1. My First Post on This Public Account

Today is the first day of the Year of the Monkey. I’ve been saying I’d start a WeChat public account for a while now, but I kept putting it off. Finally, on the first day of the Lunar New Year, it feels like a fresh start. So, here we go.

First, let me explain why I’m starting this public account. Firstly, I’ve seen so many great minds, both Chinese and international, writing similar notes. While I wouldn’t consider myself a “great mind” just yet, it’s always good to learn from the best. Secondly, since starting my new venture in the Year of the Sheep—which is different from my previous ventures in that it’s much more socially connected—I’ve had the opportunity to meet many incredibly talented people I wouldn’t have met otherwise. When I share my experiences and discuss my perspectives with everyone, I often find myself repeating the same things. So, I thought writing down some of my experiences and thoughts would save everyone’s time, and also serve as a personal record.

Of course, I’m also a bit of a perfectionist, and I hope that some of these records, many years from now, can become timeless, like Warren Buffett’s letters to shareholders (at least for myself :)). It will also be a way for me to look back at how I’ve changed.

As for what I’ll be writing about, some good friends suggested I consider my “audience” and write content they’d want to read. But after thinking about it, I realized I don’t really know who my so-called target audience is. More importantly, I don’t want to approach this public account from a marketing perspective. I want to treat it as my public “diary,” hoping it will be authentic and, more importantly, that it will make me happy. That’s the only way I’ll stay motivated to keep writing.

A few months ago, when I first started thinking about writing a public account, I drafted an outline on a high-speed train from Beijing to Shanghai. I’ve added to it since then. For this first post, I’ll share that outline, almost like a table of contents. I’ll try my best to write all of this content (though I might not write everything, and I might skip around or insert other topics. After all, this is a personal endeavor, so I won’t worry too much about strict adherence). I plan to post every few months, eventually turning this into an annual letter/memo.

That’s all for this first post.

2. My Middle School and University Days

My elementary school was in the suburbs of Hangzhou, a pretty ordinary one. But I was incredibly lucky to get into a rather special middle school in Hangzhou, the Hangzhou Foreign Languages School. According to my elementary school teacher, I was the only student from our elementary school in nine years to get into this middle school. Life can be quite dramatic sometimes. I won an award in math Olympiad, and my teacher suggested I take the entrance exam. Before that, I barely knew what this middle school was about, let alone doing any review, preparation, or practice tests. After receiving the acceptance letter, I even told my teacher I didn’t want to go. I thought from the name that it was a school solely focused on foreign languages. I wanted to go to a middle school that was strong in science and math. Later, the elementary school principal called me in and persuaded me to go. Looking back, I’m so glad I did!

Hangzhou Foreign Languages School was a great middle school. Both the teachers and students were excellent. In the early 90s, we had foreign teachers, exchange students from abroad, and opportunities for homestays overseas. It was the only school in Zhejiang Province at that time that could recruit students province-wide from elementary schools. Other middle schools only admitted students from nearby areas, so it had a near-monopoly on selecting top elementary school graduates within the province. Moreover, it was a six-year program, with direct progression from middle school to high school. Its university recommendation rate was also very high, over 80% every year. So, getting into this middle school was almost equivalent to getting into university. The teachers were less influenced by the pressure of the gaokao (national college entrance exam), so they often had more freedom in their teaching. I remember we even had several classes where we watched American blockbusters (back then, it was rare for American movies to be shown in Chinese cinemas).

Our middle school had about 160 students per year, the vast majority admitted through standardized testing based on scores. A small portion with slightly lower scores were admitted by paying sponsorship fees. Within these 160 students, there were quite a few children of government officials and wealthy businesspeople. Starting from the first year of middle school, we were required to live on campus. We were together every day, from morning runs to evening self-study to bedtime. The interaction and mutual influence among us were much greater than in other middle schools, and our relationships were also closer. These six years, from ages 12 to 18, shaped a unique set of values and worldviews among our small group, different from those from other middle schools. Compared to other middle schools, we were exposed to Western culture earlier, to a greater extent, and in higher proportions. Many of us became more liberal compared to our peers.

After graduating from Hangzhou Foreign Languages School, I was recommended to Zhejiang University’s Hybrid Class. The Hybrid Class was the predecessor of Zhejiang University’s Chu Kochen Honors College, a kind of elite education experiment in universities. Every year, students recommended to Zhejiang University and those with high gaokao scores could participate in a selection exam for the Hybrid Class (including written tests and interviews). About 200 people could get into this class and then “enjoy” different “treatment” compared to students who directly entered their respective departments. For the first two years, this class didn’t divide into departments. We studied fundamental science and engineering courses, using more challenging textbooks and having excellent teachers. However, a certain percentage of students were eliminated to the departments at the end of each semester. If you weren’t eliminated in two years, then at the end of the two years, you could choose a supervisor and join a lab. Based on your supervisor’s specialty, your major was naturally determined.

Although Zhejiang University couldn’t yet compare with Tsinghua University in terms of overall resources and strength, the resources, opportunities, and freedom the Hybrid Class enjoyed were quite good. On one hand, the supervisor system gave students a good excuse to drop some time-wasting or boring courses. On the other hand, some resources and opportunities that were difficult to allocate across the whole university often ended up with the Hybrid Class.

For example, my fortunate selection into the Melton Foundation in my freshman year is one example. This foundation was established in the early 90s by the founder of Verifone, a leader in POS systems. He had already successfully sold Verifone and also invested in AOL and PayPal. Seeing the fall of the Berlin Wall, he realized the world was about to change significantly. So he had an idea to select young students from representative emerging areas around the world and have them interact with each other long-term, grow together, so that maybe in the future they could work together to bring positive change to the world. Zhejiang University’s Hybrid Class was the only place in China where the Melton Foundation selected fellows. The other four locations were India, East Germany, Chile, and predominantly Black areas in the US. Each region had five people selected every year. After being selected, they would send you a computer and free internet access for the whole year, allowing you to first establish contact with peers in other regions online through email and instant messaging. Then, every year, everyone would fly to a member country, stay together for about 10 days for an annual meeting, discussing and having fun together. The annual gatherings gave me the opportunity to observe the daily habits of peers from other countries up close. A side benefit was that I got used to Indian English very early on. This undoubtedly helped me a lot later when I went to the US for graduate school and work, attending lectures by Indian professors, and communicating with Indian colleagues.

