have the mini programs and they have the social media piece. They have both. That makes them very unique. That’s a formidable business model. versus the traditional marketplace business model we’ve seen with Amazon, Taobao, Shopee, and the others. So that one worries me. You know Alipay was the dominant payment mechanism in China for a long long time, 10 years, and then WeChat said we’re going to do payment. And we’re not going to do payment as a standalone thing sitting on e-commerce. We’re going to do payment within social media messenger. And they went from nothing to 40 plus percent of the market in a couple of years. It was a devastating business model that just rolled through their world. Um, I’m worried we’re going to see the same thing in e-commerce that they’re going to jump in and really take a big. portion of the market. And they’ve been doubling their GMV, you know, 100% in the last year, they’re up to $250 billion GMV this last year. So I’m worried about that. And the question is who’s going to win? And my answer is I don’t know. I don’t. I know like it’s like, it’s like, we’ve got a lion, and the lion’s been killing everything and winning and suddenly a tiger shows up. and the tiger and the lion are facing off for the first time. Who’s going to win the fight between the lion and the tiger? Literally nobody knew because they both look pretty impressive. They both got jaws, they both got teeth, they’re both really big. Nobody knew until you actually put them in a cage and figured out, oh and by the way the tiger usually wins. But nobody knew that. Right, that to me is mini programs versus Taobao. Who’s going to win? I don’t know, but I know one’s a tiger and one’s a lion. I’m pretty confident of taking apart the business models. That’s what I’m looking at. So that’s the other. And those are kind of my 4.5 worries about sort of the longer term trajectory of Alibaba right now. But I’m also very excited about the cloud business. And I think that’s very interesting. So anyways, sum those up. Limited market share due to antitrust concerns of the government, recurring sort of large taxes due to this new philosophy, not new philosophy, what’s been talked about the last week. A removal from the authority of US regulators and what that means for various, that doesn’t change the company, but it could change the share prices, right? and consumer business and payment is a regulatory question mark in my mind. And then the competitive strength of WeChat mini programs. Those are the things that worry me. That’s my short list in my notes that I’m keeping an eye on. So every time something happens in the news, I sort of check my list and I see if it’s something new. And that’s kind of all I’ve come up with in the last year of all this. Now last point. You can put all of that under concepts, role of the state, and approaches to uncertainty. Now, okay, what do I like? Based on all this, what we’ve learned in the last six months, what does that mean in terms of companies I think are attractive? I really like e-commerce. I really like the domestic consumption story of China. When the companies don’t have… sort of dominant monopoly positions. If you remove that dominant monopoly-ish position from this, and we’re looking at, let’s say, JD. which only does e-commerce, which doesn’t do credit, which isn’t at the same level of sort of a stride the market like a colossus. That all looks pretty good. In fact, it looks like it’s in their favor because the government is basically opening up the e-commerce sector to give these smaller companies more space and more protection and sort of air cover from these giants. So that all looks quite good to me. And I think a lot of what’s going on is going to be good for these smaller e-commerce companies that sort of grow on domestic consumption, don’t really have an active state role involvement. And they aren’t these monopolies, not monopoly, but these giants. So I like that. I like core technology that is getting the mother of all catalysts from the government, that’s cloud, that’s semiconductor. That’s standards, that’s programming languages. That’s a lot of stuff where the government is doing everything it can to help those companies. So role of the state, that’s a wave. Very attractive. Healthcare is another one I think is pretty attractive. I’m gonna, I’m doing a couple, I did a little talk on this last week. I’m gonna do some more of this. I won’t get into that, but I think there’s a lot going on where the government is really active there. and being very supportive. So there’s a lot that’s going on. If you get an answer to those three questions, the landscape looks, anyways, that’s where I am. I hope that’s helpful. I mean, obviously there’s a lot going on right now. There’s a lot of anxiety, a lot of worry, and I don’t have a recommendation for you what to do. I mean, I don’t do that. I give you recommendations based on business models. competitive strength and defense ability because I think I have some expertise in that and I give you tools that you can use to apply yourself. That’s really what I’m doing here but I stopped short of saying this is good and this is bad because I don’t really feel like that would be doing you a good service. I mean I’m giving you the tools and I’m giving you recommendations on competitive strength and strategy but you got to make your own call on these things. Definitely don’t substitute my thinking for yours. As for me, I’ve been having a pretty spectacular week. On Tuesday morning, 6 a.m., I was officially out of quarantine, which was, I mean, it was such a strange feeling. Like, I literally didn’t know if I could lose, I couldn’t leave the room, right? You’re in the hotel room, you can’t even go to the hallway for two weeks. You just open the door and you sort of reach out and pull in the food and then you leave a trash bag. I wasn’t even sure, like, what was supposed to happen. I had to, like, call the desk. I’m like, so I can open the door, right? They’re like, yes. How do I get downstairs? They’re like, well, you just take the elevator. Like, I’m like, okay, because I wasn’t allowed to do that. It’s like nothing changed and everything changed. It’s like suddenly I went from being in this quarantine to suddenly just being a normal hotel guest. So I’m like, okay, I’ll take the elevator, I guess. And you go down to the lobby and I sort of walked outside 6 a.m. in Bangkok, sun’s coming up, always pleasant. And I just sort of walked down the street I’ve been staring at. for an hour a day for weeks. And it was weird just to look up. I’m like, this is such a bizarre experience. Then I had a great time. I sort of got my ride back to my condo, discovered that the pigeons had absolutely devastated my balcony, because I’d been gone for three months, and I’d never really had pigeon problems before. But yeah, I misjudged that situation. There were like five of them living there full time. There were eggs and stuff, and it was awful. So I learned a little lesson there. Fortunately, I hired a cleaning service to come in and do that, and one of the nice things of living here. So that I got all taken care of. Ended up buzzing around on the scooter. I went to see some condos, which is kind of what I’ve been looking at, ones I had my eye on. Saw one at 1 p.m., which was pretty cool. an offer for it on 2 p.m. That got confirmed the next day. So not an impulse purchase, but a little bit. Anyways, it’s been a pretty great week. Let’s see, I guess that’s it for me. I hope everyone is doing well. I hope this is helpful. If you have any thoughts on how to assess U.S. listed shares and… the difference between the ADRs and sort of Hong Kong and all that, I’d really appreciate it because I’ve been sort of reaching out to lawyers to ask because it’s just not my area, but I got to sort of trying to get that settled in my brain and what that means. So then if you have any advice or anyone you think I should read, please send it my way, I’d appreciate it. But that’s it for me. Hope everyone’s doing well. Take care and I will talk to you next week. Bye bye.

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