Joe Tsai Says Start Local, Then Go Global

Full Transcript

Note: This transcript was generated by an automated system and has been lightly edited for clarity. It may contain errors or omissions.

Jeremy Tepper: Welcome to View From The Top: The Podcast. I’m Jeremy Tepper, an MBA student of the Class of 2026.

Michael McDowell: And I’m Michael McDowell, a producer at Stanford Graduate School of Business. Jeremy, who’s on View From The Top today?

Jeremy Tepper: Today we had Joe Tsai, the co-founder and chairman of Alibaba. Joe is an absolute legend. He built one of the most important companies in the world alongside 17 other co-founders, including Jack Ma, the face of the Chinese tech industry.

Michael McDowell: Yep.

Jeremy Tepper: And he also owns the Brooklyn Nets, the New York Liberty, and a host of other incredible sports franchises. He’s humble, he’s smart, and he’s a really clear and crisp communicator.

Michael McDowell: Fantastic, so for those in our audience who may not be familiar, can you tell us a little bit more about Alibaba?

Jeremy Tepper: Yeah, Alibaba is so many things in one. They started off as a wholesale marketplace. Since then, they’ve launched a bunch of other products: Alipay; Taobao, which is a consumer marketplace that resembles something like eBay or Amazon; they have Qwen, the largest open source AI model in the world that’s competitive with OpenAI or Anthropic. So they do a lot of things and they do them all really well.

Michael McDowell: Why did you want to talk with Joe and what did you want to ask him about?

Jeremy Tepper: Joe is different from a lot of CEO/founders that have spoken on View From The Top. Joe was never the CEO of Alibaba and he was never the face of the company, that was Jack Ma. But fairly quietly and behind the scenes, Joe was critical in some major decisions made by the company and major strategic frameworks. For instance, Alibaba went public in the United States.

Michael McDowell: Yeah.

Jeremy Tepper: Joe is an American educated lawyer and private equity investor. He really acted as a bridge between Alibaba, a Chinese company and the rest of the world. He’s just navigated a lot of really interesting things throughout his career.

Michael McDowell: So Jeremy, should we roll the tape?

Jeremy Tepper: Let’s roll it.

Jeremy Tepper: Joe, welcome to View From The Top.

Joe Tsai: Thank you, Jeremy. Very happy to be here.

Jeremy Tepper: Well, it’s an honor to have you here. And as I was preparing for this interview and trying to wrap my head around just how massive and global Alibaba has become, what really struck me is how you have navigated across cultures throughout your career. East and west, law and business, and sports and tech. So I actually want to start with your first cross-cultural major experience. You were born and raised in Taiwan, and you moved to the US at age 13 to attend the Lawrenceville School in New Jersey. What was that like for you?

Joe Tsai: It was scary. Well, first, before I went… I never went to seventh grade. I was in elementary school in Taiwan and then my mother said, “Joe, I’m going to send you to school overseas, but you have to learn how to speak English.” And I didn’t know how to speak English. So I went to an English cram school for one year and skipped seventh grade. So I went into Lawrenceville in the eighth grade. During that cram school year, I basically memorized vocabulary, but I couldn’t put together a sentence in English. And that was sort of… So imagine you didn’t really know the language, you don’t know how to communicate, and then you’re in a completely new cultural environment. I mean, literally fresh off the boat, right? And landing in this very unique environment.

Boarding school, it’s an all boys boarding school, so that has its own sort of pitfalls, and you just have to fit in. I wanted to be one of the guys. I wanted to conform. I wanted to fit in. I looked different. I dressed different. I speak a different language. So it’s very important for me to feel like get accepted by the rest of the guys. And then very quickly, I went into sports. I got cut from the baseball team, unfortunately. Imagine a kid from Taiwan, Little League Baseball, and I didn’t make the team. Didn’t make the swimming team. But then I said, “The hell with it. I’m going to try completely new things.” I played football, American football, and then got into lacrosse because I couldn’t play baseball. It’s a spring sport, lacrosse and baseball are spring sports. Couldn’t make the baseball team, so I went to play lacrosse. So the funny thing is yesterday, Jeremy and I, I think he was very worried, so he wanted to have a prep session. So yesterday we spent an hour to prep for this talk. We talked nothing but sports.

Jeremy Tepper: Yeah, we both love sports. And I’m a huge Lakers fan and obviously Joe is a big sports fan and a Nets fan and a Liberty fan.

Joe Tsai: Yeah. I won’t blame you for that, but anyway, Lakers are doing better right now, so congratulations.

Jeremy Tepper: Thank you so much. Thank you.

Joe Tsai: And then we found out that we were both football players in high school.

Jeremy Tepper: Yeah. Undersized linebackers. Well, Joe, you found your footing. You kind of rebounded from those early sports challenges. You got into lacrosse. You went to Yale for undergrad and law school.

Joe Tsai: Right.

Jeremy Tepper: You found yourself at a tax law firm and ultimately went into private equity. But just four years into Joe’s investing career, he came across a guy named Jack Ma, who was building a company alongside 17 other co-founders. It was an online marketplace, zero revenue and a few thousand users, very early. So what convinced you that was the time to make the leap?

