A Tale of Two ‘Deadbeats’

May 23, 2023, 15:45pm2023/05/23 20:32:00 Ni Tao

Last week, a news story captivated China’s cyberspace. Dai Wei, the founder of the now-defunct bike-sharing operator ofo, made a surprising move by venturing into the United States and establishing About Time Coffee, a coffee chain serving freshly brewed coffee with Chinese recipes such as boba coffee. Priced at US$3-4 per cup, the offerings resembled those of Luckin Coffee, which popularized the business model of mobile app-based ordering and grab-and-go stores to pass on savings to customers.

The news sparked a debate within the Chinese online community. Critics denounced Dai for using 1.5 billion yuan (US$214 million) worth of deposits owed to 16 million ofo users to subsidize American coffee drinkers. On the other hand, some commentators remained optimistic, hoping that Dai’s success in the US would lead him to return home and refund the owed deposits. With the collapse of the bike rental scheme, many had lost hope of recovering what was rightfully theirs.

In a similar vein, another entrepreneur, Steven Zhang, the heir apparent of debt-ridden retail giant Suning Group, achieved a notable milestone by becoming the chairman of the renowned Italian football club Inter Milan. After a 13-year hiatus, Inter Milan reached the final of the 2023 UEFA European Champions League, marking a significant accomplishment.

Suning Group has faced criticism for accumulating debts exceeding 100 billion yuan. Moreover, the dissolution of the domestic champions Jiangsu Suning football club in 2021 while continuing to finance Inter’s spending spree added to the controversy. Zhang, who is still burdened with over US$300 million in debts owed to China Construction Bank, is considered one of the prominent “deadbeats” in China. Nevertheless, under Zhang’s leadership, Inter Milan experienced a resurgence, winning several domestic titles and making an impressive mark in European football. This achievement testifies to Zhang’s abilities as an entrepreneur and a Wharton alumnus.

Although Zhang and Dai may appear vastly different, both entrepreneurs share a common label in their home country— “deadbeats.” Interestingly, they seem to have shed that perception abroad, gaining some begrudging respect as entrepreneurs who persistently pursue new ventures. This raises the question of whether deadbeats deserve a second chance or should carry the burden of an ignominious reputation for life.

In a culture that tolerates failure, a simple answer is that deadbeats deserve an opportunity to start afresh. This appears to be the sentiment among Dai’s investors. Despite experiencing losses from their initial investment in ofo, venture capital funds, including Will Hunting Capital, a participant in ofo’s angel round, have reconciled with Dai and expressed renewed confidence in him.

Similarly, Zhang has managed to weather the storm of Suning’s financial struggles relatively unscathed. Despite mounting debts and calls for a boycott from some Italian fans, Zhang oversaw significant reforms at Inter Milan and orchestrated a turnaround for the embattled club. This accomplishment serves as evidence of his capabilities.

Admittedly, it may be morally disconcerting to witness these two deadbeats seemingly evading the consequences of their actions while starting anew in foreign countries without the burdens of shame or remorse. It is even more infuriating to realize that the purchases made by American consumers are sponsored by our hard-earned money and that the title challenge of a football club thousands of miles away is bankrolled with domestic bank deposits. The contrasts are truly agonizing.

However, upon further reflection, we must acknowledge that risks, losses, and failures are inherent in the venture capital-driven entrepreneurial game. While frustrating, we must recognize that the investments we made, the support we offered, and the membership dues we paid can all be lost when startup projects go awry. After all, the average success rate of startups is less than 10%.

Some might accuse me of second-guessing or even defending deadbeats. Indeed, hindsight is 20/20. Yet, amidst the unpredictability of the entrepreneurial world, our options are limited to becoming more aware of risks and staying vigilant against fraudulent schemes.

Lamenting over past losses is futile. Years ago, my wife fell victim to a Ponzi scheme orchestrated by an online travel agency called Blatrip and lost 3,000 yuan when the company collapsed. The baby pool parlor near my home vanished with over 100,000 yuan collected from parents, including the 2,000 yuan remaining on our prepaid card. A friend paid 30,000 yuan in tutorial fees to a music school for his daughter’s piano lessons, only to witness the closure of the school’s outlets a few months later, taking all the parents’ money with it. Personally, ofo still owes me 99 yuan.

The pandemic has further exacerbated the damages caused by our ill-informed choices, impacting offline businesses such as gyms, restaurants, hotels, and tutoring services. Despite the economic slowdown and the challenges posed by Covid-19, these losses should prompt us to engage in self-reflection.

When rumors circulate about a platform’s financial instability or when we hesitate to invest in unreasonably underpriced offerings, it is crucial to ask ourselves: How long can they sustain their operations? What are the chances of being deceived? Regrettably, many of us neglect to consider these questions. At the end of the day, humans are inclined to believe that they won’t be unfortunate enough to be left holding the bag in a pyramid scheme.

Compared to individuals who intentionally orchestrate scams to defraud victims of significant sums of money and then disappear, the amounts owed by ofo to each user are relatively small and unlikely to cause lasting harm to our quality of life. Singling out Dai alone will not solve the underlying issues. Every investment carries inherent risks. Instead of bemoaning past swindles, it is more productive to improve our judgment and remain vigilant against obvious hoaxes.

With that being said, I extend my well wishes to Dai and Zhang in their endeavors abroad. They must address their reputation deficits, should they still care about them, and fulfill their obligations to repay debts, including my 99 yuan deposit.

After all, regardless of the sum, money is money.

About the Author: Ni Tao is the editor-in-chief of cnrobopedia.com, a website that focuses on Chinese robotics and automation.