TIME technology

Alibaba Founder Jack Ma’s Other Big Job

Alibaba Chairman Jack Ma
Jack Ma, chairman of Alibaba Group Holding Ltd., in Hong Kong on Sept. 15, 2014. Brent Lewin — Bloomberg / Getty Images

The Alibaba IPO will set a record, but the company's founder has focused on China's environmental problems

Friday’s Alibaba initial public offering will officially be the largest in U.S. history: the Chinese e-commerce giant is raising $21.8 billion with its stock debut.

But Alibaba’s billionaire co-founder Jack Ma — though a major presence on the IPO circuit and a major beneficiary of it, standing to gain hundreds of millions of dollars from the stock — isn’t just focusing on his company and its earnings. In fact, last May he stepped down from his position as CEO. (He’s still the company’s chairman.) He is, as Victor Luckerson spelled out earlier this year, not your typical tech honcho. Rather, he’s a former English teacher who doesn’t code and loves the soundtrack to The Lion King.

He’s also one of China’s most important environmentalists, as Bryan Walsh explained in a 2013 TIME profile of Ma:

But as entrepreneurs get older–Ma, 48, says he is “old for the Internet”–they start to slow down, look around. What Ma saw was a country paying an environmental price for rapid development. His father-in-law developed liver cancer, a disease Ma–and some scientists–connects to the terrible water pollution that is now common in much of China. Ma saw the skies in Beijing and other Chinese cities grow foul with pollution. On a trip to the countryside near his hometown of Hangzhou, he saw that a lake in which he had nearly drowned while swimming at age 13 now barely came up to his ankles. Farmers told him that they were so afraid of the poisoned soil, they wouldn’t eat some of their own produce. “I knew something was very wrong,” Ma told TIME during a recent interview in Santa Monica, Calif. “This is serious–and we have to make people pay attention to it.”

Now Ma is making it his mission to get China to pay attention to its environmental mess. On May 10, he stepped down as CEO of Alibaba, though he’ll retain a strategic role with the company. The next day he took a new job, as chairman of the China board for the Nature Conservancy (TNC), one of the richest environmental groups in the world. TNC has generally been U.S.-focused, but the sheer size and influence of China ensure that global environmental and climate issues will increasingly be decided there. If China is going to change for the greener, it will need local champions. Ma has volunteered.

Read Bryan Walsh’s full 2013 profile of Jack Ma here: From Gold to Green

TIME stocks

4 Things Alibaba’s IPO Tells Us About a Changing World Economy

An employee is seen behind a glass wall with the logo of Alibaba at the company's headquarters on the outskirts of Hangzhou, Zhejiang province
An employee is seen behind a glass wall at Alibaba's headquarters on the outskirts of Hangzhou, China, on April 23, 2014 Chance Chan—Reuters

The Chinese e-commerce giant launches one of the largest stock-market debuts in history — and points the way to our economic future

The story of Alibaba has already become legend. Fifteen years ago, Jack Ma, a former English teacher, and his co-founders set up their Internet company in an apartment in the Chinese city of Hangzhou, not far from Shanghai. Today, Alibaba’s online shopping sites in China — mainly Taobao and Tmall — handle twice as much merchandise as Amazon. The company’s initial public offering on the New York Stock Exchange will bring in a haul of some $21.8 billion — bigger than Facebook’s — and values Alibaba at $168 billion — four times more than Yahoo.

When Alibaba’s shares start trading Friday, history will be made. And not just in the world of tech or stock markets. Alibaba’s IPO represents some much bigger trends shaping the world economy. Here are four things the IPO tells us about our economic future:

1. More and more of the world’s most prominent companies will be from the developing world.
We still have this image of China as one big factory floor where millions of poor people slog away on assembly lines churning out cut-rate toys, clothes and electronics. Sure, there are still factories like that, but ever more that low-cost manufacturing center guise is becoming the Old China. The world’s most populous nation is developing so rapidly that it is already producing companies that are major players in all sorts of industries. Lenovo is now the largest PC maker in the world, while Huawei is challenging the best of the West in telecom equipment.

