This is How to Build TRUST in China

Jared Ward: 0:06

All right guys, welcome to our latest episode of Ops Unfiltered. I'm your host, jared. I'm the founder and CEO of Luminous. Today we have a special guest. His name is David Dayton. Howdy, david, it's nice to meet you. Can you introduce yourself Because we're going to dive into some really fun topics today. I think my top viewed podcast episode was my first one with Darren and Darren. He just he reminisced about all of his experiences sourcing in China and like sort of the cultural differences. It was really cool listening to that. I think we can have a similar type of experience here, like what is your background and what are we here to talk about today?

David Dayton: 0:43

I originally got interested in China and Southeast Asia in the 90s and I lived in Thailand five or six years. I lived in Taiwan for three years. I lived in China for about 12 to 15 years and the whole time there I was doing different things. So I originally started out as an educator and then went to graduate school as an anthropologist and studied Southeast Asian cultural anthropology. Where'd you go to graduate school? I went to graduate school at NIU in Chicago, just outside of Chicago.

Jared Ward: 1:08

Okay.

David Dayton: 1:09

And I studied Thai corporate culture. And then I moved to China because I happened to be the only one in my little company of three friends from college that spoke some Chinese and so I moved first to China in 95, back to China with my own company, was there for a dozen years. I moved first to China in 95, back to China with my own company, was there for a dozen years, closed shop on the ground in China as a sourcer and shifted into consulting and I went back to got a PhD from FIU in Miami in Chinese corporate culture Interesting.

David Dayton: 1:35

And so I look at Chinese, I look at Southeast Asian businesses, and not how they do business, but how they function internally. Very interesting.

Jared Ward: 1:44

Why anthropology? Why Chinese culture and Thai culture? I?

David Dayton: 1:51

originally was going to go to law school. So I did speech and debate in college and thought law school is just where I belong. And my very last semester at BYU I took this class called Chinese culture or the Chinese cultural artifacts or something like that, anyway. But I took this anthropology class and there was one guy in there and he was studying the Grateful Dead and he'd be gone for two weeks going to Grateful Dead concerts and they'd come back and report on this. And I read this ethnography of Chinese village Chun village and I realized, oh my gosh, this is so much more interesting than law. This is what I want to do. I'd already almost finished my undergrad this is my last semester there so I finished up, moved to China for a year and then went to graduate school in corporate culture, so this was like pure curiosity Pure curiosity.

Jared Ward: 2:34

I just realized I fell in love. That was really interesting.

David Dayton: 2:36

Yeah, I just realized this is I want to study people, I want to talk about people.

Jared Ward: 2:39

Why do you think West? Because I actually think I mean this is why that episode was our top viewed episode. I mean, obviously, darren's a stud and he's so well-spoken, but I think there's this curiosity that Western society has with China. Yeah, where do you think that comes from? Is it just because they're?

David Dayton: 2:56

so different. There's this idea of Orientalism, right? So anything that's foreign, anything that's exotic is unique and interesting and intriguing, and so anything that's different from us, it's either fascinating or scary, and we can either capitalize on that and become curious about it and figure out what's going on, or we shy away from it, we back off and we say, ooh, this is just a little too much for me, and for me it was. I lived in this little, teeny, tiny town as a kid growing up, and I went to Bangkok all of a sudden when I was 19 years old and it just blew my mind and I realized, oh my gosh, there's so much more to the world than a little coal mining town out in the middle of eastern Utah.

Jared Ward: 3:33

What town in the east?

David Dayton: 3:34

Price? No way, yeah. So I went from Price to Bangkok. Exactly right, oh God. And it just literally was this mind-blowing experience of? There are tens of millions, hundreds of millions of people whose lives are completely different than mine, and that got my curiosity going and I just went from there.

Jared Ward: 3:53

Okay, well, luckily I'm talking to an expert in Asian culture, specifically Chinese Thai, specifically chinese thai, and the reason why I wanted you on the podcast so bad is because it, I mean, there's, there's a bunch of people who are like, have genuine curiosity in anthropology and in asian cultures and they'll study in a book, but very few people actually have the business background or just living on the ground, like that. That's sort of bringing together of the and that sort of bringing together of the curiosity and also the lived experience. So we met before this and you kind of gave me a list of some things, some lessons that you've learned. I'm just going to give you, I'll prompt you on a couple of these things, and then you tell me the story behind the lesson. Sure, sure, okay. So give me one second. Okay, the first one. I'm really curious about this one Don't be nice to pretty secretaries Okay.

David Dayton: 4:53

So there's a status symbol or a status recognition with having beautiful receptionists, so the prettier receptionists are right. That kind of gives your business higher social status, and so this is true for Southeast Asia and it's true for China as well, and so oftentimes you'll see applications or you'll see advertisements for want ads for people that specifically say you know what are your qualifications and what are your measurements and please attach a picture, and they're specifically asking for your measurements.

David Dayton: 5:21

Yeah, they're asking for height and weight for height and weight and bust and waist size and they want somebody that fits the model, and so I originally figured this out.

David Dayton: 5:29

When I was working, I was doing research on a law firm in Thailand and the secretary was absolutely gorgeous, and so I was talking to her about how she got her job, like I did with everybody in the office to do some research, and she's like, oh yeah, I'm way underqualified to be here, but I used to be a swimsuit model. That's how I got the job. And I'm like what do you mean? That's how you got the job. And she's like, well, you know, that's I'm here because it raises the status of the firm. So I'm in China and I'm seeing the same thing played out and I've got a couple of office managers, one of them being, eventually was my wife, right, so she's a Chinese woman. And we've got a couple other Chinese ladies who are managing my office and my quality management stuff in China, and they hired this girl to do reception workforce very attractive young woman and so we've got a small office 15 to 20 people and so I trained everybody on their jobs, because I'm the owner of this company in China and I've got people that I need to do their specific thing. So I spent an afternoon with her, talking with her about stuff. This is what I need you to do. So I spent an afternoon with her talking with her about stuff. This is what I need you to do. When these calls come in, you have to do this. If it's you know, if it's government, if it's supplier, if it's foreign client, we need to figure out some different things.

