Among the Chinese entrepreneurs, Liang Jianzhang is a special existence.
On the one hand, he founded Ctrip and successfully led the company to a second venture, bringing Ctrip into a new situation. On the other hand, he is also a population expert, and for the past 10 years, he has been paying attention to China's population issues, actively speaking out on the Internet for Chinese population issues, and has published a lot of books, becoming a well-known scholar with wide influence in the field.
More importantly, he has also implemented a series of measures to encourage childbirth on Ctrip. Since July last year, Ctrip has announced that it will invest 1 billion yuan to subsidize employees' childbirth. In addition, Ctrip is also the first in China to implement a hybrid work system, allowing employees to choose 1-2 days of remote work every Wednesday and Friday.
Recently, we interviewed Liang Jianzhang on the occasion of the release of his new book "Innovation". The following is based on the book and the conversation with Liang Jianzhang.
Organize | Hōren
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Many people ask me curiously, how can I, as a successful entrepreneur, be so obsessed with studying population economics? It all started in 2007.
At that time, Ctrip had become a leading Internet company in China. At the age of 37, I decided to quit my job as CEO and return to school to pursue a career in my academic career. In the end, it took me 4 years to get my Ph.D. in economics from Stanford University.
Silicon Valley was the center of global innovation and entrepreneurship at the time, and it was only natural that innovation and entrepreneurship became the subject of my research. In the process of research, I found that the entrepreneurial vitality of a country has a lot to do with the age structure of the country's population, and the higher the aging population, the weaker the vitality of entrepreneurship and innovation.
Subsequently, my related paper was published in the Journal of Political Economy, a top academic journal in economics. This made me realize that this is a very worthwhile topic to study, especially about the relationship between China, population and innovation, which can be said to be a very important area in academia, so I started researching China's population data.
In the past, population economists tended to discuss the impact of population on the economy only in terms of labor supply. And my research shows that the more critical and significant impact of population on the economy is the impact on innovation. When China's economy enters the stage of innovation economy, innovation is fundamental to whether it can develop rapidly and sustainably and be competitive in the world.
Innovative industries are characterized by huge R&D investment but low marginal costs. Large countries with large populations are often able to rely on the size of their markets to bear huge input costs, and rely on huge human resources to form clusters of industry and scientific and technological innovation, so as to take the lead in industrializing in emerging fields, and then quickly replicate business models in other countries.
If there is innovation, there must be inheritance, and the two are one and must be talked about together.
Inheritance refers to the fact that an innovative idea is inherited and disseminated by future generations, and it is possible to make further innovations based on it. Innovation needs to be inherited, because inheritance is the result and measurement of innovation, inheritance can reflect the impact of innovative ideas on future generations, and an innovation without inheritance, like an idea that only stays in the mind or a paper that no one has read, may not be considered innovation.
Another meaning of inheritance is to nurture future generations. If fertility is regarded as the inheritance of genes, then since the reproduction of both sexes, the inheritance of genes is accompanied by innovation, because each child's genes are a unique combination of parents' genes. The idea that the innovation and inheritance of genes and memes are the fundamental driving force of human development was first proposed by Richard Dawkins in his book "The Selfish Gene" and has been widely recognized.
If we compare people to computers, their hardware is genes, and software is memes (ideas), and human civilization needs both genetic innovation and idea innovation.
Innovation is done by humans, so population is an indispensable element of innovation. The innovation of ideas is inseparable from the multiplication of the population, just as software is inseparable from hardware.
Therefore, I believe that the meaning of human civilization is to achieve long-term prosperity through innovation and inheritance, and continue to contribute to the edifice of human knowledge or genes.
Some would argue that if technological innovations such as artificial intelligence were advanced enough, then there would be no need for such a large population, so fertility would not be so important.
This is a paradoxical argument, because from an innovation point of view, the existence of AI highlights the importance of population.
Since the advent of deep neural networks, artificial intelligence has evolved faster than ever imagined. The emergence of ChatGPT is a miracle, beyond the expectations of almost all computer scientists.
From an economic point of view, the burning question is, which occupations will AI replace, and will there be a lot of unemployment? Which industries will be positively or negatively affected? How will AI impact innovation and education? How will AI affect income distribution?
Before answering these questions, let's take a look at an industry quadrant chart. We divide some representative industries into two dimensions and four quadrants.
The abscissa is the degree of technological automation of the industry, from "easy to automate" on the left to "difficult to automate" on the right. Industries that are easier to automate include agriculture, home appliances, clothing, automobiles, and digital entertainment. Industries that are "difficult to automate" include the real estate industry, as construction workers and renovators are difficult to replace by robots in the short term. Tourism is also difficult to automate because it involves the transportation and service of people.