Alibaba takes this trend to an entirely new level — out of manufacturing and into the realm of technology and services. Ma and his executive team have created a company that can be named in the same sentence as tech titans like Facebook and eBay. And Alibaba is not unique. Shenzhen-based Tencent, which operates the popular WeChat messaging service, is yet another Chinese Internet firm with global potential. The fact is the most powerful companies in the U.S. and Europe will increasingly have to contend with Chinese companies exploding onto the world stage. And China may be in the lead among the world’s emerging economies in this trend, but it is not alone. India has produced some IT firms that can compete with the world’s best, such as TCS and Infosys.

2. Emerging markets are creating blue chips.
Ever since the idea of investing in the developing world became popular in the early 1990s, there has been a line drawn between these “emerging markets” and the more established bourses of the U.S., Europe and Japan. Emerging markets were supposed to be riskier, where only the bolder of investors would dare tread, compared with the supposedly more trustworthy and less volatile options in New York City and London. The Alibaba IPO shows how that great wall is breaking down. That a company based in a town like Hangzhou can raise more money in its IPO than one based in Menlo Park, Calif., (Facebook) shows that investors are starting to treat firms from the developing world on par with those in the developed world. Of course, the stigma staining companies from China and elsewhere won’t go away overnight — Chinese companies that have listed in New York City have had a sad history of accounting disasters. But going forward, your stock portfolio is going to hold more companies with addresses in Shanghai, Mumbai, Istanbul and São Paulo.

3. Consumers in the developing world will rule the world.
The story of the global economy since the end of World War II has gone something like this: capitalizing on better transport and communications technology, world production shifted en masse to poor countries from rich countries like the U.S. Factories replaced rice paddies in South Korea, China, Indonesia and elsewhere, which then shipped the mobile phones, computers and sneakers manufactured there to store shelves in the U.S. and Europe. The billions of people in these poorer nations couldn’t afford much of the stuff they made.

Now the global economy is “rebalancing.” Consumption in the U.S. and Europe is constrained by weaker job prospects and stagnant wages, while disposable income in China and other developing nations is increasing in leaps and bounds. That is making consumers in these countries the new engine of global economic growth. If the U.S. consumer dominated the 20th century, the Chinese and Indian consumer will control the 21st.

Alibaba is a prime example of the power of these new, emerging consumers. In 2013, Chinese shoppers bought $248 billion of stuff on Alibaba’s retailing websites. Compare that to an estimated $110 billion worth of good purchased on Amazon — globally. Increasingly, it will be companies that sell to households in Beijing, New Delhi and Jakarta that will dominate global consumer industries.

4. Your next job may be at a Chinese or Indian company.
Jack Ma has said that he plans to use some of his multibillion haul from the IPO to expand Alibaba’s presence in the U.S. and Europe. This, too, is part of a trend. Companies from developing markets are becoming more important investors around the world. According to the American Enterprise Institute, Chinese companies have invested more than $500 billion around the world since 2005 — with the U.S. the top destination.

And as companies from China, India and other emerging economies become ever bigger and bigger global investors, they will become bigger and bigger global employers. Firms like Lenovo, Huawei, carmakers Geely and Tata, appliance maker Haier and a host of others already employ thousands between them around the world. Going forward, you might just find your best job opportunity is at a company like Alibaba, based in China, rather than a firm in New York City, Paris or Frankfurt.

MONEY The Economy

China is Slowing. What If Its Housing Bubble Bursts?

Even if the real estate market in the world's second-biggest economy were to collapse, the repercussions may not be bad as you think.

While global investors covet China’s growth — as evidenced by the buzz surrounding Alibaba’s IPO — the Chinese economy is actually slowing down.

In 2013, the world’s second largest economy grew at an annual rate of 7.7%. By 2015, according to a recent report by the Organization for Economic Co-Operation and Development, that will drop to 7.3%. Meanwhile, the U.S. economy’s growth rate is projected to increase by almost one percentage point.

What’s going on? Well, China’s industrial production gains in August slowed to their lowest level since 2008 and retail sales growth declined by a few percentage points year-over-year.

Perhaps most important, the nation’s newly built home prices only grew by 2.5% in July, after surging by 10% at the beginning of the year.

