Joe Tsai: Jack Ma Is Lying Low Right Now

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CNBC Transcript: Alibaba Co-Founder, Executive Vice Chairman & Brooklyn Nets owner Joe Tsai speaks with CNBC’s “Squawk Box” today and discusses that Jack Ma is fine and is lying low.

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WHEN: Today, Tuesday, June 15, 2021

WHERE: CNBC’s “Squawk Box” – Live from Barclays Center in Brooklyn, NY

Alibaba co-founder Joe Tsai: Jack Ma is fine and ‘lying low right now’

All references must be sourced to CNBC.

ANDREW ROSS SORKIN: Thanks Becky and I’m going get straight to that big interview well we are now joined by a very special guest, Joe Tsai is here. He is Alibaba’s Co-Founder, Executive Vice Chairman and he is the owner of the Brooklyn Nets. We are at Barclays Center this morning, thank you for having us. This is your, this is your home and thank you for the, I don't know if everybody can see that, see the shot to have Squawk there on, on the big screen so we appreciate seeing you and tonight's the big game.

JOE TSAI: It's the big game. Thanks Andrew for having me.

ANDREW ROSS SORKIN: Thank you. Thank you for having us. Let me start with this, we talked in September I don't know if you remember, Delivering Alpha, but we're talking about the economy and we're talking about what the post-pandemic world would look like. This actually is the ultimate post-pandemic trade, if you will, and I'm curious, and we're gonna have 15,000 fans plus in here tonight, sort of how you see the economy coming back here in the United States, what you've seen in China and sort of how you see this all playing out at this point.

JOE TSAI: Well, Andrew, I just came in from Hong Kong where the economy is terrible and that's because the government has been focused very much on still on the spread of the virus. Where here in the United States, everybody has been focused on vaccinations. If you're vaccinated, then you can live a normal life and that's what we're talking about so when I landed in New York I was very surprised. I went to our home game, Game 2, with full, we had a full house. Right. You know, and you know we had an unvaccinated section with some social distancing but by and large, it was a full house.

ANDREW ROSS SORKIN: 98% were vaccinated.

JOE TSAI: 98% were vaccinated and that's very, very encouraging. And based on that stat, what I'm seeing, what I'm seeing is the economy is definitely coming back, it's going to roar back. When you go out to restaurants, people are having a good time. So, this is pretty much normal.

ANDREW ROSS SORKIN: But you said in Hong Kong, not so much.

JOE TSAI: Not so much right now. But I think, pretty soon, the government is going to focus on vaccinations. Right now, only 10% of the population is vaccinated. In the case of China, they're just trying to get 40% of the population vaccinated by the end of June so that's, that's going to be a good sign.

ANDREW ROSS SORKIN: Right. What do you see what else around the world in terms of, given, given the sort of span of the Alibaba business around the world, what you're seeing in Europe, what you're seeing in other places right now? By the way, even in Japan, they're having trouble with the vaccination, the Olympics is coming up.

JOE TSAI: Yeah, well, well, we are, you know 90 plus percent of our business is in China. So that's very much coming back and-

ANDREW ROSS SORKIN: In terms of the supply chains and whatnot.

JOE TSAI: In terms of supply chain also in terms of consumption, so in the last fiscal year, we have 40 plus percent year on year revenue growth that's very encouraging. We're now up to over 800 million annual active consumers on our Chinese retail platform, but if you count Southeast Asia and also parts of Europe where we're active, we now have over a billion annual active consumers and we see that the various parts of the economy will largely come back at the end of the day but it's all going to be dependent on vaccinations you know the rate at which the population is vaccinated.

ANDREW ROSS SORKIN: How worried are you about the US economy overheating? There's a conversation we were talking about with Paul Tudor Jones yesterday, big questions about inflation, the Fed meeting over the next two days on this very issue, where do you stand?

JOE TSAI: So I'm not an expert, I'm not an economist, but the way I see it is you're going to see some sort of short term tick up in the inflation rate. Obviously, the year on year comparison is an easy comparison with very robust numbers. But the real question is employment numbers, are employment numbers going to come back? Things don't get overheated unless there's a huge shortage of supply of labor with overriding demand and rising wages, right. So, I think the Fed has been very clear on a very sort of benign policy, they even can tolerate some overshooting of the inflation rate before they pull back.

ANDREW ROSS SORKIN: We want to talk to you a little bit about your role as the owner of this team but also in the context of social justice because this has become a town square, if you will, for social justice and a lot of business leaders I think are grappling with this issue of their role in it. How have you thought about that?

