The Jordan Harbinger Show - 684: Desmond Shum | Wealth, Power, Corruption, and Vengeance in China

Episode Date: June 14, 2022

Desmond Shum is the former husband of arrested Chinese billionaire "Whitney" Duan Weihong and the author of Red Roulette: An Insider’s Story of Wealth, Power, Corruption, and Vengeance in Today’s China. What We Discuss with Desmond Shum: Why Desmond's intellectual schoolteacher parents were treated as undesirables by the CCP, and how this led to his family's self-exile to then-British Hong Kong when he was 10. What the CCP does to keep evidence of events like the 1989 Tiananmen Square Massacre out of the public eye -- and what Desmond's impression of this particular event was like. How the economic necessity of corruption to make business sustainable under the watchful eye of the CCP is used as a bargaining chip to keep the operators of these businesses in line. The path that led Desmond and his wife Whitney to the inner circle of the CCP and allowed them to make billions with the government's blessing -- and the amount of work that went into maintaining the network that allowed this to continue. The circumstances of Whitney's disappearance, and the eerie phone call he received from her four years later urging him not to publish his tell-all book. And much more... Full show notes and resources can be found here: jordanharbinger.com/684 Sign up for Six-Minute Networking -- our free networking and relationship development mini course -- at jordanharbinger.com/course! Missed our conversation with Annie Duke — World Series poker champion and author of Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts? Catch up by listening to episode 40: Annie Duke | How to Make Decisions Like a Poker Champ here! Like this show? Please leave us a review here -- even one sentence helps! Consider including your Twitter handle so we can thank you personally!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Coming up next on the Jordan Harbinger Show. The reason I assume the state have taken her is, first of all, she was bent from the state, by the state, from leaving. Secondly, is on the day she vanished, three other staff of her were vanished at the same time. The three staff, three of them were vanished for three years and then reappear three years later. And then she came out two days before my book came out. When you call me to cancel the book launch. Welcome to the show, I'm Jordan Harbinger. Gordon Harbinger show we decode the stories, secrets and skills are the world's most fascinating

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Today we're talking with Desmond Shum. The best way to explain this is he's like the Bill Browder of China. If you've heard our episode last week with Bill Browder, this episode today will really fall right in the place for you. Those two have a lot in common. Some of the world's most powerful dictators want them dead. They're spilling the beans about the oligarch money. In this case, Desmond was essentially a Chinese oligarch, and now we're here spilling the beans about the inner workings of Chinese elite society and business dealings.

So the gist is this. Desmond and his ex-wife built a multi-billion dollar business, just as China was taking off. I mean, we're talking airports and trade hubs and real estate, just massive, massive infrastructure projects. they were both very well connected inside the Chinese Communist Party. And then, well, yeah, that's when things get out of control, right? Things go downhill.

His wife vanishes. She's disappeared, to be clear. She doesn't leave. She gets disappeared by the government. No one will help him. And, well, she hasn't been seen since except for one very bizarre interaction that we'll talk about here on the show. Of course, there is a lot more to this story.

And today, we're going to start closer to the beginning. If you're interested in China, dark money, oligarchs, crooked cats, capitalism and getting a glimpse into doing business at the highest levels of Chinese society, then this episode is definitely for you. Now, here we go with Desmond Schum. I want to start at the beginning here. Were you born into the Chinese communist ranks, so to speak? No, not by any means. You know, my parents are actually, I mean, both my parents are, you know, in China in the 60s, 50s, they have just essentially a car system. My parents are both from intellectuals, family background. So if you're intellectual, you're actually bottom of the pile. So my

father was cast into the black fifth category. The five black categories? Yeah. Could you explain what that is a little bit? Essentially, it was a car system. So the peasants and the factory workers are the top of the part and food chain. And then intellectual gets to the bottom and business people are get to the bottom of it. And then if you have the bottom of it, I mean, where you rank, in this hierarchy affects everything. It affects what kind of job you can get, what kind of pay you allow, even on the same job. What kind of school your children can go to?

In my parents' case, my father and my mom, despite whatever the academic performance, the best school they can go to is teachers' college. So that rich is what they went. Both my parents are secondary school teachers. And it seems like in Chinese society, teachers would be held at high esteem, but yet at the same time, you say that intellectuals and business people, the only school they could

get into is the teachers' college? That almost seems backwards somehow. I guess historically, teachers are very well respected. So culturally, it is very well respected, but obviously, especially in the 60s, my parents was paid. Today's stranger would be of something like $5 U.S. a month. So you don't get much pay. Yeah, okay. They might be respected, but they're not respected to the point where people are willing to put their money where their mouth is. That's from the sound of it. Even today, actually, even in today's China, the pay is very, very low. What they got is they got actually a lot of, you may call it bribery or pocket money from

the parents. And then you do a lot of tutoring on your side, and that's the bulk of your income. It's not your official job. And then back in the, you know, 50 years ago, that is no such thing. You know, that's no side job. Right. Okay, yeah, that makes sense. So now teachers pay still low, but they take side hustles and maybe, do you call it a bribe?

Or is it more like, thanks for doing a good job with my kid. Here's an extra thousand dollars for the year. I don't know what you would call that. Yeah, it's a tip, but it's a lot of tip. And actually, to the point now that, you know, the parents would tip more would have the children got extra care. Yeah. And then they will let you know if not tipping enough through your children. Right.

Like, hey, your son failed the test. I don't know why, because you never pay me any money. But if you pay me money, maybe he won't fail the next test, and maybe he'll understand chemistry. They wouldn't speak it out to such extent, but you can't hit. Yeah, yeah, you can read between the lines. Yeah, exactly. Yeah, absolutely.

We have to keep things kind of fast. So I'm blowing through some details here, if you'll forgive me. But you moved from China to Hong Kong as a kid after Mao dies. Yeah. It sounded like you moved because people couldn't leave China while Mao was alive, and maybe people saw some of the writing on the wall when Mao died and tried to get out? Is that kind of the story there? We got to move because my mom's father, so my maternal grandfather, was living in Hong Kong.

So we used that as an excuse for application to visit relatives. And obviously, you know, 70s in China, if you get out of China to visit or whatever excuse, you never return. But it was a long application process. I think it took like three, four years for my parents to get the permission to visit my maternal grandfather in Hong Kong. That's how we get out. Wow. You mentioned kind of growing up after that in Hong Kong in, I Won't Sugarcoat it, kind of the ghetto.

Like you kind of lived in some dicey housing areas from the sound of it. Yeah, it was true. I mean, when we first got in Hong Kong, you know, in the book I talked about my mom crossed the border between Hong Kong and China with essentially what, $2 US in her pocket. Wow. We went to take shelter essentially with my maternal grandfather and my father came to join us a year after we arrived Hong Kong.

And then it was eight people in a 700 square feet apartment, three generations. I was sleeping in a sofa bed in the living room. My parents has a bed on a sort of a corner of the living room. So that's how we started. When you think about 700 square feet and eight people, no such thing as privacy. If you got to go to the bathroom, you might as well. I mean, it's just you got nothing. Like, you're just always packed in there.

It's a wild way to live. I mean, going from where you were to where you ended up is quite a feat. Tell me about watching the Tiananmen Square Massacre on TV. You write about that as a kind of a defining moment. Actually, describe briefly what that is, because I think a lot of folks, they only have heard of it and aren't really sure what it is. Tiananmen Square, what happened was 89. China has an opening essentially in 1978.