The notion of a housing crisis in an economy more than three times the size of France brings back flashbacks of 2008 and probably a few chills down every investor’s spine.

“A property price crash in the world’s second largest economy would have global implications,” says Wells Fargo Securities economist Jay Bryson.

But those global implications wouldn’t be as worrisome as the U.S. housing collapse six years ago, per Bryson. Here’s why.

The Worst Case

To play out this thought experiment you have to assume that at some point in the near future China’s home prices will experience a decline on the order of what the U.S. experienced over the past decade. (Bryson played out this scenario in a recent report.)

Currently, residential investment makes up a pretty decent portion of the Chinese economy – about 10% of nominal GDP. To put that in context, that ratio was closer to 6% for the U.S. in 2006.

So housing is a big deal in China. If they experienced a value decline like we did, Bryson estimates that would lop off about one percentage point of growth. But the pain wouldn’t stop there.

A collapse in housing prices would result in fewer construction jobs – estimated at around 60 million people in urban China. Jobless workers would spend less, which means that those goods and services the now-unemployed construction workers would normally purchase would not get bought.

If out-of-work construction workers reduce their spending on food and entertainment, the businesses that produce that food and entertainment will make less money and then some of their workers may face unemployment too. Since my spending is your income, lower spending means people have less money in their paychecks, and the nation’s GDP suffers.

Moreover, if housing goes in the tank, banks will see losses, which means they’ll tighten credit, resulting in fewer loans for people to start businesses.

Let’s not forget the actual homeowners. If home prices fall, homeowners’ equity declines as well. (See: Sell, Short). And when people’s chief asset is suddenly worth a lot less, they’re not going to spend as much on other, discretionary items. “Although the lack of data makes it impossible to quantify the wealth effect in China, researchers have found that there is a statistically significant direct relationship in the United States between changes in wealth and changes in consumer spending,” per Bryson’s report.

Lower demand from China means that countries which sell goods to China (think Chile and Australia) will sell less stuff. As corporate profits are squeezed, a global bear market may result.

“Although China may not be as important to global economic growth as the United States, the global economy clearly would not be immune to a major property market downturn in China,” says Bryson.

The Not-So-Bad Case

Freaked out? Breathe deep and take solace in the fact that despite this potentially harrowing dénouement, the world probably wouldn’t endure another global financial crisis. And that’s thanks to responsible Chinese borrowers.

Chinese households usually have to put a lot more money down – 30% on their first home, up to 60% for an individual’s second – than Americans. So if prices were to decline substantially, Chinese homeowners would be in a much better position than Americans back in 2007 to deal with the crisis. For example, household debt-to-disposable income has grown substantially in China since 2007, but it’s still about one-third the size of U.S. households back in 2007.

The world will also feel less of a pinch. When mortgages started going bad in the U.S., foreign financial institutions lost close to $750 billion of the more than $2 trillion in write-downs resulting from the crash. That was because foreign banks owned a lot of U.S. mortgage-backed securities. Not so here. “Chinese mortgages are generally held by Chinese financial institutions in the form of whole mortgages.” So if prices were to drop, Chinese banks would suffer while U.S. one’s most likely wouldn’t.

Lastly, the Chinese government wouldn’t sit on its hands while its economy came crashing down. Beijing’s debt-to-GDP ratio is around 15%, so it has a lot of room to recapitalize its banks if needed.

So what’s an investor to do?

“I don’t lose sleep at night worrying about China, nor should other people,” says Bryson. “But they may want to keep an eye on it.”

MONEY Economy

The Takeaway from the Latest Fed Decision

Federal Reserve Chair Janet Yellen.
Fed chair Janet Yellen says the Fed isn't shifting gears… yet Susan Walsh—AP

Interest rates are going to stay low for a while longer. But the Federal Reserve is thinking about what comes next.

Updated September 17 at 4:40 pm

It’s come to this: The market is obsessed with two magic words and a bunch of tiny dots.

Federal Reserve watchers have long been attuned to the subtlest cues from central bank officials—people used to look at the size of Alan Greenspan’s briefcase for clues—but this has been an unusually big week for minutiae. In anticipation of the Federal Open Market Committee’s 2 p.m. announcement of its latest decisions on monetary policy, markets were waiting to see if the committee would again use the phrase “considerable time” to describe how long it would hold the key short-term interest rate near zero.

