Capitalism is Alive and Well in China

(A version of this article appeared in the Wall Street Journal)

Donald Trump, eat your heart out.  Last week in Beijing I learned from my Chinese friends that he smash hit television show in China this season is a reality show called Win in China where aspiring young Chinese entrepreneurs compete against each other to win 10 million RMB (1.2 million USD) in venture capital to finance their business plan. They do so by convincing judges (successful venture capitalists and CEOs) and the audience, who vote with SMS messages, that their business plan is most likely to make a successful startup. The winner is not going to be anybody’s assistant. He or she will be CEO of and own 20% of the equity in the new company.

Americans are going to have to lose their Cold War mental image of China as people in Mao jackets riding bicycles. Today, China’s national policy is innovation. Not for its own sake but because innovation is the best path to a “harmonious society” with rising employment and incomes for Chinese workers and rising tax revenues to care for the poor.

Innovation is the cutting edge of the Chinese government push to shift growth away from manufacturing and low cost industries to information technology, communications, financial services, and other high value-added professional service sectors. They understand that technology is the only way to deliver continued high growth and rising incomes to China’s workers without further polluting the air and water and clashing with other nations over scarce supplies of oil, gas, coal, and other natural resources.

I was so fascinated by Win in China’s impact that I arranged to meet with Wang Lifen (Anna Wang), the shows founder and executive producer at CCTV, China’s state-owned television network. Anna is a powerful figure in Chinese television, long-time executive producer of Dialogue, CCTV-2’s popular interview show where I had the opportunity to appear a few months ago. She honed her skills the old-fashioned way by working, at one point producing 4 different business shows—nearly 4 hours of airtime--every day.

While on a sabbatical year in America, writing a book about US media, Ann saw the explosive growth of our reality shows, like Survivor, American Idol, and The Apprentice. Inspired by the success of last year’s Super Girl, singing contest whose winner was selected by viewers using text messages, watched by more than 400 million people, she determined to create a reality show for China that combined the best ideas from all these shows. But she wanted to build the show on a base of Chinese values—innovation and entrepreneurship.

“Every young Chinese person wants to realize their dreams,” Anna told me. “The best way to realize dreams is start-ups.”

Anna recruited a powerful business team from both in and outside China for the show; venture capital firms to put up the capital, successful entrepreneurs and famous CEOs to serve as examiners and judges, technologists and financial experts, and companies like NASDAQ, Forbes, Yahoo, Alibaba, and China Unicom.

At the start, more than 120,000 Chinese would-be entrepreneurs applied to be contestants through the show’s website. The field was whittled down to 3000 people through quantitative analysis of their submitted plans. Then the show set up 54 different locations around China where 150 successful entrepreneur volunteers had personal interviews with each candidate. Of the 3000 interviews, 108 candidates were selected to attend the competition in Beijing.

I asked Anna how she was able to get so many successful CEOs, entrepreneurs, and venture capitalists to help as volunteers. She told me “the entrepreneurs like to help because it’s a value-driven show.” In China, business leaders get little respect. People have high regard for government leaders, scholars, and workers, but not business people.Poor people hate rich people in China; they think business is easy and corrupt. Win in China broadcasts entrepreneurs’ stories to show the hard work it takes to build a business, especially in the IT sector. “My intention is to educate people how successful businesses are built,” said Anna. “Entrepreneurs are the heroes of our peaceful times. They make employment and pay taxes. Our country can only be rich if we have a lot of entrepreneurs.”

In Beijing, the 108 contestants are divided into teams to run virtual businesses using MBA-style simulation models. Judges select 36 to continue. The 36 maintain open blogs with the viewers during the contest.

The next round, reminiscent of Miss America competitions, trims 36 contestants to just 12 by having judges pose live questions about their business plan, about real case studies, and other topics to see how well the candidates perform on their feet.

The 12 finalists then compete on a series of reality shows focused on accomplishing business tasks. In one show they hit the streets in teams to sell insurance to real people. In another they design and execute an operation to distribute free dairy products to poor area schools. In another they raise funds for a charity. On the final show, to be aired in early December, the audience selects the winner using SMS messages.

The prize? Not a job as somebody’s personal assistant. The winner gets 10 million RMB in venture capital financing to create the company in his business plan. He will be appointed CEO and will own 20% of the equity in the new company. The remaining equity is allocated to the venture capital firms that fund the deal (50%), to text-messaging viewers  (15%), and to CCTV (15%).

The first runner up gets the same deal with 7 million RMB in venture capital. The 2nd, 3rd, and 4th runners up get the same deal with 5 million RMB in financing. The 5 winners then go to New York to visit NASDAQ. They get the right to study for an MBA at the University of Maryland. When they do, I hope they also spend some time on US television and in Washington, DC, so American people and political leaders can get a close look at the competition. If that doesn’t light a fire under them to improve US schools and business policies, nothing will.

This is important. Countries are not competing for jobs today; they are competing for capital. Access to capital—modern tools, education and training, technology, and working capital— is what makes workers productive. Capital makes paychecks possible.

Today, global investors can move capital from any country in the world, to any country in the world, whenever they please at the speed of light over fiber-optic networks, at virtually no cost, and completely invisible to national governments. Governments who ignore these changes in the mobility of capital do so at the peril of their workers’ paychecks.

Some governments get it. Some don’t. China gets it, and is changing policies to educate and train entrepreneurs and to attract foreign capital. The U.S. government doesn’t get it. Our tax and regulatory policies drive capital away, indifferent to our workers’ needs. Other countries are even worse; the Dominican Republic’s current attempt to gouge $527 million form a U.S, company makes it a poster child for impoverishing its own people by driving capital away.

Anna, of course, really gets it. She has copyrighted the format of the show and plans to roll it out in other countries. (So much for the idea that China does not understand intellectual property.) When she does I recommend that you don’t bet against her. Anna Wang is the most impressive entrepreneur I have met in some time.