The Crocodile in the Yangtze River, Kuhn and a New Lexicon (Part 3 of 3)

By: Siyanda Pali

In 1962, Thomas Kuhn, who initially began as a Physicist and subsequently became a Historian and Philosopher of Science, published what was then a controversial but is now a highly influential book among scholars entitled, "The Structure of Scientific Revolutions." Leiden University Faculty of Humanities Lecturer of Metaphysics and Philosophy of Science, Victor Gijsbers, is certainly one of the best teachers of this subject I have ever heard. Alas, I digress. In his book. Kuhn postulates a theory for how science develops over time, mainly through 4 phases:

• The Pre-paradigmatic phase- which occurs only once in every field of science
• Normal Science
• Crisis
• Scientific Revolution

The latter 3 phases, Kuhn argued, happen all the time, with a return either to Normal Science or a clean break from the status quo by means of a Scientific Revolution.

Shanghai (chinalocaltours.com)

He also introduces the concept of a 'paradigm', which can be defined as all the theories, facts, methods etc, which a scientific discipline takes for granted and which guide scientific research in that discipline. 

The Pre-paradigmatic phase is the genesis of any scientific discipline, beginning without any mutually inclusive methods, theories and concepts. Scientists in this phase still need to come up with and develop the above eg the first historians were not in agreement about the correct way to write history. The earliest physicists didn't really know what terms to use when speaking about nature. Scientists in this paradigm can sometimes be poles apart. They do things differently, operate under different assumptions, have varying measurements and possess contrasting ideas about which problems are worth exploring. This, Kuhn believes, is an unproductive phase, because not only is collaboration for scientists synonymous to chiselling a rock with a Banana, it is also difficult to build upon the work of other scientists. It's a somewhat chaotic period until, for some or other reason (which can also be fascinating to explore), the next phase is reached. 

Normal Science then, is a state of affairs in which there is a generally accepted or upheld paradigm. In this phase, Kuhn states that scientists believe that it would be a waste of time to be critical about the paradigm e.g. Oxygen is an essential element for human life or that one Jan Van Riebeeck arrived in South Africa in 1652. He also notes that this is plausible because without it, no worthwhile or significant work or research could take place. This is the importance of a theoretical or methodological background. Within Normal Science, scientists are trying to solve puzzles within the rules of the paradigm. It is also common then, that within Normal Science, scientists come across an anomaly, a problem within the dominant paradigm which at the time, scientists are unable to solve. While Karl Popper would hold the view that anomalies are evidence of the falsehood of a theory and a paradigm, and both ought to be rejected outright as a result, Khun, on the other hand, believes that there will always be anomalies within a given paradigm in every sphere or scientific discipline i.e. things which scientists are unable to explain at the time within a given paradigm.

During Normal Science, according to Khun, scientists still possess a great deal of confidence that anomalies can and will be solved within a given paradigm. However, if the number of anomalies grows and scientists are unable to solve them within a given paradigm, this leads to a dearth of confidence in the paradigm and to the next phase, which is 'Crisis'. In this phase, scientists become critical of the paradigm and entertain the possibility of changing it. Radical and new thinking emerges as a result. The more prolonged a state of Crisis is, the more appealing fresh and radical ideas become. 

There are then 2 ways to end a Crisis. Scientists within the paradigm either need to solve the anomalies within the paradigm, which leads to a resurgence of confidence in the paradigm and Normal Science is then restored. Alternatively, the realisation of something else takes hold: a 'Scientific Revolution'. 

Within a Scientific Revolution, the old paradigm is rejected or abandoned by a great deal of scientists and a new paradigm gains traction and is supported by a large number of scientists. A new set of methods, theories and concepts become the standard which possess the potential to solve anomalies. Within a Scientific Revolution, one theory is forsaken, and another is embraced by the scientific community. This is what Kuhn refers to as a 'Paradigm shift'. These are very pronounced moments in history and have the potential to make an impact for decades or even centuries to come eg Aristotelian vs Newtonian vs Einsteinian science. It is important to note that, according to Kuhn, Normal Science is the rule and Scientific Revolution is the exception. Some of the most significant work is done in Normal Science. However, when a state of stagnation is reached, it is prime time for a period in which there is a high probability of a Scientific Revolution.

