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Editor's Note: Click here for the part 1 of this interview.
Matties: What's the conversation in China? What do you hear?
El-Abd: I think that the Chinese government seems to be a little bit pragmatic. They want to deal with the problem that's at hand right now. And what’s at hand right now is they're bleeding. Businesses are leaving because costs are too high, so in order to address that issue they're automating like crazy to keep the business here, because business means tax dollars. They're not thinking “How are we going to deal with all of these people that are becoming unemployed? How are we going to retrain them?” That conversation really hasn't taken off yet. It's in the background, but we haven't even started the conversation in America or in Europe.
Matties: Not to any substantial degree.
El-Abd: I know we want to focus on China, but the Chinese are now the number one users of automation and robots in the world, and they're adding them every single day. How can we automate this function and make it easier?
Matties: So, in the period from 1980 to now, what are some of the memories that really stuck with you of those aha moments or those ‘what the hell’ moments?
El-Abd: There's a lot of what the hell moments. I think we live the what the hell moments almost every day here (laughs). There are so many moments where you scratch your head. Like I come here every other month, so I may not come to Shanghai for a month and a half, and I come back and I say, “Where’d that building come from?” When they build a building, it's one week, one floor. That's how they do it. That's their rate. They built a new shopping complex in Chengdu. I was there, and my people told me that there's this big new building. I drove by it and I thought, whoa. What the hell is this? Now, to put it into perspective, it’s bigger than three Pentagons. Inside is a thousand-foot beach, and then they put in an LED behind that, behind the water, so that when you're on the beach you think you're outside on an island somewhere. And then they have more than 200 stores, all high-end stores, and you're just like sitting there, numb. My god, how did they do that? Where in America, all the malls are closing, and here they're opening up more.
Matties: Well, what's interesting about some of the malls here that I've seen is they've made it more of an entertainment venue, and for the Chinese people, it's an activity as much as anything, to go there and spend a day at the mall. There are levels for the kids. I mean, we're talking about acres and acres of play areas for kids. Acres and acres of restaurants.
El-Abd: I have a friend at Apple, and we were talking, so let me ask you a question: What do you think the number one visited site for tourists would be in China? Most people would say the Great Wall. It's actually the Apple Store in Shanghai.
Matties: That's a great store. I've been there several times.
El-Abd: You know, they're not going to buy. They're going there to look, to see the things they've never seen. Can you imagine the hundreds of thousands of people that go through that shop? It's amazing, and people don't know that.
Matties: Now it’s just commonplace. Before, it was just very difficult to afford, but now, not only are we seeing the iPhone everywhere, but we're also seeing more Mercedes, BMW, Rolls Royce, Porsche. I mean, I see more luxury cars here than almost what you would see in Dubai.
El-Abd: Yes. China has become the number one car manufacturing country in the world. Last year, 2016, they made just over 25 million cars in this country. That's more than twice what they do in the United States.
Matties: The problem is, with all those cars, there's a lot of traffic on the roads that weren't really designed to handle that many cars.
El-Abd: Well, here in Shanghai, they register 3,000 new cars a week. A week! That's going to be a problem for them. They'll have to address that issue, and they'll probably have to do something like they do in Singapore. If you want to buy a new car, you take an old car off the road. And they will have areas where, like in Singapore, they have the central business district. You pay more to go into the central business district, to keep the traffic at different times. That's coming. The technology and the electronics are there. You just have to make a decision when to do it.
Matties: The other thing I'm noticing is fewer and fewer foreigners coming to China, because at one point, 10–15 years ago, there was a real need for the talent, and people were getting incredible signing bonuses. You know, $20,000 a month, schools for their kids and big homes, and those deals just aren't happening. Maybe for the top level, but the Chinese educational level has gone up and their skill set has gone up to where they don't necessarily need all that outside help.
El-Abd: You're right. That's what's happening. However, I don't necessarily agree with it, and this is a touchy subject here, but as foreign corporations localize, it means they come in and all their senior executives have become Chinese, and that creates a serious problem that no one wants to deal with or talk about: corruption. The minute you localize—and this is very sensitive, what I'm saying here—the minute you localize, you get corruption. Now, personally, I won't state any company, but I can tell you, the top corporations from America and from Europe are all having that problem.
Matties: That's been an ongoing problem since the beginning of manufacturing here.
El-Abd: Yes, however, it didn't affect foreign corporations the way it does today. The exception to the rule are the Japanese, because they never localize the top. Japanese companies’ top two or three people are always Japanese, so they keep an eye on things, and they don't have a problem.
Matties: Aside from the corruption aspect that you're talking about, isn't the trend or the strategy to really become a domestic economy, rather than an export economy, since they have 1.3 billion consumers here?
El-Abd: You are right. The government is focused on developing the domestic economy, because they realize that, at some point, someday, they're not going to be able to export, just like the United States. You know, we've lost that export edge, with the exception of a couple of products. But they need to have it. They're not there yet, but that’s where they're headed and it will take them a while to get there. They still need the export. Without the export, they're not going to be able to get the domestic one going.
Matties: How many new cellphones are sold a day in China? There’s just an incredible amount of consumption that's going on. In a society that has come from nearly nothing to middle class and greater, I just see a lot of consumption.
El-Abd: Let's look at this. Actually, the real population is closer to 1.5 billion, and at 1.5 billion, you have people who didn't have a washing machine. They didn't have a TV. They didn't have a dryer. They didn't have a microwave oven. All of these appliances that we, in America or in the West, take for granted, they didn't have, so now they're buying them. The electric rice cooker, when I first came, that was the big deal. Everyone wanted an electric rice cooker. The Japanese made a ton of money selling rice cookers—until the Chinese learned how to make them.
All of these appliances and gadgets that go into the house now—they have stereo systems and speakers and digital cameras—and everything requires something to plug in, so you need more energy. Now I need a car. I have been in homes where the refrigerator is in the living room, and I'd wonder why the refrigerator is in the living room. Because we want to show you that we have a refrigerator, so it's in the living room. Oh, okay, I get it. These are the things that have changed over time, but they are consumers.
The other interesting thing that I learned is that, you've traveled to Europe, and sometimes certain European countries don't really like Americans. The International Herald Tribune, which is now the New York Times, did a survey a couple years ago, and they found that the people in the world that love Americans the most are the Chinese. They love America the most. Where do they want to go, if they could get out of here and go somewhere else? They all want to go to America. They're the number one tourist group anywhere.
And you remember, the old days, the ugly American? Okay, here you have the ugly Chinese. The difference is the Chinese government says if you misbehave when you're outside the country, your passport will be taken away when you come back. You don't go out again.
Matties: You represent China when you travel.
El-Abd: Yeah, you represent China. Behave. Show the best of China. Can you imagine telling that to the Americans? In Rome, in Milan, in Paris today, the Chinese police are stationed there, working along with the local police to make sure that everything is okay, because the Chinese don't speak English, and they go to Rome. Certainly, they don't know Italian.
So this helps them, but they've done that. The Chinese government has done that, so they take steps to help their people when they're outside the country.