James Liang on Lessons From Building From Trip.Com & Fighting Demographic Collapse
My Interview with The Executive Chairman of Trip.com
James Liang is the co-founder and executive chairman of Trip.com Group, the online travel company he helped launch in 1999 as Ctrip and built into one of the world's largest travel platforms, listed on Nasdaq and operating in more than forty countries.
A gifted student who entered Fudan University at fifteen before taking a master's in computer science at the Georgia Institute of Technology, he served as Trip.com's chief executive from 2000 to 2006, and then made an unusual move: he stepped back at the height of the company's success to pursue a PhD in economics at Stanford.
This move made him one of Asia’s most prominent voices on demography and innovation. Now a research professor of economics at Peking University’s Guanghua School of Management and a co-founder of the Yuwa Population Research Institute, Liang has published in journals including Nature and The Quarterly Journal of Economics, and has written widely on population, education, and entrepreneurship. His books include The Demographics of Innovation and, most recently, Innovationism: A New Philosophy for the Age of AI.
This conversation matters because Liang makes the case that population and youth are the true drivers of the innovation race — that ageing societies risk surrendering their dynamism and, ultimately, their control over AI.
Keith 00:00:53
Today I have the incredible privilege and pleasure of speaking with one of Asia’s finest entrepreneurs.
He founded Trip.com and is its current chairman. He has written a fascinating new book called Innovationism: A New Philosophy for the Age of AI, in which he explores what it takes for countries to raise their fertility rates and unlock the next engine of economic growth. With that, please welcome Professor James Liang.
James Liang 00:01:25
Thank you for the kind introduction. It’s a pleasure to be here.
Keith 00:01:29
James, I want to start in the 1990s, when you were thinking about starting Trip.com. What were those early conversations like when you were toying with the idea of starting your own company?
James Liang 00:01:43
That was an exciting time, because the internet was really changing everything — first in the US, and then it began to have a huge impact on the Chinese economy. But the Chinese economy was quite different from the US, because it was still developing very fast and lacked some of the infrastructure, like payment and logistics. We took that into consideration when we chose to build an online travel business, because travel was the one e-commerce subsector most likely to work around infrastructure problems such as payment and logistics bottlenecks.
Keith 00:02:21
Why is that? It isn’t obvious to me why going into travel lets you overcome those bottlenecks. What’s the insight there?
James Liang 00:02:31
Traditionally, if you buy something over the internet, you need logistics — delivery — and you need online payment, like a credit card. If you already have credit card infrastructure, it’s very easy to put that online. That’s what the US did. But in China there weren’t many credit cards at all.
With travel, you don’t need that. You can work around it. If you book a hotel, you can pay at the hotel and collect the commission from the hotel. Nothing needs to be delivered. Air tickets were a bit harder, because you still had to deliver a physical ticket — there were no e-tickets yet. But the e-ticket was coming; within two or three years it became widespread in China too. With an e-ticket, you don’t need delivery either. You still need payment, which is a bit harder than for hotels. But overall, travel was much easier to transact in China with the existing infrastructure.
Keith 00:03:41
When people think of the first wave of tech entrepreneurs in China, they think of founders like yourself, alongside legends like Jack Ma and perhaps Lei Jun. Many of you were the entrepreneurs who really carved the way for China’s technological development and dominance. But when we take ourselves back to the 1990s and early 2000s, what was the picture like? Were people actually supportive of someone like you going out to start a company, or were they much more risk-averse then?
James Liang 00:04:13
This was the first big wave of entrepreneurship — the first PC internet revolution. Even in the US there was a big push for entrepreneurship, a much bigger wave than before the internet. Later it was called a bubble. It was crazy — so much money, so much VC activity in the stock market, and so much talent going into the industry. It was a bubble, but at the end of it you had created hugely successful companies like Amazon.
The same thing happened in China. There were a lot of VCs and a lot of young people going into different internet sectors. For online travel alone, I can name five or six similar competitors who also got VC funding. It was an exciting time — the first taste of success for young entrepreneurs in their twenties.
Keith 00:05:24
In Kai-Fu Lee’s book, he talks about the idea of the gladiator economy — that competition in China is like gladiators fighting for survival, and there is no shame in copying. It’s normal to copy. Whenever a good feature comes out, the next day you see all your competitors doing the same thing. As you’ve mentioned, Trip.com had many competitors then. What was the unique insight that separated you from the rest, who didn’t survive?