Joe Tsai: It was not only zero revenue, Jack didn’t even have a company. It wasn’t incorporated. And so all Jack had was a domain name and a fresh website. And I still remember the first time I went to see him. I climbed up the stairs of the second floor, second story apartment. There were a bunch of shoes outside. You take off your shoes, you go inside. And we talked for about an hour, and I thought Jack was fascinating. He had just charisma, that leadership quality. Jack used to be a teacher, and I think teachers make very good leaders because you have to communicate well. You also have to be able to identify good talent, good students, and develop them like what teachers do. So all those quality kind of came through, and that was what I was really… I found very appealing. I couldn’t understand the business plan because the internet was new to everybody at the time, and he was talking about using the internet to get all the companies in China that make stuff and trade stuff to overseas and have foreign purchasers and buyers coming to the website to buy stuff from China.

It’s a wholesale marketplace. So Alibaba’s first website was actually in English language because it was made for the rest of the world. So an hour into the conversation, I said, “Jack, I need to have a bathroom break.” So I go into the bathroom and there were like 10 toothbrushes on the sink. So I realized people were just sleeping, living there, sleeping bags all over the place. And it was the early days of kind of the startup culture.

And I decided… I would say this to young people, when you want to switch jobs or when you find a new job and you want to do something new, find the people. The people that you want to partner with, the people whether you want to follow, the mentors that you want to learn from. And to me, Jack was both a friend, a business partner, and also a mentor. He’s taught me a lot of things, and I felt like I could learn a lot from him. And also at the time, the internet, if your business had a dot-com name in it, everybody thought that you were going to become a millionaire in six months. But for me, it was Jack, that personality, that leadership quality that actually came through from having been a teacher.

Jeremy Tepper: Yeah. You clearly struck gold in that partnership with Jack. And a lot of our classmates here at Stanford are thinking about starting companies and looking for co-founders. So what’s the right formula? What should they be looking for in their co-founders?

Joe Tsai: Well, first, I think they should… It’s something that you can get along with. Do you want to go out and have a beer with this person after work? I think that’s the first test. I think the next thing is being complimentary. So something that they’re good at, you’re not good at, and something you’re good at, they’re not good at. Having that complimentary mentality, whatever that word is, being able to compliment each other is really, really important so that the founders are not stepping on each other’s feet.

Alibaba started with 18 founders, and I think we all complimented eachother well. People brought different skillsets to things. And I think as you think about starting companies, it’s not like you want to go out and find 18 people to found the company with, but I think only two or three founders sometimes is a problem because as you scale the business, your culture gets diluted and there’s no founder around to have touchpoints with employees. And having 18 founders, we had that advantage. Each founder is able to touch more employees of the company. So I think that’s important. And then just people that you feel you want to spend 24-7 with and have a good time, because as a startup, you’re not going to go home very much or this work-life balance is not going to be something you should be focused on.

Jeremy Tepper: Yeah. I guess I should ask, did you have a toothbrush in the apartment as well?

Joe Tsai: Yeah, I brought my toothbrush afterwards.

Jeremy Tepper: Oh, perfect. So I want to touch on this point of having this many co-founders 18 in total. It’s very, very unique. And in joining them at Alibaba as CFO in 1999, you were really entering-

Joe Tsai: By the way, I was COO for three months and then Jack fired me…

Jeremy Tepper: Uh-oh.

Joe Tsai: … because he said, “Joe, you have no clue how to do operations.” I was like, “All right, fine. I’ll be the CFO.”

Jeremy Tepper: Well, yet again, you rebounded from baseball to lacrosse, COO to CFO. Now, that group of co-founders had some connectivity to each other already. You were kind of the new person coming in. You’re an American educated lawyer and investor. You’re from Taiwan. They were all Chinese mainlanders. How did you find a way to bridge that cultural boundary?

Joe Tsai: I think the first thing is, well, I’m usually more of a listener and I approach the work just with humility. I’m there to learn. I didn’t know anything about the internet. I had never worked with a company where it’s majority mainland Chinese in China, because all my prior work experience had been either in the United States or in Hong Kong. So for me, it wasn’t my place to come in and tell people what to do. So I listen a lot and just try to… Again, that Lawrenceville experience, try to blend in, try to be one of the crowd, one of the person in the community. And I think that’s helped me a lot. I think you have to bring… Everything you do, you have to bring a sense of humility to the work because there’s going to be people, you’re going to find your colleagues, your partners that are smarter than you are, that can teach you a lot and you need to approach your work with that kind of mindset.

Jeremy Tepper: Yeah. Going in and being a listener and being a humble one at that clearly served you well. Now, over time, Jack really became this larger than life figure, the face of the Chinese tech industry. And you were there for the entire journey, but largely behind the scenes. Why is that?

Joe Tsai: Because he’s better at being in front on the stage.

Jeremy Tepper: I think you’re doing pretty great.

Joe Tsai: He’s a better speaker. He’s a better inspirational leader, right? I think it’s very, very important. I mean, I would like to think I’ve improved over the years in terms of communicating to people, but he’s a natural. For him, just getting on stage, have all the employees in the same room and just say, “Here’s our direction, this is why we’re doing it.” And he’s very persuasive, so he’s better at it.

