Temu: The Rise of China’s Worst Tech Giant

fucking Johnny come Late doesn't care about football fans. Real fans know that if you look at every fourth quarter of every fucking Chiefs game before Taylor Shift got involved, it looks exactly the same. All right, this is been It could happen here. We may or may not cut that.

like fucking pussy woke libs. And it's just like, like, imagine being that racist for that long only to be immediately tossed aside.

like two weeks now writing this, so you know. So it has the absolutely dogshit tagline shop like a Billionaire.

So but I'm just gonna call it so. The the company, the parent company for both Temu and Pinda Doua, changed their name to PDD, so I'm just gonna call it that.

very beginning is this guy named Colin Huang. Huang is a weird guy. I don't know, he's he's he's he's the Chinese version of the American tech bro. So he's you know, he's he's a recognizable like asshole who started a giant company, but he's not zactly the same. So he he So he graduates from like college and China and in the early two thousands he goes to the University of Wisconsin to get a master's degree in computer science, which it like it should be illegal for anyone to

get degrees in computer science. Uh, terrible stuff, zero out of time. I should know how to use computers.

a very very influential Chinese tech tech billionaire. He gets every single article calls him the Warren Buffett of China. I don't fucking know, but like, you know, for like foreacta, like how big this guy is. Like Vivo and like the one plus company of the mixed phones those are both

like spin offs of like things that he built. But yeah, so you know, so this is this is an interesting relationship for Huang because and it's also interesting because like the narrative around Huang and PDDs that they're like these like hungry upstarts like clunging their way up from nothing, and they can like go after Ali Baba and the Chinese like tech market wars because they're like they're ferocious,

they have like nothing to lose. I'm like they're rich and fat Alibaba and like nah, Like this guy has had the backing of like a bunch of really powerful Chinese tech guys, like from the absolute beginning. Another part of like the Huang lore is that Duan like took him to this really famous dinner where Warren Buffett was offering if if you donated like six hundred and twenty thousand dollars to charity, he would like eat dinner with you and like talk with you about like finance stuff.

And so Dwan like buys this thing to go to dinner with Warren Buffett and brings Huang with him, and he Huang who's who's Huang's the founder of PDD Again, so he gives him credit for like this this like financial wisdom that he got here. Here's just from an interview with Side Jim. This is a Chinese outlet. What Buffett said is actually very simple and can be understood by my mother. Perhaps what this meal meant most to me was that I realized the power of simplicity and

common sense. Human thoughts are easily polluted. When you make a judgment on something, you need to understand the backgrounds and facts after understanding it. What you need is not wisdom, but whether you have the courage to use reason when facing facts, use common sense to judge. Common Sense is obvious and easy to understand, but our various biases and personal interests form due to growth and learning blind us.

So this is like entrepreneurial bullshit. But you know this is apparently this is like a big formative like things like ah, he like got the wisdom of word Buffett and he listened to it. It's just like what. There's the thing I think is more interesting is that he talks about what in the same interview what Dwan taught him. Swan also taught me a common sense thing. In business,

price fluctuates around value. The price will definitely fluctuate, but as long as your value increases, the final price will be close to the value. This common sense allows you to focus on increasing the intrinsic value of the company and not be overly concerned about price fluctuations in the capital market. And this, to me is fascinating because the first half of that is like orthodox Marxist price theory,

like in like in Marxist price theory. Right, The whole thing about it is that price is determined by value. The value of a commodity is determined by like the number of the amount of labor hour is socially necessary to produce it, and eventually, like price sort of like fluctuate, the price can change. It's not price isn't like identical to like socially necessarily like labor time, but it like

fluctuates around it. And so that's like the first part of it, which is the Marxist thing, except this is like China, like modern like twenty twenties China. So Marx's value theory has been degraded to like make your company valuable and don't worry about stock prices and market fluctuations. It will work out in the end.

