Winning, Losing, and the Plight of the Foreigner in China

10/19/2009 - Part of TCBN's Quality Series
Looking for a China business book? TCBN's CEO and Editor-in-Chief Janet Carmosky has two to recommend, both easy reads, and both detailing the danger of naivete. One is Paul Midler's Poorly Made in China; the other is Where East Eats West by Sam Goodman.  They belong at opposite ends of the bookcase.

by Janet Carmosky

Paul Midler’s Poorly Made in China – an Insider’s Account of the Tactics Behind China’s Production Game – consoles us that if we’re frustrated in China, it’s not Us, it’s Them. In fact, Midler tells us in his final paragraph that he thinks the US should not have started a trade relationship with China at all. It's a mess - there is “something about China’s economic rise that was causing American companies to lose confidence” but at the same time, “no one has ever beat the competition by running away from it.” What’s a hapless China business man to do? Poorly Made keeps us company while we bemoan our fate, but like the friend we have who’s lately in the bar a bit too often, it’s short on useful advice other than “don’t be naïve, it’s a jungle.”

Sam Goodman’s Where East Eats West – The Street Smarts Guide to Business in China – is the friend you turn to when you get over the fact that life isn’t easy or fair, and you’re ready to get back up and fight. Goodman tells us that if we’re feel like we’re losing it’s probably because China business is a team sport, played in China, according to Chinese rules, and we grossly overestimate how good we are in most positions: basically, “we stink at communicating with the Chinese,” so “hire a handler, already.” Deal with it. As I see it, Midler’s trying to block and tackle in a pretty rough league, and Goodman’s realized that westerners aren't meant to block and tackle in China - we need to understand the game and learn to coach.

Deep in the trenches, caught between new-to-international customers and relentlessly opportunistic Chinese business people, Paul Midler is run ragged, unabashedly exasperated. Working as an importer’s representative in South China is a tough gig, unless your idea of fun is looking for evidence that trade is, at its essence, warfare over margin and leverage. Midler’s got a few other things working against him: a product category of low value and differentiation (off-off brand shampoo and body wash); a customer without any R&D, engineering, or manufacturing expertise; and his conviction that “the customer is always right” has an inalienable logical foundation.

Midler’s analysis, is that Chinese manufacturers are bad news because they are
1. Unprincipled. In specific, they're busy shaving off some input costs, trading up to better customers, glossing over the details. In China, Midler is blatantly manipulated and disrepected by the factory. In America or Europe he would experience more ritual, tolerable, civilized ways of cutting costs, cheating with the competition, squeezing out the middleman, or stashing the smoking gun. It's about style, not principle.

2. Undisciplined: In specific, they don't care about quality. Closer to the truth is that "rigor in the process" is the foundation for all manufacturing. Midler and his buyer go into the shampoo business without ever apparently doing time in a chemical lab or a factory floor, or hiring someone who did. So they take on faith that the supplier they choose has it all under control. When I did sourcing, we qualified suppliers by checking their rejects and corrective reports, understanding the inspection standards thoroughly, and auditing batch control logs over time. In other words, there are plenty of disciplined factories in China. Bullet trains. Space program. Semiconductor foundries. etc.

Here's the useful take away from the book: Midler is onto something when he describes the Chinese as “masters of situational leverage.” Meaning, if the Chinese find themselves at a disadvantage, they change the situation until they have the advantage, then exploit it. If, as Americans, we can only do business with people who leave money on the table, are faithful to all contracts, and uphold win-win deals, stable partnerships, and long term strategy, we're limiting our commercial prospects to the low-growth world. If China plays tactical and opportunistic, we need to learn how to do it better.

That's where Goodman's book comes in. He, too, has his odyssey of pain, too, but his therapy is humility, humor, and practicality. He has 90 chapters, most under three pages or 12-point type, with titles like “You’re the F.O.B.”, “Do Your Frickin’ Homework” and “Why Your Purchaser has a BMW”. He doesn’t ask us to be shocked at how unfair things are. He gets angry when he loses, but he tries to stop blaming and start learning. Goodman's goal with East Eats West is to reveal the differences in values that motivate people in China, and instruct us in forming an attitude that lets us respond effectively. Enough of the China Bashing. Deal With It.

So, what’s the difference between Midler and Goodman?

Well, Goodman’s Canadian, which has to help in any game where claiming the moral high ground is a non-starter. But he’s also in a different phase of his journey than Midler. Spend enough time investigating Chinese culture and western culture, and you’ll tend to fall into a camp: either anti-China dragon slayers, or pro-China panda hugger. Midler’s a slayer for sure. But Goodman’s far from a hugger: he's been burned and makes no excuses or apologies.  He comes out to a less angry book because he examines not only cultural behavior, but himself as well. He finds his own blind spots and has the willingness to lose them. In so doing, Goodman succeeds where almost everyone who writes about China fails. He finds the middle ground, the vantage point of highest visibility. Goodman asks us not to wallow in regret that China has become an economic power, but to find our will for economic survival and express it - with a little more humility and a lot less anger.

	Sam Goodman, Canadian serial entrepreneur, started his first business at eleven years old. One of his most well-known ventures is the “World-famous-in-China” chain of cafes, Beijing Sammies. He has lived and worked in Asia since 1993.
	Paul Midler graduated from college in 1992 with a concentration in Chinese history and language, and he holds an MBA from Wharton. He has assisted companies of all sizes in a diverse range of industries, working directly with manufacturers in China.