By Perry Wu
When you hear about how Chinese are quick to adapt Western technology, often this is credited to the training many Chinese executives have received at American universities. American education is often credited for training many of the world's technocrats. In China, companies like Sina, Sohu and many others are managed by American-educated Chinese executives. But this is not the real story of American education's contribution to China.
A venture capital firm recently invited several dozen deep-pocketed investors to a conference at a Shanghai hotel. These investors were treated to several presentations on opportunities to spend their cash in several Chinese up-and-coming companies, mostly tech-related. But these were not your ordinary portfolio managers; these were the managers of the endowment money of many of America's most prominent universities. Duke, Yale and Stanford and many more colleges reportedly all had representatives at this conference. These are the money custodians of America's education establishment.
But what is wrong with this picture? Here you have highly-compensated professionals, responsible for earning a return on colleges' endowment funds. And where do they choose to earn this money? Chinese technology.
There has never been, and there never will be, a shortage of companies like the Shanghai venture capital firm that specialize in taking investors' money to invest in China's goldrush. So it is the job of the money managers, entrusted with college endowment funds, to exercise restraint. But restraint this is not. Taking funds and investing in highly speculative Chinese tech is the height of irresponsibility. This kind of risk-taking should be left to private, for-profit
companies.
Not only are these money managers making ill-advised pilgrimages to Chinese tech-land, they are getting highly paid to do so. Some published estimates put compensation of some of these managers at several million US dollars per year. Now, there is nothing wrong with giving exceptional pay for exceptional performance. But there is a severe lack of evidence showing that these money managers exhibit exceptional performance. Colleges and universities generally do not issue detailed analyses of the long-term performance of these money managers. But if such information was available, it would almost certainly not paint a pretty picture. And with this newly-found interest in Chinese tech start-ups, American colleges are playing even looser with college money.
I should note that the venture capital firm in question does a great job and has a portfolio of seemingly-sound investments, but fortunes in China can change overnight. And with those changes can go millions of American university money. Am I against tech investment in China by esteemed ivy-walled American colleges? You bet I am. As long as sectors like wireless Internet can be wiped out overnight due to enforcement of new regulations, the seesaw world of Chinese business does not seem the appropriate place for alumni cash.
But The Chinese people should be grateful to these universities for they are greatly contributing to China. Forget about the soft talk about knowledge transfer and Western know-how, American colleges are bringing in to China what Chinese most covet, money. But as long as the money is being invested in start-up Chinese ventures, American college donors are the real patsies.
So for the readers of this column out there who are associated with American colleges, the next time you get that letter from your alma mater asking for a donation, think twice. The money you send might just go into the pocket of a Chinese tech entrepeneur, who is long on talk and short on profits and engrossed in an industry whose fortunes can change overnight due to some new regulation (or enforcement of a law).
About the author:
Perry Wu is a writer and correspondent for ChinaTechNews.com and can be reached here at the site. Perry Wu does not hold any positions, long or short, on any of the Chinese or American company securities mentioned in this article.
It's The Money Stupid: American Universities' Real Contribution to China's Tech Boom
When you hear about how Chinese are quick to adapt Western technology, often this is credited to the training many Chinese executives have received at American universities. American education is often credited for training many of the world's technocrats. In China, companies like Sina, Sohu and many others are managed by American-educated Chinese executives. But this is not the real story of American education's contribution to China.
A venture capital firm recently invited several dozen deep-pocketed investors to a conference at a Shanghai hotel. These investors were treated to several presentations on opportunities to spend their cash in several Chinese up-and-coming companies, mostly tech-related. But these were not your ordinary portfolio managers; these were the managers of the endowment money of many of America's most prominent universities. Duke, Yale and Stanford and many more colleges reportedly all had representatives at this conference. These are the money custodians of America's education establishment.
But what is wrong with this picture? Here you have highly-compensated professionals, responsible for earning a return on colleges' endowment funds. And where do they choose to earn this money? Chinese technology.
There has never been, and there never will be, a shortage of companies like the Shanghai venture capital firm that specialize in taking investors' money to invest in China's goldrush. So it is the job of the money managers, entrusted with college endowment funds, to exercise restraint. But restraint this is not. Taking funds and investing in highly speculative Chinese tech is the height of irresponsibility. This kind of risk-taking should be left to private, for-profit
companies.
Not only are these money managers making ill-advised pilgrimages to Chinese tech-land, they are getting highly paid to do so. Some published estimates put compensation of some of these managers at several million US dollars per year. Now, there is nothing wrong with giving exceptional pay for exceptional performance. But there is a severe lack of evidence showing that these money managers exhibit exceptional performance. Colleges and universities generally do not issue detailed analyses of the long-term performance of these money managers. But if such information was available, it would almost certainly not paint a pretty picture. And with this newly-found interest in Chinese tech start-ups, American colleges are playing even looser with college money.
I should note that the venture capital firm in question does a great job and has a portfolio of seemingly-sound investments, but fortunes in China can change overnight. And with those changes can go millions of American university money. Am I against tech investment in China by esteemed ivy-walled American colleges? You bet I am. As long as sectors like wireless Internet can be wiped out overnight due to enforcement of new regulations, the seesaw world of Chinese business does not seem the appropriate place for alumni cash.
But The Chinese people should be grateful to these universities for they are greatly contributing to China. Forget about the soft talk about knowledge transfer and Western know-how, American colleges are bringing in to China what Chinese most covet, money. But as long as the money is being invested in start-up Chinese ventures, American college donors are the real patsies.
So for the readers of this column out there who are associated with American colleges, the next time you get that letter from your alma mater asking for a donation, think twice. The money you send might just go into the pocket of a Chinese tech entrepeneur, who is long on talk and short on profits and engrossed in an industry whose fortunes can change overnight due to some new regulation (or enforcement of a law).
About the author:
Perry Wu is a writer and correspondent for ChinaTechNews.com and can be reached here at the site. Perry Wu does not hold any positions, long or short, on any of the Chinese or American company securities mentioned in this article.
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