Jeremy Tepper: Well, it’s another great example of finding somebody with a complimentary skillset and working together toward the same mission. Now, your first step with Jack, as I understand it, was flying out here to Sand Hill Road, just a few minutes away, to pitch investors and raise your seed round. How do you remember that trip?

Joe Tsai: Didn’t go very well. I think we struck out. We had something like 15 meetings. We didn’t get a single investor interested in investing in our company. And that’s because I think at Stanford GSB, you’re taught to show up with a PowerPoint or something, right? You have to show people something, a demo or something. We didn’t have anything. We came empty-handed and people were like, “Jack, what’s your business plan?” Jack says, “I don’t have a business plan.” He actually said, “I don’t have a business plan.”

But the trends at the time in China was… I mean, in hindsight, you could have seen it. It was the intersection of internet technology and also China coming into the WTO, which meant trade between China and the rest of the world was going to explode. And today, you go to China, China is a manufacturing powerhouse. Everything is made in China and they’re getting better and better, higher end, higher quality, higher and higher technology, but the seeds were sown back then. That was just on the cusp of entering into the WTO. And imagine getting all these manufacturers and trading companies bringing all their products online for the rest of the world to see. That was the business idea.

But Jack didn’t just talk about the business. He said, “My mission is to make it easy to do business anywhere.” That was our mission at the time. That’s what we told investors. And today, that is still our mission. You can go on our website, Alibaba website says, [foreign language], “to make it easy to do business anywhere.”

Jeremy Tepper: That’s incredible. So a mission first leader with no business plan. Did you guys come back from that trip incorporate feedback from those investors?

Joe Tsai: Not really, because the investors just looked very baffled. They didn’t give us a lot of feedback. They were kind of reticent. I think they just wanted to reject us outright. But that experience was important because we came back and we said, “We have to do what we believe in rather than have investors tell us what we should do.” And I think that was a very important lesson. And then fortunately, we were able to raise some capital, some investors finally very skeptically bought in.

I still remember our Series A round. We actually had Goldman Sachs come in. I mean, you think, “You went to Sand Hill Row and you got Goldman Sachs?” They, at the time, Goldman was investing large private equity deals and then they had sort of a, emerging technology investment business. And I happened to know that… I have a friend who is a partner who’s running that business, and then she calls me up and she said, “Joe, I’ve got good news and bad news.” And at the time, by then I was so disappointed with all the rejections. I was like, “I can’t stand any bad news. So tell me the good news first.” And she said, “Well, we have, our investment committee have improved the investment in Alibaba.” I was like, “That’s great.” I was about to hang up, she said, “Wait, wait, you want to hear the bad news?” And I said, “Fine. What’s the bad news?” And she said, “Well, we also decided to back five other companies that’s very similar to your business model and we’re just going to see, let you guys compete.”

Jeremy Tepper: Well, compete you guys did and you rose to the top. You guys raised the round from Goldman Sachs, then another round from SoftBank, and then it was really off to the races. Over the next 10 years, you guys launched payments, messaging, a consumer-to-consumer marketplace, a business-to-consumer marketplace, advertising, and a cloud infrastructure offering, which is now the fourth largest in the world and has 40% market share in China. So Alibaba became a super app. Now, one of those major in house wins was Taobao, Alibaba’s consumer-to-consumer marketplace. Can you take us back to the moment of launching Taobao against what was at the time a real monopoly from eBay China?

Joe Tsai: It was back in the early 2000s, eBay had acquired a company called Eachnet. So immediately they had a large market share and at the highest point, they had like 90% market share of consumer e-commerce. And we were the new player coming in. And so, one day, well, going back, I mean, I think I was talking to the dean here and she mentioned someone, Jane Sun, who was the CEO of Ctrip and her husband was the first CTO, Zhang Wu, first CTO at Alibaba. He came from Yahoo. So sorry, this is a long-winded story.

Jeremy Tepper: Please.

Joe Tsai: And when Jack decided to launch a consumer marketplace, Taobao, he was very excited. He had talked to Masa at SoftBank, and Masa was very supportive, and because it’s a big idea, Masa would support anything that’s big, anything that costs a lot of money, he was supportive. And Jack’s very excited. He said, “I got the money from Masa. I’m going to do this.” And he goes to Zhang Wu, our CTO, and Zhang said, “No way in hell, over my dead body are we going to do this.” And that’s because Zhang had worked on Yahoo Shopping and it was not successful. So he didn’t have a very positive view of us going into the consumer e-commerce space, but then obviously Jack overruled everybody and I didn’t know, strategically, I couldn’t make that judgment, but I decided that we were going to structure it so that financially we weren’t going to get totally hurt.

So actually from day one, Taobao actually was a joint venture between… Fifty-fifty JV between Alibaba and SoftBank. And it wasn’t until like six, seven years later when Yahoo invested in us, we took the opportunity to fold in the rest of Taobao into Alibaba to own 100%. And that was the best decision we’ve ever made. Otherwise, today Taobao would still be half owned by SoftBank and we wouldn’t know where it would go. But when we started Taobao, it was a secret project. And if you guys know Alibaba a little bit, pretty much almost all the startup new businesses went through this apartment, the Jack original apartment with the shoes and the toothbrushes.