James Liang 00:06:01
For UI features — if your product is mostly UI-oriented, like a messaging system or a social media platform — yes, competitors copy each other fiercely. But for the travel business, the critical success factor is service. Service means how good your own service people are, and how well connected you are to your suppliers’ service systems, like the hotels and the airlines. That’s not something you can copy easily, because the trust is built up over time with your employees and your suppliers. The connections, how responsive they are, how you manage their response time and service level — that takes a long time to build.
So from the very beginning, we valued customer experience, and we put our resources behind providing the best service. For example, our phones are picked up within about 15 seconds, because we have a lot of service staff. First, you need good IT call-centre software; then you need a lot of good service people, well managed. That takes a long time to build. Today we have about 30,000 call-centre agents around the world. We quickly became one of the largest call centres — not just in the travel industry, but in almost any industry. Later, traditional companies like the airlines and the banks started to emulate us: they wanted to provide Ctrip-level service to their customers. So we really pioneered providing the best service, and that’s not easily copyable.
Keith 00:07:59
That’s interesting, because when people think about how technology companies differentiate themselves, most think about the technology or the UI/UX. Very few attribute it to customer service. I recently listened to an interview your CEO, Jane Sun, did on DBS CEO Tan Su Shan’s podcast. She talked about how, during COVID, Trip.com refunded all the merchants and all the payments made on the platform, and actually secured a loan just to do that. That speaks to the level of service quality you’ve had since day one.
James Liang 00:08:42
Yes, that has been the logic of our value creation as a company.
Keith 00:08:49
What drove you to that insight — that you should be obsessed with customer service quality — when others were focusing on something else?
James Liang 00:09:03
I look at it from an economic perspective. The value of time is about efficiency. When we started, we focused on travellers who were relatively high-income, whose time is more valuable. Your service agents are relatively lower-paid, and with the help of the system you’re effectively trading their less-expensive time to save the more-expensive time of your customers. That’s why we valued service: we’d go the extra mile to save our valuable customers a bit of time.
That positioning has stayed with us. We always wanted to take care of the high-end customer; compared with our competitors, we’ve always been at the high end of the market. As more and more people moved up economically and became good travellers, even without lowering our price, more people entered that segment. That’s been our growth story — we focus on high-end customers, and they’re the ones who value service.
Keith 00:10:35
Trip.com listed on Nasdaq in 2003, just four years after founding, and it was profitable within three years. It’s interesting, because when we look at Singaporean companies at a similar stage, we’re often told that once you hit a certain ceiling — Singapore’s a small market — you internationalise. China is almost the opposite: you have a billion people, so the incentive is to stay in the home market and dominate there. But Trip.com had this internationalisation aspect very early on, which wasn’t common in those days. Very few tech companies were doing that as aggressively as you were. What drove the insight that Ctrip had to be bigger than being China’s best travel service provider?
James Liang 00:11:28
We started our globalisation effort about fifteen years ago. For the first ten years, we mostly focused on China. Of course, I was absent for a number of years pursuing my PhD as a second career. When I came back around 2012 — about fifteen years ago — the first priority was to catch up with our competitors in leveraging the mobile internet revolution. So the biggest priority was mobile.
After we dominated the mobile space, the next big question was whether to move into other sectors — travel-adjacent but not travel, like food delivery, or ride-hailing like Uber. That was one option. The other option was to stay focused on travel and expand internationally. That’s very natural, too, because Chinese people are going abroad. Not many foreigners come to China, but within Asia there was an opportunity to expand, because Asians travel to the same kinds of hotels and resorts as Chinese travellers.
So we could go global rather than diversify. A lot of my friends at other companies wanted to diversify — food delivery, e-commerce, becoming a conglomerate, a one-stop super-app for everything. But we thought travel is one industry that is critical to being a global company, because people travel around the world. As they get wealthier, they have more money and more inspiration to travel. And the global travel industry shares the same supply chain, inventory, flights, and hotels. So I think we made the right strategic decision: to go global rather than to diversify within China.
Keith 00:13:36
You made a very interesting point — that you stepped back as CEO in 2006 after seven years, by which point Trip.com was quite dominant and already profitable. That’s an unusual thing to do. Today, in the age of AI, you see a lot of PhDs going into entrepreneurship, but you don’t see many entrepreneurs going off to do a PhD. You took the second route, which is very uncommon by historical standards — you’re one of the few. Talk me through that process. Why, when you could have gone further with the business, did you step back to do a PhD?
James Liang 00:14:19
Partly because I was very young. I went to college at fifteen — I was in a young genius programme — so I finished college at about twenty, my master’s at twenty-one, and got my first job. I felt I had the appetite for a bit more schooling. The other reason is that I came from a technical background, but as I became CEO I grew more interested in the humanities — psychology, how the economy runs, the mechanisms of government, and so on. I wanted to learn social science, and I explored a variety of subjects. It ended up being economics. That was a fascinating period; I was really excited about learning new things.
