Investor Day 2017 Part 2

Jun 9, 2017

Slides

I think by now, you should be pretty familiar with me because I get to come on the stage, be the guest question Q and A answer with every session. So that's the prerogative of being Vice Chairman. You get to invite yourself up to stage after every session. I am responsible for the strategic M and A and investments of the company. So that's why I'm here to talk about our strategic activities, M and A activities as well as capital allocation since the spending of dollars into strategic assets is a big capital allocation related decision. The I was thinking about how I present this particular segment. But after seeing the presentation of all of our businesses today, I think there is a common theme that goes through all of them, which is that all of our business units fit together pretty well through the data platform, through the common consumers that we're serving through the uniform identity of those consumers. So I was thinking that maybe this is a more difficult slide to explain. Now I don't think it's going to be that difficult. Think of strategic investments and M and A as playing a game of Go, okay? And in the game of Go, the objective is to put the pieces on the board, on the chess board and surround your opponent eventually. But you can start anywhere on the chessboard, and you can finish anywhere on the chessboard. You could be in one move, you could be in the northwest corner of the chessboard. In the next month, you can be in the southeast corner of the chessboard. You can be all over the map. And I think from the perspective of an investor, it must be very, very frustrating to look at how we look at how we are making these chess or go moves when we make strategic M and A and acquisitions, because we may not for competitive reasons, we may not always fully explain which direction we're going, but you have to understand that we're playing a game of go here when it comes to putting the right assets in the right place. And the one thing that I'd like everybody to remember is what's the purpose of making M and A Investments. The purpose is to build long term value for Alibaba, okay? So in every transaction we do, we ask ourselves, at some point down the road, is it maybe next quarter or maybe next 3 years from now or 10 years from now, is this asset going to add to the overall value of our business? And later on, I would explain the only way to add value is through synergies, to create sort of chemistry effects between the assets that you acquire the business that we own. So in this game of Go, making M and A and investments, what we're really looking at is that the assets on the board are it's not a linear thinking process. It's not like, okay, I've acquired the video business. Next thing, I'm going to go acquire a movie maker and so on and so forth. The assets on the board are networked. What does that mean? It means that, you may have an apparent reason to acquire an asset, like we bought Youku. Why? Because we want to get into the online video business. Why is that? Because we want to serve more consumers and because we think that's an extension of consumption, right? But in the back end, there's also a network effect when these assets come into the family through the contribution of data, through better understanding of the users. So what we do is that we need to make sure that when they when the assets come into the family, that they create chemistry effects with the rest of our business. And when people ask me, Joe, what's your M and A strategy? My answer is, I have no M and A strategy, okay? As the Head of M and A, I have no M and A strategy. My M and A strategy always follows our business strategy, okay? And so I have to talk to Daniel, our CEO. I have to talk to the heads of all of our business units. I have a team of people that talk to them all the time, day in and day out to really understand where they're going strategically, what they're thinking. The other thing that drives our M and A strategy is we have to be very aware of the future technology and trends, user trends, product trends, what's going out there, so that they can feed back to our own business and inform us as to we have to make some judgments as to which directions we need to sort of aim our gun, if you will. I'm going to use an analogy in sort of describing my work. Think of Daniel, our CEO and also our business unit heads, as the chef in the kitchen, they are the Michelin Star Chef. They're making great dishes in the kitchen. But in order to make good dishes, they need ingredients. And then they say to me, Joe, I need this ingredient. I need you to go out and find the best ingredient in this category and bring it back. So what I do is, I go out to the supermarket, I go out to the farmer's market, I go out to the wet market and scour the earth to look at the most proper ingredient, so that it can bring it back into the kitchen for the for our chefs to make. And guess what? During the cooking process, chemistry effects happen. That brings me to the importance of integration. Every time we make a strategic acquisition or even an investment, some degree of integration is key. We need to focus on synergies within Alibaba between the investee company or the acquired company with Alibaba. And that's actually a very, very not very easy process. It requires a lot of planning. And that's why we in the process of making an investment or an acquisition, we need to get a business owner to also own the project. It doesn't matter if I'm sponsoring the investment, I really like it. I can't independently go out to the market and say, oh, I like this fish. I'll bring it back if the chef didn't order it. That's not right. So some business owner within the business unit or the CEO