Liang Ning
Over the past few years, everyone has felt a sense of panic and anxiety. Why do we universally feel pain? Because the high-speed growth we once took for granted suddenly ended. You should know that over the past two decades, all the growth we experienced originated from two Genesis-level projects: first, urbanization. Since 1978, China has been undergoing urbanization, which is essentially a massive population migration. Especially in 2000, when China joined the World Trade Organization (WTO), factories began to be built on a large scale, and a large number of rural laborers started to work in cities. When we were young, we often said that out of 1 billion people, 800 million lived in rural areas. According to the 2022 statistical report, 914 million people now live in urban areas for the long term, marking that in the past 20 years, we have successfully urbanized 700 million people. 700 million people is the population of all of Europe, or two Americas. So in the past 20 years, China has completed the urban construction equivalent to almost all of Europe or two Americas—all the housing, all the roads, all the urban infrastructure—everything built from scratch. Second, internetization. On April 20, 1994, China officially connected to the global internet, starting the process of internetization, migrating 1 billion people onto the internet for interconnection. All the internet entrepreneurial miracles of the past 20 years came from the incremental market of 1 billion new netizens.
Three Major Changes in China's Internet Over 30 Years
1. Structural Change in Chinese People's Survival Models
Our nation has been an agrarian civilization for thousands of years, and our long-term survival model has shaped our concepts and certain national characteristics.
1.1 Survival Dependent on Natural Resources: Natural Laws and Labor
Being a farmer means relying on natural resources for production, requiring an understanding of natural laws and having labor. So the 24 solar terms are important; men are labor, oxen are labor—these are all important. The character for wealth (富) means having a field at home, having labor, following natural laws, and monetizing natural resources to survive. This is a model of long-term survival with limited resources, so concepts like "contentment," "frugality," "moderation," and "cherishing things" are cultural values developed under such a survival model.
1.2 Survival Dependent on Systems: System Knowledge and Obedience
In ancient China, there was a term "eating imperial grain" (吃皇粮), meaning one could enjoy the court's stipend by passing the imperial examination. In ancient times, studying was to eat imperial grain; today, studying is to "take the civil service exam, get a job in a state-owned enterprise, or enter a big tech company." This is the optimal survival model in our millennia-old concept: as long as I become a person of the system, learn the knowledge within the system, maintain high obedience, and am not abandoned by the system, I can receive the system's support and survive within it. Depending on the system for survival does not require understanding market laws or objective reality.
1.3 Survival Dependent on the Market: Business Laws and Innovation
When the country was founded in 1949, 89% of Chinese were farmers, and at that time, people surviving under the first and second models accounted for over 90% of the total population. However, today, 900 million people live in urban areas and can no longer rely on natural resources for survival. Of these 900 million, how many can rely on the system for survival? Therefore, what was once a minority survival model will become the majority's survival model in the future: relying on the market, business laws, and innovation. The widespread panic, unease, and anxiety today are actually about not knowing how to live in the future. In fact, there are only three ways: relying on natural laws, system knowledge, or business laws. If you master at least one, you can survive.
2. Structural Change in User Demands and Market Fundamentals
2.1 User Demands Have Changed
In the past 20 years, the life of about 700 million people can be summarized as "rushing." Rushing from villages to cities, from ivory towers to markets—everyone was new, starting from zero to adapt to the environment, without industry knowledge or urban life experience, everything unfamiliar, everything to be dealt with first. Now, 900 million people live in urban areas, whether living well or not, they have settled down. After that, the vast majority will grow old and die in cities, entering a stable state of life. You will find that the overall Chinese people are no longer in a state of frantic coping, but have their own sense of familiarity, a discernment of more flavors, and have entered a new stage of demands—self-settling, living out the beauty of life, and living out one's own posture of life. Our ancestors lived in natural landscapes; reading those ancient poems, you feel that our ancestors were completely in tune with nature and vegetation—a familiarity from long-term coexistence. In the future, we live in cities; we will live in concrete jungles and virtual online worlds, creating another kind of eternity, and we should create our own beauty.
