At the time of writing (mid 2026), PDD has a market cap of about $110-120 B. I was buying it aggressively. I wrote this primarily for myself: to crystallize the thought and to produce an artifact I can come back to and revisit.

Here’s my thought:

The mainland domestic e-commerce business is established in China. The platform is largely about everyday essentials and groceries. That means a reliable and recurrent stream of income. Given the current valuation of a $140 B market cap, a $60 B cash position, and $15 B in free cash flow, that is about a 5x multiple. A good investment decision shall require no spreadsheet. This one does not violate that - which is cool.

The company operates on a unique philosophy. The founder called it reverse insurance. The poor cannot bear a lot of uncertainty in life, so they buy insurance. The rich know that statistically the math will work out; the uncertainty in aggregate becomes quite certain. Given enough margin of safety (premiums), they are sure to make money. And that is the insurance business.

Pinduoduo operates on the reverse. The rich (the factory) hate uncertainty (how much to produce, what the demand will look like). The poor (we, the consumers) can sell our certainty (a promise to buy). Pinduoduo aggregates this certainty; the factory buys it as a form of discount given to consumers. Both sides win. Pinduoduo makes a little bit of money.

What Pinduoduo is doing, and will do more of, I argue, can only be done in China. The expansive supply chain network in China is underappreciated. China pretty much has a “city of X” for every X. The economy of that city is that X business. Think about the city of “eyewear glasses”, “toys”, etc. A sophisticated supply chain network allows fast and flexible responses to demand. It is a different world when you have to source, and sourcing takes 1 week vs 3 months.

The next phase of Pinduoduo is interesting, and it is the main reason I joined the journey. It is: what if PDD aggregates global demand for all these Chinese factories? Previously they experimented with Temu, and it seems like selling everything from every factory is too hard to pull off. They are pivoting to private label - think of it like Costco’s Kirkland brand, a lower number of SKUs. They are reasonable to rule out food and electronics. We will see how they pull this off.

Still, even if the new initiative goes bust, Pinduoduo, by the valuation of its current established business, is something of good value. Probably not going to make a filthy-rich amount of money in that case. But at least it won’t go to zero.

The company’s founding team (particularly the founder) has very favorable characters. If you come from the Berkshire school, you can recognize lots of these qualities. I think this one should do it: success is not a matter of earning personal trophies; its highest form is when the rewards are shared.

As recently as 2026, I’m surprised (or delighted, I should say) that the company NEVER mentions the word A.I. in their earnings calls. There was a trace of the phrase “intelligent technologies” mentioned (a subsidiary established). That shows the company deliberately avoids hype - and the appearance of associating itself with it (looks like they follow Ben Franklin). The founding team are computer science graduates. The CEO is a Ph.D. who still mentions his publication of an ACM paper on the web. These people know what’s going on - for sure. I guess this is one of the things I pick up on how to be a judge of characters. Let’s see if I’m good at that.