WEBVTT - The Chinese Chip Giant That Could Be Nvidia's Biggest Threat 0:00:02.480 --> 0:00:14.000 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.120 --> 0:00:21.680 Hello and welcome to another episode of the Odlots podcast. 0:00:21.760 --> 0:00:24.160 I'm Jill Wish and I'm Tracy Alloway. 0:00:24.320 --> 0:00:28.120 Tracy, we recently did that episode with Mackenzie Hawkins's talking about, 0:00:28.240 --> 0:00:31.440 you know, some of the geopolitics of AI and chips, 0:00:31.480 --> 0:00:33.680 et cetera. And when it comes to AI chips, it 0:00:33.760 --> 0:00:36.559 basically is in video and nobody else. But there is 0:00:36.640 --> 0:00:40.040 one other company that's clearly like lurking out there in 0:00:40.080 --> 0:00:40.520 the picture. 0:00:41.360 --> 0:00:42.600 Yes, right, So that. 0:00:42.520 --> 0:00:44.559 Was one of the things that came up, which is that, yes, 0:00:44.800 --> 0:00:48.159 Vidia has this huge dominance with it in AI, but 0:00:48.400 --> 0:00:51.199 you know, there is this Chinese company, as we said, Huawei, 0:00:51.360 --> 0:00:54.480 that is making a lot of progress. If there's one 0:00:54.640 --> 0:00:57.960 area of concern or if there's one possibility that another 0:00:58.040 --> 0:01:01.560 company's tech could really sort of like formed the backbone 0:01:01.600 --> 0:01:04.160 of AI, this is is probably them. 0:01:04.640 --> 0:01:08.400 I find Huawei really fascinating as a company. So it's 0:01:08.440 --> 0:01:11.920 sort of this national champion, right And even the name 0:01:12.040 --> 0:01:15.880 I think means something like China has achievements or China 0:01:15.959 --> 0:01:19.480 is able to achieve or something like that. And yet 0:01:20.120 --> 0:01:25.800 it has these like really weird European headquarters European style headquarters. Yeah, 0:01:25.880 --> 0:01:29.119 they look like French castles and things like that. And 0:01:29.400 --> 0:01:32.360 you hear all these stories about how aggressive some of 0:01:32.400 --> 0:01:36.440 the Huawei sales tactics are. There was the arrest of 0:01:36.480 --> 0:01:41.160 the founder, ridden junk Fay's daughter a few years ago. 0:01:41.680 --> 0:01:44.039 So there's just all this stuff going on and like 0:01:44.120 --> 0:01:46.720 kind of weird tensions, and I want to learn more 0:01:46.760 --> 0:01:49.240 about what this company actually is and what it does. 0:01:49.440 --> 0:01:52.640 Totally a lot of mystery, a lot of perhaps paranoia, 0:01:52.640 --> 0:01:54.960 a lot of concern about what it does and who 0:01:54.960 --> 0:01:58.520 it is and it's connection to the Chinese government, the CCP, 0:01:58.920 --> 0:01:59.360 et cetera. 0:02:00.000 --> 0:02:02.440 Okay, we have to learn more if this is going to. 0:02:02.440 --> 0:02:04.480 Be the one company they could at some point in 0:02:04.520 --> 0:02:07.560 the future threatened in video. And we really do have 0:02:07.720 --> 0:02:09.720 the perfect guest to talk about it. We are going 0:02:09.800 --> 0:02:11.079 to be speaking with Evado. 0:02:11.320 --> 0:02:11.920 She is the. 0:02:11.880 --> 0:02:15.400 Author of the fairly new book came out earlier this year, 0:02:15.600 --> 0:02:19.480 House of Huawei, The Secret History of China's most powerful Company. 0:02:19.760 --> 0:02:21.760 It's really an extraordinary book. 0:02:21.880 --> 0:02:24.840 I actually think someone asked me the other day there 0:02:24.880 --> 0:02:27.200 are a few books you would read about China these days, 0:02:27.560 --> 0:02:29.720 and this is now I think sort of an instant classic. 0:02:29.800 --> 0:02:31.760 So Eva, thank you so much for coming on odd 0:02:31.760 --> 0:02:32.880 lots kind of perfect timing. 