From Jack Ma's letter to shareholders, he gave a sneak peek into Alibaba's future

Dear Investors:

When you open this Alibaba IPO prospectus, you may be considering investing in us and participating in our future development journey. I hope to share with you some of our beliefs and views on the future in this short letter so that you can make the final choice.

[Interpretation] The rest are clichés. The first paragraph is the most relatable word: "future". If entrepreneurs are divided into realistic and futuristic, Jack Ma is the founder of the futuristic school. Jack Ma himself said that entrepreneurs should consider things ten or twenty years later. Alibaba claims to be in business for 102 years, and there are still 87 years left. It can be said that Jack Ma's letter basically sets the tone for Alibaba's performance after listing: relying on advanced corporate strategies to make money for shareholders. He will mention the future again and again later.

Our Mission and Vision

Alibaba is a company that truly believes in and practices mission-driven. For 15 years, we have stubbornly adhered to the mission of "making it easy to do business anywhere" to help small and medium-sized enterprises solve problems of survival, growth and development. Together with thousands of small businesses, we have achieved a better self through ideals, hard work and the market. In the future, we will continue to work with our customers to become a company that survives for 102 years, that is, spanning three centuries.

Unlike other high-tech companies, we are not a technology company that expands the boundaries of technology, but a company that continuously expands the boundaries of business by continuously promoting technological progress. We are not a company created by a few technological innovations or a few magical founders, but an ecosystem built by thousands of participants who believe in the future and believe that the Internet can make the business society fairer, more open, more transparent, and more freely shared, and have invested a lot of time, energy and enthusiasm - as you can see today.

[Interpretation] Alibaba's future has surfaced, and that is the four words "ecosystem". The ecosystem is mentioned 24 times in this letter. Jack Ma must have thought about this again and again, so he did not attribute Alibaba's past achievements to technology, and obviously did not intend to bet all the future on technology, so he must say that he is "not a technology company that expands the boundaries of technology." At the same time, he did not attribute the achievements to a few founders, and did not intend to rely solely on the geniuses within Alibaba in the future. Jack Ma wants to take the "mass line", which is the most clever way to play on the Internet.

However, I think that "not a company that expands the boundaries of technology" is actually a sleight of hand, because one quarter of Alibaba's partners are "technical apes."

Many years ago, the founder of our company longed to establish a company founded by Chinese people, but belonging to the whole world and this era. Over the past decade, we have been measuring our sense of achievement by the changes that China has undergone because of us. In the future, we will measure whether we are truly successful by the positive changes that the world has undergone because of Alibaba. This will be a huge challenge, but it will also be a rare blessing. This requires us to do our best every day, but more importantly, it requires us to persist in long-term investment, planning and perfect execution.

[Interpretation] This paragraph reveals Alibaba's next step in internationalization strategy. "In the future, we will measure our sense of achievement by what happens to the world because of Alibaba." The meaning is obvious. Jack Ma's listing in New York is not just about raising funds, but about starting to integrate the international market! What does that mean? It means using American money (financing), hiring American brains (many people have been recruited in the United States), and expanding the US and global markets. A relatively simple understanding is that Taobao will be opened all over the world, and logistics, payment, and review will pave the way for it, and the rest is unknown at once.

Our ecosystem-based business model

Alibaba's mission determines that the company will not become a business empire. We firmly believe that only by building an open, collaborative and prosperous business ecosystem, and enabling ecosystem members to fully participate in it, can we truly help our customers, that is, small and micro enterprises and consumers. As the operator and service provider of this ecosystem, we devote all our efforts, time and energy to ensure and promote the prosperity of this ecosystem and its participants. The only way for us to succeed is to make our customers and our partners successful.

We have always believed that enterprises in the 21st century must take solving social problems as their own responsibility. Alibaba Group has been embedded with social responsibility since its inception. We believe that a healthy and prosperous ecosystem is the foundation of our business model, which can be achieved by continuously solving social problems and taking on social responsibilities.

The Internet has given us a "once-in-a-millennium" opportunity to build a brand new business ecosystem in China. However, this transformative work is not easy. It requires us to be consistent, collaborate across fields, and always focus on building our ecosystem and the long-term interests of ecosystem participants; it requires the ecosystem to be as fair, transparent, and efficient as possible. This is not only our moral responsibility, but also the foundation of our own survival and development. This complex ecosystem is destined not to present a simple business model. Similarly, because of our complex system, it is not easy for competitors to imitate.