They did. Here’s the statement:

The Committee continues to anticipate… that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time…

That’s a relatively dovish signal, suggesting that rate hikes aren’t coming soon. Stock investors pushed prices a bit higher in the hours after the announcement, with the Dow closing at a record high of 17,156. But bond prices declined, with the 10-year Treasury bond yield ticking up to 2.164%. (Bond yields rise when prices fall.)

That may be because there was an asterisk to the “considerable time” language. The Fed also released a statement laying out the steps they’ll take to “normalize” interest rates when it’s time. Message: We aren’t doing it yet, we aren’t doing it right away, but we wanted to let you know we’re thinking about it.

Investors were also closely watching the “dot plot,” a chart showing where different Fed officials think interest rates will land in the coming years and over the long run. The dots didn’t change in a big way since June—most Fed officials want to keep interest rates where they are this year, but see them rising in 2015 as (presumably) the economy improves. Slightly more officials see 2015 as the “lift-off” date for rates than did in June.

The real story is how strongly opinions differ—those dots are pretty spread out after 2014. Fed chair Janet Yellen is widely considered to favor stimulative monetary policy, but this shows that she has to work with a much more hawkish group within the Fed that wants tighter money sooner, to prevent a surprise return of inflation. Right now, though, inflation is below the Fed’s 2% target.

Screen Shot 2014-09-17 at 2.07.46 PM
SOURCE: Federal Reserve

These little signs have taken on outsized importance for two reasons. First, the Fed has played an unusually large role in supporting the (not-so-strong) recovery, by keeping short-term rates as low as they can go since the crisis days of late 2008, and then by buying up trillions of dollars worth of bonds as part of its unusual “quantitative easing” program. Second, investors in both stocks and bonds have been betting that this status quo is only going to change at a measured pace. This seems to have been confirmed.

This story was updated to reflect the market reaction to the Fed announcement.

TIME Money

Occupy Wall Street Just Made $4 Million of Student Loan Debt Disappear

All the students whose debts were abolished went to the for-profit Everest College

An Occupy Wall Street campaign says it has abolished almost $4 million in student loan debts, in a Tuesday announcement marking the third anniversary of the Occupy protests that brought renewed attention to the issue of income inequality.

The Rolling Jubilee Fund, an initiative of the Occupy movement, has been accepting donations and buying up student loan debt for pennies on the dollar from debt collectors, and then forgiving the loans altogether. The group has spent about $107,000 to purchase $3.9 million in debt, organizers said.

The debts were held by students who attended Everest College, a for-profit institution part of the Corinthian Colleges network. The fund called Everest College a “predatory” institution that is helping fuel the $1.2 trillion in total student loan debt in the United States.

“We chose Everest because it is the most blatant con job on the higher ed landscape,” the organizers said. “It’s time for all student debtors to get relief from their crushing burden.”

The debt belonged to 2,761 people who had taken at loans at Everest College. The group is only able to purchase private student debt, not the majority of outstanding U.S. student debt that’s backed by the federal government. Corinthian Colleges told CNN it stands by the “high-quality” education it provides and denied charges of predatory lending.

TIME Economy

Watch How California’s Drought Will Affect Your Wallet

California’s drought means higher food prices for Americans.

The West Coast has been in a persistent drought for the past 15 years. California, which grows more than 200 different crops, is being hit the hardest. This year, about 500 million of acres of California’s land is expected to be taken out of production. The consequence: higher produce prices for all Americans.

Timothy Richards, a professor of agribusiness at Arizona State University, conducted research that predicted that 10 to 20 percent of California’s crops could be lost. On top of that, the threat of a megadrought, which can span over two decades, could result in a major economic crisis.

 

 

 

MONEY First-Time Dad

Why Millennials Should Have Kids—and Soon

Luke Tepper
Yes, he costs a ton, but he's worth it.

There are plenty of financial and lifestyle reasons to not have a child, but there are also costs to delaying or forgoing, notes MONEY reporter and first-time dad Taylor Tepper.

I finally realized that I’m no longer in charge of my own life a few of weeks ago.

