Use economic principles to understand how to make money today

By Boss Gu, rewritten in English by Mr. Y

Today, I'll use economic principles to discuss my understanding of business trends, or, to put it more simply, how to make money quickly in today's economy.

I often encountered many projects in the market, and many business owners asked me about effective marketing strategies, business development, and how to increase traffic. Many also ask me about starting a business. To answer these questions clearly, we must first understand the major business trends in the world today.

Those familiar with economics know that there's a concept in economics called "roundabout production".

What is roundabout production? It refers to a production method where capital goods (tools that enhance the efficiency of producing consumer goods) are produced first, followed by the production of consumer goods.

In simple terms, producing fishing nets is an example of producing capital goods, while fishing is an example of producing consumer goods. We can now enjoy such a wide variety of affordable fish because we have abundant fishing equipment, such as offshore fishing vessels.

The more developed a society's economy is, the more businesses tend to be involved in the production of capital goods. Many people probably remember what China's production model was like during the early stages of China’s Reform and Opening Up: the 3 supplies and 1 compensation trade: "processing with supplied materials", "processing according to supplied samples", "assembly with supplied parts", and "Compensation trade".

It mainly involved producing consumer goods like clothing and toys, with all raw materials and components sourced from abroad, and only the assembly done domestically. At that time, most factories directly produced consumer goods and lacked the capacity to produce capital goods.

The story of China producing hundreds of millions of shirts to trade for a single Boeing aircraft is well-known to many Chinese. Manufacturing consumer goods is considered low added-value business, while Boeing aircraft, being capital goods, represents high added-value business. Similarly, many ASEAN countries, such as Vietnam, primarily engage in contract manufacturing, sourcing raw materials and components from China and then assembling them in their countries.

The production of capital goods and consumer goods are very different. Consumer goods production typically requires a small investment. For example, a clothing factory only needs a building, workers, and some basic equipment to operate; these are generally considered labor-intensive businesses.

However, the production of capital goods, such as raw materials for clothing, requires large chemical companies. Such factories involve huge investments and have long payback periods; they are often called capital-intensive businesses.

When we talk about capitalism in general, we can also understand it as a system that allows for continuous investment in the production of capital goods.

But where does this capital come from? It comes from savings - people save money for consumption and then invest it in more valuable, long-term projects. If everyone spends all their money as soon as they receive it, that's not capitalism; what kind of system is that? You know what it is. The People's Commune was an example of such a system.

The higher the savings rate for businesses and individuals in a region, the higher the proportion of capital in that region. Which one has a higher savings rate, China, Europe or the United States? You can look it up yourself😊.

Capital goods are an important part of our daily lives. For example, my computer is a tool I use to write articles; it's a capital good that increases everyone's productivity. Our smartphones are also capital goods. You can’t use your mobile phone for eating directly, as there’s nothing on it, but you can use it for work and entertainment. Our cars are also capital goods. Transportation isn't just for consumption; it's also for work or other purposes. All means of transportation are tools for efficiency, and therefore, capital goods.

You have a smartphone, a car, and a computer; this sets you apart from someone living in a remote African village. Your production is more efficient, so you can have a higher income, while Africans have far fewer efficiency tools than you do, so their income is not as good as yours. If you analyze the Chinese business market from the perspective of consumer goods and capital goods, you'll find that in the past twenty years, China has seen a massive growth in companies producing capital goods.

This is the key to China's growing prosperity.

Using capital resources to improve efficiency is key to entrepreneurial success.

Whether in the manufacturing industry or the Internet industry, giants producing capital goods have prospered in China. They are key enterprises that drive efficiency improvements across society. Especially in the Internet industry, China is as developed as that of many developed countries. In some areas, such as e-commerce, express delivery, transportation, food delivery, short video, etc., China is even stronger than many developed countries. These are all world-class industries. And the core of these industries lies in the production of capital goods.

Alibaba, Temu and Amazon, in essence, provide an e-commerce system that facilitates efficient transactions between sellers and buyers; this system is an asset for both parties.

Uber and Didi are also software systems that help taxi drivers improve their efficiency in getting orders, eliminating the need for them to cruise around the streets like taxis did in the past.

Meituan and DoorDash offer a comprehensive system for food delivery, enabling restaurants to easily find customers and have orders delivered by a network of delivery riders. This allows restaurants to avoid hiring full-time delivery staff, as they can access delivery services on demand - another example of an efficiency-enhancing tool.

These companies typically have very long investment cycles. Didi is still in a deficit, while its total investment has reached tens of billions of dollars. These companies always believe that they need more money, because there's always room for improvement in efficiency.

Why has our standard of living improved? Because capital has been invested in tools that enhance productivity.

If you understand this trend, you can start thinking about the direction of your own entrepreneurship. If you're a small business and you don't use Amazon, Taobao, TikTok, or YouTube, what does that mean? It means you haven't connected with these highly efficient productivity tools, and you're missing out on significant opportunities.

