China: Black Myth Wukong $1B AAA Game, $86B Tencent Publisher (League of Legends, SEA Group & VNG) & ​​Real Estate Bubble Burst - E470

Jianggan Li, Founder & CEO of Momentum Works, and Jeremy Au discussed:

1. Black Myth Wukong $1B AAA Game: Jianggan and Jeremy examined the reinterpretation of 'Journey to the West' in the gaming blockbuster 'Black Myth: Wukong'. The developers overcame huge skepticism, incorporated complex cultural narratives into gameplay and overcame technical challenges to balance traditional storytelling with modern gaming technology. They also discussed the parallels with Indian and Southeast Asia mythology.

2. $86B Tencent Publisher (League of Legends, SEA Group & VNG): Tencent owns League of Legends (Riot Games), PUBG Mobile, Arena of Valor, as well as WeChat. They also inspired and invested in the game, chat, ecommerce & payments structure of Sea Group (Shopee, Garena Free Fire) and Vietnam’s VNG (Zalo, Zalopay).

3. Real Estate Bubble Burst: They analyzed the causes of property price inflation and subsequent market corrections with Evergrande & Country Garden debt. The confidence crisis has had ripple effects into the consumer and adjacent markets, spurring outflows of talent, capital and companies.

They also discussed the importance of cultural understanding in global business strategies, how multinational companies leverage local consumer insights, and the complexities of managing large-scale economic shifts in the Southeast Asia tech scene.

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(01:50) Jeremy Au:

Hey, morning.

(01:51) Jianggan Li:

Hey, morning.

(01:52) Jeremy Au:

Yeah. Wow. Where are you in the world now today?

(01:54) Jianggan Li:

Somewhere in China. So been traveling non-stop for about four weeks, started from Jakarta, then went to Kuala Lumpur in Malaysia, then spent a whole week in Vietnam, then flew directly to Beijing, from Beijing to Xi'an. Now I'm at my parents place for a short stay of one day, then tomorrow I'm going to Hangzhou, and from Hangzhou Changsha, from Changsha I'm going to Shanghai, and from Shanghai back to Singapore. So I don't know how to describe that kind of feeling, right? You just like, you get overwhelmed about all the senses, all the people you know who tell you about what's happening in different places, and you try to reflect about what they say, try to draw some connections, and that makes you mentally exhausted.

(02:26) Jeremy Au:

You know, that reminds me of like what Journey to the West and journey to the East, right? But now we can do it within 12 hours, right?

(02:33) Jianggan Li:

Yeah I was just in Xi'an, sort of the ancient capital of China for oddly a reunion of my MBA class. So they just picked that place and that place has, was the start start point of the Silk Road. And it was also the the starting point of the Journey to the West. So there's lots of cultural relics, but there's also lots of stories and people tell you about, historically, how people connected with the different kingdoms in the West and all the way to India and all the trade and stuff. It's fascinating but it's overwhelming, right?

We tried to get access to the biggest museum in that city. And that museum gives out 12,000 tickets a day, and you have to book, like, two days in advance. We tried for, for the whole four days we were there, we tried, like, each of the, each of the sessions, we tried to book tickets. And each time, 12,000 tickets were sold out. We booked out within 40 seconds after it was released on the Meituan website. And then we went to a minor museum. So people said that, okay, this museum compared to the other one, there's nothing. And we planned two hours to be in it. We hired someone to help us guide through and do the briefing and stuff. We ended up spending the whole day there.

(03:33) Jeremy Au:

Yeah. No, I think it's interesting, right? Because journey to West is actually a very famous Chinese, I don't want you to call it story or literature, which is about this Buddhist monk who follows the Silk Road to travel to India from China because he wants to bring back these literature texts about Buddhism back to China, because India is the birthplace of Buddhism. And it's quite interesting because obviously India is the birthplace of Buddhism, but of course in today's world, China absorbed it via the Silk Road but of course India doesn't really have a big Buddhist traditional practice right now, right? So it's primarily China that does it, as well as to some extent like China uh, Korea, Japan, Southeast Asia. So I think it's quite interesting uh, cultural piece and yeah, Sri Lanka as well. So it's a very interesting travel along the routes.

