Grow Your Business Like China, Part 1

“All growth depends upon activity. There is no development physically or intellectually without effort, and effort means work.” – Calvin Coolidge

On the flight to Beijing, I read a book K had bought for me, Iron & Silk by Mark Salzman. It is an account of the author’s time as a teacher and martial arts student in Canton, China. It’s skillfully and subtly written, giving a detailed look at China and its people in the early 1980s.

Iron & Silk is full of accounts of Salzman’s funny and frustrating experiences with the culture that predominated then: an interesting mix of cloistered naivete, bureaucratic tyranny, and traditional values.

There are so many stories in the book that I was shocked when the plane began descending over Beijing and I saw no pagodas, rickshaws, or rice paddies, but a modern city brimming with highways and skyscrapers.

The current economic boom in China began in 1978 when Premier Deng Xiaoping began a steady policy of economic reforms that reversed the enormous damage that Chairman Mao’s cultural and agrarian “revolutions” had inflicted on the Chinese people. That progress came by way of using foreign companies and their capital, technology, and management skills to make China a manufacturing powerhouse, capable of producing high-quality goods cheaply because of an abundance of intelligent, low-cost labor.

“Today,” James McGregor, in One Billion Customers, writes, “China is the world’s fourth largest consumer economy in the world and could easily take first place if current growth – which has averaged 9 percent in recent years – continues.”

Measured by purchasing power parity, China’s current per-capita GDP is $5,000 and rising steadily each year. China consumes 25 percent of global steel, 30 percent of the worlds’ cement, and is the world’s largest market for electrical appliances.

Foreign companies are flocking to China to sell products, set up factories, develop infrastructure, build skyscrapers, and invest in banking, insurance, and other consumer services. Contracted foreign investment in China, I read, averages $420 million a day.

McGregor says, “China is simultaneously the world’s largest startup and the world’s largest turnaround. The country can draw on a two-thousand-year tradition, but it also is inhaling Western business know-how and technology and doing everything at the same time and for the first time. That is why China has been able to progress so quickly.”

China’s amazing growth has its best visible manifestation in the awesome city of Shanghai – a sort of Jetson’s metropolis on steroids.

Shanghai itself is so over the top, in fact, that it’s hard to feel like anything but an alien when you are there. You wander about slack-jawed and dumbfounded, staring up at the gargantuan buildings and wondering who built them, who occupies them, and who pays the rent. (Four hundred skyscrapers at, say, two hundred million dollars apiece – what does that come to and how can it be justified?)

Although there are little pockets of urbanity that you can comprehend (the old town where poor people sell vegetables, eels, and turtles in front of their ramshackle huts, a few temples, and several hip mini-neighborhoods for shopping and art), most of the city is a weird, noisy, fog-shrouded dream. It’s like you have awakened in a sci-fi movie.

What Confucius Said About Growth

Shanghai is indeed a city that has overdosed on growth hormones. There are plenty of things you might like to change about it, but you can’t help but be astonished and impressed by how big it’s grown.

Confucius – the most revered philosopher in Chinese history (except for when Mao was in charge) – was once asked how a state should grow. “First,” he said, “you need a sizable population. Then you need to enrich them. Finally,” he said, “you have to educate them.”

When I first read that quotation, in my college years, I didn’t get it. I read it again yesterday in a booklet I bought called “A Collection of Confucius’s Sayings.” This time, I felt I understood it better because, in a sense, that has been the experience of China.

First, the Mao-directed population explosion, which gave the country its immense economic potential.

Then, the enrichment of the populace that has taken place since free trade and other aspects of capitalism were introduced in 1978. (One thing you have to say about the Chinese government – if it has been stealing some of the foreign investment and aid, which is such a common practice among third-world countries, it hasn’t done more than skim the surface. There has been just too much reinvestment going on in terms of infrastructure and vertical construction.)

And finally – the last stage – the current efforts to increase the level and expanse of education in this country so that China can be more competitive with the top economies of the Western World.

Market size, enrichment, and education – you can see them all at work in this booming, brave new China.

“If it worked for China,” I asked myself, “could Confucius’s directions for how to grow a state help grow a business in the same way?” I believe so. And on Friday, I’ll let you know how you can take that first stage – growth of population – and use it to help build your business.

[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]