JOE TSAI: So, one thing that I realize when you own a sports team is it's larger than a sports team. It's a social institution, you're doing it for the fans, you're doing it for the broader population. I'm really glad we're situated in Brooklyn because we have the best fans in the world and having this building, you know, Barclays Center here kind of fortuitously, we have this square or plaza in front of us with some empty space. So then, this became a location for people to gather and focus on whatever social cause that they want to focus on. This building has been the site of for us to hand out food, in cooperation with food banks. It's been the site of vaccinations, it's been the site of voting. And obviously with the last year after the George Floyd incident, people protested for social justice against racism and I think that's very, very important and seeing all this happen organically in front of Barclays Center, that was great. I felt very, very good about it.

ANDREW ROSS SORKIN: Did you ever say, I mean, you just bought this team now a couple years ago, did you ever think you would be involved in all this?

JOE TSAI: No, I didn't. I guess four years ago I didn't. I had no idea. But the NBA is very interesting, it's a very, I think it's a quite interesting sort of economic proposition in addition to all this glitzy fanfare right when you, when you look at the players, they are huge mega superstars. But the business side of things is also quite attractive in that team values are rising every year and, but before I came into this, I had no idea that this was gonna work the way it did.

ANDREW ROSS SORKIN: I want to talk more about the economics of basketball in just a minute but I want to ask you about this because you got involved in something called the Asian American Foundation, founding it effectively. It's really the first foundation focused on Asian Americans in the country in this, in this way, and it comes, by the way on the heels we're talking about Black Lives Matter, how did you get involved in that and what, what is it that you're trying to do?

JOE TSAI: So, this happened more than a year ago actually, you know, I started to notice sort of rising anti-Asian sentiment because of COVID. Everybody thinks that COVID came from China and therefore, you know, as a Chinese person, you know, I kind of felt it personally. And, and then you start to see a lot of crimes happening so there was a period of time when every day wake up, you see a new report of anti-Asian hate crime. So, a group of us, Asian Americans got together, we formed the Asian American Foundation and one of the problems that we're trying to solve, right, if you look at the Asian American community in America, everybody’s okay with Asian Americans as long as things are going well. If the economy as well, the Asian Americans play by the rules, prosper together with everybody else, that's fine. But if there's a crisis, if there's a pandemic, there's a war, or there's an economic downturn, Asian Americans get scapegoated. And just look at history, right, back in the 1800s, they banned Chinese immigrants coming into America and during World War Two, when America was at war with Japan, they actually in turn they put 120,000 American citizens that of Japanese descent into concentration camps. And then you have in the 80s, Vincent Chin. What happened was he, you know, there was an economic downturn because Japanese cars were overtaking American cars so there's a huge animosity against Japanese in Detroit. Vincent Chin who was Chinese by the way, went to a bar, got beaten up, they killed him, they beat him to death by two auto workers in Detroit and these two guys got off pretty much without any jail time. So, there's, there's a lot of that sort of under tone of anti-Asian sentiment. When things are good, that's fine, when things are bad for everyone, that's when those ugly shoots come out.

ANDREW ROSS SORKIN: And you and you've partnered with people like Jerry Yang who founded Yahoo and so many others, Joe Bae who was at KKR, to put this, to put this group together. I was shocked to see that the amount of philanthropy focused on Asian Americans is .05% in this country.

JOE TSAI: Right, right, and we were shocked to find that number. We had our team do a little bit of research and then they came back and said, over the last 20-30 years if you look at the foundation money that's dedicated to Asian American causes, 0.5% or less and so we said, well, if money is the issue, this is what we're going to focus on as the initial thing. So, the credit to people like Jerry Yang, Joe Bae, Li Lu, Peng Zhao from Citadel Securities, Sheila Marcelo and all of our board members as well as the Anti-Defamation League. We got Jonathan Greenblatt from the ADL involved as a board member because they gave us huge amount of support on the issue of anti-hate, you know, that's familiar territory for the ADL. And so, thanks to the board, we stepped up with a commitment ourselves of $125 million and then we went out and told the corporates, look 0.5% is the number, what are you going to do about it? And to our surprise everybody came in very enthusiastically, we had all of the large corporates, you know, partners coming into this. By the time we launched, we had, I think you reported on it, it was like $250 million when we launched from corporates. Right now, we have raised over a billion dollars, I think the number is $1.1 billion, we've raised from the corporates and foundations, not all of that money is going to come to us, come to the foundation, most of that money will be spent on other Asian American organizations that are doing great work in anti-hate, in getting people to go out to vote and, you know, all the great work that they're doing.

