The idea behind this saying is that times of rapid change are generally quite painful.  Historically interesting times are those involving wars and revolutions — things where lots of people die.  Growth and improvement have only come through very slow gradual change.  But in today’s China, this is anything but true.  Right now is one of the most interesting times in China’s long history, and for the majority of the country, it’s fantastic.  (If we all work hard, that kind of intersting time might be behind us.)

We read about how the Chinese economy is glowing red hot.  Their sustained GDP growth rate would make any head of a western central bank terrified.  In any established economy, a 9% annual growth rate would last maybe a couple years before it turned into inflation, recession or both.  But a very clever set of communist economists are managing to ride the bleeding edge of rapid growth far longer and further than I think anybody outside the country would have believed possible.  I’ve been reading these cold dry numbers in the same places you have.  But being here in China now, these numbers are very real.

Consider Shenzhen, just across the psuedo-international border with Hongkong.  Today Shenzhen’s greater metropolitan area has over 10 million people.  But just 28 years ago when Deng Xiaoping decided to start developing this city, it had but 25,000.  Imagine that — a city nearly the size of LA or NY that was consciously willed into existence in less then a generation.  It almost defies belief.

Having just left Shenzhen, I’m currently in Xiamen, which is the closest mainland city to Taiwan.  On a clear day like today, you can see outlying islands that are politically controlled by the Republic of China, the Taiwanese government.  There is a large and famous sign here pointed out towards Taiwan that reads "One Country, Two systems, Together One China."  The Taiwanese have a similar sign on the other side.

NPR recently aired a story about the northern border of North Korean.  There’s a theme park that is constantly empty and a small family whose job might be simply to picnic under an umbrella to demonstrate to the outside world how happy and successful the closed communist system in North Korea is.  Possibly for similar reasons, Xiamen also has a theme park on the coast facing Taiwan.  But its big roller coaster is occupied until 4:00 AM every night.  On weekends happy local families fill the beaches with their families.  I came here for a holiday 5.5 years ago during Spring Festival.  There are so many new buildings and bridges and tunnels and freeways that I hardly recognize it now.  Real estate prices boggle the mind in a way that only Manhattenites could imagine.  There is also a huge new "trourist ferry terminal" under construction here.  Its stated plans are for ferry service to Hong Kong and to host cruise ships.  The obvious long-term purpose of this project is in the fulfillment of that big red sign. 

Shenzhen is thriving as a psuedo-port for the reunification of Hong Kong.  I have no doubt that within 10 or 20 years, Xiamen will be doing the same with Taiwan.  All polluting factories have been ordered out of Xiamen in order to clean up the air.  The communists clearly want to make Xiamen attractive.  I used to buy in to the American political ideas that we must protect Taiwan from China’s oppressive government.  Taiwanese certainly used to look at it this way — a friend grew up there singing songs about how they would liberate the mainlanders from the communists.  But taking a longer term view of the situation, if I were a Taiwanese resident today, I would look forward to reunification with the world’s largest economy.

Again, talk about economics can easily obscure what’s really happening here.  Millions of people are graduating from poor subsistance lifestyles up to the comfort and safety of a working class life.  Or up to the relative luxury of a middle-class life.  Or even to the genuine luxury of being able to buy whatever they want — it’s not that uncommon here.  The difference in the quality of life of my friends and the other people I see here is obvious from just 5 years ago — be it having hot water in every room of the house, owning a car, or kite-surfing in their spare time.  These huge cities are physical manifestations of people’s lives being improved on a grand historic scale.  The excitement is palpable.  Positive energy infuses everything.  A note to Naomi Klein: this is what sweat-shops do to people’s lives.  These certainly are interesting times, and I feel priveledged to be able to experience them first-hand.

There were lots of page-search engines along the lines of Alta Vista.  They crawled the web and indexed the contents of each web page.  They would try to figure out which web page best matched your search keywords based entirely on the contents of the pages themselves.  This didn’t work very well since spammers could fill their pages with keywords they liked that didn’t necessarily add any value to you.