So we took away a team of seven people into this apartment. They all had to sign NDAs. They couldn’t tell their colleagues or spouses or anybody. So one day, the person that you’re sitting at the cubicle next door disappeared and people were like, “Where did they go?” So the first seven people seeded the Taobao business. They went to the Jack original apartment to do the work, create that marketplace. And then our first… When we launched it, the first items being sold on Taobao came from everybody’s closet. Everybody just went to their closet and said, “What do we have? What can we find to sell it on Taobao?” We seeded that marketplace with a lot of junk. That’s how this thing started.

Jeremy Tepper: Incredible.

Joe Tsai: And I remember it was for almost a year we kept it a secret project. I mean, the website was launched, so people knew Tabao existed, but nobody knew it was connected to Alibaba.

Jeremy Tepper: It’s really quite remarkable when you think about how it combines what has made Alibaba so successful. The complimentary skillsets between Jack, the visionary, your CTO at the time, who had a more conservative mindset, and then you structuring the joint venture, and then the focus that you guys applied to get this off the ground. And you guys had a lot of success with Taobao, obviously. Within two years, Alibaba took back the market. You guys took 60% market share and eBay China ultimately closed down. Now today, Alibaba is one of the most successful and important companies in the world. One in six people on this planet interacts with Alibaba’s ecosystem regularly. Now-

Joe Tsai: Is that right?

Jeremy Tepper: I think that’s it.

Joe Tsai: I need to put that into our investor presentation.

Jeremy Tepper: Fact check me on that. Yeah. If you want me to join, I’m happy to hop in. So now you’re in a different position. You are the incumbent, like eBay once was, and you’re facing up and coming challengers.

Joe Tsai: Yes.

Jeremy Tepper: So how do you guys continue to innovate from that incumbent position?

Joe Tsai: Well, we don’t always do it right. We’ve gone through periods where when we stopped innovating and we suffered from it. As a large company, by definition, I mean, we have 120,000 employees. It’s very difficult to have people in such a large place. Everybody has their role, right? It’s very difficult to get people to think about new things, about the future, innovate, because when you have an established business, then you have to set business plan, you have to set established goals, you have revenue projection that you need to meet, and all those things get preoccupied and take you away from an innovative mindset.

And then some people will say, “Well, why don’t you just set up a division called the innovation division and have those people innovate?” That doesn’t work either because those people tend to get lost and also you’re not going to allocate the best talent to that because the innovators, the innovator’s dilemma, basically, by definition, means that what… Your core business is the most important thing and you’re going to allocate the most resources to it because it generates revenues and profits and value, enterprise value, for the business. How do you address that? How do you deal with it? I think it’s always… There’s no perfect answer, but I think the one thing that you need to do is to instill in people some sense of ownership. They’re not just working for their boss. Everybody should work for their customers. And a lot of people want to make their boss happy, but I think the most important thing Jack would say is to make your customer happy, if you’re the owner of the business, then you care about the customers, right? And then if you care about the customers, then you start to worry, “All right, my customers are using… They’re used to using the product this way, but what if someone else comes in with something different?” In our business, a different way to engage with the platform. We started with a listing, then a search, now it’s short video. Different ways of engaging with the platform, you have to start thinking about these things because your customer’s not going to stay with you forever if you don’t innovate.

So I think sense of ownership, worrying about what the customers will want in the future. And you have to be a step ahead. Almost like what Steve Jobs says, you need to just invent something and then tell the customers that’s what they need. I think that’s the mindset you need to have. The other thing is you have to make decisions very quick. And in our business, in a high-growth technology business, you are always living with a deficiency of information that allows you to make the perfect decision. And so you’d have to be able to tolerate not having full information and then just making a decision and commit to it. And then if you find out you’re wrong, pivot fast in a different direction. So having that agility is also key to being innovative.

Jeremy Tepper: Yeah. That agility, that sense of ownership has clearly worked for Alibaba. You guys went public in the U.S. in 2014 in what was at the time the largest IPO in history, and it marked Alibaba’s arrival as a truly global company, in line with Jack’s original vision. And this was a global company with access to now global investors. Why was that important?

Joe Tsai: Being global, why is that important?

Jeremy Tepper: Access to global investors specifically.

Joe Tsai: Well, I think having investors in your company and being a public company, they’re one of your constituencies. And of course, I started this talk by saying we do what we believe in, we don’t listen to investors, but now as a large company, we have very smart investors that give us feedback about the industry, about what our competitors are doing, not just competitors in China, but competitors around the world. We’re in a globally competitive industry, especially talking about AI, cloud, that’s a global business. So you get a very good perspective from global investors.

But of course, at the time when we decided… Alibaba went IPO in 2014, we were going to go list in Hong Kong, but we ended up not doing that. We went to New York. There were a lot of considerations that went into it. I would like to tell you there was some intricate reason and we analyzed everything. But the simple reason was the New York Stock Exchange is well known and there was a lot of market liquidity. Most global investors, I think still as today, are American or have American roots. So it was natural for us to sort of tap into the capital markets in the United States.

