Little-Known Entrepreneurs Putting China Near Top of Billionaires’ List (NYTimes, 11/07/07)

November 7, 2007
Little-Known Entrepreneurs Putting China Near Top of Billionaires’ List
By DAVID BARBOZA
SHANGHAI, Nov. 6 — The United States has more billionaires than any other country: 415 by the last count of Forbes magazine.
No. 2, and closing fast? China.
A year ago, there were 15 billionaires in China. Now, there are more than 100, according to the widely watched Hurun Report. Forbes has documented 66.
Unlike America’s rich, China’s are hardly famous, even here. Bill Gates and Warren E. Buffett are known around the world. But Yang Huiyan and Robin Li?
Yet, who they are, and what they decide to do — or are allowed to do — with their money and newfound influence will have political and economic consequences in China and probably far beyond, analysts say.
“They could start buying companies in the U.S.,” Chang Chun, an economist at the China Europe International Business School in Shanghai, said. “They have so much influence.”
Thanks to the capitalist stock mania sweeping the Communist mainland, Chinese private and state-owned companies issuing stock for the first time are becoming the most valuable companies in the world — at least on paper — often overnight.
On Tuesday, Alibaba.com, one of China’s biggest Internet companies, had a blockbuster stock offering, raising nearly as much as Google and soaring 193 percent on its first day of trading.
That came after the debut on Monday of the state-owned energy company PetroChina on the Shanghai Stock Exchange. Its market valuation ran up to more than $1 trillion, topping that of any company in history.
Analysts are skeptical about the way China’s stocks are valued, particularly those like PetroChina with huge amounts of untradable government shares. But on paper it has dethroned Exxon Mobil as the most valuable company in the world.
Similarly, China Mobile is the world’s most valuable telecommunications company. The state-owned Industrial and Commercial Bank of China, which was nearly insolvent a decade ago, is worth more than Citigroup.
And when Country Garden, a southern China real estate company, went public in April, its initial public offering was bigger than Google’s.
But many analysts argue that there is nothing underlying the skyrocketing values, or that the obscure finances of the companies make it impossible to know their true value. And if China’s stock market is a bubble, the new billionaires will disappear as quickly as they rose.
“A lot of people are surprised at how fast this has happened,” said Jing Ulrich, an analyst at JPMorgan. “But this is the power of the capital markets. A lot of people’s wealth is based on newly listed companies.”
After a nearly decade-long bear market for Chinese stocks, investors here are in party mode. The Shanghai Stock Market is up nearly 400 percent in two years. The Hong Kong Stock Exchange is shattering records.
The emergence of the superwealthy is a dramatic turnaround in a country that once branded enemies of the state “capitalist roaders.”
But in the 1980s, Deng Xiaoping broke with Maoist dogma by saying, “to get rich is glorious,” setting off a wild scramble that has produced a generation of hungry entrepreneurs.
Many analysts believe the Chinese are so new to this type of money that they themselves do not know what they will do with it, assuming it lasts.
As much as the bounty of billionaires is a source of pride, it is also a potential cause for concern in a nominally Communist country. Per capita income in China is less than $1,000 a year.
“One issue is social stability,” says Emmanuel Saez, a professor of economics at the University of California, Berkeley. “In Latin America you had such a concentration that revolutionaries wanted to redistribute it.”
Perhaps for that reason, many wealthy Chinese entrepreneurs fight to stay off the rich lists. Plus, the early lists of wealthy often led to unwanted scrutiny, including investigations and jail for some on tax evasion or corruption charges.
But times have changed.
With the economy of China roaring and entrepreneurs sensing a golden age of stock riches, everyone seems to be mouthing the words “shang shi,” Chinese for initial public offering.
Among the most celebrated are the young Internet tycoons. Robin Li, the 38-year-old founder of Baidu, which is called China’s Google, is now worth about $2.4 billion, making him richer than Jerry Yang of Yahoo. Ma Huateng, 36, of Tencent, another Internet giant, is worth $1.9 billion. And Jason N. Jiang, the 34-year-old founder of Focus Media, is worth $1.1 billion.