The reason they went on this opening a reform part wasn't because, the CCP changed their mind. They said we want to embrace the world. We want to live the book. It was because the state was absolutely bankrupt. They have no choice, but let the president say, well, you decide what you want to grow. And then you can sell whatever you grow into the market.

They're less more entrepreneurs. Well, we cannot fit you anymore. All the stay-on-count companies are bankrupting. So why don't you go out and you can open your corner shop? Today, we call the reform opening. But essentially, in 1778, that's what happened. That was the state of China. And then so by 1989, it was about a decade after the sort of quote-and-co reform opening,

it was rampant corruption. So the start of it was a protest of rampant corruption. So you have mass protests across China in all major cities. And then you have the entire population participating. It was actually protesting against corruption. And then you have the student getting involved. And once the student gets involved, And then you have obviously a Berlin Wall coming down at the same time.

Then the student leading the charge and said, we want democracy. We want to look at what's happening in Eastern Europe. What's happening in Soviet Union, you know, they are all changing the form of government. Those are all ruled by the Communist Party. We want to change. We want the same thing. And that was the beginning of it. Obviously, you know, in the West, not the Western Europe and Soviet Union, the government basically said, well, you know,

we don't want to open fire on the population, we give up. But in China case, the Communist Party said, well, we want to keep the power, and we don't mind opening fire on population. So you have essentially armies surrounding Beijing, and then deep in the night of June 4th, you have tanks thrown into, and then cut the power of the Tiananmen Square,

which is the biggest public square of China in China, and you have the time, I think you have tens of thousands of students, essentially camping out like the Wall Street protests, you know, they're camping out in the Tiananmen Square and occupying the square with their protest. And then essentially you have armies surrounding it and moving in, opening fire on the students and tanks throwing in. And a lot of people will see the post of the tank man, right?

Right, the tank man. Yeah. In the deep, in the night, the tanks actually roll over people. So most Chinese are not willing to discuss this. I know you live in the UK, so it's different. But when I ask Chinese people about this who are in China, they'll say something like, I don't know anything about it, I haven't really heard about it, or my parents told me about it, but not really any details, or sometimes people will say, my uncle went and we never

saw him again, but nobody really seems to want to talk about it at all or even really know any details about it at all. And when I show them the Tankman photo, one of the most famous photos in the world, if you Google Tankman, you'll immediately recognize it. My Chinese friends who are, I'm talking to them on Skype, they go, I've never seen this in my life. And I don't think they're lying. They really haven't ever seen that photo because you can't find it on the Chinese Internet. Yeah, absolutely. I mean, one of the most important thing for the Communist Party is controlling the storyline. The book 1984, right, that's the line that you, the person who control the past, control the present, the present control the future.

One of the most important thing for the Communist Party of China is controlling the storyline, controlling the history. So essentially, entire modern Chinese history is wide-washed. I mean, I mean entirely, the entirety of it. And 89, obviously, it was brushed off, and then never to be, you know, if you look at any books in China published, I mean any books, go to a bookstore, 10,000 thousand books in the bookstore, there would not be a single book, a single paragraph mentioning Tiananmen Square, June 4th, 1989, not a single paragraph. And then obviously, it's a completely wash-up on the Chinese Internet.

So, I mean, it is true. I mean, majority of the people born in the last 30 years who have never heard of this. And then the parents don't want to, you know, get them into trouble. They don't want to talk about it. So that generation last, essentially, 30 years never heard of this thing.

And the people who heard of it, experience it in China, don't want to talk about it because there will be a repercussion. You can't hear you talk publicly about it. I think that's a good sort of preview because you're watching this live on TV. while you're in Hong Kong and people in China then and now, unless you were there,

haven't heard about it. Like, it's completely absent from history. It's really something else. And it sort of gives you a preview into some of what we're going to talk about here in a minute, which is you started to see corruption. You get into high finance in Hong Kong. You're not very good at it. I can relate to that. I was in high finance on Wall Street, had no idea what the hell was going on. And you start to see corruption, right? And some of the examples you give are the Communist Party's Navy smuggling beer, which is kind of pathetic and funny, but also really like, what's the status if your armed forces are in the bootlegging business? I mean, that's really kind of like a low rent way to generate revenue, but it's almost like

a metaphor for the whole thing. So, yeah, just continue on, you know, like I talk about the state was completely bankrupt in 1978, and that's why they started this quote-unquote reform opening. And because the states are bankrupt, the army is allowed to go into business and essentially generate revenue to feed yourself. So the army has been for a long time for almost 20 years in all sort of business, from real estate development to any store you can think of. So I went back to Hong Kong after graduating from Madison, Wisconsin. Very soon, I was in private equity. I was in the business at the beginning of the industry, essentially. Today, we talk about like hundreds,

even thousands of private equity firms in China. But at that time, beginning of the 90s, you almost can count by a single hand how many firms there is. So I was with a U.S. firm. One of the business lines, we invested in fast-moving consumer goods. So they have,

one of the main business type was Hennington Beer. So they were the importer and distributor of Hennington beer into China. We essentially, I mean, the firm grow, Hennington from zero revenue, I think, by in probably three years to 30 million in revenue. And I was assigned by the private equity firm to sit on the board representing the investment firm on that distribution company. And then essentially, because we're American firm,

we don't want to get our hands anywhere close to all this dirty money fraud. So what we want to do is we tell the management, it's like, okay, we take the beer in Hong Kong, you guys figured out how you guys ship it into China. You know, this is a black box to us. You know, somehow we get the beer to you, hand it off in Hong Kong, and somehow immateriously reappear somewhere in China. And so what happened in between is a black box, we don't want to know anything about, right?

But, you know, I sit on a board and then I talk to management all the time. And then one of the time they come to me and said, well, some general from the Chinese Navy reached out to us since they offered to ship the beer with their gunboats into China. Obviously, we need to pay them. You know, I was astonished. Yeah. I mean, I grew up in China when I, you know,

my first 10 years of my life was in China, you read all this comic book and telling you how heroic the Chinese, the PLA, People's Liberation Army was, you know, during whether it's the quote-unquote liberation of China or fighting the Japanese in the Second World World. You just have this image of like, you know, how great the military people are and how, how, you know, dedicated they are, how much self-sacrifice they have been doing for the country.

And then you sit on the border, and then you're like, oh, okay, they are offering to use gumbo to ship beers into China for pay. Yeah. It was quite stunning for me. I mean, it was an introduction class for me to into the Chinese business world. Yeah, some intro to the Chinese business world. Yeah, you say in the book, the message from China was, give us your freedom and we will make you rich. And there's all these gray areas in the laws so that people could always be targeted for corruption. So if you fall out of favor with those running the government, suddenly they slap you with corruption charges and you go to prison or you end up getting executed. And the game is dodge those penalties and dodge the actual rules that suckers play by and B-10 moves ahead. And you said

when you met your wife, Whitney, she's like, well-connected, has ambitious goals. She wasn't one move ahead, she was 10, and had all of the right connections to make things happen. We kind of touched on the connections thing earlier, but anywhere where you need a ton of connections, like with the Communist Party, that breeds corruption, as we mentioned. But it seems like you almost, even the non-corrupt have to become corrupted to succeed. Would you agree with that? Yeah. I mean, just some more background, maybe on the legal system, how why things are operate, the way it operates. First of all, there's several issues here. One is the law was by design to be fuzzy. So if you read any law, I mean, every law in China, that's maybe like

10 crosses on that law, right? And the last one, inevitably the last one, it's like as defined by the party or as defined by the authority. So that's in every law there is escape course. Yeah. That's intentionally there to be there so the authority can use the law as they see fit. So that's the first thing. So by design, the legal system is designed to be fuzzy, designed to be interject, the point as the authority seems fit. That's the first thing. I mean, the second thing is the law is always changing. You know, one of the most astonishing change we saw in the last few years is they change the constitution now or a sudden Xi Jinping can be president for life. You think of it. I mean, you can, you know, just like, okay, snap a finger, I'm a dictator, now I want to be president of life.

