Why It’s “Uber and Out” in China

Ultimately, Chinese culture prevailed.

Fortune-telling compass: CC license Fraxinus2

Uber has officially joined a long list of US and western companies who, unable to resist the siren call of setting up shop in the world’s second largest market, took the painful, costly and ultimately unsuccessful plunge into China, only to pull out and walk away. Economists will offer many economic reasons for this latest failure, including the local competitive landscape, the financial terms of the deal, etc. Political analysis will attribute the failure to the highly restrictive and controlling role of government-as-partner in China; but the real reason for Uber’s inability to make the deal happen, as is the case for all western companies sent packing out of China, is fundamentally cultural.

China is 360 degrees opposite, geographically, historically and culturally, from the West, and consequently, the way business is done is also 360 degrees different. Uber, Google, Terex, and so many others all entered the Chinese market driven more by pride and profit than knowledge of Chinese culture; ultimately, it was Chinese culture that prevailed.

There is an old Chinese saying: “Perseverance can make an iron bar into a needle.”

Culture can be prophetic. In the absence of reasons to do otherwise, people will default to their culture, and the Chinese have a 5,000-year tradition of defaulting to doing things in a Chinese way. With such a long history, much of it recently very successful, there are few reasons that Westerners can bring to the table to compel them to do otherwise. If the similarities between Western and Chinese cultural traditions were greater, perhaps there would be fewer stones in the road; but with Chinese and Western cultural traditions so significantly different, the obstacles on the path to working mutually together is, in most situations, simply too great to overcome.

Who’s in charge in China?

At a meeting I attended in Beijing several years ago, representing a US company struggling to nail a deal in China, a US executive, frustrated at being unable to identify a final decision-maker in their negotiations, asked me, logically, “Who’s in charge in China?” He wanted to somehow find that person and speak with him, in an effort to get decisions made. Unfortunately, my answer could not solve his problem. “Confucius”, I said, referring to the ancient Chinese sage who died over 2,500 years ago.

What I meant, of course, is that the cultural legacy of Confucius lives on in China today, and is reflected in everything; the challenging communication styles that can exist between individuals; the relationship between citizens and government; the hierarchical nature of society; and the negotiation and decision-making styles of business.

There was no Moses in China: there was no Plato in China. There was, however, Confucius, who outlined the virtues of knowing the most appropriate way to act in any given situation.

Despite the occasional political rhetoric and see-saw approach to Confucian ideals periodically emphasized (or not) by the government, the power of thousands of years of a dominant cultural way of life, based on Confucian thought, is undeniable, and played itself out, at least as far as Uber is concerned, at the business table. And what are these Confucian ideals, so opposite to the West that they sabotaged a business deal that, at least in financial terms, should have benefited everyone?

  1. Active, consensus-driven accommodation to hierarchically determined authority
  2. A non-causal, non-linear and repetitive tradition of problem-solving
  3. Dependence on interpersonal relationships and subjective truth

Let’s break this down, starting with the hierarchy and authority issue:

“Son obeys father, wife obeys husband, husband obeys the state.”

Confucius, a real, live, flesh-and-blood man living approximately 1500 BC, had the misfortune of existing during a time of great civil strife in China, and the good fortune of being a wealthy aristocrat, able to dedicate his life to thinking about how to make things better. His sage musings have been corrupted into endless fortune-cookie missives for our entertainment. (Fortune cookies, by the way, are American, and can only be found in Shanghai today by way of San Francisco, where they were invented.)

But Confucius did attempt to create a system of thought that he believed would ultimately yield an organized, peaceful society, one very different from the tragic reality of his day. His theory: that an organized and peaceful society could only result if every individual understood their role in relation to everyone else (talk about the power of group consensus!) This meant that the goal of the individual was to understand his responsibilities to and from others, as given to them by authority, and to perfect their performance in the discharge of these responsibilities. No Horatio Alger myths of growing up in the gutter and becoming a self-made millionaire; no stories of being born in the log cabin and becoming president of the country. In Confucius’ world, younger son obeys older son, wife obeys husband, father obeys state, etc, etc. Passive acceptance of one’s role — indeed, perfection and performance of one’s given role as defined by authority — is the greatest virtue: it defined, for the Chinese in Confucius’ day and for many centuries beyond, the “Confucian Gentleman”.

This leads to acquiescence in the face of authority, and to active participation in the accomplishment of consensus-driven goals, where authority dictates from above through a complex civil hierarchy (whether that authority was the emperor or the current Communist party nomenclatura), and of the imposition of top-down social and economic policy onto a population predisposed to carry out such policy. At the deepest level, it is the valuing of the performance of one’s role as it properly advances the achievement of the greater social good as defined by authority. There is no greater value to individual action than that.

One of the hallmarks of Chinese negotiating style is the insistence of one’s position again and again, despite logical challenges to that position by the other side, until the other side eventually folds.

Fast-forward to 2016, where the government needs to be controlling partner in almost every business deal; where historic relationships between individuals in authority determine what happens (guanxi, in Chinese, referring to a network of informal social relationships, built on historic obligations between the individuals involved— and sometimes their families). This is often independent of law, (hence what ultimately happens in Shanghai is often different from what happens in Guangzhou, even though Beijing has officially set the rules for both), resulting in a constantly shifting environment of opaque decision making and influence.

