What is the connection between Huang Zheng of Pinduoduo and blockchain?

Author: Seven Research

Previously, a senior recommended that I read Huang Zheng's "Turning Capitalism Upside Down." After the recommendation, I looked for it and read it, and I wrote down some thoughts afterward.

Why do I want to bring this up? Because many people might not even think about it—how could Huang Zheng, known for e-commerce and his reputation for "low prices and cutting prices," have any connection to blockchain? But after reading that article, I realized there is indeed a connection, and he pointed it out himself.

1. The Underlying Logic of Pinduoduo: A Business About "Uncertainty"

First, let’s talk about what this article is about.

Most people see Pinduoduo as cheap and focused on lower-tier markets. But Huang Zheng himself said that what he is actually doing is a kind of "insurance" business—a business about "uncertainty."

He posed a heart-wrenching question: Why does money always flow to the rich?

His answer is: Because the rich bear the "uncertainty" for others. The probabilities of life events like aging, illness, unemployment, and serious diseases hitting someone are roughly the same; however, the same blow might cause a poor person to collapse, while a rich person might just see a minor fluctuation on their balance sheet. Thus, the poor are willing to spend money to buy "peace of mind"—buying insurance, saving money in banks for that little interest, or paying a bit more for goods just to ensure immediate delivery. Money flows little by little from the bottom to the top. This is the "positive" flow.

2. "Reverse Insurance": Turning Capitalism Upside Down

So, can we turn it around and let ordinary people sell "certainty" back to capital?

The difficulty lies in the fact that one person's promise is not worth much. Online orders can be canceled at any time with no cost, leaving merchants helpless; they can only stock more goods and pass the costs back into prices. Huang Zheng's words are quite harsh:

"Your behavior is treated as a statistical fluctuation, rather than a promise that must be fulfilled."

But what if it’s not just one person, but ten thousand? Pinduoduo's group buying and time-limited offers essentially aim to crush the "wish to buy" of ten thousand people at the same moment before they have a chance to hesitate, creating a solid order that eliminates the risk of "producing goods that cannot be sold" for factories. Grateful for this certainty, factories exchange the premium they would have paid for risk with "lower prices." Money flows back a bit. This is what he calls "reverse insurance."

3. The Last Piece of the Puzzle: Blockchain

At this point, you might not see the connection to blockchain. To be honest, I didn't at first either.

Until near the end of the article, Huang Zheng posed a question—he said that to productize, standardize, and monetize this kind of "certainty," it still relies on a decentralized method to prevent fraud and create a cycle of good money driving out bad money; then he asked: Isn't blockchain inherently born for this kind of "reverse insurance"?

Just that one sentence caught me off guard. A person in e-commerce, after going around in circles, ended up at blockchain. He didn’t elaborate further, but upon reflection, it makes sense.

The biggest deadlock of reverse insurance, as mentioned earlier, is that "ordinary people's promises are not worth much"—they have no cost, are untrustworthy, and cannot be priced. Blockchain happens to cure this ailment:

• Using smart contracts to bind your promise to a deposit; if you back out, the deposit is forfeited, and you face penalties.

• This way, your "wish to buy" transforms for the first time into a real promise that incurs a cost for backing out and can be enforced, allowing factories to trust it and arrange production accordingly.

Ultimately, it shifts the matter of "trust" from relying on people to relying on rules. You see, the piece of the puzzle he wants—making promises credible, priceable, and free from middlemen’s cuts—just happens to be the innate ability of blockchain.

4. Extended Thoughts: Two Paths to Create Certainty

Following his statement, I couldn't help but think a bit more about Bitcoin (a professional habit, so please forgive me for always bringing it up).

Bitcoin is actually the purest sample of the idea that "trust relies on rules": a fixed total supply, open algorithms, and immutable rules.

• The certainty of fiat currency relies on whether the issuer exercises restraint, which is human governance;

• The certainty of Bitcoin relies on cold, unfeeling code that does not show mercy, which is rule of law.

One relies on people, the other on rules. Therefore, there are actually two paths to create certainty in the world:

1. One is the Pinduoduo path: aggregating dispersed intentions into momentum, using scale to flatten uncertainty;

2. The other is the Bitcoin path: completely locking down the rules, leaving no room for human intervention from the start.

Neither path is without its costs; the former squeezes human freedom, while the latter sacrifices the flexibility of rules.

If you're interested, you can also revisit the article "Turning Capitalism Upside Down."