Mr. Jiang grew up in Shanghai, and studied literature before turning his focus to business while in college. He says he started out selling advertising in Shanghai and then, in 1997, formed what is now Focus Media with the idea of placing video monitors broadcasting advertisements in elevators, apartment complexes, supermarkets, and even on street corners.
With the help of Goldman Sachs and Credit Suisse, Focus Media went public in 2005 on the Nasdaq — and its shares have jumped about 800 percent in two years.
But it may be ambition more than money, at least so far, that motivates him. “I want this company to be the greatest media group — the greatest media company in the world,” he said in an interview. “I want Focus Media in every part of the world.”
He says he works 8 a.m. to 2 a.m., and does not feel tired. He also says he has no time for anything else, including spending his enormous wealth. He has upgraded to a nicer home in recent years, he says, but has little time for sports or anything else. He is single and works through lunch at his desk, buying a $2.50 take-out meal nearly every day.
“I think this is typical,” he says of successful entrepreneurs in China. Experts call entrepreneurs like Mr. Jiang the country’s best hope for innovation.
“These young 30-something-year-old entrepreneurs have become billionaires, and they’ve become role models for others,” says Chen Zhiwu, a professor of finance at Yale University. “They have totally energized Chinese entrepreneurs.”
In fact, after Forbes and the Hurun Report, which tracks the wealthy, published their rich lists this fall, the government in Hunan Province, Mao’s birthplace in central China, seemed to complain that the province was not accurately represented.
The Hunan provincial government posted its own rich list on its provincial Web site, as if to say: people from Hunan are great entrepreneurs, too.
While Forbes this year estimates that there are 66 billionaires in China, Rupert Hoogewerf, publisher of The Hurun Report, has already found more than 100, and there could be many more, he says.
Mr. Hoogewerf also says that 6 of the 10 richest self-made women in the world are from China, including Zhang Yin, the founder of Nine Dragons Paper, which collects recycled paper from the United States and turns it into boxes in China.
The richest person in China, since last April, is also a woman: Yang Huiyan of Country Garden, the real estate company.
Ms. Yang, 26, who did not grant an interview, is No. 1 on both rich lists, and easily the richest woman in Asia. A graduate of Ohio State University, she is worth about $16 billion, making her richer than George Soros, Rupert Murdoch and Steven P. Jobs.
Her father, a real estate developer in southern China, gave her most of the family’s fortune in stock, just before Country Garden’s blockbuster Hong Kong initial public offering.
In keeping with their reputation for discretion, of about 15 billionaires contacted recently, only one, Mr. Jiang, agreed to an interview. They tend to hide their billions, friends say, sometimes with offshore purchases. Some even boast that they still get a $2 haircut.
Their stories, though, are remarkable. Huang Guangyu, 38, grew up in a poor village in southern China, where he and his brother sold plastic bottles and newspapers. Now, he controls Gome, one of the country’s most popular electronics stores.
Li Ning won three gymnastics gold medals at the 1984 Olympics in Los Angeles. Later, he founded a sporting goods company, took it public and signed Shaquille O’Neal to a sneaker contract. Now, Mr. Li is richer than Tiger Woods.
The rise of the Chinese billionaire is remarkable not just because of the speed with which it has happened — the country only opened up to capitalism 25 years ago — but because it happened without the help of a single global brand, no Sony or Toyota. (Japan has only 24 billionaires.)
Indeed, China’s wealthiest, largely real estate tycoons (35) and manufacturers, appear singularly focused on making it inside China, not outside.
That is the next challenge of the billionaires. And some are already embracing it.
Shi Zhengrong studied physics and solar energy in Australia before returning to China in 2001 to start up Suntech Power. Six years later, Mr. Shi’s solar energy company is valued at $9 billion, its stock price up over 300 percent since the public stock offering in December 2005.
In an interview earlier this year at his Shanghai headquarters, Mr. Shi insisted that solar power will play a role in China’s development. And as he finished the meeting, he smiled and said, “Some day, this company will be as big as Microsoft.”