a bunch of these jobs. So he's he's like a computer science graduate, right, and he's being headhunted by like a bunch of the sort of like mainstream tech companies at the time, like Oracle, Microsoft, and they're giving they want to give him like an enormous amount of money, but his mentors like, no, no, no, don't take this tech job. Take the Silicon Valley tech job. Joined Google. And so he joins Google, and this is this is

another like very famous thing. It's like, ah, he wanted to join the like up and coming, hungry tech startup. But here's the thing. So Google. He joins Google in two thousand and four, which is kind of early, but Google also goes public that year, so you know, this is up working really well for him because he gets a bunch of stock options that those stock options are

worth millions of dollars. That's a lot of Also some of the startup capital for like the later companies he founds comes from that, and Huang really quickly like works his way up the ranks. But he so he gets put in charge of like launching Google in China, and this is a fiasco, does not work at all. Huong blames like too much oversight from people at the senior leadership at Google, which I can get, but I mean

it just doesn't work at all. Like he starts as at two thousand and six, by twenty ten, Google has pulled out of trying to entirely like they're not they're not trying to push the fucking search edge because nobody uses it. So okay, Having having like unbelievably bombed out of his first tech job, he he does the like entrepreneur thing. He starts like a couple of these like shopping like online shopping companies. They do like fine, and he sells them, but they don't like do incredible and

so okay. So this is the part that a lot of the accounts of him leave out, like the sort of like fawning accounts leave out. Is the next thing that he does, which is he sets up this like really shitty game studio and they make like a bunch of like absolutely unbelievably weird and horny mobile games. So they make like Mafia City, Joy Spade, Texas, Hold'm Poker.

They have this game called Girl ex Battle that is like you you assemble a harem of girlfriends and then have them fight other people stuff Like absolutely.

Except that okay, so that's the reasonable way to explain it. But like, the thing he actually did was like why are Okay, his thought his actual thought process was why are we not selling game? Games are all like advertised in men, right, like these the apps that he's making are like weird, horny stuff for guys. Why are we

not making games with women? Which is reasonable, But then his follow up was U, effectively women be shopping, and he was like, so trying it will make a shopping thing it's just like, we'll make we'll make we'll make an app to make shopping into a game. And so one of the things he's he's also been doing one of the like the kind of like search engine optimization scams, where like he just keeps making different shopping like shopping websites and hoping that one of them will like climb

in the search rankings. But eventually he hits on a like a combination of using the like dog shit like addictive mobile gamification stuff from his mobile games in a like in an online shopping app, and he hits on that as the idea for a new shopping app. And this is what turns into PDD. Now do you know what didn't turn into PDD and is in fact better Hopefully these ads that are.

something I talked about. God, I don't know how many years ago this was now, but like a while back I did an episode about this company that poisons like three hundred thousand babies by making poisoned milk in China, and one of the things, though that was a Bastard's episode. Of the things I talked about in that episode was

how the Chinese agricultural market is incredibly fragmented. We don't have time to do a full history of rural decollectivization here, but the upshot of it is that it results in a lot of farmers working really small plots of land who are forced to sell their goods to a series

of middlemen who make the actual profits. And because these farmers have like a tiny amount of land and grow stuff on or they have like two cows, right, they don't have the financial leverage to negotiate with like the middleman. The middle bank can just set prices on them. And the product of this is you have a really really fragmented market where there's just like all of these like unbelievably large numbers of these really small sellers and part of and you know, and and and this and this,

this locks all of these people into the middlemen. The middle man can set the prices. The middlemen set the prices incredibly low, and they're locked in because they don't have another distribution method because the only thing they can do is sell to these like agricultural middleman companies. The companies like above them, like your grocery companies are like actual milk company who packages the milk. They love this stuff because it means that they don't have to like

pay the farmers. They can just buy like the goods directly. They don't have to deal with like employment stuff, and they don't have to deal with quality control too, because they can pass that on to the middlemen. Now, something else we talked about in our anti work Lying Flat episodes like three years ago, is that China has these like far like rural influencers. That was it was like a huge wave of these people that sort of like emerge.