must sponsor a transaction that we do. And the other thing I want to say is that the success or failure of an acquired business very much depends on the people, whether it's the people that we bring in and retain them or it's the business unit people that we that come and sponsor the transaction. To give you an example, several years back, we acquired the UC Web Business. And we were fortunate to have not just acquired a business, but also the people, the management team. Yuyoung Fu, who was presenting the Digital Media and Entertainment segment, came from that acquisition. And he actually helped us integrate himself into Alibaba. And then he went on to integrate help us integrate some of the other assets we acquired. So the people, very, very important. And you also need to bring in innovation. Synergies don't just happen. Synergies you can't hire a McKinsey consultant on a piece of paper and say, here's the synergy, let's do and has the P and L. Okay. Let's talk about some of the strategic goals why we do M and A transactions. And we have a representative spread of some of the companies that we have acquired or have invested in. We've all So a new dimension on the data about the user or improving the logistics experience, that's a primary reason why we do M and A. The second reason is user acquisition. We were I would say, 5 years ago, we were more of a vertical company in the e commerce business. But then we acquired UCWeb, a mobile browser business. We acquired Alta Navi, a mapping business. And we acquired, Yoku, online video. So come with that, we come the acquisitions come with new users, new customers, potential customers for e commerce. So in the earlier session, Yong Vu talked about the 2 circles and then there is some overlap, but then there is the space where things don't overlap, that's new user acquisition. And the third reason is geographic expansion. We have made investments in Lazada for Southeast Asia. We have made investments in India to expand our product and services into these regions. And finally, the new, new thing that we talk about quite a bit in this setting, as well as things that we have been thinking about for the last year or so is the whole idea of new retail. Someone people often ask me, well, why do you sometimes instead of just making an acquisition, just buy the company? Why do you make a minority investment instead of just buying the whole company? While there are some reasons why, especially in the China context, it's very, very difficult to buy an entire company. If someone was willing to sell the entire company to you, you have to wonder what's wrong with the business. So we have taken a phased in approach with respect to some of the best assets that we have acquired. Again, I don't want to bore you to that, but example, UC Web started with about 8 years ago with a 15% investment into the company, and then we phased in over 2 stages, buying up to 2 thirds of the company, keeping management in place so that they continue to be incentivized with along with the metrics of that business and then later on fully acquiring that company. So keeping management aligned interest aligned with the asset that's coming into the family is a reason why sometimes we don't buy the whole thing. Another reason is some of the investments that we make have high strategic value to us, but it is just not our core, okay? It's not what we do. And so we will make a significant minority investment and have a very and establish a very strong relationship, both formal and informal. Formal, meaning commercial contracts and whatever with the investee company. Informal, meaning we got to know the management team or the founding team really well and be friends with them. So when we sit down and talk about strategic collaboration, that's an easy conversation. The third reason why we might not acquire the whole company, but partially go in, is that we may we see some risks potentially in the business or in our ability to integrate. Most of the time, it's actually our own ability to integrate. We have to be humble about this. If we don't see that ability in place, we'd rather make a minority investment first and then see how things develop and then make the full blown acquisition. The case of Lazada, for example, we acquired 51% stake in that business. At the time, our thinking was, gee, we really like this business, great for international expansion. We like to tap into the Southeast Asia market. But do we have the ability to really fully integrate them? Let's wait. Let's wait to see how the management team of Lazada works with us. And that's an example of that scenario. And we will be I think once we've spent time together with the management team of the business that we invest in, we may take the next step to fully acquire them. I want to talk about valuation a little bit. How do we think about valuation in the M and A and Investment market? The first thing the first part of the process is someone comes or we go to someone and say, hey, we want to make an offer to buy your business, and they give us a price. And the price is usually much higher than what we're willing to pay. So you go through a process of negotiating price. But how do you negotiate the price? You negotiate the price through a valuation discussion. The valuation discussion is fairly objective because you can look at comparable companies, you can look at market trading comps, you can do a DCF, you can sort of use all the traditional financial metrics to have a valuation discussion. And in that process reduce the sellers' expectations. While we go through that valuation process, what we're really thinking about is a lot of work goes into, well, what is the real value that this acquisition would deliver to us? That's really what