15 | Michael Norris, Chinese Tech, Platforms, and Consumers

My guest today is Michael Norris (@briefnorris). Michael is a China-based analyst and is currently AgencyChina’s Research & Strategy Manager. Michael provides primary research and consulting services to nutrition, petcare, skincare, and luxury brands who want to grow in China. He’s previously partnered with Nestle, Constellation Brands, Johnson & Johnson, Richemont, and LEGO to deliver breakthrough insight and winning strategies. Outside of his consumer research work, Michael has written in-depth analyses, warnings and predictions about fast-growing Chinese companies. This includes a (now infamous) three-part series on Luckin Coffee’s shonky corporate governance – a full year before the company admitted to sales fraud.

In this conversation, we cover the China Tech scene and the future of their platforms, Chinese consumers, and his life in China.

I hope you enjoy my conversation with Michael Norris.

Show Notes:

[00:00:31] – [First question] – Intro and how Michael ended up in China
[00:01:59] – Why Michael chose to study Chinese
[00:03:32] – Life as an Aussie in China
[00:04:46] – What’s Michael’s role look like day-to-day
[00:05:50] – What does his fieldwork involve?
[00:08:06] – Favourite stories in the field?
[00:09:24] – How much has the concept of Tier Cities changed?
[00:13:39] – Misconceptions or misunderstandings around Chinese consumers?
[00:18:48] – China Tech Scene, where are we at now
[00:21:34] – Tech Scene Themes
[00:23:00] – What companies are best positioned currently?
[00:27:39] – Follow on effects of Alibaba and Tencent opening up their platforms?
[00:30:05] – Tencent
[00:33:28] – Misconceptions or misunderstandings in the China Tech scene
[00:41:55] – Michael’s future plans?
[00:45:34] – Advice for those just starting out in sharing content
[00:50:45] – Most undervalued life experience?
[00:52:52] – What experience shaped Michael’s worldview?

Connect with Michael:

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Transcript:

Kalani Scarrott (00:13): Hello, and welcome to Compounding Curiosity. I’m your host, Kalani Scarrott, and this podcast is all about compounding your curiosity, alongside my own, through thoughtful interviews with interesting guests. For transcripts and detailed show notes, check out the links in the description. Hopefully you’re as keen as me to learn something new, so let’s get stuck in.

My guest today is Michael Norris. Michael is a China-based analyst, and is currently AgencyChina’s research and strategy manager. In today’s conversation we cover the China tech scene, Chinese consumers, and his life in China. So, please enjoy my conversation with Michael Norris.

Michael, thank you so much for being here today. But, maybe just for myself, before we dive into the China tech scene and everything surrounding that, I’d love to know just more about how you first got involved with China and ended up over there all the way from South Australia?

Michael Norris (01:00): So, you’re right, I’m from Adelaide, South Australia. My journey with China started at University. I studied a Law and Asian Studies double degree, and I guess that’s one of the fantastic things about the Australian tertiary education system, the double degree which allows you to do a bit of everything, you feel [inaudible 00:01:20]. I got into Chinese in the second year of university. A few years later I was fortunate enough to win a scholarship, the Prime Minister’s Australia Asia Endeavor Award. Goodness, what a mouthful. I came to China as a student and I studied at Tsinghua University. I went back to Australia after my period of study and started a career as a management consultant. And then, a few years after that, bounced back. So, it has been an on-again, off-again relationship, but the genesis of the relationship really was university.

Kalani Scarrott (01:59): Was there any specific reason for studying Chinese? I hate telling people this because my Chinese is terrible, it’s not even worth mentioning, but I remember when I backpacked in Taiwan and, as an Australian, I just felt so guilty and arrogant that I could only speak English, whereas everyone else from Europe could speak three or four languages. The locals could speak English and… You know what I mean? So, that was my reason for studying, but what was your specific reason for choosing it?

Michael Norris (02:21): As I said, I started taking Mandarin the second year of university, and the reason why I was prompted to do this was our comparative politics lecturer in the first year of university [inaudible 00:02:34] said during class one time said that university was, “The last chance in your life to learn a language.” While that might not be true in all cases, I don’t think it’s a bad heuristic. I wasn’t immediately persuaded by this particular comment. I was terrible at languages at high school in fact. Italian was my worst grade in year 12, and it’s the grade that actually cost me a perfect [inaudible 00:03:04] or matriculation score. So, I always had, how does one say? A bit agnostic about language learning. But, after navigating my first year of university and having that line from [inaudible 00:03:19] ringing through my head, I thought I might as well put my hat into the ring and give language learning another chance. So, it started off with an offhand comment from a lecturer in comparative politics.

Kalani Scarrott (03:32): And it just grows from there. What’s life like as an Aussie in China, how do you find it?

