Zoho CEO Sridhar Vembu has kinda same warning for China as, Elon Musk had for Singapore, Japan and South Korea. Elon Musk has often warned about declining populations in several Asian countries, including Japan, Singapore and South Korea. Elon Musk even went on to say that Singapore is particularly at risk due to its falling birth rate and is almost on the verge of extinction. In a warning post some time back, Elon Musk wrote, “Singapore will go extinct in some time.” Elon Musk has expressed similar concern about South Korea and Japan.
Zoho CEO Vembu in a post on Twitter said that the ‘996’ culture strogly getting popular in China simply mean ever sinking birth rates. “As Prof Pettis explains, the Chinese private sector suffers from “neijuan” – extreme predatory competition driven by and driving over-investment. Lacking domestic income to consume their production, they are driven to seek export markets just to keep their operations alive. This is unwise – the “produce and export at all costs” and the “996” culture simply mean ever sinking birth rates,” wrote Vembu.
In another post, Vembu made a similar observation about San Fancisco. He wrote, how he did not see children playing in parks in and around SF bay area. “I visited the SF bay area this week, staying near the Apple HQ, an area of beautiful multi-million dollar homes, well maintained parks – but hardly any young children roaming the wide open residential streets (hardly any traffic) or playing in the parks. It felt empty, particularly going from my Tenkasi village,” wrote Vembu.
What Zoho CEO Sridhar Vembu wrote on China
As Prof Pettis explains, the Chinese private sector suffers from “neijuan” – extreme predatory competition driven by and driving over-investment. Lacking domestic income to consume their production, they are driven to seek export markets just to keep their operations alive. This is unwise – the “produce and export at all costs” and the “996” culture simply mean ever sinking birth rates.
Japan suffered from this same problem in the 1980s and 90s. What appeared to the outside world as “Japanese brands everywhere” really was about “too many companies, funded with cheap loans, desperately fighting it out in the global market”.
In one sense Japan never really recovered, their companies lost their drive as their workforce aged (decades of ultra low birth rates do that to you) and then Korea/China took over from them. Japan achieved “Karoshi” – death due to overwork – on a civilizational scale.
As an aside, we have seen that in silicon valley too – for example in Saas business and now in AI. Unlike in Japan and China, where bank and government backed loans dominated the investment, in silicon valley it was VC and PE. Over-investment leads to too many companies chasing too few customers. Marketing spending goes through the roof and there is no real profit (you do get “profit when we don’t count the expenses we push to shareholders” stuff).
Globalization of the past 40 years has been driven by infinitely stretchable balance sheets at every level but the imbalances have reached such an extreme that they can no longer be ignored. These trade wars didn’t happen out of the blue.
What is the alternative?
We have to embrace economic balance – production and consumption balanced regionally, which means production balanced by real income to consume the production regionally.
We have to question the entire premise of this era of massive imbalances-led globalization. We need fresh thinking.