The Road to China
Meanwhile, Back at the Ranch
The meeting was not going well.
The new English Teacher Recruitment business was about to be registered, and all the investors and partners were gathered at the table. I had been recruiting for over two months and had delivered on my commitment of signing up 20 American teachers, convincing them to put their lives on hold, sublet their apartments, put their stuff into storage, and fly to Beijing on their own nickel, just as I had done last August. (Two of the teachers I've recruited have already arrived as I write this, and I must say I couldn't be happier with the caliber of character and attitude I was able to attract!) Now it was up to the other partners to implement the other 2/3rds of the plan, creating the corporation and starting our school. But there were problems, all of which could be traced back to 1) none of us knew what we were doing regarding starting a company in China, and 2) Jim, although a very talented and experienced teacher (and a good figurehead to attract captial), turned out to have no business, leadership or investor relations skills whatsoever.
Sensing this deficiency early on, and seeing the amount of money that could be made by having a competent management team in place, I sought the help of Mr. Xian, who had been down this road before with his own company. (Earlier in the semester I had been volunteering some of my time for Mr. Xian, acting as troubleshooter and quality control agent for a troubled software project at his company. I fixed a major problem that made the customer substantially happier, and I got the programmer to produce a decent level of documentation. Mr. Xien was very thankful and claims that I saved him a lot of money.)
After showing him the business plan and informing him we still needed investors and an experienced and well-connected management team, he came through with both. He was even ready to invest 50,000 RMB of his own money (4 year's salary for the average Chinese worker) without ever having met Jim or the other Chinese partners, based solely on my enthusiasm and credibility. He also introduced an experienced ex-Government employee who had ties to the Ministry of Education, who had good feedback on our execution plan and was willing to consider becoming a partner. In my mind these two things addressed the two deficiencies that we had and would allow us to move forward to prosperity.
But Jim was not convinced that we needed more experienced people. And in our very first meeting where all the parties had come together, things started going horribly wrong. Jim's ideas of what was involved in starting a company were overly-simplistic bordering on naive, and he didn't appear open to hearing the input of the more experienced people that I had gone out of my way to recruit. Jim assumed that everyone was "on board" and up to speed with where we were in the process without verifying that this notion was true, resulting in the new members feeling "railroaded" - details of implementation were being discussed before the broad high-level issues had been agreed upon. Jim (who's a very touchy-feely kind of guy) handled Mr. Xian in a way that Mr. Xian felt was inappropriate. Because of a law that says all Beijing-based companies must have TWO registered Beijing residents at the helm, Jim installed one of his partners and his adopted son ("The only Chinese people in the world that I trust"), neither of whom are qualified for the position, which raised the ire of the investors even further. Worst of all, Jim was (still is!) absolutely paranoid about others coming in and usurping his authority (which is an expected event when investors see that the person at the helm is jeopardizing their investment, so it's kind of a self-fulfilling prophecy). I was personally embarrassed at what had transpired and the way Jim had conducted himself at such a crucial juncture, and realized on that day that the company didn't have a chance as long as Jim was in charge. It is difficult to define the qualities of an effective leader, but very easy to spot when someone isn't up to the task.
The next day I strongly recommended to Mr. Xian that he pull out, which he did, and I followed suit immediately afterward. And I was honest with the reason: "After seeing your leadership skills, I have no faith that you will be able to lead this company to success. We will instead be running inefficiently - a V-8 running on only 3 cylinders." (Men love to use car analogies, don't they?) "Can you at least teach the others your recruitment techniques?" he asked. I paused. "Sure, why not?". "And can I hang onto your investment to help cover some of the training expenses we'll be incurring?" I paused a little longer. "I'll let you hang onto 1/4th of it for three more months, then I'll need it back." Between this and documenting my processes, at least I cannot be blamed later on for walking out and killing any future attempts at starting the company on his own.
Our backup plan for the teachers was to simply broker them out to schools (the same way I got my job) after we make good on our commitment to train them, which we will do. The whole thing will be a wash money-wise. But at least we we'll be making good on our promises to these teachers and won't be leaving anyone high and dry.
But the story doesn't end here.
Jim has been an English teacher for more than 30 years, and has taught all over the world. He even started a national program in Japan in the early '80's that the Japanese government took over and grew to a large and successful organization. He was once a millionaire and then lost it all through a series of events that were never fully explained.
Jim can best be described as a cross between an ageing Austin Powers and Stuart Smalley (Al Franken's low-self-esteem character on Saturday Night Live's "Daily Affirmations" segments). His outlook and mood are entirely dependent upon whether others like him or not. He feels sorry for himself constantly and tends to play the role of victim. (An oft-heard quote: "Mirror, Mirror on the wall... thank you for not breaking!") His management style is to delegate everything without fully understanding what's involved to other partners who usually don't have a clue, then getting annoyed or angry when they're not done properly. On the other hand, he did help me get established in Beijing when I arrived, and for that I owe him a debt of gratitude.