Let's change the constitution. So the law is always changing. And then when they change the law, the most of the time, as they fit, they can backdate the application of it. So essentially, if you're a business person, you are any person in China, the ground under your feet is constantly shifting. You're standing on not a solid ground. The ground is shifting under your feet. By design and by application, the legal system is not something, you know, in the West, you have a law. and we go to the court,

and that law is very specific on where the red line is, right? And we go to the court and to argue, did I cross the red line, or did not cross the red line? So in China case, first of all,

the red line is by design, fussy. So you never know whether you cross it or not. The second thing is they draw new lines all the time. And then they back they apply it, so you can get caught no matter what.

So as a business person or anybody who's, trying to do anything in China, you're always dancing in the gray zone, you know, because that's no black and white. And then it's how do you dance in the gray zone? That's how essentially define your success. That's not good because, of course, that breeds more corruption. And we did a whole show on corruption with Brian Class Episode 650 for people who want to hear about how corruption breeds more corruption. One thing I thought was really interesting. You mentioned, this is almost like a throwaway line in the book, but you mentioned that people in the party,

the Communist Party, they go to separate schools, they shop at different stores, and you even said they get their food from a separate supply chain, which I think that's really interesting. Why is that the case? Is it safer food, better food, more reliable supply? You know, what's the reason there? So in the book I call, you know, that's a crust of a society. I call them red aristocrats. So they are. Red aristocracy, right? Yes, red aristocracy, a red aristocrats. they essentially are by bloodline. It's by who their parents and who their grandparents are. At the beginning, a formation of the party and the formation of the country.

So Xi Jinping will not be president if his father is one of the top ten generals at the founding of the nation in the 1940s. And then it's gold bloodline by, so his son will be somebody else. They got fast-tracking and everything. Just let's start where they're, you know, first of all, when they're born, they are born in a different session of the hospital. So in Beijing, all major hospitals, there are separate session for senior officials.

You only can go into be treated in those sessions if you're a vice minister and above. Oh, wow. So the vice minister is considered high official in China. So people really fight for their status. Because once you get that status, in a medical case, you can be treated in. And that's not, no money can buy you into that session.

Okay, only connections and status can get you treated in that session. And that session is all-end sweet. I mean, now, you know, I've been in there. It's all-end-sweet. It's all five-star setups. Okay, so when you're born, you're born in a different session of hospital from the rest of the country. Okay. And then when you go to a kindergarten, you go to a primary school, there are schools,

and then China, everybody knows which are those schools. there are schools that only people like them are accepted. So they'll go to a different private school, kindergarten, different primary school, different secondary school, just that's growing up. And that their family, you know, you just talk about it, and I mentioned in the book, is they got, you know, not just a separate food supply system,

they have farms dedicated only grow for them. Wow. And then so it will be a different quality of food surprise. And then even the liquor, you know, China has drink this mild high, which is like a 53% proof liquor, very, very strong. And even on the liquor, they are liquors specific, even on the bottle, it's spare a while. It's a special surprise for that class of people, for high officials. Oh, wow. It says that on the bottle.

They're not even trying to hide that. No, no, no, there's no, there's no hiding. I mean, it's set on a bottle. I mean, it's set on a bottle, you know, so everything is a separate. system. And then the car they ride in, I talk about and have a separate license play, they will identify you to the police who is the owner of the car and who is possible is riding in that car. So, you know, we're driving the bike lane, we're driving the bus lane. Crotry will just wave you through. Right, because you're untouchable. You're like royalty.

It is. It's the royalty and the aristocrats of the medieval times. Wow. In a communist country, which is like the most freaking ironic, hypocritical nonsense ever. But I mean, that's no huge surprise there, I suppose. Okay. So your wife, Whitney, ends up being a confidant to somebody named Auntie Jung, who's the wife of a very powerful Chinese politician. You said you became like the birds that clean the alligator's teeth. What do you mean by that? So Auntie Zhang is the wife of Wen Xiaobo, who was the premier of China for a decade, until Xi Jinping, claims are, you know, 2012. So how should I put it? Essentially, people like them, being the family of the Premier, they are like kings or emperors holding courts. And then they have people

rushing and clamoring into their court and say, well, take me as your advisor, take me as your partner, take me as your server. And then they will basically look at all the people coming into their court. They say, well, okay, I will pick this guy to do. this part of job for me. I will take this guy to take care of that business for me. And then they can chop you off and send you away or whatever. And so you always need to be very, very careful. So you are on the good side of them.

And then you always are competing with other people who are new to the court and want the what the position you have. That's what I mean when I say that. Game of Thrones, man. That's what it sounds like. Absolutely. You're listening to the Jordan Harbinger show with our guest, Desmond Schum. We'll be right back.

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She's giving you political cover to get projects done, real estate development, whatever it is, investments, insurance deals, things like that. And you give her 30% of the profit. and what she might do is say, hey, official that has to stamp something, you're going to stamp this thing, and we might give you a little bit of cash, or we might give you a preferred position. And she's brokering these deals and saying, this is my guy. You know, Desmond is my guy.

Whitney is my gal. They're going to do this airport thing or this insurance deal, and you're going to let them. And these people are like, okay, thanks, Auntie Jung, because she's kind of like got the strings controlling the puppets because of who her husband is. Am I kind of on point here? It doesn't really work like that. What he asks, I call you know, they are the Air Force. She's the Air Force and we are the Ground Troops.

So what does that mean? So she is like the Air Force, you know, flying over the sky, a big powerful jack, and everybody looked up and say like, whoa, you know, we need to move in to actually get things done and execute it. Because if you can do everything, she wouldn't get 30 percent. and she was taking 90%. Yeah. So reality is actually we provide bulk of the capital.

We do all the executions. But you need her as a halo behind you. We need to work on an official. Official not going to ban over and say, oh, because you are the partner of the Wend family, we're going to sign this thing on the dot line. No, they want many things. They want to negotiate, right?

Maybe I want a promotion. Or maybe I want a job in a different province. or maybe I want somebody to take care of my wife's as a promotion. You know, they want many, everybody want different things. So it is not a something, and then you cannot give everything everybody wants. It's just impossible. So reality is actually they provide a halo. They provide a halo that, well, we can possibly get those things for you, right?

And then we need to, we, in the internal, me and my wife and the company we run, We actually need to work with them, you know, like that airport project. We built about half a million square meters, so it's like six million square feet of property. Wow. We need to get all that, you know, built out. We put the money in. We need to get the troughs, you know, to approve of approvals. But those troops' approval, it's not possible without a halo.