David Dayton: 6:30

So I spent a little bit of time with her and I didn't think it was too much. I wasn't trying to be inappropriate. I mean, my wife literally works in the same office and my other office manager comes up. You probably spent enough time with her today. I'm like well, what do you mean? And she's like well, other people are starting to talk. I'm like talk, what do you mean? And she's like well, if you spend too much time with her, you're the owner and she's a receptionist.

David Dayton: 6:52

People think that she got her job for different reasons. And I'm like well, I didn't mean any of that. She's like I know, I know China, people aren't equal. In China, you're a significantly higher social status than she is, and for you to spend this much time with her suggests that there's an alternative strategy, motive, relationship involved. And so I realized that, regardless of how you feel as an American. When you're in China doing business, you have to recognize the role that you play and that role oftentimes is driven by status, by hierarchy, and if you're inappropriate, even unintentionally, with your role, you're going to send the wrong message to your suppliers, to your employees, to people that you interact with. So you have to be very aware and careful of those kinds of things. I don't mean like I'm not trying to scare people and say, oh, don't talk to anybody, right, but but but recognize that talking to people and who you talk to means more than just a conversation.

Jared Ward: 7:47

So don't be nice to pretty secretaries. It's just a proxy for be aware of your actions when you're in, for example, if you're going to China for a supplier meeting or if you're working to ink a partnership with another Chinese company. Exactly Be aware of the differences in culture. Be aware of who you're speaking with right.

David Dayton: 8:06

So don't spend an inordinate amount of time with somebody that's not on your specific social level, because it sends a message, and so you have to recognize what messages you're sending, even unintentionally, because, regardless of what your intentions are, you've got a billion other people that are watching you because you're a foreigner, you stand out. Got a billion other people that are watching you because you're a foreigner. You stand out. The spotlight's on you, they're watching you and they're only interpreting you from their point of view. They're not interpreting you from oh, he's an american, he's egalitarian, he believes in meritocracy and equality, he treats everybody the same. No, no. They're saying oh, this guy has power and he's spending a lot of time with the prettiest girl in the office that's interesting, very interesting.

Jared Ward: 8:42

this, this one's interesting to me boundary, objectsoundary objects, same same like us, they have iPhones, they drive BMWs, we have glass-windowed office buildings.

David Dayton: 9:06

They're sitting at desks with computers, they're working, you know, regularly scheduled office hours, kind of like us. It looks pretty much the same as an office does in the West, but the reality is is just because it looks the same doesn't mean people are interacting the same with those objects and with those things, and so boundary objects are things that look familiar but are used completely differently, and so your phone, for example, is an absolutely powerful tool for you to do communications, to do social media, to do business and Chinese are doing social media and business as well. But the phone is so much more in China, for example, right, it's everything in your life. You're paying your bills, you're talking with people, you're being tracked by the government, everything that you see is confined through a scope that's filtered then into your phone, and people don't have computers. So there aren't laptop computers to the extent that they are in the US, there aren't desktop computers to the extent that there are in the US. Everything's done on your phone, and so your phone is significantly more important, and so you can't make blanket rules in an office building or an office space, for example, like hey, you need to stay off your phone during work hours, because that's personal and this is working. You're going to separate the two right, because those are boundaries and you're drawing a distinct line between when you're home, you're home and when you're at work you're at work, but the reality for Chinese is I work 24 seven and I identify with my office. At least this is what it's been in the past. There's starting to be some shift and some change away from this.

David Dayton: 10:28

But those boundary objects, this telephone, is going to be sliding across those boundaries and you're going to be using it for work. You're going to be using it for personal, right? Your timeframe isn't going to be divided into. I can put my phone in a box and go to work, because I have a laptop computer and I can just do all of my work stuff here. I have a desktop right, and then when I go home I can sit on the couch and play on my phone. And if I get an email, well, you know that's convenient that I can look at it, but I'll deal with it tomorrow when I get back to work.

David Dayton: 10:53

And so those boundary objects kind of blur this idea of where I'm supposed to be or where Westerners think that Chinese are supposed to be, and so the idea, the implication or the application of this idea is that you're going to go there and there's going to be a lot of things that are similar, and people are people. We all want to take care of our family, we all want to make money, we all want to be safe, we all need to eat, but the reality is how we do that with similar objects can be very about imposing rules or ideas on Chinese employees that sound like they make sense coming from a Western perspective and look like they might fit because you're in a glass office building, but actually have cultural implications that would conflict with how your people are getting work done.

Jared Ward: 11:36

Have you ever seen a company impose a rule that like oh, that was a really bad idea.

David Dayton: 11:40

Probably the best example is Apple and Foxconn. Probably the best example is Apple and Foxconn. So in the United States all through the 2000s and into the early teens, there were people that were protesting Apple because they were quote unquote forcing employees in China to work overtime. And you've got employees that are working 70, 80 hours a week. They're living four to six to a dorm room and people in the United States are like this is you can't have this.

David Dayton: 12:08

This is. You know this is abusive labor practices. You just moved to China so that you could take advantage of chief labor and now you're exploiting these people, which you were already taking advantage of in the first place. But the reality is is in probably 35 to 45 of the provinces in China that I've been to, 35 or 45 of the 55 provinces that I've been to in China, I would guess, a thousand or more factories all over the country.

David Dayton: 12:28

I don't think I ever met an employee that didn't want overtime. They're specifically working as many hours as they possibly can in a short amount of time so they can take an extended vacation two or three times a year over the golden weeks in May, in October, in January, chinese New Year, and they want anywhere from two to four weeks off each time. And to be able to do that, to be able to take that much time off two or three times a year, they have to work an additional extra hours and they're asking for overtime. And so all these employees in Foxconn literally went to Foxconn. A because it's a great place to work and they get some, they get really good benefits. But B because Foxconn originally was offering lots of people the opportunity to work extended hours, and so, by people protesting and companies in the United States acquiescing, they're actually hurting their employees, because our employees are the ones that we're asking for additional hours.