The ordinate is the dimension of the hierarchy of needs, from low "material needs" to high "spiritual needs". People's material needs include industries such as "clothing, food, and housing", and the material needs will be relatively saturated after a certain amount, while the spiritual needs are almost endless. Tourism, entertainment and education are spiritual needs, and innovation satisfies the instinct of human exploration, so it is also a spiritual need.
From this, it can be concluded that some industries will shrink, such as manufacturing; Some sectors will be stable, such as real estate and digital entertainment; Some industries, such as travel and education, will expand and absorb more of the workforce.
Of course, in the long run, education and travel may be fully automated in a hundred years' time. But there is one job that may forever be done by humans, and that is innovation, which is an advanced behavior that is difficult for humans to automate.
Innovation is not a single industry, but is distributed in R&D and creative activities in all walks of life.
Innovation can also be partially automated, with AI helping to automate experiments, record and analyze data, or use machine learning to suggest solutions that may succeed. For example, AI can help humans search for and test solutions to problems (like the AI system AlphaFold), and it can also assist in some artistic creation. But in general, humans still dominate when it comes to asking questions and needs.
Because what exactly human beings need, fundamentally we still have to ask ourselves. Some of the choices of solutions involve values and ethical judgments that are unique to human beings. In addition, from a security point of view, humans will not leave innovation entirely to artificial intelligence. Therefore, humans will continue to grasp the steering wheel and final decision-making power of innovation, and complete innovation with the help of artificial intelligence.
At the same time, innovation can bring people a sense of achievement, satisfy curiosity, and make people have fun in the process of exploration. Moreover, artificial intelligence replaces some simple and repetitive tasks, making innovative work more interesting. Therefore, innovation will become a high-level spiritual need that will attract more people to this work.
In the era of artificial intelligence, the ability to innovate and the size of the population are even more important.
As more and more jobs are associated with innovation, AI and robots can only play a supporting role. It has been said that innovation can be achieved with only a few geniuses, not a large population, but this view is clearly at odds with historical trends. Humanity is investing more and more capital and human resources in innovation, and the denser cities and regions are, the more innovative they are, and this trend shows no signs of slowing down. In the future, more people will be able and willing to participate in some form of innovative activity, including both high-skilled jobs (such as AI programming) and low-skilled jobs (such as game testing and film review).
Moreover, AI requires a large amount of user-generated data for training, and a large number of consumer groups are very important innovation elements in the AI era.
Technological advancements such as AI mean that humans can create more goods and services with less working hours, which is a boon for humanity. If AI makes humans or populations redundant, it must be something wrong with the work system and the social distribution system, and what needs to be improved is the work system and how to better distribute goods and services to everyone.
However, the ability to innovate in future technologies is being threatened by low fertility rates.
Currently, among the major developed countries, all countries except Israel have fertility rates below the replacement level of 2.1. The countries with the highest fertility rates are France, Denmark, the United States, the United Kingdom, and Australia, and their fertility rates are slightly below replacement levels.
Most developed countries have realized that low fertility is detrimental to economic development and have adopted policies to encourage fertility to varying degrees. Some countries in southern and eastern Europe seem to be caught in the trap of ultra-low fertility.
The ultra-low fertility rates in countries in the cultural spheres of East and Southeast Asia, including Japan, South Korea, China, and Singapore, may be due first and foremost to the Confucian cultural tradition of emphasizing education.
Many parents spend a lot of time trying to get their children into top universities, and this parenting style leaves them with insufficient energy to raise multiple children.
Not only do parents need to spend a lot of effort on tutoring their children's homework, but they also need to spend a lot of money to enroll their children in cram schools. There are a large number of training institutions, forming a huge industry in these countries. East Asian parents seem to be more concerned about the quality of their children than the quantity, resulting in the lowest fertility rates in the world.
Second, as the economy shifts more to service-oriented and innovation-driven, women's education attainment and labor force participation rates are steadily rising.
In many countries, women's university enrolment rates are on par with, or even higher than, men's. In the United States and the United Kingdom, the number of female college graduates is almost 40 per cent higher than that of men. Although China is still a middle-income country, there are more female university graduates than men. In addition, the female labor force participation rate in China's cities is 70%, which is also relatively high in the world. As you can imagine, the more time women spend in education and career development, the less time they spend raising their children or on themselves.
