The Origin of Wealth

My friend Xiu Xiaoping, who runs a huge domestic and international incubator program for the Ministry of Science & Technology, just sent me a shiny publication with her photo on every page: “Africa Invest” Magazine, published by the MoST, summarizes the November China Exhibition in Cairo, promotes the Africa Invest Internet Club, lists Chinese companies in energy, telecom, and health tech; and contains pages and pages of government officials in photo ops. I can’t tell you exactly how many deals were made, and for how much, but this is certain: a lot is happening, and the money is flowing.

In two ways, watching China’s money move is a bit like looking at an iceberg. First, because the money does tend to group itself into giant piles, which break off and float away - to Africa, Southeast Asia, Brazil, the gas-rich, geostrategic ‘stans; and very occasionally, to the northern hemisphere. Second, because everything that really happens is, more or less, invisible.

Understanding the invisible calculus of how China sees the USA in relation to its money is a skill that every American business person might consider investing in. For the simple reason that as the economic center of the world continues to shift eastward and southward, we’re going to have a work a bit harder to stay relevant.

Back to the iceberg: I have an analytic to understand Chinese behavior, which I call “The 8 Value Contrasts between China and the USA.” (Unit of Society, Domain of Scarcity, Practice of Heroism, Resolution of Conflict, Containment of Risk, Origin of Wealth, Framework of Trust, and Existence of Absolutes.) As far as understanding China’s ODI goes, let’s look at the Origin of Wealth.

      Western concept: Bottom-up entrepreneurship. Idea and execution unified, then publicized by external communication and mass media.

      Chinese concept: Top down industrial policy. Vision and strategy separate from execution. Announcement of plan by the center, response and execution by business and the people. Internal coordination, minimal external communication.

Bottom line - the Chinese are horrible at all external communication except propaganda. In propaganda, the center exhorts its vision. Communication presents an idea looking for buy-in. In the western style, buy-in follows a presentation that ties together vision, strategy, and proof points of execution together.

Americans create wealth by selling – mostly ideas and stories – because our business leaders had to start from scratch. Chinese investors aren’t used to selling their ideas. They aren’t even used to being sold so much as instructed or led. So – one way to attract a little iceberg: don't think of selling ideas; think of getting a plan, ideally one with government and academic as well as private sector backing. Then lead the way.