It was a Tuesday at 9:45 p.m. I had arrived home from work at 7:30, just as my wife was putting our son to sleep.

I cooked dinner for the two of us. We ate together on our small dining room table and then spent the rest of the night preparing for tomorrow. Mrs. Tepper collected Luke’s toys and straightened up around the house while I programmed the coffee maker and started to load the dishwasher… only to discover that we were out of soap. Sigh.

I jabbed my feet into my slippers. The dishes needed to be washed, so I found myself headed outside in my pajamas.

As I plodded to my neighborhood grocery store, it dawned on me that I wasn’t running this chore because I wanted to, but because our delicate family ecosystem demanded that the dishes get washed at night. Otherwise, the milk bottles and containers wouldn’t be ready by the morning, meaning my wife wouldn’t be able to pump at work and my son wouldn’t be able to eat.

This two-hour spell of cleaning, organizing, and readying felt like the actualization of a Millennial nightmare.

I had handed over the keys to my liberty to an infant. Before Luke was born, I could sleep all morning, grab a pint whenever I wanted or fly around the country to visit friends. I could quit my job, write a novel, start an artisanal pickled beet company or simply toss a Frisbee in the park all day.

Those days are over. Full stop. But the real question is: Would I ever want them back?

The opportunity cost of having kids

Most people of my generation aren’t like me. In fact, just over one-in-four Millennials tied the knot between the ages of 18 to 32, according to Pew Research Center. That’s 10 percentage points lower than Gen Xers at a similar point in their lives in 1997 and more than 20 points below Baby Boomers in 1980.

Further, research by Wharton School of University of Pennsylvania’s Stewart Friedman seems to indicate that the majority of my peers aren’t interested in kids. Friedman’s study looked at the views Generation Xers had toward bearing children as they graduated college in 1992 and Millennials in 2012. Almost eight in 10 Gen Xers said they planned to reproduce, Friedman found, compared to only 42% of Millennials.

Parenthood comes with a price that Millennials may not be eager to pay. According to the most recent numbers from the U.S. Department of Agriculture, it will cost middle-income moms and dads an average $245,340 to raise one child up to age 18—a stunningly large figure for those who are already burdened by student debt and who graduated into a nasty Recession.

It doesn’t help that America is one of two countries without any kind of paid maternity leave and childcare is very expensive.

Another factor that might dissuade Y women: Mothers who alter their career paths to care for their children can lose out on a lot of potential income. Economist Bryan Caplan pegs the opportunity cost as high as $1 million.

And, of course, there are the non-financial opportunity costs of bearing children: less freedom, less time, and less sanity.

The payoff of having kids early

I understand all of this. I’m living it. My wife and I spend the vast amount of our weekends doing the laundry, sweeping, mopping, shopping and organizing. We schlep and push and haul all day long. Not to mention the $1,600 a month we’re giving to someone else to care for our child. We could have put that money toward a dream vacation, a starter home… or alcohol.

But conceiving a family in your 20s comes with certain advantages. For instance when Luke leaves the nest, my wife and I will be in our mid-40’s and just entering our peak earning years. That means while he’s off at college, we can power save to boost our retirement portfolio.

Plus, you’re more likely to have flexibility at work in your 20s, since you probably have a more junior position with less responsibility. The higher up you get on the food chain, the tougher it is to leave early to go to a parent-teacher conference or soccer game (or so my older colleagues tell me).

There’s also the fact that your ability to actually conceive children decreases as you age, per the Mayo Clinic, while the risks of complication—from C-sections to pregnancy loss—increase in your mid-to-late 30’s. And complications typically mean more money for health expenses.

Look, there are many reasons not to have a child. You may simply not want one—and that’s fine.

But to dismiss the idea of raising a child, or raising him now as opposed to ten years in the future, because you haven’t yet traveled the world or written that magnum opus slightly misses the point of it all. When you raise a child, especially with someone you’ve committed your life to, your self-interest becomes tied up in theirs.

To put it another way, what a lot of people don’t think about is that there’s an opportunity cost to deciding not to have a child: You don’t get to experience the sublime joy of yielding your wants and desires for the happiness of the people you love.