2.2 Market Stage Has Changed
From the perspective of Western economics, the previous era can be seen as an era of rigid demand. The characteristic of rigid demand is one word: "lack." Because you don't have it, you need it. If your home doesn't have a TV, you need to buy one; if your home doesn't have a sofa, you need to buy one. The opposite of rigid demand is elastic demand. Elastic demand is not because of lack. For example, buying your first down jacket is a functional need. After having a warm winter coat, buying a wool coat, cashmere coat, or ski jacket is emotional value. On the other hand, in the era of rigid demand, if others have a sofa, my family should have one too. Today, if my family doesn't have a sofa, it's because we don't intend to have one. You can no longer assume that because the other party "doesn't have" something, they need it, and thus judge that a market exists.
3. Product and Service Paradigms and Corporate Conceptual Capability Models Have Changed
People have changed, the market has changed, and user demands have shifted accordingly. This is not only due to life stages and generational changes but also because everyone's knowledge structure and consumption concepts are constantly evolving. In this context, your counterpart has completely changed, and your living environment and users' life stages have changed. Therefore, our product and service paradigms, corporate concepts, and capability models must also change. So, let's discuss three topics:
First, in the future, should we solve problems using a commercial framework or an emotional framework? Second, in the future, should competitiveness be efficiency-based or experience-based? Third, in the future, should we make products or brands?
Commercial Framework or Emotional Framework?
One of the changes in these 30 years is that previously we would criticize someone for being too commercial, but now we mock someone for being "love-brain" (obsessed with love).
1. Love Is Unfair
When you pursue fairness and equality in everything, that is actually a transaction. I have seriously studied why the "domineering CEO and sweet innocent girl" romance dramas work so well, because women's imagination of "being loved by a domineering CEO" is similar to men's dream of winning the lottery. When a girl is loved by a domineering CEO, it means she only needs to offer very ordinary things—kindness, innocence, ordinary care, average cooking skills—and in return, she gets all the social advantages of the CEO. What a high-leverage return that is! So, love is unfair. That is its charm. It also means that when you love someone, you cannot demand fairness from them. If you list out what you give and what the other should return, that is a transaction.
2. The Essence of Business Is a Relationship, Achieving Efficient Collaboration Between People and Things
For a long time, China has been a society of personal connections. People once advocated qualities like valuing loyalty and affection, while despising overly commercial and utilitarian behavior. But in today's urbanized society, our lives are more supported by the commercial system. We deal with companies, which are limited liability companies. Their functions and responsibilities have clear boundaries. But if you marry someone and start a family, a family has unlimited liability; a family is communist. Aren't family members just "from each according to their ability, to each according to their needs"? A female friend once told me she loves working but fears going home. At work, she knows her responsibilities, knows how to gain recognition, knows how to make demands of colleagues, and they must comply, and she knows every step she takes is correct, recognized by the company, and she gets paid. However, at home, these clear boundaries and rules disappear. She finds that what she thinks is right is not recognized by her partner. She asks her partner to do things, but he is unwilling to cooperate, and she cannot make him obey through criticism or bonuses like she can with work partners. She is an expert at handling commercial transactions but is not adapted to the ambiguity of life. Indeed, commercial transactions are based on fairness and reciprocity, with everything quantified, precise, fair, and must be fulfilled. In the face of such clarity and certainty, personal feelings and emotions are indeed too troublesome.
3. The Value of Business and Emotion
In an American university, researchers conducted an experiment. The experimenters designed a simple computer task: participants needed to drag an icon on the screen into a designated box. This operation required very little physical or mental effort and no professional knowledge. The experiment had three groups, each treated differently. The first group received $5 after completing a 15-minute task; the second group received $1; the third group, after completing the same duration, received no money but was thanked with a verbal "thank you." The results were thought-provoking. In the $1 group, participants only worked for 2-3 minutes and then slacked off, feeling bad, thinking, "How could I accept such boring work for $1? This is an insult to me." In the $5 group, participants maintained enthusiasm for a few minutes but then showed obvious negativity, feeling the task was too boring and the pay didn't match their effort. In the group with no monetary reward but only thanks, participants maintained a relatively stable positive attitude throughout the task, seeming to value helping others more than material rewards. To further verify this finding, the experimenters changed the setup. They changed the rewards for the first and second groups to a $5 chocolate bar and a $1 candy, respectively, while the third group still received no material reward, only thanks. The results showed that even with material rewards labeled with amounts, participants still valued emotional value more than material value. This experiment reveals something true about human nature. Compared to working clearly for $5 or $1, a sincere "thank you" may bring more satisfaction and happiness than giving $5. This is why Drucker said the best management is to stimulate people's goodness. The commercial system allows us to avoid many troubles and receive services with peace of mind. But if a person has no emotions and all life support comes from fair and equal commercial transactions, that is a world of robots, not a home for humanity.