(04:17) Jianggan Li:

So, let's look at the story. I mean, Journey to the West itself was legend because you have all these figures who do not exist in a normal world. And the legend goes that I think a few of them were previously part of the Jade Empress, the supreme ruler of the heaven and of his generals, his marshals, and because of certain, like, minor or major offenses, and they were condemned to the earth realm to become piggies, to become shark, to become all this. And somehow they formed a team led by this monk to overcome 81 difficulties to get the roads to transfer from India. The story really came about around the Ming Dynasty. People think that orally that people have been telling the story before that. And some people are tracing that the monkey came to Hanuman in sort of Indian mythology but the story really took roots in China and especially in the last 30 to 40 years.

In 1986, CCTV, the Central Television of China, made a TV series about that. And it was directed by a famous director and back then you didn't have a lot of visual effects. So she faked lots of visual effects but somehow some of people missed that period of optimism, right? You don't have the means but you have this simple joy that you can look forward to. And Journey to the West was, so that TV series was played every summer. So I think all the kids in China born in 1980s and 1990s would look forward to watching it again every summer on TV. And as I discovered when I was in university that it was the same thing for all the kids in Vietnam. So basically they have a version adapted into Vietnamese and it was played every summer. I was reminded about this last week when I was in Vietnam. So I was taking a taxi and and the driver's ringtone was a theme song of that, but obviously in Vietnamese, which was quite funny.

(05:52) Jeremy Au:

Wow. Amazing. Yeah, it was interesting because, it's like two stories, right? One is a real life actual story of a Buddhist monk who actually did that travel and he traveled through, obviously from Chang'an to Kyrgyzstan, to Uzbekistan, to Afghanistan, to Pakistan, to now India, and then all the way back. So there's a real story. Historically, and of course there's a legendary one, which is obviously there's a monkey king, like you said, there's a pig, there's a shark. So it's actually like, I don't know what the word is, like two stories. So it's interesting. And both of those stories actually are very important.

And I think now, we were chatting briefly about what that's new now, the new Black Myth Wukong, which is the, based on the fantastical version of it. AAA game. It's very popular. Sold out. It's number one on Steam. I think it's probably what, is this the first game that China has made it AAA and made it all the way?

(06:37) Jianggan Li:

I'm not sure whether it's the first, but it's definitely the first one in the long term. The guy who produced this game has been known in the sector for more than 10 years. And I think back in 2016 or 2017, he wrote a long article saying that the whole gaming industry in China is too short term focused, too money focused, and there's nobody who had the patience to basically produce a real like a masterpiece.

And this Black Myth Wukong game I think it took like six years to produce. And I'm not sure if you played it. I haven't, so I have it, but I haven't got a chance to play it. I don't usually play games, but I just want to see because it really took the whole sector by a storm and last week when I was in Vietnam, I mean there were a few visitors from China from the live commerce industry and the head of finance of one of the companies were saying that, hey, if I were not traveling to Vietnam for business this weekend I would have been playing the game at home in Hangzhou, so you really took things by storm. And this time, when I was in Xi'an, my friends suggested that we visit a small temple, which is like an hour and a half drive out of Xi'an, on an island in the middle of a stream, which is, by itself is funny. And the way she convinced everybody else to go is that, okay, a few scenes from Wukong was taken from that temple.

Then we said, oh, sure, we must go. And the temple from outside, just looks like normal temple. It's like small, petite, but when you went to the, I think the third like, I dunno how to describe that. For Temple you have a different sort of buildings, the third building and you were sort of immense with a Ming dynasty like, you know, you know carvings. And all this bas relief and vivid figures which were sort of taken and reproduced in a game. And apparently, that the game producers, they went to different parts of China, go to ancient temples and stuff, and to find all these relics and all these sort of interpretations of Buddhist mythology and stuff.