This foundation didn’t have a big impact on society as a whole, but it had a huge impact on me and the other fellows. It made me deeply realize how different different races and cultures in the world are. Their starting points, ways of thinking, and ways of doing things were completely unknown and unimaginable to me before. There weren’t many people in our foundation, and the relationships we formed were relatively close. Within it, not only did many Chinese classmates become couples, but also many cross-national couples were formed.

Looking back now, compared to my peers, my middle school and university experiences were extremely lucky, even somewhat special. This experience made a deep impression on me about a few things very early on:

• A “golden phoenix flying out of a ravine” (山沟沟里飞出金凤凰, meaning someone from a poor background achieving great success) is a low-probability event. Most of the children of the wealthy, especially the children of officials, are very excellent.
• Like the story of Tian Ji's horse race (田忌赛马), being able to create local advantages in a situation of overall resource disadvantage, and thus have the opportunity to win the entire “battle.” Thus, ordinary people can achieve extraordinary things.
• Money is a tool, not a goal.

Overall, my middle school and university years were lucky and fulfilling, but there was also a considerable regret, which is that I was too goal-oriented and wasted too much time pursuing first place and trying to be a good student, losing a lot of time for rebellion, mischief, and purely enjoying my youth. I only gradually realized many years later that “60 points is enough” (60分万岁) is a good philosophy.

3. My First Job

My first paid job was at Microsoft, as an intern. I interned at both Microsoft Research Asia in Beijing and Microsoft Research in Redmond, USA (the difference in pay between the two was significant :)). When I graduated, I didn't choose to stay at Microsoft. One reason was that I felt I could see what my life would be like in ten years if I stayed there. The second reason was that I asked my “life mentor,” who said, “Google seems like a pretty awesome company. It’s worth checking out. It would also be good for you if you want to start your own business in the future. If you go, stay for at least three years, because one or two years won’t allow you to truly get into an important role and truly understand the company.”

So, after graduating with my master’s degree in 2004, I went to Silicon Valley. Google became my first official job, as a coder and product manager. Then, coincidentally, Google entered China, and I was fortunate enough to be among the first employees to return to China and participate in Google China’s initial startup phase.

I stayed at Google for the full three years (but left before all my stock vested). These three years were extremely worthwhile for me. Google gave me far more than the contributions I made to Google.

First, realistically speaking, Google essentially gave me financial freedom in a very short period. I joined Google about six months before its IPO, just after graduating and somewhat naively joining the company to work on ad backend systems development. There weren’t many people back then, only a few hundred engineers. But the company quickly went public, and the growth in revenue, profit, and headcount was rapid. I remember when I first joined Google, the company’s hourly revenue was tens of thousands of US dollars; later, it became several million US dollars. The number of employees also quickly grew from thousands to tens of thousands. The money in my bank account also instantly increased significantly. This feeling of sudden wealth wasn’t very strong at the time, to be honest, because it was my first job, and I had no prior experience to compare it with. It was only three or four years after leaving Google that I increasingly realized how rare a company like Google is and how rare the opportunity to join such a company at that time was. From a probability standpoint, it's very lucky for a person to encounter such an opportunity even once in a lifetime. At the very least, it's a once-in-a-decade or two opportunity.

Second, Google allowed me to see the side effects of sudden wealth. It’s like what Buddhism says: gaining wealth requires corresponding merit. Without sufficient merit, gaining unexpected wealth might not be a good thing. This was partially validated in the experiences of early Google employees. Because of instantly having too much money, many people lost their motivation to work and began to look for new hobbies and careers. But often, they weren’t good at or didn’t even like these new things (flying planes might not work out, they couldn’t figure out telescopes, they weren’t suited to be bosses but were in boss positions). This wasted many years, delaying the time when they were most likely to make more outstanding achievements.

Third, Google gave me the opportunity to experience and understand firsthand the difficulties foreign internet companies face in China, as well as the competition with domestic internet companies. On one hand, overcoming the barriers of distance and culture to gain 100% trust and authorization from the company’s headquarters is a difficult task in itself. Without sufficient trust and authorization, facing the rapid iterations of the market and dealing with various commercial and non-commercial, formal and informal competitive practices is even more difficult. One extreme example is that, given Google’s influence at the time, holding a recruitment fair could fill a football stadium, but the actual recruitment situation was a bit of a mixed bag. Finding someone who was down-to-earth, willing to work hard, experienced, had potential, and also had good values was still extremely difficult. Contrary to what people saw on the surface, forming a fighting team was often much more difficult than for local internet companies.

In addition to these, because of Google’s success, the increased external attention and discussion about Google also increased my own thinking about Google and businesses. Of course, there are already too many books and online resources about Google. It’s unlikely I could write anything more detailed or better than them. I still want to record a few personal observations, so I can look back on them later.

• In some aspects, Google is actually quite similar to China in the past, for example, the high status of the “working class” and the emphasis on ideology. So when ideological conflicts occurred, Google’s reaction was also beyond that of ordinary commercial companies.
• Google’s management also has some similarities with China after the reform and opening up, encouraging grassroots innovation, daring to try new things, while at the same time highly centralizing core power, having the institutional advantage of concentrating resources to achieve big things.
• I think Google’s “Do No Evil” is deeply ingrained in Google’s DNA; it’s not just empty talk. Google truly puts mission and values before profit, like the excellent companies described in Built to Last. Google’s profits are a byproduct of doing the right thing. At the same time, “Do No Evil” is actually a reminder to Google of its own ability to do evil for profit. The deeper you go into Google, the more you realize Google has a very strong ability to profit through evil. So declaring to everyone that they won’t do evil and letting everyone supervise them is very wise.
• During my years at Google, most of Google’s acquisitions were successful. Most of these successful cases involved acquiring a small company with a good team that could integrate into Google’s culture and then grow into a big tree in Google’s soil. This is very different from mergers and acquisitions done to eliminate a competitor.
• There were also quite a few things that Google didn’t manage to handle well or wanted to change but couldn’t. For example, Google wanted to use the bidding model that was successful in advertising to do its IPO, thereby to some extent changing the ancient and not very efficient stock issuance industry, but the result was mediocre. Google’s founders have always tried to avoid Google entering a management model with layers of professional managers, but it seems they haven’t escaped it. Also, Google made many attempts and huge investments in social media, but its fate in this area seems to be the same as Microsoft’s in search. Some objective laws and current situations can’t be changed by a simple wish; they often require much more energy than you imagine. This is like the fact that people always have to die; it's a reality that you have to face.