Fortunately, I was still young — in my thirties — so I was able to get into a top PhD programme. Stanford’s programme usually takes people in their twenties; occasionally people in their thirties, but almost never people in their forties, because you have to get through the qualifying exams, the maths, a very tough programme. Fortunately I was thirty-six rather than forty. Because I’d become successful early and wanted a second career, and because I could get into the programme, all these things came together so that I could pursue a full second career as an academic.
That completely switched my path. I became a professor, totally immersed in research, writing papers, publishing successfully in top journals — almost becoming a full-time professor. Until our company went through a difficult period, and the board asked me to come back and run the company again. So the unique thing is that I became successful very young, still had an appetite for learning, and Stanford was wise enough to take an unusual PhD student in his late thirties.
Keith 00:16:54
When people think about someone with a PhD running a company, they usually think about technical insights or contributions. So with someone like Dario Amodei at Anthropic, it’s because he’s such a good computer scientist that he can contribute to the fundamental technology. In your case, you’d already made your success and then went into academia. My question is: why did the board come to you and say, “We need to pull you out of school to run the company again”? Why couldn’t it be someone else?
James Liang 00:17:33
The situation was, you could call it, an emergency. The mobile internet came too fast, and the company wasn’t innovating as quickly as its competitors, so we were losing market share. We almost became a loss-making company, our stock was performing badly, and we were in a very risky position as a viable company. That’s why I had to come back.
A founder is in a unique position to lead innovation in this kind of situation. If you’re not a founder, you always worry about short-term versus long-term, about your credibility with the board and with your team. It’s very hard for a non-founder to make controversial, long-term strategic decisions. For example, when I came back, in the first year I invested heavily in the product and in marketing. We became loss-making — we had our first loss-making quarter — but the stock market responded very well, because they believed that, as a founder, I was making the right investments. That’s a unique contribution a founder can make.
Keith 00:19:07
In that first loss-making quarter, you came in and invested heavily in upgrading and innovation. What gave you the confidence? Coming out of academia, you’d been out of the business for a while, and now you were going back in and making these big bets. What kept you confident?
James Liang 00:19:29
Having a background in social science, particularly economics, helps a little with managing a company. First, you’re more rational — you run the company like a rational statistician. You always want evidence. Don’t just give me your views; I want the statistical data to support it. That’s my management style.
Second, from a macro perspective, an economics background gives you more insightful macro predictions. For example, from my population and demographic research, I predicted that China would do very well and compete not just as a low-cost-labour economy but as an innovative one. Twenty years ago, I was already analysing this data and holding a very different view from other economists. That shaped how we planned our expansion in China and around the world. I also had a lot of insight into the travel industry, because it’s going to consume more and more of people’s time — as people get wealthy, they spend more time and money on it. So these macro projections also helped me run the company. But overall, being a founder was the biggest unique advantage, and that’s why the board asked me back.
Keith 00:21:15
Looking back at some of what you did after you came back, you were doing things others weren’t — you were an innovator. I’ll give you an example. I read the paper from 2014 where you implemented working from home. It was one of the earliest work-from-home experiments in a modern work setting, six or seven years before COVID, before “WFH” was even a term. That’s a very unusual way to run a company in 2014. What was the insight or intuition that made you say, “Let’s try this”?
James Liang 00:22:06
We wanted to be evidence-based. If you’re not a founder, this idea probably wouldn’t go very far, because people think the office is where work should happen. Even as founder and chairman, if you want to convince your management, you still want data and evidence. So we ran an experiment. It got published in a very good journal, because it was a unique experiment run on an actual, real-world company.
Back in 2014 — about thirteen years ago — we looked at our call-centre staff first. With the technology available then — not as good as today’s, but a combination of phones, the internet, and the PC — you could replicate the working environment from home. That saved a lot of commuting time for our staff in Shanghai, sometimes half an hour each way, so they’d save a few hours a week. That’s a huge benefit; they could spend that time with family, or on more work. Some young people actually worked more, because there were fewer distractions at home. Overall productivity was flat, but employees were much more satisfied, and turnover was much lower. So it was a big win for the company, not just for the employee — and for society, too.
Keith 00:24:06
Innovation is a by-product of many experiments, of trial and error. That’s the common thread, whether in your book or in the company: you have to keep experimenting and building your innovation capabilities. But in a big tech company, a bureaucratic inertia sets in after a while — there’s a standard operating procedure, a way things are done, and an instinct not to rock the boat. How do you fight that inertia even as Trip.com kept growing and expanding?