we, in the background, focus on during the process. And this is how we go what we go through in every single M and A and investment that we do. In the next few slides, what I want to go over is to give you somewhat of a report card. Since Maggie yesterday gave a report card of the whole business and me, I'll just give you a smaller report card of the area that I oversee. Over the last two years, we've invested about $21,000,000,000 of the company's capital in a number of companies, businesses. If you look at it, it's actually been fairly concentrated. About 75% of the capital have been invested in a few very key strategic initiatives, including digital media and entertainment, including international expansion, including logistics, including getting into the O2O space and be a big more of a player in the whole sort of local services. So all told, our approach is not very scattered. Our approach is actually very, very concentrated and very, very focused. And I don't really need to go into a lot of detail to explain to you why Youku is important, why Lazada is important, because the presentation in the last 2 days have pretty much explained that unifying theme in why we do certain things. So that's a just a report card of how we have utilized the company's capital. And as shareholders, it's your capital as well. The next thing I want to talk about is some of the minority investments that we have made. Because people always say, well, this thing, you kind of made a minority investment. Is it really strategic? How are things doing? Well, I'm pretty happy to report that our largest minority investments over the years have returned more than 4 times their original cash cost. And we've laid out I'm not going to go into the details, but we've laid out all the numbers here. We spent about $4,000,000,000 in, what is it, like 7 different investments. And today, they have a market value of $18,200,000,000 If I ever go into the private equity business, I would probably put this chart up as my track record. No, just kidding. Now there is one thing that I'd like you to understand. There is a cash cost and then there is the balance sheet carrying value. We have done a few things where, on an accounting basis, we had to adjust the carrying value on our balance sheet. So a case in point is Alibaba Pictures. We spent about $700,000,000 buying into this company that we used to control. And then through a financing transaction, bringing in outside shareholders, we deconsolidated the transaction. So actually, what happened 2 years ago was, upon that deconsolidation, we had to book an accounting game, a non cash paper game. We didn't want to do that. It was silly to book it was something like a $3,000,000,000 accounting gain. But of course, we had to follow U. S. GAAP. So we had to book the gain. So the carrying value gets written up. Today, the stock market price of that investment is below the carrying value, but we're not worried about it. But because on an aggregate basis number 1, on an aggregate basis, our minority investments have done quite well. And number 2, we're still way above water when it comes to the cash cost that we put into the business. Finally, this is the other aspect of capital allocation. What we have done with our capital structure and the cash on our balance sheet. So as you all know, in the last quarter announcement earnings announcement, we announced that the Board has authorized a $6,000,000,000 stock buyback program over the next 2 years. This is a continuation of the buyback authorization and the buyback activities that we have done over the last 2 years. So in the last 2 years, calendar 2015, 2016, we bought back a total of more than about $5,100,000,000 of stock, dollars 5,100,000,000 being the cost to us of buying back those shares. It equates to about 3 percentage points of our outstanding shares. And today, the value of that the stock that we bought back today is $9,200,000,000 based on the market price of June 7, not June 8, June 7. So we've created value. We created accretion to our shareholders and we created value if you just look at the asset that we bought back and what it was worth back then and what it's worth now. And pretty much that's my report card to you. And with that, I think Jack is up. Thank you very much, L. That was wonderful. Now we're going to give a warm welcome to our Executive Chairman, Mr. Jack Ma. Good afternoon. Well, after almost 2 days' reports, let's talk about something big. Let's talk some big numbers, right? I think you get tired of all these detail He said He said, no, no, no, no, no. No more big numbers. But I've been keeping on doing for 18 years, and I think the day as long as I'm alive, I'm always talking about the future. In the past 5 years, I tried to learn to be a Chairman. And I think as a Chairman of the company, I promised Daniel and Joe that I will focus on 3 issues. First, I try to making sure that this company is a vision driven strategy company. It's a vision driven company. I hate that Alibaba IPO and every day we worry about next quarter to quarter after next. And this is no good. This is I hate about that. I'm happy to be on the Board, joined some Board many years ago. Some big multinational companies have joined there. And when they make decisions, they hate they worry about making decision for the future. Everybody only care for next quarter. And they buy company, merge company just for next quarter. So I hate that. So I say, the day when we IPO ed, we have to be making sure that this company in next 84 years should always be a vision driven company. And the second is, as a Chairman, I should making sure the company should have a healthy culture and great people. So this is the 2nd job as a Chairman I should have. And the 