4. Why Start Another Business?

Recently, I’ve been asked quite a few times why I’m starting another business. Summing it up, I think there are two main reasons:

1. I enjoy the current work and the team. Starting another business allows me to be happier, or rather, more fulfilled.
2. I still have some ambitions, and some abilities and energy that haven’t been fully utilized. I have a hunch that the current opportunity could allow me to create something with a broader impact and a stronger sense of personal accomplishment.

Ultimately, this second point is actually part of the first. Starting another business makes me happier, and of course, I also hope that it can bring a little more happiness to the people around me, and even to more people I don’t know.

Of course, I know I can’t make everyone happy or make everyone like me. That’s not my goal. Especially with this current venture, it’s much more socially connected, involving more people than my previous ventures. This means I’ll inevitably have to face some less happy things and some people who don’t like me. But coming back to my core, I hope that every day I can face myself honestly, feel at peace, and feel that I’ve done my best. If I can gradually develop the ability of selective memory—remembering the happy things and forgetting the anxieties and sorrows—that would be even better : )

A while ago, I was interviewed by Mr. Li Zhigang, and he asked me quite a few questions related to entrepreneurship. Mr. Li’s writing is much better than my own, so I’ll “borrow” a few excerpts here as a further answer to why I’m starting another business.

Li Zhigang: What do you think you’re doing entrepreneurship for?

Huang Zheng: In the beginning, because of the education I received since I was young, I felt that entrepreneurship was a good thing, so I wanted to start a business from the very beginning. The initial idea was to build a company that could make money, and at the same time, I could become more successful. Before starting Pinduoduo, I had nine or ten months of rest at home, and I reflected more on life. That is, the most important thing for a person living is to pursue personal happiness. I found two things that bring me a deep sense of happiness:

The first is deeply working with a group of like-minded partners to overcome obstacles and create something. This process truly brings me happiness—laughing and crying together, overcoming difficulties together. The feeling of the team is the same as the feeling of a family. I enjoy this process, and I look forward to a bright future for everyone. That’s one aspect.

The other aspect is that, for Pinduoduo, I hope to do something with a greater social impact compared to what I’ve done before—something that is useful to myself and also useful to others, that can to some extent promote the occurrence of good money driving out bad money. I used to give an example to my colleagues: why did melamine appear in milk? Its essence is actually a process of consumer pressure. It’s bad money driving out good money. Because in the beginning, there must have been a large number of dairy factories that didn’t use melamine, but they all went out of business.

I think in the whole Chinese business landscape—not just China, but the world as well—some cycles are about bad money driving out good money. Today, with what we’re doing with fruit, I think we have a little chance to create a situation where those fruits that aren’t naturally ripened and go into cold storage in large quantities have a disadvantage. To some extent, we’re creating a situation where those fruits that are naturally ripened, use fewer pesticides, or don’t use pesticides at all, can instead sell at higher prices. I think this is something with social value; it’s like I’m making a contribution to society.

Li Zhigang: How would you evaluate your team?

Huang Zheng: The analogy I use with my team is that life is a process. We’re like migrant workers coming to Shanghai to work. When I first started, my skill level was low, so I carried bricks. Later, I washed dishes. After washing dishes, I became a cook. After becoming a good cook, I opened a restaurant. Our process is like this. It doesn’t mean that what I did before has no connection to what I’m doing now. Even one day when I open a restaurant, I will go back and wash dishes, I will go back and be a cook. Everything is connected. So you see our team today; Pinduoduo looks like a new company, but you see that everyone is a veteran who has been starting businesses for many years.

Li Zhigang: What is your future dream?

Huang Zheng: Our team is probably 20 years behind Alibaba’s team. I think we might have a chance, with new forms of traffic distribution, new forms of user interaction, and new internationalization, to create a different kind of Alibaba. Of course, this might seem too ambitious right now, but taking it step by step, there might be a chance. It’s not just a dream; I’ve also analyzed it. First, if you look, the form of the entire e-commerce market is actually undergoing many changes. The form of Alibaba’s success today might not be the form of success tomorrow, but people’s needs still exist and will be further amplified, so the potential market is huge. Second, the older generation will always get old. The younger generation, or those of us who are gradually entering middle age, will always reach that stage. If it’s not me, it will be some other people of my age. So what I should do is have a normal mindset, steadily and practically do what I should do, and strive to become the most reliable one among my generation.

5. Reading Russell: Happiness and the Greed for Freedom

The education I received from childhood onward consistently emphasized learning from advanced individuals and aspiring to be a useful person. So, looking back now, my reflections on role models, life goals, and even the meaning of life started very early.

From middle school, I envisioned myself as a scientist, politician, or entrepreneur. I read biographies, thinking about who I most wanted to become. Then I developed a strong interest in philosophy, contemplating questions like “I think, therefore I am.” In short, it feels like since I learned to read, I’ve been constantly setting goals for myself and finding optimal paths to achieve those goals and my understanding of life’s grand objective.

It wasn't until much later, after I had been an entrepreneur for several years, that I began to realize that achieving goals and happiness aren’t necessarily the same thing. My reflections, understanding, and exploration of happiness came very late.

Initially, I read Tal Ben-Shahar’s Happier, which is said to be a very famous course at Harvard. It had some short-term impact on me, but it wasn’t lasting. After a period of pondering this topic and some challenging practice, I feel like I’m slowly starting to understand.

Then I read Bertrand Russell’s The Conquest of Happiness. This book isn’t long, but it explains things very clearly, using accessible language. It felt like it had already articulated all my thoughts on this topic, and it seems the happiness issues faced by different professions and social classes a hundred years ago are no different from today’s. In Charlie Munger’s classic words, “I have nothing to add.”

So why am I still writing about it? There are two main reasons: First, I want to create a “summary” of the book’s content from memory for my own review in the future or for comparison when I reread the book. Second, I want to write a little about the contrast I see between Russell’s life and his own theory of happiness, because this is something Russell’s own book can’t really cover. These two points make up the title of this post.