Many people say that e-commerce is a trend, and it will be too late if you don’t join it now. But it's not that simple. The correct understanding is that if you don't use these efficiency tools, built with billions of dollars, you will inevitably fall behind and won't be able to keep up with the competition.

Any small restaurant that refuses platforms like Meituan, Doordash or Europe's Glovo is committing suicide. The platform clearly has an efficient revenue-increasing system and delivery system in place and has already attracted a large number of potential customers.

If you, as the owner of the restaurant, don't use it, aren't you crazy? This system has cost billions of dollars to develop, yet you only need to pay a small commission to access it.

And paying a commission is something every business owner loves to do. For example, if I have a product to sell, costing 100 and selling for 300, what's the maximum commission I'd be willing to pay someone to sell it for me? I'd be willing to pay up to 199.

Because I don't incur any costs, every additional sale you make means an extra dollar in my income; without that sale, I wouldn't earn even a single dollar.

If platforms like Amazon and Alibaba still require businesses to invest in advertising and search engine optimization (SEO), then platforms like TikTok offer an even more powerful tool. Essentially, you only need to focus on production, while TikTok handles all the sales and marketing for you - it's like starting a business where you outsource all your sales and marketing staff to TikTok.

TikTok achieves all this through its AI algorithms and short-video platform. As long as your content is recognized as high-quality by TikTok's AI system, TikTok will continuously push it to users. A good content creator can become an overnight sensation; they can gain millions of followers on their first day on TikTok.

TikTok also established an advertising platform to help anchors receive advertisements. This means that a talented content creator, with some effort, can even earn money on TikTok without needing a team. Because the tools provided by TikTok are so complete and efficient. For content creators, not using TikTok is a waste of resources.

I've always said that TikTok will be a world-class company because its AI-powered content recommendation system is the most powerful in the world, unbeatable. It's a platform for content creators, and content needs are diverse; showcasing good products can also meet people's content needs. TikTok is still in its growth phase, and its future will be much stronger than it is now.

After talking about tiktok, do you understand what I want to say? For any personal business venture, you must find the best tools to enhance your efficiency.

I've used TikTok, and on that platform, you basically don't need to promote your content; good content naturally attracts traffic.

This is also my first time using a WeChat Official Account (WeChat Public Platform) for personal content creation; and WeChat Official Accounts require promotion.

In the early stages, my WeChat Official account grew mainly thanks to my friends in an economics group who shared my posts daily. Now, I rely on cross-promotion with other accounts anchors to keep growing my following.

This is where WeChat Official Accounts fall short compared to TikTok: it doensn’t enable creators to focus solely on creating content; it requires time and effort for promotion. But even with these challenges, I've discovered business opportunities. I started writing for my WeChat account purely for fun, and after a few months, I started earning income; advertisers contacted me. The income isn't huge, and it is several tens of thousands of RMB per month.

I'm very sensitive to business opportunities, especiallyOfif since I've started earning some income. I began researching the WeChat Official Account industry and discovered that many people in this field don't even need writing skills; they can earn tens of thousands, even hundreds of thousands of RMB per month simply by reposting others’ content. Those who entered this industry early can even earn millions of RMB annually. I'm currently studying this field in detail, focusing on its operational system, business logic and monetization system.

Understanding the rules and logic of these platforms is key to understanding how to leverage capital goods effectively.

Training on how to use various business tools and platforms is a huge market itself.

For example, training on how to grow a Youtube channel, how to manage a TikTok account, or how to run a WeChat official account. I have friends who specialize in training for live streaming, and their monthly income from training alone can reach over one million RMB.

Good business tools are easier to sell than consumer products because they can directly generate income. For instance, if I had the time to create a WeChat official account training course, teaching beginners how to earn over 10,000 RMB a month within six months, would such a product sell well? Of course, it would, because the potential income for the customer is clear and direct.

If you don't possess any special skills or expertise, relying solely on your own abilities to open a store, find customers, distribute flyers, and provide customer service will greatly reduce your chances of success, simply because your efficiency is low.

How can you possibly run a small store with the best graphic designer, the best salesperson, and the best advertising strategist? You can't. Therefore, your efficiency is low, and your output is limited.

Taobao is working on improving this, but their AI technology isn't yet sophisticated enough to perfectly match different products with individual customer needs.

What would an ideal Taobao AI system look like? It would be one where you wouldn't need to boost sales or rankings; your products would automatically find their most suitable customers. If your product is of high quality, even on your first day on Taobao, you could achieve millions in daily sales.

Of course, achieving this level of efficiency is very difficult, as Taobao would need to invest heavily in AI technology, customer profiling, product quality assessment, and customer feedback analysis.

Many factories are now starting to transform their sales models. Traditionally, factories either focused on contract manufacturing or relied on distributors to sell their products. Now, they are directly selling their products on various online platforms.

For example, with the rise of community group purchasing and social media group purchasing, these platforms handle all the marketing and promotion, leaving the factory to focus solely on product quality and logistics. The factory can concentrate on management and quality control; as long as the product is good, there's no need to worry about sales, this is an efficient division of labor.

