---
title: "Involution: Fight to Make Your Opponent Bleed Out First"
description: "Involution is inevitable and will inevitably lead to collective bleeding, but there is an antidote. Who will be the final victor in involution? Those who boldly participate but have the antidote."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2024-05-13"
language: "en"
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# Involution: Fight to Make Your Opponent Bleed Out First

> Involution is inevitable and will inevitably lead to collective bleeding, but there is an antidote. Who will be the final victor in involution? Those who boldly participate but have the antidote.

Involution is inevitable, and it will inevitably reach a state of collective bleeding, but there is an antidote. **Who will be the final victor in involution?** **Those who boldly participate but have the antidote.** The term involution is so popular that almost all competitive behaviors are described as involution. It's like the Northeastern Chinese "zheng" (整) and Henan's "zhong" (中). "Zheng" can almost summarize all verbs, such as "zheng liang kou (wine)" (整两口酒), "zheng ji ju" (整几句). "Zhong" can almost summarize Henan people's affirmative responses, such as good, okay, can, OK, etc. This is incorrect and misleads the public. However, involution also reflects the true state of current business; no one can escape it, and its endgame is clear.
**Since there is no escape, the only option is to find a way to be the final victor in involution.**
**Who is the final victor? When others have bled out, you still have your last drop of blood.**
**Involution is a battlefield of bleeding**
The popularity of involution has deviated from its original meaning. It originally did not mean fierce competition, but competition so intense that the "income-to-effort ratio" declines, equivalent to "inflation" of input. Key point: **the income-to-effort ratio declines.** Input increases, returns decrease, to the point of bleeding. Otherwise, it's not involution, or the term is misused. The reason for the decline in the effort-return ratio is that everyone has entered a coercive involution track with no exit. Everyone passively enters **"grabbing each other's share in the same way"** and escalates. This is the main reason for the decline in the effort-return ratio. According to the degree of decline, involution is divided into four levels. **First-level involution: growth without development** This is the lowest level; although there is still growth, the enterprise does not progress, and profits decline. **Second-level involution: maintenance without growth** Although there is no growth, it must be maintained with continuous investment.
**Third-level involution: housecleaning-style clearing**
Forget growth, let alone development; make opponents bleed their last drop. This is repeatedly staged in the boxing ring. Generally, if you don't exit before the second level, you can't find a successor, so you have to tough it out. Bleeding affects health, and continuous bleeding ends in death. What is the outcome of third-level involution? It is **"batch deaths" of business entities in the industry or market**, also called **"housecleaning" or "clearing."** A more academic expression is **"increased industry concentration,"** meaning that since enterprises die in batches but demand remains, market share concentrates on surviving enterprises. **Who is doing the housecleaning? The future leading enterprises.** This has happened many times in China. Industries with oligopolies have all experienced this. Therefore, as long as you make opponents bleed out first, the victor may "win at a heavy cost," but the gains are huge. Some might say that international brands focus on value and do not participate in involution. This is a typical reversal of cause and effect. In fact, international brands were also the final victors of involution, just earlier. So, when do enterprises stop participating in involution? The answer is when enterprises reach a tacit understanding of **"balance of terror."** What is balance of terror? It is the mutual ability to destroy the opponent, like nuclear weapons between the US and Russia. Before achieving balance of terror, involution is inevitable. Chinese industries are far from balance of terror. So involution will continue. **What is the fourth level? Collective clearing and exit.** For example, in low-price segments, brand manufacturers may collectively exit, becoming the price range for private labels. For example, wholesalers once collectively cleared out. In the future, distributors may also collectively clear out. Collective clearing does not mean the field disappears, but rather gives way to other business models.
The four levels are: **earn less, earn nothing, lose a little or a lot, and collective clearing.**
Now we are at the third level. What is the use of classifying involution levels? **To help participants mentally prepare and reserve resources and methods.** The outcome of running a business can be clearly seen from the involution process. **Involution is inescapable**
Can involution be avoided? Small enterprises focusing on high-end can escape, but those targeting the mass market cannot. Some like to use the word "win-win," where everyone (especially SMEs) reaches a tacit agreement not to engage in confrontational competition and make money together. This is fantasy. Such views emerge at different times. This utopian idea is neither reasonable nor legal. **Involution is inevitable; it will appear at a certain period and then disappear.** That is business logic. The chart below shows the life cycle. Almost all business life cycles are similar: product life cycle, personal career life cycle, industry life cycle, enterprise life cycle, national economic life cycle. **The four stages of the life cycle: introduction, growth, maturity, and decline.** All life cycles are like this. In the growth stage, rapid development, many enterprises enter, and suddenly they hit maturity. What do they do? It's like seeing a bright future and everyone having children. More and more children are born, and suddenly you're told: not enough food. What to do? To survive, you have to fight for food. Isn't that the rise and fall of ancient dynasties? As mentioned earlier, the most severe involution is "batch deaths." When a batch dies, "food" becomes sufficient. In the beer industry, there were thousands of breweries; now there are 3 major + 5 minor. In the ham sausage industry, there were hundreds; now only 3. In the instant noodle industry, there were hundreds; now you can't remember the fifth. In the home appliance industry, there were hundreds; now no more than ten. In the dairy industry, there were over 4,000; now only 3 are national.