Jeremy Tepper: Well, after the IPO, you stepped down as CFO and stepped into the role of vice chairman. And Alibaba went through a 10-year period, which you discussed earlier was on the less innovative side, a 10-year period of challenge. And you returned as chairman in 2023. You talked about quick decision making. So can you walk us through the quick decisions you made when you returned as chairman?

Joe Tsai: Number one, I wouldn’t say I made the decision. We collectively as a new management team, including our CEO, Eddie Wu. We decided what we were going to focus on. We were going to focus on our core business of e-commerce, and we were going to focus on AI and cloud. We were doubling down. I mean, we had a cloud business, but it’s a CPU-based compute business. We decided that AI is going to drive future need for cloud, GPU-based cloud computing business. And so you pick those two lanes where we’re going to be extremely good at. We’re going to be extremely competitive. And then the rest of the assets or businesses that we have are just less important. And you have to decide what’s important and what’s not.

So deciding what’s important, first decision. The second decision is, okay, in the lanes that we want to be very good at, what kind of resources we want to allocate to, whether it’s capital or people, you want to put the best resources into it. The third decision is on the rest of the stuff, let’s sell them or get rid of an exit or whatever. Somehow manage them in a way so that it’s not distracting to the management team. It’s very important. Management team has limited bandwidth. You only have 24 hours a day. You’re not going to be able to watch eight different businesses. I mean, we used to go to investors and say, “Alibaba has six different divisions and here are these segments and that segment.”

That’s stupid. If I was an investor, start listening to a guy that says, “I have six businesses,” then they’re going to say, “What are you going to really focus on?” There’s no focus. So we actually streamlined a lot of that. We sold unimportant assets or non-strategic assets. But then there are some businesses that are in the gray area. They are not core-core. However, they have strategic value. One example is our food delivery business. It’s a business called Ele.me. We were getting killed by our competition. We had only 20% market share. Our competition had 70% market share. And every investor is like, “When are you going to exit this business? Just get out of food delivery.” And I told people, you’re right, food delivery itself, we may not want to be in the food delivery business per se, but the whole delivery infrastructure was going to be important for e-commerce because it’s an instant commerce delivery infrastructure. If you want to buy stuff, you order meals, they’ll come to you in 30 minutes or even shorter period of time.

But what if in the future people want to buy clothing, luggage, their cell phones, whatever, they want it in 30 minutes. If I sold that business, I would have lost that quick delivery infrastructure. And so even though that business itself was not core to us, it has strategic importance. So we had to sort of decide in the gray area what to do with those. There were a lot of businesses where a lot of the management teams of those gray area businesses came to us and say, “Oh, we’re strategic and important.” And I’m like, “You’re not.”

Jeremy Tepper: I would hate to be one of those folks.

Joe Tsai: But then you have to be a little bit direct. You have to say, “I’m sorry. I know you’ve worked very hard. You’ve done a very good job, but you’re just not going to be core to our business and we kind of have to find some way to either find a partner for you to take on the risk or do something different.”

Jeremy Tepper: Yeah. That clarity and focus on the strategy has served you well over the last few years, you and the team. You brought up doubling down on cloud computing and AI, so I want to talk about that. AI is really the newest arena for a race between the world’s two largest economies, the United States and China. How do you see the race playing out?

Joe Tsai: I think AI is a race among companies, but AI shouldn’t be a race between countries. It’s a technology. It’s electricity. I’ve described AI as… Having access to AI as having access to water and air. Can you imagine if a country denies another country something that’s essential to life? So I don’t see this race as a race between two countries. I think there’s a lot of areas where people can cooperate and benefit the world.

AI today has achieved a lot in the medical area. We’ve been able to have AI tools that could detect early stages of pancreatic cancer. And I mean, a lot of these positive benefits should be available to everybody. So I don’t subscribe to this view that there should be a race between two countries. I can understand that there’s a school of thought that says if the military gets ahold of AI, that whoever runs faster or develops AI faster for military use will have supremacy. But let’s just limit that to the military field and let AI capabilities proliferate around the world. And that’s the way to go, I think.

Jeremy Tepper: Yeah. I think most people today would agree that AI has this potential to be hugely transformative globally, but yet there are two very different strategies between Chinese companies and American companies. Chinese companies have access to very low cost of energy. They’re pursuing mass distribution open source like Alibaba is. And American companies have a hardware semiconductor advantage. So maybe we don’t call it a race, but which approach do you think will win?

Joe Tsai: We have to define what winning means. I think for me, winning means it gets proliferated. I hate the word diffusion. I wanted to say proliferation, but then people bring in kind of the analogy of nuclear weapons, whatever. So AI should be used by the most number of people and in whichever society where they have most people use AI and benefit from AI is going to be the winner.

Jeremy Tepper: Well, Alibaba has pursued that strategy. Qwen, Alibaba’s model, recently surpassed 700 million downloads globally. It’s the leading open source model in the world. How much of Qwen’s success, your success in building Qwen as a product, comes from prior successes scaling other products like Taobao?

