Utopia of Pinduoduo
Next to the gorgeous Lake Mendota, the University of Wisconsin – Madison (UWM) sits aside. West of the campus, there is a Walnut St., which is as ordinary as all other streets on campus. From south to north, houses, apartments, gas station, express stores and laboratories scatter along the street. HUANG Zheng was born in Hangzhou, graduated from Zhejiang University with a bachelor degree and gained his master degree from UWM. From 2002 to 2004, Zheng majored in computer science, a major is highly ranked among the US universities. On June 29, 2018, Pinduoduo, founded by Huang Zheng, submitted its listing prospectus to SEC with a registered company name Walnut Street Group, as ordinary as no one could tell its ambition.
In Walnut Street Group's prospectus, Huang Zheng mentioned that Pinduoduo should not be a tool characterized with personal features and colors. When talking about the picture of Pinduoduo, Huang Zheng said that Pinduoduo would be a mixture of Costco and Disney (a combination of cost-efficiency and entertainment) that will be driven by distributed network of artificial intelligence agents (not the mainstream centralized network of artificial intelligence agents). Such an ambiguous description was taunted and received as an unrealistic story by the public; people hardly understood the concept that Zheng presented and even Zheng himself admitted it was a "Description in the Utopian Tone".
Utopia, as commonly accepted, is an exceptionally ideal world and future. To bring the utopian dream into reality, one of the measures is minimizing human interests through completed and perfected system of laws and institutions instead of man ruling. It is once said that, when Bezos preparing to found Amazon, he had used to come up with a utopian idea: the ideal shopping website should not cost consumers' time on searching for goods, and instead, a few items listed on the site page should exactly meet what customers' needs. Restrained by technological barrier at that time, Bezos' thought could be actualized. However, Amazon has kept simplicity style in its UI design and made remarkable progress on personalized recommendations that none of its competitors could catch up with. So far, Amazon is valued more than USD 880 billion and the second largest tech company except Apple Inc. Piles of reasons could explain Amazon's success. The top two reasons might be followings: the first one is user first and the second is that continuously investing in technology secures user first and optimizes the efficiency. Interestingly, in Amazon, whose belief is user first, the founder Bezos that worships the tech the most, is shockingly rigorous to his employees and often referred as "tyrant".
According to Pinduoduo's prospectus, dated to March 31, 2018, Pinduoduo had more than 700 engineers, which was 50% of its total employment. In which, 100 of those participated in algorithms and program designing. The high employment percentage of engineers and the tech background of both founders, Huang Zheng and CHEN Lei, have embedded the company with tech genes and driven the company through tech. Though the outside criticizes Pinduoduo for its coarsely-designed products, Pinduoduo is indeed a company ruled by tech instead of man. For a company who truly believes in user first, users are customers. Sellers are business partners of the platform and both parties aim to serve customers. In old days, Alibaba was in a debate of "Who is the customer?" for years and finally closed the question with "users are customers". Apparently, Pinduoduo agrees that users are customers and treats sellers as business partners other than customers; based on users(customers) interests, Pinduoduo has encountered numerous conflicts with sellers, and conflicts will still emerge and last for a considerably long time. Another fun fact about Pinduoduo is that, similar to Amazon, tech-driven company lacks humanity: plenty of Pinduoduo's employees sensed little about their meaning of existence, but being over-used, under-valued and unappreciated, and no space for self-development.
In the era of internet, varied people share a common utopian dream: decentralization. In the drama Silicon Valley, Richard and his fiend founded Pied Piper, and kept fighting against the giant tech company Hooli with failures. Richard was a typical tech nerd and he believed that internet had been born due to an honorable utopian assumption, but become a tool and been utilized and centralized by giant companies like Hooli; Richard abhorred Hooli and wanted to establish a decentralized network: A New Internet. In season five, Pied Piper partially actualized the dream of decentralized network finally, and the future was seemed so brilliant and optimistic. Obviously, in eyes of "Richard", giants in silicon valley like Apple, Amazon, Google, Facebook and in China like Alibaba, Tencent, and Baidu are all centralized platforms and losing visions. It is undeniable that the world belongs to those centralized platforms.
Receiving investments from Tencent and it became the second largest shareholder, the outside agree upon that Pinduoduo is a Tencent member now, but Huang Zheng holds a contrary opinion. Zheng also dislikes the idea of people comparing Pinduoduo with Alibaba or JD. Zheng emphasized for times that current giants are imperialist:” Alibaba, JD, DiDi and Meituan, they are all involved in imperial-alike wars, scrambling for definite boundaries for their empires. But I think our generation should think more than that.”(Caijing Journal). Zheng expressed his preference towards Toutiao(Byte Dance), which is referred as a personalized news recommendation service platform driven by tech: "You can regard Pinduoduo as the Toutiao, but products are not news but goods."(Caijing Journal). It is well-spread in investment circle that Toutiao is preparing to be listed in HKSE with a valuation of USD 45 billion. A famous media professional CHENG Lingfeng once highly praised that WANG Xing from Meituan and ZHANG Yiming from Toutiao (Byte Dance) were Groundbreakers of the New Generation. Agree or not, Zheng admires Toutiao but disinclines Meituan. Zheng may agree that non-imperial thinking mode and competitions are more important, even though Pinduoduo is considered as the successor to overturn the imperial giants and to become the next one.
