Thread by @ruima

1/ Colin Huang is the founder & ex-CEO of China's largest ecommerce co by # of users, Pinduoduo $PDD ($155Bn mkt cap). He retired earlier this year at just 41 yrs old. With net worth of $53Bn, he's the 21st richest person in the world.
This is PDD's biz logic in his own words:

2/ Note: Colin gave very few interviews and only has a few public blogs. This is from 9/22/2017, an entry titled "More free market or more planning? Thoughts on supply-side reform" where he lays out the types of demand reform & why he thinks one type can realize supply reform.

3/ So first, he thinks that supply and demand are two sides of the same coin and initially seems a chicken-and-egg problem. But his friend told him a story abt how WWI triggered need for mass standardization of clothing & this confirmed his suspicion demand reform comes first.

4/ So there are 3 types of demand side reform.
First, meet the demand that has always existed but has not been fully met. This is a large category that covers most kinds of supply-side upgrades, ie airplanes becoming not just for war & adventure but mass transportation.

5/ Second is the emergence of new applications / scenarios. This is the case with the WWI example where suddenly many goods are needed in large quantities & standardized, driving changes in the organization, management and delivery of supply-side production and distribution.

6/ But the third way is from changes in front-end demand aggregation, or a significant change in info collection costs. ie, after smartphones, the cost of collecting routes, locations & aggregating consumer demand has been significantly reduced, making cos like Uber possible.

7/ The 2nd type of change in demand = far & few in between, but the 3rd type of change should have many cases.
We should be able to make a semi-market economy by using a semi-"planned economy" on demand side to promote the realization of semi-"market economy" on the supply side.

8/ "Traditional ecommerce" makes supply side more transparent and enhances competition, but doesn't really change manufacturing. In fact, the more competitive / free the marketplace, the more powerful the disconnect between demand and the offline production plan.

9/ This is bc most large factories still rely on large orders from large channels ie Walmart & intl retailers. They're disconnected from the small vendors duking it out on these online marketplaces. The free circulation of demand doesn't mean manufacturing is any less planned.

10/ So we still need to work on the demand side. What if we can let consumers have more patience, coordinate w others, give up immediate gratification? We can use social recommendations, networks, interests to segment demand that allows for more time to be fulfilled.

11/ While this kind of aggregated demand is not gonna be as much as Walmart, but it'll be enough for one production line. This way we can have 1 Walmart order become 50 small orders, manufacturers can be less dependent on Walmart, factories can compete for each of the 50 orders.

12/ If we can do this, then we can resolve the diff between the highly market-oriented distribution side and the rigid planning of the production side. In its place, more planned demand and more market-based supply side would merge. And demand and supply can be more synchronized.

13/ BTW, the above is EXACTLY how $PDD works! If you're a regular @techbuzzchina listener, you'll recognize this is C2M, or consumer-to-manufacturer. Colin's explanation is pretty elegant, & while it has elements of Aggregation Theory (@convexity16 wrote abt it), he goes farther.

@TechBuzzChina @Convexity16 14/ One thing I wanted to do this yr is to highlight more Chinese tech voices. They influence a lot of my thinking & I want to give proper credit. Colin Huang doesn't really need any introduction but I think his few words are worth reading. Follow for more.

@TechBuzzChina @Convexity16 15/ Links for your reference:

@techbuzzchina episode on C2M: techbuzzchina.com/episodes/ep-77…

@convexity16 essay on PDD: distillingfrenzy.com/the-richest-ma…

@turnernovak on PDD:
turner.substack.com/p/pinduoduo-an…

Want more China tech nerdery? Join our Insider community! techbuzzchina.com/insider

Well glad to see this thread blew up. But your real takeaway might be that this kinda experiment is very difficult (impossible?) to run ex-China and expect to see more diff Ecommerce emerge there bc of supply chain upgrades / experiments, which is what everyone is focused on.

In addition for those of you who have been following me a while know I’ve quoted Colin before on the timing of this, which was also v impt. Excess capacity ~2015 made suppliers v willing to try new things. Amazon did same btw ard same time! So it’s a combo of factors for success.

Finally this is one example of what I mean by when I say Chinese cos more strategy driven than product driven. Also there is just this underlying belief you can shape the market a bit, often via managed growth, not exclusively focus on removing friction. 😉