So, what does Alibaba have to do with Kuhn's Structure of Scientific Revolutions? Perhaps it is best, once again, to look at the life of the Founder of Alibaba, Jack Ma, for some answers. Alibaba is a companay born, to a large extent, due to Jack Ma's openness to new ideas, as well as the foresight, insight, drive, among other things, to bring the vision to fruition. There are numerous other invaluable components which were necessary to build the company into the behemoth which it is today, such as great talent, both from China and abroad, excellent Strategic Management, great leadership etc. Alibaba was an idea whose time had come and is a perfect example of the opportunities which exist before, during and after industrial revolutions. The 4th Industrial Revolution may very well cause significant disruption globally. However, one is fairly confident that nascent industries today eg Data Analytics, the Internet of Things (IoT), Artificial Intelligence (AI) etc will unlock a prodigious amount of opportunities in the future. It is also necessary for societies, invariably, to do some thinking about how the latter-mentioned for example (AI) should and could be utilised to best serve humanity, given Moore's Law for example.   

Perhaps it is fitting for me to also state another reason why I think Alibaba is a darling among so many. This reason is one of the primary reasons for my love and passion for technology and innovation: the ability to constantly engage great ideas and the immense value which the company creates for millions of people across the globe and the exponential potential to continue to do so over time.

One of the greatest tenets from the Alibaba story and that of Jack Ma specifically is that the human spirit cannot be catalogued. This is why it was possible for a former English Teacher to start and grow one of the largest technology companies the world over, directly and indirectly employing millions of people. I also think it is important to note that I am not advocating for the dogmatic stance that entrepreneurs or entrepreneurship is the only standard or measure of success we ought to aspire to. As important as they may be, we ought to delve deeper in our inquiry. If a global pandemic has not taught us that we ought to truly appreciate the diversity of gifts bestowed upon mankind, I'm not too sure what will. I do think it is more apt to strive for the creation of societies which allow people to express themselves, their talents and to fulfill their potential. 

The Crocodile in the Yangtze River, Kuhn and a New Lexicon (Part 1 of 3)

 By: Siyanda Pali

Hangzhou is a wonderful city situated on the east coast of China’s Zhejiang province. It’s the province’s capital city, with a vibrant population of no less than 10 million people and boasts numerous reasons as its claim to fame. Not only is it the home of the world-renown Grand Canal, a world heritage site which stretches all the way to Beijing, China's capital, the picturesque West Lake and Leifeng’s Pegoda, it is also the home of the mightiest crocodile in the Yangtze river: Alibaba.

Jiuxi, Hangzhou (Siyanda Pali)

Hangzhou is fantastic for several reasons as I have mentioned above. Perhaps one of the most noteworthy of these is because of its disposition to be an incredible hybrid between natural beauty and the city or urban life. One has the serenity and lush Jiuxi forest to explore as well as the Binjiang district, which has the stunning Qianjiang New Town, a modern metropolis. Equipped with a very good public transportation network, which encompasses, the Hangzhou Metro, busses and designated bicycle lanes, the city will also be the host of the 2022 Asia Games, which all bode well for the city’s future prospects.

Binjiang District, Hangzhou (Siyanda Pali)

It was in this city that in 1999, Jack Ma, a former teacher, and 18 co-founders started  Alibaba in his apartment. They were spurred on by the belief in the massive potential which technology and innovation, the electrifying force of the internet, had in playing a role to better enable small and micro-enterprises to connect producers with customers and markets both domestically and globally. From those humble beginnings, the Alibaba group has grown in leaps and bounds to become one of the world’s most significant players in the mobile and e-commerce space. In 2014, it debuted on the New York Stock Exchange and became the world’s largest IPO, raising $25 billion US. In 2020, the company and its subsidiaries also boast a presence in digital media, cloud computing and entertainment, amongst others. It is also listed on the Hong Kong Stock Exchange, with revenues of up to RMB 509.7 billion or $72 billion US for the year ended March 2020. 

I was finally able to visit the company in August this year, adjacent to the Hangzhou Normal University CangQian campus. It was great to be at the headquarters of this brand which is now adored and admired by many across the globe. 