Taylor Tepper is a reporter at Money. His column on being a new dad, a millennial, and (pretty) broke appears weekly. More First-Time Dad:

TIME Gaza

U.N. Announces a Deal to Rebuild Gaza

“We must fundamentally change the dynamics in Gaza,” U.N. envoy says

The U.N. has brokered a provisional deal with Israel and the Palestinian Authority to enable reconstruction work to begin in Gaza, U.N. Middle East envoy Robert Serry said Tuesday.

The U.N. says it will help to rebuild the private sector in the Gaza Strip and give the Palestinian Authority a leading role in reconstruction efforts.

Serry stressed the urgency of getting building materials into Gaza as well as reviving the economy.

“We consider this temporary mechanism, which must get up and running without delay, as an important step towards the objective of lifting all remaining closures,” he said, describing it as a “signal of hope to the people of Gaza.”

Serry gave assurances that the U.N. would monitor building materials so they did not end up into the hands of militants.

In July and August more than 2,100 Palestinians were killed in Gaza and thousands of homes were destroyed after a 50-day military campaign led by Israel. During that time, 66 Israeli soldiers and at least five civilians died.

Serry told the U.N. Security Council that a renewed conflict “would be a disaster” and that “we must fundamentally change the dynamics in Gaza.”

On Tuesday the World Bank released a report detailing the damage the conflict has inflicted on the Palestinian economy.

“The conflict and humanitarian tragedy in Gaza has made an already struggling Palestinian economy worse and put further stress on the fiscal situation of the Palestinian Authority,” said the report.

On Sept. 4, the Palestinian Authority estimated it would cost $7.8 billion to rebuild Gaza, Reuters reports.

TIME Economy

The Poverty Rate Just Declined for the First Time Since 2006

New York City's Homeless Population Shows Sharp Rise In Last Five Years
A homeless man sleeps on a Manhattan street on Aug. 22, 2014 in New York City. Spencer Platt—Getty Images

45.3 million Americans, or 14.5% of the population, lived below the poverty line in 2013

The percentage of Americans living in poverty declined year-over-year for the first time since 2006 last year, according to a report released Tuesday by the United States Census Bureau.

45.3 million Americans, or 14.5% of the population, lived below the poverty line in 2013, down from 15% in 2012. The percentage of children under the age of 18 living in poverty declined to 19.9% in 2013, down from 21.8% the preceding year. It was the first recorded drop in childhood poverty since 2000.

The officially defined poverty threshold for a family of four in 2013 was $23,834.

Nonetheless, the report emphasized that the long-awaited declines in poverty were not quite large enough to be considered statistically significant improvements (i.e. definitively greater than a measurement error). The general findings of the report, entitled Income and Poverty in the United States: 2013, was that the measures of poverty had plateaued, with household income registering a statistically insignificant uptick to $51,939, an improvement of $180 over the previous year.

 

TIME Workplace & Careers

This Is the Worst Paying, Fastest-Growing Job in America

Home Care Workers
A community nurse making home visits in a rural area. BSIP—UIG via Getty Images

Historical discrimination, demographics, and public funding have left home care workers at the very bottom of the American work hierarchy

fortunelogo-blue
This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

By Claire Zillman

On Wednesday, California Governor Jerry Brown signed legislation making the state the second in the nation to institute statewide paid sick leave.

At the signing ceremony, Brown said that the legislation—expected to bring paid sick leave to most of the 6.5 million Californians currently without it—“helps people—whether it’s a person working at a car wash or McDonald’s or 7-Eleven.”

Well there’s one group of people it doesn’t help: home health care workers.

Because of cost concerns, Brown negotiated a last-minute amendment that exempts home health care workers from the law.

The carve-out of these workers is not surprising, says Abby Marquand, director of policy research at the Paraprofessional Healthcare Institute, a nonprofit advocacy organization. Why? Workers who care for the elderly and disabled in their homes are “an easy target for holding down costs,” she says. “Collectively, as a society, we haven’t valued the work they do in the way we should.”

That’s a problem in and of itself, and it has been amplified by the fact that the home care industry is the fastest-growing sector of the American economy.

For the rest of the story, please go to Fortune.com.

 

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