Milestones
In Conversation with Alan Song: Return to the Fields of Hope
Date: 2023-12-20 Views:
Source: Undercurrent, Shi Jiaxiang, Liu Jing
Alan Song appears to be someone with distinct personality traits—a person of clear loves and hates.
Over the past few months, Alan Song has given multiple media interviews, repeatedly emphasizing that consumption and technology are not binary opposites. Amid this year's technology investment fervor, Alan Song was the first to point out the current overheating in technology investment and excessive cooling in consumer investment.
On many public and venture capital topics, he comes across as an "idealist" who observes keenly, engages deeply, and expresses courageously. He frequently speaks out with integrity on macroeconomic topics such as the economy, demographics, and urban governance, continuously advocating for a more fair and just capital market environment and an entrepreneurial spirit that creates greater consumer welfare.
The origin of this conversation was to discuss the relationship between technology investment and consumer investment at a time when technology investment is hot and consumer investment is under pressure. He calls for finance to serve the real economy, emphasizing that technological development is merely a means—people are the ultimate purpose. Everyone must recognize consumption's importance to the national economy and not focus all attention solely on the technology sector.
Admittedly, for Alan Song, these remarks undoubtedly carry a position: as a consumer investor, he naturally advocates for it. But what he points out is actually an anomaly everyone sees: a primary market—and indeed the entire business world—ruled by systems and concepts often speaks with only one voice.
This compels Alan Song, as a critic, to "cater" to this narrative pattern to some extent. For instance, he acknowledges that future investments will value the "technology content" of consumer industries. When discussing Laoxiangji, he mentions that Laoxiangji has intelligent stores, AI automatic checkout, and has achieved digital management across the entire industrial chain. He also considers Eastroc Beverage the company with the highest innovation level in the beverage industry over the past decade, as Eastroc is the first company in China's beverage industry with data assets, consumer insights, data-driven capabilities, and digital precision marketing abilities.
But consumption is still consumption itself. Coca-Cola's greatness lies in the fact that Coke is Coke, that all Coca-Cola tastes equally good, that you and the president drink the same Coke—not in being guided toward so-called digital entrepreneurship.
Today's consumer investors are reshaping themselves according to what the times demand.
Alan Song is also trying to grasp young people's needs. Two years ago, his view of Pop Mart was: this kind of thing doesn't have a very long lifecycle and is difficult to attract long-term attention. But in this conversation, he not only acknowledges Pop Mart's role in satisfying young people's emotional value but has also started buying Pop Mart products himself.
However, Alan Song also has aspects that haven't changed. Among investment schools, he still belongs to the "classical investment school." In Alan Song's words, he prefers to be "an institution focused on investing in the consumer and service industries."
If a fund is compared to a factory, unlike giants with multiple product lines that increase win rates through synergy, Harvest Capital only does one product line—consumption—and strives not to make mistakes. Their investment style is extremely conservative: they review over 200 companies annually but only make 3-4 investments. Harvest Capital's investment principle is to believe that 20 years from now, this brand can be embedded in people's daily lives—finding the 1 fish among 100 that will survive.
But companies meeting Harvest Capital's requirements have often already passed through turbulent inflection points, with good cash flow and well-established brands, markets, channels, and management operations—areas where investment institutions simply providing money doesn't work.
This is where their renowned post-investment services come into play. A colleague of Alan Song once said their work is detailed to a degree that even exceeds that of buyout funds, even participating in membership operations, service SOPs, brand second curves, HR recruitment processes, and other management aspects.
Take Xiaocaiyuan, their exclusive investment, for example. On December 19, 2023, following its first financing round in March, Xiaocaiyuan, a leading enterprise in China's restaurant chain industry, announced completion of a new financing round. Harvest Capital's cumulative investment reached RMB 500 million—the largest financing in the mass-market affordable dining sector in recent years.
After Harvest Capital's entry, from the brand's new strategy to implementation, they participated in the company's daily operations. Alan Song frequently travels to Tongling and Shanghai for Xiaocaiyuan business. To recruit high-caliber financial management talent, he personally interviews every CFO candidate. The Harvest Capital team built the internal control system from scratch and improved the company's BI and membership systems. Many peers who visit Harvest Capital for inspections and exchanges often conclude: "Harvest Capital is not an investment institution; it's a real economy-oriented, service-oriented investment company."
Because they rarely pull the trigger, they naturally miss many giants or unicorns, such as Heytea and Weilong Latiao. However, Alan Song doesn't consider this regrettable. "If we miss something, we miss it—just don't miss the future." In this dimension, he's an optimist, looking more toward the future than the past.