James Liang 00:24:49
As a founder, it’s fine — that’s another reason being a founder is important. You can run three experiments, fail two of them, and as long as one works, that’s okay. Sometimes you can fail all three. I’ve run a lot of failed experiments and failed innovations.
But I also encourage our management, even at the first-line manager level, to experiment and try new things. As long as you try it at a small scale, analyse it, and understand the risk and the benefit, we can study whether to scale it to the company level. So we really encourage many small experiments from the bottom up. Then, at the executive level, you only need to look at which experiments succeeded and should be replicated or raised to a higher level of the organisation.
Keith 00:25:57
I want to zoom out and talk about national innovation capabilities. You have this framework of innovationism. It takes the lessons you learned from Trip.com and maps them onto nations — how they can become more innovative. It rests on the idea that human civilisation is built on two things: the accumulation of ideas, and the accumulation of people. I’d like you to elaborate on innovationism, and on the formula you’ve derived from it.
James Liang 00:26:37
The formula tries to analyse the factors that make a country more innovative. The countries I study have to have all the other infrastructural factors first. They can’t be at subsistence level — they have to be at least middle-income, so they have enough resources not just to feed themselves but also to think creatively, experiment with new technologies, and put resources into R&D.
Once you have those basics, it comes down to how many talented people you have, and how well those talents can exchange ideas — both domestically and with the rest of the world. Domestic exchange is usually much more intense, because communication at home is friction-free and more frequent. So if you have a large domestic community of researchers, innovators, and entrepreneurs, your innovation capacity will be very high. But you also need to communicate internationally. If you cut yourself off from the rest of the world, as China did a few hundred years ago, you’ll stagnate.
So the formula depends on how big your population is, how young it is, how easily your domestic society can communicate and collaborate internally, and how open you are internationally. China is very well connected internally. But some other places aren’t — think of Europe as one “country”: it’s not very connected, because each nation has its own language, laws, and culture. All four factors go into the formula.
Keith 00:28:52
How would you weight those four factors? Which is the most important?
James Liang 00:28:57
It’s not a weighting; it’s not additive. It tries to measure the number of connections you can have. So it’s population size times population capability — by which I mean how young and how educated your population is — times the intensity of internal exchange, meaning how well connected you are domestically, times how well connected you are internationally.
Keith 00:29:31
I ask because you’re one of the more learned minds on demography — not only from your scholarship, but because you have access to real-life travel data, which is itself a derivative of population data. You understand people’s consumer preferences and how they’ve evolved as populations change. And demography is destiny. I spoke to Manoj Pradhan, an economist who has also studied demographics, and his key thesis was that an ageing population’s greatest effect is to create a much more inflationary environment. In your book, your articulation of an ageing population is that it hurts a country’s innovative capabilities the most. Why is that?
James Liang 00:30:29
First, if you look at the most successful entrepreneurs and scientists, they usually create their companies or make their breakthroughs in their thirties. Entrepreneurship declines quite steeply after forty or fifty. That’s reasonable: at thirty you still have the energy and the risk-taking mentality, and your family is just forming, so you don’t yet have the heavy responsibilities or the preference for stability that come with a big family.
The other factor is that if a society has a much larger cohort of older people than younger people, you get an inverted pyramid. In any company or government, promotion is more or less based on seniority. So in a top-heavy organisation, your promotion slows down, and you don’t control important resources or decision-making power. Even in a large organisation, as the age structure gets older, you not only have fewer young people, but those fewer young people are less innovative or entrepreneurial, because they don’t have the leverage or the decision-making power in an ageing economy.
Keith 00:32:18
In your view, the East Asian countries — Singapore, China, South Korea, Japan — have all experienced this demographic decline and are becoming super-aged societies. Singapore itself is a super-aged society. What, in your view, is the cause? Why are we ageing faster than even other countries?
James Liang 00:32:41
There’s a big overall trend: when people have more career and entertainment choices — especially women — they spend more time on entertainment and career, and less time and money on having many children. That’s the general trend. But East Asian countries have even fewer children than Western countries like America because of the very competitive exam and school-filtering system. We try to filter students at a very young age — ten, fifteen — into elite primary schools, elite high schools, elite colleges, versus the average schools.
The competition this creates is an arms race, a zero-sum, wasteful competition. It’s a burden on parents — time, extra tutoring, the financial cost — and it means the children don’t have a very happy childhood. That really dampens people’s desire to have more children. Parents don’t want their kids to go through it, and they don’t want to go through the painful parenting experience themselves. So they don’t have many children.
