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Colour me biased but how is innovation supposed to thrive in an environment where a "miscalculated talk" is enough to halt a $37b IPO? I had heard Matt Ridley

Colour me biased but how is innovation supposed to thrive in an environment where a "miscalculated talk" is enough to halt a $37b IPO? I had heard Matt Ridley speak about how [0] innovation thrives where there is "freedom" and gives me doubts about China's capabilities to innovate as much as it wants to. [0] https://www.aier.org/article/matt-ridley-on-innovation/ https://www.aier.org/article/matt-ridley-on-innovation/

mochialex 6y ago
You are free to grow as much as you can until it’s time to harvest
- aabhay 6y ago
  I think this is definitely the western assumption from events like this, that the regulators want a cut, etc. The real risk here is that once you grow big enough to pose a real risk to economic stability, AND you are clearly not publicly pledging your fealty to the state, then you get 'out of control' and Chinese culture would support reining you in. While this may seem corrupt to the US lens, I personally have to admit that this kind of action strikes me as politically savvy. Regulate before Jack makes the statement, and it seems like stifling innovation; don't regulate at all, and the capitalists gain power.
kristianov 6y ago
On the other hand I also hope the financial elites would stop innovating with shits like "sub prime".
- Proven 6y ago
  You still don't get it. The innovation is not that it exists. The rest is left as an exercise to the reader.
ur-whale 6y ago
It all depends on what kind of "freedom" one talks about. If it's things like free speech and a wide and colorful political spectrum, then yes, China basically has no freedom. But if it's economic freedom, China has way more than most western countries. Remains to be seen which kind matters for innovation.
- vmurthy 6y ago
  Given that free speech/free flow of information is a fundamental building block even to economic innovation, I'd say this matters more. You can have all the economic innovation in the world but if it offends a party, it's unlikely to be widely adopted isn't it?
- seniorivn 6y ago
  it's not necessarily about who has more it's probably about who has enough freedoms of all kinds and we have a situation where political freedoms a shrinking every where with different speeds and from different starting points, economic freedoms are moving in different directions all over the world even inside big countries. without a very complex model of all of it it's nearly impossible to tell what combination is the most favorable to a particular kind of innovation(for example face recognition might be a lot harder to innovate in a country with great political freedoms regardless of economic freedoms).
wombatmobile 6y ago
> how is innovation supposed to thrive in an environment where a "miscalculated talk" is enough to halt a $37b IPO? Wait and see. This is just one week in a 20 year journey. Ma hasn't lost anything.
franklampard 6y ago
Mobile payment and other real innovations aren’t killed. But please don’t count risky lending as innovation: it has to be regulated.
- jayparth 6y ago
  Innovation can make lending that seems risky to one party significantly less risky to another. Example: you think lending to folks with low credit scores is a risk, but I evaluate credit in a different way that lets me discover that some folks with low credit scores really are credit worthy. Note that I am not supporting Ant Financial with my comment. I have no clue how their business works. But your comment is missing a key point.
  - PeterisP 6y ago
    The point is that we're regulating the risk you're allowing to take with other people's money. If you believe (or claim, which is a different issue) that "some folks with low credit scores really are credit worthy", then you're free to take on that risk and profit from it if you're lending your own money. However, if you're playing with someone else's money, then you do not get the privilege to make arbitrary calls on what's risky and what's not; the society has to presume that you may be mistaken or lying (especially because there's an incentive to lie), we have to discard and ignore your novel, innovative evaluations, and evaluate the risk according to some conservative measure that other people trust. I mean, it's not about being allowed or disallowed to make the loans, it's about capitalization requirements to cover the risks i.e. the need to back up your assumption that these people really are credit worthy with your own funds. Innovation on better credit evaluation can help you lose less money on bad loans, which directly impacts your profit as a lender; but it can't (or at least shouldn't) be used to justify that you deserve extra leverage so that you'd have lower capital costs; the capital requirements are there to protect others from your risk-taking.
  - charwalker 6y ago
    And if you leverage that 100:1 (300bn:3bn) you vilate a metric ton of banking regulations and responsible practice. It's not an industry for fast change or pivot especially when you're looking at a company leveraging itself so far beyond the more average 1:1 or 50/50 for banks. \ 100x typical risk is not something most investors recognize as real let alone a sane investment. A financial advisor would ask how the fund is making a 100x return and step faaaar back from that portfolio.
gcatalfamo 6y ago
China has nothing against innovation. They just want to decide who gets rich with it and how much.
- JumpCrisscross 6y ago
  > China has nothing against innovation. They just want to decide who gets rich with it and how much. Is this sarcasm? If I am ambitious, why would I be an innovator in this system? Versus the person deciding who gets rich?
  - gcatalfamo 6y ago
    It’s a trade off Chinese businessmen have to live with in China. Most medium-big All companies have one or more board members coming from the “party”. It’s not a secret they very calmly tell you the same thing when you visit them in China.
    - JumpCrisscross 6y ago
      > It’s a trade off Chinese businessmen have to live with in China Agree this isn’t news to anyone familiar with China. What led Ma to make the alleged comments is beyond me. That doesn’t invalidate discussing its effects.
  - rfoo 6y ago
    > If I am ambitious, why would I be an innovator in this system? Versus the person deciding who gets rich? Why would the person deciding who gets rich let someone else become such person? I mean, it's not impossible, but is certainly very hard, risky and needs some unique skillsets. Sometimes you don't have the choice, no matter how you are ambitious.
    - JumpCrisscross 6y ago
      > Why would the person deciding who gets rich let someone else become such person? No man rules alone. And no man is immortal. If you are smart, ambitious and lucky enough to build a multibillion dollar company, you can put those faculties to work climbing the political ladder.
