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The book, “The Leadership Challenge”, has been sold over 1.5 million copies, claimed as the most trusted source on becoming a better leader. Some critic believes that it is because the book is research-based, it is practical, and it has heart! In deed, a presentation by one of the authors, Barry Posner, showed us all.

The title of Dr. Posner’s presentation showed two sides of the same coin: What people want from their leaders or why would anyone follow you? He continued with a citation from Charles Darwin: “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change,” followed by another one from Edward Demming: “Change is not required … because survival is not mandatory.”

So, in this changing world, what is the simplest definition of a leader? With more than 20 years of research, Dr. Posner kept surveying people from different classes and different locations and countries. Surprisingly, the top 4 most wanted leadership characteristics always are

1. Honest
2. Competent
3. Inspiring
4. Forward-Looking

Credibility is the foundation of leadership. As Coopers & Lyband have pointed out: “Higher degree of management trust is the number one characteristic of innovative companies.”

Leadership is a relationship. Dr. Posner provided the following 7 lessons for leaders:

1. Character counts
2. Know your self
3. Grow big ears
4. Develop capacity
5. Make something happen
6. Keep hope alive
7. Show them, don’t tell them

The 4th edition of the book will be out soon, with 389 pages of lessons and ideas for leaders now and of the future. I have one with Dr. Posner’s signature. The combination of both the book and the presentation helps me identify true leaders that I have encountered through my career. They are role models, who inspire people even when they are not around.

Among all the books talking about China, the book, “China: The Balance Sheet,” provides the most balanced view, thanks to the word “balance” in its title. It “is the fullest attempt to understand and describe the most important emerging power in the world” by two of the world’s preeminent think tanks, the Center for Strategic and International Studies and the Institute for International Economics. From the preface of the book:

China is an exceedingly complex, and sometimes internally contradictory, society that is difficult for outsiders to decipher. Indeed, there is no single “China” any more than there is a single “United States of America”; sharply different views exist within that country on most topics as the leadership struggles with immense challenges both at home and as an emerging power on the world scene.

The book lists some interesting facts or statistics of China:

• Throughout the 1990s, China was the fastest growing export market for U.S. firms — a trend that actually accelerated from 2000-2005, as exports of U.S. firms to China rose by 160 percent while exports to the rest of the world rose only 10 percent.
• China graduates more than 800,000 students a year in engineering and sciences. While China’s numbers of engineering graduates are impressive, the average quality is less so. Recent studies by the McKinsey Global Institute estimated that only one-tenth of China’s engineering and IT graduates are capable of competing in the global outsourcing environment.
• By the mid-1990s, China’s adult literacy rate was just over 80 percent, compared to just over 50 percent in India — but China’s female literacy rate was 73 percent, compared to 38 percent in India. This gave China a crucial advantage in attracting foreign investment in manufacturing.
• Over the past few years China has become increasingly dependent on increases in investment to drive economic growth, suggesting that China’s financial system allocate capital inefficiently. As a result, by 2004 the share of investment in GDP had reached about 40 percent. Although China has received large amounts of foreign direct investment, these funds in recent years have financed only 5 percent of capital formation. Moreover, domestic savings have been more than sufficient to finance the high level of capital formation that has characterized the last three decades of economic growth.
• China’s unusually strong growth performance has been the sectoral transformation of its labor force. The share of the labor force employed in agriculture has declined from 70 percent at the outset of reform to about 50 percent today. China’s extreme shortage of arable land means that agricultural productivity is extremely low. Thus, as workers leave agriculture and are absorbed in either manufacturing or services, major productivity gains ensure.
• The earlier examples of Japan, Korea, and Taiwan show that severe resource constraints are not necessarily an impediment to rapid, sustained economic growth. As long as the global economy remains open, the raw materials and resources necessary for rapid economic growth can be imported. Indeed, China’s bill for its net imports of energy and other primary products in 2004 was only 4 percent of its GDP — less than the 5 percent level that prevailed in Japan and Taiwan at the beginning of their high growth in the mid-1960s, and less than half the levels these countries hit by the late 1970s, when energy prices had soared. On the other hand, compared to 1978, by 2004 China produced three and a half times as much output for each ton of standard coal equivalent of energy consumed.
• China, however, faces the additional problem that its rapidly rising demand for basic energy and mineral resources stems not only from rapid growth but, more importantly, from inefficient resource use. For example, China’s energy consumption per unit of China’s GDP in 2005 was only one-seventh that of the United States, its consumption of primary energy was slightly more than half of the U.S. level.
• Direct taxes on households are relatively small. In 2004, for example, combined government tax revenue from the personal income tax, levied on income of employees in the modern sector, and the agricultural tax, levied on peasant income, was only 1 percent of GDP.
• According to the United Nation’s projections, China’s working-age population will soon begin to shrink after peaking around 2015. Labor shortages have already begun to surface in some parts of China, such as in Guangdong Province.
• Increases in private consumption expenditure will depend to an unusual degree on a reduction in the savings rate of households, which has been running at about 25 percent of disposable income since 2000. By contrast in the United States in 2005 households spent more than their disposable in come, i.e., the savings rate was slightly negative!
• China’s economy at present apparently pays little price for corruption. The economic losses corruption causes are astonishing — as high as an estimated $84.4 billion or 5 percent of GDP in 2004. But foreign direct investment has not fallen as a result and China’s economy continues to outperform most of the rest of the world.
• No one claims that China is today a rule of law country. Nevertheless, most would acknowledge that China has moved a long way from the primarily “rule of man” governance approach of traditional China, and is taking steps beyond the instrumental “rule by law” approach characteristic of legal reform in recent years, toward a legal system that increasingly seeks to restrain the arbitrary exercise of state and private power and does provide the promise, if not the guarantee, to assert rights and interests in reliance on law.