On the other hand, his conservatism is also reflected in his attitude toward money. In the conversation, he believes that only by creating value can one share value, repeatedly emphasizing that he has no intention of pursuing excessive wealth and hopes every penny earned is deserved. In a market environment where investment and speculation coexist, he calls for capital not to expand disorderly but to engage in effective investment behavior, believing his profession bears the responsibility of adjusting industrial structure.
"Pursuing a beauty with a sense of hardship," Alan Song summarizes. Achievements with a sense of hardship are admirable—the challenges are greater, producing stronger flow states. After 28 years in the industry, he feels that the flow from obtaining benefits through asset management is limited. In his narrative, employment, tax revenue, and the national economy are high-frequency terms and the ultimate landing point of all investments.
A practical manifestation of this pursuit of hardship is that he even wants to rename Harvest Capital as Harvest Industry and personally enter the business world. "The real economy has greater marginal social benefits and stronger marginal improvement efficiency. Products and services will profoundly change a generation—more advanced than finance." This is tantamount to giving up a high salary to start a business back home.
This perhaps explains why he participates in expressing views on many public issues. When policy and financial order intervene in more important real economy sectors, the real economy produces pendulum movements left or right. He hopes to express his ideal world with clearer values.
The following is the conversation transcript:
Undercurrent: Over the past period, you've repeatedly mentioned that consumption and technology are not binary opposites. Why do you so clearly refute this opposition? And who is creating the opposition?
Alan Song: This is a typical situation in the primary market now: rushing headlong to invest in technology without paying much attention to consumption. Also, various policy and regulatory signals are being released, with everything tilted toward enterprises with high "technology content." Consumption is a function of income, income is a function of employment, and employment is a function of people's livelihoods. Local governments are directing massive resources toward local platforms, state-owned enterprises, specialized and innovative enterprises, and "bottleneck" industries, with resources flowing to the private sector and people's livelihoods being few and far between. Some departments even have one-sided understandings of the relationship between national economy and people's livelihoods, wanting so-called high-tech grass but not livelihood consumption seedlings, issuing administrative "traffic light policies" that discriminate against consumption and restrict livelihoods. They're enthusiastic about a "Great Leap Forward in Technology," about pulling up seedlings to help them grow.
Of course, technology now faces "bottleneck" pressure. We've been missing class too long and need to spend more money catching up. Concentrating forces can indeed accomplish great things. I don't oppose effective equilibrium market management, nor do I oppose tilting resources toward technology and seeking productivity from technology. But we can't choose between technology and consumption. Even if three opportunities go to technology and one to consumption—that would be reasonable, but now not a single opportunity goes to consumption. We can't cancel consumer enterprises' right to use capital markets just because they don't face economic or liquidity pressure.
Supporting technological progress, solving bottleneck problems, and promoting China's industrial and value chains to advance toward high-value upstream positions cannot happen overnight. Historical experience has repeatedly proven that whenever we engage in campaign-style fattening and so-called "overtaking on curves," it invariably results in crashes, messes, and enormous waste of social wealth.
Undercurrent: The venture capital industry seems easily trapped in this spell: campaign-style investment followed by campaign-style reflection.
Alan Song: Why does this campaign-style investment always appear in the venture capital industry? I think many enterprises are engaged in arbitrage—wherever there's profit, that's where they go.
Current policies obviously favor technology, so everyone swarms to chips, clean energy, and large models. The short-term effects are obvious—they're arbitraging policy benefits: whatever the state supports, that's what I do. Regardless of whether the market needs it or whether it can withstand long-cycle market testing.
Of course, I personally don't oppose this "arbitrage," because when water is too clear, there are no fish. We must also view speculation and investment, arbitrage and anti-arbitrage scientifically. Investment and speculation are twin brothers in financial markets; speculation also has its role—providing market liquidity and activating trading.
A mature, healthy, and orderly market indeed needs both speculation and investment. As long as markets exist, arbitrage will exist. What we need to do is remove the foam from the coffee and drink the coffee.
Undercurrent: Many people believe today's technology investment bubble is considerable.
Alan Song: Because we've given relatively loose policies—no need for three years of profitability, no need for large scale, no need for profit levels to list. In the process of supporting technology enterprise development, we indeed need some unconventional measures.
But let me give a simple example: when everyone invested in the AI Four Dragons years ago, they listed successively in recent years—how many people made money? Their sales are mainly to the government; they haven't reached the market yet.
Of course, the special nature of technology enterprises is that if one great technology enterprise emerges, previous investment mistakes can all be crossed out, because technology enterprises winner-takes-all and can grow exponentially.