Even in a Virtual World, ‘Stuff’ Matters (NYTimes, 09/09/07)

September 9, 2007
Even in a Virtual World, ‘Stuff’ Matters
By SHIRA BOSS
IT’S payday for Janine Hawkins. Not in the real world, where she is a student at Nipissing University in Ontario, but in the online world of Second Life, where she is managing editor of the fashion magazine Second Style.
Ms. Hawkins, who in Second Life takes on the persona of Iris Ophelia, a beauty with flowing hair and flawless skin, keeps a list of things she wants to buy: the latest outfits from the virtual fashion mecca Last Call, a new hairstyle from a Japanese designer, slouchy boots. When she receives her monthly salary in Linden dollars, the currency of Second Life, she spends up to four hours shopping, clicking and buying. After a year and a half, she owns 31,540 items.
Living it up in Second Life is a break from Ms. Hawkins’s part-time job as a French translator, but she works just as hard in the virtual world.
Last month, she earned 40,000 Linden dollars ($150), for interviewing designers, arranging fashion shoots and writing about trends in Second Life, called SL by frequent users. “I usually spend what I earn,” Ms. Hawkins said. “It’s entertaining.”
It also says a lot about the real world, especially when it comes to earning and spending money.
When people are given the opportunity to create a fantasy world, they can and do defy the laws of gravity (you can fly in Second Life), but not of economics or human nature. Players in this digital, global game don’t have to work, but many do. They don’t need to change clothes, fix their hair, or buy and furnish a home, but many do. They don’t need to have drinks in their hands at the virtual bar, but they buy cocktails anyway, just to look right, to feel comfortable.
Second Life residents find ways to make money so they can spend it to do things, look impressive, and get more stuff, even if it’s made only of pixels. In a place where people should never have to clean out their closets, some end up devoting hours to organizing their things, purging, even holding yard sales.
“Why can’t we break away from a consumerist, appearance-oriented culture?” said Nick Yee, who has studied the sociology of virtual worlds and recently received a doctorate in communication from Stanford. “What does Second Life say about us, that we trade our consumerist-oriented culture for one that’s even worse?”
Second Life, a three-dimensional world built by hundreds of thousands of users over the Internet, is also being used for education, meetings, marketing and more obvious game playing. It’s a wide world with a lot going on, in multiple languages, and it can be real-life enhancing for populations who are isolated for physical, mental, or geographic reasons. But as a petri dish for examining what makes many of us tick, Second Life reveals just how deep-seated the drive is to fit in, look good and get ahead in a material world.
Many residents have lived the American dream in Second Life, and built Linden-dollar fortunes through entrepreneurship. In what could have been an ideal world, however, or one where anyone could be a Harry Potter, Second Life has an up-and-down economy, mortgage payments, risky investments, land barons, evictions, designer rip-offs, scams and squatters. Not to mention peer pressure.
“Second Life is about getting the better clothes and the bigger build and the reputation as a better builder,” said Julian Dibbell, author of “Play Money,” which chronicles his year of trying to make a living by trading virtual goods in online games. “The basic activity is still the keeping up with the Joneses, or getting ahead of the Joneses, rat race game.”
TO have a Second Life, one needs a computer, the Second Life software, and a high-speed Internet connection. You use a credit card to buy Lindens, and Lindens earned during the game can be converted back into dollars via online currency exchanges. Players start by choosing one of the standard characters, called an avatar, and can roam the world by flying or “teleporting” (click and go). Nobody can go hungry, there is no actual need for warmer clothes or shelter, and there is much to do without buying Lindens.
But walking around in a standard avatar, when there are so many ways to buy a better appearance, is like showing up for the first day of school dressed differently than all the other kids. You stick out as different, as an SL “newbie.”
“It’s hard not to fall into that,” Mr. Yee said. “There are shops everywhere, so it’s easy to say, ‘Oh, O.K., I guess I’ll get a better pair of jeans.’ ”
Second Life was started in 2003 by a Silicon Valley techie inspired by a sci-fi novel, “Snow Crash.” It is owned by a private company called Linden Lab. The original idea of the game was to unleash creativity. Residents don’t have to wear the latest fashions; they don’t have to look — or act — human at all. They can take any animal, robotic, or inanimate form they want.