Zheng said that he had two icons that he admired: one is Lee Kuan Yew and the other is Benjamin Franklin. Lee Kuan Yew pulled Singapore from the third world and made it a modern country; Benjamin Franklin is a man that had made great contributions in different fields: a successful merchant, and an outstanding scientist and politician after quitting business. Ambivalently, Lee Kuan Yew's authoritarian policy fits small size countries, but in big countries, he would probably become a power-centralized ruler; When Benjamin Franklin quitted business after 40, he became a scientist and politician. Whether this was a personal selection or forced by the outside is unresolved. One thing we could assure is that after Pinduoduo stepping into the capital world, it is destined to be on the opposite side of small and ideal; Zheng's idea of keeping Pinduoduo from being characterized with personal features and colors seems hard to achieve ever since. In decades of Lee Kuan Yew's reign, it is no that Lee Kuan Yew did not want to rule, but he could not un-rule; when his son Lee Hsien Loong sat in his seat, Lee Kuan Yew was condemned for his fake-democracy and dictatorship. Benjamin Franklin's success was bred on a different land. To culture and change a land is more complex and harder than to select seeds or to trim branches.
Zheng has a mentor named DUAN Yongping, who was known for establishing BBK Electronics(BBK), auctioned Warren Buffett Lunch and ranked in the money from stock market. But for other people(including myself), strengths of Duan Yongping include being professional in institutionalization, daring to forsake interest, and following his heart. No matter BBK, or BBK hatched OPPO or VIVO, all are armed with gifted professionals and experts, but what is more important is their perfected institutions, whether in excitation mechanism, HR regulations, or competition mechanism. Good institutions could make the bad to be good, and this saves Duan Yongping from routine works and let him enjoy his leisure time in the US, while the company is still safe and sound. Foundation is the promise for long run and the most critical part is to build up institutions that could bring the company forward without restraining by its founders. Zheng called himself the forth mentee and has said that his mentor had casted great influence onto him. His Pinduoduo is somehow similar to BBK group in its business mode and strategy planning. Nevertheless, if Zheng wants a free-and-easy life like his mentor does, he needs to culture a right team and set up satisfactory institutions for Pinduoduo
Back to 2006, before the internet explosion, a company named Maimaibao has started to sell product to fourth, fifth- or sixth-line cities, suburban and rural areas through mobile websites. At the beginning, the company was selling copycat electronics, clothes and shoes, which turned out to be incredibly profitable. The only fly in the ointment were the backward status of instant logistic network and the inconvenience of making payments: shipments could only be carried by EMS, which service leaves much to be desired; payment could only be cash on delivery, which tremendously increased the costs. Maimaibao obtained Tencent's investment in 2014 and became a Tencent member, but its subsequent development was disappointing. situations are improved, and incoming players want to occupy the sub-third-line cities' market. The instant logistic network has covered numerous towns and villages, mobile-pay is widely accessible, and social network has gained its user base in these areas. It is evident that those sub-third-line cities' market has become increasingly ideal for market players. It is commonly accepted that "encircling the cities from rural areas" are a means for players to take over the city market, and rural area is only functioned as a springboard and will be abandoned once the city market is opened. After years, the rural areas stay marginalized and filled with copycat and low-quality products.
In comparison with the sales No.1 company Walmart, Costco is more commended by IT practitioners. MI's founder Lei Jun claimed that he had learned how to sell high-quality product at a low price from Costco. Zheng from Pinduoduo said that the ultimate orientation of Pinduoduo is be the personalized Costco for diversified groups: bring the infinite flow into finite commodities and form to a scale; when the scale upgrades to dimension level, inversely customize commodities to cut off the costs. Alibaba fails to build its brand in C2B and C2F market, but MI and Pinduoduo are full of potentials. Besides Costco, another company that Zheng appreciated is Disney, which could be called the most successful O2O company in the world. Online and off-line flows are strategically combined and prove that a win-win could be expected when the virtual and real worlds come into one. In the film Ready Player One, the reality is far from expected but the virtual world could still be attractive and utopian; though virtuality and reality are twins, they are contradictory at the same time. The utopian world presented by Disney could only let people temporarily return to innocent days; the Oasis in Ready Player One could only excite people for a moment.
It is reasonable to expect Pinduoduo's combination of Costco and Disney, which is a utopian dream driven by distributed network of artificial intelligence agents. Yet, it is lightyears away from actualizing the dream, and on the road to achieve the dream, Pinduoduo and its founder Huang Zheng would be subjected to myriad anti-utopia forces, which might appear in bundles and be mighty beyond imagination.
——Author: YuanPu; write to YuanPu at YuanPu@EqualOcean.com