3rd, before I retire as a Chairman, I retired as CEO 5 years ago. Before I retired the Chairman of the CEO, I tried my best to build a healthy ecosystem for this company to survive. So these are the 3 jobs that I took as the Chairman, and I learned how to do that job better. And when I talked to the investors, I said that Joe was scared and all the team of financial teams, they scared because I said, I'm not scared. I remember that 18 years ago, Joe and I went to Silicon Valley. We talked to over 30 venture capitalists. We said we want to be one of the top Internet companies in the world. And VCs, all the venture capitalists were scared. They all said, no, forget about it. So we did not raise any money. The first trip, Joe and I went. And since then, I did not write any business plan. And then well, it was brief. At that time, Alibaba dotcom ranking like a couple of 100,000,000 names behind. So we want to be number top of 10 sites. Everybody thought we were crazy. The second time, I remember a 15 year it's like year 2003 when we just breakeven. We start to compete with eBay. Joe and I went to San Francisco or no, Los Angeles. And I talked to as many big PEs. And when I talk about we will move to C2C, we will go to the consumer market, we'll compete with eBay, the investors at that time were also scared. No, no, no. You have no chance to win eBay because C2C market in China has no chance. EBay taken already taken 90% of the market share. And 3 years ago, when I when we listed in New York, and I say we will raise a little bit money, $20,000,000,000 people thought it was a joke. But now I think we need more money, more money for the future. And I think compared to the future, Alibaba is still a baby. If you say in the past 18 years, we were I think we are amazing. We were so lucky. We're one of the luckiest company in the world. We are in a wonderful industry, Internet, and we are in a wonderful country like China. We have we got so many supports from our colleagues and great team and all the things. So we're lucky. But this company would love will the vision is to last 102 years. So we have another 84 years to go. And people say, well, 102 years is a great number. But we take it really seriously. As main Founder and Chairman, I really take this thing very seriously. So every plan, every year on the strategy meeting, we'll review what we're going to do next 10 years. What the 10 years? Every project, every big investment we do, we think about 10 years later. We think about 5 years later. So we have a 3 year plan, 5 year plan and 10 years plan. Almost every year, we review. So without that, if you only if you talk about 102 years, but never care about 5 year plan or 10 year plan, you really do not believe what you're talking about. And I want to tell all the investors, we are very serious about 102 year vision that we have another 84 years to go. So compared to the future, our market cap, of course, I think I'm happy about that, but don't compare to the others. If you compare to Amazon, I'm not happy about that. But if you compare to the future, we are still a small company, a very young company. At 18 years old, we are growing to that size, but we're still a baby thinking inside. So what we want to do in the future? We want to be the 21st century globalized company. And I would say the 1st technology revolution had a business model called a factory. The second technology revolution called there's a business model called company. So what will be the date and time, the Internet time in the 21st century, what be the best business model for this century? We think about is something called like a platform the business. So we are lucky 15 years ago, we start to move our company from a normal like a website to a platform like. And I think the other thing is that whether you're a big company or great company, not depends on what kind of opportunity you catch. Most of the companies in China, they're always waiting for opportunity. If there's a good opportunity, they catch it, they become a good company. When they cannot when they miss some opportunities, they're gone. In China, couple of years ago, there was a very popular saying that, right? If you're a pig, right, even if you're lucky happen to be on the on the wing, there's some drill, you will be flying. A pig will fly. But if the wing goes, the pig will die. So I think that it's not about what kind of opportunities you grasp. It's about what kind of value you create for the future. What kind of problems you solve for the world. The big problem you solve for the world, the big company will be. The great problem you solve for the world, the great company you will be. So Alibaba think about one thing that what kind of problems we can solve for the world in next 10, 20 years. If we are we can figure out the problem in 10, 20 years, what are the problems, then we start to prepare now. That will be big. So we think we are a company in Hangzhou. We are not a company in New York. We're not a company in Silicon Valley. We're not a company in Beijing, Shanghai. We're a company in Hangzhou. As a Hangzhou company, the way we compete with the others is that how we judge for the future. That's the competition we have. So we believe the future like this, and we spend all the resources going there. And we believe this will be the world problem. If we can solve that problem, we'll be great. That's the way we think about how we lead our future. So today, e commerce, cloud computing and whatever business we have, all designed it but 10 years ago, 15 years ago. So people say you're great today. No, I think we're not great today. We were great 10 years ago. 10 years ago, we believed this thing will happen. 15 years ago, we believed this thing will happen. 