And I don't know how to describe that. We talk about it and say, okay, sure, we must go. But when you are there, you get overwhelmed. It's just a very small room, but thousands of figurines on a wall and intricately carved, like six, seven hundred years ago, and there are a few other temples which are a bit further away. Further away means like a few thousand kilometers away, and so we didn't get a chance to go, but but one of my friends actually went to some of those, even older temples, some of the carvings were done like 8th century, 9th century and I always thought that that the cultural relics and all this craftsmanship in the northern part of China was simple compared to what you typically see in Hokkien or Cantonese temples, because it was much easier to organize trade of different materials and a craft. And people, the workers oversee the overland right overland is like, I mean talking about journey to the west is, it's easily a few thousand kilometers with no men and that and you have to pass dangerous and sometimes hostile territories. But still, it was overwhelming.

(09:06) Jeremy Au:

Yeah, I think one interesting part is that I find like a lot of these temples are so full and so dense, I think with all the various relics that they've gathered which is quite different of course from the Western museums, which tend to be much more, I dunno what curated they have everything is, a lot of it is in the back, right? In the storage. And then they rotate out items and they have a lot of explanation. So the bit of a narrative piece versus I think a lot of the Chinese temples are more, it's like what you see is everything we got right? So it's very dense.

(09:32) Jianggan Li:

The museum we went to was, since I was in that city, I was just studying about the museums. Of course the one we went to and even a minor like, stone stool outside, left, like, randomly in the courtyard is, like, 2,000 years old. It's just crazy. And many museums were actually built on top of discovery, basically, discovered a lot of a lot of cultural relics and dug out of the ground in order to protect, in order to store it, the beauty museum. They then expanded the museum. They started keeping things which were discovered in villages nearby and stuff, and soon, boom, there's a museum that is worth like a day or a few days visit.

(10:04) Jeremy Au:

Yeah. So you said that the producer of Black Myth: Wukong said that the gaming industry in China is very short sighted. Could you share more about why is it short sighted?

(10:13) Jianggan Li:

I read his article about a week ago. Of course, I'm not in the gaming industry, so when he first wrote it, like, almost ten years ago, I didn't read it but essentially he was saying that, some people are too focused on money, right? So last 15 years, there's a boom of consumer access to mobile internet, access to mobile gaming, and you don't need to produce something super sophisticated, but you just need to produce something simple and addictive casual games. And get people to top up and stuff. So it was very easy to make money back then. And to produce the AAA piece, it takes years, right? Especially with Wukong. I mean, you have literally sent team to all these places to basically replicate all these carvings and stuff. And you need to understand the history really well, et cetera, et cetera. So the whole production takes much longer and historically, it's a very difficult decision, because, I mean what I mean historically is like over the last 15 years, it was a very difficult decision for you to tell your investors that i'm going to spend all this money, and I might not be able to see any results in six, seven years time and what all my peers are sort of making big bugs by just, like producing short videos or selling casual games. So it was a difficult sale to investors and it's a difficult sale to a team as well because the same thing here. And then people look at their peers making lots of money and they'll say, "Hey, I'm here doing craftsmanship" and it's just not something that people are used to in a society where things are changing very fast, where big money is made, it's very difficult for people to keep patience.

(11:27) Jeremy Au:

Yeah, I think it makes sense. The Chinese gaming industry is huge, so some of the statistics I've read before is that there's about 700 million players, which is pretty much, but half of all Chinese people game and then basically, the gaming industry is about 66 billion today, USD expected growth rate around 8%. And there's obviously all these famous games, right? PUBG, is a big one. Honor of Kings, so obviously Tencent and NetEase. These also like unicorn billionaire companies are quite focused on building these freemium games mobile games, casual games, and, yeah, it's a huge industry already.

In fact, I would say that this is probably like the first AAA game I've really seen on my end. I'm a bit of a, I guess, casual gamer. I was a big gamer back in the past, and now I just primarily watch gaming videos and follow gaming industry. And I think this is the first time where also I've seen even like Black Myth: Wukong be famous outside China, I would say. You see people in America or Canada also playing the game as well. So it's quite interesting global appeal.

