"Inverting Capitalism" (Huang Zheng)

Note: This is Huang Zheng's reflection from his twenties, and because of this reflection, he founded Pinduoduo, which is the culmination of this system thinking. Understanding this is key to understanding Pinduoduo and believing that Pinduoduo will be the terminator of e-commerce—whether it’s online Amazon or offline Walmart, it’s the same.

Buffett is a respected capitalist; he is a pure capitalist. His entire career can be described as tirelessly, focused, and rationally moving money to enjoy the fruits of compound interest. I enjoy reading his letters to shareholders, which repeat the same simplicity, echoing a difficult purity over decades. In his empire, one hand is insurance, the other is investment; one hand sells risk resistance, collecting money, while the other places money in a moat-protected orchard that can generate compound interest.

Initially, when I started writing the public account, I wanted to write an article about insurance, tentatively titled "Insurance, the Ultimate Expression of Capitalism." I roughly wanted to say that insurance is interesting and reflects capitalism well. The "rich" have capital and "more money," thus stronger risk resistance; the "poor" have "less money" and weaker risk resistance. Therefore, the "poor" need to purchase this risk resistance from the "rich." Although insurance is indeed needed by many, providing them with a more stable life, or at least a more stable mindset. However, ultimately, insurance as a product further promotes the transfer of wealth from the poor to the rich. It is said to be the ultimate expression of capitalism because it further amplifies the power of capital. The soft, abstract notion that "wealth equals safety" is also monetized through insurance. If this continues, if the market is highly efficient and undisturbed, and the law safeguards the legitimacy of capital and its compound interest, then it is very likely that the rich will become richer and the poor poorer.

The reason why Buffett is admirable, even regarded as great, I believe, is: he is not only an immensely talented capitalist who can play the game of capital to the extreme; he is also a lovable person who clearly understands that money is not the end goal. He enjoys the happiness brought to him by the capital game while wisely donating the vast majority of his money to the younger Bill Gates, trusting Gates to accomplish the necessary redistribution of wealth. At the same time, he boldly advocates that other wealthy individuals also donate their money and urges the government to raise taxes on the rich, aiming for a more significant systemic redistribution of wealth. (Interestingly, Buffett's father was a Republican congressman, and these proposals he now advocates do not seem to align with Republican views.)

A miraculous Buffett was born in capitalist America; he finds joy in the games of insurance and capital compound interest while lightly passing the burden of money to Bill Gates. This is quite wise, perhaps one of the simplest and most relaxed ways for a capitalist to gain happiness in a capitalist environment. Money accumulates first and then is redistributed; in this cycle, Buffett mainly focuses on the first half. In the "post-capitalist" era, it assumes that effective redistribution and accumulation of money are equally important.

I can’t help but wonder if it’s possible to utilize insurance and compound interest, or inverted insurance and compound interest, to make wealth distribution more equitable? Are there mechanisms that allow the poor to sell "insurance" to the rich, where the poor can also sell their "soft power," their willingness, and risk resistance to the rich, thus achieving a more refined feedback and a shorter cycle of wealth flowing back from the rich to the poor?

For example, if a thousand people think in summer that they need to buy a certain type of down jacket in winter, they could collectively send a joint order to a manufacturer and are willing to pay a 10% deposit at last year’s price. Under such circumstances, it is very likely that the factory would be willing to offer them a 30% discount. This is because the factory gains a certainty of demand from their joint order that it originally did not possess. This certainty can transform into ease of production during low production planning and can also be converted into assurance during the procurement of raw materials. The factory could even further sell this certainty to upstream and supporting manufacturers to achieve further cost reductions. From a transactional standpoint, this transaction resembles a group of people each spending $1 to buy a $3 limited-time voucher, and then the factory, having sold these vouchers, could further purchase similar limited-time vouchers from upstream and supporting manufacturers, like spending $1,000 to buy $3,000 worth of limited-time vouchers. If this thousand people have a certain credit record and place a joint order expressing their intention without paying a deposit, would the factory be willing to offer them a discount?

I think they would likely be willing; however, perhaps not 30%, but would 8% be acceptable? This is akin to the factory using its own issued limited-time discount vouchers to purchase a guarantee for future purchases from regular consumers. If one further thinks, there are indeed many forms that can market, productize, and monetize ordinary people’s willingness and their certainty about future demand. If the system provides each person only one opportunity to express their willingness to buy a down jacket, it would be like giving everyone a down jacket intention voucher (this intention voucher might be earned through accumulated credit); would this intention voucher hold value for the capitalist opening the factory? How would the price of this voucher be determined? What restrictions should there be on bilateral trading?

The essence here is that every individual (whether poor or rich) often has a much clearer understanding of their own willingness, their needs, and plans at a particular point in the future than others do. Moreover, this planning and willingness of each individual, as well as their certainty about a specific behavior, tends to be valuable to the suppliers who meet those needs. It can reduce the uncertainty of organizing production and can help achieve a more efficient allocation of resources and capital.

Therefore, I speculate that capitalists and the wealthy would be willing to purchase this inverse insurance from ordinary people and the poor. This inverse insurance can allow every ordinary person's credit and willingness to be monetized; this reverse insurance no longer has the poor accumulating credit and money to borrow from the rich and pay interest (in cases of borrowing, the poor must pay interest on borrowed money, which means the things they buy are more expensive than what the wealthy buy) or spend money to buy life certainty from the rich. Instead, it reverses; the rich and capitalists pay ordinary people and the poor to buy certainty in their production capital allocation. In the former type of insurance and financial lending products, money flows from the poor to the rich, while in this inverse insurance, money flows from the rich to the poor; there should be a qualitative difference here.

The next question is how to productize this certainty of behavior regarding personal willingness for everyone (regardless of wealth); how to standardize it so that it can circulate like discount vouchers; how to create forms for expressing willingness; how to create products to achieve this certainty’s transmission; and how to financialize and monetize this transmission of certainty. In addition, one must consider making the productizing process of this certainty transmission decentralized (as scenarios are too numerous and situations vary) and to be able to avoid fraud in the production and circulation of such relatively decentralized "certainty products," forming a virtuous cycle of good currency driving out bad. I wonder if blockchain is born for this kind of "inverse insurance" at the right time...

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