8 years ago, we believed cloud computing, big data will come. So we start to make decisions 18, 15 10 years ago. And then we put all the resources, all the talents, everything just to focus on. So I said to many, the entrepreneurs, if there are 9 rabbits on the ground, if you want to catch 1 rabbit, you should not change the rabbit, you should change yourself, just stick to 1 rabbit. That's the way to do it. So we had our vision 10, 15 years ago. We know this is where we want to go, and we'll do anything change ourselves to be sure that we catch that rabbit. So we think globalization, anti globalization, anti trade and trade protection is a problem. It's going to be a big problem in the future. So how we can help globalize? We think globalization is a great thing. And how but it's only like 20, 30 years. In the past 20, 30 years, globalization helped a lot of developed countries, helped a lot of big companies. So in the past 30 years, globalization, global trade was controlled by 60,000 big companies and which make rich company richer, big company bigger and small companies, small countries, SMEs all in trouble. And the young people didn't have chance. So we think about, if we can make globalization, international trade, cross border trade more inclusive, making sure every small business has the chance, making sure every young people has the chance. That we can solve a lot of problems. People worry about the jobs because the new technology come will take away a lot of jobs. But I but we think if we can make globalization more inclusive, then we can create more jobs. If a small business, you can only sell your products to your neighbors in your county. What if you can sell products across the ocean, across the country to the others? That might be a great solution for the job creation and a great solution for today's problems. So that is why we've been focused we believe that we can do something for globalized trade, for globalization. We were helping not 60,000 big companies. We can help 6,000,000 or 16000000 small business that they can sell and buy cross board. This is what we want to do. And the second thing is that the world economy has never been sustainable. How can we make our technology to enable the global trade, global business to be more sustainable? And meanwhile, how we can make business people and people of the next generation happy and healthier. So these are the 3 values, 3 problems that we want to solve. The world is not globalization people don't like it, but we think we should make it inclusive. We should make global business more sustainable. We should make the people in the future are more happy and healthier. So these are three problems and these are three values we want to create. So in this way, that we definitely want to be a globe a company that can help globalization. So e commerce will be the best solution. And if you want to do e commerce, you definitely have a good technology, good people, people with good vision. 5 years ago, when Alibaba when the Taobao Tmall GMV just crossed 170,000,000,000 GB, which is USD 1,000,000,000,000. I had a crazy idea. I say, what if we can make a USD 1,000,000,000,000 by the 20 year anniversary of Alibaba. That is year 20 19 because we were born in 1999. So we said year 2019 today, we call year 2020 fiscal year, right? We should meet the US1 $1,000,000,000,000 Everybody will say, yes, why not? But I hate the exchange rate. We never put that in the account. So at that time, it's like $1 is like a 6 RMB, but now like $1 close to 7. So we need to have we have like 1,000,000,000,000 yen big gap, which is not easy. But I'm happy about it. Daniel said, target is a target. KPI is a KPI. Let's do it. If we can if we do in a normal way, we will never meet it. So the next 3 years, our small target is go cross US1 $1,000,000,000,000 dollars. Dollars 1,000,000,000,000 nobody no company in the whole world in the last 100 years, people can imagine, any company can do it. We have to do in a very innovative way. We have to do make it happen. But if we cannot make it happen, we'll be in trouble. The trouble is that we got a big goal that is in year 2,036, we will be a company that can serve 2,000,000,000 populations, 2,000,000,000 consumers. We want to be a company that can create 100,000,000 jobs for the world. We want to be a company that can support 10,000,000 profitable business on the Alibaba platform. So what is that? If a company can serve 2,000,000,000 consumers, that is 1 third of the total population of the world. If the company can create 100,000,000 jobs, this is probably bigger than any government most of government can do. And if your company can support 10,000,000 profitable business on its platform, This is called economy. Today, Alibaba's GMV, which is e com I mean, it's e commerce rise. Alibaba GMV is ranking 22nd economy of the world. We are just behind Argentina, right? But I think when we cross USD 1,000,000,000,000, we are sort of ranking, 17 or 2016. But in year 2,036, if we can make a 2,000,000,000 and 100,000,000 and 10,000,000, we will be ranking number 5 economy of the world. What does number 5 mean? Number 1, I don't know China or U. S. A. Or if just say USA, China, Europe, maybe Japan and us. Well, people say this is too big. It costs nothing to imagine, right? If you even do not dare to envision it, if you do not think about it. So 18 years ago, when 18 people in my apartment, we all together less than US50,000 dollars We start to think that one day, we will be the top 10 business, I mean, website of the world. We were brave at that time. Today, we have 55,000 people. We have a lot of money. We have a lot of talents, technology, datas. We have a lot of deliverable users or we have a half 1000000000 people already using our services. Why not to