(12:27) Jianggan Li:

I think production quality is definitely something, right? It took so many years to build this masterpiece. And second, I think there are lots of things it can tap into. So it's not that you are building something completely new. You have a story that that older people, presumably most people in sort of East Asian cultures are familiar with. And also, people find a resonance to the Journey to the West or the mythology part of the Journey to the West has been used in many things. Jack Ma, the founder of Alibaba, once said that the monk was like one of the probably the best leader in history. He's very determined and he doesn't have the super hot powers but he never gives up. No matter how hard things are, he never gives up. He motivates his team and stuff. And the monkey has some superpowers, but, it was funny, right? I If you read the story, which I read a few times, that for many of the big monsters or the sort of the big adversaries that you encounter along the way, he can't really defeat them purely by power. And what he essentially does is that he discovers, oh, this monster used to be the mount of this, like, Imouto in the Heavenly Palace. And obviously, because of whatever reason that mount, be it like a turtle, be it whatever they came to the earthly realm and to become a monster. So what he essentially does is that he goes to the heaven and he looks for the boss. He said, dude your mom has been doing these bad things. Let's make a deal. So essentially that's a lot of that. And people are looking at it and people saying that, okay, you have the superpowers, but sometimes relationship comes much more than the superpowers.

(13:45) Jeremy Au:

Isn't that the moral of all of China business?

(13:48) Jianggan Li:

And they have the pig, right? The pig is of course he has some superpowers, but compared to what the monkey has, is very limited, which means that he can only defeat about like 10% of the adversaries they encounter along the way, but the piggy has one, which I wouldn't call superpower, but has one skill is that he makes the whole team fun. He makes the whole journey less now. And there's also this shark, right? The shark almost never talks. So Joe goes that in a whole TV series produced in 1986, there were only two lines of the shark, which were repeated throughout the series. First is that, "oh, our master has been caught by a monster." The second is that, "Oh our big brother has been caught by a monster. What should we do?" So he doesn't have any steel, but that guy is fiercely loyal and he never complains. He always takes the biggest burden and et cetera, et cetera.

So then they, there's another figure, which is the horse. The horse was the son of the dragon king. I think in the East Sea or the Northern Sea, I can't remember but essentially it's a dragon. So at normal times, he just transforms into a horse, but in extreme difficult situations, he will revert to his original form of a dragon and help things out. So you see, I'm not sure whether the author had thought about all this and maybe just a sort of combination of you know what you take from mythology and your life experiences, but people now are trying to sort of reinterpret that in many different ways, I think especially these two years when economy is struggling a little bit. So people are trying to find more inspiration is saying that look, this resonates with what we're going through now, and this is what we need to go through this.

(15:09) Jeremy Au:

Yeah, so I think we've definitely heard about the Chinese economy struggling a bit. I think one of the interesting pieces is that it comes from different angles, right? So I think the West calling it overcapacity. If you look at it from Southeast Asia, looking at it in terms of like Chinese companies being forced or have to or want to come to Southeast Asia. I think obviously we think about it in terms of the property prices as well in China. So lots of different angles. How are you feeling and thinking about it?

(15:32) Jianggan Li:

I'm not sure if you heard recently that the whole, this restaurant chain called Din Tai Fung, right? The Taiwanese chain famous for its soupy buns. It's popular in Singapore. It's popular in many places. And I think two weeks ago, they announced that they would close all the stores in Beijing, 14 stores. All the stores in Beijing will be closed and obviously, and that news was like caused lots of people to start debating what exactly is happening, right? This is like slightly more premium restaurant where I think with average spending per person of above 100 yuan.

And some people are saying that it's because the foreign companies are not back and that's, so as a result, there's less business dining and stuff. And some people are saying that it's because the consumption power has been sluggish. I've been talking to lots of friends this time when I'm here. People still have the money. I feel that there's still lots of cash being stashed away but a couple of reasons. First, the few years of pandemic caused lots of people to rethink about their lifestyle choices, right? Before the pandemic, everything was reverent. Everybody had sort of good expectations of the future and everybody was, I was speaking with a friend of mine who runs e commerce for some of the luxury brands in China. And I think one consensus is that many young people are spending, not worth spending, not really beyond their means, but they were spending on things which are one level above their actual income level because they expect the income will become better. And obviously, one thing is that, okay the growth has reached saturation in a way. You just simply can't grow as that fast forever.

