By Song Xiangqian, Chairman of Harvest Capital

The train of time roars by, leaving behind the saying: "All that has passed is just a prologue." Some joke that only those who have tasted the bitterness of the times can truly appreciate the value of Pinduoduo. Taobao struggled for twenty years to evolve into something like Tmall, but inadvertently lost to Pinduoduo—the former self.

In November 2023, Pinduoduo announced its third-quarter performance, with a 94% year-on-year revenue growth and a 47% increase in net profit. The robust performance triggered a skyrocketing trend in Pinduoduo's stock on the U.S. market, reaching a market value of $195.9 billion in three consecutive days, surpassing the giant Alibaba. Pinduoduo, established for 8 years, overtook Alibaba, the long-established e-commerce leader, reshaping the landscape of competition and prompting rare comments from Alibaba's leadership. While expressing blessings to their competitors, Alibaba's Chairman revealed the last bit of stubbornness: believing in Alibaba's potential transformation.

01、The Essence of Growth

Physicist Ilya Prigogine, in his famous book "The End of Certainty," pointed out that growth primarily comes from the increase in information and the growth of order. He used the analogy of atomic arrangement and its utility in the physical world to explain the essence of economic growth. Orderly growth brings strength to the system, achieving genuine industry growth and industrial progress, and, consequently, achieving high-quality organic growth.

This is considered the best exploration of the essence of growth. Similar to how "entropy" represents the level of disorder in a system, the transition from disorder to order requires openness, work, and exchange to truly achieve ordered growth. Today, Pinduoduo's rapid growth signifies a form of order, aligning with the beta of the times and meeting the purchasing power of the masses. This indirectly explains the objective fact of the developed tiered economy in China. More importantly, behind the 800 million Pinduoduo users lies the real China. Pinduoduo's victory is a triumph of cost-effectiveness in this era of consumer downgrading.

02、Every Coin Has Two Sides

An undeniable fact is that after twenty years, Pinduoduo has retraced Taobao's old path from the bottom up, reclaiming the label of the "imitation capital of the world" that was once discarded. In a trance, the industrial upgrading and quality revolution that the entire nation has worked on for twenty years ultimately succumbed to the cruelty of the times and economic downturn, leading to despair.

Every coin has two sides, and we must also acknowledge Pinduoduo's adaptation to the times, becoming more concise, efficient, focused, and emphasizing cost-effectiveness and user experience. Pinduoduo's success is not merely the victory of a "price butcher" with tactics like "slash once," "instant purchase + instant return," and "¥9.9 free shipping." Instead, it is a success based on precise and profound consumer insights and a value system centered around consumers. With an increasing population outside the fifth ring road and a growing downward purchasing power, they indeed need the tangible benefits and respect that Pinduoduo offers.

From this perspective, Pinduoduo's victory has both reason and dignity, catering to the effective needs and consumer downgrading of the residents, seizing two major opportunities: low prices and going global. Duo Duo Juan Wang has not only left no room for domestic competitors but has also expanded vigorously globally. Looking at the massive download data of Temu Global, no one doubts that Pinduoduo's red flags will fill the entire world. However, no one knows for sure whether this order is a temporary trend or a long-term one, and what kind of system each corresponds to. No one can clearly know when this imitation logic, and the game of bad money driving out good money, will end.

In the short term, it does meet consumer demand and the "existence is reasonable" logic of market economy purists. However, in the long run, it will inevitably harm economic development, product upgrades, and industrial progress, ultimately undermining consumer welfare and surplus.

Recently, the Indonesian government issued Ministerial Regulation No. 31 of 2023, banning the use of social media as a platform for selling goods. In simpler terms, it is a ban on live streaming for sales, and it is a comprehensive and thorough ban. The official explanation from Indonesia is that the "predatory pricing" of these live-streaming e-commerce platforms and social e-commerce is threatening small and medium-sized enterprises. Technological development should create new economic potential rather than stifle existing economies. This is the choice made by Indonesia in the face of the long-term interests of economic health and, undoubtedly, more countries will make similar choices in the future.

