Delta #4 2024: The Jack Memo

Internal memo triggers nearly 5% gain for Alibaba & rise in Chinese Ecommerce

Jack Ma’s internal memo - his first major written piece for quite some time - and general re-appearance in the public eye has triggered sudden optimism.

Key points made include:

• Praising new management for owning up to past mistakes.

• Highlighting the changes made to simplify and make Alibaba more agile.

• Stating a renewed focus on value to customers.

• Hailing the start of the AI era.

Below is the full translation with our commentary:

To Transformation & Innovation - On the first anniversary of Alibaba's reorganization

In the last few days, many people have sent me the video of Joe's interview. Some folks reached out and told to me that we have been very clear owning up to our past mistakes :) Yes. I thank Joe for his courage and sense of responsibility. Making mistakes is not scary - no one is faultless. What's really scary is not knowing your mistakes, not admitting them, and not correcting them.

Over the last 25 years, Ali-ers have accomplished many successes, with many innovations and feats. But in those same 25 years, we have also made countless mistakes, and will continue to make mistakes in the next 77 years [Note from AA: this is a reference to Jack Ma’s oft-repeated goal - to build a business that will last for 102 years]. Calming facing up to our problems is not to deny the past, but to responsibly seek the path forward. Don't cry over split milk and don't complain about others. Times have changed, we must keep up. Not only must we bravely admit and promptly rectify yesterday's problems, but we must also face the future and transform. This why we preserve the continuity with the past and keep moving forward.

Last year I wrote on the intranet: Alibaba will change, Alibaba will transform. Over the past year, Cai Chongxin [AA: Joe Tsai] and Wu Yongming [AA: Eddie Wu] led Alibaba through a series of future-oriented transformations with admirable courage and wisdom.

The core change this year: do not chase KPIs for their own sake, but regain an understanding of ourselves and returning to the path of customer value [AA: This is where we believe Alibaba lost its way in the past - whereas PDD maintained better focus on customers, as we discussed previously]. We raised the “scalpel” against our “big-corporate disease”, transforming from a slow decision-making organization back to putting efficiency and the market first, simplifying the company and making it more agile again. The new management addressed problems and the future directly, put their trust in young people, fully empowered young teams, and have been decisive on what we want and don't want. Our idealistic passion and mission of "making it easy to do business anywhere" [AA: A slogan of Alibaba from its earliest days, this was made extremely difficult by the Alibaba-Tencent spat, but conditions appear to be improving] will never change, but over the past year, the new management made many changes, not only cutting through yesterday's ossified strategies, but also building the future of Alibaba.

All throughout, from B2B to Taobao, to Alipay, to Alibaba Cloud, we innovate not to pursue higher profits, but to strive to survive in a rapidly changing era; we innovate not to change others, but to change ourselves; we also never innovate to surpass competitors, but to keep up with the future. Innovation is not about keeping up with fads, but is instead a test of your true survivability. It requires you to disrupt your perception from within, to challenge yourself nonstop, to keep doing things others dare not do, do not want to do, and have never done before...

Facing this era of great technological change, a span of three to five years is like a century for Tech, enough for earth-shattering changes to occur [AA: Jack is not being overly melodramatic - recall that PDD gained 300 million users and listed on the Nasdaq in 3 years]. I believe that three years from now, e-commerce will certainly not be whatever is in vogue today...The important thing is not to catch up with someone today, but to think about how to improve the consumer experience for the e-commerce of the future...The AI era has just arrived [AA: Alibaba has invested heavily in AI after the release of ChatGPT, and in our opinion, its LLM Qwen probably ranks as one of the top 3 or top 5 open-source models right now], everything is just beginning, and we are right on time!

This year, amidst lots of internal and external doubts and pressures, I saw the birth of a strong and brave Alibaba team. When talking about transformation and innovation, the biggest fear is turning them into mere slogans. Transformation and innovation are painful, because transformation requires paying a price, and innovation requires a step-by-step grinding down [AA: we believe that Steve Jobs describes the process perfectly in this video]. Org changes & restructuring involve every employee. Thank you to all Ali-ers for your dedication and commitment this year. Thank you for choosing to believe and persist despite constant changes and even shifts in IPO decisions. I salute you - it is your perseverance that has allowed Alibaba to return to a healthy growth trajectory.

The path of transformation and innovation will never be applauded, because we are transforming our favorite bad habits and revolutionizing vested interests...The road is long, but we won't be alone, walking it together. In the future, we need to change ourselves more proactively and rapidly, only by taking on even greater transformations, can we build a vibrant Alibaba for the future.

Come on, Alibaba!

Feng Qingyang (Jack Ma’s nom de plume within Alibaba)
2024.4.10

Full disclosure: We hold a long position in Alibaba, Tencent and PDD - this is not a solicitation to buy or sell. We have no current business relationships with the companies mentioned in this note, and are not paid to write this piece (other than paying fellow exponents of the research).

Disclaimer: This should not be construed as investment advice. Please do your own research or consult an independent financial advisor. Alpha Exponent is not a licensed investment advisor; any assertions in these articles are the opinions of the contributors.