If you buy our stocks, you will also become part of our ecosystem. While fully protecting your interests, we also hope and ask you to work with us to ensure a more sustainable and healthy development of the ecosystem.

[Interpretation] This should be the first time that Jack Ma has systematically discussed the concept of ecosystem. This ecosystem should be inspired by the Google Planet strategy. The idea is consistent, that is, breaking the self-limitation of traditional enterprises and turning the closed system of operating enterprises into an open system of ecosystem. Openness is definitely more dynamic than closedness, and openness is definitely more resistant to risks than closedness. If Alibaba is closed, it is sellers, buyers and platforms. But if you look at it from an open perspective, as long as it is related to Alibaba, it is proud of it, Taobao girls, express delivery industry, online shopping trainers, etc. There are too many, hundreds of kinds, these industries that have never existed before, it is indeed an ecosystem where you are in me and I am in you.

Here, Jack Ma reveals how Alibaba will make money in the future, which is what Wall Street calls the business model. It is not simply making money from promotion fees (which is now the majority of Alibaba's income), but cultivating a piece of soil, allowing various crops to grow naturally, and making a piece of land prosperous. Alibaba, the pioneer and owner of this land, will naturally win. Seeing this, why do I have a feeling that Jack Ma has also read the book "Out of Control".

The letter will also mention a key point about the ecosystem, which is that the ecosystem is not planned, but evolved naturally. This deeply reflects Jack Ma's view on the world and the future of Alibaba. In connection with what Jack Ma has always said in the past, "embrace change", in fact, there is no business that is built to last forever. For a company to stand firm, the most important thing is to be able to adapt quickly, and this change is the evolution of the ecosystem.

How we will face the challenge

The past 15 years have not been easy for us. We have come to where we are today amid controversy and challenges. Although we are walking on thin ice every day, we often find that we have to face complex situations, balance and coordinate the interests of all parties, and make difficult choices: the interests of buyers and sellers, the competitive relationship between sellers, the relationship between entrepreneurship and regulators, the relationship between pioneering innovation and prudent conservatism, and so on. Behind any great innovation and progress, there will be competition with conservative and vested interest groups. There will be supporters and opponents.

In addition, many of the drawbacks of the real business world will also appear in our ecosystem, such as counterfeit goods, intellectual property rights, and those who try to use our ecosystem to gain unfair benefits. Like all companies today, we must solve these thorny problems, because even an ecosystem built on the Internet cannot be immune to traditional economic issues, and our ecosystem and its participants cannot be separated from the real world. It is definitely not easy to deal with these problems, because there is never a perfect solution or answer. At the same time, the ecosystem is not planned, but evolved naturally, so Alibaba's development must change rapidly at any time to keep up with the changes in reality and the network environment.

After we become a public company in the United States, all the controversial problems we faced previously will not only not be reduced, but may even face more challenges. When a large Internet company from an ancient Eastern civilization enters the global vision, the clash of culture, values, laws, and even geopolitics will complicate many issues. In addition, I am a founder who is full of controversy, and there will definitely be many headache-inducing topics and debates surrounding me. . . We hope that these disputes are constructive and can contribute new ideas to the discussion of globalization.

[Interpretation] This paragraph is clearly a risk warning. The biggest risk for companies that focus on the future is not the unknown future, but the power struggle between innovation and tradition; the biggest risk for Chinese private enterprises that focus on the international perspective is not the challenges of the international market, but the clash between major power relations and Eastern and Western civilizations. The controversies that arise from these struggles will never subside. Here, Jack Ma also made a self-deprecating comment: I am a controversial person myself.

Of course, avoiding challenges is not our style. If you were our shareholder, you would certainly be confused by us. But I want to make it clear to everyone here: no matter what happens, we will stubbornly stick to our ideals, insist on being ourselves, insist on the future, and adhere to the principles of honest and transparent corporate governance. We will unswervingly defend the long-term and healthy interests of the Alibaba ecosystem. Your trust and support will be our greatest asset, and living up to your trust is our creed.

[Interpretation] In addition to the ecosystem, the high-frequency word is "persistence". Alibaba has 102 years to run, and there are 87 years left. Listing is just a transit station, not the end. For Alibaba, which has just entered adolescence, the road to listing on the New York Stock Exchange and the road to internationalization are full of flowers and thorns. The future has come, but there is no way to know where the enemy is. Without persistence, it is impossible to become a century-old enterprise.

