3/7/22 Ukraine War Impact on China, Neil Shen Proposals for China Tech, ByteDance Shared Service Platform
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Insider Digest 3/7/22: Ukraine War Impact on China, Neil Shen Proposals for China Tech, ByteDance’s Shared Service Platform
Housekeeping / Announcements / Fun:
Ah, apologies if you were waiting for a newsletter last week and didn’t receive one — that’s because we didn’t send it after all! It ended up being too chaotic to try to follow the Ukraine war and what was happening to the capital markets over vacation so I have moved some of the less time-sensitive pieces to this week. Apologies about that!
More than ever, due to the speed at which information is coming in, I find myself really enjoying the conversations on our Discord server. It was crazy active last week, due to Ukraine, with many good discussions and viewpoints. Thank you to all of those who participated, and please do join us if you haven’t already!
The newest deal for the TBC Investment Syndicate is up, and it is in conjunction with Kevin Xu’s Interconnected.blog. If you are an accredited investor and applied to join the syndicate, you should have received an e-mail about the investment. If you don’t see it in your inbox, you can always see the deal here. Please don’t share the link with anyone else!
3/2/22 Chinese Views on Russia-Ukraine Conflict
The Impact of the Russia-Ukraine Conflict on China
*Notes from Morgan Stanley's Fireside Chat on March 2, the speaker is a senior professor at the Central Party School
It has been a week since the conflict between Russia and Ukraine, which is also the largest gray rhino incident in the international community in 2022. The previously widely predicted situation of "Russia's quick fight and quick victory" did not appear. With the arrival of military assistance from Western countries to Ukraine and the gathering of the "international army", the war has entered a stalemate. Although NATO and the United States have repeatedly stated that they will not send troops to directly participate in the war, but only provide weapons and humanitarian assistance, as long as the war drags on for too long (more than a month), both in terms of the international political situation and geopolitics, Russia is in a highly unfavorable position.
After the conflict, public opinion in China showed two attitudes: one side supported Ukraine on the moral level and national sovereignty level, and the other side supported Russia (mainly netizens) based on emotion. So from an objective point of view, what is the relationship between Russia and Ukraine and China? Russia and China have a lot of trade in energy and agricultural products, and also have a very close relationship in international politics; and Ukraine is one of the earliest responders to the "Belt and Road". Chinese entrepreneurs have been contracted to manage what accounts for 10% of Ukraine's total land, and the two countries have in-depth cooperation in trade, industrial investment, agriculture, energy, and science and technology. The 2013 Treaty of Friendship and Cooperation between the People's Republic of China and Ukraine stated that the two countries are a "strategic partnership", and China "in accordance with UN Security Council Resolution 984 and the Chinese Government's Statement on Providing Security Guarantees to Ukraine on December 4, 1994, Commitment to unconditionally not to use or threaten to use nuclear weapons against Ukraine as a non-nuclear-weapon state, and to provide Ukraine with corresponding security assurances in the event of aggression or threat of such aggression against Ukraine using nuclear weapons.”
As the war progressed, China's position changed from "respecting Ukraine's territorial and sovereign integrity" and "attaching importance to Russia's security demands" at the beginning, to "regretting the war" and expressing sympathy for Ukraine. The front page of Guangming Daily published an article on March 1, "The general trend of win-win cooperation between China and the United States is irreversible", it can be seen that China's attitude has also undergone subtle changes. In general, I think the Russian-Ukrainian conflict has the following impacts on China:
3/6/22 Neil Shen's Suggestions at the Two Sessions for China Tech
Neil Shen, head of Sequoia China, is the only member of the Chinese venture capital community who is a member of The National Committee of the Chinese People's Political Consultative Conference, you know, the other annual plenary session that is held at the same time as the NPC, and is thus one of the National Two Sessions AKA Quanguo Lianghui. He is also by far its most successful and while I absolutely expect him to "talk his book" as well as abide by the party line, he is also a very astute investor who does put his money where his mouth is. In the past few years, he's been known to tout climate change and healthcare as core investment theses, and data shows that he's allocated his funds accordingly. Of course, Sequoia China has an obscenely large amount of money at its disposal, so it's not too hard to be the most prolific investor when it wants to be, but I have yet to see compelling evidence that he is being purposefully misleading. There's no reason to at the Two Sessions especially, not when it is one of the best opportunities to drum up government support for his proposals, which I summarize and comment on below:
1. Decarbonization / Climate Tech
2. Agricultural Microbes
3. Pharmaceutical Innovation
4. Neurological R&D, especially for Senior Health
5. Digitize Manufacturing
HBR: How ByteDance Became the World’s Most Valuable Startup
I wrote this together with Professor Roger Chen at the University of San Francisco.
How has ByteDance managed to be so consistently successful? An important contributing factor, we argue, is its innovation strategy, which relies on a shared-service platform, or SSP.
Specialized Teams
Bytedance uses its SSP platform differently from most companies. The company’s product teams or units don’t control their own operating resources. Instead, many common business, technology, and operating functions (among them HR and legal) are centralized and organized into corresponding teams. The teams are highly specialized, so that the right people can be found and flexibly deployed as needed to each new venture. Cloud and shared operational tools, some of which have been developed in house, allow ByteDance to maintain this seemingly complex organizational setup. Product and related teams still focus on serving customer needs, but they rely on different SSP teams to accelerate development and growth. For example, when ByteDance tasks a new venture team with investigating user needs and market opportunities, the team can go to the user-research specialists at the SSP for data support, saving time on market analysis. In other companies, these tasks are undertaken by the product team, which is rarely best equipped for such information gathering. Subsequently, when a use case has been identified that justifies developing a new app or product feature, the product team is paired with engineers at the SSP level to develop the new product or feature.
In some cases, product teams customize existing technologies that have already been developed by the SSP. Algorithms are a case in point. Product teams at ByteDance work with SSP algorithm engineers to fine-tune their enormously powerful recommendation engines. The SSP has also brought together other important teams: user-growth teams, which help identify and acquire desired users; content teams, which establish partnerships to acquire new content; analytics teams, which help to develop deeper user insights; and sales teams, which drive monetization.
As expected, because so many capabilities have been centralized into this large SSP, the actual product teams tend to be small and focused, especially in the exploration stage. Douyin, for example, began with just a handful of employees, and the education team began with just two. Importantly, the relationship between the SSP and market-facing teams is symbiotic and mutually beneficial. It’s this virtuous loop of continued discovery and improvement that has enabled ByteDance’s success.
Have any comments or questions? See you on the Discord server!
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