Understanding the smile curve and stepping out of the cognitive valley of blockchain – Meng Yan

Ten years ago, around this time in 2013, “Internet thinking” was all the rage in China. I haven’t studied the history of this phenomenon in depth, but my impression is that the launch of the video column “Logic Thinking” at the end of 2012 and the simultaneous explosion of Xiaomi phones played an important role in promoting “Internet thinking.” Although the Chinese people began to go online in the late 1990s, it was the success of mobile Internet and the popularity of “Internet thinking” that established a universal faith in the value of the Internet.

The flip side of the popularity of “Internet thinking” was frustration and discouragement. Many people should still remember Jack Ma’s famous “can’t see, can’t respect, can’t understand, can’t catch up” stinging critique. In fact, the success of the Internet was a promise made in advance that was fulfilled. As early as the late 1990s, people predicted the Internet revolution, vividly describing the blueprint for the digital economy of the Internet, and economists like Van Lian created network economics. During the .COM bubble, application scenarios such as Internet search, social networking, e-commerce, media, gaming, and streaming video were all proposed. The direction was already pointed out to you, the principles were also explained clearly, and the olive branch was extended countless times, but it just took more than ten years to fulfill the promise. Most people still fell short, which can be imagined to be very bitter.

I am one of those who fell short. In the late 1990s, I read a lot of books and articles on the Internet and the digital economy, and I believed early on that the Internet would change the world and that the digital economy was the greatest opportunity for my generation. As early as 2001, I entered the smart mobile device industry to develop Pocket PC, so I had unique learning and practical conditions for the technology and trends of mobile Internet. It can be said that my starting point was very high, but later I completely missed the Internet and mobile Internet. What happened in between?

I have carefully reflected on this issue and found that I have followed a “smile curve” in my understanding of the Internet. Specifically, when I was still in school, because I had no practical experience, my mind was mainly filled with book and theoretical knowledge. But looking back afterwards, although my understanding of the Internet during this period was still in the clouds and fragmented, because it came directly from front-line thinkers’ first-hand thinking, it was actually closer to the essence and had a higher starting point. It was with my deepening involvement in the industry and increasing practical experience that my understanding deviated and declined, and I entered a long canyon. It was precisely in this cognitive canyon that I began to doubt the Internet business model, became numb to the progress of technology and business, and turned a blind eye to my friends’ olive branches time and time again. By the time the Internet was completely successful, my cognition had been restored and I had missed the era dividend of the Internet.

Based on my observation, the phenomenon of the “cognitive smile curve” is very common. Most people’s views on new things follow a three-stage rule, starting with thinking it is one way, then realizing in the middle that it is not that way, and finally looking back and realizing it is that way after all. When analyzing the theory purely, although it is a conversation between scholars, it is more in line with the essence and endgame due to the direct viewpoints and materials from the forefront field. When starting to practice, it is found that there are many difficulties, which will lead to serious doubts, and combined with the so-called experts who give you convincing explanations for why this and that does not work during the industry slump period, it is easy to be misled and go negative. When the conditions are ripe and the great work is completed, when I look back, I realize that it was right at the beginning, and it was the middle stage that was covered by clouds.

Take me as an example, for my understanding of the Internet, the main twists and turns occurred during the most difficult period of the Internet after the dot-com bubble burst. The halo of the Internet company collapsed, the stock price became a fairy, and we young people who once eagerly anticipated the success of the Internet revolution needed to explain. At this time, some experts and media came on stage and explained why the Internet did not work, which made me start to doubt the prospects of the Internet from a theoretical perspective.

The three negative views that had the greatest impact on me at the time were:

First, the Internet does not have a healthy business model, and after all the fuss, it is not known how to make money, except for selling ads or going gray, which seems far from a monarch.

Second, e-commerce is not in line with China’s national conditions. The moral level of Chinese society is low, fraud is rampant, and it is impossible to establish the credit system required for e-commerce.

Third, the Internet can only be a supplement and tool for the real economy, and cannot establish a new economic order and industrial form.

These three views are not only theoretically self-consistent and substantive, but also seriously in line with my experience at the time. For example, at that time, CSDN made a technical book e-commerce website, and the person in charge was my friend, so I had the opportunity to observe a e-commerce website up close, from scratch, slowly taking shape, and then gradually declining for various reasons, almost the entire process of returning to the dust, which allowed me to see that there were really many seemingly unsolvable problems hidden in the details. For example, at that time, it was popular to pay in cash and pay on delivery. After the deliveryman delivered the goods, he took the paper money back to the courier company, and then the courier company settled with the e-commerce website. It is not an exaggeration to say that at that time, there were incidents every week where deliverymen disappeared after collecting money, or even courier companies disappeared after pocketing money and goods. We really couldn’t see how to solve it at that time. Who could have thought that less than ten years later, Chinese people can already buy food, medicine, and financial products with peace of mind through online payments.

In short, the canyon of the “smiling curve” gave me a serious deviation in my understanding of the Internet, and I repeatedly rejected opportunities to join the Internet industry. Everyone knows what happened later. With the rise of the Internet and the rise of “Internet thinking”, my understanding of the Internet gradually moved to the rising section on the right side of the “smiling curve”, but by this time, I had completely missed the opportunity.

Looking back on this experience and thinking, my purpose is not archaeology, but because I feel that the development model of the Internet seems to have been put on the rhyme by blockchain today. The blockchain industry is also in a difficult situation today, and the public’s understanding of the blockchain has also reached the low point of this smiling curve. When many people first started to contact and learn about blockchain, they thought it was quite clear. Isn’t it about eliminating account friction through shared ledgers, enforcing automatic law through smart contracts, and incentivizing collaborative behavior through token economics? But after several ups and downs, together with the experts’ condemnation, various difficulties and dangers in the real world, everyone gradually became confused and felt that it was not the case. This is the current situation.

My persistence in blockchain, in a sense, is to make up for the regret of missing the Internet. The underlying value logic of blockchain is incredibly clear and solid in my opinion, and it has been tested in practice a long time ago, and the problems that hinder its success have been identified and are being solved one by one. The success of blockchain is only a matter of time, and its success will bring paradigm shifts to the global digital economy. So I have no reason not to stick to this direction, and I believe that it will not take long to see the light, and what needs to be done now is to persist and cross the valley of the cognitive smile curve.

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