Michael Norris (03:39): Given that I’ve been here a couple of years now, and also my language skills, I don’t have too much of an issue day-to-day. Of course, Australia-China relations have brought new challenges to being an Australian in China. But, on the whole, I think I’m pretty fortunate. Having said that, being or living abroad in another country, and perhaps you can appreciate this, is that there’s always a sense that no matter how well you integrate, language-wise, you can go from being foreign to local, but you can never be truly local. I think that applies particularly in countries where the immigrant population looks visibly different from the majority population. And so, you always have a sense of distance even though you may be up to scratch when it comes to language and cultural sense.

Kalani Scarrott (04:46): Yeah, that’s a great point. So, with your role day-to-day, what exactly does that look like?

Michael Norris (04:51): I’m a consumer researcher, so I’m the research and strategy manager at AgencyChina. What that means is that I spend a lot of my time trying to understand the markets that our clients work in, and that might be desktop research, it might be looking at reports, it might be looking at client-side internal documents or datasets. Might be looking at third-party datasets. And then of course, the most exciting part is going out and being in the field, interviewing consumers, running consumer surveys, checking supermarkets and shopping malls at point of sale. So, I would say there’s a fair amount of time spent in the office, and then there’s also a good chunk of time that’s spent out of the office on the road interacting with consumers, being at point of sale. It’s a good mix. It’s a good balance.

Kalani Scarrott (05:50): Yeah, I’d love to know more about the exciting fieldwork, what does that look like exactly for you? Where are you going? What are you looking for?

Michael Norris (05:57): Right. So, we’ve got about 30 cities within our coverage universe, and those 30 cities are spread across different city tiers, they are also in different geographies. So, we’ve got a good spread of the country. The reason why we choose these 30 cities is twofold. One, is that these cities are where our clients do the majority of their business. And also, these cities are easy enough to travel to and recruit for consumer interviews. And so, what it looks like in practice for a particular project is we might go to three or four different cities, and within each city we’ll be running a focus group or home interviews, depending on the study. And so, what that means is that in any given city you’re talking to anywhere between 10 to 20 consumers in their home for a couple of hours. And then, depending on the study, even going out with them to observe them as they interact with the product category.

So, for instance, if it’s something quite boring, like milk, it could be going out and shopping with them on their shopping trip. Or, if it’s something a little bit more exciting, like cars, then it could be taking a drive with them on their daily commute. Or, in the case of gaming, it might even be sitting down next to them as they’re in a gaming bar, observing them as they play and interact with the game. So, it’s quite varied and much depends on the product category. I think the most rewarding thing is that in a given year you manage to meet so many people, and it’s a real privilege to be able to meet idealistic students, loving parents, exercise enthusiasts, free spirited retirees, a real cross section of society.

Kalani Scarrott (08:06): I don’t know if you can answer this, because of obviously confidentiality and stuff, but is there any favorite stories?

Michael Norris (08:13): Favorite stories for me, I think rather than personal stories, which of course might embarrass our respondents, going to lower-tier cities, especially in the last year or so where there’s been much, much less foreign travel, you do get the surprise factor, whereby you might cause a stir in a small place. There’s this funny little story where, as I was crossing the street, a driver of a minivan sort of stopped quite suddenly at a pedestrian crossing and caused a two-car pile-up as he saw me cross the road. He was sort of transfixed, didn’t understand that there was a pedestrian crossing in front of him, slammed on the brakes, and then the car behind him went straight into the back. Which, is very unfortunate, but it just goes to show that eyes always on the road, right?

Kalani Scarrott (09:24): Yeah, exactly. Something different every day, sounds cool. Is there that much of a difference between those tier-one, tier-two, tier-three cities anymore? How much of the gap still remains and how much has been eroded, do you think, especially since the time that you’ve been in China, how much have you noticed that change?

Michael Norris (09:38): This is the $64,000 question for a couple of different clients, and here’s the quick and dirty answer. If I were to take you, spin you around three times, and transport you across the different city tiers, I think you’d find that shopping precincts in tier-one and tier-two have a lot in common. Much more in common than tier-two and tier-three. They look pretty much the same, have the same range of shops, and then even the shoppers themselves look the same, in terms of their aesthetic, their sense of style and the like. If I were to transport you to a couple of different homes and you were to take a look around, I think homes in tier-two and tier-three, just by virtue of size factor and the layout, have more in common than their tier-one counterparts. And, workplaces share the same attributes, so the tier-two and tier-three city workplaces have more in common than tier-one.

