Divergence

Recent success of many Chinese companies worth our attentions: Oppo and Vivo gaining top 3 positions in the market, Momo tripling its revenue in the latest quarter, and Netease seeing strong momentum in their mobile games businesses. From them, we identify one key success factor behind: the support from people living in second or third-tier cities and rural areas in China. They may be the workers in factories or construction sites; they are becoming wealthier and probably looking for new possibilities of consumption and entertainment. They rarely caught the mainstream attention, but they are the silent majority of China. It’s the people who are buying Oppo and Vivo phones, paying for credits in mobile games, and sending virtual gifts to live video streaming hosts. It’s this group of people who are not even understood by analysts, investors, traders, and many other elite groups in the society that contributed to the rapidly growing revenues of companies.

We are witnessing an increased divergence between the understanding from “elites” and the reality of the society. Lack of information and our own cognitive bias prevent us from knowing the real situations and making right decisions. Blindly relying on our own values and judgements will only leave us in our comfort zone; the demand, habits and preferences of the majority can be surprisingly different from our expectations.

From this trend, there are always lessons to learn: We should always be open and humble in understanding the world. We shall never base our conclusions solely on our guts or feelings; rather, we rely on comprehensive data and facts to make informed decisions. We should also never underestimate the power of the ordinary. They represent huge underserved markets in China. Understanding the changes in trend and taste from their perspective can offer us valuable insights on the next great opportunity.

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