I. Russell’s “Happiness”

After reading The Conquest of Happiness, my own summary is roughly these few sentences:

1. Have the courage to face common sense, use common sense to make rational judgments, and use rational thoughts to guide your actions.
2. Shift your interest from achieving an infinitely perfect self to an interest in external objective things.
3. Be willing to give up on things that cannot be changed or conquered.

The first sentence is the core, because the latter two are actually natural results of practicing the first. For the first sentence, the two key words are “rationality” and “common sense.” Please allow me to offer some rather informal “excerpts” about the interpretation of these two words from the book and my own embellished memories.

Common Sense

• Humans are a very, very tiny existence in the universe, and the time of human life is incredibly short. What we can do and change is extremely limited. This should be the background we should always be aware of.
• People’s thinking and concepts largely depend on their background, the education they received in their youth, and their current role and interests. So, when judging an authoritative view, or judging a common worldly view, or a parent’s expectations, you must be able to understand their background and consider their background role and interests. Based on these background facts, what is often needed is just common sense for judgment. What is needed more is not wisdom, but the courage to still pursue rationality when facing the facts. (Common sense is actually obvious and very easy to understand, but various inherited biases and biases caused by personal interests blind us, making us ignore these common senses. Isn’t this very similar to what is said in Buddhist scriptures?)
• The values of different regions and different groups of people are different. What is non-mainstream in one place is very likely mainstream in another. In Russell’s view at the time in Britain, the mainstream value in America was comparing wealth. And in Britain, when there was an aristocratic class, what the aristocratic class compared more was non-wealth things, such as art.
• “One of the most unfortunate characteristics of human nature is envy; a man who acquires something does not find happiness by looking at what he has, but by looking at what others have.” Envy is the main driving force for fairness between different classes, countries, and genders. At the same time, expecting to achieve that kind of fairness through envy will be the worst kind of fairness. It reduces the happiness of the fortunate rather than increasing the happiness of the unfortunate.
• “It is a characteristic of human nature to give affections more readily to those who appear not to need them than to those who do.” (Like banks are more willing to lend money to those who don’t need it.)
• “Your motives are not always as altruistic as you think.”
• “Don’t overestimate your own value.”
• “Don’t expect others to value you as much as you value yourself.”
• “All unhappiness depends upon some kind of disintegration or lack of integration; there is disintegration within the self when there is no coordination between conscious and unconscious mind; there is lack of integration between the self and society when it is not possible for the individual to unite himself with the outer world through objective interests and affections.”

Rationality

• “It is not the business of reason to generate emotions, though part of its business is to discover ways of preventing emotions that are harmful to well-being.”
• At the same time, “reason does not wish to diminish the intensity of feeling. When they are good or partially good, the rational man will be glad that he can feel them, and will not try to restrain them.”

II. The Greed for Freedom

Russell himself said, “Three passions, simple but overwhelmingly strong, have governed my life: the longing for love, the search for knowledge, and unbearable pity for the suffering of mankind.” These overwhelming pursuits of his not only brought us influential works like Principia Mathematica, which had a huge impact on mathematics and philosophy, but also brought us “diverse and important” Nobel Prize-winning works, The Conquest of Happiness being one of them.

At the same time, these overwhelming pursuits also brought him four marriages. What I haven’t quite figured out is that his four marriages and his “overly open” behavior at the time should have also brought pain to some people. This pain should in turn affect him. This should not be conducive to joy or happiness. Can these three overwhelming pursuits also be understood as a greed for freedom?

Russell himself said in the “Effort and Resignation” section of The Conquest of Happiness, “The doctrine of the golden mean is a dull one, yet it can be proved true in a very large number of cases.” So, should the pursuit of knowledge and freedom also involve some resignation? For example, giving up the endless pursuit of whether God exists and simply believing in his existence, would that be happier? If one can willingly give up part of freedom and firmly believe that being in one country, one place, and with one person is good, would that be happier?

Of course, Russell’s longevity, to some extent, also makes me question whether my speculation about his life lacks sufficient factual basis. After all, it’s hard for me to believe that a very unhappy person or someone who lives a life of extreme indulgence can live to ninety-eight.

6. Entrepreneurship as Investing, and Investing as Entrepreneurship

Recently, I've been in contact with some institutional investors and gradually gained some understanding of the institutional investment procedure. I feel that sometimes the perspectives of investors and entrepreneurs are indeed quite different. When I was starting businesses before, I hadn't raised any funding. When I was investing in the secondary market, I didn't think much about this difference either. On one hand, I’m gradually understanding the differences between the perspectives of institutional investors and entrepreneurs. This is new and unfamiliar to me. On the other hand, I’m recalling my own thinking when I was investing in the secondary market before. It seems to be consistent with entrepreneurship; there’s not much difference. Looking at it now, perhaps the investment and business education I received is relatively niche, but in terms of the time it takes, it’s effective with a high probability. So, I want to record some of my previous thoughts on investing and entrepreneurship. Comparing them might be an interesting thing to do.

I. Investing as Entrepreneurship

I understand Buffett’s saying that buying stocks is buying part of the company. You must have a long-term holding mindset to find good businesses and good partners. This is actually very similar to starting a business. On one hand, you must focus on the business model and choose the right business model (not all models work). You need to spend a lot of time researching the details of this business model. On the other hand, you must choose good “partners.” When investing, you must treat the founder and CEO as your future partners. Ask yourself if you are willing to do things with them for the long term. If the founder’s or CEO’s character or culture makes long-term cooperation uncomfortable for you, then it’s best not to buy on day one. This is the same as starting a business. If you feel that a person is not suitable for the team in the long run, but useful for a short time, bringing such colleagues in often leads to regret. If this unsuitable person is a partner, then it’s not just regret; it’s utter regret.

Besides focusing on good businesses and good teams, investing also needs to consider whether the price is good. This seems to be different from entrepreneurship, but upon closer inspection, it’s actually the same. Buffett has mentioned in many places that Charlie Munger evolved him from an ape to a human. It was Charlie Munger who made Buffett realize that he should buy good companies at a reasonable price, rather than spending time picking up cigar butts (cheap companies with some residual value, but often not very good companies). This is even easier to understand in entrepreneurship. If a business is particularly easy to do and doesn’t require paying a large price, it’s often not a good business that generates a lot of long-term cash flow. Good decisions are often difficult and require paying a painful price. A good company should spend effort to solve/overcome those correct but difficult problems, rather than picking up a lot of sesame seeds everywhere (the mindset of picking up sesame seeds everywhere often means you won’t even pick up sesame seeds. This is completely different from accumulating small victories into a big victory). Another point related to price in investing is to see if the loss in the deal is overall acceptable. Looking at this from an entrepreneurial perspective is more concrete, that is, when investing in a cause, you must see if it will kill you. Staying alive is the primary task of starting a business. At the same time, you often have to evaluate from another perspective, that is, whether you can win and whether you have enough power to invest to win.