You might actually have seen you've seen the videos of just like someone in rural China like cutting wood or something.

they're doing is okay. So you you know, you have your regular influencer who's trying to sell you like the image of rural life, right, and then you have the farmer influencers who are trying to sell you the image of rural life and also their potatoes. And this is this is like the marketing strategy. This is this is this is this is how you can skip the middlemen and like actually sell your fruit is by becoming an influencer. Which it's so cursed. It's so cursed. I hate it so much.

They have an enormous amount of tex startup money. If we use that tech startup money to give them rebates, we can do things that like you know, we can not charge them commission, right, And if we can do this, we can turn around and sell these fruits for like zero dollars a zero dollars is this l like exaggeration, but when I like, they're selling these fruits for an are unbelievably cheap, Like we are talking ten mangos for

a dollar and thirty nine cents, which is like a steal, outrageous, right, And you know this is this is incredibly successful. What they're doing basically is a giant version of the Amazon gambit. Right, they're eating shit and taking losses to sell all of this stuff, although they're losing less money than you'd think, like the actual price of these goods is already so low, and we're gonna come back to that too, because that that's an aspect of what's so messed up about this

whole thing. But you know, so they eat shit, it takes some losses, but they really really quickly build market share. So this is a very very short smart strategy because it's not just in the sort of real market. China has a shit ton of like small and medium sized producers that make a whole bunch of things, or like guy with one factory person doing like craft production stuff.

And pdd's plan is to pull together all of these sellers like this, this whole all all of these people from different markets into just one giant, like one giant like market that they control now importantly unlike Amazon, And this is unlike ali Baba too, because Ali Baba works on a fairly similar model to well, okay, in a lot of ways, is a similar model to Amazon. It's identical, but Unlike those two companies, PDD doesn't run their own

logistics network. It's all it's all third party. Like the shipping and all that shit is done by is done through third party logistics stuff. So like their shipping companies, they don't own warehouses like that stuff, you know, what they're What they do instead is they use the shipping companies and warehouses that were developed in like the earlier parts of the Chinese tech boom, and they're able to just use that infrastructure to you know, to to ship

all their stuff around. And this means that the company is extremely lean in the sense that like they don't have a lot of physical assets like they know, and this means they don't have to deal with labor costs or like the logistics problems of actually having to like you know, of actually having employees packing boxes and making things.

They're just an app. It's it's it's well, they're they're like the original model of Uber in some sense, right where like you don't like Uber doesn't fucking own or wasn't supposed to be owning cars. I mean, I guess Uber's a bad example because they were trying to do

the automated car thing. But that was a fiasco. But you know, the thing that PDD makes is just an app, but it's it's an incredibly addictive app, like it's it's it's a shopping gotcha game, which is like maybe the worst sentence in the history of the human language.

kind of pushed back on some some of that. We're still not all of it, but like there was definitely some some degree of like, oh, well, we are simply not going to be buying all of these games if it's just full of micro micro transaction bullshit. And then Fortnite took over and we're back and how again, but whatever.

now because it hurt their gaming market so much. They're like, well, shit, okay, we have to we need those yeah, like that's the only way to make money. Yeah. But you know, but PDDs like brilliant. They're sort of like the the the absolutely evil shit that they realized is like, we can just we can just do this for shopping. And so like the moment you log in, right, there's like these flash deals, and there's these group deals, and this is the thing that the group deals are, the thing that

that PDD is based around. So the way it works is you get these group deals, and so you get a link and you send it to people, and the more people click on the link to buy the thing, the cheaper it becomes. So and then you send the links over we chat, which is the curve of like catch all Chinese messenger or like social media app that

everyone uses to like talk to their boomer parents. And so the thing that your boomer parents are doing is they're sending these shopping links to each other, and you know, and the the the more like the more people click

on these links, the cheaper the good becomes. So when the more people are buying it, the more people you rope into buying stuff from this app, the cheaper it is, and the more deals you get you get things like they'll just like give you like quote unquote free money if you spend enough money, basically like in the same way that like micro transaction works right, where it's like, you know, in a game, it's like if you play the x number of games, will give you like in

game currency, whereas this is just like will literally give you money. We're like send things to you.