But, having said all this, one of the things that we’ve come to appreciate, and perhaps we’re early to appreciate, is that the tier model is maybe a little bit outdated or a little bit outmoded. We prefer to look at geographic clusters, and so we cut China into nine different geographic clusters. Let me rattle them off for you. The Yangtze River Delta cluster, the Shandong Peninsula cluster, the Chengdu-Chongqing cluster, the Western Plain economic cluster, the Pearl River Delta, Central China, Western Taiwan Straits, and then of course we’ve got the Beijing-Tianjin-Hebei cluster, and then finally the Northeast China cluster. What you find, when you cut the country like that, is that the growth of retail sales stands out as being the big difference, that you start to see differences emerge there. And also, when you go to those clusters, irrespective of whether it’s a tier-one city sitting within that cluster or a tier-two city sitting within that cluster, the levels of disposable income are remarkably similar. And so, that’s a better predictor for us than the city tiers, especially when it comes to things like disposable income, purchase channels, information channels.

And so, one of the things is that over time this geographic lens I think has been validated, in the sense that if you look at North-South, coastal inland, GDP contribution, and per capita income. So, it tells a similar story, that it’s maybe nicer or more analytically valid to cut it by geography. Even if you look at share of GDP, per capita GDP, it all tells the same story. So, we love this idea of geographic clusters as the way of looking at the country. And, all the more relevant during COVID times, when you may have particular areas being locked down and impacted on a local level, but that not transferring to a whole of country impacts or broad regional impacts.

Kalani Scarrott (12:54): Yeah, that’s a great answer, and a great way of looking at it because… I’m no China expert, but the definition of tiers, maybe it was more relevant 10, 15, 20 years ago than it is today I think.

Michael Norris (13:04): Yeah, it’s just one way of cutting it. It’s just one set of buckets to cut the country with, but we prefer a geographic overlay. But tiers, it creates a nice common language, especially when you’re talking to clients or when you’re talking to investors, everyone has coalesced around this tier idea, so it’s not a bad concept, I’m not throwing it out. I just think that there are more robust ways, more rigorous ways to look at the country.

Kalani Scarrott (13:39): Pretty broad question, and maybe from outsiders looking in, do you think there’s any big misconceptions or maybe misunderstandings around Chinese consumers and the way they behave, especially with regards to how foreign national companies look at Chinese consumers and how they go about it?

Michael Norris (13:53): So, one thing that I’d like to use your platform, your podcast, to be able to jump on my soapbox about, is this idea of consumer patriotism. So, over the last couple of years there’s been a lot of interest in domestic brand outperformance. And, attempts to explain this phenomenon tend to gravitate towards this explanation of, “Well, the local consumer prefers Chinese brands.” I have a number of issues with this, analytically. I don’t think it holds. One, it’s a monocausal explanation, which you should always be wary of. But, there are a number of dubious implications of that particular approach. For instance, if you believe that domestic brand outperformance is due to consumers looking out for domestic brands, then it implies that the consumer knows the country of origin of every brand in the category. That’s a high bar for your consumers to have. And, I’m doubtful that if you ask the average beauty consumer that they would know where Maybelline comes from. You might get different answers, whether it comes from the US, whether it comes from France, etc. So, that’s the first dubious implication, that the consumer knows where each of the brands come from.

The second is that where it comes from is the most important purchase consideration. It’s not performance, it’s not price, it’s not packaging, it’s not marketing efforts. Again, that is improbable. And then, you run through the list of other implications, that even if it’s not the most important, that the consumer places it as the most important aspect. That even though you might have a L’Oréal product that works to reduce fine lines and the consumer said, “No, I’m not purchasing L’Oréal because it’s not Chinese.” And of course, that’s a little bit absurd, right? And then, going further through the list, if there was truly this local consumer patriotism wave, then it would affect all domestic companies equally, and that’s not the case. There are variations in performance, and those variations in performance must be explained by strategy, rather than local consumer patriotism.

Even if that’s too much, and you work through those, and you still think that it’s local consumer patriotism, then I put to you what I call the Perfect Diary test. Which is, everyone says that Perfect Diary’s this poster child of preference for local brands and consumer patriotism and the like. But, for those people who have actually picked up a Perfect Diary product, the words, “Perfect Diary,” are emblazoned on the product in English. If you truly believe that the consumer is patriotic, nationalistic, what have you, wouldn’t they be put off by this? Wouldn’t they want a product that is Chinese through and through? And so, irrespective of you take my dubious implications, or if you can’t pass the Perfect Diary test, you come to this place where this is actually a pretty shitty explanation across all measures of logic. And so, what I’d like to be able to say to your listeners is that domestic brand outperformance has multiple factors at play. Domestic brands are getting better, quality-wise. They’re more receptive to local consumer needs. There’s a lot of VC money behind them, which means they’re able to spend two to three times the category average on sales and marketing. And, they’re serviced quite well by capable contract manufacturing within the country. What this means is that they’re quite fast to go to market.