Jared Ward: 13:18

Why do you think it's so difficult for Americans to fathom this? Is it the differences in our economy, maybe, like we're just not a manufacturing economy?

David Dayton: 13:27

Well, part of it is that is that probably nobody that you know has any manufacturing experience personally. Nobody that you know has ever worked in a car plant in Detroit, right, because they all left. Or nobody that you know has ever been actually building things, unless it's a hobbyist who's maybe started his hobby into a project or something like that, right, and then he offshored it someplace after he got there. So we don't understand the manufacturing mindset, but you also didn't. None of us ever grew up in poverty, and we can say that for certainty. I mean even people that came from you know the sticks in West Virginia, or from you know the slums of of New York or Detroit or Chicago or something like that. They don't understand even. They don't have the same concept of poverty as Chinese do.

David Dayton: 14:05

So my wife can tell stories about how she had a chestnut tree that kept her family alive one winter period. That was it. They didn't have anything else to eat. And she tells stories about Chinese New Year sitting on the steps of a neighbor's house because she smelled that they had rice cooking and she sang as a little girl on their steps, hoping that they would hear her and feed her, right, and so we don't have any idea what it's like to grow up poor. And when you grow up like that, you realize, oh my gosh, I have a short window of productive life opportunity because retirement age in China is very young 50, 55 years old it was, now it's a little bit higher. But you've got 20 years, 30 years max, and you've got to take care of yourself, your spouse, however many kids you have probably only one, but maybe two now and you've got to take care of four grandparents, right, four parents, your parents and your spouse's parents. So you've got six or eight people that are dependent on one to two people's salary, covering three generations of time.

Jared Ward: 15:02

If I, as an American, put myself in a poor Chinese family's shoes, they're part of a small village, hasn't really technologically advanced at all. Most of the people are starving, so if a factory is being built nearby and they have an opportunity to go in and work like, then this is like. This is a massive opportunity for them.

David Dayton: 15:27

Huge opportunity, and there aren't a lot of villages that haven't been caught up technologically or starving now. China's done a really good job of bringing people out of poverty. Walk me through that.

Jared Ward: 15:35

Walk you through the, because I feel like that's also a stigma that China has.

David Dayton: 15:41

People are starving, yeah, people are starving. People are starving, yeah, people are starving Villages are in China.

Jared Ward: 15:44

So bring people up to speed, like what was China like in like early two thousands versus modern, or like I guess, when, how have things evolved in rural, rural China?

David Dayton: 15:54

Real quick basically 79, 80,. The switch turned on and allowed people to start working. By the nineties it was just explosive growth and and and individuals were starting their own companies and people were growing. People were collectivizing talent and capital and starting to do their own businesses. And in the 2000s, when China was admitted into the WTO, 2001, it really just took off and they got tons of foreign investment and you see all the multinationals moving in and all of the Chinese from Hong Kong and Taiwan and overseas moved in, flooded really into China in the 90s and 2000s and started up all of these businesses and all of this capital comes in and so you literally have what took the United States from, say, 1950 to the 80s, so post-war until the 80s. Right, China did it in a decade and then they expanded on that in another decade. How did they do it? How?

Jared Ward: 16:45

was it even possible?

David Dayton: 16:48

Lots and lots and lots of reasons. But A they started at zero right, so they didn't even have cash. So I moved to China in 95 for the first time and I was given the option to be paid in cash or in exchange certificates foreign exchange certificates which was money for foreigners, because foreigners in lots of places still weren't allowed to use Chinese money, which was still a new thing. Most of my students had grown up not having cash right, they had tickets. So you had a ticket to buy a bicycle or a ticket to buy a bowl of noodles or a ticket to buy oil, and your work unit your government work sponsored work unit gave you a stack of tickets depending on your social status and your job, every month.

David Dayton: 17:21

Here's your stack of tickets for the month you run out of tickets, you're out of food. So they didn't have cash until the 80s, and so it's brand to brand speaking. So, a they're starting from nothing. B the stereotype of Chinese technocrats that just foresee into the future and are these brilliant strategists that's really partially true is that they have done an extremely good job with industrial policy and they said we're going to build infrastructure regardless of the cost, because that's going to help, we're going to educate. They're still doing that.

Jared Ward: 17:49

it's come to an end it's starting to fall.

David Dayton: 17:51

Now they're building it all over the world. You're exactly right.

Jared Ward: 17:53

In china, basically all the low-hanging fruits, like we've seen in latin america and guatemala in africa, absolutely like they're just adding infrastructure everywhere, like absolutely, it's brilliant's brilliant.

David Dayton: 18:03

For better or for worse, for better or for worse, they are building and the thing is, is that we complain about this or the United States gets scared about this? But who the hell in the United States knows how to build a railway or an airport or a stadium or a subway?

Jared Ward: 18:17

We don't build, who's going to do the long-term investment? Who's going to do the investment on like a 50, 100, 200 year time horizon, like we can only see things four years at a time.

David Dayton: 18:25

And who's going to build something in a non-democratic government with little transparency and a poor economy and high levels of corruption, Right? I mean, the United States just looks at that and Western Europe looks at that and says no chance. Right, there's just no way we're going to do that. There's too much risk involved. And China comes in and says we don't care how much risk is involved, We'll build it for you and we'll give you the loans to build it, and if you don't pay it back, it becomes ours. And so they've taken a lot of the risk out. Now it's come back to bite them and it's come the world right. And the world's needed it. And the world still does. And the West complains a little bit about it, but we don't have the capabilities to build that kind of stuff anymore. I mean, we're not bidding on building subways in Nigeria but China is Exactly.