tactics they use are absolutely wild. They get in trouble in twenty twenty one for this promotion called Bargain for Free Goods, where you'd get a link and the claim was that if enough people clicked it, you would get the good for free, and so this guy tried to do it, but he could can only get it two point nine percent of the cost. So we sued them for false advertising, and the claim got thrown out, but the company had to pay him like money, So like

this is the kind of shit that they're doing. Rechat actually like blocked their links for a while because, you know, because like some enormous portion of messages suddenly we're just like these people sending these spam links to like every single person they know, trying to get them to buy like a fucking toothbrush so that your toothbrushes can be cheaper. Right, But eventually we Chat kind of like you know, WeChat gives up and they start like allying more with PDD.

I mean, there's a whole there's a whole complicated story I'm not going to get into here about like the like China's really really ferocious like tech company wars because like in the US, you know, like our tech monopolies are relatively stable, right, Like they've sort of portioned up the Internet into and like distribution and stuff into just

like basically like local monopolies. Right, Like like Google is like the only search engine company there's there's basically no competition there, right, Like there's some competition in terms of social media, but even then it's like and it's not like the Chinese version words like unbelievably ferocious competition and sometimes they cooperate, but yeah, you know, it's it's really fierce.

And PDD. You know the thing that they do, right is they pair this app stuff with direct to consumer sales, and PDT is really the pioneers of this. She In and okay, so i I she In is that fucking fast fashioned clothing company. I learned today that it is actually pronounced she In because the name of the thing is she In, like s a she she and then she's like she's in. Yeah, I hate it so much. I'm so sad. I I mean, I feel slightly better because,

like I kept trying to read it in Chinese. It's like this doesn't make any sense, Like it's just baffling. It doesn't and it's like, oh no, it's because it's in English. Yeah, but PDD is the precursor of Shean's like strategy, right, like they're they're the originators of this, except they're you know, they're what they're doing basically, it's

it's a fact. It's kind of like drop shipping. But you know, the sales are being pushed by these these sort of gamified app stuff, and this means that they have this like real time supply management system that tells producers like like they can like they go down and like tell their sellers like what to produce more of

based on like app sales. So you know the way it works is you start off with a small it's like a small number of things, and then you get ads to push that those like fucking toothbrushes or whatever. And then as like sales ramp up, you ramp up productions. You can ship people more toothbrushes. Now do you know who else will ship you toothbrushes that will probably be better quality than the PDD tooth pressure. No, we can.

dollars a month. Like that's like on a good month, right, they're making seven hundred dollars a month, which is that's eight four hundred dollars a year, and that's that's that's if you have twelve good months, right, if you have normal months, it's more like six thousand dollars a year, and so you know, and when when when when you're in a place where people are using stuff like this, And again that's someone who like has a job full time, is making like six thousand dollars a year, and so

people use PDD to shop because it's incredibly cheap and it's also addictive. And when I say cheap, like we're talking like two dollars for a pair of genes cheap, right, and like that's that's also like cheap and you on too. It's like unbelievably low prices.

get to that. We'll get to that next episode. The main cost of the stuff being cheap is that the stuff they buy like sucks ass like literally literally this only the CEO talks about is that their gambit is that, Okay, we'll ship you ten mangos for for like a dollar thirty nine. Two of them will be rotten, but that means you still get eight mangos.

to the line. So but here's here, here's what. Here's they They've done a lot of they because the most of the PDD coverage came from before their people got run out, so quote following the IPO, a number of purchase series is allegedly bought from PDD. We're shared online, including a hair dryer that broke out in flames after it was switched on and a part bake.