But second is also, after a few years of the pandemic, people sort of realized that, okay, I don't need that kind of stuff, right? I can live perfectly well. And it's sort of the mindset has been transformed, right? I care about my body. I care about my health. I care less about being luxury, buying all these good bags to show off to my peers. And it's just a whole transformation here. And we talk about the industrial overcapacity for sure, because, this is how the economy functions. If there's demand, somebody is going to, in a sort of market economy, some people is going to organize the production but of course, like sort of arranging the production and such takes time. So that never goes in coherence with the actual demand, which fluctuates in cycles. The problem in China is that it hasn't seen that kind of cycles that you normally see in the West, and because a serious downturn would be very serious and it would be, would be deemed as causing some social problems. So I think the government has been trying very hard to prevent any serious correction which might not be good because you have all these risks which are not fully unleashed during a correction. You don't have a correction. So you have all these risks been building up.

(17:44) Jeremy Au:

I think at end of the day, whenever there's a capitalism, there's always boom and bust cycles, right? It's how things are by nature. Exuberance versus a kind of like a downturn. So I think there's always a bit of a policy dynamic that always needs to happen, which is during good times, how do you slow it down? During the bad times, how do you invest in it to make it better? Of course, I think in America, and there's a lot of stimulus spending, obviously through deficit spending because of the benefit of being a reserve currency. So I think there's a lot of advantages that they have. And then during the pandemic, we saw that everybody received a stimulus check that was assigned by Donald Trump to saying like, Hey, this is my money to you go ahead and spend it. And then of course that was followed by Biden who also did a giant IRA, the Inflation Reduction Act, which was a trillion dollars stimulus over a long period of time and of course contributed to inflation actually. So that was an interesting piece, but I think there's a lot of stimulus spending there. Now, how's China thinking about getting through this time period with the property bubble deflation?

(18:38) Jianggan Li:

The problem with the property is that many people buy property, sort of property became, for many of the ordinary people, it's just the only sort of reliable investment over the last 20 years because of those, whoever who didn't invest in property in early, like 2000s or early 2010s regretted it by that late 2010s, and also I think the stock market in China has not been performing well and like historically so lots of people lost money on stock market and that there are not like sophisticated financial instruments. And also I think the domestic education has not been done properly in China in a way that many of the advisors, that I mean you probably know that so are very eager to sell products rather than properly educate the investors about risk, right?

So property was like something which people saw, I mean over 20 years as a short bet I mean you invest in that. The value will never go down. And so when there's a sign of overcapacity of property, when things start to being flat or trending down a little bit, and that causes a panic, right? And people are trying to sell and especially lots of people are taking leverage to buy investment properties. That's a big issue. There are rumors that some new policies are coming out this week. So I'm not sure what's going through policy makers' mind, whether they are, they're sort of, trying to avoid like giving out everything at once, trying to test, okay, whether something works. And of course, there are also people sort of arguing that if you don't give a big shock remedy and things will not work. So there's lots of debate in a society. I'm not privy to the thoughts of the exact policymakers on this market, but I do think that the property prices are a key thing preventing sort of young people from spending more in consumption.

(20:05) Jeremy Au:

It's a interesting problem for sure, because I think this is the first time I think that China has really gone through this property price deflation crisis, I would say. I remember in when I was there, there were all these like ghost cities being built, and people were already criticizing back then that all these developers were building all these like properties and people were just buying these investments. So I think we knew this for a long time was coming, at least in terms of the complaints, but I think the bubble went up quite, Longer for quite a number of years, actually, and then when it popped, popped very hard.