My conclusion out of the book is that China will keep playing its role as “the world factory” for at least another decade as far as its workforce is growing. Higher energy cost can be easily absorbed by higher energy efficiency. Anyway, it is definitely a book worthing reading with a lot of details packed in about 200 pages.

For a decade, this name, Min Zhu, has been associated with the very success of WebEx, a leading Internet conferencing platform company. Under his tenure, the company left those heavyweights, such as Microsoft, IBM, and Cisco in the dust. WebEx created even more buzz early this year while Cisco acquired the company for $3.2 billion, the second largest deal for Cisco in the past 5 years. Two years ago, Min left US to ride the economic waves happening in China. He founded Cybernaut Venture Capital Management, an incubator VC firm. He is also venture partner of New Enterprise Associates, one of the prestigious US VC firms.

In Oct. 6, he returned to Silicon Valley to share his China story. His speech, full of wits and inspirations, led to laughs and applauses from the audience. As his retirement plan, Min wants to contribute to China growing economy. With over 20-year experiences in high-tech industry, Min was lost at beginning. Due to the fact that China doesn’t have a credit system, many times, people didn’t treat him seriously simply because either his car is not good enough or he doesn’t have a designated driver. After two years, however, he touched the pulse of China’s economy like no other.

Min believes in service sector. More specifically, he singled out the top 5 areas

1. Financial service, including banks and insurance companies
2. Health care service
3. Education for college entrance exam, and Chinese learning
4. E-commerce
5. Media

I concur with two examples. Insurance is definitely hot. China Life Insurance (LFC) has a whopping 100% return if people jumped in later June. Similarly, the leading English education company in China, New Oriental Education & Technology Group (EDU), generates another 100% return since late January.

As an investor, Min is interested in companies having online-offline business models, resided in a market with size around 100 billion RMB and without any dominant player. The company must have a good team. He favors low-tech companies with high-tech flavor. He noticed that the typical time-to-IPO is a very short 3 year average, which is very ideal for investors. VC industry is also booming in China with Zhejiang Province alone having more than a hundred local investment funds. When talking about China bubble with average PE of SSE around 50, Min likes the economy to have some sort of bubble. He notices that the whole US IT industry has improved tremendously after previous Internet bubble in 2000. Without that bubble, the industry wouldn’t have made so much progress and without bubble bust, the industry wouldn’t mature dramatically, leading to a more solid booming beyond the industry itself. The recent boom is led by NYSE with P/E ratio of Dow Jones Industrial average still around 17.

As a philanthropist, Min donated $10 million to his alma mater, Zhejiang University, setting up Zhejiang University Innovation Institute, International. He has a lofty mission to drive innovations that affect common people’s every day life. One good area is green-tech. He believes that solar panel cost will be driven down by Chinese manufacturing industry to be compatible with oil and coal within 2 years.

Finally, Min shared his keys to the success during the Q&A section:

1. Optimistic
2. Persistent
3. Grateful
4. Team spirit

And don’t forget B2G (Business-to-Government), if one wants to do good business in China.

There are a lot more in this 3-hour event. I cannot list every good point mentioned by Min. One thing is sure by Min that there will be a lot more opportunities coming out in the next 5-10 years. These who surf well in the China wave could definitely accumulate a lot of fortune. Though, it is equally important to succeed for a good cause, like what Min has done.