I believe: the next Internet, still the Internet

In 2006, I interned at a hedge fund in New York, where my job was to serve coffee to traders. Later, because the posture of serving coffee was not right, he often soiled the plate, and even lost this job, and instead sorted out the World Gold Mine Yearbook - that is, the content of dozens of big books was entered into Excel. It's boring and lowly technical, but for the first time I know from it that there are so many countries in the world, and these countries actually have populations and industries.

Every Monday at lunchtime, the Foundation holds an internal training event, mainly when the fund manager comes out to chat with everyone and answer various questions. One day, out of the small talk was the head of an emerging market fund. It was an American, but not as lonely as the average American, and had been to many countries, including China, India, Brazil, and South Africa. After talking a lot about his international travel and research experience, he paused and said very seriously:

"China's economic development over the past decade or so has been impressive. A lot of people ask me where the next China will be. If you've been to Chinese mainland and understand China's regional gap, the urban-rural gap, you should admit that the next China is still China. The 'China' as we know it now is actually only a small part of China. If the whole of China can develop, it will be many, many 'Chinas', and their scale and duration will far exceed your expectations. ”

Since then, until 2021, the fund manager's words have been fulfilled, and Chinese companies have occupied an increasingly high proportion and an increasingly important position in the international division of labor. After 2021, the situation may change, and no one knows what will happen next. However, in this era of rapid change, it is already remarkable that a prophecy can last for fifteen years.

Throughout the 20th century, bearishes of the United States generally failed; in the first two decades of the 21st century, bearish on China generally failed as well. Of course, the situation may change now, and we can only wait and see. The past can only be used as a reference, the key is what to do next.

Since the second half of 2021, I have seen countless negative remarks about the Internet – not just a few Internet giants, but the entire Chinese Internet industry. I see these remarks in the self-media. I've seen these statements in traditional media. I see these remarks in analyst reports. I see these remarks in my circle of friends and WeChat groups. At first, I could see this kind of speech two or three times a month, and then I can see it every day, and now I see it more than once a day. These statements are sincere, convincing, and quoted, often receiving 100,000+ views and thousands of retweets. These statements were particularly persuasive after being adapted into video, live streaming, etc., and many people I know have been persuaded. With Chinese stocks down 80% and the Hang Seng Technology Index down two-thirds, you can't help but believe these remarks.

Unfortunately, all the negative remarks on the Internet industry are wrong. People who believe in this kind of rhetoric will miss the next decade or even twenty years of growth, and will miss a series of high-quality investment objects, just as they have missed Tencent, Apple, and Google in the past two decades.

The Internet is completely different from the so-called "hard technology" such as chips, lithography machines, drones, biomedicine, and new energy batteries. In human history, innovations that can be compared to the Internet are very rare, and all I can think of is: fire, wheels, printing, steam engines, internal combustion engines, electricity. We can count the computers (computers) that were born in the mid-20th century, but they have integrated into the Internet as a whole and become part of the latter.

More than two decades ago, more than one scholar said, "The 21st century is the century of living things." Another said, "The 21st century is the century of nano." "They were wrong. Biotechnology and nanotechnology have also developed to a large scale, but compared with the market size of the Internet, it is nothing less than a drop in the ocean. Why? Because the Internet is not just a technology, not just a set of standards, not just an industry. It has completely and profoundly transformed the human way of life to the point that we no longer even remember the state of life before it was born.

The Internet is the behemoth of the 21st century, and no history textbook will be able to bypass it for thousands of years to come. The Internet era will be regarded as the highlight moment of all mankind like the era of geographical discovery and the era of the Industrial Revolution. Strictly speaking, the Internet is more important than electricity, internal combustion engines, and steam engines because it is not only a way of production, but also a way of life. Imagine this: in the decades after the commercial application of electricity, we not only had all kinds of power equipment, but also had fantasy entertainment methods such as movies and phonographs; electric lighting gradually changed our biological clock; telephones completely changed the way we communicate- adding these inventions together, which is equivalent to the Internet today.

I would also like to emphasize that while "Industrial Internet" (To B) is often discussed, the most promising thing for the next decade is still the Consumer Internet (To C). History has repeatedly proven that the companies with the deepest moats and the greatest growth potential are those that directly contact consumers and build user stickiness among hundreds of millions of people. People who think that the industrial Internet will replace the core position of the consumer Internet, just like those who think that "hard technology" will replace the core position of the Internet, only see the trees, not the forest.

Microsoft's consumer-grade business already accounts for one-third of revenue and a quarter of operating profits. The "industrial Internet giant" is also expanding its gaming business through acquisitions, entering every family's living room and bedroom.

Apple has always been a thorough consumer hardware (and software) company, and now it has further increased revenue and profit margins through paid services such as personal space, digital media, and streaming, thereby building the world's most unbreakable business model.

Amazon is considered to be the most successful company in expanding from the consumer Internet to the industrial Internet, but in the past few years, it has invested more in offline retail (including O2O), fresh e-commerce, games, live broadcasting and film and television content than in cloud computing.

Google has also made great strides in cloud computing, but over the past year, it has prided itself on continuing to grow advertising revenue through its new retail advertising model (Google Shopping) and new features of Google Map; its YouTube has also made significant progress in commercialization.

Don't get me wrong, I don't mean to belittle the "industrial Internet", just as I don't mean to disparage "hard technology". I just want to say that everything else is eclipsed by what the consumer internet can do. Do you, like some analysts, believe that the consumer internet has peaked and that there is no new territory to develop? Then you are wrong, because the end of the user enclosure does not mean the end of the development of the application, the latter still has a long way to go.

In terms of virtuality, the entire Internet entertainment content ecology has just been established. There are only 3 billion gamers worldwide, just 60 percent of Internet users, and even fewer people can stream long videos anytime, anywhere. Thanks to VR/AR technology and Web 3.0, the metaverse may come true within the next two or three decades. The richness of entertainment we enjoy on the Internet today has surpassed the craziest dreams of our ancestors; but what our grandchildren will enjoy will far exceed the craziest dreams of today.

In terms of reality, the Internet's penetration of traditional consumption is only half of the way. From China to the United States, e-commerce platforms are committed to daily food and miscellaneous food, and on this basis, they intervene in the upstream, with the ultimate goal of transforming the huge and ancient industry of agriculture. With the combined effect of technologies such as artificial intelligence, big data, robotics and drones, more and more people around the world will enjoy same-day or next-day delivery services; their offline consumer experience will also be greatly improved. Where conditions permit, the complete integration of consumption and the Internet will be basically realized in the 21st century.

Whenever I see these advances, whenever I see what Internet technologists, product managers, and operations people around the world are doing, I see a vibrant world. The global epidemic in the past has fundamentally increased the speed at which enterprises and individuals have embraced the Internet and embraced digital survival. In fact, at the beginning of this year, I was a little pessimistic; but after reading the earnings reports of Amazon, Google, Apple and Microsoft, I was more optimistic than ever.

"It's going to be the east wind, Watson. This wind has never blown in England before. The wind would be cold, it would be strong, Watson. When this gust of wind blows, many of us may wither. But it is still god's wind. After the storm passes, a purer, better, more powerful land will stand under the sun. —Sherlock Holmes

I believe that no matter how long this storm lasts, after it has passed, the next internet will still be the internet.