Our problem-solving priorities

I have pointed out on many occasions that Alibaba believes in the business management philosophy of "customers first, employees second, and shareholders third." Many investors may find it difficult to understand this view when they first hear it.

I am here to make it clear to you that Alibaba can only create value for shareholders if it adheres to the principle of "customer first" and creates lasting value for customers. In the new economic era, the most important factor in satisfying customers is our employees. Without diligent, happy, passionate, dedicated and talented employees, creating value for customers is just empty talk. Without a satisfied workforce, there can be no satisfied customers, and without satisfied customers, there can be absolutely no satisfied shareholders.

We respect and appreciate the support that investors have shown us with their own money. We hope that our investors can not only get financial returns, but also share with us the sense of achievement in improving society. Over the past 15 years, our investors, including SoftBank, Yahoo ..., have received generous returns and participated in Alibaba's process of creating jobs, encouraging innovation, promoting fair competition, and driving the transformation of social and economic growth models.

I would also like to emphasize that the company will not make decisions based on short-term fluctuations in our revenue and profits. Our strategic decisions will be fully and thoroughly implemented in the long-term development plan driven by our mission. All talents, capital, technology and resources will be used to ensure the long-term healthy development of the Alibaba ecosystem. We are looking for long-term investors rather than short-term stock speculators.

[Interpretation] This is an Eastern way of expressing the protection of investors' interests. Wall Street investors may have to think about it, but in the end, it's the same. What Jack Ma wants to express is the difference between Alibaba and many Chinese Internet concept stocks that have appeared in front of Wall Street investors before, or the difference between short-term arbitrage and long-term investment. Chinese concept stocks made Wall Street crazy for a while, but later they were known as arbitrage cashing in the United States. Jack Ma said "longing for long-term investors", which on the one hand shows his ambition for Alibaba to stay in the New York Stock Exchange for a long time, and on the other hand, it is obviously a spoiler: "Listen to me, hold for a long time, and you will make money."

As for how to make money, Jack Ma is clearly suggesting that you look at the major shareholder Yahoo. In 2005, Yahoo invested $1 billion in Alibaba and acquired 40% of the latter's shares. By 2012, Yahoo sold its 20% stake in Alibaba and earned $7.1 billion. The remaining Alibaba shares held by Yahoo are worth nearly $30 billion. This investment has become one of the highest return investment cases in the world.

Our governance mechanism

In order to ensure the long-term healthy development of the company and the long-term interests of customers, employees, investors and all parties involved, Alibaba must make all decisions based on the principles of consensus, collaboration and responsibility. The Alibaba Partner System is the embodiment of this operating philosophy. We believe that such a cross-domain cooperation mechanism can help managers eliminate bureaucracy and hierarchy, achieve teamwork, and thus better improve the company's business.

To operate a large and complex ecosystem like Alibaba, we cannot rely on one or two founders or management, no matter how capable they are. We must use a mechanism and select more people who are outstanding in their respective fields and have common beliefs. Partners do not protect the interests of partners, but use a system to protect our sense of mission, values, vision and culture. By absorbing new partners, we balance sticking to core beliefs and maintaining openness to ensure that our ecosystem and operating mechanism continue to evolve with time and scale.

In order to build a healthy and sustainable business ecosystem, our company charter authorizes Alibaba partners to have a strong say in the company's strategic direction and culture. We have spent a long time thinking and practicing, with a strong sense of responsibility, to build and improve this structure, and we are extremely cautious in selecting partners. I hope you will read the description of Alibaba's partnership system in the prospectus carefully to learn more about our uniqueness of this corporate governance structure and our constructive thinking about management behind it.

[Interpretation] Explains the partnership system. The partnership system is accepted by the US market. Previously, Google and other companies have used AB shares to compete with capital. Alibaba's partnership system has added some of its own innovations. The core is to prevent the major shareholders of the investment party from arbitrarily using the weight of their shares to interfere with the operation of the company. You should know that Alibaba's major shareholders are Yahoo of the United States and Softbank of Japan!

Dear investors, after Alibaba went public, our annual report every year will include a letter written by our partners in turn to communicate and report with you.

Thank you again for considering investing in Alibaba. My partners, colleagues and I assure you that we will serve the Alibaba ecosystem wholeheartedly.

[Interpretation] The meaning of this paragraph is that the next letter will not be written by Jack Ma.

Jack Ma

Executive Chairman of Alibaba Group

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.