So I think, I don't know, maybe the key lesson of course is when during the tough times, you have to do shock therapy to get people spending again, et cetera. But also I think, you have to pop those bubbles earlier, deflate them as early as possible. Otherwise, you see young people being priced out of being able to buy new homes because people are buying for investment. But then obviously, everybody's leveraged out because they're buying for investment. I don't know. It's not a good position to be in.

(20:57) Jianggan Li:

It's definitely a very tricky situation. And if you think about that, the whole economy is not only, I mean, the property itself is a large part of the economy, but around property, there are lots of, like, different sectors like all this, like, renovation companies or this home furnishing brands and products and all this home improvement, et cetera, et cetera.

It's actually a huge part of the economy. And of course, the sort of property developers would have their suppliers, their supplier would have their own suppliers. So now I think that's this big cascading so the effect coming and obviously it's a very tricky issue to solve. Very tricky.

(21:27) Jeremy Au:

I think there are the famous bankruptcies, right? So we have Evergrande, which is like these folks, developers that were leveraged up as well. They borrowed money. They also took the deposits of customers to construct new buildings, but of course, with the rise of interest rates globally, plus Chinese policy on like how much leverage they can take, they basically ran out of working capital, right? And they haven't been able to finish their buildings. All those deposits are half built. So they're still stuck in the buildings. A lot of people are complaining and protesting but it's not only them, right? There's a lot of other folks who are like in similar boats as well.

(21:58) Jianggan Li:

As I mentioned that there's lots of other industries closely associated with property and also the finances of local governments are also closely related to property. I think it's something to do with some tax reform in 1990s, which sub delineates whatever that's that can be collected and kept at a local level and whatever that's collected and sort of kept at the central level. So I think that was the key reason why many local governments resorted to selling sort of land to basically help finance the city building etc. So that has been going on for more than 20 years and obviously, local government spent a lot during the pandemic for all this pandemic sort of measures. And if they couldn't sell land if the industry sort of growth is flat, there's a debt problem, right? I mean they have to find money somewhere to basically pay for all this cost and all this service, all this date.

(22:43) Jeremy Au:

Yeah, not an easy answer because, these are billions and billions of dollars of constructed buildings, but if you let them go and you don't let them whatever, then obviously consumers are going to protest and we should just put in money to let it finish, right? Yeah.

(22:57) Jianggan Li:

Yeah, I mean my speculation is that maybe they were they will find a way to sacrifice the banks, right? Especially the set own banks, but obviously when, so lower the interest rate and et cetera, et cetera. So makes the banks make less money, but but finance the sort of lower the debt burden across the society. So people have more money for investment and spending.

(23:14) Jeremy Au:

Yeah. I think lower interest rates might be the way to do it. And then basically you end up nationalizing some of the debt vehicles needed, right? Maybe through a state guarantee so that you can finish up building off the assets. But then, I think it's a first time ever for the Chinese government to ever do something like this.

(23:28) Jianggan Li:

Yeah. Yeah. And also it's hard for us who are not in that boat to comment on it. You probably know as an investor, right? So we put yourself in a funnel shows, which now you are building things and you were building things before you became an investor, but you see that we're looking from outside to say that, okay, this is an obvious problem. I see that you should resolve it, versus if you're in a driving seat, that I see this problem, and many others have to balance.

(23:50) Jeremy Au:

Not to mention people complain that these guys are too big to fail, moral hazard. These guys are getting a bailout, blah, blah, blah. They should bear the consequences. Yeah.

(23:59) Jianggan Li:

And all these different voices which you can't afford to completely ignore.

(24:02) Jeremy Au:

Yeah. It's not easy, right? Because so many developers like you said are in trouble, but also construction related companies beyond Evergrande, like Shamal Group and Country Garden. So what's the response you think for Chinese companies now, right? Part of it is like compete domestically. Some of it is also expand overseas to look for new growth. I know Pinduoduo has been doing a lot of expansion using Temu, for example.

