President Salovey and alumnus Tsai talk tech in Silicon Valley

“I think what Yale does, what a liberal education does, is it trains you to be a leader,” Joe Tsai ’86, ‘90 J.D. said at a reception and conversation with Yale President Peter Salovey ’86 Ph.D. on “Yalies in Technology” held in Menlo Park, California, on June 24.

“The point is, you've got to lay the technical foundations, but there is more than that, and a liberal education really helps you to think that way,” according to Tsai, executive vice chairman and a co-founder of Alibaba, the world’s largest online and mobile commerce company.

Salovey described Tsai, whose father and two sisters also graduated from Yale, as “one of Yale’s great citizens and amazing alumni” at the event, attended by dozens of Yale alumni and friends from Silicon Valley and the San Francisco Bay area. Yale trustee Donna Dubinsky ’77, co-founder of Numenta and former president and CEO of Palm Computing, opened the evening with introductory remarks. Both Dubinsky and Salovey celebrated the recent announcement of the expansion of computer science at Yale and thanked Tsai for his leadership and support in that effort.

Tsai credited his time on the Yale lacrosse team as among his most formative experiences. “What I learned from sports at Yale was everything you need to learn in life. It is about hard work. It is about discipline,” he said. “It is about working as a team and all of those values that you learn from being on the team and playing a team sport. You really carry that through to life.”

Teamwork has clearly been key to the founding and success of Alibaba, as Tsai recounted. In addition to leading founder Jack Ma, the enterprise had 17 other listed founders including Tsai.

Tsai noted that Alibaba is different from U.S. based e-commerce companies like e-Bay or Amazon because its customers are different. “The shoppers in China are completely enamored with online shopping in a way that is not the case in the United States. Here, shopping is all about ‘I want to buy something. I want to do it in the shortest time.’ It is not fun. It is just get it over with. I want to shop quickly. That is the end of story … but in China, shopping is entertainment.”

Alibaba began in 1999 as a business-to-business (B2B) company with Alibaba.com, an English-language website that enabled small exporters and manufacturers to reach overseas buyers worldwide. In 2003, Tsai said, his company started Taobao, a consumer platform that is now China’s largest online shopping destination, “really out of paranoia because we saw that e-Bay was dominant in consumer ecommerce. We thought that if they were successful in ecommerce consumer-wise they would also to come into the B2B space and compete with us. So, the best defense is offense.”

The new platform came as China was starting to shift from an export- and investment-led economy into a consumer-driven economy. “Over the last 10 years we've really benefited from this shift of the entire GDP structure, if you will, of China to a consumption-driven economy,” Tsai said.

“In China today, you are most likely visiting Taobao from your mobile device,” he added. “Whenever you have a free moment — riding the bus or waiting for a taxi or whatever — you are on Taobao seeing what is available, discovering something new. That has enabled us to grow our business.”

Tsai says Alibaba tracks its business by operating metrics, rather than financial. “Financial is just really the result. That is what Wall Street cares about, but it is really sort of the output rather than what we are trying to drive towards,” he noted. Alibaba has 350 million active shoppers annually on its platforms, and over the last fiscal year, generated $394 billion of gross merchandise volume, the value of transactions that take place on its marketplaces.

Salovey asked Tsai what Silicon Valley might learn from China and what differentiated the two areas. Alibaba’s executive vice chairman observed that in China the Internet space is more competitive than in the U.S. because of the development phase it is in. “The U.S. Internet is fairly well developed, and the typical U.S. Internet user is probably 10 years older than the average Chinese user, so user behaviors are pretty set. So in many verticals there is not as much competition as there should be, but in China in every segment of the Internet space there is competition.

“The other thing is Internet companies in China all try to get into each other's territory,” Tsai noted. “Here you have Facebook for social networking, Google for search, Amazon for e-commerce; the boundaries seem to be clearer. But in China there are not a lot of boundaries among the top three or four Internet companies. So that is a big difference.”

At the same time, he said, Chinese tech companies have a lot to learn from U.S. companies. The typical founder in a Chinese technology company tends to be a technologist and come from an engineering background, according to Tsai, “but the way they become successful is less about analyzing the market and figuring out the unit economics … it is all passion and drive and just persistence.” In the U.S., entrepreneurs are more analytical, he comments, adding, “I meet U.S. entrepreneurs; they really know their space well. They can talk about numbers, they can talk about unit economics and they can talk about how their competitors are doing.”

Salovey emphasized that the need for such analytical and teamwork skills underscores the value of a liberal education. Addressing the audience, which included a number of young alumni and current students, Yale’s president said, “One of the things that strikes me about what so many of you do here, even if you are living the Silicon Valley legend of working by yourself in a garage and building something that changes the world, eventually you're probably going to build an organization. … And now you have to communicate the value of that idea to someone else and you're going to have to work with some other people, negotiate with other people, work as part of a team, think about it in a creative way, and not just build it and sell it.”

Beyond technical skills, Salovey said, successful entrepreneurs need the skills that a liberal education helps to provide and develop: “how to think creatively, critically, how to communicate, how to work in teams.”

Tsai concurred that a liberal arts education is relevant for success in entrepreneurship and technology. “One of the best classes that I took at Yale was on jazz” taught by Professor Willie Ruff, Tsai said. “I discovered that what Yale taught me was how to think and how to learn, how to take the core skills I had, the core numerical skills, the core language skills, and apply those skills and learn a new area.”

He continued, “The other thing about Yale was everybody felt really free to be themselves. They didn’t have to pretend they were someone they were not. So there was a diversity of characters, personalities; people were themselves. That is really important because when you ask yourself, ‘What do I want to do in the next 10 years,’ you want to do something that you're really passionate about. And I think being encouraged to be myself and to do what I was passionate about really enabled me to go out and take risks.”

Tsai and Salovey also agreed about the importance of investing in and strengthening computer science and engineering at Yale. “I know lots of people from Yale who are founders of tech companies or contributing in tremendous ways to technology companies here in Silicon Valley,” Tsai said. Salovey pointed out that Yale currently ranks very high among world universities in the amount of venture capital per capita attracted by students and alumni based on recent Pitch Book rankings.

Moreover, in the world today, and in the world of tomorrow, an understanding of computer science will be more crucial for leaders in all sectors, they believe.

 “I think every English major at Yale should take a computer science class,” Tsai remarked, explaining his support for the growth of computer science as valuable for all students across campus.