Innovation Key to Curbing China's Involution

3 hours ago7 min read2 comments

The relentless grind of 'involution'—that intense, zero-sum competition where everyone works harder just to stay in place—is a challenge David Siegel, the sharp-minded co-founder of hedge fund Two Sigma, believes can be tackled head-on with a heavy dose of innovation. Speaking last week at the third Family Business Summit in Hong Kong, Siegel pinpointed the core of the issue, observing that the sectors feeling the most heat, from the electric vehicle arena to the frantic world of food delivery, are often those where products have become somewhat commoditized.When everyone is essentially selling the same thing, the only lever left to pull is price, leading to brutal margin wars that benefit no one in the long run. This isn't just an academic observation; it's a daily reality for countless businesses and workers in China, where the pressure to out-hustle the competition has become a defining feature of the economic landscape.But what if the way out isn't working harder within the same old boxes, but building entirely new ones? Siegel's argument echoes a fundamental principle of smart investing and entrepreneurial strategy, one I often discuss in the context of personal finance and side hustles: true wealth and sustainable growth aren't found in crowded markets, but in creating unique value. Think about it like this.If you're trying to get ahead financially, competing for the same generic job or starting another me-too business is the equivalent of joining a price war; your earnings potential hits a ceiling fast. The most successful individuals and companies, much like Warren Buffett's value investing philosophy, seek a 'moat'—a durable competitive advantage.For China, and indeed for any economy facing similar pressures, that moat is forged in the fires of genuine innovation. This means moving beyond simply making a cheaper EV battery and toward developing a battery with twice the range and half the charging time.It means reimagining food delivery not as a race to the bottom on delivery fees, but through AI-driven logistics that slash costs while improving service, or through subscription models that build customer loyalty. The capital and the talent are there; the key is channeling them away from red oceans and into blue ones.This shift requires a cultural and financial ecosystem that rewards risk-taking in deep tech and foundational research, not just rapid iteration on existing models. It's the difference between playing a better game of checkers and inventing the game of chess.For the aspiring entrepreneur or the established family business, the lesson is clear: stop competing and start creating. The path to curbing involution is the same path to building a resilient and truly prosperous enterprise—by innovating your way to a market where you are the only one playing.

#featured

#China

#involution

#innovation

#economic competition

#EV market

#Two Sigma

#David Siegel

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