Keith 00:34:25
So the educational experience has a huge downstream effect. Children who grow up in a stressful environment say, “I don’t want that for my own child,” and as a result they decide to have fewer.
James Liang 00:34:34
Exactly. People want to talk about this exam-oriented system. Of course it has a good side — people study harder. But they say it hurts innovation capability: it saps their energy, and they’re less likely to really enjoy a subject, which isn’t good for innovation. That’s a small marginal effect, though. The big effect, as we discussed, is the miserable parenting and studying experience. So people don’t want more children, and they don’t want their children to go through the same thing.
Keith 00:35:21
I want to ask how you hope to reverse that trend through your work. You’ve established that to be innovative, a country needs a strong and young population. In your work — at Trip.com, or through your institutions and think tanks — how are you thinking about getting the fertility rate up again?
James Liang 00:35:49
There are three levels: the national government level, the business level, and the individual level. The most important is the government level. Especially with AI, society overall has more resources — time and money — to give to every family. But the squeeze is on young people. Starting a career is getting harder, because entry-level positions are being squeezed and training periods are getting longer. At the same time, young people need to start a family, maybe start a company — everything is squeezed into around age thirty.
But people now live to a hundred, and there are plenty of resources. It’s not that we don’t have enough people to work — we don’t have enough jobs. So at the societal level, there’s definitely more resource; it’s just that the young have too much on their plate. The government should reallocate resources to young people — give them money. All out-of-pocket expenses for children should be reimbursed, in my view. If you’re raising two or three children, you should be paid as though it were a full-time job.
So you’re talking about reallocating a few per cent of GDP — around five per cent — from other sectors to the young. People think five per cent is a huge number, far higher than what governments actually spend. Singapore probably spends less than one per cent, even with such a rich economy. Some of the most generous economies, like the Scandinavian countries, spend two to three per cent — not nearly five. Do you really need five per cent to reimburse out-of-pocket expenses? Five per cent is just one year of growth — one year of China’s economic growth. If you reallocate five per cent from other sectors — from building freeways, from other infrastructure — or just sacrifice one year of growth to reallocate to young people, you’d solve this huge problem. It’s the most critical problem facing many economies, and humanity as a whole. So it’s really worth spending a few per cent of your GDP.
Keith 00:38:35
What’s the bottleneck? In all your conversations with policymakers and leaders, at your level of influence, what’s the main thing preventing them from thinking, “I know this is a wicked problem — maybe I should compromise on growth by five per cent”? What stops them?
James Liang 00:38:55
For small economies like Singapore, it does make sense to allocate five per cent. I think Singapore actually does that to some degree — maybe not five per cent, maybe three — giving money to would-be scientists and entrepreneurs to fund their innovation. But where do these people come from? They come from other countries. So immigration is an easier, more cost-effective way to tackle the population problem.
But big countries can’t do that, and at a global level you can’t either. So at some point I’d think even large economies like India or China should consider an education tax: if someone is educated in India or China and then goes to work for Singapore, they should pay back the cost of the education they received, which was usually subsidised by their local government. That kind of cherry-picking strategy works for small economies, but not for big ones.
Keith 00:40:10
In Singapore, even immigration has to be handled very delicately, because it’s a small ecosystem. Too much rejection of foreigners who become Singaporeans affects the body politic, so there’s a trade-off in a more pro-immigration policy. Why is it hard for countries to say, “We want to encourage higher birth rates among our own citizens — we should give them more money,” for example?
James Liang 00:40:44
In general, the economics community still under-appreciates the size, youthfulness, and demographic factors that drive innovation. It’s not fully appreciated yet, though it’s starting to gain recognition. That’s why Japan and Korea have massively increased their child subsidies, and they did raise their fertility rates in recent years because of it. China is still behind — it has only just reversed the one-child and two-child policies to become a pro-fertility policy, but hasn’t yet put much investment into baby bonuses and other benefits. China can definitely afford it, though; its production capacity is so strong that it would be easy to use that capacity to fund family subsidy programmes. But I think it’s coming.
Keith 00:41:49
At a smaller level, at Trip.com or in your own work, how are you incentivising companies or your own employees to have children?
James Liang 00:42:00
There are certain things businesses can do. You can create family-friendly products — as we do with family-friendly travel, where parents can take their children on a good holiday. On top of that, flexible working arrangements can really help young couples balance career and family. Working from home, for example: if you save a few hours by not commuting, you have more time with your family. We’re also experimenting with letting people take unpaid leave, without needing to give a reason, for up to two months. You work a little less and earn a little less, but you have more choice in balancing career and family.
