Crossing the Cognitive Chasm: A Self-Narrative of an Entrepreneur Riding the Internet Wave

Author: Meng Yan

Ten years ago, around this time in 2013, "Internet thinking" was all the rage in China. I haven't studied the ins and outs of this matter seriously, but I recall that the launch of the video program "Logic Thinking" at the end of 2012, along with the explosion of Xiaomi phones around the same time, played an important role in the widespread popularity of "Internet thinking." Although the general public in China began to go online in the late 1990s, the establishment of a universal belief in the value of the Internet came after the mobile Internet's great success and the emergence of "Internet thinking" as a prominent field of study.

Another side of the explosive popularity of "Internet thinking" is frustration and disappointment. Many people should still remember Jack Ma's famous remarks about "invisible, undervalued, incomprehensible, and too late." In fact, the success of the Internet is a fulfillment of a promise made in advance. As early as the late 1990s, people predicted the Internet revolution and clearly outlined the blueprint for the digital economy, with economists like Van Reenan creating network economics.

During the dot-com bubble, applications such as Internet search, social networking, e-commerce, media, gaming, and streaming video were all proposed. The direction had already been pointed out, the reasoning was clear, and countless olive branches were extended; it just took over a decade to fulfill the promise. However, most people still missed the boat, and one can imagine how bitter that must feel.

I am one of those who missed the boat. I read a lot about the Internet and digital economy in the late 1990s and firmly believed that the Internet would change the world, thinking that the digital economy was the greatest opportunity for my generation. I entered the smart mobile device industry in 2001 to engage in Pocket PC development, which gave me excellent conditions for learning and practicing mobile Internet technologies and trends. One could say I had a very high starting point, but later I completely missed the Internet and mobile Internet. What happened in between?

I have carefully reflected on this issue and found that my understanding of the Internet followed a "smile curve." Specifically, while I was still in school, I had not engaged in practical experience, and my understanding was mainly based on books and theoretical knowledge. However, looking back, although my understanding of the Internet during this period was somewhat superficial and haphazard, it was relatively close to the essence due to the first principles thinking directly from frontier thinkers, giving me a higher starting point.

As I became more deeply involved in the industry and gained more practical experience, my understanding actually deviated and declined, entering a long valley. It was in this valley of understanding that I began to doubt the Internet's business models, became numb to the progress of technology and commerce, and turned a blind eye to the olive branches my friends extended time and again. By the time the Internet was fully successful and my understanding was elevated again, it was too late, and I had completely missed the era's dividends.

From my observation, the phenomenon of the "cognitive smile curve" is very common. Most people's views on new things follow a three-stage pattern: initially thinking it is one way, then feeling it is not that way in the middle, and finally looking back and realizing it is indeed that way. When starting with pure theoretical analysis, although it is empty, the viewpoints and materials come directly from thinkers in the frontier field, making it relatively close to the essence and the endgame, providing a higher level of understanding.

Once practical engagement begins, difficulties arise, leading to serious doubts. Coupled with the low points in the industry where so-called experts provide elaborate explanations of why this won't work and that won't work, it is easy to be led astray and move towards negativity. By the time conditions mature and success is achieved, one looks back and realizes that the initial understanding was correct, but it was obscured by clouds in the middle stage.

Take my understanding of the Internet as an example; the main twists and turns occurred after the dot-com bubble burst during the Internet's most difficult period. The halo of Internet companies faded, stock prices plummeted, and we young people who had eagerly anticipated the success of the Internet revolution needed explanations. At this time, some experts and media emerged, explaining why the Internet wouldn't work in a penetrating and convincing manner, leading me to begin doubting the Internet's prospects theoretically.

Three negative viewpoints had the greatest impact on me at that time.

First, the Internet lacks a healthy business model; after all the efforts, no one knows how to make money, apart from selling ads or engaging in gray markets, which seems unworthy.

Second, e-commerce does not fit 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 serve as a supplement and tool for the real economy, and cannot establish a new economic order or industrial form.

These three viewpoints are not only theoretically coherent and substantial but also align closely with my experiences at the time. For example, CSDN had a technical book e-commerce website, and the person in charge was my friend, so I had the opportunity to closely observe the almost complete process of an e-commerce website starting from scratch, facing numerous challenges, slowly taking shape, and then gradually declining for various reasons, ultimately returning to dust. This allowed me to see that many seemingly unsolvable problems were indeed hidden within the details.

For instance, at that time, cash payment and cash on delivery were prevalent. Couriers would deliver goods and return with cash to the courier company, which would then settle with the e-commerce website. It is not an exaggeration to say that every week, there were cases of couriers disappearing after collecting money, or even courier companies vanishing after taking money and goods. We really couldn't see a solution at that time. Who would have thought that less than ten years later, Chinese people could confidently purchase food, medicine, and financial products through online payments?

In summary, this "smile curve" valley led to a serious deviation in my understanding of the Internet, causing me to decline multiple opportunities to join the Internet industry. What happened afterward is well known. My understanding of the Internet gradually moved to the rising segment on the right side of the "smile curve" with the great success of the Internet and the rise of "Internet thinking," but by then, I had completely missed the opportunity.

Reflecting on this experience and thought process, my purpose is certainly not to engage in archaeology, but because I feel that the development model of the Internet seems to be echoed today by blockchain. The blockchain industry is also in a difficult phase today, and the public's understanding of blockchain has reached the low valley area of this smile curve. Many people, when they first started to engage with and learn about blockchain, had a clear understanding of the principles: eliminating reconciliation friction through shared ledgers, enforcing contracts automatically through smart contracts, and incentivizing collaborative behavior through token economies. However, after several ups and downs, coupled with the criticisms from experts and various difficulties in the real world, people gradually became confused and felt it was not that way anymore. This is the current state.

My persistence in blockchain, in a sense, is to make up for the regret of missing the Internet. The underlying value logic of blockchain, in my view, is incredibly clear and solid, and has long been validated by practice. The issues hindering its success have also been identified and are being addressed one by one. The success of blockchain is merely a matter of time, and its success will bring a paradigm shift to the global digital economy. Therefore, I have no reason not to persist in this direction, and I believe that it won't be long before we see the light of dawn. What needs to be done now is to persist and traverse this valley area of the cognitive smile curve.