In summary, it’s really not good enough to say that local brands are growing at a faster rate because the consumer is patriotic or is supporting China made. It’s an explanation that is born and persists because it’s easy to understand and it fits into our preconceptions or our misconceptions about the Chinese consumer. But, if you spend any more than 45 seconds on this, you get to a place where it falls down.

Kalani Scarrott (18:32): Yeah, that’s a perfect way of explaining, because if domestic brands are outperforming, they probably should be because they know the market, they’ve got the logistics behind them. Like you said, it’s probably just a cop out, that you can just [inaudible 00:18:41].

Michael Norris (18:42): Yes, quite right.

Kalani Scarrott (18:44): Do you mind if we go onto China tech scene?

Michael Norris (18:46): Of course, absolutely.

Kalani Scarrott (18:48): Tell me your thoughts, where we at now? What are you thinking about most?

Michael Norris (18:54): This year we’ve seen a lot of regulation, and the thing that is going through my mind is, “What is the best way to be able to characterize the different regulation?” If you have a summary table of all the different regulation that’s taken place this year and you have the rows as the sector, so maybe data and cybersecurity, platform competition, content, algorithms maybe as the rows. And then, in the columns, whether this is a China-specific regulation, whether this is regulatory catch up. So, you’ve got regulatory debt and the regulations need to be updated to meet the demands of the modern economy. Whether it’s setting a new trail in regulation, so really advancing regulatory causes. And then, if you try to place all the regulations this year in the rows and the columns, what you find pretty quickly is that if you try to explain all of them, it gets really, really hard. And so, this is where, without regurgitating what I’ve tried to say in other places, I find it difficult to be able to explain all of the regulations with some unitary theory.

And so, one part of the scene for me at the moment is sense making, when it comes to this picture. And then, the next is, we have these regulatory initiatives underway, and the question then becomes, “When does enforcement start? What’s in the pipeline for later on?” Some of these topics, data and cybersecurity, algorithmic recommendation, even the regulators themself and say, “Wow, this is a big job. We’re going to need half a year, in the case of interoperability. Or, we’re going to need three years, in terms of algorithmic regulation, to be able to work through all the thorny issues.” And so, for me, it’s a case of trying to make sense of what’s going on, and just trying to get a sense of, “Okay, well now that this new landscape is in place, what does the enforcement environment look like? And, what’s coming down the line?” So, those are the issues that preoccupy me in my spare time.

Kalani Scarrott (21:34): Yeah, perfect. In terms of the pipeline, your pinned tweet, I love this, it describes China tech in 2019, The End of The Beginning, where cheap user growth comes to an end. 2020’s theme was Digital Giants, dominant but vulnerable, where ecosystems get tested. And, 2021 was Regulatory Pressure Points, so where there’s new levels of scrutiny and forced openings in walled gardens. So, what might 2022’s be, speculating?

Michael Norris (21:55): I do this, my theme for the year, on January 4th of each new year. And so, it’s not January 4th yet, it’s October 7th, so I will say that I’m not quite ready to reveal, at least what I think, the theme next year will be. But, if you put all of these together, the ones that you just said, you look at all of these themes in totality, an end to cheap user growth, vulnerabilities in the digital giants’ ecosystems, and regulatory scrutiny, you quickly find that life is not getting easy for China’s digital giants. This, combined with economic slowdown, does two things. One, it ups the competitive stakes between the major players. And two, is that it places a premium on good strategy, because the cost of failure is increasing. And so, I think it makes the competitive environment so much more interesting and the stakes are much higher than what they were before.

Kalani Scarrott (23:00): If you’re willing to, who do you think is best positioned to take advantage of this? I know you ripped into Bilibili today on Twitter, but who do you think is best positioned, or maybe who’s worst positioned? Take it however you want.

Michael Norris (23:12): Before we go through the positioning of individual firms, it’s worth thinking about the stakes. So, interoperability and the requirement that you can’t block links to other ecosystems, I think everyone’s understood that it shuffles the money pile. It shuffles the money pile in three buckets. E-commerce, digital advertising, and payments. And, if you look at the size of the prize here, the stakes, payments is huge. So, by 2025 there’s about 81 trillion US Dollars in payments expected to be flowing through China. So, getting more or less of the payment flow, especially commercial transactions, which you can charge processing fees and other sorts of things. That becomes important, to get a chunk of that money pile. E-commerce is about four trillion US Dollars in 2025, so again, not chump change, right? But, a step down from 81 trillion for payments. And then, digital advertising, which is about 310 billion US Dollars by 2025. So, you can see the step order.