In the long run — at the government or business level — if we really think about it, we should reduce the forty-hour working week. We keep asking where all the jobs will come from; unemployment will be a big issue. Yet we haven’t changed the forty-hour week in a hundred years, despite all the productivity gains. So this is an opportunity, and I think it will really happen: the hours in the working week will be reduced.
Keith 00:43:41
How do you see that reduction playing out? How many hours do you think we’ll move to?
James Liang 00:43:48
We’re running an experiment where we let people take an extra two months of vacation during the year. People with small children will probably take a four-day working week instead of five, which works out to about two months a year. Others just want to take more vacation — a longer period to relax, or to do other things for a month — then come back refreshed, and probably more productive. We’ll see. That’s the experiment we’re running right now.
Keith 00:44:24
Look forward to it.
James Liang 00:44:27
It’ll be a nine-month experiment. We’ll have a control group and an experiment group, and we’ll compare performance, employee satisfaction, promotion, fertility, and a lot of other factors at the end.
Keith 00:44:46
I want to ask about something we’ve been trying in Singapore. The government here has been very aware of the fertility problem for about forty years, ever since the birth rate started to decline. We’ve tried cash incentives, tax breaks, national campaigns — even, as recently as this year, an idea floated for a national matchmaking service. Almost none of it has substantially moved the needle. What are we missing?
James Liang 00:45:24
The baby bonus — giving people extra money — is the easiest and fastest, most effective way. But to move the needle you need five per cent, not just one. That’s a question of quantity: how much you actually spend on it.
At the business level, these things are only just being appreciated. The research is only now coming out, and there’s a lot you can do — basically offering people more flexibility in their careers, over a year or over a longer period. A ten-year tenure track for women professors, for instance, should be extended if they have more children, so they can manage their flexibility over the course of their tenure while taking family into consideration.
At the individual level, there’s education, which is the toughest, because you’re talking about changing the whole filtering and admissions system. You want to push admission as late as possible. People now get longer and longer training and degrees — a lot go on to master’s degrees, and almost everyone goes to college. If almost everyone goes to college, why filter at ten or fifteen? Just let them have a good time and finish college, and filter at the end. You should pretty much get rid of the elite undergraduate programmes, because they’re standardised anyway. The reason they filter so early is that high-quality college and high school education used to be scarce — but it’s not scarce anymore, especially with AI. So you should make college education universal, and then filter at the end of college. That would relieve most of the pressure — not all of it, but most.
Keith 00:47:59
In Singapore, like in China, we have this filtering — the PSLE, the Primary School Leaving Examination, then your O-Level and A-Level examinations, then university. In China you have the Gaokao. You’re saying we should do away with all that and just —
James Liang 00:48:19
You can have a GRE — essentially a general test you take any time you want. In China, the Gaokao would become like a GRE. You could take it in your first, second, or third year of college, in every subject. Depending on your score, you’d go to a different elite graduate school or not. You don’t need to filter early, because some people develop later, and early filtering creates a lot of stress. You always want to do the test as late as possible. It’s like testing your employees — you want to test them right now, not on how they performed ten years ago.
Keith 00:49:03
The pushback I hear from people in the policymaking space is that you’re just moving the stress to one point — now you’re pushing all of it to the end, rather than distributing it across primary and secondary school.
James Liang 00:49:19
People will respond differently. Tiger parents, or self-motivated kids, will still put pressure on themselves early. But people who are late developers, or who have a different perspective on their children’s values, can have a more flexible education — which is very possible now, especially with AI being a better tutor than any human tutor.
Keith 00:49:59
You’ve spoken about the baby bonus, about giving cash, and about reforming the education system. What else should we be looking at? What other dimensions should we consider to improve a country’s fertility rate?
James Liang 00:50:16
I’ve talked about education reform, the baby bonus, and flexible work arrangements. The last thing is more philosophical: making people aware of the benefit, the meaning, and the joy of having a large family. That’s almost been forgotten, especially in China, because they themselves are one-child products of the one-child policy.
It’s hard, because the cost, uncertainty, and risk are all front-loaded. You experience the hardship when the children are very young. The first year, the first child, is very difficult. The second and third children are much easier. And people now live much longer — sixty, seventy, eighty, ninety, rather than forty or fifty. So you have a whole second half of life, from your fifties onwards, and whether you have a big family makes a huge difference. Life is much more rewarding and fulfilling if you have children and a big family, and they in turn have their children, rather than having no children from fifty onwards. You put up the investment and cost when you’re young, around thirty, but you reap the benefit for a much longer period. People don’t realise that, and they don’t realise the regret. When you reach forty or fifty, you regret not having children — your perspective changes as you get older. Men can still have children at forty or fifty, but if a woman, or her husband, comes to regret it, they’ll face a difficult problem. So these things need to be communicated to young people directly and openly, based on research and data.