0:02:33.320 --> 0:02:34.639 Thank you so much for having me here. 0:02:35.120 --> 0:02:39.200 Actually is really perfect timing because just today the founder 0:02:39.280 --> 0:02:43.560 of the company, Renjong Fei, gave a interview with People's Daily, 0:02:43.720 --> 0:02:45.960 and as clear in your reporting, he does not do 0:02:46.040 --> 0:02:49.320 like a ton of media etc. Certainly not like Jensen 0:02:49.400 --> 0:02:52.359 Wang always talking to the press. What do you take 0:02:52.400 --> 0:02:54.880 away from that that suddenly there's a just to I 0:02:54.919 --> 0:02:57.640 think literally just today or maybe yesterday, that there's a 0:02:57.760 --> 0:03:00.680 Ren Jong fey interview with People's Daily. 0:03:01.200 --> 0:03:04.280 Yeah, so this is very very rare for them to 0:03:04.320 --> 0:03:09.560 publish a full interview transcript with a private enterprise entrepreneur 0:03:09.760 --> 0:03:11.840 on the front page of the People's Daily, which is 0:03:11.840 --> 0:03:17.280 the party's mouthpiece and usually is chronicling what the nation's 0:03:17.360 --> 0:03:20.840 leader Sdingping and other senior officials are doing. And I 0:03:20.880 --> 0:03:24.760 think it really speaks to Huawei's sort of central role 0:03:24.840 --> 0:03:27.360 now in China's tech industry, and not only that in 0:03:27.520 --> 0:03:32.639 diplomatic relations. This is a message to the United States 0:03:32.680 --> 0:03:35.080 and the world for them to put his words on 0:03:35.160 --> 0:03:37.800 the front page of People's Daily ahead of time, when 0:03:37.920 --> 0:03:41.720 Huawei is very much in the crosshairs of the Trump administration. 0:03:43.320 --> 0:03:46.160 I want to ask the pressing question on my mind 0:03:46.280 --> 0:03:49.040 and then maybe get into other important stuff. But what 0:03:49.200 --> 0:03:53.000 is the deal with the European castle headquarters for this 0:03:53.160 --> 0:03:55.880 company that has sort of grown in tandem with the 0:03:55.960 --> 0:04:00.360 Chinese economy and is considered a national champion, national symbol 0:04:00.440 --> 0:04:04.320 in many ways. Why do they have French castles and 0:04:04.400 --> 0:04:06.760 like Greek statues as their headquarters. 0:04:07.600 --> 0:04:11.000 Yeah, this is one of the strange and amusing things 0:04:11.000 --> 0:04:13.560 about this company. They have this sort of larger than 0:04:13.640 --> 0:04:18.080 life campus that just mystifies people when they come to visit. 0:04:18.200 --> 0:04:22.240 They have like a replica of Versailles, they have a 0:04:22.320 --> 0:04:25.800 replica of the castle of Heidelberg from Germany, and they 0:04:25.839 --> 0:04:29.080 have their R and D operations in things like European 0:04:29.120 --> 0:04:30.000 style castles. 0:04:30.040 --> 0:04:33.240 And it's very strange to people, and this has never 0:04:33.320 --> 0:04:36.440 been fully explained by the company, but in a way 0:04:36.520 --> 0:04:39.719 it does show the level of their ambition, like they 0:04:39.720 --> 0:04:43.640 are building sort of an empire far more than just 0:04:43.880 --> 0:04:47.000 what many people think of sort of a single tech 0:04:47.000 --> 0:04:49.840 company does, and it's global footprint. 0:04:50.560 --> 0:04:52.600 The weird thing about Lalawaeys, you know, when we talk 0:04:52.640 --> 0:04:56.159 about these big Chinese industrial giant. Typically a lot of 0:04:56.200 --> 0:05:00.240 them are publicly traded or talking about puid or show 0:05:00.360 --> 0:05:03.359 me or so forth, or cattle the battery company. And 0:05:03.440 --> 0:05:07.240 then it's also not a state owned enterprise. You tell 0:05:07.240 --> 0:05:09.760 in the book the story it was founded in Shenzhen, 0:05:09.960 --> 0:05:13.279 and either the late seventies or early eighties, they explicitly 0:05:13.279 --> 0:05:16.839 decided not to go down the Sooe wrote, unlike competitors 0:05:16.880 --> 0:05:17.400 ZT E. 0:05:17.640 --> 0:05:20.240 What is it though? Explain like what is the structure 0:05:20.240 --> 0:05:20.880 of this company? 