think about it big? Of course, we do not own that economy. The 5th largest economy we envision, we believe if Alibaba cannot do it, the other people will do it. So if we can work with other people, make this global new economy, It's based on Internet. Using this economy, we were helping global buy, global sell, global pay, global logistics and global travel. Today, many cities in China, you don't need to do anything. Just a mobile phone, you can travel all around the world. We believe in couple of years, when you have a passport and mobile phone, you can travel all around the world. And 5 years later, you don't need a passport maybe. Just a mobile phone or just your face recognition travel around the world based on your status. So this thing could happen. You have we have to open our mind and think about it. So this is what we want to do that we will globalize the business. We will make globalization more inclusive. We will make everybody, if you have a mobile phone, at that time, whether it's a mobile phone or not, if you have like a gadget, like a mobile phone, you can global buy anything you want because we hope as a 10 year CEO must have told you that in next 8 years because this goal was put 2 years ago. Anywhere in China, you want the buy things online, within 24 hours, you will receive it. Anywhere in the world, if you order online, you will receive a product within 72 hours. I met a girl in Russia a few weeks ago and she said, well, AliExpress was great. I said, why is it great? She said, the speed was fantastic. I said, what do you mean by fantastic? She said, only 9 days, I received my products. Remember, like 2 years ago, it took almost 2 months and a half for a Russian girl to receive a product from China to Russia through AliExpress. 9 days for them is like a rocket. But we will make it happen anywhere in the world. For Tanyou, I told the Tanyou, the vision one of the vision for Tanyou is 24 hours anywhere in China. So Beijing faster, Shanghai faster, Guangzhou fast. To my standard, that's not does not account. Tibet fast, Mongolian fast, Yunnan fast, Guizhou fast. That is called the speed. So we have to make a network first. When network is invest is work, the network effect comes, the speed is going is going to be speed up. So I would say, globally, we will build up a logistic network that within 72 hours anywhere you order. So there's no big difference between you order things here from Mongolia, you order things from here to Argentina. 72 hours, that's so we have using technology, have to be creative, have to be connecting all the something that we want to do. And we want any small business, they can go across the board. Today, most of the free trade zones of any countries, the free trade zone are designed for big companies. We are encouraging every government to build their free trade zone for small business. The big companies can go across the custom offices within 24 hours for small business, maybe 7 weeks. So how we can encourage government, how we can encourage the policymakers, make globalization more inclusive, supporting millions and millions of small business can buy and sell across the board. This is called EWTP, not EWTO. EWTO is organization very complicated. Platform is something we can work on. And also payment, I think Eric has told you about, we are building up a network that we were making sure every small business, every individual in next 10, 20 years, the financial should be inclusive. And we believe tech thing, not the Fintech, right? Fintech is a financial institute try to improve their power. Tech thing is to enable everybody to be able to reach the financing. We are technology companies to making sure that everybody is equal. Everybody should be able to reach the money they want. Not those people don't need the money, money come. Need the money, you never receive it. So this is something we want to bring to the world. And I've been working very hard shareholders. I've been really working hard. Last year, I fly in the air 870 hours or 876 hours. And traveling and meeting, visiting 40 countries and seeing all the prime minister, ministers like diplomatic, a minister. I'm happy that I enjoyed doing that. I got a lot of response from those countries. And Malaysia as the first country has already started the EWTP, the testing country. And we will try to make this thing more and more popular. We will try and we are I'm sure that more and more young people, women, small business, government officers will join us. So this is something that I'm excited about. If we really can make the, the 5th largest economy, we need 2,000,000,000 population. As the 2,000,000,000 population, China will probably get 800,000,000 something. We need 1,200,000,000 people from outside China. This is why we go Southeast Asia, 1 Road, 1 Belt. And imagine the other thing, which you think about, President Xi Jinping announced in Davos Meeting, next 5 years, China is going to import US8 $1,000,000,000,000 This 1 Road, 1 Belt Conference just happened last month. The China government again say in next 5 years, China will import 1 or USD 8,000,000,000,000,000. Guys, what does 8,000,000,000,000 U. S. Dollars mean? 16, Walmart Global. Then China is changing very fast from exporting country to import countries. So this $8,000,000,000,000 means a lot to China, means a lot to the world, of course, means a lot to a country, a company like Alibaba because e commerce probably will be the solution. If you go to Guangzhou Fair or Las Vegas Fair to sell $8,000,000,000,000 it's impossible. So let's think about the other. So globalization, absolutely, we are excited. Absolutely, it's a huge opportunity and to reach gold cross USD 1,000,000,000,000 and next 3 years, we need a lot of money from GMV from these