I think that, with AI and with longer training and internships, we should return to what the old Chinese saying advises — 先成家后立业, first start a family, then build your career. You still have a long way to go after forty or fifty — plenty of time to pursue a career, or to travel with your family. But having children is best done in your twenties and thirties. So you should probably prioritise it a little more, given the full picture of your lifespan — on the condition that the government gives you enough money and support. If you don’t have support and you’re broke, you can’t have a family. But with government support, you should really think about having a family first, and a career second.
Keith 00:53:56
In the book, you have many case studies — the US, China, Japan, Europe. You take a deep dive into these geographies and explore their innovation capabilities. When you look across all of them, what are the unique advantages that each country — say the US and China — has that lets them stay at the forefront of innovation?
James Liang 00:54:36
Thirty years ago, it wasn’t appreciated that big economies — big populations — have such an advantage. You could have Japan or Finland, with a small or medium population but very successful multinationals like Sony or Nokia. But manufacturing companies are easier to replicate, and you can export your products because the standard is objective — if you have better fuel efficiency, you’ll sell.
For the information age, the latest rounds of innovation — internet, software, AI — are a digital revolution. First, they’re even easier to replicate. But on the other hand, users participate in the innovation. Take a search engine: the more people use it, the better the search results, because the long-tail searches get solved. It’s the same with AI algorithms — the more data going into training, the more successful. That’s why US and Chinese companies dominate, and few Japanese or European companies do: the sheer size of the user base is a big advantage for innovation, as is the sheer size of the talent pool.
China is so successful in many fields because it can explore all possible paths. It’s the only country that can operate in all the subsectors and become a leader in many of them, because it has a huge research population — the number of R&D people in China is probably two or three times that of the US. That’s why I’ve predicted China would continue to do well, until, about twenty years from now, it hits a speed bump, when the current fertility collapse catches up with it — twenty years later, when today’s children grow up.
Keith 00:56:55
But you sit at the intersection of the US and China. You built a Chinese company, listed it on a US exchange, and were educated in China until you went to Stanford. So you have a unique vantage point on East and West. Where do you see the US–China rivalry playing out in terms of technology? Will it fundamentally be a zero-sum competition, as much of the Western media posits — or will the dynamic be different?
James Liang 00:57:26
If you think about who’s going to be number one, then of course it’s a zero-sum game — there’s only one number one. But economically, it’s not zero-sum: innovation benefits everybody who can use it. Chinese innovation will benefit US consumers, innovators, and the economy as a whole, and vice versa. If you view it that way, it’s a competition, but not a war. War is more of a zero-sum game.
But if you’re talking about national security, then of course you want to be number one, and from that perspective it’s more likely zero-sum. Yet even in a zero-sum game, what’s the best strategy for the US or China? You still want to be open to all the Chinese innovators, and China wants to be open to the US and the rest of the world. If the US cuts off Chinese scientists from coming to the US, it will hurt China — but it will hurt the US more, because China is almost the same size, or bigger. If you’re a very small economy, you can be crushed by being cut off. But if your rival is almost as big as you, cutting it off hurts you too. So even if they view it as a zero-sum game, they shouldn’t cut each other off. They should still collaborate — and that’s a good thing for the world.
Keith 00:59:06
You’ve spoken a lot about the salience of big countries. Through your book and your work, I’ve come to truly appreciate the importance of having a big country — the many benefits of a large population. In Singapore we’re very small, so we’re very aware of this constraint; we have a domestic market of just five million people, which is hardly a city in China. So if I flip that lens and look at your innovation-capacity formula: clearly Singapore doesn’t have the size, but our internal linkage and external exchange are quite strong, because we’re —
James Liang 00:59:50
Yes — very open and connected to the rest of the world.
Keith 00:59:53
We’re developed, we’re open to trade, and we’re open to foreign investment and to investing in other countries. So on internal and external exchange, we’ve got that sorted — at least our infrastructure is right. That leaves population capability as the one variable we really need to focus on. That’s how we survive, I suppose. How would you define population capability, and how should governments — especially small countries like ours — improve it?
James Liang 01:00:34
When I say population capability, people assume education is the most important factor. But my view is that, beyond a certain point, more time in education is actually counterproductive. For a middle-income country like Singapore, once you reach a college admission ratio of sixty or eighty per cent — where most young people already go to college — putting extra resources into education isn’t going to help much.