Therefore, these large producers of capital goods serve the entire society. They allow individuals to focus on their areas of expertise, rather than forcing everyone to become jack-of-all-trades.

Studying the rules and mechanisms of different capital goods platforms is the best starting point for aspiring entrepreneurs. If you are a newcomer to the workforce, choose a platform and study it thoroughly; you will become a core talent for your company. If you are a college student, you can start experimenting with these platforms, familiarize yourself with the rules, and try to generate income.

Some people said it's just a website; they were completely wrong. To enable food delivery riders to achieve the highest delivery efficiency, Meituan or DoorDash likely needed to organize thousands of programmers and field staff to work tirelessly for several years, making food delivery a viable profession. Without this sophisticated system, a delivery rider might only earn a few dollars a day, and the job wouldn't exist. Meituan has created a profession through software, and a decent profession at that.

I've seen women delivering food with their children; I don't know their stories, but I do know that an ordinary woman can register on her phone and immediately become an income earner - that's a truly remarkable achievement.

The first wave of delivery workers, with the support of these tech giants, were able to rent buildings, establish delivery stations, and some even earned millions annually. Now, the transfer fee for a Meituan delivery station can easily reach several hundred thousand to a million RMB. Those jobs, once considered low status, have become lucrative thanks to their contribution to increased efficiency.

And speaking of those who oppose the free market: Didi or Uber drivers essentially "employed" Didi or Uber; Didi is merely a sales platform for the drivers. Similarly, Meituan or DoorDash delivery riders and restaurant owners "employed" Meituan or DoorDash; Meituan is simply a tool for them to improve efficiency and increase their income. To view drivers, riders, and restaurant owners as victims exploited by Didi/Uber and Meituan/DoorDash demonstrates a complete lack of understanding of business.

Next, let me talk about another industry: pre-prepared meals.

What are pre-prepared meals? They are meals that are already cooked; you just need to heat them up, and they're ready to serve on the table or deliver to customers.

This is also a capital-intensive industry, serving the restaurant and food delivery sectors. Pre-prepared meals can be made safely and healthily. The pre-prepared meal market in Japan is highly developed.

What does this mean? You don't need to buy ingredients or hire chefs to run a restaurant, and it's incredibly efficient - you can easily handle three thousand food delivery orders at lunchtime.

Although this industry is just starting out, many takeout restaurants have already started to get involved. These takeout restaurants serve everything from breakfast to supper, but they don't have any professional chefs, only ordinary staff. This is because the food is pre-prepared and only needs to be heated. Combined with a platform like Meituan's delivery system, this significantly boosts efficiency. Imagine a food service operation that can run 24/7 - that's unparalleled efficiency!

China's B2C e-commerce sector is already quite developed and is now moving towards incorporating AI, but another area, B2B e-commerce, is still in its early stages of development. The concept of B2B e-commerce isn't simply about connecting businesses for online purchasing; rather, it involves larger businesses providing higher-quality goods and services to smaller businesses, allowing the latter to focus on the areas they are best at, thereby achieving an overall improvement in efficiency.

You'll see that JD.com and Taobao are both expanding into offline small grocery stores, empowering them with technology. While progress may be slow and there's a possibility of failure, ultimately, one of these giants will succeed in this sector, providing comprehensive logistics and product selection services quickly and efficiently, even enabling each retailer to use AI to select the right products to stock, thus improving efficiency and profitability.

You will see that large capital-intensive businesses continue to grow, attracting the best talent from across society. Meanwhile, smaller businesses will become more agile and efficient, rapidly increasing their profitability. Taobao is a giant platform, supporting millions of small businesses. Similarly, the TikTok global platform may serve tens of millions of content creators. The majority of these companies' profits will be reinvested to continuously improve efficiency and enhance their capabilities.

This means that the easiest and most successful way to start a business in the future will be to collaborate with these giants.

If these companies aren't large enough, it means they lack the financial resources for investment. For example, imagine if Amazon couldn't invest in Amazon Web Services (AWS). AWS is a capital-intensive product that provides IT infrastructure for businesses, helping them grow and benefiting all entrepreneurs and consumers. Similarly, Microsoft is a dominant player; its Windows and Office products are essentially productivity tools and capital assets that save businesses and individuals significant costs and time.

Think about how much Google and ChatGPT have improved your efficiency and saved your time.

The future is an era where large corporations and small innovative businesses coexist. If you don't have the potential to become a giant, strive to become a partner and leverage the resources of these giants - this is the best path for most startups.

You can follow the lead of these giants and offer small, yet valuable capital goods to the market, such as developing a simple mobile app for displaying presentation notes, or using WeChat mini-programs to develop a more fun Hongbao system. Countless people have made a fortune by collaborating with these giants on their platforms.

Of course, you also have to hope that public sentiment against big corporations doesn't destroy them. A business environment without the support of large corporations is a sign of insufficient capital, low efficiency, and a marketplace where everyone's income is low - don't expect any major opportunities for making big money.

Source & Copyright Notice

This article is adapted and translated from the Chinese original with the author’s permission. Translation © 2025 Mr. Y. All translation rights reserved.

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