II. Entrepreneurship as Investing

As the saying goes, men are afraid of entering the wrong industry, and women are afraid of marrying the wrong man. Like investing, which particularly focuses on business models, the choice of industry and business model in entrepreneurship itself often determines a large part of the outcome. That is to say, you must spend a lot of time researching what the right thing is and then think about how to do things right. Progressing gradually in the right direction is far better than running wildly in the wrong direction. Buffett said that he has seen many ordinary people make a lot of money in the financial industry, and he has also seen quite a few very smart and excellent people struggling in bad industries. On the road of entrepreneurship, many times it's like investing: choice is more important than effort. Moving forward on the right path, even if it’s slower, is like the compound interest in investing—a 20% annual return for 20 consecutive years is very powerful, much more profitable than a 100% increase this year and a 50% drop next year.

Buffett and Bill Gates, in a conversation with MBA students, asked the students a question, the general idea being: if you treat each of your classmates as a company, and you have to invest all your current money in one of “them,” taking a 5% stake, which one would you choose? Often, you won’t choose the smartest or the most capable, but you will often choose the most trustworthy. This analogy is especially appropriate for choosing partners in entrepreneurship. Often what we want are trustworthy long-term partners, not people who seem very capable but you never know if they will stab you in the back.

When Buffett talks about investment targets, he often mentions a concept: moats. If we treat various decisions in the entrepreneurial process as investment decisions, then we have to distinguish which of the things we exchange for time and money are assets and which are costs. Those that are beneficial to deepening the business’s moat over time are often “assets,” and those that are more detrimental to you over time can be seen as costs. There are not many mistakes in the purchase of assets, at most just buying something a bit too expensive. But wasting costs is very abominable and often has negative effects. In the entrepreneurial process, one type of special asset is people united under a certain culture, and one type of cost is the cost of buying labor or skills. The distinction and transformation between these two are very interesting things and also things with a particularly high ROI. If all costs become appreciating assets, then our CFOs and investors would probably laugh in their sleep. But interestingly, many times when investing, the distinction of such major differences is often hasty and the weighting is far from sufficient.

7. Uncertain Love — Buddhism, Quantum Mechanics, Logic, and AI

Since I was a child, I would follow my grandfather to worship Buddha. I'm not sure if my grandfather was a Buddhist, but he firmly believed in the existence of Buddha, in the existence of super powers beyond our world, yet not fully knowable. Back then, when burning ghost money and offering food, it seemed we would sometimes also offer sacrifices to the "White Impermanence" and "Black Impermanence," although I didn't know what they were. Later, in middle school, I learned that the Buddhist saying "It is not the wind that moves, nor the flag that moves, but the mind that moves" is idealism. Then, after reading some books on Zen, they always said that Buddhist teachings rely on enlightenment, which cannot be explained in words. What can be explained is not the true path to becoming a Buddha. Later, during a visit to Fo Guang Shan, I saw a popularization film by Master Hsing Yun saying that Buddha is a human, not a god, and that everyone is a Buddha. Buddhism teaches that everything is empty and that one should not be attached to anything. These are roughly the core memories I, a non-Buddhist who has reverence for Buddhism, have of Buddha. Clearly, my understanding of Buddha is extremely superficial and vague.

In university, I took a class that I only partially understood, but was very attracted to: quantum mechanics. Quantum mechanics says that everything has wave-particle duality, meaning I am both a wave and a particle. There’s a famous principle called the uncertainty principle, which states that if the position of a particle is measured more accurately, the deviation of its velocity will be greater, and vice versa. Besides these two points, there are two more of my own thoughts: one is about waves. Waves are very interesting. Each small part basically reflects the overall characteristics of the entire wave, but you can’t completely perceive its full picture like you can with a particle, because it can permeate infinitely, and the observer is also immersed in it. Any measurement we make is actually an interaction with the entire wave, a reaction after it is disturbed. When measured, it is no longer what it was originally, and what it originally was is actually something you can’t fully know, because as soon as you measure it, it is no longer the original it. And if you don't measure it, you can't perceive its existence, even if you are in it or very close to it. Without interaction, then it seems as if it never existed. This is very similar to what Buddhism says about impermanence and unknowability. You can only guess, only understand through enlightenment, but you can never “grasp” it. It is impermanent; it is omnipresent. You are in it. If it is a wave that permeates infinitely, then perhaps you are part of this wave, and you yourself are all the characteristics of this wave, but you still can't truly grasp it. Any attachment you have, any deliberate measurement you make, is a kind of interference to it. After the interference, it is no longer the original it, and even you are no longer the original you. And what exactly is it? You don’t know, and you don’t need to know, because you are actually it.

Another thought is about the means by which we understand the world. When we look at various sciences through which we understand the world, it seems without exception that “seeing is believing.” Science’s measurement of the world mainly relies on light. I don’t understand relativity, but I vaguely believe that in order to accommodate light (to give light a special, unchanging speed), it had to conceptually change time (of course, what time is is originally a problem. When time is measured by light, it is one thing. What if it is measured by touch or mental contemplation?). Our dependence on light is so strong that I can’t help but feel that the world we see is the way it is because we use light to measure it—that is, our way of measuring creates this world. This world is created by our own subjective measurement. If we could not rely on it, what would the world be like? But perhaps we simply can't because we ourselves are some kind of broad wave. If this is the case, then all so-called materialism based on “seeing is believing” is itself idealism.

In 1931, the brilliant and short-lived mathematician Kurt Gödel proposed the incompleteness theorems, shattering the dreams of all mathematicians and philosophers for nearly a thousand years. The basic meaning is that within a self-consistent system composed of a limited number of axioms, there will always be propositions that cannot be deduced by this logical system to be true or false—that is, there will always be unknowable/undecidable problems in this system. It clearly tells us that our attempt to explain the world with a limited number of principles plus logic is futile. Gödel proved that this is impossible.

