Ep. 8: Lu Qi & Baidu: the Breakup that Broke China’s Heart

This week on TechBuzz China by Pandaily, co-hosts Ying-Ying Lu and Rui Ma look at the resignation of Baidu COO and tech genius Lu Qi and how the move brought tidal waves of speculations, commentary, and reactions to the Chinese tech world.

TechBuzz China by Pandaily is a weekly technology podcast that is all about China’s innovations. It is co-hosted by Ying-Ying Lu and Rui Ma, who are both seasoned China watchers with years of experience working in the technology space in China. They share and discuss the most important tech news from China every week with commentaries from investors, industry experts, and entrepreneurs.

What is Lu Qi’s story and where is he going next?

What did Lu Qi do to have Baidu stocks rise by 58% during his tenure?

Why did his departure strike a strong cord, while previous departures of top Silicon Valley execs such as Huge Barra from Xiaomi and Andrew Ng from Baidu resonated less with the Chinese tech world?

Rui and Ying-Ying answer these questions and more on this week’s episode! As always, you can find these stories and more at pandaily.com. Let us know what you think of the show, and don’t forget to follow us on Twitter at @thepandaily and to like our Facebook page!

Full Transcript

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[02:01] Lu Qi’s departure had unparalleled coverage in China. He quit as COO of Baidu on Friday, May 18. It’s now two weeks later and he’s still in the headlines. The man has legendary status in China. “Whoever has Lu Qi, will own the world of AI.” So goes the saying. Which is why the stock dropped 9.5%, or something like $9Bn, the day his departure was announced. Although the stock had gone up 58% during his 18 months there.

[02:50] While Lu was there, Baidu did a few things investors really liked. Such as selling its loss-making food delivery business. He also closed its Baidu Doctor app. IPO’ed iQiyi 爱奇艺, its video streaming business. And of course, poured a lot of resources into AI.

[03:17] Tech company employees said that they felt like their heart had been broken, and that Lu leaving was like going through a breakup. None of this was really captured in the US media, because Lu has a different reputation in China than he does globally. In China, the immediate phrase following his name is always, quote “The highest ranking Chinese person in Silicon Valley.” Or “The Silicon Valley Chinese legend.” Which is convenient, since his first name Qi 奇, is the same character that means legend. Or “The light of Chinese.” 华人之光。

[03:55] He was born into a desperately poor family in Shanghai, and had very little to eat growing up.
The Chinese media is always describing how short and skinny he is, as evidence of his childhood malnutrition. Luckily though, he was super smart, and got into Fudan复旦, a top ten university in China, as an undergrad in computer science.

[04:36] Completely by accident, he attended a lecture by Carnegie Mellon computer science professor and Turing Award winner Edmund Clarke at Fudan. His questions stood out so much that the professor invited him to pursue a PhD in the US.

[05:02] After graduation, Lu joined IBM’s research lab. He didn’t stay too long before going Yahoo, and was there for ten years, eventually managing something like 3,000 engineers and heading up the search and search advertising group. When he left in 2008, he was supposedly thinking of going back to China, but was personally recruited by Steve Ballmer to join Microsoft instead. There, he launched Bing, Microsoft’s search product. Chinese media seem to think he might have been in line for the CEO position before suddenly leaving in 2016 due to “health reasons.” And that’s when Robin Li snatched him up for Baidu. Lu was hired as Group President in charge of products, technology, sales, marketing and operations, in January 2017.

[05:52] He was really respected for sleeping only four hours a night and being in the office by 6am every day. He was known for bringing 15-minute standing meetings to Baidu, and for answering every single email, no matter who it was from. He emphasized efficiency in a country where hierarchy is traditionally very important.

[06:30] Unlike the previous high profile Silicon Valley departures from Baidu and other large Chinese tech companies, such as Hugo Barra from Xiaomi, Andrew Ng also from Baidu … this one seemed to really have struck a nerve with Chinese people. I think it’s because of Lu’s homegrown hero status, because unlike the others, he is local Chinese, and grew up in the farmlands of Shanghai Pudong.
If you take a look at Tencent and Alibaba, both their number twos are overseas Chinese. Joe Tsai at Alibaba is a Taiwanese Canadian. Martin Lau at Tencent was born in Beijing but is really from Hong Kong.
One was a lawyer, and the other a banker. Neither had Silicon Valley clout before jumping into Chinese internet. Furthermore, they’re not tech prodigies, and they joined when China tech was still far behind the West.

[07:19] Lu, on the other hand, is a Silicon Valley success. He’s the perfect hero for today’s China. He is a tech genius, management pro, and can succeed in the U.S., but chooses to be in China. This is the type of top-notch global talent that China tech is looking for and desperately needs to retain. No wonder that when he left, the entire industry felt, in their own words, heartbroken and close to tears.

[07:48] Chinese netizens have a difficult relationship with Baidu. It’s one of the most maligned companies in the media. It’s still not really recovered from the medical advertising scandals of a few years back, and it’s just known for being a very typical Chinese company — very political. No wonder then, that when Lu left, rumors began circulating that he was ousted because he was on the wrong side of marital strife between the couple. It got so big that Baidu PR had to come out with an official statement that it was untrue and even threatened legal action.

[08:40] There’s almost daily headlines speculating on where Lu is going next. Maybe Xiaomi, because there was a photo of him with Lei Jun, although Xiaomi has also officially said that is a rumor and untrue. Others are hoping he does a startup. Certainly more than a few VCs are ready to invest at a unicorn valuation if he decides to do so.

[09:06] And more than a few believe that his departure was inevitable– given that Baidu is a Chinese company. They think he couldn’t have survived in a Chinese company. And some of the loudest voices are coming from Chinese people.When Lu joined Baidu, another former Microsoft exec named Tang Jun 唐骏 wrote him an Open Letter. When Tang joined Shanda, a gaming company that used to be NASDAQ listed and was a big deal for its time, it was kind of the same thing. High level foreign tech exec, joining a local Chinese tech company.

[09:39] Tang was super pessimistic about Lu’s future at Baidu. He basically said — there’s nothing you can do. It’s not gonna change. Your employees are simply not going to care because they are so used to listening to the one big boss, in this case, Robin. And while he was cheering for Lu to make Chinese internet great and gave him some tips, such as making sure you don’t step on Robin’s toes, it obviously didn’t work out.

[10:09] Given the amount of reorg Lu spearheaded I’d imagine lots of people found themselves with new job responsibilities and titles or perhaps without a job altogether he must have made a lot of enemies, maybe without even realizing it. All those qualities Lu exhibited: work ethic, openness, lack of hierarchy, diligence, technical skills, focus on R&D and superior product … those are things that represent the best of Silicon Valley, and it seems that Chinese tech workers very much want the same in their companies and leaders. The US and China have more common than they may think.

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