Undercurrent: What factors do you think might make the consumer sector in the primary market heat up again?
Alan Song: First, the state issues fundamental measures to stimulate consumption; second, the economy stabilizes; third, solving problems through rule of law.
The three drivers of economic growth are investment, consumption, and imports/exports. Now real estate investment, private enterprises, and fixed assets are all in a downward state, making it difficult to drive growth through investment. Foreign trade's maturity and global share are very high at 14.7% globally, with challenges outweighing opportunities.
So we can only rely on consumption. Technology can drive consumption—like Apple, Tesla, and Microsoft. Without a consumer market, where would these enterprises apply their products? Kant said people are the purpose. Technology is the means. All technological inventions and progress must ultimately be applied to consumers to make people's lives better.
On the other hand, consumption also supports technological development. It solves massive employment and creates enormous tax revenue. We can't expect technology enterprises to provide massive employment positions.
So we must develop both technology and consumption, driving with both wheels. We must never let fear of choking prevent eating. From this perspective, technology and consumption are actually not in opposition. Don't think technology is trendy and consumption is mundane. Technology and consumption are two sides of the same coin in economic and social development, and the two most important elements in the national economy—technological progress and consumption support. Consumption creates application scenarios for technology.
Kant said people are the purpose; technology is not the purpose. Technology is means and tools; human welfare is the purpose. We can't pit consumption against technology and make the market do "either-or" multiple choice questions. Discriminating against consumption is reverse suppression of technology, because technology will have no market.
Undercurrent: What actual impact has the downturn in consumer investment over the past two years had on enterprises?
Alan Song: Consumer enterprises are generally stable with decent cash flow. Whether or not to use capital markets isn't urgent. Long-term, this can actually allow consumer enterprises to concentrate on managing operations well, steadfastly providing good products and services to the people, creating a rare period of calm.
Everyone discusses China's economic resilience and elasticity. When discussing resilience and elasticity, everyone expects policies to be issued, economic growth to be faster, total volume to be larger, policies to be more forceful—this is wrong. China's economy's true resilience and elasticity lie in genuine deepening of reforms, in institutionalization and rule of law, in adhering to market-based allocation of production factors, adhering to market economy principles, and releasing institutional dividends. Time is the scale that weighs enterprise value; profit is the byproduct of doing the right things. In this context, facing macroeconomic environmental changes and structural changes in production factors and slow variables, Chinese entrepreneurs have no choice but to practice internal skills, improve management, optimize operations, refine technology, and strengthen value.
Chinese enterprises face such an era of clearance. Turning danger into opportunity, turning crisis into safety, Chinese enterprises' competitiveness, competitive level, and structural competitive advantages slowly begin to be nurtured and grown. Chinese enterprises' competitiveness begins to emerge, and a large batch of entrepreneurs truly capable of participating in global competition begin to surge forth. I think such competition, such clearance, such downturn, such crisis is actually a good thing. This is genuine excellent training for entrepreneurs, industries, products, services, and brands—rebirth through fire, phoenix nirvana. The era of "quality and affordability" is beginning, a quality revolution is emerging. The way out is quality; we can't simply compete on cheapness. The era calls for the emergence of entrepreneurs. Floating clouds cannot obscure our vision; let the winds blow from all directions.
Undercurrent: Do enterprises' own shortcomings need to be addressed more urgently?
Alan Song: Objectively speaking, although industrial policy orientation has created some obstacles for consumer industry development, the main obstacles are still our own underlying logic problems—like the chain service industry.
First, China's chain operations have numerous franchise companies that don't have an altruistic empowerment spirit, simply collecting franchise fees, brand fees, management fees, and even profiting from selling equipment. Second, in the development process, many participants simply emphasize price competition—cheapness—but not quality. Just harvesting one wave through price competition makes it impossible to harvest a second round. Third, our business strategy is deficient. In the relationship among people, products, and places, we play with products and places, rarely centering on people. The biggest competition in business is trust. Behind brands is quality competition, and behind quality is the entrepreneur's character.
Why are companies like Costco and Sam's Club high-level commercial civilizations? Because their success actually lies in being consumer-centric. Centering on people, managing relationships with people. Costco, with its crazy altruistic mentality, conducts business honestly and works steadfastly. In the triangular relationship of people, products, and places, they always center on people. People are the purpose; products and places are means. Essentially, they treat retail as a service industry. Traditional retail relies on earning price differences as channel merchants. This is an asymmetric war of high dimensions beating low dimensions—or rather, the battle is over before it begins.
