# "Capitalism Turned Upside Down" (Huang Zheng)

Note: This is Huang Zheng's thinking from his twenties. Because of this thinking, he founded Pinduoduo. Pinduoduo is the culmination of this systematic thinking. Understanding this is key to understanding Pinduoduo and believing that Pinduoduo will be the end-game of e-commerce—whether it's Amazon online or Walmart offline, it's all the same.

Warren Buffett is an admirable capitalist, a pure capitalist. His entire enterprise can be described as tirelessly, focused, and rationally moving money to enjoy the fruits of compound interest. I enjoy reading his letters to shareholders, where he repeats the same simplicity and the purity that is not easy to maintain for decades. In his empire, one hand holds insurance, the other holds investments; one hand sells risk resistance capacity and collects money, while the other puts money into orchards with moats that can generate compound returns.

Initially, when I started writing, I wanted to write an article about insurance titled "Insurance, the Pinnacle of Capitalism." The basic idea was that insurance is interesting and very much embodies capitalism. The "rich" have capital and "lots of money," therefore have strong risk resistance; the "poor" have "little money" and weak risk resistance. So the "poor" need to purchase this risk resistance capacity from the "rich." While insurance is indeed needed by many people and gives them more stable lives and at least more peace of mind, ultimately, insurance products further promote wealth transfer from those without money to those with money. I call it the pinnacle of capitalism because it further amplifies the power of capital. "Having money = Greater safety"—this soft, intangible concept is also monetized through insurance. If this continues, if the market is highly efficient and unimpeded, and the law guarantees the legitimacy of capital and its compound returns, then it's very likely that the rich will become richer and the poor will become poorer.

The reason Buffett is admirable and can even be called great, I believe, is: he is not just an exceptionally talented capitalist who can play the capital game to its extreme; he is also an endearing person who clearly understands that money is not the purpose. On one hand, he enjoys the pleasure that the capital game brings him; on the other hand, he wisely donated the vast majority of his money to Bill Gates, who is younger than him, and confidently lets Gates complete the wealth redistribution that should happen. At the same time, he fearlessly advocates for other wealthy people to donate their money, advocates for the state to increase taxes on the wealthy, and to conduct wealth redistribution with greater force from a systemic level. (Interestingly, Buffett's father was a Republican congressman, and what Buffett now advocates for doesn't seem to align with Republican positions.)

A magical Buffett was born in capitalist America. He derived pleasure from the insurance and capital compound interest game, and gently passed the burden of money to Bill Gates. This is so wise. This is probably the simplest and most relaxed way for a capitalist in a capitalist environment to gain pleasure. Money first accumulates and then redistributes. In this cycle, Buffett mainly focuses on the first half. In the era of "post-capitalism," assume that effective wealth redistribution and accumulation are equally important.

I can't help but wonder: is it possible to use insurance and compound interest in reverse—or inverted insurance and compound interest—to make wealth distribution more even? Do there exist mechanisms where the poor can also sell "insurance" to the rich, where the poor can sell their own "soft power," their intentions, their risk resistance capacity to the rich, thereby achieving more fine-grained feedback and shorter cycles of money flowing back from the rich to the poor?

For example, suppose a thousand people in summer decide they want to buy a certain style of down jacket in winter. They write a joint order to a factory and are willing to put down a 10% deposit at last year's price. In this case, the factory is very likely willing to give them a 30% discount. Because from their joint order, the factory obtains a certainty of demand that the factory originally didn't have. This certainty can be converted into the convenience of utilizing the low valley of production plans for manufacturing, or can be converted into confidence when purchasing raw materials. The factory can even further resell this certainty to upstream and supporting manufacturers to achieve further cost reduction. In terms of transaction form, this transaction is like a group of people each spending 1 dollar to buy a 3-dollar limited-time voucher, and then the factory, because it sold these vouchers, can further buy similar limited-time vouchers from upstream and supporting manufacturers, for example, spending a thousand to get three thousand limited-time vouchers. If these a thousand people have a certain credit history and they jointly placed an order expressing their intentions but didn't pay the deposit, would the factory be willing to give them a discount?

I think they probably would be, just maybe not 30%, but would 8% work? This is like the factory, using its self-issued limited-time discount coupons, purchasing from ordinary consumers an insurance guarantee of future purchases. If we think further, there are actually many forms through which ordinary people's intentions and ordinary people's certainty about their future needs can be marketized, productized, and monetized. Suppose the system gives each person only one opportunity to express the intention to buy cotton coats. That's like giving each person a cotton coat intention voucher (this intention voucher might be exchanged using accumulated credit). Would this intention voucher have monetary value for factory-owning capitalists? How would the price here be determined? What restrictions should exist in bilateral transactions?

The essence here is that each person (whether rich or poor) has much clearer understanding of their own intentions, their own needs and plans at a certain point in the future, compared to others. And each person's planning and intentions, as well as individuals' grasp of certainty regarding their own behaviors, often have value to the supply side satisfying those needs. It can reduce the uncertainty of organized production and help achieve more efficient allocation of resources and capital.

For this reason, I speculate that capitalists and the rich would be willing to purchase this reverse insurance from ordinary people and the poor. This reverse insurance can allow each ordinary person's credit and intentions to be monetized. This reverse insurance is no longer the poor accumulating credit and money to borrow from the rich and pay interest (in lending situations, the poor, because they borrowed money, must pay interest, so the things they buy end up being more expensive than what the rich buy) or spending money to buy the rich certainty in life. Rather, it's the reverse: the rich and capitalists pay money to ordinary people and the poor to purchase the certainty of their production capital allocation. In the first type of insurance and financial lending products, money flows from the poor to the rich. In this reverse insurance, money flows from the rich to the poor. There should be a qualitative difference here.

The next questions are: how do we productize each person's (whether wealthy or poor) certainty about their own intentional behaviors; how do we make it standardizable and circulate like discount coupons; how do we create forms to express intentions; how do we create products to realize the transfer of this certainty; and how do we financialize and monetize this transfer of certainty. Beyond this, we should consider decentralizing the productization process of this certainty transfer (because there are too many scenarios and situations) and avoiding fraud in the relatively decentralized "certainty product" production and circulation process, and forming a positive cycle of good money driving out bad money. I wonder if blockchain was created precisely for this kind of "reverse insurance"...