So I think this actually could be a good thing if used correctly, where we where we purposely sabotage every like fourth person who buys anything online.

we supposed to control who makes counterfeit stuff? But this is this is actually like it gets to a kind of like cultural thing where you know, what is one of the things that happens in world trying This happens in a lot of places where like almost everyone is wearing like clothes that are like knockoff brand stuff because it's just the cheapest clothes and like that's that's the kind of clothes that's being made that you can afford if you're you know, like you're you're trying to sort

of make it like in World China, so you get like, you know, you have like entire villages where you walk in and everyone's wearing like like niaky and like a dietis or something like it's like nice. This stuff gets really wild, really fast. So here's from that that sedging interview with Colin Huang. Again, so here's here's a catching.

It's a Chinese media outlet, so they're their interviewer. One of the best selling products on PDD is a bottle of affidisi at priced at twenty seven point eighty on that is like three almost four dollars, with a total of four point seven million orders sold. Do you think this medicine might be real? Here's the CEO. First of all, medicines are healthcare products sold on pdd's platform must have national certification marks. Secondly, the gross profit margin of healthcare

products is already extremely high. Just like facial mass. Do you think the two hundred yond facial max is useful? So again, again, what is happening here is that like they have sold like one point four point seven million orders of of like a fake afrodisiac, And when the CEO is asked about his response, it's like, well, but who could really say if any health products work?

shit and it really sucks. But on their hand, none of the constant bad press like stop pdd's rise, right, and now it is time to leave Colin Huang behind soil. Until about phil twenty twenty, pdd's rise was synonymous with

its CEO, Colin Huang. But in mid twenty twenty, Huang resigned as the CEO and kind of like exited public life effectively, like not entirely, we kind of like he like took he like he resigned as CEO, and then twenty twenty one he resigns as like a chairman of the board and he's like, you know, he's doing this like philanthropic stuff instead, and he's you know, he's doing his like post CEO life thing, right, And we've never gotten a good answer as to why he stepped down.

But I have a theory, and I think my theory's pretty good. And also it goes into have I Garrison, have I explained to you the thing about I don't remember if I've done it on this show, I talked about the Chinese payday loan app thing.

What effectively happens is at around like twenty fourteen twenty fifteen, a bunch of Chinese tech companies, especially like delivery companies like sort of like China's version of grub, Public Door, Dash and Ali Baba, they're like Amazon equivalent gets in it too, and these people realize that they can start their own payment platforms. So basically like all these companies

are making their own version of PayPal. But then they realize that they can use these platforms to give out payday loans, so that you can in one app take out a paid a loan to order delivery, or you can in one app take out a payday loan to buyshit from Amazon with the payday loan. Ten Cent gets in on it, so you can buy Mitro transactions with your payday loans. This, as you might expect, Spiral's out

of control. Immediately on. The interest rates on these loans are enormous, and this means that they make an unbelievable amount of money, and so apps just start like shoveling these loans in people's faces the momently long onto apps. But the thing is, like this doesn't stop with just like the big shopping apps right by twenty nineteen. It's not just you know, like when I say this is going to apps right like you're fucking Like imagine if Twitter was trying to offer you payd A loans.

But the thing is the other thing that he really loves is the number of hours that you can get people to work in China that you can't really in the US, So we'll get to that fucking next episode. But you know, okay, so like like your your fucking Twitter is trying to see you paid a apps. But then it gets the point where your fucking flashlight app is trying to sell you, trying to get you to take out payday loans, like your like photo app, like every fucking app on your phone is trying to sell

you pay loans. That sounds incredibly at this and this is one of these things, right that like, okay, like as bad as like American apps are, right, like it is as bad as like the version of capitalism that we have in the American app ecosystem, Like the wildest shit is always going on in the Chinese tech market, which is like even more insane than the American tech market. And this is the thing, like we don't actually have this here, and I've I've been trying to figure out