Efficiency vs. Experience: Which Is Fundamental?
Efficiency and experience are words I often discuss recently because they conflict. Standardization aims for efficiency, but a good experience is definitely not standardized; it is individualized. Eating a meal replacement for lunch and finishing in 5 minutes is about efficiency; carefully preparing a meal and enjoying it is about experience.
1. An Era of Oversupply
For over a hundred years, our nation's enduring demand has been to move toward "modernization." We learned, introduced, and embraced industrial civilization, building standardization, efficiency, and scale. In 1979, the slogan "Time is money, efficiency is life" erected in Shekou Industrial Zone lit up the sky of Chinese people's concepts like lightning; it was a cry for industrialization. In 1982, this slogan was hailed as "the most well-known slogan with the greatest influence on Chinese people." Decades later, after generations of hard work, we now have the world's most complete range of products and most efficient supply chain, we have internet giants like BAT, ByteDance, and Meituan, and we have the world's best infrastructure. Twenty years ago, many Chinese people didn't have their first TV, first phone, first lipstick, or first pair of white sneakers. Today, you can say the economy is bad, but at the same time, Chinese users can say they lack nothing.
2. The World Is Not Made of Business, but of Life
Life, business, and existence. These three words are often discussed in my recent exchanges. The shallowness of business is that the world is not made of business, but of life. The essence of business is to serve life and existence, not the other way around. In life, we continuously accumulate human experiences in different scenarios. However, we must ask: is the true demand of life efficiency? Is the pursuit of life to grow rapidly, age rapidly, and die rapidly? Obviously, the true demand of life is experience—experiencing every moment, every growth, and the feeling of multiple possibilities. Before the industrial era, the word "efficiency" did not exist; it was born with industrialization. We have enjoyed the benefits of industrialization, such as standardization, efficiency, and scale, which helped us solve material scarcity. When I first came to Beijing, I had only one suitcase. Later, moving became 3 boxes, and then a large truck. All these things constituted my life; they were all given by industrialization. At the same time, we can see that industrialization has made the world crude. On this Jiangnan morning, we brew a cup of tea properly, feeling the tea leaves unfold in water and release their aroma. This moment makes me happy; it is very unindustrial. People like the poem "The Slow Old Days" because in the past, everything was hard to come by; you would carve a chair carefully and use it for a lifetime. Such attention and cherishing do not appear in industrialization. Then, we find that people's travel is largely an attempt to escape the industrial era. We want to briefly leave our urban roles and return to natural landscapes, ancient towns and villages, or old European castles and streets. We want to escape the industrial rhythm and return to a natural rhythm. We see that in the midst of economic lamentations, what still seems to work is cultural tourism. Yesterday on Pingjiang Road in Suzhou, it was almost shoulder to shoulder, crowded; it was the first time in over a decade I saw Pingjiang Road so packed. I am happy for these people out traveling. And today, many tourism projects are again standardizing, efficiency-izing, and scaling. Efficiency is to solve insufficient supply. Today, what is valuable is not standardized supply, but experiences worth sharing on video. If the experience is not up to par, if it doesn't move people, then competing on efficiency is meaningless.
Making Products or Making Brands?
1. White Labels Are Fertilizer for Channels
Recently, topics like origin products, factory goods, the rise of white labels, and the era of white labels have been hot. White labels are fertilizer for channels; those who talk about the rise of white labels and the era of white labels are channel players.
1.1 Pinduoduo's Colosseum Model
Pinduoduo is very successful both domestically and internationally today. It is based on China's supply chain advantages and has built a model similar to a Colosseum. In this model, companies compete mainly on the single indicator of price. To lower prices, companies may choose to reduce raw material quality, further compress their profit margins, and cut other costs. It seems like they are grabbing orders from competitors and surviving, but in fact, they are also stabbing themselves, cutting off their own profits one by one. Killing 850 enemies while losing 800 of your own. Then, what is achieved is Pinduoduo's low-price mindshare, Pinduoduo's brand and user scale, and capital valuation. When users want cheap goods, they go to Pinduoduo. Users don't need to remember any brand; they just need to find the cheapest thing they want. If you dare to be one yuan more expensive, users will abandon you. When you can no longer sacrifice to gain users, you will be completely abandoned. This is the fate of a white label—becoming fertilizer for channels.