ANDREW ROSS SORKIN: So, here's a hard question for you. I think it's a hard question, I don't know. How do you think about your role as a leader here in the United States on issues around Asian Americans, Black Lives Matters, voting rights, all of that. And whether and how you can speak out about for example, human rights abuses in China? It's a hard one, I know.

JOE TSAI: You have to be specific on what human rights abuse you're talking about because the China that I see the, the large number of the population, I'm talking about 80%, 90% of the population are very, very happy with the fact that their lives are improving every year. When I started Alibaba in 1999, the GDP per capita was $800 in China. Today is over $10,000. And if you talk to a parent in, you know, in China and you ask them, are your children going to have a better life than you are, most of them will say, absolutely, yes. They are going to be educated, they're going to find good jobs, the economy is expanding, right? So I'd like you to be more specific on that.

ANDREW ROSS SORKIN: So let me ask it to you in this way though, there are a lot of American business leaders today that are being pushed by their employees, by consumers to say look, we're taking a stand here on voting rights for example in the United States, you're also doing business in China, you should be consistent right. Even Marco Rubio and others were actually criticizing American companies for what he was arguing was a hypocrisy. And when you talk to a lot of American business leaders, they say, look, I can speak out here but I know that I'm not in a position to speak out there because if I speak out there, it’s not that my hand is going to get slapped, it's that my business is going to be damaged by the government because I'm just not allowed to do it.

JOE TSAI: Yeah, I think American companies, CEOs, understand this very well which is different cultures have different values and mores and in China you have different set of values, you also have a very different political system in that one single party dominates the governance of the country which, you know, whether you like it or not, there are some great benefits, like, China has managed to build a terrific infrastructure because there's no politicking around whether you should build a highway from point A to point B, right? So, these are, these are all the benefits and the bottom line is, you have to look at the results, are people happy. When I look at China, the average citizen, citizen is very hopeful about the future. They're happy about where they are. And, you know, I think that’s really-

ANDREW ROSS SORKINL But you read, but you read the same headlines that I do about some of the human rights issues, no?

JOE TSAI: I live in Hong Kong, right, so everybody is worried I still think it's kind of funny that people call me up, you know, on these big zoom calls and say, Joe, where are you and I say I'm in Hong Kong and they say oh, are you okay, right? Well, over the last year, they impose the National Security Law. Hong Kong is one of the very few places that did not have national security legislation in place. What is this for? It's against sedition, it's against people that advocate splitting up Hong Kong as a separate country. These are things that are not allowed. You know why? Because Hong Kong used to be a colony, you know, a few 100 years ago, China lost Hong Kong to the Brits because of the Opium War. The British wanted to sell opium into China and as a result of some battles, China had to give, carve up Hong Kong, gave it up. This is a very scarring kind of history of China having foreign powers come in and carve up your territories. So, for, so if you put yourself in the Chinese people's mindset, you know, if you're a Chinese citizen, I look at this history, I want to make sure that we prevent foreign powers from carving up our territories. I think Hong Kong ought to be seen in that context, you know, I think there's a lot of criticism of, you know, the democratic freedoms or freedoms of speech is being suppressed. But overall, since they instituted the National Security Law, everything is now stabilized. In 2019, when people were protesting on the streets, I was actually afraid to walk onto the street. You know why? Because I speak Mandarin and they were targeting every person that spoke Mandarin because they would assume that you come from the mainland. You know while I actually grew up in Taiwan where you know they speak Mandarin there. And so, I actually felt physically threatened with, with these protesters, right. So, I think now we have more stability. Hong Kong is going to be fine. You know why because it's a free market economy. When you invest in Hong Kong, free flow of capital, you put money into the Hong Kong Stock Exchange today and in Hong Kong dollars, tomorrow you can take it out in US dollars. There's a free flow of capital. It's also, it also has the most benign tax system there is for capital formation. The income tax rate is only 15% and then there's no capital gains rate, no taxes on capital gains, dividends, and so if you want to invest in Hong Kong, great for capital formation.

ANDREW ROSS SORKIN: I want to talk to you more about that in a second but I know that Becky's got a question back in the studio, Becky?

BECKY QUICK: Yeah Joe I just wonder, how's Jack Ma? You've been working with him for over 20 years and after kind of seeing him on the global stage for such a long time, we haven't seen him in a long time. What, how's he doing and what's happening with the rectifications of his businesses?