0:05:21.240 --> 0:05:23.400 This sort of gets to the heart of why I 0:05:23.480 --> 0:05:27.520 was so interested in this company, Huawei Technologies, in that 0:05:28.000 --> 0:05:30.520 if you really if you understand how this company works, 0:05:30.560 --> 0:05:34.200 then you really do understand how China works writ large, 0:05:34.360 --> 0:05:39.240 and so it is this fusion between capitalism and the 0:05:39.279 --> 0:05:44.000 party controlled Chinese economy. That's where Huawei sits. So it 0:05:44.080 --> 0:05:48.880 is registered as a private company and it is privately held. 0:05:49.080 --> 0:05:53.799 They have resisted listing on the stock market for decades, 0:05:54.240 --> 0:05:57.479 which means that they are able to take a longer 0:05:57.560 --> 0:06:00.680 term view. They don't have to deliver quarterly results. They 0:06:00.720 --> 0:06:05.320 aren't under the gun from investors to be profitable every 0:06:05.360 --> 0:06:09.320 single year even though they are, so they sort of 0:06:09.400 --> 0:06:12.280 are able to flow more of their money into long 0:06:12.360 --> 0:06:15.359 term R and D investments, And the other part of 0:06:15.400 --> 0:06:19.960 it is they do have national guidance under the Party 0:06:20.120 --> 0:06:24.800 from Beijing as one of the nation's tech champions, and 0:06:24.880 --> 0:06:26.359 so it's kind of this fusion. 0:06:27.080 --> 0:06:30.480 How does competition with CTE actually work. Huawei is this 0:06:30.520 --> 0:06:35.080 big important privately held company in China, but ZTE is 0:06:35.120 --> 0:06:38.840 part state owned. I guess both of them like have 0:06:39.040 --> 0:06:43.000 some sort of relationship obviously with the CCP, But how 0:06:43.040 --> 0:06:45.640 do they actually compete against each other? And I guess 0:06:45.720 --> 0:06:49.800 how does the Party actually view the purpose of that competition. 0:06:50.560 --> 0:06:55.359 Yeah, so HUAWE and CTE they're crosstown rivals. They're both 0:06:55.400 --> 0:06:59.080 based in Shinjin. They're sort of like siblings. How they've 0:06:59.120 --> 0:07:02.479 grown up in some ways very similar in the types 0:07:02.520 --> 0:07:06.520 of products they offer and their global footprints. And this 0:07:06.920 --> 0:07:11.600 reflects how China has built its economy, which is it 0:07:11.720 --> 0:07:16.560 encourages this kind of competition among domestic companies and they 0:07:16.560 --> 0:07:20.200 have to fight it out amongst themselves, and this pushes 0:07:20.240 --> 0:07:23.920 them to be more efficient, to be better, and Huawei 0:07:24.000 --> 0:07:26.640 largely has been the one who's worn out. 0:07:26.920 --> 0:07:30.000 But there's competition everywhere, right, and there's competition in the 0:07:30.120 --> 0:07:33.320 United states, what is it specifically about the bones of 0:07:33.360 --> 0:07:37.200 this company that makes it unique in how cutthroat and 0:07:37.200 --> 0:07:38.040 competitive it is. 0:07:38.640 --> 0:07:44.880 I think Huawei is infused in this Chinese communist ethos 0:07:44.960 --> 0:07:49.280 of sacrifice towards a larger calls, towards the company's calls 0:07:49.360 --> 0:07:54.280 and the nation's calls in a way that is quite unique. 0:07:54.640 --> 0:07:58.560 And so one example will be so in January nineteen 0:07:58.640 --> 0:08:02.560 ninety six, this seminal moment in Huawei's history, which was 0:08:02.600 --> 0:08:08.200 its first mass resisignation ceremony, and so Jen Jong Fei 0:08:08.320 --> 0:08:11.720 essentially fired his entire sales department and made them reapply 0:08:11.800 --> 0:08:14.640 for their own jobs because he was unhappy with his performance. 0:08:15.080 --> 0:08:18.000 But the way he went about this was just very 0:08:18.040 --> 0:08:21.240 different than what you would see in a Western company. 0:08:21.400 --> 0:08:23.880 So each of the salespeople had to write up a 0:08:23.920 --> 0:08:27.920 resignation letter, and then they held a rally where all 0:08:27.920 --> 0:08:33.120 the employees took turns criticizing themselves. You had salespeople blaming 0:08:33.160 --> 0:08:36.800 themselves and pledging that they were going to sacrifice themselves 0:08:36.920 --> 0:08:40.800 for the company's success. And this gets to this communist 0:08:41.160 --> 0:08:46.800 ethos of self criticism and sort of sacrificing your individual 0:08:46.840 --> 0:08:51.400 interests toward the national goal, which is really a key 0:08:51.440 --> 0:08:52.960 part of Huawei's culture. 