It’s more a question of quantity, or of youthfulness. If you have more children per family, you have a bigger cohort of young people and a more vibrant, youthful culture, which helps innovation at the cultural level too. You’ll have a younger economy overall, with less burden to support the old — so a healthier economy, with more resources going into innovation. You definitely don’t want everyone coming from abroad, using immigration to solve the problem. Of course Singapore could solve it through immigration. But most Singaporeans want a bigger family — the reason they don’t have their ideal family size is that they worry about financial costs and careers. So giving young people enough support to have more children would definitely help both innovation and the overall economy.
Keith 01:02:37
I want to ask about AI. We haven’t touched on it for a reason: I think innovationism is a philosophy that’s relevant regardless of AI, so I’ve pushed this to the end. But now, in this age of AI specifically, why is innovationism ever more important?
James Liang 01:03:06
Because you’re running out of things for humans to do — that’s why AI makes this so pressing. What should we spend our time and resources on? What are the most rewarding and most meaningful activities humans can find? It really comes down to two things: having children, and innovation.
The essence of humanity — the difference between humans and other animals — is innovation. We innovate, we inherit, we build our knowledge, and we have more and more people. That sets us far apart from animals, which have no innovation or accumulation of knowledge. But the difference between AI and humans is that humans have been tested over hundreds of millions of years by evolution. Having children — genetic innovation — has been a very successful mechanism for replenishing our genetics, adapting to new environments, and passing our knowledge down through generations. So these are the two essences.
That’s why I say in the book that the most meaningful activities for humans are innovation and having children. There’s also a risk-control argument. If we let AI take over innovation, we’re out of control — innovation is inherently risky and involves ethical judgement. Wanting to have more children is a human thing that AI will probably never understand. AI might even think that replacing humans is not such a bad thing. Having enough children is also a risk-control matter: if we don’t have enough population, the combined brainpower of humanity becomes far less numerous and powerful than the silicon brain cells, the chips — and then we’ll inevitably hand over control to AI. That’s not a scenario we want. We want to remain the masters, not the slaves, of AI — even if the AI may love us. But who knows?
Keith 01:06:09
A sceptic might say the AI hype train is moving too fast — that people are exaggerating the significance and impact it will have on the economy in the long run. You’ve been through multiple revolutions, including China’s digital revolution. Fundamentally and personally, how is this revolution different from the previous ones you’ve participated in?
James Liang 01:06:44
This is not just an economic shock; it’s a philosophical shock. It shocked me that combining a bunch of neurons — silicon chips, the GPUs they call neurons — can do amazing things, pretty much replicating what the brain does. When you think about it, it’s not surprising: the brain is also just a bunch of neurons. By that analogy, AI is technically capable of doing anything the brain can do.
It’s already replacing a lot. It’s showing up in the data in a big way — entry-level programming jobs, which we considered very good jobs, are going away. In a twenty- to thirty-year time frame, human-like robots will do more of the service-level jobs. That won’t happen in the next few years, but over ten or twenty years it will. So this is different: it’s replacing everything a human can do. It’s not just replacing the muscles; it’s replacing the brain. And it’s happening very fast.
For white-collar jobs, it’s actually hurting young people, entry-level workers, and recent graduates trying to find jobs. That will be very bad news for fertility, too. So governments and economists should really think about measures to tackle this once-in-the-universe transition. Otherwise it will be very chaotic and problematic. But overall, as I said, society has more resources that can go around, because it’s an age of abundance. We can definitely afford to reallocate resources and money from other sectors to the young.
Keith 01:09:02
To wrap up, I have one final question. We’ve talked a lot about the things that affect young people. If you had one piece of advice for someone young today, who’s leaving university and entering the working world, what would it be?
James Liang 01:09:23
I give this advice in the book: pursue a rich life, with a variety of experiences. Ultimately you want to be a successful innovator, but to be one you need rich experience. So try different things, learn different subjects. Having a large family helps, too. Travel to different places. Live a rich life, and don’t be afraid of trying new things. There will be some hardship — you’ll have to work very hard when you’re young — but that’s all part of the experience, part of the journey.
Keith 01:10:03
I’d be remiss not to ask: you’re the founder of Trip.com, so if there were one place everyone had to visit in their lifetime, what would it be?
James Liang 01:10:12
One destination? These days I really recommend travelling to China — even the western part, which has the highest mountains but also very good infrastructure and easy access to the most magnificent scenery. Travelling in such a different, fast-growing country gives you fresh perspective and fresh insight, whatever you do.
Keith 01:10:36
With that, Professor James Liang, thank you so much for coming on. And everyone, do get a copy of his book — I’ve benefited richly from reading it, and I hope you will too.
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