But you have to do all that by ourselves. So we had a ground trip doing the real execution, but you need that halo on your back. That makes sense. Okay. And through the halo effect and a lot of hard work, you do this massive insurance deal. This will sort of skip the details, but you turn what I guess is about 12 million into 100 million. Pretty nice return, but that's just the beginning. You mentioned the airport deal, which we'll get to in a bit here. But I thought it was interesting, by the way. You say, when you get married, you had a small wedding outside of Beijing in order to hide your connections. Now, in the United States where I am right now, you would have a big wedding where people

could be seen and you can show off how important you are and you got your connections and your boss and you got your mother-in-law and her family and friends. And you're doing the opposite. You're like, all right, we got to do this on the low so that nobody knows who we are connected to. And that's an interesting juxtaposition. Yeah, I think that is very interesting. So there's several things I mean I can talk about here. So first of all, when I was writing the books, you know, the publishers and, you know, give me photos, right? You know, do you have photos, Wen Jabal, you know, the premiere? Do you have a harmony photo?

What are the photos you have with Auntie Zhang and, you know, her sisters or parents or whatever? I was like, geez, I looked at my photo album. It's like, I don't have much photo. You know, although I would work with them for a decade. It's like in China, if you're that close, you don't want people to know. The people who, you know, you go to a lot of lobby firm in D.C., right, they have a photo of the guy, you know, shaking hand with the vice premier or the premier of China, and they put in the lobby of the office.

And then you're like, whoa, I'm coming to the right office to buy service to open doors. People do photo ops and never the people have real relationships. The real relationship, people like us, we don't want anybody else to know about it. And that's the people we need them to know it. That's the first thing. You know, the other thing is very interesting if anybody is traveling to China. You go to any high-end restaurant in China, any, I mean, there's a lot of private rooms, like a lot more private rooms than anywhere else in the world.

You know, I give a story in a book, Beijing Hotel, one of the most high-end stay-owned hotel, five-star hotel in Beijing, right on the square of Tiananmen Square. On the top floor, there's an entire floor about 20 rooms of private dining room. And in the 20 room, that's one room, that room has three person. Their job is traffic control. So you have 20 rooms, dining rooms. You possibly talk about 100 people in and out of that floor. Their job is make sure whoever is getting, when they come up to the floor,

before they come into the room, when they leave the room, going downstairs, they don't run into anybody else. Interesting. They essentially coordinate rich dish serve when. When you're going to get your desserts, when you're going to, get your bills, you know, just make sure. And then when you step out of the room, they make sure the elevator is already there waiting for you. So you don't run into anybody. Although, you know, a lot of high official are dining at the same time on the same floor, but none of them

will run into each other. It's because nobody wants to know who is cooking up some deals with who. Right, right. So this is like all the people that you aren't supposed to necessarily be working with, you might be having a meal with them. But the last thing is for, you don't want to be seen with other government ministers or by other government ministers. And there's these three people who probably know a lot of stuff about a lot of people. Would you say those people are in a pretty good position to maybe sell some of that information to people who want to know? That seems like a good position to be in. I'm sure that some of them are really working for the state security people. Yeah. Like I think whatever China's FSB or CIA is or FBI, those people are all

probably from their highest paid hosting job in the world, probably. Yeah, so on to my wedding. So what we do in Beijing is it's very difficult. You know, if we do a big banquet, first of all, who do we invite? You say, well, when you invite these people, you are showing off your cards, like who you have your relationships with. You don't want that to have it. And then the second thing is, you know, one table sits 12 or 10. The closer to a wedding couple have a closer relationship. The people who have a more distant relationship sit further away in a banquet hall. You don't want to show your hands. You don't want to show your hands. You're closer to have a closer relationship. The people who have a more distant in a relationship. You don't want to show your hand. And it's very difficult, like, who you put priority ahead of whom, right? Who's going to sit on table one and who's going to save on table two and who's going to stay on table three? You may offend people. You don't want to, you know, get into this kind of trouble. So that's why, you know, we never actually have a banquet, just a small family thing.

We never done a big one in Beijing. It's impossible to do a big one in Beijing, giving our situation. Yeah, that completely makes sense. That's so interesting and so different from the United States. The airport deal, right, you finance. it with these sort of like bank state-owned loans and officials keep getting arrested for corruption. And one of the guys whose signatures you need ends up disappearing, it sounds insanely stressful, the way you describe it in the book. You've got all these connections, the schmoozing,

the guanxi, as they call it in Chinese two, that you have to make and manage. And on top of that, it's like, yeah, we just need a signature from so-and-so. Oh, yeah, he got arrested and nobody knows where he is, and it's been months, and we can't find him, and nobody will tell us where he is. And that's almost like a very uniquely sort of Chinese problem of somebody getting arrested and vanishing. Yeah. Before we go into the airport situation and the story you just talked about, let's talk about the insurance deal we did earlier.

That was my first big score. And that was, you know, essentially in 2003, we invested in the insurance company and the insurance company, the insurance industry of China at their time was just happening, was just happening. Today, we invest in this company called Pingang Insurance. Today, this company is item number one, a number two biggest insurance company in the world. They own 10, 9.2% of HSVC.

They're the biggest shareholder of HSVC. And then that was the story that essentially get Wendy into trouble and get all of us into trouble, become a front-page story on New York Times, and then brought our relationship open with the Wend family. It was presented as a corruption deal, It was a corrupted deal because, you know, we made something like 25, 30 times money on that deal. But the reality is actually it's like rearview, mirror, retrospectively, say, oh, you make a lot of money.

Yeah. I'll tell you what, you know, obviously you go through the book and then you look at sort of trajectory I was on. We basically come from nothing and then become billionaires. In that process, obviously that's hard work. Obviously, that's luck. but obviously that's being wise to the situation and all that. A lot of it. I keep telling young people, you know, that parents send it to me, say, well, you help my children.

And I say, well, hard work and wisdom give you a present, maybe upper middle class life and maybe a rich life. But to be extraordinary wealthy need luck. Luck. And let me use that insurance deal as an example. So when we invest in the company, why do we invest? We don't know that, I mean, at that 2003, who the heck knows where China going to be? You know, nobody imagined, I think at that time, 2003, 20 years later today, China would be the second largest economy of the world.

Nobody in the whole damn well, imagine that not even the Chinese themselves, right? And then the only reason we invested with because Goldman was in it. Golden Sachs? Yeah, Goldman Sachs was in it. Morgan Stanley was in it. And then we heard HSBC going to come into it. And then we're like, okay, so the likelihood of this thing will kind of fail through, it's not very high. Because of all the name brand banks that are investing HSBC.

And it's like those people don't make bad high risk investments very often. And they certainly don't all do it together. Right. So we feel it's like a song investment and looks it's going to be safe. That's why we invested. It wasn't, you know, nobody knows. So what happened was. So after we invested, I think it was like in about three years or so.

It was listed in Hong Kong. And my memory served me, right, it was listed at 980 a share. We bought in about 230, 240 a share. It was listed at 9.80 a share. Wow. If I could have sell, I would definitely take some chips off the table just to cover my course, right? Sure, yeah. But I can't because I have my share hold in China and China have capital control

so you cannot get your money out of China. You should ship your money out of China. So I cannot sell. I have to sit on it. And then two years later, and then we went up to 18 and all that. Two years later, after that,

so about five years after investment, it was listed in Shanghai Stock Exchange. And then it was listed at 30 to 80 a share. So rich is what, I don't know, 15 times I'm not investment. Yeah. But again, because we have such a block, We have a six months lock-in.

We cannot sell. You know, if I could have sell, I was sold an IPO, take some of my chips off the table. So we cannot. So we got a six-month lock-in. In the six-month, the stock went up to 160 a share. The high was 160 a share. But we have a lock-in.

We cannot do nothing about it. By the time I came out of lock-in, the shares were trading at $65 to $70 a share. At that moment, I sold all my shares. So I made what, 25 times? I'm on the money. But the thing is, you listen to what this happened. It's not by my design.