Joe Tsai: A lot. If you think about these large scale internet companies with hundreds of millions or even billions of users, the problems that we try to solve is the problem of scale, the problem of concurrent users coming in. So the problems of parallel computing. So having that experience really helped us in developing the right algorithms to… Ultimately that turned into AI. And our effort in the modern AI, as we know it, is based on the transformer architecture. So we had development efforts dating back to 2019. And remember, this is like three years before OpenAI publicly came out with ChatGPT, but we didn’t put enough resources into it. Back then, people were still debating whether that’s the right technology path versus something different. But once back in 2022, when ChatGPT came out, I think everybody woke up and said, “We need to double down. We need to put those investments in.”

But by then, we had already at least three years of development in transformers, but also, large-scale computing. We had invested in our cloud infrastructure back 17 years ago when we decided that our e-commerce business was getting so large in terms of users and also the data that we have to manage… We have to develop proprietary software to manage computing clusters. And basically, my layman’s way of thinking about it is your software enables clusters of 50,000 computers, 100,000 computers to work and think like one brain, even though they’re located in different data centers.

So that’s the technology that we developed proprietary. That formed the basis of our cloud computing business today. So we went into cloud computing out of necessity, not because it was a hot thing. Back 17 years ago, nobody has heard about cloud computing. Nobody really thought it was a business. So yeah, so basically we had a lot of good foundational work that’s done before the current version of AI.

Jeremy Tepper: We’ll be back with more of Joe Tsai after this.

Jeremy Tepper: I want to return to a lifelong passion of yours on this point of competition, sports. You acquired a majority ownership of both the NBA’s Brooklyn Nets, and the WNBA’s New York Liberty in 2019, and together they were recently valued at nearly double what you acquired them for. How did you know these were great investments and not just passion projects?

Joe Tsai: I didn’t. I thought they were safe investments in the sense that the value was not going to go down. I think a few years ago, I gave the analogy of, if you live in New York City, you see a rooftop apartment, Park Avenue apartment, that’s, you buy into it, you’re not going to lose money, because it’s in a good location. It’s a prize asset that everybody wants. So I thought the downside was going to be protected, but I did not anticipate how much the valuation of these professional sports teams have increased over the last few years.

There are two leagues in the United States, the NFL and the NBA where there’s tremendous amount of value being created, and that’s because of the media rights, meaning broadcast rights, streamers and TV networks pay a lot for these media rights to be able to broadcast your games. And that’s supported the increase in valuation.

Jeremy Tepper: Yeah. You applied that investor mindset, assessing risk in becoming an investor in these two amazing franchises. Now you turned a true passion, sports, into an investment strategy, and business school advice on passion is somewhat mixed. Some say, “Avoid turning it into a career,” and others say, “You got to do what you love.” Where do you stand?

Joe Tsai: I can’t imagine if you woke up every morning, you went to work and you hated your job, that’s not a recipe for success, but you could be passionate about a lot of things, but at least you have to be interested in what you do and you want to do it better. Whether you call it a passion or something different or dedication or interest, there’s gradations. If one of you says, “I’m passionate about cooking,” and then you go out and try to open up a restaurant, that’s great, but that’s probably not why you went to Stanford Business School for. So my advice is, find the people first. Find the people that you want to spend time with. And then obviously the mission of the company and the stuff that you do is something that you have an inherent interest in. Whether you call that passion or not, you should be passionate about your colleagues, about your coworkers. That’s what I call passion.

Jeremy Tepper: Well, with that, Joe, I’d like to turn it over to a few of my classmates who have prepared questions for you.

Student: Great. Hi, Joe. Thank you so much for coming over and speaking with us today. My name is Catherine, I’m a current MBA2 student. And before GSB, I actually spent three years working at JP Morgan Hong Kong as a coverage banker for Alibaba Group. So working across many business units and then ecosystem players such as Ali Cloud, Homa, Ali Picture, Ali Health, et cetera. What really amazed me is Alibaba’s capability of pioneering very sophisticated business structuring and capital allocation. Looking back, what are some decisions that you’ve made or the group have made are misunderstood by the market, but is really critical for the growth of the company?

Joe Tsai: Well, I would like to think we’re very sophisticated in technology, in products. I mean, I think we do a pretty decent job in terms of managing the capital markets and I guess so called financial engineering. I’m sorry, your question is, what is…

Student: Yeah. What are some decisions on business structuring and capital allocation that are potentially misunderstood by the market, yet to be very critical for Alibaba’s growth today?

Joe Tsai: Yeah.

Student: Yeah.

Joe Tsai: Look, I think today everybody is worried about the amount of capital that’s being allocated to AI at the different layers. In our company, AI means a full stack of things. How much money we put into developing our LLM, how much cap ex we make into our cloud infrastructure. And also we have, in order to sort of test how good your AI is, you have a consumer application, right? So we now have the [inaudible] app, which is our consumer application. So how much money do you allocate to promoting marketing to promote the consumer application? So along the full stack, you have to allocate capital. And I think every company that’s serious about AI is doing all these things. And perhaps that’s the part that investors are trying to figure out whether you’re allocating correctly to different parts of the stack.