1.2 The Essence of Current Cross-Border E-commerce
The rise of cross-border e-commerce is the confluence of three variables: the spillover of China's supply chain capabilities, the increase in global e-commerce penetration, and social media driving. So, whenever someone tells me they are going overseas, I say product going overseas, brand going overseas, channel going overseas. Because if it's just product going overseas, grabbing goods from China's supply chain and going to places where other Chinese merchants haven't yet competed, you earn a wave of dividends. The so-called dividend is when there are fewer competitors and you don't have to give up profits for competition. But the direction of industry is surplus, so this simple supply chain monetization will inevitably return to the Colosseum model. At that point, whether it's car sales, lipstick sales, or power banks, the essence is just earning a brick-carrying wage. If it's channel going overseas, then you have to ask: who is your fertilizer?
1.3 The Former Vitality of White Labels and the Mediocrity of Brands
Brands have pricing power, while white labels do not, so white labels can only follow market prices and become fertilizer for channels. Why is China full of white labels and lacking brands? Because of the era. We are standing at the end of the previous era and the beginning of the next; this moment presents this scene. In the previous era of material scarcity, the market's dominant force was on the supply side. Many of today's large Chinese companies have the capability of large-scale supply of low-end goods. They don't even need to do user insight because everything is lacking; they just copy competitors and push goods into channels. Sometimes I talk to small bosses who make white labels or knockoff products, and I find they are truly creative. I remember going to Huaqiangbei in 2005; at that time, Huaqiangbei could produce three new products a day, and the innovation in a month was almost equivalent to the innovation of global mobile phone companies at that time, and those innovations were truly wild. Why could these people in Huaqiangbei do it? Because they faced market demand directly. You need it? OK, I'll make one for you tomorrow; I'll solder the circuit board with a soldering iron on the spot. That was the primitive and vibrant state. At that time, Huaqiangbei was called "Shanzhai" (knockoff), but in contrast, those big factories seemed mediocre. Because big factories survive systematically; they don't need to face the market directly. As long as they know the survival rules of their system and complete system instructions, they can survive. Facing the market directly means higher risks, and they are unwilling to bear the possibility of innovation failure. But on the other hand, it's heartbreaking that so many small bosses like those in Huaqiangbei, who are creative, inspired, and so familiar with electronic components, are in a state of "poor and short-sighted." I don't want to make quality products, I don't want to build a brand, I don't want to think long-term; I just want to ship today's goods and worry about tomorrow later. So the problem with Shanzhai is no after-sales service, no quality control; after selling, you can never find me again. That was the basic picture of that period.
1.4 China Is at a Time to Produce Major Brands and Masters
In many industries, China is at a time to produce major brands and masters. Today, 60% of clothes on Amazon are produced in China, and half of the world's wool is either produced in China or shipped to China for processing. We produce 60% of the world's clothes, process half of the world's clothing raw materials, and buy one-third of the world's luxury goods, but we don't have major brands.