(24:23) Jianggan Li:

There's a lot of desire to go overseas and expand. I was in Jakarta, just saw the demand of like new businesses from China, which we're trying to navigate there. Mind boggling. And in Vietnam, you see, there's an article which I can send you, written by some Vietnamese media, saying that there's huge stockpile of warehouses along the Chinese Vietnamese border, and you have lots of like, Vietnamese live hosts in, physically in China, like live casting about goods. These are Vietnamese people and and to Vietnamese audiences and stuff. So there's lots of efforts to actually go out. I think training is relatively more straightforward because you just produce the goods and you sell it, but of course depending on how you sell it, it impacts the sort of the sectors in the destination markets differently, right? Now there's all this noise about all this, like, direct B2C sales from China hurting the local businesses in different countries. Indonesia has been going against cross border e commerce for a long time. Brazil and South Africa just raised their taxes. And made it very difficult for people to sort of declare a lower value of declare lower value for their goods. And then you have this all this debate in the U. S. about revoking the de minimis rule, right? So everything below sort of $100 you get shipped into the U. S. tax free directly to consumers. So there's all this backlash. And and, of course, that, that makes the company think that, we discussed this last time. How should they maybe take some lessons from the Japanese companies, right? Because much of the produce of Japanese brands are built outside Japan. And I think some companies, Chinese companies are doing that.

And when I was in Vietnam, I spoke with some folks from this Chinese TV manufacturer called TCL. So they just celebrated the 25th anniversary in Vietnam. They went in 1999. And of course tremendous, you also know the brands like Haier, et cetera. They've been like, global for many years and these companies offer lots of lessons for others, but The tricky part is that I think for Chinese business, they're always very scared of competition, right? Unlike many of the western companies you have executives like building case studies and coming out to share their experiences and the Chinese companies tend to be as people outside will call it very secretive because they are, first, scared of if I say too much, regulators might find traces of things that I'm doing which, which is not exactly compliant. And second is that all my competitors are noticing this and they will explore the opportunity I just shared. So there's no, no incentive for them to share.

(26:26) Jeremy Au:

Yeah, I think there's actually a lot of Chinese companies that have been in Southeast Asia for quite some time, right? So for example Tencent, which was the kind of like gaming publisher that we talked about they also acquired League of Legends in 2011, but they also invested in Shopee, right? And Sea and Garena. Garena is a subsidiary of Sea Group and they have the distribution rights for League of Legends. So I think they have about 20%, I think might be less now of Sea Group and then obviously, yeah. And obviously we also have Alibaba as well as a presence in Southeast Asia through Lazada and Red Mart which is so they've been around for a long time, but all of them have worked quite hard to keep themselves quite low key. I think one more thing I can't remember is that I think Tencent is a part of VNG group, which is the, I guess the Sea of Vietnam, the super app of Vietnam in terms of e commerce and like local domestic messaging and gaming.

(27:15) Jianggan Li:

Social app, payment, et cetera, games. Yeah ,VNG sort of constrained themselves to Vietnam whereas Sea Group, like, went into really different countries. And this is something which I've actually been reflecting, sorry, this is a subtracting a little bit. Obviously, when when Garena was built, and obviously Singapore, it was built in Singapore, right? VNG and Garena were invested by Tesla around the same sort of years. And Garena was built out of Singapore. And from the beginning, you know that the market is not big enough, that you have to go somewhere else. For VNG, I do think that at that time people had lots of expectations for the market in Vietnam. So you sort of feel that, okay, you build multiple things for the Vietnamese market, the market is big enough that eventually it will return. I don't know. Maybe VNG should have gone out of Vietnam in the early days, but it's very hard to make that call, right?

So it's the same for the Chinese companies, right? So many of them, when they were having a really good time so they built the sort of international markets in a more opportunistic way and not in a very super serious way. But now many are forced to. So there's one argument is that could have done it earlier? Build some infrastructure outside so that at least they know the market and when they really try to sort of do it big time now and that they have fewer sort of, tough lessons to learn because they've learned all these lessons at a lower cost in the past. But it's very hard to say because again if you're in a driving seat, you see much more things than people from outside commenting on it.