Repeat after me …

Chinese history, in many ways, is the story of the static repetition of one dynasty after another, without the apparent development that is often inherent in a nation’s history. There is an old Chinese saying: “Perseverance can make an iron bar into a needle.” The end product is the result of sheer repetition, the same act being repeated over and over and over again. No teleological development in either case. No causal, progressive, incremental change. Just the same thing, again and again and again, until the end result is achieved. The building of the Great Wall simply requires lining up a million people to repeat the same act of placing one brick on another until, voila, you have a Great Wall.

One of the hallmarks of Chinese negotiating style is the insistence of one’s position again and again, despite logical challenges to that position by the other side, until the other side eventually folds. In ancient China, one of the most successful techniques of getting the prisoner to confess was the endless and repetitive drip, drip, dripping of water. Most important, in China there are over 20 distinctly different spoken languages, making the language spoken in Hong Kong (Cantonese) unintelligible to speakers in Beijing (who speak Mandarin). However, the written form of Chinese (using symbols, or “kanji,” that represent concepts or words rather than alphabetic sounds) can be read by all, independent of how one speaks the words they read. Therefore, the very complicated, written, kanji-based Chinese script never advanced to a simpler alphabet (in fact, such “advancement,” had it occurred, would have been a disincentive to communication; therefore, it never happened).

As a consequence, today the average Chinese child must learn approximately 3,000–5,000 kanji in primary school, simply to attain a basic level of functional literacy. In the world’s most populous nation, developing literacy is, as one can see, at the very least, a cumbersome task, and yet the greater need for maintaining comprehension among many different language speakers is stronger than the need to simplify the written script into one of alphabetic sounds.

In order to learn these thousands of kanji, the nature of kanji themselves requires the unquestioning acceptance of fact, as opposed to rational analysis, from the authority (teacher says: “this is the kanji for ‘man’), and the repetition of writing it over and over again until one memorizes it. In an educational system geared to rote memorization of logically unrelated facts, provided by an authority that cannot be questioned, students (the future population) learn more than just how to read: more deeply, they learn the value of rote memorization, that mastery comes from repeating the same act over and over and over again; that facts flow from the powerful and resource-rich; that such people cannot be questioned; and that intellectual value is measured by the quantitative accumulation of data, not the critical, analytical or creative interpretation of perceived experience.

How can China’s great economic success today, out of this cultural tradition, be anything but having become the world’s factory, where the same item is produced over and over again, millions of times upon millions of times; and where the proprietary ownership by individuals or corporations of knowledge, information and data that can be duplicated for all presents the West with one of its knottiest problems when working with China today (the piracy of CDs, books, and copyrights)?

Should it be any surprise that doing business with China inevitably entails the transfer of expertise, knowledge and resources, which then get replicated, duplicated and mass-produced, seemingly overnight? Expertise that most Western companies view as their most valued asset, resulting in China’s almost predictable requirement for them to give it away to China as part of the cost of doing business there? But in the Chinese Confucian tradition, it is precisely the obligation of the receiver of knowledge (the student) to eagerly do so while providing nothing in return, and it is precisely the obligation of the provider of knowledge (the teacher) to offer it, with no expectation of getting anything in return.

Truth is relative.

At the deepest level, these Confucian values all rest on a fundamental perception that subjective interpersonal relationships (and the required risk-avoidant and protocol-based styles of communication that emerge) trump objective rules and processes, and that there is greater value in case-by-case subjective interpretation of events than in applying objective, rule-based logic. The result is a society where decisions that are appropriate are more important than decisions that are ethical or “right”, and where “right” is, in fact, interpreted as being so precisely because it advances the subjectively interpreted solution.

In such a world, images and symbols take on greater meaning than clear, explicit facts, and a common symbol of this fundamental valuing of relative, situation-based truth, over objective rule-based truth, is the symbol of the east itself: bamboo and willows. Compare this to the symbol of the Western oak tree. Bamboo and willows bend with the wind; they get their strength precisely from their ability to bend, first this way and then the other way, depending on how the wind is blowing. They succeed precisely because they accommodate to the immediate situation. The British oak, on the other hand (and it is not coincidental that it is, in this allegory, British, as Britain had symbolically represented Western values for much of modern history) is admired for remaining solid and unchanging in the face of the winds of change: its strength comes precisely from resisting the changing winds, and remaining true to its essence.

There was no Moses in China: there is no history of a God establishing right from wrong; there was no Plato in China, no legacy of a philosophical search for ultimate standards of right, wrong, truth, beauty, etc. There was, however, Confucius, who outlined the virtues of knowing the most appropriate way to act in any given situation, and to adjust one’s actions as the situation changed. This valuing of situationally appropriate behavior over behavior that has been determined according to objective and universally understood precedents of right and wrong is fundamental to China, and results, at least in business, in contracts and agreements that can suddenly change; where negotiations start — not end — when agreements are signed; where rules and laws can be trumped by guanxi and regional obligations; where personal gain and self-interest are unfettered by moral or ethical concerns.

While China may succeed for a long time doing things in this Chinese way, and while there is, no doubt, much the West can learn from the Confucian perspective, ultimately and eventually, no business, and no nation, can work without a true north, or at least the struggle to identify one. This is China’s greatest challenge, and until it resolves it and integrates it into the grander Confucian legacy, it will remain the greatest obstacle for businesses looking to succeed in China.

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