John Artman, editor in chief from Technode of host of China Tech Talk, joined us in a conversation to discuss three different and interesting stories from China entrepreneurial space and align them in the underlying theme of explaining what numbers and narratives can mean in China. We began with the bike rental startups collapse, followed by the Mafengwo scandal and finally the recent leaked financials from Luckin Coffee into the open. Through the lenses of these three stories, we discuss how we need to understand and adjust our expectations to the future of China’s economic growth.

Here are the interesting show notes and links to the discussion (with time-stamps included):

  • John Artman (@knowsnothing, LinkedIn), Editor in Chief from Technode and Host of China Tech Talk and NodeWorthy podcasts [0:25]
    • Since our last conversation, what have you been up to and what are your reflections for the year 2018? [0:48]
  • Numbers and Narratives China Edition [3:42]
    • Here’s how I am going to start the conversation about what we really want to discuss in this podcast. We want to discuss how numbers are presented by various prominent companies in China and then follow by their narratives not matching up. Before we get to the over-arching theme, we like to start with three stories:
    • Bike Rental Startups’ Collapse with Ofo and Mobike [4:05]
      • When the bicycle sharing (or I should be pendantic to call it bicycle rental) companies emerge in the open, they were hailed as the next big things after ride hailing startups. Last year, 2018 witnessed the blood bath of bike sharing companies with Mobike acquired by Meituan-Dianping for US3.8B and Ofo in dire straits, did the numbers they reported on revenues or usage match the reality that they were painting to the press and investors? [4:44]
      • The strategy they use are similar to the past startups who burn cash to gain market share and then hope to be the last man standing, but it did not work for them as compared to others for example, ride hailing and group buying, where did these bike sharing companies go wrong? [7:50]
      • Should Ofo and Mobike merge given the circumstances of their rivalry? [9:43]
    • The Fake Reviews Accusation for Mafengwo by Xiaosheng Bibi (Ding Ziquan) and Hooray Data: Let’s start from the story of Mafengwo, an up and coming travel website in China that rivals CTrip (the tripadvisor of China), [Source: Original article accusing Mafengwo launched by Hooray Data and XiaoshengBibi and various articles: SCMP, Pandaily], can you briefly provide an account of the story? [12:18]
      • One key theme of the story is the use of big data and software algorithms to match the data scrapped from Mafengwo’s sites against the other websites. Is this an interesting application of technology to aid investigative journalism at scale? [15:12]
      • Mafengwo was raising a round with prominent investors. Does this scandal derail them from getting the investment? [17:21]
      • It is a well known fact that most Chinese Internet go thru gladiatorial fights between different players and other factors such as fake data and reviews using the zombies and “navy” (shui jun), does the investors really scrutinize their numbers and do their due diligence or other factors at work? [18:00]
    • Luckin Coffee’s recently leaked financials by CareerIn [18:58]
      • Luckin Coffee has went from a highly profitable startup to now a loss making one, and the leaked financials showed a few interesting facts: (a) the average selling price per coffee which they claimed is about 24 yuan which is approximately US$3.5, and with 85M cups of coffee, you should get 2.04B RMB equivalent to US$300M, but instead they got 760M yuan ~ US$111M that makes the average selling price to US$1.3, so it’s pretty different from what they say and what the reality reflects, (b) the gift ratio is actually for every 1 coffee a Chinese consumer buy, they get 1.5 coffees for free. The numbers given from the startup vs the reality they have are totally different. So how does one really assess a fast growing startup in China? [21:18]
    • From the past three stories, what can we learn about numbers and narratives that are presented by Chinese fast growing companies? [24:45]
    • Should we just factor in the zombies and navy to put a discount on their growth? [26:40]
    • Is the growth in China really real and how should we adjust our expectations as consumers or people watching the business growth there? [27:53]
  • Closing [29:55]
    • Can you recommend a book or movie or podcast or anything which recently made an impact to your work and personal life? [30:04]
      • John’s recommendation: Noah Yuval Harari’s “21 Lessons for 21th Century”, Ray Dalio’s “Principles”
      • BL’s recommendation: “A Guide to Big Debt Crises”
    • How do my audience find you? [31:45]

Podcast Information:

The show is hosted by Bernard Leong (@bernardleong & weibo) and are sponsored by Ideal Workspace (Twitter, Facebook and LinkedIn) with their new Altizen Desk (Twitter, Facebook, Medium). Sound credits for the intro music: Taro Iwashiro, “The Beginning” from Red Cliff Soundtrack and this episode is edited by Carol Yin, and co-produced by Carol Yin and Bernard Leong.