0:08:53.440 --> 0:08:57.240 Tracy, would you do a self criticism and sacrifice for 0:08:57.280 --> 0:08:59.880 odd lags and talk go up on stage in front 0:08:59.880 --> 0:09:01.920 of the entire team and talk about ways that you 0:09:02.000 --> 0:09:02.320 fall in. 0:09:02.360 --> 0:09:05.760 Short, Joe, do I do self criticism every day? 0:09:05.760 --> 0:09:06.120 I would? 0:09:06.400 --> 0:09:08.360 It would take part in an odd Locke self criticism 0:09:08.400 --> 0:09:09.280 session in front. 0:09:09.040 --> 0:09:09.440 Of all of you. 0:09:10.160 --> 0:09:13.320 Okay, since we brought up self criticism, which is very 0:09:13.400 --> 0:09:16.680 very much a CCP thing, and everyone remembers like the 0:09:16.760 --> 0:09:21.559 images and writings about self criticism sessions in like the 0:09:21.640 --> 0:09:27.520 nineteen sixties nineteen seventies, What exactly is the connection between 0:09:27.960 --> 0:09:32.480 Ren Jung Fei, the founder of Huawei and the CCP. 0:09:32.800 --> 0:09:36.040 I know he used to be a PLA engineer, I think, 0:09:36.120 --> 0:09:39.160 but other than that, like, what exactly is the connection? 0:09:39.920 --> 0:09:44.960 Yes? So the Party plays an overarching role in China, 0:09:45.120 --> 0:09:47.880 including over the private tech sector, and so it is 0:09:48.160 --> 0:09:52.559 always always there. So Huawei since its early days has 0:09:52.640 --> 0:09:56.640 had a Communist Party committee within the company, which is 0:09:57.000 --> 0:10:00.240 a normal thing and required in China, even for owned 0:10:00.320 --> 0:10:03.640 companies like Walmart or Disney that are operating in China. 0:10:04.120 --> 0:10:07.280 And so this throughout its history has played a role 0:10:07.360 --> 0:10:13.040 in aligning the company's operations with national goals, and in 0:10:13.040 --> 0:10:15.920 some ways Doubles is an HR department, and that they 0:10:15.960 --> 0:10:20.560 have a role an authority to fire people, to recommend 0:10:20.600 --> 0:10:23.040 people for promotion or vice versa. 0:10:24.320 --> 0:10:25.520 Yeah, this is really interesting. 0:10:25.679 --> 0:10:28.280 They also sort of police the behavior of at least 0:10:28.280 --> 0:10:30.400 the party members who work for the company. I think, 0:10:30.440 --> 0:10:32.200 like you talk in your book about, like you know, 0:10:32.240 --> 0:10:35.720 they make sure that they're engaging in good moral behavior 0:10:35.760 --> 0:10:37.480 like not gambling and stuff like that. 0:10:38.120 --> 0:10:42.400 Yeah, certainly, And so the party members are It's not 0:10:42.520 --> 0:10:46.440 the majority of Huawei's employees, but a sizeable proportion of 0:10:46.480 --> 0:10:49.880 the staff are party members, and the Party Committee specifically 0:10:50.160 --> 0:10:53.640 is in charge of overseeing the moral guidance of these 0:10:53.720 --> 0:10:56.760 employees who are supposed to be leaders within the company. 0:10:56.880 --> 0:11:02.000 And every few years there is the crackdown on immoral 0:11:02.080 --> 0:11:17.640 behavior within a company that aligns with nationwide crackdown. 0:11:22.840 --> 0:11:25.960 Can I ask a very very basic question which probably 0:11:26.000 --> 0:11:28.760 should have been my first question instead of asking about 0:11:28.800 --> 0:11:33.120 the castles? But what does Huawei actually do and what 0:11:33.160 --> 0:11:36.840 did they start out making versus what they make and 0:11:36.920 --> 0:11:37.400 do now? 0:11:38.320 --> 0:11:41.280 So the way to think about Huawei is right now, 0:11:41.320 --> 0:11:44.920 we live in this information economy and data is sort 0:11:44.920 --> 0:11:48.679 of the most valuable commodity in any nation now, and 0:11:48.840 --> 0:11:53.079 so Huawei is the company that builds the pipes that 0:11:53.160 --> 0:11:56.360 carry data both in China and around the world. It's 0:11:56.840 --> 0:12:01.520 emerged