whoevercares 6y ago
The truth is Chinese system is also quite flexible at all levels and people commonly do not follow the rules or use different interpretations and implementations (at very least they workaround a lot). The audit system for many industries are not mature as well. So yea ironically if you are a Chinese innovator at early stage you might find there’s much less restrictions in China to innovate (not necessarily from moral high ground as long as it’s lucrative ) than the US. Later you become big and draw more attentions but hopefully you know how to play by the rules. I personally don’t think it will make early stage innovation harder
- andreilys 6y ago
  Except when your early innovation threatens an incumbent who has party connections. I imagine those scenarios don’t go well for the early innovators unless they themselves have a party sponsor that out ranks the incumbent.
  - whoevercares 6y ago
    Well luckily the party itself isn’t so innovative
- bigmattystyles 6y ago
  >> The audit system for many industries are not mature as well. So bribery? Is that what you mean?
  - snovv_crash 6y ago
    If you're the only player in a new field you essentially set the expectations
  - whoevercares 6y ago
    I mean regulatory system. So you can do something that can be heavily regulated in USA, not necessarily illegal
sgt101 6y ago
Is that the Matt Ridley that destroyed the Northern Rock bank while being chairman of it for 3 years ? His time culminating in the first run on a British Bank for 70 years and forced nationalization? I genuinely would not pay attention to one word he says or writes, it bewilders me that anyone does.
duxup 6y ago
I think freedom to innovate and non free nations tend to be SOMEWHAT conflicting things yes. Having said that, I think China's concern may at least partly really be regulatory in nature ... or I suspect they would have good reason to be concerned. (I really don't know their motivations) Ant doesn't like / want to be a pawn shop... kinda makes you wonder what if anything their loans are backed by / what would happen if they grew even bigger and imploded.
geodel 6y ago
Yup, I wonder why US stifling innovation by putting regulation on what people can say on YT/Twitter/FB etc.
cryptica 6y ago
The global tech industry is a farce. There hasn't been any real innovation in a decade. It's top-down, bureaucratic, government-oriented, debt-fueled, hype-driven, risk-averse... It's not just that there is no innovation; people forgot what innovation means. Jack Ma is right in pointing out and then proving to us how terribly financialized the world economy has become (it's not just China). The stock market has nothing to do with the economy, it's financial (and political) theatre.
dirtyid 6y ago
The environment built a company that could have IPO'ed for 37B. That's more than what most systems can accomplish, and on balance that may be enough, or ability to limit is even favourable.
SkyMarshal 6y ago
>how is innovation supposed to thrive in an environment where a "miscalculated talk" is enough to halt a $37b IPO? Fwiw that can happen in the US too. If a corporate exec says something unwise during the pre-IPO quiet period, the IPO can potentially be scrapped. And there other consequences to unwise public statements, like when Elon Musk publicly claimed he had a major new deal, which moved markets and then turned out to be a lie. He got bitch-slapped by the SEC for that.
rjsw 6y ago
Matt Ridley certainly made maximum use of the "freedom" that was available to him.
justicezyx 6y ago
ANT practices a surveillance backed micro financial lending for consumers. How can that innovation justify the astronomical risks?
sfifs 6y ago
Well from actually regularly visiting China and having a team reporting to me on ground, i don't think lack of innovation is remotely the problm in China. In terms of a digitised economic model impacting regular Joes,m China is a few years ahead of where other markets are. When drawing conclusions, it's a good idea to test theories against hard evidence - BOTH factual and counter factual. Think tanks are notorious for cherry picking the factual evidence and ignoring inconvenient counter factual evidence due to the nature of their mission. That's the reason think tank reports don't make the grade of peer reviewed articles in prestigious academic journals.
- xibalba 6y ago
  > i don't think lack of innovation is remotely the problm in China From your on the ground experience, what do you think is the problem?
  - sfifs 6y ago
    So what's happened i think is a bit of (1) Very rapid provincial/local government supported innovation and economic expansion across the board with little time for more "big picture" regulatory and risk management frameworks to catch up (2) a large growth in the number of relatively inexperienced financial market investors created by the expansion who fuel boom and bust market cycles. What you see is a bit of power balance struggle that is happening as the regulatory and risk management pieces of the government catches up to the expansion and innovation. It's happening across the board - financial, environment, safety, data privacy regulations (ie. companies buying/selling data) etc etc - these headline grabbing actions are one way to build popular support.. not too different from how prosecutors amd regulators operate in the West actually.
- mola 6y ago
  Yup, Think tanks devolved to (or started as?) propaganda machines. Nothing more.
- vmurthy 6y ago
  Thank you for this. I didn't remotely say that China isn't innovating. I meant to say that if China has ambitions of becoming a world leader in innovation, this kind of party sponsored innovation / innovators isn't probably the right way to go.
klelatti 6y ago
I'm sure you're not aware but quoting Matt Ridley is deeply ironic given he was chairman of a UK Bank with an innovative business model. Quoting Wikipedia: "Under non-executive chairman Matt Ridley and Chief Executive Adam Applegarth, Northern Rock had a business plan which involved borrowing heavily in the UK and international money markets, extending mortgages to customers based on this funding, and then re-selling these mortgages on international capital markets, in a process known as securitisation. On 14 September 2007, the bank sought and received a liquidity support facility from the Bank of England, to replace funds it was unable to raise from the money market. Reporting of this complex scenario led to panic among individual depositors, who feared that their savings might not be available should Northern Rock go into receivership. The result was a bank run – the UK's first in 150 years – where depositors lined up outside the bank to withdraw all of their savings as quickly as possible, particularly since many others were doing the same."