It's not my, it's not my design. You know, it ain't up to be 25, 30 times. But it's just not by design. It's complete luck. Well, okay, it's not entirely luck when I do the deal. The timing of the sale. Yeah. That ride of 30 times is not my smart.

It was the market is with me. Right. And I just happened to be. So when New York Times came out of the stories, you know, these guys makes like, you know, I think we make like, you know, like two, 300 million on it. And the Wend family make almost close to a billion on it. Wow.

And, you know, they say, oh, this is corruption. It's like, damn, you know, six years ago, who the heck knows this thing going to go up like 30 times? Nobody knows. Right. It's like Bitcoin. Anybody knows it's going to go up 30 times. Do you think you're going to sell at that price at a time? Right.

I mean, it's ridiculous. I mean, so that was the insurance deal. I mean, it was just, you know, blah, the trend is with me. Yeah. Put it that way. And you have a similar deal with the air. airport deal. We don't have to go over all those details because there's a lot of really interesting things in the book that people can read about as well. But the money finally starts rolling in,

especially after the airport deal. And it sounds like I won't go into all the details on how you guys went crazy, but a couple choice things here. Ferrari's cars, fine. Fifteen million dollar colored diamond. But that's not the most interesting. The most interesting thing was a $500,000 watch, which is the same one that apparently there's like 10. Vladimir Putin has one. Where is that watch now. Did you keep that thing? Yeah, I haven't. Okay. Yeah. When you give me it as my birthday present on my 40th birthday, my name's engraving. I mean, I would be afraid to wear, let alone own anything like that. I'm not going to ask you where it is. I'm going to Google this and see if there's an image that comes up because I won't ask you to show it to me, because I'm sure

it's not in your house. You're too smart for that. I mean, this is real wealth. Like when you're buying a $15 million colored diamond and a $500,000 watch for someone's birthday, you're on another This is almost going to space money. Interestingly, the people, you know, read my book. I mean, that book, you know, if you go into Amazon, in the U.S., I think that, you know, out of five stars, rating at a 4.6 or something, 4.6. So it's very good rating, right? But if you look at the critique of the book, the guys who give me one star or like, this

is garbage, a lot of it, they're just offended by how I describe how money was spent. Yeah. A lot of it, a lot of it. of it. And they're like this is a corrupt, decadent, you know, lifestyle, you know, how dare he come out to speak about it, right? Giving my background, giving, you know, what I've been through in the last, you know, 40, 50 years of my life, I know this is going to come if I write it the way I write it. Yeah. And then giving them my situation, I'm not writing this to show off my wealth. No, no. That's no need for it. It doesn't come across that way. The way I spent money wasn't unique to me.

It was common among that class of people. And my book is a record of last 20 years of rise of China. I want to show the world, first of all, I want to tell the truth. The second thing is by telling the world is my lifestyle, essentially I'm telling the world is how that class of people in that period in time in China look at wealth and how they relate to wealth and how they spend wealth. So that's what I want to do with that book, with those stories. The second thing is, interestingly, if I may conclude, which I didn't write in a book,

is, you know, China, I talk about how poor background I came from. But that wasn't unique to me. Like 99% except, you know, that 1% of the red aristocrat, they live in a different world. That's what China was. I mean, you know, making $5 a U.S. a month in the 1970s wasn't unique. It was actually $5 a month was considered middle class in China at that time. So everybody in China essentially came from nothing.

So when they come out all of a sudden with this kind of wealth, I made this description. It's like cavemen coming out of cave. It's like caveman coming out a barren cave and then look at like, wow, there's so much in the world I can take. and then we were just taking everything and then sort of experiencing life to the fullest and say, well, how does that change me?

How does that, you know, what does it mean to owner Roes-Royce and then drive it all of a sudden? What does it mean to have a jet, you know, all of a sudden? You know, I talk about in a book, it's so ridiculous. We have three jets going to Paris for a trip, right? Four families. We have three jacks and then two jet were just empty jets following around

because everybody wanted the same jack to play cards. Let me just highlight this. You brought three jets to Paris for four families, but everyone ended up flying in one so they could play cards. But the other two followed anyway because who cares about the 150 grand it cost to fly to Paris in a private jet, right? Like, unbelievable. The thing is, I actually, I was writing that, and I was so amazed.

I was actually, I relate that to my people on the trip. I was thinking about it, 20 years ago, if we can think when we get to be adult, we can buy a a brand Phoenix of bicycle. Phoenix is a bicycle brand out of Shanghai. It's supposedly the best bicycle of China. If we could in an Adao who own a Phoenix brand bicycle, we will consider really lucky, quite successful.

And today, that's 10 of us going to dinner in Paris and in three jets. I mean, look at that gap, how much to jump it was and it has been. It was astonishing the jump. Yeah. Right? And just reflect on it. It's really incredible. I mean, what you did in what you built in the book was really, really something incredible.

I want to highlight again the idea of connections in China being so strong. I knew that this was a thing, but it's so much more than I ever imagined. You discuss, it's kind of an anecdote where you say officials and party leaders and entrepreneurs, they literally have three dinners per night, like one at six, one at eight, one at ten, and then a tea drinking meeting at midnight or whatever to continually foster connections. It's like a full-time job. Was that every day, or did you mean like once a week people are doing this? Or are these officials doing this like five nights a week?

Probably five nights a week. Wow. They're spending like 40 to 60 hours just on connections and relationships, huh? Yeah. I mean, because we talked about earlier, you know, we all dancing great zones. If you want to do any, achieve anything in life, you need to encourage. your counterparty to come into the gray zone to dance with you. But how do you convince the other party to come into the gray zone?

And then we can together build something, achieve something. You need to build trust. And how do you build personal trust in China's situation? You need to spend time together. You need to read into each other and say, well, is this guy really trustworthy? You know, who's his connections? Is he going to backstack me? Even the order of the street dinner, that's an order to it.

So usually what happens. So in China, dinner's supposedly start at 6.30. So 60 30 slot is the slot you reserve for the most respected person. So the person who is like a sort of in a hierarchical society rank above you, that's just like Aunt Tzang, we always have a dinner at 630 with her. We're having dinner with her. And then we have another dinner starting at 5. person who you have dinner at five,

in a hierarchy, it's ranked lower than you. So they don't mind to have dinner at five with you. They know they're ranking lower in the society. Yeah. They want something from you, but they appreciate you're willing to do the dinner, first of all,

and they're willing to spend the time with them. So although they give them the five o'clock slot, they're like, okay, you know, that's fine. But for the people who rank above you or you want something from, you definitely always have to be the 630 slot. And then you have an A.O. clock slot, right? The A.O. clock slot, it will be more people who are sort of level with you.

And then it will be maybe your friends or people who are already close business associate. So they know you are busy like before that, but they appreciate you coming out to have an A.O. cloth slots, right? And then you have the wine dining time with your buddies, you know, after the first dinner. It goes on like that. It's wild and it makes me feel like when do you sleep. You must not sleep enough when you do stuff like that. Everybody's on five hours of sleep all the time.

I mean, I spent eight years in an airport project and after that I sold a project to the Singaporean. One of the main main reason I saw that project is because that project is so draining physically. I mean, I'm literally drinking half a litter every day. Of alcohol. Of 53% proof of alcohol. Oh my God. And sometimes more than half a litter.