1.5 The Justice of Corporate Profits: Profits Nourish the Innovation Ecosystem
Why don't we have major brands? Because Chinese companies dare not have pricing power. Because Chinese users are unwilling to pay for brands. Why do Chinese consumers like origin products and factory goods? Because Chinese users' concept is that a product should be priced at the cost of raw materials; they only pay for "material" and "tangible things," and everything beyond the material, all "intangible things," should not be paid for. This is the concept we need to change! We Chinese are used to relying on the simple monetization of natural resources, but today we must rely on the market and everyone's creativity to live. And today's main value creation is not material but a large amount of intangible things: technical patents, aesthetics, and subtle experiences. Where is the justice of corporate profits? Why should there be a profit margin between the raw material cost and the selling price? Because this profit margin is needed to support people. Without profit, you can't pay, and you can't keep people. Huawei is China's best company; it openly says it wants profit margins. Huawei is a profitable company; it uses its profit margin to support people. What kind of people? It supports China's best geniuses, the world's best mathematicians, and the world's best engineers, helping Huawei achieve technological breakthroughs, build that patent wall, and construct Huawei's advantages. Why does LV sell a bag made of artificial leather for so much money? It uses this profit margin to nourish the world's most imaginative designers, the most avant-garde artists, and then the most attention-grabbing stars to create the most unseen luxury spectacles. Then, it makes people yearn for certain lifestyles and creates luxurious imaginations of modern life. They use profit margins to support such a group of people. What are we doing? We want to eliminate all profits, leaving only a 5% gross margin. This 5% gross margin is only enough to support industrial workers, and even then, it can't support them; we need to build dark factories and lay off all workers. Because Chinese users will never pay for Chinese brands, Chinese companies will forever be a Colosseum of white labels, repeatedly suppressing the cost of industrial workers, so we will never have profit margins to support innovative and creative talent. Then China will only have white labels. Because brand pricing power, behind it are technical patents, aesthetics, and artistic expression, all requiring high-level talent. In the past, we haven't supported this group. This is actually the point where both enterprises and consumers need to update their concepts. Of course, we should pay for beauty, for innovation, for technical patents; we should never return to 20 years ago when I was proud of using pirated software. China has industrial workers and engineers; that was the talent advantage of the previous era. In the next era, China needs a new talent structure advantage. 900 million people live in cities; how do they make a living? Agriculture doesn't need people, factories don't need people, and the system can't accommodate that many people. Everyone needs to live by creativity. What is creative work? Technological innovation, visual innovation, auditory innovation, artistic innovation, aesthetic innovation—these are valuable, and these are actually human work.
1.6 The Chinese Market Is Maturing in Both Directions: Brand Companies and Rational Users Are Growing
I really like the Fotile case. In this case, we can appreciate multiple conflicts, choices, and reconciliations: commercial or emotional, efficiency or experience, white label or brand. First, Fotile is a kitchen appliance company providing high-end full-scenario kitchen appliance solutions. But the first question is: with fast food, meal replacements, convenience stores, and food delivery so developed today, do we still need to cook at home? Do we still need a kitchen at home? In big cities, one square meter costs 50,000 yuan; if you don't have a kitchen, you can have an extra room, and using the kitchen money to buy food delivery can last many years. So, renovating a kitchen at home and buying all the pots, pans, bowls, and seasonings to cook yourself is like buying a car versus taking a taxi; it's not economically worthwhile and definitely not efficient. It's neither economical nor efficient, so why spend time cooking yourself? A book, "The Anthropologist in the Kitchen," describes a moment: the author had a particularly stressful day; she returned home, entered the kitchen, started chopping vegetables, lighting the fire, boiling water. In this step-by-step process, she seemed to regain a sense of control over her life, and an inner sense of order arose, as if she could resist external uncertainty and gradually relax. I really like this description. I think people don't live in concepts but in such specific moments:
When you chop vegetables methodically, you feel a sense of control over your life; when you serve a bowl of noodles to a hungry family member and they eat it all, soup and all, and burp, that sense of accomplishment; when a family sits together to eat, eating the same things, growing into a family look, that familiar sense of stable happiness.
A home without a kitchen is like a hotel. You can completely rely on the commercial system, like food delivery or convenience stores, to solve three meals a day. You can completely rely on the commercial system, modern division of labor, standardization, and clear boundaries to solve many life problems. But you might find that what you want to solve efficiently are the things you want to get rid of. Then around 2003, traditional integrated cooktops appeared, integrating four functions—burner, range hood, steamer, and oven—into one appliance position. For functional needs, everyone pursues high integration and cost-effectiveness. So when integrated cooktops came out, the market welcomed them, and a bunch of manufacturers popped up, using the classic white-label playbook, quickly resulting in over 500 brands on the market. At this time, Fotile did not follow up with integrated cooktops. Fotile has been in this field for many years, with technical capabilities, brand advantages, channels, and user base; launching an integrated cooktop product would be too easy for Fotile. At Fotile's internal meetings at the time, everyone debated whether to follow this wave and pick up money on the ground. But Fotile chose to spend several years developing and launching a new category called the Integrated Cooking Center. Why? Because integrated cooktops have the advantages of integration and low price, but they also have an important bug: the smoke exhaust function is at the bottom, which is inconsistent with the natural path of smoke rising and with the reserved pipelines in buildings, potentially posing safety hazards. Fotile saw the user's demand for integration and also saw this safety hazard. Mao Zhongqun, Chairman and President of Fotile Group, asked three questions that brought the team to consensus: "If it were your own kitchen, would you buy an integrated cooktop? If it were your parents or relatives, would you buy one for them? If it were your very good friend, would you recommend an integrated cooktop? If none, why should we sell it to our users?" After that, Fotile invested several years in R&D and launched the Integrated Cooking Center. Now, the overall market for integrated cooktops is declining, while Fotile's Integrated Cooking Center sells very well. Many users have removed their integrated cooktops and replaced them with the Integrated Cooking Center. Why do I like this case? Because it shows the two-way maturation of the Chinese market. Today's market is that both Chinese enterprises and Chinese consumers are more mature and rational than before. Moreover, Chinese people are still putting effort into building their kitchens; a home guards the flame for a specific person, and you feel that in the bustling crowd, everyone has a specific belonging, and the world has a place to settle.