As long as it's an industry from the industrial era, it's basically like this. Agricultural-era industries are slightly more fragmented, with lower concentration. For example, catering and tea. An industry that once had thousands of enterprises ends up with two or three oligopolies; it's normal. **90% or even 99% of enterprises die in involution; that is the ultimate purpose of involution.** Inescapable collective death, leaving only a few to watch over the industry. **Two major battlefields**
Involution always exists, but the battlefields differ. **However, don't think there is only one battlefield, and don't think victory in involution is necessarily within the involution battlefield.** The art is outside the poem; the skill of involution lies outside involution. In marketing, cost-performance and added value each have their arguments. Actually, they are two sides of the same coin. Brand expert Miao Qingxian has an article "'Being Different' and 'Following the Crowd': Which Pit Will You Jump Into?" Individuality and mass appeal are also two sides of the consumer. Similarly, brand expert Kong Shou says there are over a dozen such pairs. Consumers are contradictory. **On one hand, they haggle over cost-performance; on the other, they are generous with added value.** It's hard to imagine this is the same consumer.
**The battlefield of cost-performance is definitely the battlefield of involution, determined by the low-price band attribute. The "comparison" in cost-performance includes not only performance-to-price ratio but also comparison with competitors.** Consumers compare, so manufacturers have no choice but to involve. The compared objects must please consumers and inevitably involve. Where there is a battlefield of involution, there is a battlefield without involution. I drew a chart using price bands to separate involution and non-involution areas.
The mainstream price band is a concept I've been emphasizing recently: the price band with the largest sales volume, also the dividing line between cost-performance and added value. **Below the mainstream price band is basically the cost-performance zone, also the hardest-hit area of involution.** Coercive involution makes participation unavoidable. **Above the mainstream price band is the added-value zone, where brand added value is played.** This is where involution does not occur. Have you seen Moutai compete on price? Have you seen luxury goods involve? Why use the mainstream price band as the dividing line? Because the mainstream price band has the largest sales volume; goods below this price band indicate high penetration, not scarce, gradually losing social attributes, mainly use value, so cost-performance is important. The duality of goods: natural attributes and social attributes. Natural attributes require cost-performance; social attributes require added value. **Every product has duality, but which proportion is higher is distinguished by the mainstream price band.** **Goods below the mainstream price band have high penetration and weakened social attributes. The higher the price, the scarcer, the more social attributes matter.** In the past, some low-income smokers carried two packs of cigarettes. One for themselves, focusing on cost-performance; the other to offer friends, focusing on social attributes (added value). **Involution battlefield migration**
Recently, price involution has been severe, and the mainstream attribution in China is **"consumption downgrade,"** which is not invalid. But there are two other completely opposite logics: **First, mainstream price band migration** The mainstream price band in Chinese industries has been migrating. For example, 10 years ago, the mainstream price band for bottled water was 1 yuan per bottle. Now it's 2 yuan, but migrating to 3 yuan.
Not long ago, "Lingshou" published an article "Rather than Consumption Downgrade, It's IQ Upgrade." Indeed, as the mainstream price band moves forward, the price range between the old and new mainstream price bands enters the cost-performance involution zone. What used to be IQ tax now becomes cost-performance. At this time, the price range of involution expands, so involution seems more severe. After all, areas that didn't involve now do. For example, in recent years, beverages are a rare category still growing; 3 yuan has become the minimum price, while 20 years ago, a 500ml Coca-Cola was only 2 yuan. The higher the beverage price band migrates, the larger the involution price range. **When will the mainstream price band stop migrating? At least not yet for FMCG.** **Not long ago, I chatted with the head of a leading FMCG company about price band upgrades, which are far from over. Bold guess: China's FMCG industry's relatively stable mainstream price band should be higher than Europe and America. From the beverage industry, the mainstream price band has already surpassed international brands, and the upgrade is not over.** Each migration of the industry's mainstream price band releases new involution price space and creates new added-value space.
**Second, category attribute changes** From a category perspective, consumer goods roughly fall into three types: **specialty goods, shopping goods, and convenience goods.** Specialty goods are categories heavily dependent on brands; shopping goods focus on style and cost-performance; convenience goods are small items bought simply, some care about brand, others don't.