Every day a week, I'm like six days a week. I'm drinking that much. And get to a point, it's like, I have enough. You know, I need to get out of this game. This is the Jordan Harbinger show with our guest, Desmond Schum. We'll be right back. Hey, thank you so much for supporting the show and for listening to the show for that matter. By the way, all those codes, discounts, everything you need, all in one place,

Jordan Harbinger.com slash deals. If you're going to buy something, I would love it if you'll look at the deals page. Once again, Jordan Harbinger.com slash deals. You never know, we might have a discount code for it. You can also search for any sponsor we have using the search box on the site as well, right on our website. Please do consider supporting those who support this show. Now for the rest of my conversation with Desmond Schum. Now, okay, around this time, China, I say the Communist Party starts to sour on entrepreneurs. And the wisdom becomes, make your money and get out as fast as you can.

It kind of reminds me of this Jack Ma issue, right? Everybody was like, oh, Jack Ma's so great, he's so powerful. And then he sort of, I guess not even sort of. He vanishes out of the public eye for a while. And it really highlights the idea that everyone who's wealthy in China or everyone in China is ultimately a tool or instrument of the state. You know, now you have Elon Musk and all these folks like they're really public and they're kind of doing whatever they want in the United States as entrepreneurs. In China, that doesn't

fly. No matter how high you get, and especially if you get really high, if you become the Jeff Bezos or Elon Musk of China, like Jack Ma, you become even more of a puppet or instrument of this state. And at this point, I know you have to have Chinese Communist Party officials inside your company on the board or at high levels. It's really an interesting juxtaposition because you start off by, like, all right, everybody in China loves a good, wealthy entrepreneur. And then it was like, actually, we're kind of done with you guys. You made enough money. You've developed the country a little bit.

Give us the power back. And that becomes unhealthy, right? You said in the book, the party has an almost animal instinct towards repression and control. And any time the party can afford to swing towards oppression or repression, it will. So it sounds like the reforms toward capitalism and the free market were relaxed, like you said, in 1979, because the country was so broke they needed money, and then they swing back to repression and control, I guess because, like you said,

the party has an almost animal instinct towards repression and control. It seems like they would leave things open, but that's not what they did, right? They went straight back to, all right, let's clamp down on everything again. Why do you think that is? I think, first of all, I think since 1949, the Communist Party took over China,

political power trumps everything. So we just talk about Jet Ma, right? I mean, for a very long time, he, maybe still today, he is still the richest person in China, right? The richest person in China doesn't mean anything in front of the political power.

The way Xi Jinping, not even Xi Jinping, not even the political, they're that higher. Like a minister, for people like them, looking at the richest person in China, they're like, what the heck are you? I can chop you off, and tomorrow I can put a Peter Lee onto it to be the richest

person in China. It doesn't change. So political power trumps everything. Wealth doesn't mean anything. That's why every wealth owner in China stashed money away, where in Switzerland and Hong Kong used to be, and now today it's for a lot of their money in Singapore, because they know private property is not protected. The party can come over and take over anytime. Yeah, you do see a lot of wealthy Chinese people moving money abroad. I would say hiding money abroad, I guess, because I know that some of that illicit transfers of money. I'm doing a show about this as well. And after the sale of the airport

share, you wanted to move your money abroad as well. You say in the book, CCP, the Chinese Communist Party allowed private property rights in 1979, but what the party giveth, the party can takeeth away. So it's actually safer than to stash money in real estate investments in the West, in Canada, New Zealand, United States. And you also note that former senior officials are forbidden from leaving China. I did not know that. Is that still policy? Like if you are a high-level official in China, you can just never leave the country at all again? Yeah. It has been more stringent and more enforced. Wow. Essentially, if you are ministered and above, you will never get out. You'll never leave China. And then vice-minute then under, then it will be selected cases.

Even for, so you can't even go on vacation or anything, right? Like, you have an exit ban, no passport, basically. A lot of times I today, these days I talk about, you know, CCP essentially almost like a mafia. Yeah. Once you join, you are in for life. There's no such a thing called walking away alive. That is definitely an analogy that I've heard used many, many times on this show.

It certainly seems apt, given what I'm about to get into here now. So this Western news agency, I think it was Time magazine, they blow up a story about super wealthy CCP officials. And your wife, Whitney, she kind of has to fall on the sword in order to protect people above her like anti-Jung. Let's talk about this Bo Shilai story. So this blew up in the West as well. There was a movie about it, but I can't remember what it was.

I saw it. Do you know what I'm talking about? They show, they sort of dramatize how this businessman was murdered. So Bo Shilai is, again, it's a second generation. You know, his father is one of the, he's a head of economy, economic minister in the 1950s, one of the most senior official in the 50s and the 40s. What should I, you know, as same as Xi Jinping, he's second generation. And he was essentially openly challenging for the top job, which is unusual.

Because usually in China, this kind of situation is always still in the back room. he was using a populist movement in the province in the Chongqing. It's a city of 30 million people. He was the head of that. He was running a populist movement over there essentially to check up his profile and they essentially openly challenged for the head job. And he was actually destined to get into the party bureau, which is the 7-9-person top executive body of the Communist Party.

He was about to get into it. And then the police chief, his municipality, running into the American embassy. Oh, wow. That caused his stamp for. And obviously, subsequently, they charged him with corruption. And his wife also was charged with corruption and also killing an American business person. He was British, yeah.

Yeah, a British business person. Right. So she poisons this British businessman. And then they burn his body and say, oh, you know, he drank himself to death or something like that. So Bo Sili goes to prison for life. his allies then are digging up dirt on anti-jung. Your wife Whitney gets caught in the middle of that net.

And anti-jung is suddenly she wants to donate all of her family's assets to the state to avoid prosecution, which is also very Game of Thrones. And this kind of thing just seems to be the norm in China. And you mentioned this in the book as well. If you look at the list of the richest people in China, it's always changing. So every few years, 80% of the people or whatever are gone from the list. And the reason is because the chess pieces have moved and they're no longer in favor. And a lot of them are dead or in jail at that point.

I mean, China has essentially have the richest person list about 20 years now. And then if you look at over the 20 years, there will be about 6, 7 people who are the richest person, right? I think let's just talk about those seven, eight people. I would say probably two of them went to jail and one of them just came out like two years ago. Like a couple of them disappeared. Essentially, so like fell off and it's so far. You won't see their name anywhere.

And then you have Jet Ma, you know. So the top 100 list, you know, if you look back, I would say probably 20% of them somehow happened to be in jail subsequently. And then you got another probably 20% 20, 30% of people just fell off the list and you never heard of them. It's just how much does the environment changes and how fast does it change? Yeah, that to me is, again, as an American, it's pretty wild. The other thing that's crazy is, so your wife, she gets an exit ban from China, again, forbidden from leaving. And it's so crazy that the government can prohibit you from

leaving the country without being convicted of a crime. Like, if you're convicted of a crime, okay, you know, might be a parole condition or something like that. But they can just say, hey, you're not allowed to leave. Suddenly, no due process. And then she disappears. And this is the part that is just Twilight Zone bizarre. So she vanishes. You start making calls. Nobody knows anything. And your sources tell you she was probably drugged and beaten up and then they'll probably inject something in her spine and she will come out a zombie. What is the point of that? What does that mean? Are they literally going to inject her with something and then she comes out a zombie? that like a euphemism that I don't understand? So what happened in her situation was beginning of

2017, she was banned from leaving China. This is very common, banning people from living China. You know, I, what happened was they don't even notify you. What happened is you, you take your passport, you go to the airport, and you find out at the gate of immigration officer, you're banned for leaving. That's how you find out, actually. So she was banned from leaving beginning of 2017. And then in September 5th, she just vanished. The reason I assume the state had taken her is, first of all, she was bent from the state by the state from leaving. Secondly, it's on the day she vanished, three other staff of her were vanished at the same time. So four of them vanished on that day.