Will China's Tomorrow Be Good?
A question that everyone doesn't talk about but everyone cares about deep down is: Will China's tomorrow be good? Instead of asking such an abstract question, it's better to think about what Chinese people will be like tomorrow and in the future. Because the collective appearance of future Chinese people is the future of China. What will future Chinese people be like? We won't be like our ancestors, living in villages, following natural rhythms, and writing poems full of natural perception and natural spirituality. We 900 million Chinese live in cities, relying on creativity and the market to survive. We need to inject commercial civilization into our ancient civilization.
1. The Direction of Commercial Civilization: Not Strength, but Goodness
In the business field, it has always seemed like a very Social Darwinist field, where everyone defaults to the survival of the fittest, and the weak should be eliminated. Industries eliminate the weak every year, companies eliminate weak employees every year. In this context of survival of the fittest, admiring the strong becomes a convention. So you can see that even today, several of China's top entrepreneurs are most enthusiastic about talking about fighting, killing, and becoming stronger. Business values have always seemed to be the values of the strong. Strength is certainly important; every company needs to build competitive advantages. But business is a relationship. There is no independent business, nor independent strength. A product exists because users need it; a company exists because the industrial ecosystem needs it; an industry exists because society needs it. Business is the relationship between you and strangers, between people and things, between people and people, between companies and companies; it's about quickly building social collaboration and exchanging resources. The scale of a company is not how many resources it devours, but how many relationships it can accommodate. The true value of an outstanding enterprise should be reflected in driving industrial progress, stimulating creativity, and promoting the diversity and prosperity of the industry, not the opposite.
2. The Opposite of Civilization Is Ignorance and Barbarism
At the beginning, we talked about social pain, much of which comes from commercial ignorance. Countless young people entering cities cannot return to villages, cannot enter the system, and cannot enter the market. This is the pain of ignorance about commercial civilization. Because they don't understand the laws of business. They can't read the market's rhythm like their fathers knew the natural rhythm of the 24 solar terms. But I see a major platform boasting annual profits of tens of billions of dollars; they think this is the success of their scale, but it is also commercial barbarism. We 900 million Chinese coexist in cities; those who don't understand market laws are ignorant, and those who learn market laws are often barbaric. The ignorant are trapped in the fear of survival, and the barbaric are immersed in the thrill of scale expansion, and then they become binary opposites. Pop-up comments often say to hang capitalists on utility poles; this is using one barbarism to counter another. It's scary, but it's a voice, and it's real. Biology creates life; humanity creates civilization. A more civilized enterprise is not one with larger scale, but one that provides more space. Let more creativity be unleashed in new spaces; let more life energy be placed in new spaces; let more idle resources shine in new spaces. Let the complexity of human nature, the diversity of humanity, and the diversity of biology each find their place in the ever-growing new spaces. The word "civilization" comes from the I Ching: "The dragon appears in the field; the world is civilized." This is the expectation of our ancestors three thousand years ago for a beautiful future: not only to live but to create civilization. "Giving civilization to commerce" may be the mission of our generation of Chinese, because our ancestors before us had no such pressure, and now 900 million of our people live together in cities. If we cannot move toward greater civilization, but instead allow ignorance and barbarism, and then split apart and plunder each other, then what we leave for future generations is disaster.
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