Last week, roughly 1400 Google employees had signed an internal letter demanding that more information be shared with employees about the products the company was developing in its recent China push. Although the Silicon Valley juggernaut seems to be working on a series of China-focused projects, the one to have gained the most attention was “Project Dragonfly,” which reportedly involves a version of Google Search which would comply with China’s famously-tight internet regulations.
“We urgently need more transparency, a seat at the table, and a commitment to clear and open processes: Google employees need to know what we’re building,” the letter said.
Additionally, the letter called on Google to allow employees to participate in ethical reviews of the company’s products, to appoint external representatives to ensure transparency and to publish an ethical assessment of controversial projects.
Google’s return to China has been a contentious topic in many circles. The firm’s top leaders have drawn criticism from the political, tech, and journalism communities in the US, while regulators have kept online discussion of the topic in China to a minimum. It has been a subject of heated debate in several chat groups I am in.
I suspect the reason that this issue has become such a lightning rod stems from much deeper differences between the values, cultures, and socio-political systems of which internet companies play an ever-increasing role in governance.
This is evident simply in the language used in the Google letter, and the request employees made, which is not exactly new in working with China. The employees of Google requested transparency. After all, Google is known for its commitment to internal transparency, quite remarkable for a company of its size. “Default to open,” a phrase often used for opensource developers, is also famously a principle for information-sharing at Google. In other words: unless confidentiality is absolutely necessary, information should be shared.
Indeed, at least from the outside, the opacity with which Google has approached its China re-entry seems to be far more a trait of the market it is entering than of its own corporate culture. While Google’s creed is to default to transparent, Chinese organizations tend to default to more closed and opaque methods of decision-making and information-sharing. For foreign firms and individuals working in China, transparent practices often must be shed in order to do business, simply because local partners, regulators, and other stakeholders require it.
Comparatively high opacity is simply a necessity for survival in Chinese business. It is a feature, or a bug, of the Chinese system, depending on how you look at it. I’ve personally been both frustrated and fascinated by China’s opacity, and have spent the past year or so trying to find out why exactly it is this way. In conversations with scholars, business leaders, and others, here is what I can conclude, to the best of my understanding.
“Catching fish” with Schrodinger’s cat
There’s a saying in China that “it’s easier to catch fish in muddy waters” (渾水摸魚). This is often quoted by foreign investors who are skeptical of the claims made by Chinese firms, saying that opacity is a tool used to defraud investors or to engage in corruption. Indeed, between 2008 and 2012 alone, fraudulent Chinese firms listed on US stock markets lost approximately $14 billion of shareholder value, enabled by complicit financial institutions in the US. It not uncommon for Chinese startups to use opacity to cover up bogus claims made in order to secure funding, and many Chinese people disregard the country’s own stock market as being rigged by corruption and insider trading.
While it is tempting to assert that opacity in Chinese business is born purely out of insidious schemes to get rich quick at the expense of others, it is also simply a necessary method of survival within its system.
Over the course of China’s Reform and Opening Up, both the country’s leadership and its companies have maintained a pragmatic approach, relying less on an ideology or a strict code of principles, but applying elements from a variety of systems, according to what was most suitable for maintaining prosperity and stability. This approach is frequently associated with Deng Xiaoping’s statement that “it doesn’t matter whether a cat is black or white, as long as it catches mice.”
The emphasis on pragmatism, however, has also been associated with a moral vacuum in China, and a well-documented corruption problem. After all, if the goal is to catch mice, inflexible ethical frameworks can prevent the cat from successfully procuring its dinner. As the winds of China are known to change suddenly, savvy businesspeople in the country must also be prepared to quickly adjust. If adjustment is both necessary, frequent, and unpredictable, keeping cards close to the vest can minimize the complications associated with such changes in direction or creed.
In a 1935 attempt to explain the phenomenon of quantum entanglement, Austrian physicist Erwin Schrodinger used the metaphor of a cat. The scenario presents a cat that may be simultaneously both alive and dead, a state known as a quantum superposition, as a result of being linked to a random subatomic event that may or may not occur. This state of being two seemingly contradictory things at once has since been associated with the term “Schrodinger’s cat.”
The way that Chinese law works, oddly enough, puts each business and individual into its own state of “quantum superimposition.” Laws tend to be written in ways that are quite broad, open to interpretation and may be in direct conflict with others. They are also selectively enforced, depending on who is doing the enforcing and which aspects of the law are being emphasized at that current time.
Tim Murray, co-founder of J Capital Research, once explained the situation by saying, “In China, complying with one law will often put you in breach of another, so that at any given time, anyone can be found in breach of anything.”
Like Schrodinger’s cat, which is both alive and dead at the same time, most people and businesses in China, in relation to the law, can be considered something like “Schrodinger’s criminal:” simultaneously being guilty of a series of crimes, while at the same time, being innocent. It all depends on the perspective, focus, and intention of those enforcing the law.
How then, should businesses looking to protect themselves go about operating in China? Well, opacity helps in most cases. If an act is permissible at one moment and punishable the next, it behooves businesses, individuals, and officials to keep quiet about many of the dealings, just to stay safe.
Can “default to open” work in a “default to closed” world?
It is clear that even in this relatively early and tentative stage of Google’s China re-entry, we are already seeing a culture clash. Something has got to give: either Google abandons some of its core principles, forgets its China plans or China accepts Google’s way of doing things. The last of these possibilities seems the least likely.
However, it is acknowledged, even by the highest levels of authority in China, that opacity is a problem, and one from which no one suffers more greatly than Chinese people themselves. As the country’s businesses and regulators experiment with systems of social credit, blockchain, and digitization in general, it is clear that one of the primary purposes is to increase transparency and to reduce issues like fraud and corruption, which are fostered by opacity.
As Google feels the heat for its opacity in China, it may help bring about the transparency which the Chinese business environment has long needed.