JOE TSAI: So, I think you have to separate what's happening to Jack and what's happening to our business. I think our business is, you know, under some kind of restructuring in the, on the financial side of things and also in antitrust regulated, regulation. We, you know, had to pay a big fine but we've gotten that behind us so we're looking forward. In Jack's case, he's fine. He's lying low right now. I talk to him every day. I actually messaged him, we have our own you know messaging platform, he's actually doing very, very well. He's taken up painting as a hobby. It's actually pretty good, I can show you some photos later.

ANDREW ROSS SORKIN: But let me ask, to follow up on what Becky was asking, those, there is either speculation or headlines that suggests that the, the Chinese government, effectively, has, has effectively taken his power away from him that he's, he's laying low because of the role of government that the government has, has effectively taken his power in the context of Alibaba, in terms of what they've done with the Alipay IPO, in terms of what they've done even with his this, the business school that he was putting together. Do you see that, do you feel that, does he feel that, what, give us a little bit of color on how we should think about that and understand it.

JOE TSAI: Well, you know, Jack is, since about two years ago, he stepped down as the CEO of the company also he handed over the chairmanship of the company to Daniel Zhang, who is our current CEO. So, for the last two years, he's pretty much out of the business and I think the idea that Jack has this enormous amount of power, I think that's not, not quite right. He is, look, he is just like you and me, he is a normal individual. He wants to, he has built a tremendous, you know, company of this scale, he's done great things for society. He's done quite good things in the philanthropic area. So, you know, I think today he just wants to sort of say hey, you know, I want to focus on something, I want to focus on what I really want to spend time on which is, you know, all the hobbies, all the philanthropy and that's where he is now.

ANDREW ROSS SORKIN: But just to put a fine point on it, do you believe he's laying low willingly, maybe that's the question.

JOE TSAI: I think so. I think he's, well, I don't think he's laying low, you know, in the area of philanthropy. I don't think he's laying low, you know, with his friends and everything. You know, he's living a normal life after business, right.

ANDREW ROSS SORKIN: Let me ask you a couple other questions about basketball because tonight is going to be a big game. James Harden is not going to be playing unfortunately, but he's just joined the board of Saks, did you see this?

JOE TSAI: I saw that. I kind of saw Instagram photos.

ANDREW ROSS SORKIN: Do you advise him or any of the other players, I was gonna say, Kevin Durant, so many of these players have become not just players but entrepreneurs in their own right. Do you guys have lots of conversations about venture capital and maybe investing money?

JOE TSAI: Yeah so I don't think you should see players as these one dimensional people, right. They happen to excel in basketball, but they also care about what they want to do, you know, outside of basketball or maybe post career in the NBA. And I think it's pretty natural that they realize how much influence and power they have and, and the fans that they, you know, they attract, they can leverage that to market whatever they want and I think it's great. By the way, I didn't advise James Harden on getting onto the board of Saks. He, he did it himself and I think it's a great thing. I mean, look at this, the fashion walk coming into the tunnel, right, all these guys with, you know all the NBA fashion now has become a thing, right, something that my, my son, my kids, my two sons and my daughter, they follow all the time, they like care about what these guys wear before the game.

ANDREW ROSS SORKIN: We gotta run. Where are you gonna be sitting tonight?

JOE TSAI: I'm going to be sitting somewhere across from the bench, probably on the floor and-

ANDREW ROSS SORKIN: Do you have a couple of seats, how does this, how does this work? Do you get to choose your seat at the game of, the day of or how does it work?

JOE TSAI: Well I have to fight among my friends for seats because they all want seats and sometimes I want to be nice and give them my seats, right, so it’s always a fight.

ANDREW ROSS SORKIN: What do you think is the best seat in the house, for real?

JOE TSAI: I think, I think the best seat-

ANDREW ROSS SORKIN: Is the center court on the court, there's some people like to be, by the way, right behind the basket.

JOE TSAI: Yeah. You know what I think the best seat in the house is where Steve Nash sits because he's got the whole game plan going, he's got formations and, you know, where the player, where he wants the players. Sometimes it works, sometimes it doesn't. But, you know, I would just love to be in that seat and also sort of have his brain, think through him.

ANDREW ROSS SORKIN: Well, I'm rooting for the home team so I wish you lots of luck tonight.

JOE TSAI: Thank you.

ANDREW ROSS SORKIN: I assume Lasry will be here too. You'll have to, right, you have Marc Lasry.

JOE TSAI: Marc Lasry will be here yes so, he's-

ANDREW ROSS SORKIN: You guys will not really sitting together but maybe, I don't know do the owners ever sit together?

JOE TSAI: Sometimes we do.

ANDREW ROSS SORKIN: Right, not a game like tonight. Anyway, good luck. Thank you very, very much.

JOE TSAI: Thank you.