Economic development brings changes in category attributes. For example, 30 years ago, home appliances were definitely specialty goods; you'd eat pickles for years to buy a famous TV. Now, a TV is at most a shopping good, even a small convenience item. **Cars also have a trend from specialty to shopping goods.** Categories that were once high-end have fallen into the mundane, so of course they involve. That's why we feel car sales are increasing, but the auto industry feels more involved and business is harder. After China's reform and opening up, there was a wave of industry (category) popularization. In the early stages of popularization, the entire category was specialty goods, and all price bands were added-value zones. The more popularized the industry (category), the more the added-value zone moves forward, eventually changing the entire category's attributes. Category attribute changes are related to penetration rates. This is also the qualitative change in category attributes brought by quantitative changes in price bands. Regarding involution, two contradictory explanations may both be valid. **Economic development expands the price space for involution; economic depression worsens involution in specific (low-end) price bands.** **Third, extreme involution leaves no room for brand manufacturers** Retailer private labels are the result of extreme involution. Private labels bypass distributors and brand manufacturers, with factories directly supplying retailers. Consumers only care about cost-performance, not brands (though brand endorsement is still needed). It has two prerequisites: **one, very high product penetration and extremely mature technology; two, brand manufacturers and distributors exit, with no circulation costs (simplest logistics) and no added value.**
This is the fourth level of involution mentioned earlier. In the private label price band, brand manufacturers have no qualification to involve. Of course, the private label price band is expanding, no longer limited to pure cost-performance.
**The "antidote" to involution: fight to feed the war**
Involution is a war of attrition, and attrition means bleeding. As mentioned, once you enter second-level involution, exit is generally hopeless, and you can't stop losses unless you decisively give up; otherwise, you can only bleed out. Even "too big to fail" enterprises can't avoid it. I once encountered a case of "rolling over the leader." This was an extremely severe involution in an industry, to the point where there was not only no profit but no gross margin. At that time, the larger the scale, the heavier the losses. I didn't understand "diseconomies of scale" before, but suddenly I did. **The outcome of involution: the "leader" and "third" disappear, and the "second" becomes the absolute leader.** Later, the "leader" summarized in the media that they had been fooled by the "second." Any product the "leader" had lost money; any product the "second" didn't have made money. The products the "leader" didn't have were not because they couldn't produce them, but because promotion failed. These products were the "high-end products" of that time. Use low-end products to fight channels and support the team, use mid-range for sales volume, and use high-end for image and profit. So, what is high-end? Generally understood high-end is often detached from reality, extremely high-end, even entering luxury. **High-end with sales volume is the next mainstream price band.** If you build this price band, you have both sales and profit. More importantly, this price band doesn't have price wars. Back to the earlier topic, the term involution is overused. New products, channels, brands, policies, talent—all are said to involve. Among these, only those involving price, policy, and promotion are true involution; other areas may be fiercely competitive, but they are not "declining effort-return ratio" involution, and may even be the "antidote." For example, new product promotion, channel building, brand creation may not yield immediate results, but they are not declining effort-return. The earlier point that involution is inevitable refers to the price band where involution occurs, but there are always areas without involution. **As long as it's an area of added value, there is an "antidote" to involution.** Around the mainstream price band, a watershed forms: **the price band is a normal distribution around the mainstream price band, with relative balance on both sides.** When involution below the mainstream price band is more severe, the added-value zone above expands. China's experience since reform and opening up has shown that when traditional fields are saturated and competition is fierce, another price range releases greater energy. Indeed, the current reality in China's FMCG industry is that most are focused on involution, but many enterprises are also focusing on rapid growth in higher price bands. I even call for: **SMEs struggling in low-end price bands should move to high-end price bands as soon as possible. This is a niche space with added-value price space.** Finally, let's talk about the "antidote" to involution. Involution is inevitable, it bleeds, and prolonged bleeding leads to death, "batch deaths," until the industry is highly concentrated. So, involution is making opponents bleed out first. But this is not a clever play. The clever play is to find the "antidote." Here is the logic of the antidote. How can a person who is constantly bleeding not die? The answer is **transfusion.** Is there a spectacle of bleeding and transfusing at the same time? In elementary school, there was a homework problem I didn't understand: a pool with water flowing in and out, when will it fill? I thought who would be so stupid! Now I see it's common. Bleed while transfusing. That's what happens on the operating table. **Transfusion is not capital transfusion, not unlimited, but hematopoiesis.** **Hematopoiesis is fighting to feed the war, using high-end added-value wars to support involution in the cost-performance zone.**
**Bleed in the involution price band, everyone bleeds together, until opponents bleed out. In high-end, do added value, that's hematopoiesis. Use the blood from high-end to support the blood loss in the involution zone.** The stronger the hematopoiesis, the more fierce the involution you can launch in the involution zone. Roll over opponents, achieve yourself.**


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