We don't need to blame Pinduoduo for changing consumer habits, nor do we need to blame its "cheap and low-quality" products for trampling on the "brand and intellectual property" with abandon, or for delivering a harsh blow to China's nascent quality revolution. Nor do we need to dwell on the prevalence of the imitation culture and the ruthless decline of the commercial values of winner-takes-all. It only proves one truth: the capital market is short-sighted, and business order is sometimes disorderly. The meeting of "beautiful things" and "cheap prices" is, in some sense, more difficult than the reunion of Cowherd and Weaver Girl. Great companies are always so hard to find, and after careful consideration, Warren Buffett would say: time is the weigher of a company's value, and money is the byproduct of doing things right. We all need to learn to let the bullets fly for a while. Waiting is sometimes a virtue, and there are always people and things worth waiting for.

Taobao, Tmall, and JD.com have all had their glorious moments and orderly brilliance. While cheering for Pinduoduo's growth, we should perhaps question the order behind this growth and what it means in the long run.

03、The Answer is Still Order

As the saying goes, "As you sow, so shall you reap." The development of mobile e-commerce platforms led by Pinduoduo has reached a crossroads in history. What kind of order to establish, what kind of system to form, and whether it has sustainable high-quality development are no longer multiple-choice questions but definite answers that will continue to interrogate them:

1. The challenge of long-term interests and short-term gains. Blindly pursuing short-term explosive performance growth and the increase in corporate market value, neglecting the coordinated development of quality and industry health, and only enjoying the dividends brought by the so-called "Giffen Law" will face the backlash of the market and the long-term interests of the enterprise. Development that does not unite "beautiful things" and "cheap prices" will be short-lived. 
2. Choosing between short-term monopoly profits and market dominance and the long-term dividends of industry balance and healthy development. Truly understanding long-termism and the value of harmonious and healthy industrial ecology, forming an interest and value outlook of "broad observation, thin accumulation, and thick release," or blindly running with eyes closed to fish for profits. This essentially is a choice made in the absorption of institutional and inclusive development.
3. The challenge of capital's orderly expansion. The healthy and orderly expansion of capital must be built on the foundation of supporting industrial development, expanding on the friendly competition order between online and offline, especially friendly to physical businesses. Expanding simply and crudely relying on the network effects, scale effects, and Metcalfe effects of the Internet, forming the so-called winner-takes-all type of index growth, gaining a monopoly dominance position, and squeezing the survival space of physical businesses and quality products through subsidy methods with ample capital strength.
4. The challenge of the healthy and continuous development of the platform economy. Platform economy should serve high-quality development and a high-quality life, respect contributions from all participating entities, lead the economy, achieve shared development. Platform enterprises have formed a monopoly advantage with a clear market dominance. If they do not undergo a transformation from simple traffic monetization to value creation, no longer rely on user dividends and business model dividends, but deeply integrate with the real economy, create value, leverage data advantages, achieve the efficiency leap of the industrial value chain, and maximize consumer welfare. This way, not only will consumers benefit, but producers will also be profitable. It will not only make entrepreneurs successful but also turn brands from internet-famous to long-lasting, reduce the overall social circulation cost, achieve shared development, not impede fair market competition, and enhance the legitimate rights and interests of consumers and merchants. This development of a healthy and friendly business order has vitality.

The answers to these questions determine the order we have, thereby determining whether we can achieve what kind of growth and the quality of that growth. To some extent, it also determines our future lifestyle and living standards.

So, we can't help but ask: Is the rise of Pinduoduo, Douyin, and other social e-commerce platforms really only about "cheap prices"? Is it only the victory of a low-desire society and the convergence of the sinking world? When will our "beautiful things" and "cheap prices" finally meet? Why can the pioneer of e-commerce, the eagle sauce, and less developed East Asian neighbors demonstrate a model benchmark for unifying "beautiful things" and "cheap prices"?

Do our Chinese peers who Copy It Right really forget the values behind the copy mode or the values behind the order? Or is it that the values behind the order are fundamentally uncopyable? Or, the rampant expansion of capital does not need to consider these long-term issues, and these are precisely the questions worth contemplating after the rise of Pinduoduo. The results of the implied arrangement of the social-economic order will form what kind of system, lead society's giant ship to where, and these are the questions that truly deserve profound inquiry. Do we really have the possibility of realizing an order that is both "beautiful" and "cheap," thus unlocking the code for high-quality growth with "the beauty of the system," and truly implementing the rational prosperity of "endless beauty, only in the twilight."

Sincerely hope that it's not just Pinduoduo that wins while the entire society loses.