as the most proficient company that does this, that 0:12:01.600 --> 0:12:05.480 builds the networks for both internet and phone data around 0:12:05.520 --> 0:12:08.440 the world. And in addition to that, it's also China's 0:12:08.520 --> 0:12:12.480 leading producer of chips, which right now are the heart 0:12:12.600 --> 0:12:16.480 of this AI revolution. And so the US has Nvidia, 0:12:16.600 --> 0:12:22.079 and China's alternative is Huawei. And so they make telecom networks, 0:12:22.280 --> 0:12:25.880 they make the chips, and they also have expanded to 0:12:27.000 --> 0:12:33.160 a wide range of other products, including consumer technologies like smartphones, 0:12:33.559 --> 0:12:37.559 smart watches, and smart cars. The most recent one. 0:12:38.160 --> 0:12:38.960 Oh, I didn't realize. 0:12:39.000 --> 0:12:42.360 It's really amazing with these big Chinese tech giants, they 0:12:42.360 --> 0:12:45.480 really build everything. And I actually do think sort of 0:12:45.520 --> 0:12:47.960 aside here, it's interesting that like ten years ago, there 0:12:48.040 --> 0:12:51.080 was talk about an Apple car, and they spent a 0:12:51.080 --> 0:12:53.640 lot of time looking into getting into cars and it 0:12:53.800 --> 0:12:55.359 just sort of never materialized. 0:12:55.640 --> 0:12:56.480 And yet hear you. 0:12:56.400 --> 0:12:58.680 Of these here's a company that was clearly late to 0:12:58.720 --> 0:13:02.560 the smartphone game relative to the Apple iPhone, which was 0:13:02.600 --> 0:13:05.400 the beginning, and now it's doing cars and watches and 0:13:05.440 --> 0:13:08.000 everything else, and all the five G gear and all 0:13:08.000 --> 0:13:09.400 the things that Apple doesn't do. 0:13:09.920 --> 0:13:12.160 It strikes me is very revealing. 0:13:12.400 --> 0:13:15.200 There's a comment from the founder that was I think 0:13:15.559 --> 0:13:17.520 dates back to the nineties where he said a country 0:13:17.559 --> 0:13:20.560 without its own program controlled switches is like one without 0:13:20.600 --> 0:13:25.880 an army. That strikes me as something that he identified, 0:13:25.920 --> 0:13:28.920 which now almost every country or everyone around the world 0:13:29.000 --> 0:13:31.000 is thinking. It's almost like he was thirty years ahead 0:13:31.000 --> 0:13:33.760 of his time, because if you think about the anxiety 0:13:33.480 --> 0:13:36.800 in the US about various technologies that we don't build here, 0:13:36.840 --> 0:13:39.079 if you think about the anxiety in Europe, et cetera, 0:13:39.480 --> 0:13:43.840 it really seems like that line is now becoming conventional 0:13:43.840 --> 0:13:46.599 wisdom among companies and governments all over the world. 0:13:46.960 --> 0:13:50.240 Yes, it really speaks to the role of technology in 0:13:50.360 --> 0:13:54.000 nations and its relationship to the governments in which there's 0:13:54.080 --> 0:14:00.320 always been this through line from technology to nations sort 0:14:00.320 --> 0:14:04.720 of control and surveillance operations. And so that that is 0:14:04.760 --> 0:14:07.600 why Huawei has been sort of in the crosshairs of 0:14:08.320 --> 0:14:11.160 not only the US governments but governments around the world. 0:14:11.440 --> 0:14:13.280 Is this role out of place? 0:14:13.880 --> 0:14:16.440 So on this note, one thing I'm really curious about 0:14:16.640 --> 0:14:21.200 is how does Huawei actually make big decisions. So you know, 0:14:21.440 --> 0:14:25.320 for instance, if it wants to launch a self driving car, 0:14:25.640 --> 0:14:28.680 what does that discussion actually look like. And I guess, 0:14:28.720 --> 0:14:31.880 like we just did an episode with Ricardo Houseman where 0:14:31.880 --> 0:14:35.520 we were talking about economic complexity and the idea of 0:14:35.760 --> 0:14:39.680 countries sort of jumping from product to a more complicated 0:14:39.720 --> 0:14:42.720 product and then a more complicated product after that. But 0:14:42.800 --> 0:14:46.120 I guess how much interrelation is there between all the 0:14:46.160 --> 0:14:47.440 things that Huawei makes. 