And while there is a minority population of animal characters, and wearing butterfly wings is currently in vogue for humans, for the most part the population is young women bursting from their blouses and young men bulging with muscle. (Underneath the clothes are cyber genitalia, sold separately. Mark Wallace, a blogger who writes about Second Life, explained that the parts are not fashion accessories but rather “a functional appliance” for, ahem, entertainment purposes.)
While a frequent criticism of Second Life is that spaces are often empty and that there’s “nothing to do,” a crowd can be found at the mall, just as it can in suburbia. For example, the Xcite! store, which sells body parts, is “always crawling with avatars,” said Mr. Wallace, co-author of a forthcoming book, “The Second Life Herald.” Fashion is big business in Second Life, along with entertainment and land development.
Big corporations like Toyota have set up islands in Second Life for marketing. Calvin Klein came up with a virtual perfume. Kraft set up a grocery store featuring its new products. But those destinations are not popular.
“These brands that have this real-world cachet are meaningless in Second Life, so most are ignored,” said Wagner James Au, who blogs and writes books about Second Life. “Just showing up and announcing ‘We’re Calvin Klein’ isn’t going to get you anywhere.” American Apparel closed its virtual clothing shop, and Wells Fargo abandoned the island it had set up to teach about personal finance.
Second Life exclusives do exist: A magic wand was a hot item at one point, and the sex bed is currently in demand. (“If you lie on it with more than one avatar, it’s like you’re in a porn movie,” Mr. Au explained.)
But the more mundane items are what really drive the economy: clothes, gadgetry, night life, real estate. “People buy these huge McMansions in Second Life that are just as ugly as any McMansions in real life, because to them that is what’s status-y,” Mr. Wallace said. “It’s not as easy as we think to let our imaginations run wild, in Second Life or in real life.”
Mitch Ratcliffe, an entrepreneur and blogger, was an early resident of Second Life and built a house with a lake. But he was soon disillusioned with the upkeep involved with owning the property. “I don’t see why I would want my second life to be about the same striving and profit that my first is,” Mr. Ratcliffe wrote in a blog entry about his Second Life adventures. He eventually reincarnated himself as Homeless Hermes.
“People come by, see the user name and tell me how sorry they are that I don’t have a home. Why?” he wrote. “It’s very middle class, very staid in the way economic stigma is attached to a failure to get to work.” In the meantime, Homeless Hermes took up buying and selling virtual land and has pocketed the equivalent of $800.
Land is the biggest-ticket item in Second Life, with Linden Lab selling islands for $1,675, plus a $295-a-month maintenance charge.) Catherine A. Fitzpatrick, a Russian translator in New York who in Second Life is a landlord known as Prokofy Neva, got into the game three years ago and now owns hundreds of apartment buildings, houses and stores that she rents out to about 1,500 tenants who pay from $1.50 a month to $150 a month. She takes several hundred dollars a month out of the game to pay real-world bills. Prokofy Neva herself does not have a house. “If I did, I would rent it out,” she said. “Why not make money from it?”
She has, however, turned over virtual acreage for a land preserve and public use. She and an architect friend were initially entranced by the idea of creating artistic homes that could defy gravity, but they discovered that there wasn’t demand for that in Second Life.
“The average person wants a ranch house or a beach house,” she said. “They don’t want even Frank Lloyd Wright.” (She added, “These people are my customers, so I respect that.”)
Some residents do wear grunge clothing — itself a status symbol in Second Life because of the difficulty of replicating ripped and stained clothing digitally. But the largest slice of the population follows the crowd, and the crowd is not dressing up as dragons.
“The money is in the real-looking stuff: making skins with red lips and smoky eyes, and stiletto boots,” said Ms. Hawkins, the Second Life fashion writer. First comes something popular, then the knockoffs. Soon everyone has one. “People go for similar looks and similar things,” she said.