countries. So that's why Lazada, AliExpress, all going to move very fast. The second opportunity, I would say, is China opportunity. China today have more than 300 middle class. They are middle class, but the spending capability spending capability is very low. So China is going to reach with today's growth in 5 to 6 years, we're going to have 500,000,000 middle class. That means almost close to 2 American population. And this is going to be a huge change for this economy. And China today is e commerce will take a huge role inside that. We then think that consumption upgrading, importing is the key. So we're going to do a lot on that. And China, the other thing is which I told last year that a lot of people do not agree, I say, in next 20 year next 10 years, China is going to be facing 5 new, new retail, new manufacturing, new financing, new technology and new energy. The new retail, I think, you have heard about Daniel yesterday talk about in detail. The essence of new retail is from is like shifting from selling products to people to serving the people, but selling to services. So new retail is going to be big. And the other is new manufacturing. I heard people ask about the questions about new manufacturing. The way we 8 years ago, cloud computing and big data, 8 years ago, we make decision. That because we know that in the future, retail based on data, manufacturing is the best data. So 3 in the past 3 years, this company our company discussed a lot much more than most of people in the world about IoT. We believe IoT. We think IoT is the future, is the solution of solving the manufacture upgrading problem of China. Today, a lot of people in America talk about AI, big data, especially AI. It sounds like if you do not talk about AI, you are in trouble. Honestly, we never talk about AI in the company. I hate people talk about AI in the company. AI normally discussed by those company without datas. AI is normally taught by by the academic professors. We've been using that for a long, long time. I remember when our first CEO of Alipay, You know, the Alipay transaction is big. A lot of thieves coming. So in order to because if we like army pay today's transactions amount, we need at least 2,000 policemen, maybe 20,000 policemen. You cannot catch all the bad guys because when you have such a large transaction, all the bad guys come. So we use machine learnings. We hired over, I think, in our company, more than 200 policemen joined us. They are all the expert of criminal behaviors. So we teach computers to learn how to catch criminals. If you are a thief, a great thief can figure out 10 ways of stealing money. This is a great thief. Normally, a thief can only figure out 2 or 3 ways. But computer can learn 20,000 or 2,000,000 ways. So when the thief was think he is so smart with the idea with the machine will say, I have seen this a 100 times. So I think doing good thing to me, AI doing good things for the other people, normally irrational. I just love you. I like you. I do things without thinking. All the bad guys do bad things with logic. If you have a logic, A, I can do better job than you are. So to my understanding, machine learning and artificial intelligence is the best way to arrest the bad guys. We've been doing that on the e commerce and Alipay for many years, And we never call it AI. And I think that the IoT is going to be big because in the past years, machine all drink electricity. Next 20 years, machine will drink datas. In the past 20 years, we make people like a machine. And next 20 years, we will make machine like a people. So this is going to be big. The China 2025 and the Germany 4.0, This all moving to the datas. And new financing. New financing, I think, Alipay has already Alipay entered financing already told about that. We are tech thing. We are not the Fintech. Fintech is still old financing. Fintech is tried still tried to control 2018. The 2018 is a special date for China. The big banks, they serve 20% of the big companies, and they made 80% profit. For us, we want to do eighty-twenty. We want to serve 80% of the small business, 80% of the consumers that never got a chance to reach the financing. We only we are happy about 20% profit. Joe, is that right? 20% is good enough to me. And also the new technology, We are moving faster on cloud computing. We are moving faster on the mobile technology. We also investor on the operating systems. We are having a lot of, you know, big vision that trying to be sure that Alibaba is a real high-tech company. I told the team, the real high company Alibaba should set a model, you know, like a model is Google. People say, you know, Robin is engineer. Mark Tony is an engineer. Jack Ma is a salesman is a teacher. Oh, he's a salesman. No, I'm not a salesman. I'm an evangelist. And I want to say is that evangelists believe in the future. Engineers believe technology. And I believe technology is for the future. I may not be a good engineer. I may not be a good engineer. I'm not actually, I'm not an engineer, but I respect engineers than most of the engineer. I respect them. I listen to them. I admire them. But we communicate it better. I tell this is something if you do in that way, you can solve lot of problems. If you do this way, you can solve the engineer problems. And they love that. I work very well with all the engineers. One of the examples we did is Ali Cloud Computing. Doctor. Wangji and I are working perfectly. And most of engineers hate cloud computing 80 years ago because they think this thing does not work. And I believe this thing work. And I never bargain with engineers how to make things happening. But I tell this is the direction supposed to be. So we're lucky. And I want to say, we should build technology that is great for the