I don’t even have the right answer for you, but I do think that these three things that I’ve mentioned, a consumer AI application, the large language model that’s backing up, that’s supporting the application, and also the infrastructure that’s supporting everything, those are equally important. And you kind of have to anticipate that… You just have to believe that there’s going to be demand. The infrastructure investments, you have to be very forward-looking, securing data center capacity, securing the energy, buying the equipment, there’s a lead time to it, but I think that your judgment of whether there’s going to be demand should be based on what ultimately the users, the enterprises that are going to need the demand, as opposed to some philosophical pursuit of AGI. There is a lot of philosophical pursuit of AGI right now that’s driving the demand, but then at the end of the day, you need to kind of look at what the market can bear.

Student: Hi, Joe. My name is Hang. I’m MBA1 currently at GSB. I was also a coverage banker at Credit Suisse in Hong Kong, and I wanted to ask you a question on Alibaba’s culture. People often describe Alibaba’s culture as having a very strong Ali flavor, AKA [inaudible], in Chinese, with its own language systems and expectations. While this has helped drive performance it can potentially also create pressure and bureaucracy. How do you think about the trade-off between maintaining a strong corporate culture and ensuring openness, inclusiveness, and innovation as Alibaba continues to mature in the future?

Joe Tsai: Like I said, you have to like the people you work with. So I think if I were to define what is the essence of [inaudible], it is you want to have a beer with your coworker after work or it’s not even after work because it’s also part of work because you’re spending time with your coworkers. And I think that’s important. And like the culture, how do you avoid bureaucracy, right? Well, you have to define what’s important, what is not, and be able to tell people that their division is not important. You have to have the guts to tell them. I think a lot of companies make mistakes because they don’t want to hurt the people. I mean, you use the word inclusive. I’m sorry, we’re running a business. We can’t include everybody in the enterprise. If they’re not going to be contributing to where you want to go, you have to let them know.

Student: Thanks, Joe, for all the great sharing. So I’m Musia, second-year MBA. Sadly, I’m not a current banker for Alibaba, but I actually work as a product manager in China and also build a partnership with Alibaba Cloud and broader ecosystem. So I was wondering, since Alibaba’s ecosystem and also full stack AI strategy, as you mentioned, really fascinated me. So from your perspective, what has been the most challenging and most difficult step to make, but is really crucial for the company in term of AI transformation?

Joe Tsai: I think what is difficult is every part of the stack that I mentioned that we have to invest in costs a lot of money. And then you… Invariably, people ask, “What’s the ROI?” But like I said, you have to have a certain belief that it is strategically important and you’re not going to focus today on ROI. And the other thing is, it’s not like we came to this with a well-designed grand plan that these are this layers of the AI stack that we have to… They all come sort of in different moments. And if they didn’t have their own individual success at their layer, then they wouldn’t have gotten attention, right? So it was a very bottoms up process.

And then when you look back in hindsight, you think, “Well, that’s kind of haphazard because there was no grand design to begin with.” What if your LLM development was unsuccessful, then you would not have put any more resources into it. And it turns out that having a really good large language model, a large foundational model is really, really important in the AI race. I’m not talking about race between countries, I’m talking about race among companies. So those are some of the difficulties and in a way there’s a little bit of luck involved, but then at the end of the day, I go back to the people. You have to identify the right people to work on these projects.

Jeremy Tepper: Thank you, Joe. And thank you to my classmates for those thoughtful questions. Joe, before we wrap up, we’re going to do a View From The Top tradition, the rapid fire segment. Are you ready?

Joe Tsai: Yeah.

Jeremy Tepper: All right, let’s do it. City that feels most like home to you.

Joe Tsai: Taipei. That’s where I was born.

Jeremy Tepper: Favorite sports arena food?

Joe Tsai: Barclay Center, for sure.

Jeremy Tepper: Okay. But what item at Barclay Center?

Joe Tsai: For some reason I’m thinking of the Vietnamese banh mi pork sandwich.

Jeremy Tepper: All right.

Joe Tsai: Yeah.

Jeremy Tepper: I’m a hot dog guy, but yeah, that’s great too. Okay. Best purchase you’ve ever made through Taobao.

Joe Tsai: Oh, a pair of gym shorts, Under Armour.

Jeremy Tepper: Nice.

Joe Tsai: I think I bought them 10 years ago. I’m still wearing them when I exercise.

Jeremy Tepper: It’s a great endorsement for Under Armor. The app on your phone that you use most.

Joe Tsai: I have two apps that I use a lot, most. One is the Qwen app because now it’s an assistant for me. When I do research, whatever, I want to know something, I go to the Qwen app. The other one is Twitter. I get all my news. If I want to know what’s going on in the world, I can get it instantaneously from serving… I mean, now the algorithm is so good, so they know what I’m looking for. It’s basically subjects on AI and sports. Those are the two things.

Jeremy Tepper: Well, last rapid fire question on sports. Would you rather win an NBA title with the Brooklyn Nets or become a professional lacrosse player?

Joe Tsai: Oh, that’s a tough one. Both have low probability, but I’ll take the NBA title.

Jeremy Tepper: All right. NBA title it is. And to close, one final question, and this one isn’t rapid fire. What’s your best piece of advice for those in the crowd today hoping to build a global company?