Many of you may be asking why did I invest so much of my time and energy into something which relied so heavily on a leadership quality that had not yet been established? The truthful answer is I tend to trust everyone by default until the first time they demonstrate that the trust is not warranted or deserved. There was a lot of money that could have been made, and I had absolutely nothing to lose by giving it a shot. In this instance, it was Yet Another Seed Sewn. (I think by this time I'm a contender, along with the likes of Abraham Lincoln, Oskar Schindler, and George W. Bush, for the award of greatest number of failed business attempts.) In this case he demonstrated that he wasn't right for this business to work, and so I have moved on.
Jim kept trying to get the company started after this setback. Potential investors came, sniffed around, and left. One was a very qualified and experienced businessman who wanted to up the ROI by pumping a million RMB into it and have us recruit 1,000 teachers a year (ouch!), but then did some digging, learned about Mr. Carr, decided this would be a liability to his future political career, and left in a huff. Then this morning there was a meeting with someone at the Beijing Institute of Education, who had a budget, the identical goals of recruiting, training, and placing; PLUS they also had the blessing of the powers that be. BUT they had no experience or means of recruiting and training. A perfect fit! The best part about this arrangement is that Jim wouldn't be in charge, so one last time I volunteered my time to lend credibility and see where things go. Most likely nothing will come of it. Time will tell.
The meeting was going very well.
The General Manager and two of his aids were sitting around the large conference table with smiles on their faces, pretending to hold a Data Egg like device and typing on it, just to see what it would be like and enjoying the experience. They gently laughed and all nodded to each other as they validated the concept. They understood! They all "got it"! After giving this pitch over 100 times to Venture Capitalists in the U.S. and hearing nothing but objections as to why nobody would ever embrace this concept (yeah, like instant messaging, SMS and Graffitti were better ideas that would obviously take off), Mr. Xian was instrumental in getting me in front of the G.M. of China Putian, a very large telecomm firm that makes cell phones and is investing in the next-generation 3G mobile phone infrastructure, and they're looking for a radically different idea to possibly jump-start the market. (I knew there was a reason I had volunteered my time to Mr. Xian's business earlier! :-) ).
What was proposed was a joint venture between Mr. Xian's company and China Putian - each would chip in some funds and resources to create a new entity that would develop prototypes and intellectual property, and then market it / license it (or not, if Putian wanted a competitive advantage). The budget for Phase I was pretty modest - a generous salary for me (by Chinese standards, anyway), a small staff, legal fees, round trip airfare so I can visit the states 2-3 times a year, and funds to allow me to attend conferences and present papers once the Chinese and international patents had been filed.
"Mr. Xian, this budget looks great, but I have a problem... I've accumulated some serious debt back home, and although your budget will have me living quite well over here, it won't even make a dent in what I owe. I really need an American-sized salary to allow me to pursue this" I said, indebtedly.
"Hmmm..." said Mr. Xian, very seriously. "Then we'll need to create another revenue stream to support you. What do you think about starting our own English school? Just you, me, and Mr. Liu (the well-connected manager Mr. Xian had literally brought to the table). Same business plan as before."
(*!*) "What, you mean without Jim?"
"We don't need him! He's more of a liability than a business asset. You can do his job as well! And I have the means to finance this without the need of other investors."
I pondered this carefully. Mr. Xian was right. We could do it ourselves, and I would just be in charge of recruiting and training. Plus I could get some local help quite cheaply, and still have time to work on the Data Egg project. If successful it could pay down the debt and I'd get the shot at fulfilling a dream I've had for more than a decade. And then after that - who knows?
"How long before we can start?"
"I'll have Mr. Liu look into it and come back with a plan after Spring Festival." It turns out that that's about the same time that the G.M. of China Putian is scheduled to get back to us regarding the Data Egg Joint Venture proposal we sent him.
So here I am, barely two weeks before leaving the country, a lot of teachers arriving shortly afterwards with no business that can profit from them, and two very big loose ends. Life just doesn't get any more interesting than this!
Since the Winter Break Intensive English classes I was supposed to teach at have been canceled (oh, did I mention that my partners weren't even able to get ANY students for just ONE CLASS that would have raised the initial working capital we needed?), I now have the wonderful problem of deciding where to travel to during these next 8 days. If something interesting happens, I promise you'll be the second ones to know.
Until next time...
"Yours Truly, Gary Friedman"
February 4, 2004
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