The original story of Alibaba, which is not in the original 1001 Nights, tells of a poor man finding 40 thieves’ riches in a cave and bringing them into the light of day. We are meant to identify with the thief, even though he is about to commit a terrible economic crime, deflating all the wealth of the world by bringing vast new stores of it to light.
This is also the story of Alibaba Group Holding Ltd (NYSE:BABA). It has brought the riches of China’s small manufacturers to world markets, and in the process produced enormous deflation, from which it is benefiting.
Having conquered its home territory, Alibaba is now moving to capture the rest of Asia, the fastest-growing economic region in the world. Only Amazon.com, Inc. (NASDAQ:AMZN) stands in its way, larger in many ways (e.g., market cap and sales volume), but without Jack Ma’s secret in its corporate DNA.
Fortunately for BABA stock holders, there can be more than one winner.
The Alibaba Debate
The debate over Alibaba stock is waged fiercely here at InvestorPlace, and wherever good analysis is sold:
- It’s better than Amazon, says James Brumley, even if the whole market is a pirate lair.
- Its cloud business is a secret weapon, says Vince Martin.
- It can’t dodge the ugly questions about product piracy, points out Josh Enomoto.
- Buy it now and worry later, says Will Ashworth.
- Or try a “counterfeit butterfly” strategy using options, suggests Chris Tyler.
My own view, while bullish, is based on founder Jack Ma’s own hope that President Trump won’t set off a global trade war. He is using all his Forrest Gump-like charm to head one off, and doing the Lord’s work in that.
No one has more to lose in such a war than Ma, and his shareholders.
Grabbing Alibab With Both Hands
While most analysis of Alibaba is focused on its business within China, management is focused on breaking out of China and into Australia, India and (through its film and TV unit) into the U.S. as well.
Alibaba is based on what is, once again, a revolutionary idea that greater communication and trade can lead to global understanding, prosperity and peace.
I say it’s “once again” revolutionary because it runs counter to global political trends in which ultra-nationalists are seizing power, pushing down criticism and seeking to make war on one another. All the political yammering misses the key economic point that Jack Ma is right.
Trade is good.
The nations once called the “Third World” are developing their economies at a rapid rate. You haven’t read much about places like Ethiopia, Cambodia, the Congo and Vietnam because they are practicing the arts of peace. Their economies are growing, their people entering the global middle class. Birth rates are declining, people are being educated, and extreme poverty is receding.
Untold Riches Everywhere
As people emerge from real poverty, a poverty even poor Americans can’t comprehend, they gain a stake in stability because they have something to lose. At this point, they are touched by ambition and a desire to better themselves, not by taking from others but by building the world around them.
This is the force Jack Ma is trying to unleash. It’s what his business-to-business marketplace has been all about. It’s his strategy, and Alibaba’s corporate focus. Make opportunity a global thing and people will turn swords into plowshares.
This is what American conservatives have always claimed capitalism to be about. Not mercantilism, but win-win deals that create wealth for both sides of every trade. Forrest Gump, Ma’s favorite movie, is about the magic of just going forward. It’s a hokey story, a better world through enterprise, but it’s why I own shares of BABA stock.
Some things you buy with your gut.
Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in BABA and AMZN.