Yahoo searched a database that was built manually instead of by crawling.  Yahoo’s staff would catalog thousands of web sites and categorize them according to keywords.  This provided a higher level of quality since a human reviewed every entry, but they were having trouble keeping up with the explosive growth of the net.

Then there was these two punk Stanford kids with their upstart Google.  Google was a lot more like Alta Vista than Yahoo in that they automatically crawled and indexed the entire web.  But they judged which pages were useful not based on what was on the page itself, but on other pages on the net that link to it.

We all know who won.  But I’d like to share a perspective on why that uses a political analogy. Google democratized search.  Yahoo was based on a communist model.  Alta Vista was complete anarchy.  Democracy won because it gives power to the people, and the aggregate opinion of millions of people is almost always better than even a carefully chosen set of experts.

Yahoo’s model was analogous to having a central politburo that makes all decisions.  Provided the politburo is skilled and benevolent, this can be a great solution.  But if the system they control gets too big, it just won’t work.  Alta Vista’s ranking system gave everybody speaking equal say in what happened, which amounted to total anarchy.  Google allowed every web page on the net to cast a vote on which pages were the most important ones.  (Beyond that, the pagerank system iterates so that some votes coming from more important pages count more than other votes — the details of implementation are always key.)  Information democracy is achieved by giving everybody a say in what’s important and aggregating the reults.

There are numerous examples of democratic services completely obsoleteing services based on communist editorial systems.  Wikipedia democratized the encyclopedia and has replaced Encarta.  Youtube democratized internet video clips and replaced iFilm.  In many more cases, the democratic service hasn’t replaced the centrally-controlled services, but provides a strong alternative.  E-Bay democratized shopping.  Blogs have democratized news.  Open-source software has democratized software development.

Clearly democratization isn’t a silver bullet for every problem.  Expertise is much more rare and valuable in some fields than others.  But if your business today is based on having a database that your staff maintains, take note!  Somebody’s probably out there right now figuring out how to build a competing business where anybody in the world can contribute to their database.  And pretty soon they’re gonna be taking pot-shots at your market.  Managing user-generated content is really hard.  Counting votes is really hard.  But if it’s done well, it will dominate any system based on central editorial control.  With the help of computers, groups of people can solve problems far more effectively than individuals can.  This truth will not change.

(I brought this idea up at the Decibel Festival talking about music editorial systems and received a lot of positive feedback about it, so I wanted to post it.  But I must give credit for the vocabulary to my good friend Ramez Naam — I first heard it when he was critiquing a startup’s business model as being communist.  At first I laughed, but later I appreciated his wisdom.)

Many years ago I remember a friend of mine saying she was investing in Starbucks because she saw it as an aggressively run company that sells an addictive product.  Wise choice she made.  I’ve also heard several amusing stories recently about how Starbucks got their venture capital.

At business school lectures I’ve had at least two VC’s tell me this exact story: Howard Shultz comes into their boardroom to pitch them on how he’s going to charge $5 for a commodity product that regularly sells for 25 cents.  The VCs listened politely to his presentation, waited for him to leave the room and then laughed their asses off.  This must have happened to him a lot, since I’ve heard about at least two incidents of it.  Barring hindsite, it was a reasonable reaction, IMO.  Now I hear my b-school friends trying to figure out how to charge $5 per brick for really high-end bricks.  There’s one key missing element to this plan: mortaring a row of really nice bricks on Tuesday doesn’t give you blinding headaches on Wednesday if you decide your wall is all done being built.

Interestingly, in order to actually secure funding, Shultz had to prove that urban coffee markets are/were really far from saturation.  To demonstrate the almost insatiable desire of modern yuppies to suck down sweet foamy caffeine drinks, he opened 2 Starbucks retail stores on the same block of downtown Chicago.  The fact that both stores quickly became profitable was proof enough to the investors that this business was going to go somewhere.

And here I am, freshly back on the wagon, having endured my blinding headaches, staring at these two tall tasty tins of temptation sitting on my desk…  rat bastards…