Joe Tsai: I don’t think you should think about building a global company from day one, because you have to win local. If you have a grand plan, I mean, the world is a large place. To build a global company, you have to have a lot of infrastructure that starts with small pieces. So you have to have small wins. So think about small wins and win locally, where you start, you have to win the market where you started. And then you can think about going overseas, going global because with those winning local battles, you’re training your team, you’re developing talent that enables you to be a global player. So you got to start somewhere.

Jeremy Tepper: Ladies and gentlemen, Joe Tsai. Thanks, Joe.

Michael McDowell: All right, let’s get right into it.

Jeremy Tepper: Let’s do it.

Michael McDowell: You asked Joe about the newest arena for a race between the world’s two largest economies, also known as AI. Jeremy, you didn’t hold back. Talk about his answer.

Jeremy Tepper: Everybody wants to talk about the AI race. And everybody is calling it a race. And most people are calling it a race between companies and a race between China and the U.S. That is a very common framing. And Joe is uniquely well positioned to talk about this, not just because he’s a co-founder and chairman of the world’s largest, most-used open source AI model, but also because he has bridged the U.S. and China as a business leader for 25 years.

Michael McDowell: Yeah.

Jeremy Tepper: So I had to ask about it. And I pushed a little bit harder because I really do think that these two countries are taking very different approaches. I really hope that the exchange Joe and I had encourages people to think about some of the different principles with which these countries are looking towards the next 100 years of human flourishing.

Michael McDowell: Yeah. And it seems like he pointed to population-level adoption of AI.

Jeremy Tepper: Yeah. Joe called AI a fundamental right like air or water.

Michael McDowell: Yeah.

Jeremy Tepper: I’m not sure people think of it that way, yet, but his answer was also telling about the Chinese approach. AI is a mechanism by which Chinese companies are growing their user engagement massively, including in the global south where there’s less dollars to spend, but massive opportunity to use AI.

Michael McDowell: So how’s it going to play out? No, I’m kidding. Shifting gears. Joe had a lot to say about the nuts and bolts of his business, operations, supply chains, capital allocation. Was there anything in particular that you picked out or that you’d want to highlight?

Jeremy Tepper: Focus. And simplicity. When Joe came back to Alibaba as chairman, he and the team simplified the business. I think that is applicable to just about every business in any industry. The more you can simplify what you’re doing and focus on doing it extremely well for your consumers and your users, the more right you have to earn more business with those consumers and users.

Michael McDowell: So early in the conversation, you talked a little bit about investors and business plans. What did you take away?

Jeremy Tepper: Founders have a vision of the future. Investors have pattern recognition of the past. So it’s not surprising to me that Alibaba came to raise money in the Bay Area and struck out.

Michael McDowell: No business plan.

Jeremy Tepper: No business plan. Yeah, maybe that was a challenge, but also they were anticipating the next 25 years of global commerce, and investors don’t think that way. I think it’s a lesson to a lot of people that are building companies right now, especially given the rise of private capital markets and venture capital in the last 25 years. It can be easy to fall into the trap of thinking, “I’m building a company alongside investors and I need investors to build a company.” I think it’s actually quite the opposite. You set a mission and a vision for the company and only builders can do that. Stick to that mission and vision and you find investors that see it as well. And over time, you prove to them because they have pattern recognition that that vision will play out.

Michael McDowell: Part of what feels key here is something Joe said in the conversation, “Everything you do, you have to bring a sense of humility to the work.” What did you think about Joe Tsai on humility?

Jeremy Tepper: It was such a consistent theme in almost every topic we discussed. He just really brings a humble approach. From the start, he talked about listening and learning from his co-founders, from Jack and the rest of the team. When launching Taobao, he talked about how he didn’t have a perspective or at least a strong perspective on the product, but he knew how to structure a business. And he was just constantly, even more recently when he rejoined as chairman, he talked about making changes as a team. I framed the question as what changes did you make? He reframed the question as these are the changes we made.

Michael McDowell: That’s an important distinction. Yeah.

Jeremy Tepper: Yeah. So constantly he models humility and he clearly does not pound his chest on what he’s good at, but he’s very self-aware. He knows what he’s good at, but he doesn’t need to tell you. He’ll just stick to it, which, is a lesson for all of us.

Michael McDowell: He’s a team player.

Jeremy Tepper: Hugely so.

Michael McDowell: So when you’re in Brooklyn, are you sitting courtside?

Jeremy Tepper: Joe, if you’re listening to this, please, I would love some courtside tickets.

Michael McDowell: All right, Jeremy. Thank you so much.

Jeremy Tepper: Thanks, Michael. You’ve been listened to View From The Top: The Podcast. This interview was conducted by me, Jeremy Tepper, of the MBA Class of 2026. Michael McDowell is our managing producer, and Michael Riley edited and mixed this episode. Special thanks to Liz Walker.

View From The Top is the Dean’s Premiere Speaker series. It was started in 1978, and is supported in part by the F. Kirk Brennan Speaker Series Fund. During interviews led by students, leaders from around the world share insights on effective leadership, core values, and lessons learned along the way. You can find more episodes of View From The Top on our website, gsb.stanford.edu/business-podcasts. Don’t forget to rate and subscribe and follow us on social media at @stanfordgsb, and see you next time on View From The Top.