In the short five years since its founding, Pinduoduo's market capitalization is nearly $100 billion, becoming the fourth listed Internet company after Alibaba, Tencent, Meituan with a market capitalization of hundreds of billions of dollars.

E-commerce upstart Pinduoduo's 40-year-old founder and CEO Colin Huang, also known as Huang Zheng, has a net worth of US$45.4 billion, according the real-time billionaire list compiled by Forbes. That means he has surpassed Alibaba founder Jack Ma to become the second-richest person in China, closely trailing behind Pony Ma, founder and CEO of Tencent.

What's the secret that Colin exceeded Alibaba founder Jack Ma to become the second-richest man in China?

Focus on long-term investment and the intrinsic value of the company

In his first letter to shareholders, Huang said: "Pinduoduo will be a company that focuses on long-term development and investment in the future. It may seem radical at times, and it may seem too conservative at times, but it all follows a simple and consistent logic, that is, focusing on the intrinsic value of this institution.

In the operation of Pinduoduo, the most typical practice action for this concept is to start the 10 billion subsidy plan in June 2019. In Huang's view, although the 10 billion subsidy plan is recorded as large expenses in the financial statements, in return for consumer trust and repurchase habits, and trust is the most valuable asset.

In his 2019 letter to shareholders, he also wrote:

Likewise, Pinduoduo now has the ability to generate large amounts of revenue, and current short-term expenses and revenue are only weakly correlated. The short-term expenses on the books (which we believe are a significant portion of valuable investments) are also highly adjustable. It's not a good idea to take money from the "piggy bank" and put it in a fixed term. We will not change our current business strategy for quite some time and will continue to focus on intrinsic enterprise value, actively seeking out opportunities for inputs that are beneficial to long-term company value, even if they would be recorded as large short-term charges under accounting standards.

At the end of March 2020, the number of annual active users of Pinduoduo had reached 628 million. The average annual purchase per consumer reached 1,842 yuan. All have gained significant growth before the 10 billion subsidy plan.

Slow down the speed of development 

Huang once told reporters that "what he focuses on is the current development. He won't plan for five or ten years either. He will think of a very distant goal and a very near implementation."

Finding the right direction and road and moving forward, even if it is slower, is better than running on the wrong road. Just like investing in business models, entrepreneurial choice of industry and business model often determines a large part of the outcome. In other words, it takes a lot of time to study what is right, and then think about how to do things right.

It's far better to move incrementally in the right direction than to run wildly in the incorrect direction. Buffett says he's seen a lot of ordinary people who can make a lot of money in the financial industry, and he's also seen several very smart and excellent people who are in the struggle in bad industries.

In the road of entrepreneurship which is similar to the investment, choice is more important than effort. In the right path forward even if a little slow, as if investing in compound interest, 20 consecutive years of 20% annual return is very powerful. Far more profitable than going up 100% this year and down 50% next year.

Stick to its own principles

Another spiritual core that Huang inherited from Duan Yongping is the principle. Huang listed integrity as a core value of Pinduoduo.

In the IPO prospectus, Huang elaborated on this division.

The core value of Pinduoduo is "Benfen". The word "Benfen" is difficult to translate in English, but it roughly means "to stick to one's job", which has several meanings in our context:

Be honest and trustworthy

Do your part, no matter what anyone else is doing.

Go back to your original intention, and focus on doing what you should be doing.

For the management of Pinduoduo, principal means focusing on creating value for the consumer. We may not be understood, but we are always acting out of good intentions and not evil.

Doing things this way may lose some short term opportunities, but it has great long term value and can bring trust, lower communication cost, more opportunities.

Before founding Pinduoduo, Huang also worked as an e-commerce agency, Leqee. According to the report in 2016, when Leqee was expanding its business, a brand owner asked for bribes, and Huang did not agree, so the company lost 60% of its turnover. But in the long run, after this incident, they no longer need to educate employees to be honest and responsible; it also has an educational effect on customers who want to ask for bribes. "When you're just starting out, you can't ask for scale if you do this thing. You don't even pay bribes in that situation, people realize you're serious, you save a lot of subsequent costs, it's like a war, which can maintain stability for many years." Huang said, "Integrity will become a core competency in China, and the longer a company that speaks of integrity has been in business, the higher the barriers to construction and the more resources it has accumulated"

Huang Zheng himself said, "Integrity means that I don't cross the line and I can take some losses. The principle becomes our own culture and a very strong core competency. And the more people who are willing to take advantage of it, the more opportunities you will get."

This is an article from WeChat official accounts MeiGuyanjiushe(ID: meigushe), translated by Chris Yuan.