(28:27) Jeremy Au:

Yeah. Outside in, obviously everyone wants to expand and do well in new markets, but inside out capability wise, your talent, do you have the executives who are comfortable working like in an MNC format able to cross borders? I think Singapore companies all grow up knowing they have to get outside Singapore because the government is telling them, their friends are telling them it's like, Oh, Singapore is so small. So everybody starts out. And of course, Singapore has a great airport. So everybody has traveled around the region quite a bit. Whereas I think for Vietnam, obviously is a less history of like exports in terms of like cross border team building, for example, right?

(29:00) Jianggan Li:

I think for most markets when you look at all this, if you talk about tech per se, Indonesian companies, if you compare Grab and Gojek, Grab was founded in Malaysia, but it very quickly moved to Singapore, and very quickly it was operating in multiple markets, and it was realizing that just these two markets were not enough. And if you look at Gojek, obviously, it was rightly so, right? In the beginning, they have still lots of potential for Indonesia, and it will be a distraction for you to go elsewhere, and you have limited resources. But eventually, we try to go in where we are already big, and you have all these issues, which I was discussing with Prof Chang in our book, right? You have all these people issues, you have all these leadership issues, organizational issues, and product localization issues. And whatever Gojek encountered in Vietnam, in Thailand, expanding into these markets in a way, fundamentally similar to what Chinese companies or any other companies would, would expect when you already have a large home market presence and we try to expand into other market big or small and you have to juggle all this sort of multi market organization, which is not easy.

(29:56) Jeremy Au:

Yeah, this actually reminded me of my theory of the five types of unicorns in Southeast Asia. The first is a Singapore breath story, which is, I think Asia Partners talked about in their report by basically from Singapore, you expand across Southeast Asia. So your Grab and your Sea group the second category is your Indonesia only approach, which is your which is your Gojek and Tokopedia. And then the third category is in Vietnam, like you try to do multiple products, so maybe like each product line is a hundred million dollars or 10 million of revenue, but you try to stack up five to 10 of these product lines, like a super app or mini conglomerate for Vietnam. And then the fourth type is, like you just happen to be based in Southeast Asia, but you're actually a global company, like, I don't know, crypto or, you just happen to live in Bali or Thailand. And the fifth type is the Chinese companies who are moving to Singapore and becoming Singaporean. So you have your Shein and your ByteDance, Singaporean companies now. So those are the five types of unicorns I think I'm seeing in Southeast Asia.

(30:51) Jianggan Li:

Oh, there's another type, which is corporate ventures. Investing a billion dollar into a company and saying that, okay, this company has a 1 billion investment of, and obviously it's a unicorn, it's worth more than a billion.

Yeah. So a billion dollars I've been putting, have you committed to this company? Obviously this company is worth more than a billion. So that's another type.

(31:07) Jeremy Au:

It's not mutually exclusive for the first five uh, I would say but, sometimes it can become reality, you know?

(31:12) Jianggan Li:

So, again, back to what we discussed earlier about boom, bust cycles, when people sort of had this sort of unicorn notion, have all this theories and pathways of how you could potentially build large tech companies. And of course you always have diverse opinions, right? Some people think that it's too hard. It's not possible. And the reach is too diverse. Some people think that, okay, China has done it. This region is a quarter of China's economy. Why can't it do it? And some people are saying that okay, some are acknowledging the challenge that enormous but it takes some great entrepreneurs to overcome this, etc, etc. These are all narratives. I mean, boom bust cycles. So I don't know. There's a lot there's lots of criticism about VCs but I think, is that, they're responsible for their money, they're responsible for their, for their people's money. They're acting out of that professionally, and they take responsibility for what they do. And some companies work hard, some companies don't work hard and some people have greater judgment than others. Some people have greater luck than others. This is all not part of the normal economy, right? And as a result, the infrastructure gets better, the payment gets better, the logistics gets better. So the people's choices of goods and stuff gets better. So yeah, that's good enough.

(32:09) Jeremy Au:

On that note, let's tie it off and I'll see you next month.

(32:12) Jianggan Li:

Yeah. I'll see you around. Bye bye.