And then the three staff was disappeared for three years. And all four of them, never been charged to today, never been charged. three of them were vanished for three years and then reappear three years later. So a year ago, they reappear in the process, never been charged. And then she came out two days before my book came out. When you called me to cancel the book launch. Right. So to clarify, like her phone, you've been calling her for four years.

Her mom's been calling her every day for four years. Yeah. And then you write this book. She could be dead for all you know. and then suddenly she calls you on the phone from the number that had been dead for four years. That's the part that's crazy. Like, I want to highlight that. I don't mean to interrupt you, but the idea that you've been calling this person for a year,

and their mother's been trying to reach him, no dice, suddenly your book is going to come out. There's a press release, and she calls you like, oh, hey, long time no see. By the way, don't publish your book. I mean, what? Your phone line is dead for four years. the news of my book comes out, suddenly your phone works and you can call anybody in the whole world? Like, what the hell is going on? That was the crazy thing.

I mean, the reason I published a book was, you know, you talk about like taking a shot down the spine. It was about a year and a half after her disappearance. I was in London talking to this friend of her. He's one of the most respected economists in China. He looked at me in the, I know, we were having coffee together. He looked me in the eyes. he said, you know he's, most likely not, they will never let her out, right?

And I was like, all right? And then he said, like a matter of fat, if they let her out, they're going to give her a shot down the spine, she will come out as a zombie. That's the part I'm really sharp. Because he looked at, I mean, we know each other,

we know him for that decade, and he's an economist, you're not even a security guy. And he talked it as such a matter of fatally, it sounds like it's like a known practice. And that's the part, really. shocked me. It's just like, really, you can do something like that? I mean, the state can do something like that. And they will do something like that. Because we know, you know, the reason

she was taking was most likely to be political. That's why they took her for years and years. And then we never charged her because obviously she has some inconvenience fact for the state. They don't want that to ever come up. That's what happened. Yeah, of course. It's so insane. Obviously, you can't go back to China, and you never would. You probably don't even want to fly over China at this point. It's more than China. I mean, today I can never go back to Hong Kong. I mean, Hong Kong is such a part of China.

I'm pretty sure if I land in Hong Kong, I would never come up. And given that, they have kidnapped people in different countries. So in countries that have very close relationship with China, I wouldn't go. Like country like Thailand, Thailand, there's a bookshop. your audience may have heard of it. The bookshop published basically a satire on Xi Jinping that CSTP went ahead and kidnapped everyone, arrest everybody from the bookshop. The kid and the owner who is a Swedish national from Thailand.

Wow. And that's six, seven years ago, and that guy's still in China. He went on TV and said, I don't want my sick with Swedish passport. I don't want to be a Swedish citizen. I want to be a Chinese citizen so I can sit in jail essentially. Yeah. They put him on TV to do that. And then there is major newspaper.

They have stories like Dubai. China runs a dark cell in Dubai. They were kidnapped. A dark cell? Yeah. They were arresting Xinjiang, you know, the Uyghurs. The Uyghurs, and then arresting them in Dubai and shipping them back into China. So, I mean, there are countries like that obviously can never touch one.

Wow. That's terrifying. The reality is you're one guy and you're going against a state like China. I'm trying to think of a diplomatic way to say this, but the truth is if they really want to do something, the resistance you can put up is pretty minimal, right? Yeah, that's, I mean, that's a lot of struggle before the book came out. You know, I consult people with this kind of situation, like, you know, Bill Browder.

Bill Browder. Yeah, Browder wrote a book on Red Notice, right? Actually, he's a friend. I consult him. I consult him, like, how should I arrange my security, right? Yeah. Yeah, but reality is, you know, me versus a stay, a party with 90 million members, second largest control the second largest economy,

that's absolutely nothing I can do if you want me dead or they want me anything, right? That's very little I can do. But in that regard, I have to say, America is the safest country in the world. I have been in dialogue with the FBI in the U.S. They are very good. Really? It's another class about. Really?

They are protective, a lot better intelligence, and they're willing to do things about it. That's interesting. I have, I'm trying to think of what I can say here, I have had some experience with Chinese intelligence operations and the FBI in the United States. They take things seriously where you would think, oh, they're not going to believe me, they're not going to care. And they do not only believe you, but they're on it. And it was surprising to me too, because you don't usually expect efficient police response from the U.S. government about something that sounds kind of insane, Right?

Yeah, yeah. I mean, giving my experience, I really have to say, I mean, I tell them themselves. I mean, I tell the Brits and I tell the Europeans, the American FBI, just another class about you guys. That's interesting. But you're still UK-based. So, yeah, come on, Scotland Yard. Get on it, right? Yeah.

Are there CC, I mean, I know there's a lot of CCP agents in the U.S., especially in the United Kingdom. Do they harass you at all? So far nothing has happened. So we're like cross-up and like keep it that way. Yeah, no kidding. No kidding. You were friendly with many people in Xi Jinping's inner circle. How do you assess his character? Do you think he's a socialist zealot like many people seem to think, or is he more on the other end of the spectrum? First of all, I think, you know, he's a second generation. He sees himself as an emperor to

rejuvenate the dynasty. He wants to rejuvenate and re-engineer the entire country to the ideals of the Communist Party. And then to give Communist Party such vitality, they can rule forever over China. They actually put it in a change of constitution again and put it in there, the Communist Party going to rule over China forever, essentially. That's what he wants to do.

That is the, I think for everybody, including Chinese in China, that's the most dangerous thing, because he is re-engineering the entire country in every dimension and then we, everyone of them don't know what's the end state he has in mind. I'm not sure even he

knows where the end state in mind. But he's definitely, you know, whether you look at the tech industry, the education, the state of the private economy, the relationship with the West, you know, with America, you know, and then the history, engineering, the country, restructuring the country

in every dimension in his view that's for the longevity of the party's control over China. And that's the, you know, where it's going to end. That's the most dangerous thing. Yeah, especially looking at what's happening with Russia and Putin, it's like a lot of times dictators endgame is, well, I'm going to die and I don't really know what's going to happen after that. And it's like, uh, instability, infighting, possibly war, hard to say. But these guys aren't necessarily thinking about how it's going to end for everyone else. That's not really in their nature, is it. China's, in Xi Jinping's mind that the

relationship with Russia and Putin is this. And the enemy of my enemy is my friend. Yeah. So in his mind, in CCP's mind, the biggest threat to their existence is America. So enemy, of my enemy is my friend. So who are their friends? North Korea is their friend. Iran is the friend. I mean, they signed a contract for $500 billion to buy oil from Iran, right? And Russia is their friend, right? So they're going to manage the relationship with the rest of the world, but they're not going to ditch Russia despite everything's happening right with Ukraine. Yeah, for sure. No, that totally make sense. I'll end with this. You mentioned this interesting anecdote where you marched in a counter protest in Hong Kong. So like a pro-Chinese Communist Party protest in Hong Kong. This is

before you had escaped, obviously, and left China. And you mentioned that everybody had been bused in or flown there and that it sort of was almost like a big performance, right? Everyone's trying to get brownie points from the party. It seems like the answer might be obvious, but I'm curious, what do you think of this now? People fighting for their right to freedom in Hong Kong and other people, including yourself, you know, are over there so they can avoid prison, gain favor for a business deal. The idea was capitalism and freedom are these bad things. And the very people asserting this in a protest or doing this because they want to make money in China, right? So they're saying, no, you don't get freedom. You don't get capitalism. That's bad. But also when I go back,

I want a contract to build roadways in Xinjiang. And because they had absolutely no freedom unless they did the party's bidding, right? So doing CCP bidding purely out of fear and self-interest, it's got to sting a little bit, right? What happened in Hong Kong since the CCP took over? What do you think? I mean, there's got to be at least a little bit of guilt

for playing a tiny role in that, even though you were just a pawn. That's a long story. But I actually just talked about it this morning with somebody. That happened 10 years ago. 10 years ago, I think, you know, reality is I think 10 years ago, how I looked at China, I mean, how awake I'm to the CCP is very different to what I'm today and how the world looked at China 10 years ago. And it's very, very different from what is today.