Jared Ward: 19:13

Nobody gives a shit.

David Dayton: 19:14

Yeah and so anyway. So there's a lot of reasons for China's ascent, but high levels of education, high levels of industrial policy, high levels of investment in infrastructure. And then don't discount the idea of clustering, and this is probably if we can shift gears and talk about how do we separate from China or how do we reconnect from China. You can't, because even if you could go to Thailand or Malaysia or India or Mexico and find a factory that does what you're doing in China, the 200 little factories that are surrounding that factory don't exist and the infrastructure to get all of that from those little factories to the big factories and then to the port doesn't exist yet. And that's what China's done in spades that nobody else has.

Jared Ward: 19:58

Oh, a hundred percent. It's incredible. I'm curious about this one Bribes, dinners, payments, kickbacks, paying more to get what you've already contracted for.

David Dayton: 20:09

But the reality in China is is that things on the ground change and change very, very, very quickly. And it's not just infrastructure development, right. It's dynamics of supply, right. Supply is very unstable oftentimes for raw materials that you need, and so you go into a factory and you contract for something and they're 90% of the way done and they say we're not going to give this to you unless you pay a little bit extra and you've got a couple of options. A, you can fight tooth and nail and kill your supplier and get the deal, but probably the last 10% is going to be crap, right, because they're not going to finish it.

Jared Ward: 20:53

Oh, they're going to cut corners.

David Dayton: 21:02

They're absolutely going to cut corners right or there's not a lot of trust that's built there. Or you can say, all right, let's figure something out. You know why is this happening. What's the problem? What can I do? And sometimes the what can I do is you pay a little bit more. And if you pay a little bit more you still get what you want and it's still a good deal in the first place and you have a little bit of margin.

David Dayton: 21:21

And if you're working in China or third world anywhere right, developing country anywhere Southeast Asia, latin America, anywhere If you haven't built in a margin of error for their errors or for other errors or other issues or problems like delays or supply problems or labor strikes and things like that right, or you can compensate or at least not really get hurt, then you haven't been smart about the contracts you drew up originally.

David Dayton: 21:44

So recognize that you're in an unstable environment. The United States kind of thinks everywhere runs like us and if we have a contract, everybody follows it to the letter and that's the letter of the law. But contracts don't mean the same thing in Asia. Contracts are a starting point for a lot of people in Asia because you have to build relationships of trust because they have weak legal systems, right? If we get in a legal dispute in China, who's going to win? Well, probably the person with the best connections to the government, even though the legal system's getting better. If you get in a dispute with a factory in China and I've seen this multiple times I've got a buddy in China right now from Australia who is actually been denied exit from china. They got exit visa bans but because he sued a factory one but the factory then countersued him for, like, he spoke bad about them in a news release defamation defamation of character thank

David Dayton: 22:37

you, yeah, yeah, and they're countersuing him for defamation and because they are paying to have the suit delayed, he is indefinitely locked in China and can't leave. Oh my God, okay, so. So there's lots of times when paying a little bit more to get what you already contracted for is your best option, and you do it and you get out, and then, in fact, we realized is a he'll pay, which is a bad thing, right, you're going to have to negotiate around that but B this is somebody that we can work with. This is somebody that will allow us to negotiate and compromise and go back and forth together. And so you've also got to chit. Now you can go back to them next time and say, hey, we helped you out, it's time for you to help me out. I need this order two weeks faster Because we had a delay last time. I've got to make up the time. Here's the price. You said it, okay, but now I need it a little bit faster this next time.

Jared Ward: 23:26

Let's work this out together and because they asked and you agreed, now you can ask another. So the principle here is unstable environments. The only stable thing in unstable environments is your relationship correct and account for that. Correct, like, make sure there's wiggle room.

David Dayton: 23:36

You will probably have to pay a little extra, absolutely in in an unstable time, absolutely so, and to prioritize the relationship yeah, yeah, the relationship is is so much of what that matters and a lot of people say, oh, it's not relationships anymore. I really have a lot of Chinese friends who, when you talk about relationships, guanxi right, this relationship, this idea of connections and working together, they're so tired of talking about. Oh, we don't want to talk about this with this and that no-transcript.

Jared Ward: 24:34

You still think it's very much alive 100, it's 100.

David Dayton: 24:37

Well, the same people that are saying shy away from from, from personal relationships are also recognizing the fact that Xi Jinping is now in charge and it's an autocratic system and it's a top-down, and if you're close to Xi, you get what you want.

David Dayton: 24:51

And when Xi says something, everybody jumps and says OK, how quickly, how fast, right, and so they're willing to admit that it happens on a certain level, right, but then ignoring all of the bureaucracy and all the cultural history that it's happening at other levels as well.

David Dayton: 25:02

Level right, but then ignoring all of the bureaucracy and all the cultural history that it's happening at other levels as well. Now, to their credit, and specifically the Xi's anti-corruption campaign of last decade, a lot of it has been replaced. You can't just hand over a bottle of Jack Daniels or something like that, or a bottle of Baijiu, the white Chinese liquor, to an official. Nowadays. You can't take them out to dinner and wine and dine them the same way that you could before. There's a lot of things that have changed, but the fundamental nature of trust still has to be built at a personal level. You trust the people that you work with. We hire people who are competent, but we find out later that the people who we can trust are actually the people who get the most done, and the same thing is true for China.

Jared Ward: 25:42

I really want to dive into this one. When yes means no, what is this referring to? Like the displeasure of saying no in front of people?

David Dayton: 25:53

As you ask me questions, a couple of times I said yes, yes, yes, yeah, yeah, yeah, yeah, yeah. That doesn't necessarily mean I agree with everything that you've said in your sentence. It means I'm hearing you and in China it's just that, but more so. So you're telling me, david, I have to have this done on Wednesday, and you say yes, yes, yes. And that yes, yes, yes means I know that you have to have it done on Wednesday. I told you there's absolutely no way we can have it done on Wednesday and I haven't changed my opinion. But I hear what you're saying, but that's way too long of a sentence. So I'm just going to say yes, yes, yes.