Recently, AI is particularly hot, and many people are starting to feel that AI will replace humans. But I have a vague feeling that if it is based on the current deterministic (mechanical) judgment of 0s and 1s, then computers should have huge limitations. It completely encounters the undecidable problems mentioned in Gödel’s proof. What will happen if we have quantum computers in the future? I don’t know, because theoretically, quantum computers can not be limited to a limited number of axioms, not limited to 0/1 mechanical judgments.

Buddhism, quantum mechanics, and Gödel’s incompleteness theorems all seem to be telling us:

• The world and human life as a whole are unknowable, at least imprecisely measurable, uncertain.
• It is impossible to describe and regulate the world with limited rules. Things are imperfect and incomplete.
• Furthermore, I vaguely feel that what is seen is largely determined by how it is seen. The local may describe the whole, although the whole is unknowable.

Yet we humans often want what we lack. Those who lack arms want arms; those who lack legs want legs. Life will eventually pass, but we often seek immortality. Love is not eternal, yet we place our hopes on unchanging stones. Perhaps this world is inherently uncertain, inherently impermanent, so we so relentlessly pursue eternity, pursue a definite sense of security. We not only pursue it, but also always want to grasp it, to interfere with it to prove its existence and our own existence. But we don’t know that its existence may not be what we think it is. It is never unchanging. The more you measure it, the more you interfere with it, and the more you interfere with it, the more it is not the original it. After you have tested it countless times to reassure yourself, it has already been changed by you. Like trust, like love, it is uncertain. The more you measure it, the more it disappears. You can only firmly believe, only accept the uncertain fate, accept it, and it will exist, and you will be happy.

8. Bad Money Drives Out Good, the Movie Theater Phenomenon, and More

I haven't written on this public account for a while. Part of the reason is that I wanted to write about this topic, but my thoughts were scattered, and I didn't know how to start. A few days ago, I had a casual chat with a good friend after dinner, and we talked about a few points that helped me clarify things. So I quickly wrote it down.

1. Bad Money Driving Out Good from a Neutral Standpoint

First of all, "bad money" and "good money" are neutral concepts. The phenomenon of bad money driving out good, first discovered by British Chancellor Thomas Gresham, is: when there are two kinds of legal tender with different gold content in the market, and the money supply is sufficient, people will tend to keep the money with higher gold content at home for collection and spend the money with lower gold content first. This phenomenon is also known as Gresham's law. This phenomenon is actually quite easy to understand and conforms to human nature, just like in the late Republic of China, the government desperately issued gold yuan notes (paper money) to replace silver dollars. At this time, everyone naturally spent the paper money first. For the mint, gold yuan notes had low costs and could be printed at will, which was beneficial to them, but at the same time, it was detrimental to the common people. This is bad money. Naturally, everyone voted with their feet, and naturally, "bad money" flooded the market, and good money became more expensive. This is individual behavior driven by everyone's self-preservation. If this individual behavior cannot be united, then the mint, with its stronger single power, will win. By printing gold yuan notes, most people were still plundered of part of their personal wealth.

So, is bad money driving out good something everyone wants to prevent? Not necessarily. First, the mint wants to issue bad money. Second, the flooding of bad money is driven by every individual. The reason why everyone says "bad money driving out good" is bad is partly because they hope that others will give them good money, while they want to use the bad money first. This selfishness is understandable, but the result is that all the common people as a whole suffer losses. Each individual wants to protect themselves, but they can't protect themselves. If everyone is not united, they cannot form enough power to resist the mandatory force that designates bad money and good money with the same face value.

This phenomenon describes from one side the phenomenon that selfish and disunited individuals cannot resist the mandatory power of managers. From another perspective, it also describes a phenomenon of using the power of individual selfishness to redistribute wealth and reduce the cost of public services.

2. The Movie Theater Phenomenon

Another phenomenon is the movie theater phenomenon, which is similar to "bad money driving out good" but also different. It describes a collective self-harm phenomenon that may occur in a group of selfish individuals without organization and lacking external mandatory power. That is, if people in the front row of a movie theater stand up, then people in the back row will also stand up. As a result, what was originally a good thing for everyone to watch while sitting becomes a tiring thing for everyone to watch while standing.

In my opinion, the movie theater phenomenon is more worthy of everyone's research and response. Because it is a phenomenon of collective self-harm, no one really benefits, unlike "bad money driving out good," which is actually one force defeating another force and promoting the popularization of bad money. Currently, "bad money driving out good" is cited more often, but most of the time I think it actually refers to the "movie theater phenomenon."

3. One Piece of Shit Spoils the Whole Pot of Soup

The people who stand up first in the movie theater are like a piece of shit falling into a pot of soup. Soon, the whole pot of soup can only be thrown away. Here, a proportion problem is pointed out. Soup actually has a self-purification ability. Like sewage from rivers flowing into the sea, if the proportion is very low, it's actually okay. But as long as this proportion rises to a critical point, the original purification ability collapses. Many times we say that a bad phenomenon is not mainstream, so there is no problem, and it also exists in another benign system, as if there is no difference between the two sides. This is a very dangerous idea. You must know that the critical point of the size of a piece of shit that spoils a pot of soup is often very low, perhaps the difference between one percent and five percent. One percent can be purified, but five percent can only be thrown away entirely. For example, if the proportion of liars in a group of people is only 1%, then the society can operate efficiently and benignly with the presumption of innocence. But if this proportion rises to 5% or 8%, the presumption of innocence will force others to the side of the liars. In this case, the society can only make a presumption of guilt. This is a difference in nature. The cultural operating efficiency of the two systems will undergo fundamental changes. But be careful that this qualitative change caused by quantitative change often does not happen at 50%, but often at a much lower value. In business, we know that Amazon essentially determined the pricing of books and thus subverted the book retail industry when its book share was far less than 50%. Everyone has cancer cells in their body, which is normally okay, but if their replication and spread exceed a certain value, you get cancer, and cancer doesn't need to spread to 50% to take a person's life.

So when we talk about looking at the mainstream or comparing two systems that are not 100% perfect, we must pay attention to the difference between 1% and 5%. Don’t think that they are both small parts and of the same nature. Many times, the qualitative change is between this 1% and 5%.

