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How China taught me to love Big Business

May 5, 2011
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The local bike repair and shoe repair stands near the Bund

We Americans, especially young and idealistic Americans, have a tendency to hate on big businesses. The image of Big Business as a juggernaut a greedy juggernaut, sucking all the goodness and life and uniqueness out of communities and replacing it with cheapened mass culture, is pervasive. Many resist patronizing places like McDonald’s or Starbucks, because they’re big characterless chains. It’s so easy to root for the local little businesses, and so sad when they close their doors. We want to blame the big guy.

China has taught me that we’re only seeing the very end of the Big Business story. Big Business revolutionized all businesses, big and small, for the better. I recognize this now because China is still in the middle – or arguably the beginning – of the business transformation, which is being pushed by Big Business. Let me explain:

Shanghai, and China as a whole, has an overwhelming number of small, family-owned businesses. The Chinese, despite the communist hiccup with Mao, are extremely entrepreneurial. Little businesses like those pictured above dot every Chinese city – a man or two with the miminum required equipment to fix a bike or a shoe,  or to whip up a bowl of chao mian (a.k.a. chow mein – fried noodles). They may pay for real estate, but many opt for a table or a stand.  You also pass countless salesmen on the street with bike carts selling fruit, or watches, or cell phone covers, or dishwear, or anything you can think of.  Most of these businesses (without real estate) are illegal, but they are so prolific that they’re overlooked; business liscense laws are not well enforced for the locals. There are no barriers to entry, barely any capital down. A tiny investment, and you’re in business.

Unlike in the US, most of these little local businesses offer products or services for much cheaper than their Big Business counterparts. They have to in order to compete because what they offer is typically of lower quality; and to stay competitive, they cut corners (illegally), and are likely to rip you off. A street food stand, for instance, might be using tainted or recycled oil and ingredients. The shoe repair guy is not offering refunds, so if he botches the repair, there’s nothing you can do. You could never sue these small business owners for screwing you or making you sick because China’s legal system is too underdeveloped (and the fact that the business is illegal to begin with), but if you could you wouldn’t want to anyway because they have no money to make it worth your time or money. As a consumer, you are completely unprotected when patronizing these tiny businesses.

As a small business owner in China, you’re also unprotected. Most small business owners in Shanghai are making just enough to get by. Every industry is seriously fragmented here, and competition is fierce. Small businesses have to keep prices (and margins) very low to compete with all the other businesses, especially those with better quality products and services. They bargain with customers, sometimes to their great gain–but usually bargaining customers push margins ever further down. Moreover, most small business owners have no safety net – no job security, no medical insurance. Their kids often stop going to school early to help with the family business. Many of these workers never take holidays. It’s a tough life.

In come the big businesses like KFC and H&M. Do these businesses but some of the little guys out of business? Yes. But they also provide a lot of jobs, and, perhaps more importantly in the long-run, they set a new standard. KFC and McDonald’s in China are little safe havens of cleanliness. You know every surface has been scrubbed, every ingredient is safe, every employee washes their hands. Stores like H&M offer receipts and discounts. You know your pants won’t fall apart at the seams a week after you buy them; but even if they do, you can go back to the store and they’ll certainly replace the pants for you. There are STANDARDS at these places – of quality, service, consistency. You can trust them.

When I eat at KFC, I know I’m not gonna get sick, and that is so, so valuable here.

And for the employees – ah, where do I start? Medical, dental, job security! If you’re fired, you still get paid for awhile while you look for work. You have a guaranteed wage, so your income doesn’t fluctuate day by day. You get paid vacation and sick days. What the typical shoe repair stand owner wouldn’t give for a sick day that wouldn’t cause him to go hungry!

We Americans forget that at one point, our businesses were just as small, untrustworthy, and unregulated as China’s are today. There have been many major food safety scandals over the last two years here – I read about them in the news everyday – but America, too, had huge food scandals in 19th and early 20th century. Upton Sinclair’s The Jungle did not exposed the disgusting condition of our meat processing facilities until 1906, after which the Pure Food and Drug Act was passed. Until then, we had basically no oversight over the food being produced and sold to Americans. (The Food and Drug Administration didn’t exist until 1930.)

The “Big Business” that we demonized played a huge role raising the standards for all businesses in the US, so that now even all the local businesses are trustworthy, for the most part. After all, they have to compete with the big guys, so they have to play by the rules the big guys set, which are mostly good rules. Consolidation of industries makes them more efficient, safer, and better for the most part (unless monopolies take over).

I’m watching this shift happen right now in China, where the small business owner is often worse off in every way than the KFC employee, and my appreciation for how Big Business has impacted the world continues to grow. Thank you, Big Business, for improving all our lives! (Mostly. Those McDonald’s fries certainly aren’t making us any skinnier… another topic for another day!)

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One Comment leave one →
  1. mary ann cronin, a friend of your dad's permalink
    May 6, 2011 1:36 am

    Today, I bought a few hundred shares of renren, because I do believe China is the next big world for investors. At the same time, I do believe that American businesses will show them the way. I really enjoyed your blog. I received it from your dad. I will continue to read it, and have marked below to send me posts via email. I have been thinking many times of a least one trip to China. If I decide to make the trip, I will send you a note to see if we can meet. Peace. MAC at cronin8223@gmail.com

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