Perhaps it is apt for one to ask: What is it about Alibaba that has such an allure for many? What is it that induces such a great affinity for the company by so many? Depending upon who is being asked, one is likely to encounter different answers for different reasons. Among the main reasons for the above, besides its profitability of course, is the inspirational life story of Jack Ma himself. He befriended foreign tourists regularly over a 9-year period at the Hangzhou Hotel, which also gave him an opportunity to not only practice his English, but to also engage with different ideas. That single act, following his intellectual curiosity to learn English, has been one of the building blocks of not only his success, but also that of many others. Having struggled to find his footing for years in various pursuits throughout his life prior to starting Alibaba, he faced numerous setbacks. However, in his own words," I never gave up." The rest is history. 

Alibaba, Hangzhou (Siyanda Pali)

Having been fortunate enough to engage an Alibaba employee and friend of mine about what it is he enjoys or likes about the company, I was able to discover that not only was the compensation very good to excellent, the company culture was one that is appealing. Employees have a sense of freedom at the compay. Jack Ma has always maintained that at Alibaba, customers are first, employees are second, and shareholders are third. This flies in the face of conventional wisdom, propagated by one US Economist Milton Friedman, that the shareholder is the be all and end all of a company. Nevertheless, this orientation to ensuring that customers and employees are treated exceptionally well has paid dividends over the years. It's 6 new values are a succinct and powerful driving force:

1.  Customers first, employees second, shareholders third.
2. Trust makes everything simple.
3. Change is the only constant.
4. Today's best performance is tomorrow's baseline.
5. If not now, when? If not me, who?
6. Live seriously, work happily. 

Alibaba Values (Siyanda Pali)

Global GDP as projected by the IMF's World Economic Outlook will be around -4.9% in 2020. China's GDP figure has been affected by the above, shrinking by some 6.8% in the first quarter of 2020 in comparison to the same period in 2019. In a year which will very well be an annus horribillis for millions across the globe, mainly propagated by the Covid-19 global pandemic, Alibaba has managed, as have some technology companies, to increase revenues by a fair margin, 35.2% for the year ended March 2020. These annualised earnings are higher than those of other firms which are peers, similar to the USA's FANG (Facebook, Amazon, Netflix, Google) shares, BAT (Baidu, Alibaba, Tencent), with Baidu having reported a 7% decrease in annualised earnings in Q1 of 2020, and Tencent having reported a net gain of approximately 30%.

The Alibaba group has several strengths in its arsenal. Among these are its dominant market position within China. Alipay, for example, has a ubiquitous presence throughout China. You can expect businesses from as small as a street vendor to a large multinational to have either a WeChat Pay (competitor) or an Alipay QR code as an acceptable means of payment for goods and services. China, as a result, is incredibly close to being a cashless society. Alibaba also has a well-diversified product portfolio. Some of the other companies which form part of the Alibaba group include Taobao, which is China's largest C2C sales medium, as well as TMall, China's largest B2C online retail marketplace. It has also made strategic partnerships through mergers and acquisitions which have created synergies for its service offering. This is also coupled with an expanding wholesale and retail market in China. 

Some of the risks and challenges the company must navigate include strong competiton both domestically and globally from the likes of Baidu, Pinduoduo, Jingdong, Tencent, Google, Amazon etc, as well as not only operating in an era of protectionism, but also being able to grow revenues.

Other internal risk factors which the company needs to circumnavigate to maintain trust in the market, as stated in their 2020 annual report include:

• The quality and attractiveness of content available through their digital economy together with the value, quality and functionality of products and services
• The integrity of not only the company, but also its software providers, merchants, logistics providers, service providers and other participants in their digital economy
• An earnest endeavour to maintain high levels of service
• The safety and integrity of data on company platforms
• The fairness and effectiveness of rules governing company marketplaces and platforms
• The ability to protect intellectual property rights and consumers
• The company's ability to enable reliable payment and escrow via Alipay

There is no question that as a city, Hangzhou offers the best of both worlds: natural beauty which few cities can compare with. On the other end of the continuum, it boasts a buzzing metropolis, further fueled by a tech giant such as Alibaba, possessing a rich history in the world of start-ups and organic, technology companies. Alibaba, as have all companies in 2020, have had to negotiate a devastating period for humanity. In spite of the above, as well as other risks and challenges it faces, it has done fairly well in 2020, and continues to tread with caution in its currently tumultous environment. 