mochialex 6y ago

You are free to grow as much as you can until it’s time to harvest

aabhay 6y ago
I think this is definitely the western assumption from events like this, that the regulators want a cut, etc. The real risk here is that once you grow big enough to pose a real risk to economic stability, AND you are clearly not publicly pledging your fealty to the state, then you get 'out of control' and Chinese culture would support reining you in. While this may seem corrupt to the US lens, I personally have to admit that this kind of action strikes me as politically savvy. Regulate before Jack makes the statement, and it seems like stifling innovation; don't regulate at all, and the capitalists gain power.

kristianov 6y ago

On the other hand I also hope the financial elites would stop innovating with shits like "sub prime".

Proven 6y ago
You still don't get it. The innovation is not that it exists. The rest is left as an exercise to the reader.

ur-whale 6y ago

It all depends on what kind of "freedom" one talks about. If it's things like free speech and a wide and colorful political spectrum, then yes, China basically has no freedom. But if it's economic freedom, China has way more than most western countries. Remains to be seen which kind matters for innovation.

vmurthy 6y ago
Given that free speech/free flow of information is a fundamental building block even to economic innovation, I'd say this matters more. You can have all the economic innovation in the world but if it offends a party, it's unlikely to be widely adopted isn't it?
seniorivn 6y ago
it's not necessarily about who has more it's probably about who has enough freedoms of all kinds and we have a situation where political freedoms a shrinking every where with different speeds and from different starting points, economic freedoms are moving in different directions all over the world even inside big countries. without a very complex model of all of it it's nearly impossible to tell what combination is the most favorable to a particular kind of innovation(for example face recognition might be a lot harder to innovate in a country with great political freedoms regardless of economic freedoms).

wombatmobile 6y ago

> how is innovation supposed to thrive in an environment where a "miscalculated talk" is enough to halt a $37b IPO? Wait and see. This is just one week in a 20 year journey. Ma hasn't lost anything.