0:14:47.960 --> 0:14:51.080 So Huawei's founder in Yung Fei is still the leader 0:14:51.120 --> 0:14:55.280 of the company and people have been anticipating his retirement 0:14:55.400 --> 0:14:58.920 for many years and he's still unclear when he will retire, 0:14:59.080 --> 0:15:03.440 and so no he is making those decisions, and under him, 0:15:03.880 --> 0:15:08.120 there are rotating chairs who take It's kind of a 0:15:08.160 --> 0:15:11.960 strange system. They take turns doing half year stints as 0:15:12.160 --> 0:15:16.160 Huawei's the acting CEO, and so it is a collective 0:15:16.320 --> 0:15:20.200 decision that's being made about the company's broader strategy. And 0:15:20.240 --> 0:15:25.120 this is meant to provide consistency in the company's direction 0:15:26.040 --> 0:15:29.120 going forward, especially as they're looking to a future where 0:15:29.440 --> 0:15:30.960 mister n has retired. 0:15:32.120 --> 0:15:34.480 One of the things that I had forgotten about that 0:15:34.560 --> 0:15:37.120 you talk about in your book is how many big 0:15:37.160 --> 0:15:40.160 networking companies there used to be even ten years ago, 0:15:40.200 --> 0:15:43.320 but certainly like twenty years ago or twenty five years 0:15:43.360 --> 0:15:45.440 ago around the dog Com Boble and there's just all 0:15:45.480 --> 0:15:47.760 these names that I had really I can't remember the 0:15:47.840 --> 0:15:51.360 last time Ericson still exists, but it's clearly just nothing 0:15:51.480 --> 0:15:54.440 like what it used to be. There's three Colm and 0:15:54.600 --> 0:16:00.560 Palm in Nortel, Northern Telecom and Loosened and Marcone, like 0:16:00.760 --> 0:16:03.200 all of these companies that I just hadn't forgot, had 0:16:03.360 --> 0:16:07.080 forgotten about for years, these sort of makers of telephone gear, 0:16:07.120 --> 0:16:10.480 and there's others too, and lund I didn't realize and 0:16:10.960 --> 0:16:13.360 correct me if I'm wrong. It basically seems like the 0:16:13.400 --> 0:16:16.000 reason we don't talk about any of those companies anymore 0:16:16.400 --> 0:16:20.280 is basically due to Huawei, and Huawei specifically really was 0:16:20.280 --> 0:16:24.040 the story of all these different telecom companies ultimately losing 0:16:24.040 --> 0:16:25.280 out Huawei. 0:16:25.280 --> 0:16:29.120 Certainly so there was a period during the two thousands 0:16:29.120 --> 0:16:32.160 when Huawei just sort of mopped the floor with its 0:16:32.200 --> 0:16:35.400 competition around the world and ran a lot of these 0:16:35.880 --> 0:16:40.000 major companies out of business, and so Canada had Nortel, 0:16:40.480 --> 0:16:44.240 the UK had Marconi. These were gear makers who are 0:16:44.240 --> 0:16:47.960 making similar equipment to Huawei, and they all just went 0:16:47.960 --> 0:16:51.080 out of business within a span of a few years. 0:16:51.280 --> 0:16:55.400 And that's partly why officials in the West started ring 0:16:55.440 --> 0:16:58.000 the alarm a few years ago, which was they looked 0:16:58.000 --> 0:17:01.320 around at the global market and it was all Huawei. 0:17:01.760 --> 0:17:05.800 It's just dominating this market. And in a way for 0:17:06.160 --> 0:17:09.560 Western countries it was sort of an own goal. They 0:17:09.560 --> 0:17:13.000 could have fought harder to keep their companies in this market, 0:17:13.080 --> 0:17:18.280 which is critical to technological development and critical to national security. 0:17:18.400 --> 0:17:21.520 But these companies all went wunder and there's only a 0:17:21.520 --> 0:17:24.919 handful of companies and the world left that make this 0:17:25.000 --> 0:17:25.720 kind of equipment. 