David Dayton: 26:25

And Americans were like, oh, he said yes. Yes means yes. When does yes not mean yes, right, and so a lot of times you'll be in negotiations, you'll be in discussions, and negotiators that have never been to China before will go in. They'll negotiate something. They'll. I'm like what you know what? What's going on? How come nothing happened? And the reality is is they said yes to everything that you said, meaning they affirmed that they heard everything that you said, but they didn't agree with everything that you said, and there's a huge difference. So how do you?

Jared Ward: 26:57

frame a different question, For example like how do you, how do you ask? How does an American ask no, Are the goods going to be done by the 21st?

David Dayton: 27:06

Yeah, great, great, great, great, great question. So how do you actually get around that? And and the answer is, is that you make them not make, but you, you get them to respond back to you the things that they can commit to and can do. If you say I've got to have this done by next Wednesday, and they're like, yes, yes, yes, yes, yes, before you leave, you say, okay, can you go back and specifically tell me what you're able to do and what you can commit to? And they'll say, yeah, we're able to get this done by Friday and we'll work really hard and we'll commit to getting it done by Thursday evening. You know, 2 am. You'll have it by the end of the last shift.

David Dayton: 27:43

And you're thinking in your head well, I asked for Tuesday and you said yes, but now you're telling me Thursday and, yeah, that's exactly right, but you've got a commitment from them of Thursday and you have a capability understanding of typically it takes us till Friday, but because it's important to you or because whatever else we've negotiated, we'll move it up. You know a shift for you. We'll get it done one shift early, you know 12 hours early or something like that, and that's what I've done.

Jared Ward: 28:06

So many manufacturing runs with different Chinese factories and even I'm learning a lot of this too. It's like no, it's so true, like everybody. You ask them like, oh, is everything going to be on time? I'm like yeah, oh, of course You're not going to say no.

David Dayton: 28:41

Because it's. The simplistic answer is they're not going to say no, right, Because it's it's. And the simplistic answers they're not going to show because it's a shame culture. If I say no to you in front of all these people, then I look bad, right, and all my employees know that. But if I say yes and you agree and everybody's happy and we take photographs, then we can shuffle off to a side room and we can discuss all the details and the employees don't. We're all in agreement. We've got a great start to this.

David Dayton: 29:04

Let's move forward, right, but what happens to Americans is they get that public perception, the agreement, the shake hands, the photographs, and then the Chinese are ready to go back and have a little negotiation session and the Americans get in their cars and drive away and they skip the part of okay, what's realistic, what actually has to happen to get things done in the factory. And so you need to understand not what your factory tells you that they can do online, but what they're actually doing and what they can commit to and what they're willing to commit to for you to get your projects done. And then you need to base your timelines off of that, and if they don't work for you. You either have to split it up and give it to somebody else, right, or find somebody else completely.

Jared Ward: 29:41

That's very interesting. That's very practical advice. Actually, I'm curious about why karaoke Like getting absolutely shit-faced in a karaoke bar and why do the Chinese do business like that.

David Dayton: 29:56

So what I've been told from Chinese is this we don't have a good legal system, so we have to be able to trust you. And to be able to trust you, we need to recognize that you're going to be able to make some sacrifices with us, and that sacrifice needs to be something personal, because this relationship is personal. So Americans think that business is business and personal is personal, and Chinese don't have that distinction. Everything is just all the same together, right, they don't separate those two things, and so and so, if you're willing to sacrifice yourself, if we can get drunk together, throw up on the floor, fall down staggeringly drunk together, it's a bonding experience, right, it's an opportunity for us to do something.

David Dayton: 30:39

So in the U S, we go play golf, maybe we go to an NBA game right, we have all of these diversions that we pay for because we have a structured legal system that backs us up. But we recognize that trust is important, but we're going to do it in different ways. They're recognizing that I don't have a legal system to back me up. I have to figure out how to work this out with you. So I hate karaoke and I don't drink, and so for me, I would have to go into relationships and straight up tell them I hate karaoke and I don't drink. We've got to figure out something else to do. So we would do picnics, we would go play basketball. So oftentimes you'll have factories that have a basketball team, not a basketball court or a soccer team. So what if you suck? Go play, right. If you suck, it's even better, right If you suck, it's even better, right?

David Dayton: 31:21

Because then they're like oh, we can beat the Americans at their own game, kind of thing, literally. And so you have to participate in events that get them to trust you. And I've had factories that have come back to me, dozens of factories over the years, that said we didn't really trust you until the second or third order because you didn't go out and do karaoke with us, you didn't go get drunk with us, right, and it takes a little while, right. But then you have people to come back to you and say things like I remember one sales manager for big, huge factory said to us I love when you come in your orders because it's a Wednesday night. You always come and do QC on Wednesday nights.

David Dayton: 31:52

He's like I love when you come and do QC on Wednesday nights because I know I don't have to drink and I can go home and see my daughter. He's like my daughter and my liver love you. That's awesome, right, yeah, and and and so you, finally you get you. Finally you get into these relationships where people are like, oh, this is consistent, this is valuable, this is good, I can trust this guy, and but it takes a little bit longer to do so without the karaoke, without the drinking and this this is interesting right here third world logistics problems.

Jared Ward: 32:18

So people talk about first world problems, third world problems, but what about third third world logistics problems, like drivers getting kidnapped, like holding your shit?

David Dayton: 32:27

we had a qc guy that we. So our model was that we would have multiple of our own qc employees and managers that we trained, that had worked for us and the larger the project we would put qc managers, embed them in the factories, so they'd live in the factory for the entirety of the production run so they could manage everything that was going on. They could see everything that was happening. And we did this big, huge run and at the end the factory had run out of money, but they'd finished our project. They needed us to pay the whole thing and we had gotten some kind of terms I don't remember what they were 30 or 60 days after or when it landed and we paid. I don't remember what the terms were at this time, but anyway, they said we need it now and we're like no, no, no, no, no. We have an agreement. We can't do that. We can give you some of it, we can't give you all of it. We just don't have that much cash right. That's not cash for us right now. And so they held our guy hostage and our product.

