As some of my readers know, the past two weeks have been pretty tough for me business-wise. I found out some things were going on behind my back, and some senior people in game development had to leave because of that. Honestly, for a few days my outlook on doing business in China became a lot more pessimistic. But I now I realize that it was partially just bad luck and I am getting over it. Sometimes you meet and trust the wrong people. But you need to be able to trust people to do business, without an optimistic outlook on life and people you cannot grow a company.

Pessimists would probably say: “See, I told you. The cliché is true, people in China will only try to rip you off.” But I see it different, if you do business the odds are that people will eventually try to take advantage of you, you just have to be smarter than they are. Yes, it caused me some sleepless nights, but in the end it’s actually good for the company – the rotten apples are gone and good people have already replaced them, and I will have firmer control on the daily operations.

And it’s also not just China: it happened to me before with German business partners, who seemed reliable but turned out to be crooks, and it will likely happen again. You learn from these things, and the experience makes you stronger. I might be a bit more careful as a business person, but in the end it won’t change the way I do business in China. Only optimists can be successful!

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  1. sorry. you are right, it can happen anywhere, though in today’s china it seems a bit more prevalent. too bad you can’t share details; it would be very instructional for your readers

    you can not build a business without trusting people, but here you have to keep them on a very short leash, take an auditor’s approach to every expense/purchase order, and control the chops.

    one of my friends in beijing gave me very valuable china business advice. he said “you laowai have a hard time in china because you are just not bad (huai) enough. we chinese do stuff that you wouldn’t even think of.”

  2. @anonymouse: I like your quote, will keep it in mind. I do not want to publicly share the details of what happened, I am not huai enough for that (yet).

    I don’t believe in running a business by playing the role of a cop. In my opinion people need some freedom in order to make things happen, but not everybody can handle the freedom.

  3. I prefer the empowerment approach too. But i would not be free with the chops, and I would still strongly advise you to choucha expense reports, purchase orders and marketing deals to try to prevent fraud and kickbacks. The thing that is really hard here is that to most people taking a kickback or filing a false expense report is not considered wrong.

    If you run any marketing events you have to look at every line item expense. marketing huodong, especially events are very very fertile ground for large kickbacks. And while your employees may not ask for them, the local partner will most likely offer, and sometimes a large bundle of cash is really hard to turn down.

    I just went through something similar with one of our most tenured employees. We renovated our offices and soon after she quit. Only then did we find a whole set of kickback issues from her final months with company.

  4. Just wondering, what did you do when you found out about the kickbacks? Did you take any action or just let it go because she left already?

  5. we let it go. like a lot of things, it was hard to prove to the level we could take it to the gongan. plus, we are not a perfect company in terms of absolute compliance with the tax authorities and she knows that.

    no one seems to check references here so we couldn’t have any input with a future employer. had she been a guy i think my partner, against my wishes, would have hired some extrajudicial help to at least get satisfaction, if not our money back.

    i just chalk it up as a contribution to my china tuition fund (do we ever graduate?) it was not big enough amount of money to matter, but we did make sure that her colleagues know we know what was going on, that we took action, and that we are paying attention.

    empowerment can be very dangerous here, and not just when it comes to finances. people really seem to like to have very structured environments. or i have just not been able to hire the right people, which is very possible

    good luck. you are dead on that you need to be an optimist to be a successful entrepreneur. but being an optimist and having very strong controls in your company do not have to be mutually exclusive.

  6. I remember one wisdom:
    Do not suspect the man you use, but if you doubt sb. You should not put him/her in a very important position..

    Somehow I don’t know how to comfort people.. But things happen, what we can do is try to solve it. Luckily you did that! All your friends will feel happy for that.

    Please think about that you found this problem in an early time, and you become stronger and salted from that..

    In my own opinion, we always should trust people.. Even one day they betray us, it is also their mistakes and misfortune.. As you said, the bad person will bear the all aftereffect.. and maybe also feel a little ashamed…

    Whatever, wish you best!! 🙂 Be cool! ha:)