And then, besides the money pile, overlaid with the take rate. So, the e-commerce take rate is different from payments, which is different again from digital advertising. Plus, the margin of each of those services gives you a more granular sense of the stakes. But, the rough order remains the same. Payments is a bigger money pile than e-commerce, which is a bigger money pile than digital advertising. And so, the question here is, “We’ve understood these three money piles, how do the money piles shift? Are we expecting restrained revision, or are we expecting some sort of radical reshuffle?” I think most folks have defaulted to restrained revision, a couple of percentage points here, a couple of percentage points there. I think that is, at least, the go forward hypothesis to be tested. With any sort of hypothesis-driven thinking we’re trying to falsify it.

Now, onto individual firms. The big question is, “Who benefits more, Tencent or Alibaba?” I’ve made it clear that I think Tencent is the biggest net beneficiary. It has more time on device, it will transact more e-commerce through WeChat Pay. And, as e-commerce becomes a bigger part of Tencent’s ecosystem, that means higher CPMs for its advertising, it’s able to take some of that digital advertising spend away from rivals. The negatives, of course, are that rivals can use WeChat to scale. You can have [inaudible 00:26:15] deals coming onto WeChat and challenging Tencent’s investees, like Pinduoduo and JD. That means that its investees are exposed to more competition.

But, on a net basis, I think that Tencent is perhaps the biggest beneficiary. This is not to say that Alibaba and ByteDance, as well as other players, don’t benefit, it’s just that the downside is perhaps bigger for them. For instance, you see a lot of folks talk about, “Well, Alibaba is able to launch more of its services on WeChat, is able to scale existing and future ventures, so that means it gets more e-commerce transactions.” But, that’s just one part of the picture. On the other hand, they might lose digital advertising spend, because you might have advertisers advertising through Tencent rather than Alibaba. And, they may have fewer transactions processed through Alipay. As we talked about before, that payments piece is big. It’s not to say that Alibaba is a net loser here, but I think the downside is maybe skewed against it more than folks realize, because those digital advertising revenues at Alibaba are quite juicy.

Kalani Scarrott (27:39): Any other [inaudible 00:27:40] effects maybe from Alibaba and Tencent opening up their platforms, do you think, that maybe people aren’t covering?

Michael Norris (27:45): I think ByteDance is not talked about enough here, so of course ByteDance will be able to share content from its short video platform, Douyin, on WeChat. But, what folks aren’t taking into account is that ByteDance’s e-commerce ambitions will be thwarted, to an extent, by interoperability. Because before, they tried to get merchants listing stores in Douyin. But now, of course, you can link to your [inaudible 00:28:26] store, or whatever store it may be, and the platform, at least in theory, can’t do anything to dissuade you from that choice. Before, that arrangement, Alibaba had negotiated some carve outs with ByteDance, and it paid a pretty handsome sum to be able to allow some of its big merchants to be able to hang their [inaudible 00:28:53] store on Douyin as the official e-commerce site. Although we only have the rumored numbers, we’re talking in the order of a couple of billion US Dollars. So, the last toll or strategic agreement between the two was rumored to be worth about three billion US Dollars.

ByteDance won’t enjoy that nice little payment anymore. And, it also means that it loses traction for its e-commerce offer, and that you might have these merchants saying, “Well, I might as well hangup the link for my [inaudible 00:29:43] store, that’s where we do most of our transactions, rather than opening up a new Douyin store to be able to participate in Douyin e-commerce.” So, perhaps that’s the element where there’s a little bit of downside that folks aren’t quite thinking about. Does put the brakes on ByteDance’s e-commerce ambitions, for sure.

Kalani Scarrott (30:05): Yeah. Maybe you’ve touched on this already, but in July you tweeted that, “Tencent is the biggest net beneficiary of forced cracks in the walled gardens of China’s internet. However, adjustment won’t be without hesitation, pain, and scrutiny.” What do you think maybe they can expect, in terms of the hesitation, pain, and scrutiny? Maybe just walk me through it.

Michael Norris (30:26): Tencent has an aversion to doing this. It’s not for the reasons that people think. It’s not necessarily because they’d like to have less competition. That’s part of it, sure, but it’s not the whole picture. There are a lot of thorny issues around opening up [inaudible 00:30:52] system. Data protection, viruses, scams, all these sorts of things. And so, what they’ll do is they’ll take a gradual approach, just as they have done with WeChat sharing content of competitors. At the moment you can only share in 1-to-1 chats, rather than group chats, and you will expect to see them take baby steps towards fully opening that up. But, as they do so, expect pressure from folks like ByteDance, and folks like Alibaba, to sort of pound the table and say, “Hey, let’s move faster towards an open internet here.” And so, how it navigates that particular pressure is challenging.