David Dayton: 33:19

Do americans? Do we call the police local police? Yeah, well, in a local town, who's going to win peddling influence back and forth with the local police or pushing an issue. Obviously, the local factory they're probably employing relatives of the policeman who is there, right, they're paying taxes that are paying his salary, right, they're the ones that are seeing him on a regular daily basis.

David Dayton: 33:39

We just came in, ordered a project and we're going to leave. We didn't have any relationships, we didn't have any guanxi, we didn't have any influence, and in a corrupt system where you don't necessarily not even in a corrupt system, in a system that doesn't have a good legal process, right or great enforcement, there's no way we were going to win. And so we had to pay all of it to get the guys out and to get a product out. And so there's logistical issues in third world countries, like trucking and roadblocks and traffic jams and shipping delays, and then there's kidnapping and bribes and all sorts of other stuff that you don't learn about in school, that you just have to figure out when you're on the ground and you realize oh my gosh, they kidnapped my employee. What?

Jared Ward: 34:17

the hell do I do now? So have you ever gotten an employee kidnapped?

David Dayton: 34:21

Well, that was our store, that was us, that was that was, or that was our store.

David Dayton: 34:23

That was us, that was, that was, that was us, that was okay, that was your company, that was, that was in wago, the qc, that was yeah we were out of shenzhen and in wago there was, uh yeah, he got kidnapped and and and when they said it at first I'm like, oh, I just call the police. I mean, I literally just kind of brushed it off right and you know, and as it got into like day two and day three, I realized, oh, this is, this is serious. You have to figure out the logistics of situations that you've never contemplated, ever in your life.

Jared Ward: 34:52

Yeah, that's even just feeling that it feels so foreign. Yeah, the fact that you'd have to deal with that.

David Dayton: 34:59

So the same guy. Here's another. Here's another quick story here. The same guy after he'd worked for us, the guy that got kidnapped. He'd worked for us for three or four years and he came to us and he was a fantastic QC manager. We really loved him. He said I've got to quit next week and I said no, no, no, no, no, no. What do you mean? You've got to quit next week? Do you have another job? Like I'm, you know, big brain, I studied anthropology, I studied Chinese. I, I know, I didn't know, I didn't have a clue. Guys like no, no, no, you understand.

David Dayton: 35:43

In my hometown there's one shop. The people who own the shop have a daughter, my parents and those people set up an arranged marriage and because I've gone to college, I'm going back home to run the shop and getting married. I'm like, oh, that's easy, we can fix that. I'll pay you more than what you'd make. Find somebody else to run the shop and you and your wife come and live here and you can still work for me. He's like no, no, no, you don't understand. I have to go home and take care of four people and a shop and I'm the only one with an education, and that's what's happening and there's no negotiations. I don't have a choice. I'm like what do you mean? You don't have a choice? Right again, american pops out. What do you mean? You don't have a choice. You're, you're a 26 year old, you know, college graduate with multiple years of experience. What do you mean? You don't have a choice? No, no, no, no, no. You don't understand. I told you you wouldn't understand. You're American. You think everything's about you. I am doing this for my parents and her parents and for our children. I'm doing this for generations.

David Dayton: 36:33

And he left and you know we had to replace him and for as difficult as it was for us to replace him I't imagine how it was was for him right? Did he have regrets that he had to leave the job that he was in the city, the life that he was in, to go back to this village and work and manage, you know, a little shop, you know? Did he wish that he could have had some negotiations? Or was this his filial responsibility? Was pleased to go back and help his family? And I don't know right, literally, he was right. I didn't understand it. I mean, I can, intellectually, I can map out all of the different reasons and all the understandings, right, but, but, but. In my heart I'm like that's crazy. I don't understand how that happens, but for him it wasn't, wasn't a choice, yeah, in american culture.

Jared Ward: 37:15

It's, it's almost completely inconceivable.

David Dayton: 37:18

Yeah, if your parents said to you drop whatever you're doing right now, move back to pod wherever, run a grocery store for me and get married to somebody that you've never met and you've got a week. I would say F off, Exactly Right. Even even even if it was your parents, even if you love your parents, you'd laugh. And then you drop the phone and hang up and you know, and then when they called back, you know it would get a little more tense as the conversation went on and and I don't know if he had that conversation or not, but the decision had been made and he was going home and it wasn't a discussion and I didn't understand. He was right, and there are cultural things like that about logistics, about people management, that you don't understand, and even when you are, informed.

Jared Ward: 37:59

You still might not understand. I'm I'm curious about this. Basically buying art chinese versus american views on buying art like. So you say here, what if your boss invites you to an exhibit of her cousin's artwork like? So what is? What meaning are we missing?

David Dayton: 38:15

so this is, this is exactly what happened to me. Um, so I was, uh, working at a university here in the united states and my immediate supervisor had a cousin who was an international artist and she was having an exhibit. And my supervisor came to our house, we were having a dinner, we're having a thing for our department and she told me and my wife, my, my, my cousin is having an art exhibit at this gallery. We would love you to come. And so, as an American, I'm like, oh, that's so nice of you to invite us. I didn't know anything about it. It was kind of a small thing. I wouldn't have known about it had she not have told me. And so my thinking was, oh, fantastic, this is kind of a nice little cultural thing. I get to experience something else. You know, it's social time outside of work, where I get to spend a little bit of time with my superior, which is a good relationship building kind of thing. Right, I thought, great, awesome, I'll do it.

