“Starting from last night, whether it’s the domestic BAT companies or the foreign big companies, from their executives in front of the stage to their shareholders and even the real controllers behind the scenes, they must all be unable to sleep.”
They must all be in meetings, exchanging information frequently at various levels.
Since the end of the last century, we have been facing an era of middle-class decline, which simply means that the income of the middle class in developed countries no longer leads economic growth.
Not only did it fail to continue leading economic growth, but it also lagged behind, even significantly behind, economic growth.
From America to the European Union, and then to small countries in East Asia such as Japan, Korea, and Singapore, none are exempt.
The traditional olive-shaped society can no longer be maintained.
This trend has never been reversed in the past four decades.
The middle class, which emerged after the rise of the Industrial Revolution and experienced explosive growth after the end of the Cold War, is facing a catastrophic predicament for the first time.
The expansion of the global division of labor under a liberal system and technological revolutions have led to a continuous and rapid expansion of the middle class.
As for why this trend was interrupted around the year 2000, some proponents of free-market economics believe it was because China joined this cycle, thus hindering the original cycle of middle-class expansion.
In simple terms, the previous loop was:
England developed a new technology (the spinning jenny), and then their wool spinning/weaving gained an absolute advantage.
This allowed capitalists to freely open factories, resulting in a large number of British workers being hired, while the labor force in other industries decreased.
As a result, England, which already faced a labor shortage, began importing products from other continents, such as food from Australia.
Both groups of workers saw an increase in their current income, and they no longer lived on the brink of subsistence, achieving a basic level of prosperity.
This group of people then needs other products, which in turn inspires the creation of more technologies.
Then more people were employed, achieving basic food and clothing security, and even being able to purchase fixed assets.
This leads to more specialized and detailed division of labor, and workers' income/assets are finally able to achieve long-term surplus.
This led to the emergence of financial services, allowing workers to borrow money—they could leave the fixed assets they had left to the next generation to assume (and the debt to them) while they enjoyed the fruits of their labor.
Alternatively, you can transfer the cash flow from another person's assets to you through an arrangement called stocks for retirement, which is retirement securitization.
They believe that this perfect cycle and perfect global division of labor were blocked in China around 2000 because of China's entry into the world.
After joining this cycle, the poor in China gained job opportunities and money, but their money was taken away by China in a seemingly open and deliberate way.
In reality, this is a trivial reason; the underlying reason is that it is too easy for capital to make money.
After trying their hand at finance and internet businesses, investors find that making money through developing new technologies is much slower than in finance and the internet.
For capital, the essence of the internet is actually financial business.
The essence is not that China's entry into this cycle led to the downward mobility of the middle class, but rather that the difficulty of developing new technologies is far greater than before, and research and development has completely entered a deep-water zone.
Moreover, the cost of trial and error is extremely high. Even for giants, investing too much in the wrong path can be devastating.
Therefore, the most fundamental reason is that labor income is far behind capital profits, a phenomenon that is becoming increasingly apparent.
Corresponding to the downward mobility of the middle class, mid-sized companies are also becoming increasingly lower-class.
This phenomenon began to emerge gradually in 2016, after the rise of the mobile internet wave.
Today, this is even more evident: apart from the giants at the top and the companies at the bottom, there are fewer and fewer middle-class entities.
Almost none.
Before the rise of mobile internet, e-commerce in various niche markets emerged one after another. At that time, they were called vertical e-commerce. Jumei, Vancl, Mia, Babytree, and Mogujie all failed.
Only the giants—Taobao, JD.com, and Pinduoduo—will survive.
This applies to online e-commerce, and it applies to other sectors as well.
For companies in the middle, it feels like they can disappear in the blink of an eye.
The underlying logic is resource integration, and the resource integration capabilities of giants are far stronger than those of medium-sized enterprises.
The reason why 2016 was a crucial year is that, at the macroeconomic level, the contraction of capital had already begun to emerge in 2016.
Although the Federal Reserve raised interest rates frequently in 2022.
Whether it's capital or traffic, it's becoming increasingly difficult for companies in the middle to acquire these resources.
Small businesses can barely survive by cutting costs, while giants can increase revenue and reduce costs by leveraging low financing costs and their existing advantages.
The middle-tier companies are not good.
In recent years, the real estate companies that have gone bankrupt in China have mostly been medium-sized private enterprises; large enterprises have not died, or at least barely survived.
But yesterday's press conference by Kechuang Biotechnology will change all that. Except for me, you will all be relegated to middle management.
All of our original advantages will be overturned.
Taking Tencent as an example, the traffic moat you build is completely useless in the virtual world.
The user relationship network you build also loses its effectiveness in the virtual world.
Tencent's only advantage is its employees and the cash flow lying in its books.
The moat was completely destroyed by a single nuclear bomb from Kechuang Biotechnology.
The same applies to ByteDance and Taobao.
In this new era, these companies, which have been brought down by the technological innovation of biotechnology, have all become mid-level enterprises.
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