And of course, the decision, if for instance ByteDance, after ByteDance’s Douyin product getting access to WeChat, perhaps breaks Tencent’s terms of service. Making that call and pulling the trigger to say, “Actually, we had you on here in the spirit of interoperability, but look, you’ve broken the rules. We’re going to have to ban you.” Imagine the hoopla that that would cause. This opening up may be very short-lived because both the regulator and the platforms have given themselves the carve out to say, “Well, we will open up, but the opening up has to be in the letter of the law and the spirit of our terms of service. And of course, if somebody oversteps the mark and gets shutout, then we may return to a closed ecosystem relatively quickly.” And so, I think that that’s something that folks don’t quite think about as much. Because, if you read Tencent’s legal defense to ByteDance’s lawsuit about it closing down access to Douyin on WeChat, the reason that Tencent gives is that, “ByteDance broke WeChat’s terms of service at first instance.” And so, whether or not we see a repeat of that, how harsh a critic Tencent is of these different services that are able to launch on WeChat, these are all open questions.

Kalani Scarrott (33:28): We spoke about misconceptions and misunderstandings in Chinese consumers, so maybe for the China tech scene, what do you think are some similar ones there? I know you’ve been pretty critical of armchair experts on Twitter, but what are your thoughts?

Michael Norris (33:39): Armchair experts is a different topic. The misconception, I think the Chinese consumer, on the consumer side, is that consumer patriotism topic we talked about. But, on the tech side, the persistent misconception is these company approximations. I don’t know how many IQ points have been shaved off or dollars lost through claims that, “Baidu is China’s Google. JD is China’s Amazon. Nio is China’s Tesla. Luckin Coffee is China’s Starbucks. Bilibili is China’s YouTube.” It represents the worst of lazy thinking. Using Bilibili, which is a platform that I don’t think too much of, as an example, if you were to say that, “It’s China’s YouTube,” well congratulations, you’ve got the scale wrong, you’ve got the user habits wrong, you’ve got the content wrong, you’ve got the revenue model wrong, and you’ve got the monetization model wrong. But, good for you in finding a very loose approximation between these two services.

Kalani Scarrott (34:52): Have they got anything right?

Michael Norris (34:54): This is really, really reductivist and really dangerous. I strongly encourage folks to walk away from those approximations as quickly as possible. So, that would be the misconception around China tech, these very persistent company approximations. You mentioned armchair experts, maybe it’s helpful to say what we mean here because I don’t wish to throw stones in glass houses. My day job is consumer research, and then I write about China tech for shits and giggles, right? But, my beef with armchair experts is threefold. The first is accuracy, the second is impact, and then the third is value add. So, accuracy first. There are some folks out there that sort of position themselves as being a [inaudible 00:35:59] to understand China. I think that’s fine. I think that’s an admirable aim. Now, more than ever, we need to increase our understanding of what’s happening inside China.

However, these folks tend to undo themselves because they use exaggerated, factually incorrect claims to drive clicks. And so, I think this is one, intellectually dishonest, but more importantly, because it undoes that very virtuous aim to try and increase understanding between China, it’s actually morally contentious. And, the second is impact. Within the China tech [inaudible 00:36:43], I’m unaware of anyone, although this makes me sound like dick, other than myself, who’s actually broke a story. There is a fundamental difference between doing a UX and a UI walkthrough versus sniffing out and writing about business models in companies that don’t make the grade. That’s different, again, from investigative journalism and the like. And so, this dovetails into the value add discussion. Which is, with improved translation, software, more frequent reporting, and more comprehensive datasets, I actually believe that, on some levels, the information asymmetries are decreasing. So, this means that things like product walkthroughs and translating speeches are much less valuable than what they once were. And, the level of insight that it gives the armchair expert is highly questionable.

And so, these are my list of gripes. I sincerely hope that we’re all in it for the right reason. And, sometimes the need to monetize by making our funnels bigger and attracting more and more eyeballs, it does mean that people lose their way, and it’s unfortunate.

Kalani Scarrott (38:20): Yeah, it’s completely justified and completely fair. If someone wanted to… The opposite of that, how would you advise someone if they wanted to avoid all that, improve?

Michael Norris (38:33): At least in China tech, if you want real value add, I would say that if you’re sitting on proprietary research, so for instance e-commerce trackers, I think that you could make a name for yourself pretty quickly by saying, “These are the top listed brands, and this is how their e-commerce sales are tracking. These are the top listed Chinese brands, and these are how their e-commerce sales are tracking.” At the moment, a lot of firms sit on that information and they try and sell clients agreements to be able to view and use that information. But, if there was someone who sat within those organizations and said, “Look, my marketing strategy is going to be to open up some of that data,” I think that they would cut through pretty quickly. To be able to see and track, “Okay, L’Oréal’s doing this, Perfect Diary is doing this, this is great.” And then of course, once you’ve got that level of exposure, then you can bring people in for the discussion around, “You’ve seen that we’ve got this tracking service, would you consider signing up with us?”