why it never happened here. I think it has to do it partially with banking regulation and partially with like the fact that like the actual American payd A loan companies don't want other companies to like cut in on

their business. So I think that's what's happening, but like in China, it's literally like and this is happening in like like like twenty nineteen, twenty twenty, twenty twenty one, that this stuff is happening, so you know, and it's an all and this this gets I mean, it turns into just a fucking nightmare because you know, obviously, like this turns into this giant wave of people who got it in over their heads and can't pay their loans back because they took out a payday loan with thirty

percent interest. And also, and this is one of the fun things, companies just straight up lie about their interest rates. Like there's a lot of examples of the companies saying we have a nine percent interest rate, and then you know, in the contract it says nine percent interest rate, and then when they try to get you to pay it back, it's like thirty percents, right, Like this is like you know, and sometimes they're they're even they're you know, you're getting

up to like one hundred two hundre percent interest. Like he's like organized crime levels of interest. And you know, like Alli, like the tech giants are all into it, Ali Baba isn't quite as big into it. As like some of the other companies, but like they're doing it, like they absolutely are doing the payday loan shit. And I mentioned Alibaba here because in late twenty twenty, Jack mob who's the founder of Alli Baba, just like disappears.

He's just gone for like several months, nobody, nobody knows where he is, and then he reappears in like twenty twenty one, but he's not doing tech ceo stuff anymore. He's doing like weird public education tours and like rural China.

And this causes like a huge, a huge like kind of thing in the American press because what they're reading it as, and they're kind of right, is that there's this in twenty twenty one, there's this enormous raft of financial regulations on tech companies, and this GUS interpreted is like a crackdown on chech companies, Like the CCP is trying to bring the tech giants in line, like they

disappear Jackmaw and you know, one of them. This is something something that a story that gets lost in this in the American press is that like one of the big things they're trying to do is stop is stop all of these fucking companies, I'm turning their apps to THEO ped alone factories. And you know, like I'm I'm not like a CCP fan, Like it is well known.

Like it's like my dislike of the CCP is so large that like a non insignificant number of people in the US think I work for the CIA, right, But like this is like those fucking companies they were like they were like like on the edge of completely annihilating the Chinese economy. They were very they got very very close to just like reducing like enormous swaths of the entire Chinese population and to like peer at based debt pionage.

It was a fucking disaster. And this is part this is a big part of why this like tech crackdown came in because the CCP was like, holy shit, if you guys do this, like you're actually going to like like you're you're gonna you're gonna fucking nuke the Chinese economy, Like we cannot allow every single fucking app to be a paid a loan like service and things. I mean, it's still not great now, but it things have gotten a lot less bad in the in the pay a

loan like thing since then. But you know again, like it it. It had to get bad enough that your flashlight were trying to get your take out of payd a loan for the CCP to actually like go after their like tech giant darlings. And I think what happened is that I I think what happened is that Colin Huang like saw which way the wind was blowing and he was like, Okay, there's gonna be a giant crackdown now now two wits credit. This is the only time

I will give PDD credit for anything. PDD actually didn't do the payday loan shit, I think because Colin Huang was just like was like smart enough to be like, this is a fucking terrible idea. Like if we try to get our like rural customer base hooked on payday loans, all these people are gonna just be completely broke in

like nine months. So PDD doesn't do it. But he takes this moment like he picks twenty like July twenty twenty, which is like a couple months before Jack modest speers, and he just fucking nopes and he's like I'm out and yeah, like things, you know, and he picked a good time and this meant that, like, you know, he never really faced any consequences for you know, he wasn't

really caught up in the crackdown. He got out fine, and you know, he he picked, he picked the time to do it, and pdd's future in America was still ahead of it. But when the Chinese media began to uncover the dark side of PDD in twenty twenty one, Colin Kwang was nowhere to be found. And that is what we're covering tomorrow. We haven't even gotten to the bad stuff yet.