4. Changing Collective Self-Harm Requires Huge Energy

If a group has 100 people and 8 of them are liars, and research shows that a presumption of innocence system only works when the proportion is below 3%, then in order to transform 5 of the 8 people, it definitely doesn't take the effort of 5 people. It usually takes 10 times the effort, that is, 50 people working together can transform 5 people. One example is New York’s cleanup of graffiti in public places. It is said that every station in New York’s Manhattan Central Terminal was covered in graffiti. To rectify this, the mayor spent a lot of effort, going every day to brush one wall. If someone painted a little, he would brush it all, repeatedly for many, many days, and the graffiti gradually decreased and then disappeared. It is said that Singapore’s management of spitting was similar, paying many, many times the cost of the destroyers to reverse the “trend” and form a benign operating system.

5. Channels Have Value, Expensive Things Sell Better

One way to change public trends is to directly carry out large-scale rectification. Another way is to use channels. In business, there is a phenomenon worth discussing: sometimes things sell better when they are more expensive. For example, for products like air conditioners, someone needs to install them, and someone needs to recommend them. It is possible that internet direct sales similar to Xiaomi, which pushes prices to the "lowest," are not as good as Gree giving enough profit to installers and channels. Although the channel’s approach seems to raise the price of goods, in practice, channel and service costs are perhaps the most economical and benign way to maintain some kind of public perception. This kind of channel and service cost is necessary. It makes the cost of maintaining a certain order apparent, while ignoring such a cost system may lead to "bad money driving out good." This phenomenon, which violates the price-supply-demand curve principle described in economics textbooks, is actually very, very common. Charlie Munger has repeatedly said in his books that we can also easily find such examples in consumer goods, commercial software, hardware, and other fields. This phenomenon of expensive things selling better may even be the mainstream in some areas.

9. More Market or More Planning? – Some Thoughts on Supply-Side Reform

A few days ago, a friend and I were talking about the history of clothing production. He said that large-scale, mass clothing production is a result of World War I, because the war triggered the need for rapid, large-scale clothing production, which led to today’s sizing standards. The fashionable Burberry trench coat that is popular now was also originally produced for the military. I haven't verified the entire history, but I have seen Burberry trench coat advertisements, which did tell a touching war story. Hearing my friend's statement for the first time, I was a bit surprised and also a bit skeptical, but it did activate my thinking about supply-side reform over the past year.

Supply and demand are two sides of the same coin, mutually promoting each other, a bit like the chicken and egg problem. It seems impossible to say who came before whom. But to make changes, you always have to start from one end. The story my friend told seemed to reflect my vague yet strong feeling.

To fundamentally reform the supply side, you must first reform the demand side. The demand side is the key to driving supply-side reform.

The first type of supply-side reform is satisfying needs that have always existed but have not been fully met. For example, humans wanted to fly, and one day airplanes finally met the need for flight and also met the need for fast transoceanic travel. This major category covers most supply-side upgrades, satisfying people’s demands for faster, more, better, and more beautiful things. When one kind of greed is satisfied, another greed will appear. Of course, this greed is mostly called pursuit.

The second type of supply-side reform originates from the emergence of new application scenarios. For example, the world war appeared. Under this new, sudden application scenario, clothing and many other daily necessities were needed in batches, on a large scale, and with standardization, which promoted huge changes in the supply-side production organization, management, and delivery circulation.

The third type of supply-side reform originates from changes in the aggregation of front-end demand, or rather, from a significant change in information collection costs. For example, after the emergence of smartphones, the cost of collecting routes, locations, and ride-hailing demand was greatly reduced, allowing people to meet their travel needs with shared transportation methods like Uber.

There should be some other situations that cause supply-side changes that I haven't thought of, but no matter what kind of supply-side change it is, there should always be a corresponding demand. Major changes in people’s demand scenarios are not many (new scenarios like war that cause the second type of change). Upgrading people’s existing demands (more, faster, better, etc.) is quite common, but are all these faster and more things worth pursuing and encouraging? This is a question worth reflecting on, but I won't elaborate on it here. The third type of change, through the aggregation of information and the full-chain connection to achieve better and more efficient satisfaction of existing needs, has great potential and is mostly worthy of encouragement. Thinking a little further about the third type of change is quite interesting. There are a large number of possibilities to exchange the unification of time and space for higher overall efficiency and lower costs. Abstractly speaking, there is a possibility of a semi-market economy that promotes the supply side to break through the lagging large-scale planned production and achieve small- and medium-scale batch "customized production" by promoting the demand circulation side to adopt more planning, that is:

Use the semi-"planned economy" of the demand circulation side to promote the realization of the semi-"market economy" of the supply side.

Our original online e-commerce solved the problem of moving the Yiwu small commodity market online. This highly transparentized information on the circulation side and accelerated market competition among various merchants, but it didn't change traditional manufacturing factories much. How much a factory produces still requires some planning. The main factories still rely on large offline commercial supermarket orders, scheduling plans according to cycles of several months or even half a year or a year. The more intense and market-oriented the online merchant competition is, the greater the gap and contrast with the offline production plan becomes. The gap between planned bulk foreign trade orders for international demand and scattered online sales orders is also greater. In this case, the main factories still rely on Walmart and Carrefour. The extreme marketization of the pure circulation side online does not change the lag and high planning of the production side. So, is there a model that can change the lag and high rigidity of the production side's planning? I think we still have to make a fuss about changes on the demand side.

Assuming we can give front-end consumers a little more patience and a willingness to coordinate with others, giving up part of the "what you see is what you get" and the impulse of "wanting it right now," then we have the opportunity to use recommendations between people, relationships between people, and similarities in interests to do people-based aggregation, aggregating each person's personalized needs into planned demands with a certain amount of time flexibility. The degree of aggregation of this demand may not be as large as the half-year bulk orders of Walmart, but it is enough to make a factory production line operate economically. In this way, we have the opportunity to break down a large Walmart order into 50 small batch orders. The back-end production can also get rid of its dependence on Walmart, change the original model of authorized manufacturers fully planned production, and then let dozens of manufacturers with production capacity compete in the market for these 50 batch orders aggregated according to various different demands.

If this can be done, then the contradiction between the highly marketized online circulation side and the rigid planned production side can also be alleviated. What replaces it is the integration of more planned demand and a more market-oriented supply side. The front-end and back-end information will be more comprehensively connected, eliminating the mismatch between demand and production, and even helping our traditional production get rid of its dependence on traditional Walmart-like supermarkets, finding its own differentiation in the differentiated batch aggregation of demand, and realizing a real supply-side revolution. From rigid to flexible, from homogeneous to differentiated and characteristic, from lagging planning to semi-marketization synchronized with demand.