franklampard 6y ago

Mobile payment and other real innovations aren’t killed. But please don’t count risky lending as innovation: it has to be regulated.

jayparth 6y ago
Innovation can make lending that seems risky to one party significantly less risky to another. Example: you think lending to folks with low credit scores is a risk, but I evaluate credit in a different way that lets me discover that some folks with low credit scores really are credit worthy. Note that I am not supporting Ant Financial with my comment. I have no clue how their business works. But your comment is missing a key point.
- PeterisP 6y ago
  The point is that we're regulating the risk you're allowing to take with other people's money. If you believe (or claim, which is a different issue) that "some folks with low credit scores really are credit worthy", then you're free to take on that risk and profit from it if you're lending your own money. However, if you're playing with someone else's money, then you do not get the privilege to make arbitrary calls on what's risky and what's not; the society has to presume that you may be mistaken or lying (especially because there's an incentive to lie), we have to discard and ignore your novel, innovative evaluations, and evaluate the risk according to some conservative measure that other people trust. I mean, it's not about being allowed or disallowed to make the loans, it's about capitalization requirements to cover the risks i.e. the need to back up your assumption that these people really are credit worthy with your own funds. Innovation on better credit evaluation can help you lose less money on bad loans, which directly impacts your profit as a lender; but it can't (or at least shouldn't) be used to justify that you deserve extra leverage so that you'd have lower capital costs; the capital requirements are there to protect others from your risk-taking.
- charwalker 6y ago
  And if you leverage that 100:1 (300bn:3bn) you vilate a metric ton of banking regulations and responsible practice. It's not an industry for fast change or pivot especially when you're looking at a company leveraging itself so far beyond the more average 1:1 or 50/50 for banks. \ 100x typical risk is not something most investors recognize as real let alone a sane investment. A financial advisor would ask how the fund is making a 100x return and step faaaar back from that portfolio.

gcatalfamo 6y ago

China has nothing against innovation. They just want to decide who gets rich with it and how much.

JumpCrisscross 6y ago
> China has nothing against innovation. They just want to decide who gets rich with it and how much. Is this sarcasm? If I am ambitious, why would I be an innovator in this system? Versus the person deciding who gets rich?
- gcatalfamo 6y ago
  It’s a trade off Chinese businessmen have to live with in China. Most medium-big All companies have one or more board members coming from the “party”. It’s not a secret they very calmly tell you the same thing when you visit them in China.
  - JumpCrisscross 6y ago
    > It’s a trade off Chinese businessmen have to live with in China Agree this isn’t news to anyone familiar with China. What led Ma to make the alleged comments is beyond me. That doesn’t invalidate discussing its effects.
- rfoo 6y ago
  > If I am ambitious, why would I be an innovator in this system? Versus the person deciding who gets rich? Why would the person deciding who gets rich let someone else become such person? I mean, it's not impossible, but is certainly very hard, risky and needs some unique skillsets. Sometimes you don't have the choice, no matter how you are ambitious.
  - JumpCrisscross 6y ago
    > Why would the person deciding who gets rich let someone else become such person? No man rules alone. And no man is immortal. If you are smart, ambitious and lucky enough to build a multibillion dollar company, you can put those faculties to work climbing the political ladder.

whoevercares 6y ago

The truth is Chinese system is also quite flexible at all levels and people commonly do not follow the rules or use different interpretations and implementations (at very least they workaround a lot). The audit system for many industries are not mature as well. So yea ironically if you are a Chinese innovator at early stage you might find there’s much less restrictions in China to innovate (not necessarily from moral high ground as long as it’s lucrative ) than the US. Later you become big and draw more attentions but hopefully you know how to play by the rules. I personally don’t think it will make early stage innovation harder

andreilys 6y ago
Except when your early innovation threatens an incumbent who has party connections. I imagine those scenarios don’t go well for the early innovators unless they themselves have a party sponsor that out ranks the incumbent.
- whoevercares 6y ago
  Well luckily the party itself isn’t so innovative
bigmattystyles 6y ago
>> The audit system for many industries are not mature as well. So bribery? Is that what you mean?
- snovv_crash 6y ago
  If you're the only player in a new field you essentially set the expectations
- whoevercares 6y ago
  I mean regulatory system. So you can do something that can be heavily regulated in USA, not necessarily illegal

sgt101 6y ago

Is that the Matt Ridley that destroyed the Northern Rock bank while being chairman of it for 3 years ? His time culminating in the first run on a British Bank for 70 years and forced nationalization? I genuinely would not pay attention to one word he says or writes, it bewilders me that anyone does.