This is what we advocate: this is an era of good people doing business. Earning hard-earned money deserves respect. Time is definitely the scale that weighs enterprise value; profit is the byproduct of doing the right things. The great way is simple; the business way is true. There are also many companies relying entirely on traffic economy, like internet livestream commerce, but internet celebrities don't equal lasting fame, and classics don't equal eternity. Behind consumption is still the entrepreneur's character.
Undercurrent: You invested in Laoxiangji. Does it count as quality and affordable?
Alan Song: Indeed, the average spending per customer isn't very low. We're also continuously providing more suitable products and services for more suitable consumers, providing better average spending. The market is also progressing. China's consumer population segmentation is extensive—some think 20 yuan is cheap, some think 30 yuan isn't expensive, some think they can afford 40 yuan. Pricing is a science.
Undercurrent: How do you define Wen He You? It's not a restaurant company?
Alan Song: Wen He You originally only provided snacks, with monetization within the space mainly relying on dining, but actually not in the future. There should be dining, entertainment, performances, other service industry retail—it can become a collection of urban life.
This is an innovative revolution. I prefer to position it as a creative industry. To succeed in entrepreneurship and productize and standardize it also has difficulties and challenges, because each city's culture is different, consumption habits are different, and consumption psychology is also different. Continuous innovation capability is needed.
Undercurrent: Xiaocaiyuan's Chairman Wang is very mysterious. From the founder's perspective, why did you invest in Xiaocaiyuan?
Alan Song: Today's business competition essentially competes for entrepreneurs' cognition, and even more for entrepreneurs' character and altruistic spirit. To become a long-term sustained business winner requires training driven by altruistic spirit to address shortcomings and practice internal skills. This reflexivity will obviously drag down enterprise development in the short term but is high-dimensional wisdom that plans before acting in the long term. From Chairman Wang Shugao and the Xiaocaiyuan team, we see this wisdom.
Undercurrent: Besides digitalization, consumer changes are also something consumer enterprises need to focus on. Will you invest in younger consumer enterprises in the future?
Alan Song: Yes. Youth is the future. Today's young people are the main consumer population of the future. Paying attention to young people's consumption needs is always a top priority for consumer goods enterprises and consumer funds.
The young generation is a generation that has received better education, a generation of rising consumption, and the first generation of consumption democratization, with their own consumption propositions. We need to respect them and trust them.
Undercurrent: As an established consumer fund, how do you ensure you understand young people's needs?
Alan Song: Through digital engineering. We collect user opinions and portraits, know the needs of each different age stage, establish data engineering through digitalization, and let young people's ideas participate in product production, manufacturing, and sales.
The future is a flexible supply chain, a process of flexible production, an F-to-B-to-C process, and a digital-driven process where demand reversely reshapes supply.
Undercurrent: But whether it's coffee or tea drinks, you've never invested, yet these are indeed consumer products young people really like.
Alan Song: I think this is a crowded track, with supply exceeding demand. A subdivided industry—its existence is reasonable. Many people indeed love milk tea, with the audience ranging from 15 to 35 years old. Very young children don't drink it, and older people don't drink it either, because high sugar and high milk have certain health impacts.
Natural laws constrain industry development and form ceilings. This is invisible—you can't break through it. China actually doesn't need so many milk tea shops. If you go to various cities now, especially first- and second-tier cities, oversupply is visible to the naked eye. This is caused by capital quickly chasing trends. Future competition will be quite fierce.
Undercurrent: How do you view the blind box economy? If there were another opportunity to invest in Pop Mart, what would you do?
Alan Song: I would invest.
Every age stage has its own market demand within its system. Read their hearts, read their needs, understand their needs, and you can provide suitable products.
It still has certain universality, and its lifecycle and user age levels are also relatively broad. But objectively speaking, for milk tea, once you're over 35, you know you need to maintain health and don't dare drink so much. Satisfying cravings is fine, but drinking one cup a day isn't very realistic.
Undercurrent: You don't make many investments. Among so few opportunities, which projects do you most regret missing?
Alan Song: None. Regrets are always the next one. If you missed it, it means you were wrong. Just review and summarize the mistakes. If I'm right, they're wrong; if I'm wrong, they're right. Things that are neither right nor wrong are hard to exist. If you miss it, you miss it—just don't miss the future. I don't really like reminiscing about the past. I prefer facing the future because I believe the future will definitely be better than today. From this perspective, I'm an optimist.
Undercurrent: In investment, what risk can you least afford to take?
Alan Song: Doing something knowing it's wrong.