And then, the other that I think is pretty basic, but I don’t know if anyone’s really done it, is just to take the most important stories for some of these firms and to be able to build an RSS feed for each of the tech giants. And, of course, the value add comes later through putting the dots together, “What does it all mean?” But, just this ability to be able to help folks walkthrough or to be able to curate some content around these big tech firms, and then of course to be able to pull the pieces together by saying, “Of this list of 50 news items in the month, these highlighted ones are the most important. And, they’re important because they set off this particular catalyst, or they bring this into play, or what have you.” It sounds basic, sure, but I’m not sure anyone’s out there doing it. There’s a lot of folks that seem to play in the middle somewhere, which is, “I’ll use my newsletter or my paid community, and I’m not sure whether or not there’s any other approaches or monetization models out there.” And of course, then there’s just people like me who just are on their for shits and giggles, and don’t have a monetization model.

Kalani Scarrott (41:55): So, no plans for the future? You just enjoy doing it, posting online?

Michael Norris (41:58): Yeah. It’s important to separate the consumer stuff from the China tech stuff. I have no plans to monetize any thinking about China tech, and the reason is that it’s not my day job. I think it would be disingenuous to say that I have some higher level of understanding or what have you, and then to be able to ask for people to hand over money on that basis. But for the consumer stuff, that’s where, of course, we welcome clients to be able to have a conversation with us, to be able to walkthrough their research needs and what they’d like to understand about their consumers. This is one of the things about posting online, is that although I’m sort of a semi-public presence, and you’re able to make a reputation from sharing content online, when you work for clients in this professional services context, particularly consulting, you can’t talk about what you’re working on online. I know an extraordinary amount about different product categories, everything from instant coffee to male skincare, but if I started posting some of these thoughts, these outputs, these industry trends, it would raise eyebrows from clients, “Oh okay, well we engaged Michael to do that work and there he is sharing it with however many thousand people, it doesn’t look right.” So, what that means is that, in our context, there’s going to be things that I can’t say or I can’t talk about because it’s proprietary to our clients.

And, that’s maybe a little bit different from other professionals. If you’re a designer and you worked up a new Starbucks menu item, you could show the design in your LinkedIn and you could say, “Hey, this is the work that we did for Starbucks, isn’t this great?” Similarly, if you’re an investor, you can publish your investment thesis and say, “Look, we are long Starbucks because we think that they’re gaining share in China and it’s underappreciated.” I can’t walk up and say, “Well actually, Starbucks has lost share of grab-and-go customers. And, the number of grab-and-go customers that it does have has decreased ever since you have lower cost services like Luckin Coffee and [inaudible 00:44:44] Coffee coming onto the scene.” I can’t do that.

And so, it is a different playing field, and this is one of the double edged swords of content. Content gives you a start, but as you start making that reputation and landing engagements with clients, particularly engagements of a secret, confidential nature, then an avenue of your content strategy closes. Products, or categories, or industries that you know a lot about, some of what you know can’t be shared. And so, this is one of the things that aspiring content creators, especially those who are in consulting, need to appreciate, if they haven’t already.

Kalani Scarrott (45:34): Yeah, do you have any tips or advice for someone starting out, in terms of content, what they put out, or any lessons you’ve learnt along the way?

Michael Norris (45:41): When it comes to content, I would encourage people to think about being differentiated. We talked before about China tech content space and, to be honest with you, I was at a little bit of a loss to try and think of things that people could do different. And so, this is where I think it takes some care and skill to be able to look at what’s already out there and go, “I’m going to do that quite different.” One example that I quite like is Tom Fishburne, from the Marketoonist, who has a cartoon about marketing, and then accompanied by… It’s not an essay, it’s just a short explanation of the phenomenon. And, I think that’s a wonderful job of being different. It’s someone who’s not talking about marketing in the same way, but instead uses an illustration, and the illustration, sure enough, gets widely shared. And, perhaps folks need to think about using a couple of different mediums to be able to help them standout. Whether it is cartoons accompanied by an essay, whether it is the essay plus audio, whether it is a podcast, and a newsletter. These combinations I think are going to be evermore important for aspiring content creators.

So, apart from the differentiation in the format, what you’re giving folks has to be different as well. This is the hardest, I think, to do. The format variation, how you organize your writing, or your thinking, that’s easy enough to differentiate on, as hard as it may be. But, really to be able to write a different lens, a different way of looking at the world, that isn’t contrarian for contrarianism sake, that’s the challenge. And so, being able to bring that analytical lens to there, it’s not easy. But, I think the payoffs are there enough that you can try. Especially when you’re small and starting out, you can run a couple of different experiments. And perhaps you’ve got much more experience of this than me, in terms of working out what works and what doesn’t on a truncated timeframe.

