Podcast: Investing in Asian Innovation
As an active investor focused on finding extraordinary companies, Developing Markets Fund’s Portfolio Manager Justin Leverenz has witnessed a tech transformation unfold in Asia in which innovative companies with a deep understanding of local markets have leapt ahead of competitors in the U.S. and other developed countries. In this special edition of the World Financial Podcast, Justin speaks with key players in Asia’s leading e-commerce, ride-hailing, and biotech companies about the evolution of the technology landscape in Asia, and how these companies are creating opportunities for investors. Below are a few highlights from the episode.

Participants:

Joe Tsai: Co-founder and Vice Executive Chairman of Alibaba.

Wang Xing: Co-founder and CEO of O2O service platform Meituan Dianping.

Colin Huang: Founder and CEO of e-commerce platform Pinduoduo.

Hoo-Ling Tan: Co-founder of Southeast Asia leading ride-hailing platform Grab.

Bhavish Aggarwal: Co-founder of Indian ride-hailing platform Ola.

Chris Chen: CEO of Wuxi Biologics, a leading platform for the development, manufacturing and testing of protein therapeutics and biologic drugs.

The Evolution of Retail

[3:10] Joe Tsai: The online, offline integration of e-commerce means it doesn't matter whether a consumer walks into the store to pick up a product from the shelf or buys it the next day on a mobile phone. It means digitizing the consumer journey and your inventory system, and setting up a store-based logistics system that works, and can be very efficient and deliver at speed.

[10:15]Wang Xing: When we started Meituan in early 2010, the first business was local deals. So we’d sell online deals for offline merchants, including all kinds of restaurants, hotels, movie theaters, and hair salons and spas. Sort of like a Groupon. In 2012, we expanded into online mobile ticketing and in 2013, we got into hotel booking and food delivery. Five years later, we have become China’s largest hotel booking platform, in terms of room nights, and the largest food delivery platform in the world.

[26:00] Colin Huang: A key differentiator for Pinduoduo is how we think about shopping as a social experience. We encourage users to find friends to join them in team purchases at a discount to the purchase price an individual would get. Teams can share products with friends. This mirrors the offline experience, where we seek friends’ views of which products are good, what looks good on us, etc. With an additional layer of information on purchase behavior, we can create a more refined social graph that captures more relationship dynamics than would get signaled through a friend status or like action on traditional social media networks.

How Ride Hailing Companies Are Improving Driver Economics

[19:05]Hoo-Ling Tan: When we first started Grab, we were trying to create a more convenient, safe, trusted, and transparent system for passengers, and a platform where folks could earn honest income.  At that time, average utilization for taxis was in the 30% range. Today, utilization rates are 60%-70% or higher, and now we’re trying to help drivers earn more than just passenger income through deliveries.

On the Evolution of Technology in India

[23:00] Bhavish Aggrawal: It's easier for Indians to operate on the world stage as we see in Silicon Valley. Language is not a barrier for us to do business, but it also keeps a certain segment of the population out from the benefits of the Internet. If I look out five years and beyond I don't believe this will remain the case, and it's happening now. As India becomes digital and data costs decrease, more people in India, above the current 100 million, will own smartphones, with access to data and original content in their native language.

On Innovation in Pharmaceutical Business Models

[31:15] Chris Chen: At Wuxi Biologics, we don't discover or sell drugs ourselves. We build a platform to help any entrepreneur with an idea for a drug, be it a Harvard Graduate or a Tel Aviv scientist or a Shanghai entrepreneur, to leverage our infrastructure. We make the first milligram of their drug, and if it works, test it. And if that works, we make a metric ton to sell it, to go to the patient. Our business model is making the discovery, development, and manufacturing of biologics much easier.  

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As of 2-3-2019 holdings of Alibaba, Wuxi Biologics, Meituan, PDD and Grab are: 6.38, .57, 1.63, 1.02 & 1.04 percent respectively of the Oppenheimer Developing Markets Fund and the mention of such companies are in no way a recommendation by OppenheimerFunds Inc.