The Crocodile in the Yangtze River, Kuhn and a New Lexicon (Part 2 of 3)

 By: Siyanda Pali

The retail e-commerce space is a single but highly significant arena in which Alibaba is a market player. As is evident below, the arena has shown steady growth over the last few years, starting from 2014, with annual sales of aproximately $1.3 trillion USD to the estimated annual figure of $4.1 trillion USD in 2020. This figure is projected to soar to $4.9 trillion USD in 2021.

(Shopify)

The Coronavirus pandemic has upended traditional or conventional life as we know it. This has been the case not only for individuals, but also for all manner of business, organisations, countries and continents at large. It has also highlighted, rather fascinatingly, how different countries have provided different solutions for the same problem, with varying degrees of success. Similarly, different regions and countries have a specific profile when it comes to e-commerce sales. According to data by Statista, the 10 largest markets globally in terms of 2019 sales are as follows:

1. China ($740 billion USD) 
2. United States of America ($560 billion USD)
3. United Kingdom ($93 billion USD)
4. Japan ($87 billion USD)
5. Germany ($ 77 billion USD)
6. South Korea ($ 69 billion USD)
7. France ($ 55 billion USD)
8. Canada ($ 44 billion USD)
9. Russia ($ 19 billion USD)
10. Brazil ($ 16 billion USD)

From the above, it is clear that China, which is Alibaba's domestic market, is the world's largest e-commerce market, with aproximately $740 billion USD in sales in 2019. Not too far behind is the United States of America, at an estimated $560 billion USD. What is a pertinent insight to glean from the above is that of the 10 largest e-commerce markets globally, 3 are emerging market economies, namely China, Brazil and Russia.

(Search Laboratory)

From a strategy perspective, the latter-mentioned as well as the above could hold some keys for the captain of an e-commerce player. From the above, one can deduce that potential sales or significant opportunities exist in emerging markets, which could be a pre-cursor of the composition of the market in the future. Of the above, only Spain is an outlier, coming in at an annual growth rate which is below the global average of 9.6%. Every other country exhibits forecasts which will outstrip the global average. Leading the pack is India, with 19.9% estimated growth. This is followed closely by Indonesia at 17.7% as well as South Africa at 13.7%. Mexico, Turkey, China, Argentina, Saudi Arabia and Brazil are all expected to grow at between 10.7% and 12.6% for the foreseeable future. 

From the above, Alibaba's dominant market position in China is clearly evident. It had 58.2% of market share for the 2018 year. This is followed by Jingdong (JD.com) at 16.3% as well as Pinduoduo at 5.2%. What is rather interesting to see from the above is that Amazon China has been pulverised by Alibaba in China, with less than 1% market share in e-commerce sales. Fortunately or unfortunately, eBay has had similar fortunes in China, having to eventually exit the Chinese market. It goes without saying then, that within China, Alibaba's strongest competition comes from other domestic players such as JD.com and Pinduoduo.

Alibaba vs Amazon

Alibaba and Amazon are constantly paired together in the e-commerce space. This is, without a doubt, because the two are arguably the most influencial market players the world over. From the above, it is glaringly obvious that although Amazon may not possess any noteworthy market share in China, it is certainly a leader, or has positioned itself to be a leader, not only in the US, but in other markets globally. From the above, it is also clear that Amazon surpasses Alibaba in various streams of revenue in 2020 by several multiples, eg its core commerce revenue, cloud revenue as well as other revenue. However, when analysing operating profit, there is no distinct difference between the two companies, with about $1 billion US seperating the two.

 It is worth noting that the two companies seem to be pursuing different strategies in their approach to achieving their goals. Amazon seems to seek to control every aspect of the value chain, accumulating large amounts for PPE (Property, plant and equipment) for example, with it's massive distribution facilities. Alibaba, on the hand, seems to focus more on providing the technology which will enable the movement of goods between parties. Both models are certainly intriguing, and it will be interesting to see how both companies continue to serve their customers.