52 Chapter 3 From Farmers to Manufacturers 53 minimized marketing costs.SMEs learned to retool quickly to meet the de- The era of rapid export growth provided the ideal environment for hui: mand for new products.Often,a whole cluster could get by with sending dense social networks of people living close together and working in in- one representative to trade shows to collect orders from foreign buyers.By terlocking businesses.Lending money to one another to invest in their keeping their business within close-knit networks,Taiwanese entrepreneurs SMEs served everyone's interests;like nearly everything else the SMEs did, were able to minimize risk while sharing know-how and capital. it concentrated resources for mutual benefit.Small-scale factories were not Capital was especially precious in Taiwan's SME economy,because small particularly safe or pleasant places to work.Their environmental practices firms'access to formal credit was minimal.Banking and finance were weak did no favors to the natural world or human health.And many,many points in the ROC economy,and government credit policy favored large SMEs were losers in the ruthless competition for orders.Nonetheless,small companies.It was nearly impossible for SMEs to borrow money in conven- and medium-sized enterprises were the foundation of Taiwan's export- tional ways,so they turned to informal sources of capital,including mutual led development.Like coral polyps building up a reef,thousands of tiny aid societies,or hui. businesses powered by millions of small,unsecured loans built one of the Hui are a fascinating solution to the shortage of credit in developing world's largest trading economies. economies;they resemble microloans,but require no outside sponsor.If a Small and medium sized firms are the bedrock of Taiwan's economy, Taiwanese wants to assemble a hui,he or she(hui are very common among but a handful of consumer-oriented manufacturers did manage to get large. women)invites friends,relatives,coworkers,and business associates to Tatung Corporation is to Taiwanese what GE and Ford are to Americans:a join.The duration of the hui typically is one month per member,they company everyone grew up with.Women of a certain age get misty remem- tend to last between one and three years.The first month,each member bering their first Tatung rice cooker (introduced in 1960);folks in their contributes a set amount of money,and the founder takes the whole kitty. forties can sing the Tatung advertising jingle they watched on their first TV Thereafter,everyone (including the founder)continues to pay in the same (black-and-white,1964;color,1969)with its classic import substitution monthly contribution,but the other members bid for the kitty.The win- tagline:"Tatung!Tatung!Local products are the best!"Tatung products ning bid is,in effect,interest paid to the remaining members.Each member brought electric power into millions of homes (generators,transformers, gets to "buy"the kitty one time;the longer you wait,the more interest you cable)and helped relieve the misery of long tropical summers(electric fans, can earn. 1949;air conditioners,1964).In many ways,Tatung is an exception to the Today,Taiwan is saturated with formal credit,as the ubiquitous credit pattern of Taiwanese manufacturing:a large,consumer-oriented company card ads in the Taipei subway attest.But many Taiwanese still participate producing for the domestic market.But in other ways,it's a typical family- in hui-and some participate in many hui at the same time.Hui do not owned company-just one that happened to get very,very big. require a credit record,documentation of income,or really any paperwork Tatung Corporation is the successor to Xie Zhi Business Enterprise, at all.A skillful player can balance interest paid and interest earned and founded by Lin Shang-Zhi in 1918.In the early years,the company's main schedule payouts when they're most needed.Of course,hui have one seri- line of business was construction;it built the Executive Yuan complex,one ous drawback:cheating.They are not legally binding,so there's little protec- of the largest Japanese-era buildings still in use today.In 1939,the com- tion if a member decides to stop paying in once the member has taken his pany went into iron and steel manufacturing as Tatung Iron Works.It began or her money out. mass production of electrical motors and appliances a decade later.In 1962 What makes hui possible is the dense network of relationships in which it was listed on the Taiwan Stock Exchange.In 1969 the company adopted they are embedded.If a coworker asks you to join a hui to help raise a down a mascot,Tatung Boy. payment for an apartment,you know that coworker will see you at work Tatung Boy is a strapping,round-faced lad dressed in rugby gear,rugby every day until that hui has played out.If the coworker disappears,that ball tucked under one arm.He's cheerful and cute,but he was designed to coworker knows you will find him or her (or at the very least the coworker deliver some stern lessons.To begin with,there's a slot in his head to put will never work in this town again):23 million people are fewer than you'd money in,because,as the company founder famously stated,"Entrepre think when they're squeezed together on an island the size of Denmark. neurship starts with the saving of one dollar."His extra-large head and eyes And few tears are shed for those who lose money by joining hui with reflect the importance of staying smart and keeping an eye on consumer strangers,because everyone understands that absolute trust is an absolute trends;his oversized feet reflect Tatung's pioneering spirit.The rugby outfit requirement for joining hui. symbolizes teamwork