Since its founding in 2015, Pinduoduo has made a name for itself as one of the largest and fastest-growing e-commerce platforms in China. Getting listed has not only garnered lots of attention on the platform, but also on its founder, Colin Huang, who subsequently became China’s 13th richest person in 2018.
Throughout the few years, Colin has written ten articles on his WeChat public account. These articles were mainly accounts of his own life/entrepreneurial experiences, as well as his thoughts and insights of the market and values.
Earlier this march, Colin announced that he was stepping down as the chairman of Pinduoduo, which surprised many. However, reading the thought processes from his articles, it might be seen that this decision was not so surprising as part of his character and values.
In this article, we uncover 4 entrepreneurial learnings from his articles.
#1 Money is the means, not the end
On his very first job, Colin had been working for Google as an engineer in 2004. When the company went public in August that year, many of Google employees, including him, had become rich overnight. “We suddenly had so much money in our bank accounts,” he recalled, “It was as if money fell down from the sky.”
Colin mentioned how the unexpected situation had resulted in many losing the motivation to continue working, but instead, started to pursue new interests and courses. However, it didn’t turn out well for most, as those newfound interests were simply a whim. For example, wanting to fly a plane but not having the skills, or realizing that they were not fit to be an entrepreneur after setting up a business.
He saw the full effects that money had on his colleagues, and felt that they “had wasted those few years away, when it could be spent making more impact.”
Developing this mindset about money has helped Colin Huang largely in his career. Instead of being thrown off the path by windfalls, he kept his mind on his job. This allowed him to maintain his enterprise even after achieving financial independence and success at an earlier age. Huang subsequently went on to start Pinduoduo after a few entrepreneurial ventures.
#2 Finding the unique opportunity
Many couldn’t understand why Colin Huang was so interested in the lower-tier markets in China. While a part of the reason was to pursue societal value and business opportunities, the larger motivation for Colin was the opportunity to test the new concept of “C2M (Customer to Manufacturer).”
This concept came from a conversation with his friend on the history of clothing manufacturing, from which he learnt about how demand could reshape supply.
He summarised his learnings about the three types of demand evolution into 3 points:
- The first type of demand evolution originates from human’s greed and pursuit for pleasure. They wanted a product that is efficient, better and aesthetically pleasing. Even if one pleasure has been satisfied, humans will always move on to another one, therefore there will always be some demand. One of the examples given was how planes have satisfied the humans’ wants to fly.
- The second type coincides with newly emerged scenarios, like how World War I gave birth to a strong demand for standardized apparel such as uniforms.
- The third type comes from the change in collecting and understanding consumer needs; one example is the emergence of location-based services.
He saw an opportunity to evolve into a C2M model, whereby consumers can approach retailers with initiation of production. This would significantly increase the efficiency of production. At the same time, consumers benefit from having their needs and budgets prioritized.
#3 Entrepreneurship is like an Investment
One of Colin Huang’s favourite books is “The Conquest of Happiness” by Bertrand Russell, a British philosopher and logician. In the book, Russell seeks to uncover the different causes of unhappiness in modern lives, and proceeds to lay out a rationalist prescription for a happy life. From this book, Colin Huang summarised his three takeaways:
- Having the courage to face common sense, using it to make rational judgements, and using rational decisions to direct our actions
- Instead of perfecting your own interests, turn your attention to perfecting external interests
- Learn to give up on things that cannot be changed or conquered
When he was 26, Colin’s mentor had brought him along to a lunch he bidded with Warren Buffet.
“There are a lot of ordinary people who manage to earn a lot of money in the financial industry, but I’ve also seen many intelligent people who struggle in bad industries. Oftentimes, entrepreneurship is just like investments — Choices are more important than effort.” Warren Buffet’s words had left a huge impact on Colin Huang, and shaped his thoughts around business and capital.
For Colin, his choice was to do a job that is right, but tough. It was right because the aim of entrepreneurship was to resolve the problems faced by the market and society. However, it was also a very tough job, because it takes a lot (of energy and money) to be able to make the right decision.
“When it comes to investments, we look at the bigger picture to evaluate if the dealin loss is something we could withstand. If we apply the same idea to entrepreneurship, it is important to see if we have enough bandwidth to dive into a business. The most important thing about entrepreneurship is to survive,” Colin explains, “It’s not only about if you can win, but how much energy you can put in to win.”
#4 Knowing to differentiate assets and costs
“If we were to treat every decision made during your entrepreneurial journey as an investment decision, then there is a need to categorize what we spend our time and money on. Which ones are assets, and which are costs? Interestingly, despite its importance, many usually do not give much thought to differentiate costs and assets during investments..”
In the summer of 2018, Pinduoduo invested a large sum of money into World Cup advertisements, bringing in the increase in marketing spending. Colin explained, from the perspective of management, spending large amounts of money on branding is a long term investment. If they were to spend this amount of money on advertising for 2 to 3 years, consumers would start to see Pinduoduo as a trusted brand. This is comparable to buying an invisible asset which would only be shown as marketing costs on the finance report.
Colin Huang sees assets as things that are beneficial to the business in the long run, and those that have increasingly negative effects as costs.
While these 4 lessons are consolidated from his entrepreneurial journey, they are also applicable to our own life as well.
1. Money is the means, not the end : How do we make better financial decisions to empower ourselves in reaching larger goals?
2. Finding the unique opportunity: Do we have a unique advantage that sets us apart from others? Have we leveraged our full potential?
3. Entrepreneurship is like an investment: Life is like an investment too – learn to make the choices we won’t regret
4. Knowing how to differentiate assets and costs: What are some things we should do to create assets in our life in the long run? For example, upskilling may seem like a cost, but is an invisible asset in the long run.