10. Turning "Capitalism" Upside Down

Warren Buffett is an admirable capitalist; he is a pure capitalist. His entire career can be described as tirelessly, focusedly, and rationally moving money to enjoy the fruits of compound interest. I enjoy reading his letters to shareholders. For decades, he has repeated the same simple truths, repeating a purity that is not easy to achieve. In his empire, one hand is insurance, and the other hand is investment. One hand sells risk resistance, collecting money; the other hand puts money into orchards with moats that can generate compound interest.

Originally, when I started writing this public account, I wanted to write an article about insurance, tentatively titled "Insurance, the Ultimate Expression of Capitalism." I roughly wanted to say that insurance is very interesting and very representative of capitalism. "Rich people" have capital and "more money," therefore having a strong ability to resist risks. "Poor people" have "less money" and a weak ability to resist risks. So "poor people" need to buy this risk resistance from "rich people." Although insurance is indeed needed by many people and gives them a more stable life, at least a more peaceful state of mind, ultimately, insurance products further promote the transfer of wealth from the less wealthy to the wealthy. Saying it is the ultimate expression of capitalism is because it further amplifies the power of capital. The soft and intangible idea of "having money = being safer" is also realized through insurance. If the market is highly efficient and undisturbed, and the law guarantees the legitimacy of capital and its compound interest, then what is likely to happen is that the rich get richer and the poor get poorer.

The reason why Buffett is admirable, even labeled as great, I think, is because he is not entirely a highly talented capitalist who can play the game of capital to the extreme; he is more of a lovable person who clearly knows that money is not the goal. On one hand, he enjoys the happiness brought to him by the game of capital; on the other hand, he wisely donated most of his money to the younger Bill Gates, entrusting Gates to complete the due redistribution of wealth. At the same time, he is not afraid of criticism and advocates that other wealthy people also donate their money and that the state raise taxes on the wealthy, carrying out greater wealth redistribution from the mechanism. (The interesting thing is that Buffett's father was a Republican congressman, and what Buffett is advocating now doesn't seem like the Republican platform.)

In capitalist America, a magical Buffett was born. He gained happiness from the game of insurance and capital compound interest and lightly handed the burden of money to Bill Gates. This is so wise; this is probably the simplest and easiest way for a capitalist to gain happiness in a capitalist environment. Accumulating money first and then distributing it—in this cycle, Buffett mainly focuses on the first half. In the "post-capitalist" era, assuming that effective redistribution of money is equally important as accumulation, I can't help but wonder if it is possible to use insurance and compound interest, or rather, reversed insurance and compound interest, to make wealth distribution more even? Are there mechanisms that can allow poor people to also sell "insurance" to rich people, allowing poor people to sell some of their "soft power," their willingness, and their risk resistance to rich people, thereby achieving more refined feedback and a shorter cycle of money flowing back from rich to poor?

For example, if a thousand people think in the summer that they want to buy a certain style of down jacket in the winter, and they jointly write an order to a manufacturer and are willing to pay a 10% deposit based on last year's price, in this case, it is very likely that the factory is willing to give them a 30% discount. Because the factory obtains a kind of demand certainty from their joint order that the factory did not originally have. This certainty can be transformed into the convenience of production during production plan troughs, and it can also be transformed into confidence when purchasing raw materials. The factory can even further sell this certainty to upstream and supporting manufacturers to exchange for further reductions in factory costs. In terms of transaction form, this transaction is like a group of people jointly spending 1 yuan each to buy 3 yuan of limited-time vouchers. Then, because the factory sold these vouchers, it can also further buy similar limited-time vouchers from upstream and supporting manufacturers, for example, spending 1,000 to buy 3,000 yuan of limited-time vouchers. If these thousand people have certain credit records and they jointly place an order, expressing their willingness but not paying a deposit, would the factory be willing to give them a discount? I think they probably would, just maybe not 30%, but could it be 8%? This is like the factory using its own issued limited-time discount coupons to buy an insurance from ordinary consumers that guarantees future purchases. If we think further, there are actually many forms that can marketize, productize, and monetize the willingness of ordinary people and the certainty of their future needs. Suppose the system gives everyone only one chance to express their willingness to buy cotton clothes, which is like giving everyone a cotton clothes willingness voucher (this willingness voucher may be exchanged for with accumulated credit). Then, is this willingness voucher valuable to the capitalists who open factories? How is this price determined? What restrictions should there be on the bilateral transaction?

The essence here is that everyone (rich or poor) is often much clearer about their own willingness, their needs and plans at some point in the future than others. And this individual’s plan and willingness, as well as the individual’s grasp of the certainty of their own behavior, is often valuable to the supply side that meets the demand. It can reduce the uncertainty of organizing production and can help achieve more effective allocation of resources and capital. Therefore, I guess that capitalists and rich people are willing to buy this reverse insurance from ordinary people and poor people. This reverse insurance can monetize the credit and willingness of every ordinary person. This reverse insurance is no longer about poor people accumulating credit and money to borrow money from rich people and pay interest (in the case of borrowing, poor people, because they borrowed money, have to pay interest. Therefore, the things he buys are more expensive than what rich people buy) or spending money to buy certainty of life for rich people. Instead, it is the other way around: rich people and capitalists spend money to buy the certainty of production capital allocation from ordinary people and poor people. In the former kind of insurance and financial lending products, money flows from poor people to rich people, while in this reverse insurance, money flows from rich people to poor people. There should be a qualitative difference here.

The next question is how to productize this certainty of individual willingness and behavior for everyone (rich or poor); how to standardize it so that it can circulate like discount coupons; how to create forms to express willingness; how to create products to achieve this certainty transfer; and how to financialize and monetize this certainty transfer. In addition, we should consider decentralizing the productization process of this certainty transfer (because there are too many scenarios and too many situations) and being able to avoid fraud in this relatively decentralized "certainty product" production and circulation process and form a positive cycle of good money driving out bad money. I wonder if blockchain was born for this kind of "reverse insurance"…

(After finishing writing, thinking about this upside-down capitalism, it’s really a bit interesting :-) )