Of course, the fact that women are more involved in innovation and have a successful career is a huge step forward for society. And the relationship between female independence and fertility is not entirely contradictory. If a country provides adequate maternity benefits, women have the right to choose freely to balance career development with family well-being. For example, the Nordic countries, which offer comprehensive maternity benefits, including childcare services, have the highest female status and fertility rates relative to other developed countries.
Thirdly, modern cities provide people with a lot of entertainment and leisure lifestyles, so people have less time to raise their children.
Because of this, young people in cities are constantly delaying their marriages, and late marriage has become the general trend. Some people choose not to have children or even prefer to live a single life. In addition, addictive forms of entertainment, such as online games and virtual worlds, have seriously affected young people's desire to find a partner in the real world.
Some countries and regions in East and Southeast Asia are also characterized by a low proportion of births out of wedlock compared to other developed countries. In these countries and regions, children born out of wedlock remain a social taboo. According to the Organisation for Economic Co-operation and Development, in 2020, only about 2.5 percent of newborns were born out of wedlock in Japan and South Korea, while the average proportion of children born out of wedlock in the European Union was 41.9 percent. In the Nordic countries and France, the proportion of children born out of wedlock exceeds 50 per cent.
China's fertility rate in 2022 is only 1.05, and only South Korea has a lower fertility rate than ours in the world. According to recent data released by the Shanghai Municipal Health Commission, the total fertility rate of Shanghai's registered population in 2023 is only 0.6. In order to alleviate the crisis of low fertility in the future, China should introduce a series of strong policies to encourage fertility as soon as possible.
The core of these policies is a variety of cash subsidies, tax subsidies, mortgage subsidies, etc., as well as the introduction of various supporting child-friendly policies, such as the construction of nurseries, equal maternity leave for men and women, opening up foreign nannies, assisted reproduction, equal treatment of single-parent families, encouraging mixed work and other related policies.
It would take about 2%-5% of GDP to provide maternity benefits to have a significant effect. This is slightly higher than that of the Nordic countries, which have been more successful in encouraging childbearing, spending 1%-3% of GDP on encouraging childbearing.
France and Sweden both spend 3-4% of GDP to encourage fertility, and their fertility rates are also 1.8 to 1.9, close to replacement level. In contrast, in southern European countries, fertility encouragement is generally only 1-2% of GDP, and fertility rates are generally below 1.5. In recent years, Germany has stepped up its efforts to encourage childbearing, which was originally low, and the fertility rate has also increased.
Some people say that Japan has always encouraged childbearing, but the fertility rate is still very low. In fact, if we take the developed countries of Europe as a reference, the efforts of East Asian countries, including Japan, to encourage childbirth are still relatively low, and the expenditure on encouraging childbirth generally accounts for only 1%-2% of GDP.
Is it true that Japan's encouragement of fertility is ineffective? We should ask, how low will the fertility rate be if Japan does not encourage childbearing? It will most likely be much lower than it is now. Thanks to its measures to encourage childbearing, at least Japan's fertility rate is relatively high among East Asian countries and regions. South Korea's fertility rate has fallen below 1 because the cost of raising children is higher than in Japan and the cost of education is higher than in Japan, and the encouragement of childbearing is not as strong as in Japan.
China needs to introduce policies that encourage fertility more strongly than other countries. Of course, there is also the most difficult education reform, and only by reshaping the existing college entrance examination and high school entrance examination systems can the ultra-low fertility rate be reversed.
These policy reforms are very difficult and require the consensus of the whole society to be implemented.
At the micro level, the specific direction of innovation is unpredictable; At the macro level, a country's innovation power stems from the exchange of ideas among its innovators.
The so-called innovator may be a scientist in a related field, a manufacturer of key components, or an in-depth user. Communicating with these innovators is the source of innovative ideas, so a country's ability to innovate depends on the size of its population, its capacity, and the amount of internal and external communication.
Population capacity refers to the average individual abilities of the population, which includes talent, education, experience, energy, communication ability, and risk-taking ability. The volume of internal and external exchanges refers to the smoothness of domestic and foreign exchanges, covering various forms of exchange such as information, commodities, and capital. A metaphor is that human society is like a brain, people are like neurons, the more neurons (as if there are more people), the more active neurons (as if the individual is more capable), and the more connections between neurons (as if internal and external communication is smooth), the more developed the brain will be.
It is expressed in the formula: innovation = population × population capacity × (internal communication volume + external communication volume)
The four variables of population size, population capacity, internal communication volume and external exchange volume correspond to the scale effect, aging effect, agglomeration effect and flow effect, respectively.