Undercurrent: This principle sounds very simple.
Alan Song: People are influenced by other factors—various market noises, emotional influences, external technical factor disturbances. This is the scariest—knowing it can't be done but doing it anyway. This is the most unacceptable problem. Our company often says that there's nothing that must be done—precisely to prevent this kind of thing from happening.
Undercurrent: How should enterprises and individuals conduct themselves in this era?
Alan Song: In today's process of societal system reconstruction, the underlying logic of conforming to social development trends and super-strong dynamic system adjustment capabilities are more important. Understanding system reconstruction means understanding China's future. Life is a Kondratieff wave. Going with the trend and guiding according to circumstances makes it easier to reconcile with change. Truly standing with the lives of 1.4 billion people, resonating with society's greatest common denominator, at this historic turning point of system reconstruction, naturally makes it easier to align with time and remain compatible with the system.
Each of us is a variable in the game of social systems. Staying synchronized with the times and advancing with them prevents being cleared out by the system. Following historical trends, moving in concert with progress, giving time to civilization and giving civilization a future—only then can we more deeply integrate ourselves into this era and correctly advance into the depths of history.
Undercurrent: You once said you wanted to rename Harvest Capital as Harvest Industry. Why?
Alan Song: Harvest has been around for 16 years, and I've been in the industry for 28 years. Through long-cycle development and continuous cognitive upgrades, we finally understand a truth: doing finance is not as good as doing real economy.
Because finance integrates resources and obtains benefits through resource allocation, but real economy is a higher-dimensional thing—from nothing to something, from small to large, going through multiple cycles. The challenges are quite large, but I personally prefer beauty with a sense of hardship.
Beauty with a sense of hardship is more admirable—from nothing to something, from weak to strong, experiencing multiple cycles. The challenges are great, producing powerful flow states. If purely through capital arbitrage, obtaining benefits through asset management, marginal effects diminish, without particularly strong sense of achievement and satisfaction.
Undercurrent: Why do you have this idea?
Alan Song: It may be related to my upbringing. My mother was a teacher, my father an accountant. I grew up in a large state-owned enterprise aided by the Soviet Union during the First Five-Year Plan in Xinjiang. From the wilderness at the founding of the nation to today, I've seen real economy change the destiny of a generation and a country.
After reform and opening up, it's the same. China becoming the world's factory today—it's real economy that established our international competitiveness, not finance.
Financial tools are neutral; we can use them well. But finance has profit drives and is prone to deviation. Finance is means, like technology—it's not the purpose. Developing real economy is the purpose.
For me personally, I don't want to become an asset management company. I want to truly make good products, apply capability replication brought by knowledge accumulation to enterprise operation and management, to creating good products and services. We gain social recognition and value recognition—such meaning and attraction may be greater.
Undercurrent: What advantages does Harvest have in doing real economy firsthand?
Alan Song: We're not financial investors, nor outsiders and bystanders to enterprise value growth. We're contributors and co-creators of enterprise value growth. When we decide to enter this field, at least we believe we're already prepared.
Undercurrent: Whether during the pandemic or hot events, you really like public expression. What has this brought you?
Alan Song: Steady daily progress; merit never goes to waste.
For us, creating socioeconomic value means bearing social responsibility and standing on the side of common sense and conscience. Someone in this world must tell the truth; someone must speak out on public issues. If everyone doesn't speak out on public issues and all remain silent, when the avalanche comes, not a single snowflake is innocent. Every grain of dust in the times falling on individuals becomes a mountain. The price each of us pays for our silence is enormous.
I have no intention of playing the role of public intellectual, but regarding matters related to our lives, involving public interests, and in fields I'm familiar with, I still need to observe keenly, participate deeply, and have certain expression. In today's era, observation is also support, let alone expression. Being the correct self is very important. Our life's value is striving to meet a better self on life's path.
Undercurrent: Does it bring trouble?
Alan Song: Of course. But if everyone self-protects, thinking matters don't concern them, hanging high above it all, then no one cares about public issues. All these issue problems will someday extend and harm oneself.
Speaking out in fields I understand fairly well counts as well-intentioned insights. This is just one viewpoint, one judgment, but I personally think that in today's limited environment and space, being able to express and discuss is already beneficial. Courageously speaking out on public issues—don't be afraid. The more people in China who walk the right path, the more people who dare to speak out, the more hope this society has.
I especially miss the 1980s—that was on the fields of hope, because you believed reading and working hard could change your whole life, change your destiny. The core is returning to a fair competition environment, returning to an environment where all people are full of confidence and hope.
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