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Joe Tsai talks economics of the NBA, entrepreneurship ... and President Trump

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Alibaba Group Executive Vice-Chairman Joe Tsai at the SCMP Town Hall Meeting at Excelsior Hotel in Causeway Bay. 24MAR16 SCMP/Jonathan Wong Photo by Jonathan Wong/South China Morning Post via Getty Images

In a virtual discussion with students and alumni at Yale last week, Joe Tsai talked about how entrepreneurship is about solving problems, including social ones; the economics of the NBA; how it’s better to take coding classes than French ... and accused President Trump of impugning all Asian-Americans with his descriptions of the coronavirus.

Billed as a “fireside chat,” the talk took place at the Tsai’s Center for Innovative Thinking at Yale (Tsai CITY) and was wide-ranging, with its theme “the power of students to lead and create change through innovative thinking.” The Center released a YouTube video of the hour-long talk on September 25...

In talking about the Nets and the NBA, Tsai revisited a position he’s discussed before, how the league structure insures a somewhat even distribution of wealth (which in the past he’s somewhat jokingly called “socialist.”)

According to Forbes contributor Gary Edwards, who wrote about Tsai and another hyphenated Canadian, banker Michael Lee-Chin, Tsai described the NBA’s basic economics this way:

...50% of The Nets’ revenues comes from ticket sales, while the other 50% comes from the NBA. As an owner, he can influence fans via marketing campaigns, but the League-generated revenue is beyond his control, as it comes from television rights, licensing and merchandising. The NBA reputedly made $8 billion in 2018, and each of its 30 teams has an average valuation of $1.9 billion. (Joe bought The Nets and the Barclays Centre for $3.3 billion.) Given the revenue model, intellectual property (IP) is fundamental. In the NBA, the League owns the IP and licenses it to distributors, who then share the content with the fans. Because the owners of the 30 NBA teams and the League own the IP, they control the balance of power vis-à-vis the distributor.

He also said that two years ago, around when he bought a minority stake in the Nets, he realized that it was time to slow down.

Joe shared that it was only in 2018 that he realized that because he had achieved “relative success and comfort”, he could slow down, focus on his family and on his passion, which was sports.

Tsai who has criticized Trump’s trade policies in the past went further in the talk, suggesting that Trump’s description of the coronavirus presents a danger to Asian-Americans.

One of the most poignant moments of Joe’s chat was when he noted that President Trump impugns all Asian-Americans by labeling COVID-19 as “the China virus” or “Kung flu”. Joe highlighted that it was only 75 years ago that FDR committed an egregious violation of civil rights by putting Japanese-American citizens in internment camps during WWII out of fear that they could not be trusted.

Tsai, of course, has had a complicated relationship with Trump. As early as November 2016 and continuing since, Tsai has warned that any major disturbance in US - China relations would result in serious economic issues for both nations. However, after Tsai and Alibaba founder Jack Ma donated 2,000 ventilators to New York and New Jersey in April. Trump —as well as the governors of the two states— thanked Tsai and Ma, calling both men his “friends.”

“Jack Ma is a friend of mine and he’s made it very possible to get about 1,000 ventilators from China,” President Trump said back in April. “But that was from him and my other friend [Tsai] that was really a gift. And we appreciate it very much.”

Tsai, of course, was criticized last October by Trump supporters and others when he tried to explain the motives of Chinese officials who had cracked down on political protests in Hong Kong ... which Rockets GM Daryl Morey had famously supported in a tweet. That dispute has led to a blackout of NBA games on Chinese television, a huge financial loss for the league.

The Nets owner also had academic advice for the students in the discussion.

He advised students to learn to code, because software will run the world. Instead of studying French, learn to code. He also recommended taking courses in statistics, data science and psychology.

And he suggested that they appreciate emotional IQ — knowing when to listen, when to speak, when to take a step forward, when to take a step back, humility and self-awareness.

Beyond sports and cultural issues, Tsai spoke about business, Stewart reported.

Attention to detail, starting with the spreadsheet of revenues and expenditures, is critical, he noted. Tsai, one of the world’s most successful entrepreneurs, said that the biggest success in being an entrepreneur comes with solving problems, as he and his partners did with Alibaba. In that case, it was using the Internet to level the playing field between companies big and small.

Again, Stewart...

Joe emphasized that entrepreneurship is never really about making money; it’s about identifying a problem and solving it, and most of the world’s biggest problems are social, as COVID-19 and the BLM protests have made clear. Alibaba’s mission was to help small businesses to succeed...

Joe reiterated that entrepreneurs that solve social problems create tremendous value, but it’s up to the entrepreneur to determine whether and how much of a slice to take. You don’t need to be a non-profit or a charity to solve a big problem.

Regarding his experience going from a six-figure job in New York to a start-up in Huangzhou, China, Tsai it was a culture shock.

Joe noted that going to work for an operating company in Asia meant that, for the first time, he saw a diversity of skillsets, educational backgrounds and experiences. It was a huge cultural shock, especially as he had not grown up in mainland China. To succeed, he had to stay humble, listen and observe. He ended up meeting a great group of amazing founders. He hadn’t expected to find them in China. But he did. And the rest is history.

Tsai and his wife, Clara Wu Tsai, have donated more than $30 million to the Center, which describes its mission this way: “to inspire students from diverse backgrounds and disciplines to seek innovative ways to solve real-world problems.”