Kalani Scarrott (48:35): Yeah, and even just then, what you enjoy as well. Sometimes something might work, but it’s like, “If I don’t enjoy doing it [inaudible 00:48:36].”

Michael Norris (48:36): Yes, and that’s so important, isn’t it? That, as we’re talking about, you have to be in it for the right reason, a noble cause times a passion for the field. And, I do think that it’s multiplicative if you don’t have a passion and it’s zero, then anything multiplied by zero is zero, right? And likewise, if you’re not intellectually honest then you’ll get found out as well and your reputation will suffer as a result.

Kalani Scarrott (49:12): If you don’t mind me asking, your longterm plans? Continue with consulting? Do you like the content side? What are your general thoughts going forward? I’m just curious.

Michael Norris (49:20): I have no idea.

Kalani Scarrott (49:23): Just happy where it takes you?

Michael Norris (49:25): Yeah, I think so. I’ve hopped around a couple of different things now. My university education was grounded in law, I became management consultant working in highly regulated industries in Australia, and then I jumped over China to do market research. And so, I’m quite open to doing new things, starting again, that doesn’t put me off. Instead, for me, the real satisfaction comes with continuous improvement and getting a little bit better each day at things that I’m trying to be better, whether it is the work we do for our clients, the way we communicate with clients, whether it’s being nicer to people that you come into contact with every day. I’m just trying to get a little bit better at the stuff that means something to me.

Kalani Scarrott (50:34): I love that mindset. It’s similar to myself, I guess. I don’t quite know where I’m going to end up, but I know if I do a little bit every day it sort of just compounds, adds up. Who knows? Eventually it will turn out.

Michael Norris (50:43): Exactly right. Exactly right.

Kalani Scarrott (50:45): To move into my closing round of questions, back to university days, what do you think is the most undervalued life experience that university-aged students don’t give weight to? What’s an underrated skill or an experience you think they should have?

Michael Norris (50:57): I’m privileged that we interact with a lot of young people, and although I can only generalize across Australia and China, I do think that a lot of young people, University graduates, are engaged in a very hollow, individualistic ladder climbing exercise. And, if I was speaking to my 18-year-old self, I’d encourage him to really engage with a volunteer association, deepen my sense of civic values and contribute to civic society. And, I think that COVID pretty neatly illustrates what happens to societies with a weak sense of solidarity, civic duty, and civic responsibility. And so, I really impress upon my 18-year-old self that paying taxes and this very transactional lens of, “Your responsibility as a citizen is really just the start of doing your bit for a fairer, healthier, and more resilient society.” So, if I were to speak to my 18-year-old self, or go back in time, or encourage others, it would really to be, “When you’re thinking about those university extracurriculars, yes, there will be things that you’re passionate about, yes, you may do some things to make your employment prospects look better, but at the same time you need to pick up this habit of giving back, in a volunteer capacity, to some causes that you feel passionate about.” I think that that’s so important and often we overlook that when we think about ourselves or that resume padding exercise.

Kalani Scarrott (52:52): I love that, that’s great. Have there been any books, classes, or experiences that have been influential in shaping your world view?

Michael Norris (52:59): When I was growing up, I was in and out of hospital a lot, so I had a couple of different operations, couple of different things not quite right. And, from that I think I learned the value of luck, really, that it plays in your life. And, being lucky enough to be born in a place where some of these procedures are possible, to be lucky enough that a test comes back and it says that a tumor is benign rather than malignant. And so, these are things that I carried with me, I think, from a young age, to say that when you evaluate your life, or evaluate other people’s lives, there are so many of these lucky moments, lucky breaks. Of course, that experience also gave me a real cold lesson in how valuable ones health is. So much potential is stripped away from people when they don’t have a healthy body that supports what they would like to do. When you see some of the more tragic things in our society generally has to do with health outcomes. And so, I think that that’s just such an important space. And, when I have the means to do so, it’s an area that I would really like to dedicate a large chunk of myself to, to be able to make sure that other folks can experience much better health outcomes.

Kalani Scarrott (54:50): Michael, that’s a beautiful answer. That’s a great way to wrap up as well, thank you so much. I’ve had a blast today. That was unreal.

Michael Norris (54:56): Likewise.

Kalani Scarrott (54:58): If you enjoyed this podcast episode, be sure to check the website, compoundingpodcast.com. On the website, you’ll find every episode complete with transcripts, show notes and other related resources. Also be sure to sign up to my weekly newsletter, Curated by Kalani, where I share what I’ve been reading, learning, and watching for that week. Same as the podcast, it’s compressed to impress and I aim for maximal return in the time invested. So sign up at kalanis.substack.com. You can also connect with me on Twitter @ScarrottKalani. But until next time, have a good one.