future. We should have built technology that solve the problem. Alibaba is not that company that, oh, there's some money there, so we should go there. Oh, there's opportunity there, we go there. We grow from Taobao, why we go Alipay because if we do not have Alipay, we will collapse. So we do the Alipay. When we have Taobao and Alipay, we say if we do that in 10 logistics, we will collapse. So we do logistics. So we say, now if we do not have the cloud computing, all the traffic will make us collapse. So when we do all these things, we find out we are not happy. So if we're not happy, nobody will be happy. So how can we make people happy? Then entertainment might be happy. So we do things because customer need, not because this is something that will make money. Today, the more things we do, the more human nature we understand. The more things we work, we partner with others, we know our problem, our partner's problem, our customer's problem. So we want to be the customer the company that solve the customer's problem. So with that much opportunities in China, the 5 news, the fast growing China economy, and China will be is the 2nd largest economy, might be the 1st largest economy in next whatever years. Do you think China should have a few companies that are the top tier of the world? So people say, Alibaba is a Chinese company. No. Yes, we are. We are born in China, but we grow for 21st century. We grow for the world. We are born in China, but we made this company for the global. So we having a great plan for globalization. In our company, every year, we will have at least 4 meetings, amount of 300 senior management of Alibaba. We say 2 in Chinese, 2 in English. If you cannot understand, I'm sorry, go back to learn English. So most of the we will see more and more international the colleagues here, we will send all the Chinese the most of the Chinese, the colleagues go outside to support. So as the 2nd largest economy, we think China will have company like a Walmart, Microsoft, IBM, Google, Apple that influence the world in the past years. In the last century, there are so many American companies that influence the world and be the number one. So we think China may have the chance to have a couple of them. And Alibaba hopefully will be the top, the real top ten of the world. So what will we have? We have I think you see all the things what we have today, but we think we have people, we have culture and the very important the other assets we have is we have the datas. If you look at the world today, I don't know which country or which company in the world that has such rich data than us have. People say, oh, you're everywhere. We are economy. You invest anywhere, you have no logic. We have a logic. You don't have a logic for economy. Because we have our economy logic. You only have to think about you are you are Amazon. No, we're not Amazon. Amazon is Amazon. Alibaba is economy. We are not a Google. Of course, we have Amazon Business. We have Google Business. We have a physical business. We have most of business you can see because we are economy. And the economy to support this economy growth traditionally is the soil water, the land, the water and the environment. For our virtual economy, the most important thing is data. Data is our water. And so and the other is network. The other is environment, the value we create for our Alibaba users. So this is the basis that that's why and there's a conference there are a lot of conference in the future because Alibaba own that much data. We know datas, you have to be careful the privacy. You have to have care for the data security. I saw one of the questions that, how many datas that you have not used yet? 99.99, we have not used it yet. Because we don't know how to use these datas. This is something that we did 8 years ago, where we made the decision for Alibaba become a data company. We say, we don't know how to make money out of the datas. But we know in the future, no company, no country, no business can survive without datas. So we have to focus on datas. Today, if we cannot figure out the solving the problem of privacy and security, then we should not use the data. The data is just to improve our business. And how it's like when you conserve all the oils, what do you worry about? So we never worry about we have more datas. And we will continue to making sure the data is good for society, for the globalization to be more inclusive, sustainable and happy and healthy. So that's it. That's something I want to say. We have data. We have a people and great culture. And I would say the other thing is I'm happy about the most powerful organization, the governing of the company. We are partnership driven. And our partnership are so different from the investors' partners and lawyers' partners. Joe probably can share next time about our partner system. So because the partner system culture, we guarantee that our company is a vision driven strategy. We have to be vision driven. We have to solve problem for the world. We have to create value for the customers. We have to be happy all the time. So that's it. That's what I want to say. And hope to see you again next year. And last year, we have like 200 investors. This year, we have like close to 400. We hope we can have 10,000 investors someday here. And not about data not about the data on the screen, the results and forecast like Maggie said. People in the future come here, we want to share how we do the business and how we go across the date from IT to DT, how we survive, what the experience. We want to be the company that can share experience with you guys. Thank you very much. Thank you, Jack. So we ask Jack to stand by and then we're going to invite Joe, Maggie and Daniel back on stage for our Q and A.