David Dayton: 39:00

My wife, as soon as everybody leaves, says how much is the art? I'm like, oh, I don't know, we don't need to buy anything. And I just, you know, we look at all the pieces and we're checking everything out and my wife starts asking about prices and she's like, well, what about this, what about this, what about this? And she finds a piece that's not the most expensive, but certainly isn't the least expensive, and she's like we want this one. I'm like, no, you don't have to do that, you don't have to buy anything. She said, no, no, no, I really like this. And she's just talking this one looks so good in David's office. I think that we need to get this piece.

David Dayton: 39:35

And she bought the piece of art. And I came home and I said hey, we really didn't need to buy that. And she's like you're trying to get a promotion, right? You're trying to get a different position at the university, right? She has to write a letter for you, right? I'm like, yeah, but she'll do that anyway. She's like now she will for sure. And so her thinking was so strategic just across the board. She just recognizes your supervisor, asks you to an art show that's related to her. We're definitely buying something.

Jared Ward: 40:01

That's cool. Yeah, I feel like it still happens in the United States.

David Dayton: 40:07

For sure, but for me, I didn't think that it was necessary. It doesn't hurt.

Jared Ward: 40:14

Would somebody else more?

David Dayton: 40:15

strategically minded than me. Think about that. And I said for sure, for sure, for sure, right, and I'm not saying it's exclusive to China, and probably all of these things that we're talking about aren't necessarily exclusive to China, right, but but they're manifest in those relationships, and that's just one of them is that you have conversations about things, and the same conversation with the same words means two different things to two different people involved. For my wife it was, oh, she's asking us to come and buy, and for me it was, oh, we have an opportunity to interact outside of work.

Jared Ward: 40:42

Interesting. We touched on this a little bit before, but especially in recent years, the Chinese government expanding to Hong Kong, there's fear that they're going to try to take over Taiwan. There's that whole debate on is China actually, is Taiwan a part of China or is it actually separate? What do most people get wrong about their perception of the Chinese government as they're building infrastructure and they're overreaching for Hong Kong or they potentially might go take Taiwan? What would you say are Americans' biggest misunderstandings, looking at the Chinese government's actions from the outside in? That's an interesting question Because I think we most Americans including myself, I think a lot of times we assign malice to it, yeah, when maybe that maliciousness might actually not be there, or maybe are we right, I don't know.

David Dayton: 41:41

In the case of Hong Kong and Taiwan. I think that we misunderstand the importance of security and sovereignty to China. I had a whole bunch of Chinese friends that have said to me about the Taiwan and the Hong Kong issue what if we paid a whole bunch of activists to rally for independence of Hawaii in Hawaii? And I'm like, well, as long as you didn't break any laws. Like, there's people that have been rallying for Hawaiian independence in Hawaii for generations, right, go ahead. And they're always like, oh, you totally don't believe that. You're just saying that. I'm like no, no, no, no, no. You want to vote for Hawaiian independence, you want to promote Hawaiian independence? Go ahead. Right, that's okay. And where that example falls apart is like well, what if we sold arms to Hawaii?

Jared Ward: 42:30

Okay, there you have the Hawaii, but.

David Dayton: 42:32

Hawaii doesn't have its own currency and it doesn't have its own government and it doesn't have an unended civil war with the United States government. So there's a little bit of nuance there. But the idea that there's this getting back to the original question, there's this overarching autocratic bureaucracy that makes decisions from the top down, at every single level, all the way to the ground. That's probably the thing that most Americans get wrong. There absolutely is autocracy at the top and there absolutely is rules that are promulgated from the national level out to the provinces and then the counties, and then the states or in the cities, but how they're implemented is very different. And so every single province, every single city, those territories, they're going to implement them the best way that they can achieve the goals for their specific area.

David Dayton: 43:18

And oftentimes what the national government does is they'll allow a period of two to five years of experimentation. They'll say here's the law, and it's very vague, and here's the goal and it's very specific. Figure out how to get from here to here. Interesting. And then the provinces all do it differently. And then after two to five years, they'll say, wow, nanjing is freaking awesome at this.

David Dayton: 43:37

You've got the Nanjing option or you've got the Guangzhou option. These are your two choices and they then force everybody else that wasn't as successful as these two places to go forward with those kind of policy implementations. And so that happens a lot. And so it's not that Xi Jinping is saying go arrest the foreigner on block seven of street four in Shenzhen at two o'clock this afternoon, and you know it filters all the way down and somebody runs and goes and does it. It's not that specific. That's probably, I think, the thing that most people get wrong.

Jared Ward: 44:03

Yeah, well, also like there's an unbelievably positive effect that that has like having having one administration making decisions from the top down.

David Dayton: 44:14

for you know, having one administration making decisions from the top down for 100 years. What's the famous quote from the journalist in the United States? A chill ran down my leg at the speed of autocracy, or something like that. Shivers go down my spine at how fast autocracy, how efficient totalitarian regimes, get things done. Yeah for sure If you've got no opposition. How quickly can you get things done If you can just say to all the environmentalists that are complaining shut up, we have to have this road here, Shut up, we have to have this bridge here, Regardless of how many dead turtles there are, boom it gets done.

Jared Ward: 44:46

So obviously there are negatives. I think that's what Americans get wrong is we think so much in terms of like four-year increments. And it's why, like I talk about this all the time, I'm very against Trump's tariffs, not because I don't want America to become, I want America to become a manufacturing economy. I think that'd be awesome for us as an economy, it'd be awesome for the middle class, working class. But the problem is, whatever tariffs trump puts on china, say, he put it puts a 60 tariff, kind of like he did in his first presidency. He did 20 tariffs across.

Jared Ward: 45:24

Like so many different issues, I felt that, and all of a sudden, the price of goods, just they would just pass on to the consumers because all of a sudden, their goods are at the port and, okay, there's an 20% tariff on this that you have to pay and you just mark up the price of goods. My biggest issue with tariffs isn't the fact that, okay, trump is doing tariffs and that's bad. It's more like in order for the US to become a manufacturing economy, that needs to be like a 20, 30, 50 year plan that people are aligned on, and I just feel like that's not going to happen in the United States. Whatever he does, if a Democrat gets elected like he'll scrap the plan. What's?