duxup 6y ago

I think freedom to innovate and non free nations tend to be SOMEWHAT conflicting things yes. Having said that, I think China's concern may at least partly really be regulatory in nature ... or I suspect they would have good reason to be concerned. (I really don't know their motivations) Ant doesn't like / want to be a pawn shop... kinda makes you wonder what if anything their loans are backed by / what would happen if they grew even bigger and imploded.

geodel 6y ago

Yup, I wonder why US stifling innovation by putting regulation on what people can say on YT/Twitter/FB etc.

cryptica 6y ago

The global tech industry is a farce. There hasn't been any real innovation in a decade. It's top-down, bureaucratic, government-oriented, debt-fueled, hype-driven, risk-averse... It's not just that there is no innovation; people forgot what innovation means. Jack Ma is right in pointing out and then proving to us how terribly financialized the world economy has become (it's not just China). The stock market has nothing to do with the economy, it's financial (and political) theatre.

dirtyid 6y ago

The environment built a company that could have IPO'ed for 37B. That's more than what most systems can accomplish, and on balance that may be enough, or ability to limit is even favourable.

SkyMarshal 6y ago

>how is innovation supposed to thrive in an environment where a "miscalculated talk" is enough to halt a $37b IPO? Fwiw that can happen in the US too. If a corporate exec says something unwise during the pre-IPO quiet period, the IPO can potentially be scrapped. And there other consequences to unwise public statements, like when Elon Musk publicly claimed he had a major new deal, which moved markets and then turned out to be a lie. He got bitch-slapped by the SEC for that.

rjsw 6y ago

Matt Ridley certainly made maximum use of the "freedom" that was available to him.

justicezyx 6y ago

ANT practices a surveillance backed micro financial lending for consumers. How can that innovation justify the astronomical risks?

sfifs 6y ago

Well from actually regularly visiting China and having a team reporting to me on ground, i don't think lack of innovation is remotely the problm in China. In terms of a digitised economic model impacting regular Joes,m China is a few years ahead of where other markets are. When drawing conclusions, it's a good idea to test theories against hard evidence - BOTH factual and counter factual. Think tanks are notorious for cherry picking the factual evidence and ignoring inconvenient counter factual evidence due to the nature of their mission. That's the reason think tank reports don't make the grade of peer reviewed articles in prestigious academic journals.

xibalba 6y ago
> i don't think lack of innovation is remotely the problm in China From your on the ground experience, what do you think is the problem?
- sfifs 6y ago
  So what's happened i think is a bit of (1) Very rapid provincial/local government supported innovation and economic expansion across the board with little time for more "big picture" regulatory and risk management frameworks to catch up (2) a large growth in the number of relatively inexperienced financial market investors created by the expansion who fuel boom and bust market cycles. What you see is a bit of power balance struggle that is happening as the regulatory and risk management pieces of the government catches up to the expansion and innovation. It's happening across the board - financial, environment, safety, data privacy regulations (ie. companies buying/selling data) etc etc - these headline grabbing actions are one way to build popular support.. not too different from how prosecutors amd regulators operate in the West actually.
mola 6y ago
Yup, Think tanks devolved to (or started as?) propaganda machines. Nothing more.
vmurthy 6y ago
Thank you for this. I didn't remotely say that China isn't innovating. I meant to say that if China has ambitions of becoming a world leader in innovation, this kind of party sponsored innovation / innovators isn't probably the right way to go.

klelatti 6y ago

I'm sure you're not aware but quoting Matt Ridley is deeply ironic given he was chairman of a UK Bank with an innovative business model. Quoting Wikipedia: "Under non-executive chairman Matt Ridley and Chief Executive Adam Applegarth, Northern Rock had a business plan which involved borrowing heavily in the UK and international money markets, extending mortgages to customers based on this funding, and then re-selling these mortgages on international capital markets, in a process known as securitisation. On 14 September 2007, the bank sought and received a liquidity support facility from the Bank of England, to replace funds it was unable to raise from the money market. Reporting of this complex scenario led to panic among individual depositors, who feared that their savings might not be available should Northern Rock go into receivership. The result was a bank run – the UK's first in 150 years – where depositors lined up outside the bank to withdraw all of their savings as quickly as possible, particularly since many others were doing the same."