Definitely. You are part of my explanation why I did what I did 10 years ago. I understand that. I just figured hindsight always being 2020, this is not a judgment of your character. But today, you know, if you're giving what's happened to Hong Kong, giving what happened to Xinjiang to the Uyghurs, and giving how, you know, how they're backing up the Russians, you know, what's happening in Ukraine, if you're still speaking up on China's behalf, on CCP's behalf, it's hard to explain up. Agree. And hey, thank you very much. You've been very open and generous with your time. The book is really interesting. A lot of cool insights. And I appreciate your perspective.

I mean, you were really in the high elite. You're rubbing elbows with the red air. aristocracy, and now you are spilling the beans. And I think me and my audience certainly appreciate that. So thank you very, very much. Well, thanks for your time. That's giving me with this opportunity. We've got a preview trailer of our interview with poker star Annie Duke on how we can learn to make better decisions by thinking in bets instead of trying so hard to be certain all the time. So stay tuned for that after the close of the show. The quality of your life is determined by the some of two things, the quality of your decisions and luck, when something bad happens to us, we act as a skill wasn't involved at all. We just sort of pawned off to the luck elements.

But when good things happen, we sort of ignore the luck element and we say that it was because of our great skill. A self-driving Uber just hit and kill the pedestrian. But what I thought was really interesting was that the reaction was to suspend the testing and just to take the cars off the road, not just the Uber cars, but other self-driving vehicles. And what I didn't see were any comparisons to how self-driving vehicles did per thousand miles traveled versus the technology that we already have on the road, which is cars that are driven by humans. We know that 6,000 pedestrians die per year by regular driven cars. Let's say that you're on the side of the road and you've got a flat tire. And of course, what everybody's thinking in that,

moment is I have the worst life ever. Like, why do these things always happen to me? I'm so unlucky. I'm so miserable. What's really interesting to me about it is, like, you could have gotten a promotion, like the biggest promotion of your life three days before. And you're not standing on the side of the road going, my life's great because I just got the biggest promotion I could ever imagine.

So imagine that you had this flat tire a year ago. And now I'm asking you today, a year later, how much do you think that that flat tire, tire would have affected your overall happiness over the year. For more with any Duke, including some common mistakes we make when evaluating decisions, check out episode 40 here on the Jordan Harbinger show. So you may be wondering more about the phone call from his wife after her being just gone for four years. I certainly was.

All she did on the call was warn him not to publish the book and then hinted that him and his son might not be safe if the book was published. That is a creepy sort of imagine your wife, the mother of your son has to call you and basically threaten you. That's the kind of leverage they have. She also said, oh, the authorities haven't treated me so badly. Meanwhile, she missed the funeral from her mother who was dying. She hasn't seen her son ever since then and has been disappeared for four years.

So I guess it's got to be pretty bad if you are now under the thumb of somebody who doesn't let you see your family. So China during these days just sounds a lot like the Wild West. There were a lot of anecdotes in the book about, let's say, rival telephone companies ripping out one another's phone lines, bus companies that would have to get permission to go to certain places for a municipal or provincial bus service. Like, imagine buses won't let other buses into their territory. People are ripping out wires that are supposed to be for an obvious monopolistic infrastructure.

People would send thugs over provincial borders to kidnap rivals. This is like the governor of New York, sending thugs over to kidnap the governor of New Jersey. absolute insanity, right, because they have a difference in policy or one guy wants to push something through. So even though everything was technically owned by the state, it was still sort of like gangs or mafia, maybe not even sort of like gangs or mafia, obviously gangs or mafia. And Xi Jinping has changed a lot of that, not necessarily for the better. It's kind of been like one mafia takeover. I'll get to that in a second.

But for corruption punishments, remember Desmond talked about the red aristocracy. So people who are really well connected, they get a prison sentence. commoners usually get a bullet in the head for the same thing. So there's no real rule of law or application of law in a fair way. A lot of the development deals in the book that Desmond talks about required him to scare off other competitors or use inside connections and information in order to close the deal. So a lot of the book is like, yeah, we bought land from one holding company and then we sold it to another holding company at an inflated price. By the way, all owned by him and his companies, right? Then they had to buy it back for another price. So tons of officials and other people are just

dipping their beaks in everything. The inefficiency is staggering. Someone actually told him, if you're a Chinese businessman and you haven't done time in prison, you haven't accomplished anything. What that means essentially is it's so impossible to avoid corruption and it's always one gang versus another and falling into favor and out of favor based on connections that if you aren't going to jail for this kind of stuff, you're just not thinking big enough. And it really doesn't bode well for ambitious people in the Chinese business space at all. I just, I can't even imagine operating an environment like that. By the way, so when Xi Jinping came to power, the CCP, the Chinese Communist Party, they investigated 2.7 million officials for corruption and prosecuted

1.5 million of them. Imagine that. Che Jinping actually says freedom of speech and other, quote, unquote, Western values need to be rooted out. And he cracks down on lawyers. and other people who want a more free and open China. I mean, to just think about that statement, it is unbelievable. Xi Jinping's personal power drive really is securing the longevity of a Chinese Communist Party, led by red aristocracy. She is driven first by the need for the CCP to hold onto power, and he is the best person to make that happen in his mind, right?

And then all the other stuff, taking down the tech titans, restructuring the system, getting rid of so-called corruption, and, of course, replacing those people with people loyal to him, that is all so the CCP's power can last for generations. And then, of course, they're deeply, deeply paranoid. That's why they have a surveillance state. That's why they try to rewrite Chinese history. They close China behind the Great Firewall, so they have a closed internet, not to mention the propaganda with the population.

Look, every country has propaganda. The Chinese stuff is next level. They really know what they're doing over there. Including what's happening in Xinjiang. They just cannot afford any dissent to challenge CCP power. They can't afford any dissent at all. Scary stuff. I know some of you think I am just alarmist. I lose my mind when it comes to China, so to speak. But look, there's a reason I am not alone in these types of opinions. And I hope

you enjoyed this episode. I enjoy producing stuff like this. Yes, it's a little terrifying. I kind of get that. I appreciate that you stick with me on these. Links to all things, Desmond Shum, will be in the website in the show notes at Jordan Harbinger.com. Please do use our website links if you buy the books from the guests or anything from any of our sponsors. It does help support the show. Transcription, the show notes, videos on you. YouTube, advertisers, deals, and discount codes, all at Jordan Harbinger.com slash deals. Please consider supporting those who support this show. I'm at Jordan Harbinger on both Twitter and Instagram, or you can hit me on LinkedIn.

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