laowaigentleman:

What about people who inherit large sums of money from their parents. I mentioned Gina Reinhardt. Gina's father was a bushman who, just like Jed Clampett from the Beverley Hillbillies, had no education and suddenly found himself in possession of more wealth than he could ever dream of. He had no idea how to do business, but he had enough money to pay people who did and acquire more assets which he in turn paid competent people to run for him. Gina inherited this empire.

Gina tried to purchase parts of the ABC network and orchestrated a PR campaign to undermine the regulators so that she could espouse her right wing libertarian ideological views - comprehended in a folksy fashion rather than a deep philosophical understanding of course...

Gina is now the richest woman in the world for the simple reason that she had so much wealth that it was impossible for her not to accumulate more. She didn't have to have any money making skills because she has so much money that if one venture goes down, she can cut her losses and move on. But keep in mind, she has no skills in running commercial ventures at all - in fact she is practically functionally illiterate, though still more functional than a lot of Chinese educated businessmen.

Rupert Murdoch's sons are the same. James Murdoch lost $6 million Aus in 4 months and cost 55 journalists their jobs.

Australia is not a very corrupt country. For a start, Gina couldn't accomplish what Silvio Burlesconi and Vladimir Putin achieved with the television stations in their respective countries due to the robustness of the regulations and the quality of education among the general Australian population.

Now consider China's commercial environment: my close friend is Sichuanese and very wealthy. He inherited his wealth from his parents and attended the same university as I did in New Zealand. He has an accounting degree, but he can barely speak English. He returned to China and is now investing in apartment construction with other well connected families. His wife was chosen for him because of her family background. My friend did not want to marry her. She lives in a separate house from him, but they come together for parties to show a bit of face.

In New Zealand, my friend would never cut it as a chartered accountant. His work output was practically zero and he only passed the degree because the name on the top of his essays and tests was foreign, so the examiner knew to be (extremely) lenient.

His mother claims that his family has enough money for six subsequent generations to live on without ever having to work. When he first returned to China, he lost a fortune speculating on the stock market. Now he is the owner of a venture which employs over 4000 people. If I had him as my CEO, I would be scared.

He's probably one of the slightly better ones if you consider that older Chinese people with entrepreneurial skills had to spend their prime years hiding in a hole from Mao's Red Guards and that Chinese society seems to revere older people as wise and treasure the notion of experience even if a person hasn't had 20 years of experience, but 1 year's worth of experience repeated 20 times.

laowaigentleman:

http://en.wikipedia.org/wiki/Gina_Rinehart

Sorry about misspelling her name. I am of German extraction, so I'm inclined to spell German names in a German fashion.

xinyuren:

You ask a very general question ("Wealthy Chinese") and then give very specific examples.  Of course there are going to be exceptions to every question.  My answer was a general rule, not an answer to your specific cases.

Generally, people become rich by design.  It generally doesn't come by accident or luck.  Many wealthy people are born into money, but that doesn't guarantee that they can keep it.  Acquiring wealth and maintaining it isn't rocket science, but it does require a certain mindset.  Of course there are exceptions to this general rule, as you have noted.

laowaigentleman:

@xin. China is clearly the opposite of the western examples I have described. Families all over China suddenly found themselves rich by accident during the 80s and 90s. Now the new generation who are given a lot of money by their parents have no idea what to do with it besides speculate on the stock exchange and buy houses. That is a general trend rather than a few particular examples.

Go inland. You'll see the sons of former village leaders driving mercedes and bmws who start up a bar. The bar will run for about six months. They don't pay wages, rather a commission to a huge pile of workers who tend to outnumber the customers. Once the venue's novelty dies they quickly shut it down and perhaps open a new one.

I am sure you don't believe for a minute that the majority of China's wealthy are wealthy by design and merit. Most of it is guanxi. Think of Wang Jianlin. He would probably be a bank clerk in the US and the baidu guy didn't even create a good product, a team just copied google (ineptly) and then blocked it off, giving him a state monopoly.

I know of another guy who has a monopoly on supplying alcohol to all of the local bars and supermarkets of a provincial capital. If anyone else tries to compete with him, his family (who have lots of guanxi because his grandfather was in the gang of four) us their guanxi with the police to send in inspectors with a barrage of compliance documents to shut any rival operation down. If he had to operate in a competitive environment, it is highly unlikely he'd make such massive profits. Especially when you consider that foreign beer in China retails at the same price as it does in the west. The western prices are high because of the taxes imposed by the governments to pay for the healthcare costs associated with the consumption of such beverages. In China, this becomes a profit margin for a businessman.

xinyuren:

What you fail to realize (or maybe you don't put much strength to it) is that these "lazy", "incompetent" rich in China are still rich by design (most of them) but I didn't say anything about merit :-) The rich here are the survivors. They know how to manipulate things their way, anyway they can.  Do you think guanxi just falls out the sky?  Doesn't it take a certain instinct to know what you can't control and pay for "experts" to handle things?  They have succeeded in the Chinese environment.  That is no less an accomplishment than anywhere else.  The rules are different, but you still have a pool of players striving to be rich.  It's dirty, it's backwards, it is not easy to do business in China, but their instincts has drawn them to the money.  China is a lot like the Mob, back in the America's 1920's (organized crime).  Do you think being a mob boss was easy?  And do you think the Mob went away?  No.  It exists in modern times, but has adapted to new rules and a new system.  This is what businessmen do.

The main reason why this is a highly theoretical discussion is that we have no way of knowing how these Chinese players would be changed and react if they were exposed to Western society instead of Chinese.  They might be completely different people altogether.  Like how would the NBA players in the 60's perform against modern athletes?  We will never know. Actually the business world in China is not as different as you paint it. The mentality is the same. The strategies are the same. Only the delivery is different. Business is business is business.

laowaigentleman:

Would he have been successful in China though? Perhaps he would have had no guanxi and if he tried to start from nothing he'd have gotten nowhere.

I'm trying to figure out what percentage of wealthy Chinese could replicate their success in the west if they had to start out there.

DrMonkey:

If you want to quantify honestly this, you will have a sampling problem. You might be able to estimate that from real examples... But you won't have a significant sample size anyway.

I think us humans are very adaptable, with work and intelligence, we can flourish in a wide variety of situations. Chinese are not different in that regard. You see people here getting rich in ill ways, but then in Chinese society, that's the most likely path to wealth *by design*. If you want to be wealthy by being creative, you better go elsewhere or you will be hounded by middlemen...

It's getting slightly better (I'm in China, working in a startup mostly into research work after all), there is government commitment to try to change that. They created a shell for startups with cheap well serviced facilities, cheap land (for making a factory) accessible loans, and grants. All that with clear rules of the games ! It's a progress compared to 10 years ago. One major problem we have now is recruiting properly trained locals, the education system is really bad at making engineers/scientists :p

laowaigentleman:

Much obliged :-)