Nicholas Bloom: belief

Transcript context

…How bullish are you on Chinese management? I don’t have fantastic recent data, so I’ll give you my best data. We surveyed them last at scale in 2005. At that point, they were roughly in line with GDP. They were okay. They weren’t fantastic. I’ve had some other surveys, but not internationally comparable. More recently, they’re pretty good. I have to say, manufacturing — a lot of what drives good management practices is being large, being around for a while, being open to competition, and having educated employees. And China has those inputs. A lot of their manufacturing firms, in particular, are big. They’re competing ferociously with other companies. Actually, Chinese education system is churning out vast numbers of engineers, and they’ve been operating for quite a while. I suspect at this point now, Chinese manufacturing management is pretty good, actually. It’s harder to tell in other sectors, particularly those that are not internationally comparable. Their financial services — who knows as much? That’s harder to evaluate. Typically, if you want to look for well-run companies, it’s size, high levels of competition, open to trade, educated employees, no family firms where it’s handed down by primogeniture — the eldest son inherits it. If you go into the sectors that don’t have these issues, then you tend to see very good management. In China, typically, tick most of those boxes in manufacturing. Over 20 years ago, your Stanford colleague Frank Fukuyama wrote a book on trust. He basically said, “Well, China will never have successful large firms in the way that Japan does because there’s not enough trust in Chinese society.” That seemed plausible at the time. Yet, obviously it’s turned out to be wrong. What did we miss about China? Since you emphasize trust and corruption and ability to delegate authority without too many bureaucratic checks and balances, ex ante, China seemed bad on all those things. Yet Chinese big business has done pretty phenomenally well.…

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