David Dayton: 46:03

been really interesting. Two responses to that is that A, you're exactly right in that we don't have any industrial policy, long-term industrial policy. Americans are scared of that. Americans don't want the government involved. So as I go around, as I set up these programs that I've got called Doing Business in China and Doing Business in Southeast Asia and Doing Business in the Middle East, right, as I set up these programs with governments and with industry and with educators, one of the things that I found is that every single place that you go, the best place to go is the embassy. Go to the embassy, figure out what they can do for you, right. But as an American, it took me two or three countries before I realized, oh, the embassy's got options for me overseas. Because my initial thought is get the government out of my life. I don't want the government in my life because they raise taxes or they cause more expenses or they cause more paperwork for me, right. But I agree with you in that we don't have any industrial policy. For whatever cultural reasons or political reasons, we don't have industrial policy, and so everything is in these four-year chunks.

David Dayton: 46:54

Now the second part of that answer is is that what Trump implemented? Regardless of if you agree with it or not, it was the first thing that was done to China in 25 years, and it created a systemic change. So, for the first time, you had military and politicians and academics and businessmen that were all saying, in 2017, for the very first time, ah, maybe China is a problem, maybe we do need to do something, but it took somebody to be able to say the speed of totalitarianism. It took somebody to be able to say I'm going to do this and we're going to get it done, and we're going to start something. Right or wrong, we started something. What was interesting, though, is that, as much as everybody complained, the Biden administration has continued all of those policies.

David Dayton: 47:34

They've continued those policies, so those policies have now been there for almost eight years, right, and Trump's either going to continue or increase them, probably as we move forward right, and so there's been some consistency for the first time, and so there's hopefulness in that, regardless of what your position is on and I'm not an economist, I'm not going to get into how tariffs work but there's some consistency in the China position. I think I heard somebody quip the other day that China's the only issue that both Democrats and Republicans can agree on. I don't know if there's anything else that everybody agrees on. China's the problem, and that's the only thing that nobody's going to argue with you on.

Jared Ward: 48:12

Yeah, I think you worded that well. Industrial policy that's something that I wish the US could be more strategic on that, and I wish we could think of things in terms of like a hundred year time horizon.

David Dayton: 48:24

What China?

Jared Ward: 48:25

has done is spectacular like incredible.

David Dayton: 48:37

China has five year plans and they implement these five year plans and then they build on those five year plans the next five-year plan. So I had a Chinese person that told me when I was doing some research in Shenzhen in 2018, he says, if you want to know who's wealthy now or why the people who are wealthy now are wealthy and who's going to be wealthy next, look at the five-year plans. He's like that's where, he said. Literally, he said that's where the piles of money are. The piles of money are in five-year plans and so the US has started to do this with the CHIPS Act. So we're saying we're going to pay to have companies reshore back onshore stuff into the United States, invest and build here, and we're probably never going to get back to building cars or furniture or things like that on a mass scale. Our education levels have gone up to the point where that probably isn't going to ever be feasible. Be feasible, but chips and stuff like that are, and technology is to a certain point. So we're starting to build those things and you know, there's an argument whether or not it's competitive or not, but but there's a definite argument for self-reliance and self-sufficiency and national security involved in that and that's part of that industrial policy.

David Dayton: 49:30

Right, we saw that in covet. All of a sudden, we didn't have medical supplies. Everything was made in china. We couldn't even buy masks. Yeah, right, right, and and and. To think that if you have a medical emergency and you have to import the stuff to take care of it, what a precarious position you individually and us as a country are. And so there's some real value into having some industrial policy. And I don't, I don't know to what extent, but we do need to start somewhere, and hopefully these last couple of administrations have maybe not hit the right note, but are at least starting to play the song.

Jared Ward: 50:02

I think I do need to say a positive word, though, on democracy and Americans. I think socially, social issues, we move very fast. I think obviously we evolve faster than most countries, um, and social issues probably evolve much more slowly. And in in china, or their authoritarian governments, um, yeah, it's one positive for sure, for sure, right I'm not trying to disparage democracy anyway.

David Dayton: 50:27

I'm just saying, though, that our focus has been in the american dna. Is government bad? Yeah, we found it on the principle of government go away, and so we're very wary of industrial policy because it looks like robber barons, it looks like big industrialists and even the big fear about trump and is elon musk right now right, one of the big fears like, okay, how connected is a guy that's building rockets and cars and social media? You know what does that really mean for somebody involved in an administration's?

Jared Ward: 50:58

yeah, very true. No, your your example of the embassy, like that's such a perfect example. Like you didn't go to the embassy, you didn't think, like it didn't cross your mind that I lived in the government 20 years and never went to an embassy unless I had a problem like unless there was no place else to go.

David Dayton: 51:12

I never went to the embassy and I had a problem. Unless there was no place else to go, I never went to the embassy. And all of a sudden, I'm setting up these programs and I realized, wow, they actually have an entire department in the embassy just to help people like me. And when I realized that, oh my gosh, my job became so much easier.

Jared Ward: 51:24

That's awesome. Well, we're running low on time. David, it was awesome to have you in.

David Dayton: 51:42

Pleasure to speak with you. Where can people follow you, because you've obviously got some really interesting stories. Are you active on LinkedIn or YouTube or any of these platforms and doing business in Southeast Asia? That I do for companies, for profits. I go into companies, I help them figure out strategies on how to manage operations either going to or getting out of, or participating in these areas and I'm in the process right now of developing the online versions of those so people can check them out on their own, without having me go and deliver something in-house.

Jared Ward: 52:11

But SilkRoadInternationalnet, SilkRoadIntailnet that's where I'm at Awesome. Give David a follow. Thanks for stopping by.