0:17:26.440 --> 0:17:29.640 So speaking of national security, you make the point towards 0:17:29.720 --> 0:17:32.760 the end of the book that Huawei's goals they go 0:17:32.880 --> 0:17:38.159 beyond just shareholder returns. It's also concerned with China's place 0:17:38.280 --> 0:17:42.520 in the world and helping boost China's competitiveness and all 0:17:42.560 --> 0:17:45.840 of that. And obviously there's that CCP link as well 0:17:45.840 --> 0:17:49.199 that we already discussed. But I guess my question is 0:17:49.240 --> 0:17:52.600 what are the sort of strengths and weaknesses of having 0:17:52.760 --> 0:17:57.520 a corporate mission that goes beyond just pure profit. How 0:17:57.560 --> 0:18:00.200 does that actually affect the performance of the company. 0:18:01.240 --> 0:18:04.560 Well, for the most part, this has been very successful 0:18:04.640 --> 0:18:08.040 for Huawei, and that part of why it's become number 0:18:08.119 --> 0:18:11.080 one in its field around the world and difficult to 0:18:11.160 --> 0:18:15.879 challenge is because it's not playing by these same rules 0:18:15.920 --> 0:18:18.679 where it needs to seek profitability and it needs to 0:18:18.720 --> 0:18:23.639 maximize profitability kind of explicitly, that's not its main mission, 0:18:24.040 --> 0:18:27.000 and it's not publicly traded, and so they can take 0:18:27.200 --> 0:18:31.119 temporary losses and plow all their money into R and 0:18:31.200 --> 0:18:34.520 D in a way that like a publicly listed US 0:18:34.640 --> 0:18:39.359 company might find difficult to convince investors to put up with. Yeah, 0:18:39.440 --> 0:18:44.119 so it has allowed Huawei to become incredibly strong and 0:18:44.160 --> 0:18:48.360 incredibly competitive in a way that's difficult for Western rivals 0:18:48.400 --> 0:18:52.080 to compete with. I guess one major risk of this 0:18:52.200 --> 0:18:56.520 kind of alignment with Beijing is, you know, you become 0:18:56.680 --> 0:19:01.879 at the whim of China's government policy, which often comes 0:19:01.920 --> 0:19:06.560 in swings and often goes overboard. And Huawei is one 0:19:06.600 --> 0:19:09.800 of the few companies that has survived in such a 0:19:09.800 --> 0:19:12.359 strong state from the nineteen eighties to the present day, 0:19:12.440 --> 0:19:17.040 and many companies have gone under in China under sort 0:19:17.080 --> 0:19:18.280 of these political wins. 0:19:18.960 --> 0:19:23.160 It does seem like there's a parallel between the trajectory 0:19:23.320 --> 0:19:26.600 of Huawei and also the current government under a shujan Ping. 0:19:27.160 --> 0:19:28.720 Ren Chung Feng's own. 0:19:28.640 --> 0:19:32.040 Father was sort of cast out of the Communist Party 0:19:32.080 --> 0:19:34.640 or criticized or something like that. He was a persona 0:19:34.720 --> 0:19:38.119 non grata in some manner or another, much like she's 0:19:38.240 --> 0:19:42.320 own father. And yet Ren has obviously committed himself to China. 0:19:42.400 --> 0:19:46.119 Obviously she is, he's the president of the country. It 0:19:46.160 --> 0:19:48.160 does feel like there has been this sort of clear 0:19:48.240 --> 0:19:50.800 co evolution. One of the things that you write about 0:19:50.840 --> 0:19:53.359 in your book that I thought was interesting is he 0:19:53.520 --> 0:19:55.600 was talking about like people who got sort of kicked 0:19:55.600 --> 0:19:57.040 out of the party, and he says, you know, if 0:19:57.080 --> 0:19:59.560 you get cast into the fire and you survive, then 0:19:59.560 --> 0:20:00.680 you become the phoenix. 0:20:01.040 --> 0:20:02.520 It really does seem like a. 0:20:02.440 --> 0:20:07.040 Story here about sticking with the party and sticking with 0:20:07.080 --> 0:20:11.920 the country even when you suffer personal misfortune because of it. 0:20:12.760 --> 0:20:18.880 Certainly, and Huawei's story and specific is China's story. More broadly, 0:20:19.520 --> 0:20:24.159 the company was founded at the dawn of China's grand 0:20:24.240 --> 0:20:27.280 experiment with capitalism, when it was starting to open up 0:20:27.400 --> 0:20:33.320 from purely socialist economy, and it's been in step with 0:20:33.880 --> 0:20:39.280 China's development ever since, and so its fate is intertwined 0:20:39.520 --> 0:20:43.720 with Beijing's, probably more than ever now. And this has 0:20:43.920 --> 0:20:47.080 been something that Jen Jong Fei has tried to resist 0:20:47.080 --> 0:20:50.960 at times, to put some distance between himself and the government. 