Population size and scale effects
For high-tech or cultural and creative industries, the scale effect is becoming more and more significant because the fixed investment in R&D and innovation is its main cost. For example, at Ctrip.com, 5,000 software engineers can be employed, compared to 1/10 of the Chinese market in Japan, so a similar Japanese company can only employ a few hundred engineers.
It has been argued that with the further development of globalization, even a small country will have access to the global market. This view is true to a certain extent, as today's shipping costs and trade barriers are low, and companies from a small country can export standardized manufactured products all over the world.
However, in the increasingly important field of information services such as the Internet and artificial intelligence, the advantage of the size of the population of a large country is still irreplaceable. This is because the first-mover advantage in this industry is very critical. Once one company gets a large number of customers first, creating a network effect, it will be difficult for other companies to catch up.
In an industry where network effects play a huge role, the winners will be those that can be the first to cross the "critical mass" of customer size. For example, if 10 million customers represent a "threshold," the penetration required to reach that threshold would be about 3% in the U.S. market, which has a population of 300 million people. For Japan, with a total population of only 100 million people, the necessary penetration rate is 10%. In China, the rate is less than 1%.
So, if you compare when an innovation reaches a tipping point, the U.S. market will typically be faster than the Japanese market. After the U.S. Internet companies such as Google, Apple, Facebook, Amazon, and Yikexing successfully reached a critical value in the domestic market, they quickly expanded to other countries and successfully occupied the world market. In the Internet industry, the timing of the start is often enough to distinguish the winners from the losers.
This first-mover advantage is also reflected in the data advantage, especially in industries such as artificial intelligence and robotics, where user data becomes an element of training algorithms, and the more user data, the better the algorithm. Clearly, U.S. and Chinese companies, which have a large number of domestic users, have an easier head start.
Population capacity and ageing effects
Low fertility not only leads to a decrease in the size of the population, but also inevitably leads to an aging of the age structure of the population. Gifted entrepreneurs are generally the most creative in their 30s.
If a country has a large number of young people in their 30s with higher education, then it will increase innovation, especially disruptive innovation. Conversely, if a country is rapidly aging, there will be fewer potential young inventors and entrepreneurs.
There is also a blocking effect in an aging society, that is, the elderly affect the vitality of the young. The probability that an employee will be offered a senior position depends on the age structure of the workforce in the relevant field. If there are a large number of employees in their forties and fifties in the company, it is unlikely that younger employees will be given more managerial responsibilities because senior positions are already occupied by older employees.
As a result, in an aging country, not only is there a smaller number of young people, but it is also difficult for young people to start a business because their development is hindered by a larger number of older people.
Japan is a prime example of a negative example, where the number of start-ups has declined rapidly in recent decades in line with an aging demographic. None of Japan's top 10 high-tech companies were founded within the last 40 years.
As a result of the blocking effect, when the workforce becomes older, younger employees are promoted at a slower rate. When the age structure shows an inverted pyramid shape with more seniors and fewer young people, employees have to wait longer to be promoted to senior positions, and they cannot get the necessary training and accumulation to become entrepreneurs at a young age.
Internal communication and agglomeration effects
In manufacturing, the agglomeration effect is the result of the proximity of related firms to each other. The agglomeration effect of high-tech industries is the result of the gathering of innovative talents. When creative people come together, this effect can create a chemical reaction.
In Silicon Valley at night, restaurants and cafes are filled with engineers in casual attire discussing the next technological breakthrough and entrepreneurial opportunity. With the addresses of countless high-tech companies in such close proximity, it's easy for people to move between different companies.
In Silicon Valley businesses, there is a lot of employee mobility. If an engineer has a creative idea but can't get the company's financial backing, he can take the idea to another company and even start a new company on his own with the support of venture capital.
In addition, big cities can not only better match talents with enterprises, but also provide opportunities for more talents with different disciplinary backgrounds to work together. In recent years, technological innovations in the Internet and software fields often require multidisciplinary cooperation, which further enhances the advantages of large cities.
China's innovation also comes mainly from first- and second-tier cities. The Chinese population is among the largest in the world and should be the most populous city in the world, so although China's population is no longer growing, there may be room for the population of large cities to grow. The government should actively expand the capacity of large cities, stabilize housing prices in large cities, so that more young people can live and work in big cities, give full play to the agglomeration effect, and enhance innovation.