In Ms. Hawkins’s online closet are avatars that let her move around as a rubber ducky or as a fruit salad encased in gelatin. But those identities are novelty items that usually stay on the shelf. When she goes out in virtual public, Ms. Hawkins usually takes the form of Ms. Ophelia, who has more than 250 pairs of shoes.
Items are real-world cheap — an outfit usually costs $2 to $5 — but they can add up quickly. “It’s so easy to buy something, you don’t realize how much you’re spending,” said Carrie Mandel, a homemaker and mother in Chicago who spends two work days a week as well as evenings and weekends on her Second Life business, selling pets.
One coveted status symbol in Second Life is a souped-up muscle car called the Dominus Shadow. It currently costs 2,368 Linden dollars, about $9 at the current rate of 268 Linden per dollar. Many players pay that much every month for premium membership that lets them own land, and all are sitting at computers with high-speed Internet access. So why don’t more people treat themselves to the prized possession of a Dominus?
“It’s expensive in-world,” said Daniel Terdiman, author of the forthcoming book “Entrepreneur’s Guide to Second Life.” “You don’t think of how much things cost in real dollars; you think in Linden dollars. When something is expensive, even though it comes out to a few dollars, a lot of people don’t want to spend that much money.”
Although Linden dollars can be bought with a credit card, there is evidence that the in-world economy is self-sustaining, with many players compelled to earn a living in-world and live on a budget.
Surprisingly, many take on low-paying jobs. They work as nightclub bouncers, hostesses, sales clerks and exotic dancers for typical wages of 50 to 150 Linden dollars an hour, the equivalent of 19 to 56 cents. A recent classified ad stated: “I am looking for a good job in SL. I am sick of working off just tips.” This job seeker listed potential occupations as landscaper, personal assistant, actor, waitress and talent scout.
Second Life players are evidently discovering what inheritors have struggled with for generations: It’s not as much fun to spend money you haven’t earned. Apparently, despite the common lottery-winning fantasies, all play and no work is a dull game, after all.
“People don’t take jobs just for the money,” said Dan Siciliano, who teaches finance at Stanford Law School and has studied the economies of virtual worlds. “They do it to feel important and be rewarded.”
And to buy more things. “A lot of exotic dancers want to become models, so they can earn more money to buy more clothes,” Ms. Hawkins said.
It’s not just vanity that drives people to dress up in Second Life. It’s also seen as good for business. Ms. Fitzpatrick, the landlady, says she doesn’t really care about how her avatar looks. But she cares about what prospective tenants think. “I felt I had to go, finally, and buy the hair and the suit,” she said, “or my customers might think I’m too weird.”
Appearances count in Second Life’s financial world, too. Banks and stock exchanges are housed in huge, formal structures draped in marble and glass. “People in the banking industry wear shiny silver suits and are absurdly tall and have hired a couple people to walk behind them in black suits with ear bugs and shoulder holsters,” said Benjamin Duranske, a lawyer who blogs about legal issues related to the virtual world.
THE stock exchanges and banks in SL are imposing, but they are unregulated and unmonitored. Investors fed Linden dollars into savings accounts at Ginko Financial bank, hoping to earn the promised double-digit interest. Some did, but in July there was a run on the bank and panic spread as Ginko A.T.M.’s eventually stopped giving depositors their money back. The bank has since vanished. With no official law and order in Second Life, investors have little recourse.
Robert J. Bloomfield, a behavioral economist at Cornell University, studies investor behavior in the real world and recently became interested in how investors behave similarly in Second Life. “We know the little guy makes lots of dumb mistakes,” Professor Bloomfield said. “They tend to be overly impressed by the trappings of success. We see that magnified in Second Life.”
Some Second Life residents are calling for in-world regulatory agencies — the user-run Second Life Exchange Commission has just begun operating — and some expect real-world institutions to become involved as the Second Life population and economy expands. “It’s a horse race as to whether the I.R.S. or S.E.C. will start noticing first,” Mr. Duranske said.