0:20:51.200 --> 0:20:54.920 But what they make it's so critical for the nation's 0:20:55.000 --> 0:21:00.320 technology industry, so critical for national security, that there's no 0:21:00.359 --> 0:21:01.639 way of really separating it. 0:21:02.359 --> 0:21:05.439 I was just about to ask about tensions between the 0:21:05.480 --> 0:21:07.800 company and the party, but can you give us some 0:21:07.880 --> 0:21:11.560 examples of where disagreement might arise or why RINN would 0:21:11.720 --> 0:21:14.920 want to separate Huawei a little bit from the CCP. 0:21:15.880 --> 0:21:19.600 Yes. So, in the nineteen nineties, Huawei went through this 0:21:19.720 --> 0:21:22.119 period where it was setting up a lot of joint 0:21:22.160 --> 0:21:26.320 ventures with state owned enterprises across the country. That was 0:21:26.680 --> 0:21:31.200 its first big step to take over the China's domestic 0:21:31.320 --> 0:21:35.800 market was through these tie ins with local governments. And 0:21:35.880 --> 0:21:39.800 so during that period there definitely was tension. There was 0:21:39.880 --> 0:21:43.520 definitely culture clash. So then Huawei had to be taking 0:21:43.560 --> 0:21:47.280 on all these new employees who were used to the 0:21:47.359 --> 0:21:51.239 slow pace of work in state owned enterprises, you know, 0:21:51.760 --> 0:21:56.480 leisurely lunch afternoon nap, and it was quite a shock 0:21:56.760 --> 0:22:00.080 for them coming to work at Huawei, which was a 0:22:00.119 --> 0:22:05.560 company where employees literally worked themselves to death in some cases, 0:22:06.080 --> 0:22:08.880 and that kind of martyrdom was sort of idealized. 0:22:09.040 --> 0:22:10.680 Can we talk a little bit about alcohol. 0:22:10.840 --> 0:22:13.720 Tracy posted a story from what was actually in the 0:22:13.760 --> 0:22:17.399 Wall Street Journal yesterday that there is another, yet another 0:22:17.520 --> 0:22:22.520 attempt by the Xjinpin government to crack down on certain excesses. 0:22:22.720 --> 0:22:26.200 And there are some like local government officials, and they 0:22:26.280 --> 0:22:28.840 consumed a bunch of bottles about you, and then one 0:22:28.880 --> 0:22:31.479 of them died that day. You also talk about this 0:22:31.720 --> 0:22:33.879 in your book, which is that, like the sales culture 0:22:33.920 --> 0:22:35.840 was so intense, and there was this expectation that the 0:22:35.840 --> 0:22:38.800 salespeople had to get more drunk than the colleagues or 0:22:38.880 --> 0:22:41.040 than the clients, so that the clients never felt embarrassed 0:22:41.040 --> 0:22:43.840 by how drunk they're getting. Talk to us about alcohol 0:22:44.040 --> 0:22:46.399 and like all this drinking and partying that goes on. 0:22:49.000 --> 0:22:52.119 Certainly so Huawei through most of its history in China 0:22:52.160 --> 0:22:56.320 has had this reputation of a very bro culture, which 0:22:56.640 --> 0:22:59.960 in China meant a lot of heavy drinking of heart 0:23:00.080 --> 0:23:04.359 to liquor by jo which is this incredibly strong liquor 0:23:04.880 --> 0:23:08.320 and China. 0:23:09.400 --> 0:23:11.080 You're not missing anything. I hate it. 0:23:11.640 --> 0:23:13.880 I got to try some keep going. 0:23:15.359 --> 0:23:19.160 So part of Chinese corporate culture of entertaining your clients 0:23:19.240 --> 0:23:22.719 is taking them out and getting just rip roaring drunk. 0:23:22.920 --> 0:23:26.280 And as the salesperson, you're supposed to get more drunk 0:23:26.400 --> 0:23:30.439 than your client to show respect to them, and so 0:23:31.720 --> 0:23:36.760 and so you have the salespeople who really are had 0:23:37.080 --> 0:23:42.000 were suffering pretty severe health consequences of this heavy drinking. 0:23:42.119 --> 0:23:46.400 And at some point, the officials within Huawei they were 0:23:46.480 --> 0:23:51.960