Opening up to the outside world and the effect of mobility
The fundamental reason for the irreplaceability of international exchanges is that no matter how big a country is, it is still small compared to the world. No matter how much the domestic population is, it is still much smaller than the world population. And the products, goods, and ideas from afar are often more diverse or inspiring. For example, when Christopher Columbus discovered the New World, new species not only improved agriculture, but also gave rise to naturalism and evolution, as well as astronomy and physics. Therefore, even in a country with a large population, it is important to learn from the world with an open and humble attitude.
China is the world's largest trading country and has a high degree of openness to investment, but there is still room for improvement in opening up the flow of information and people.
The national innovation model can also be extended to the enterprise level. For example, the innovation ability of an enterprise depends on the quantity and quality of R&D personnel, and under other similar conditions, the more R&D investment, the stronger the innovation.
The purpose of innovation is not contradictory to the pursuit of profits, because emphasizing innovation is conducive to improving long-term profits.
Another implication of innovation is that there is no homogeneous price competition. When considering whether to enter a new market, it should not only be based on the profit margins of that market, but also on the ability to seize opportunities for innovation, i.e., to do something better than existing competitors.
In addition to the number and ability of talents, the innovation ability of enterprises also depends on external and internal communication.
Since enterprises are much smaller than countries, internal communication is about creating scientific methods and decision-making methods, an environment for learning and sharing, and a culture of equality and openness.
External exchanges include peer exchanges and upstream and downstream exchanges. The behavior of external communication is largely determined by the organizational structure of the enterprise.
An important dimension of the analysis of the organization is centralization and decentralization. From an innovation perspective, if the industry as a whole is facing rapid change, there are a lot of opportunities for innovation. In this case, decentralization is more advantageous, because it can mobilize the initiative of various business units and seize innovation opportunities more quickly. On the contrary, if there are not many opportunities for innovation in the industry, then centralization is more conducive to reducing costs and increasing efficiency.
The intensity of external communication also depends on the company's procurement strategy. In general, the more open the procurement and cooperation strategy, the more conducive it is to external communication. In some companies, all parts are mainly completed by fixed long-term suppliers or holding subsidiaries, achieving so-called "vertical integration". This reduces a lot of communication costs and seems to be more efficient in the short term. But if there are many opportunities for innovation in an industry, this model can easily lead to sluggishness.
Conversely, if you adopt an open sourcing strategy, i.e., you have many suppliers to compete, then you will be more flexible. The trade-off for this is that when there are many vendors, the cost of connection and communication is higher.
For individuals, the division of labor in today's society is becoming more and more detailed, but innovation relies more on cross-border cooperation. Epiphanies of innovation often occur when knowledge from different disciplines merges with each other. This requires us to expand the depth and breadth of our knowledge as much as possible, and to be proficient in the use of statistics and computer tools.
What we really need to learn are the basic theories, models and tools to understand the world. For applied or detailed skills, you can skip them or wait until you need them. Therefore, in basic education and even at the undergraduate level, it is necessary to spend more time learning instrumental and theoretical knowledge, and extensively cover the basic knowledge of different fields, rather than receiving professional subject education too early.
Innovation is hard and takes a long time. Many people's attempts at innovation may end in failure, so the values of innovation will not automatically become mainstream in society. But whether the attempt at innovation succeeds or not, it will ultimately benefit the whole society. As mentioned above, only by recognizing the values of innovation can more social resources be invested in innovation.
In the same way, in modern society, the cost of raising children is mainly borne by families, but the innovation of children's future mainly contributes to society. Considering the huge cost of raising a child, fertility culture does not automatically become the mainstream of society. As a result, fertility rates in almost all rich countries are well below replacement level.
Procreation is a personal choice, and everyone's choice should be respected. However, I believe that if a society can provide a friendly environment for childbearing, and create a social, cultural and public opinion atmosphere that encourages childbearing, then such a social environment can still influence and change individual choices.
In short, there is a mismatch of interests between innovation and reproduction, and there are contradictions between current and long-term interests, personal interests and social interests, and between the interests of the present generation and the interests of future generations. While most people recognize the long-term mission of innovation and legacy, it will be difficult to do so.
It is only when many people have reached a new social consensus, that is, after innovation and inheritance are regarded as the mission of civilization and the meaning of life, that it will be possible to promote the necessary reforms in public policy. Contemporary societies are much richer than they were a few decades ago, and they are well positioned to devote enough resources to support innovation and fertility. What is really lacking at present is the general recognition of the values of innovation in the whole society.
On the scale of the universe, human life is very short, and the earth is very small, but as long as we continue to innovate and inherit, we can realize infinite expansive and interesting possibilities.