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James Liang is not your typical billionaire. As the co-founder of Trip.com, a company valued at over $50 billion, he has reached the pinnacle of entrepreneurial success. However, mid-career, Liang made a pivot that baffled his peers: he left his executive role to pursue a PhD in demography at Stanford University. This transition was driven by a realization that the primary driver of national innovation is not just capital or policy, but the age and scale of a population. Today, Liang is one of the world's leading advocates for radical fertility support, even going so far as to pay his own employees $50,000 for every child they have.
Key Takeaways
- Demography as Innovation: A society’s ability to innovate is directly linked to its age structure; younger populations are more risk-seeking and energetic.
- The Aging Stagnation: In "reverse pyramid" societies, seniority-based systems block young talent from advancing, leading to a conservative, stagnant corporate culture.
- The Scale Advantage: In the digital and AI era, larger domestic populations provide more data and a bigger "test bed" for new technologies.
- The 10% Solution: Reversing fertility decline may require governments to invest up to 10% of their GDP into family support and child-rearing incentives.
The Demographic Root of Economic Decline
While most economists attribute Japan’s "Lost Decades" to the bursting of a financial bubble in the 1990s, James Liang argues that the root cause was actually demographic. Japan was the first nation to experience a sustained low fertility rate, which took roughly twenty years to manifest as an innovation crisis. As the population aged, the number of young entrepreneurs plummeted, and the nation largely missed the digital revolution that defined the early 21st century.
Liang notes that while financial crises typically last a decade at most, Japan’s stagnation has persisted for thirty years. This suggests a structural problem rather than a mere fiscal one. Notably, Japan lacks the "Silicon Valley" dynamic found in the United States, where young founders are given the resources to disrupt incumbent industries. In an aging society, the social and political gravity shifts toward stability and the preservation of existing wealth, rather than the creative destruction required for growth.
"The problem with an aging population is a cultural technological stagnation that will suffocate any creative act."
The Problem with the Reverse Pyramid
When a society’s demographic structure resembles a reverse pyramid—where the older cohorts outnumber the younger ones—the internal dynamics of every institution change. In seniority-based systems common in East Asia, a shrinking youth cohort finds it increasingly difficult to reach positions of influence. Younger workers are promoted more slowly and have less decision-making power, which discourages risk-taking.
This demographic shift also impacts the political landscape. Older voters, who typically have higher turnout rates, tend to support conservative economic policies that favor pensions and stability over investment in new, unproven technologies. Liang argues that this creates a feedback loop: a society that feels "old" acts "old," ultimately deterring the very innovation needed to support an aging population. He contrasts this with the "youth fetishization" sometimes seen in Silicon Valley, which, despite its flaws, fosters an environment where radical ideas can gain traction quickly.
The "Seniority Trap" in Corporations
In a youthful society, large cohorts of young people compete and rise based on merit. However, in an aging society, the larger, older cohorts often control the corporate ladder. This "Seniority Trap" means that by the time a person reaches a leadership position, they may be less inclined toward the high-energy, high-risk endeavors that define innovation. Liang's research suggests that the "golden period" for innovation is roughly age 30, a window that is shrinking as education requirements lengthen.
Scale Advantage in the Digital and AI Era
A common misconception is that the digital revolution makes geography and population size irrelevant. Liang argues the opposite: in the age of AI and big data, the scale of a domestic population is a decisive competitive advantage. Innovation in software and AI thrives on large user bases that provide the data necessary to train algorithms. A larger population provides a lower "critical mass" for a business model to become viable.
For example, a niche service that requires 30 million users to be profitable represents only 3% of China’s population, but nearly 25% of Japan’s. This makes it significantly easier for startups in large countries to achieve success at home before expanding globally. Liang points out that the marginal cost of software is nearly zero, meaning that whoever wins a large domestic market first can often dominate smaller markets with ease.
"The scale advantage for large countries is getting even larger in recent years in digital economies."
Innovationism and the Concept of Genovation
Liang has formalized his worldview into a philosophy he calls Innovationism. This framework posits that the long-term prosperity of human civilization depends on two pillars: innovation (the creation of new knowledge) and heritage (the preservation and application of that knowledge). Within this, he coins the term Genovation—the idea that the "hardware" of humanity (our genes and people) is just as important as the "software" (our ideas).
The Meaning of Genovation
Genovation suggests that raising children is itself a form of innovation. Without a steady supply of new "brains," the existing knowledge base cannot be maintained, let alone expanded. In his science fiction novel, After Immortality, Liang explores a world where humans have stopped aging but have also stopped having children. He depicts a society that is peaceful and stable but utterly stagnant, eventually losing its competitive edge to more traditional, "mortal" societies that continue to reproduce and innovate.
The Role of AI
Some argue that AI will eventually replace the need for a large human population. Liang is skeptical of this claim for both normative and descriptive reasons. Normatively, he believes innovation is the most rewarding human pursuit and should not be outsourced. Descriptively, he argues that AI lacks human values and ethics, making it a risky tool to lead unpredictable innovative processes. Innovation requires a "human in the loop" to validate what is truly interesting and beneficial for the species.
The Geopolitical Race: US vs. China
The technological competition between the United States and China will likely be decided by demography. Liang observes that China is currently at the frontier of many industries, particularly in manufacturing and heavy assets, and is poised to overtake the US in overall R&D investment within the next five to ten years. However, this momentum faces a significant threat: China’s fertility rate has collapsed to levels well below replacement.
While the US faces its own demographic challenges, its ability to attract high-skilled immigrants provides a buffer that China currently lacks. Liang predicts that while China may pull ahead in the short term, it will hit a "demographic cliff" in approximately twenty years. Unless China can radically reverse its fertility trends through massive state intervention, the long-term advantage may shift back to the United States.
"China will likely overtake the US in next 5 to 10 years... until like 20 years from now because the collapse in fertility."
Conclusion
James Liang’s message is a call to action for policymakers and entrepreneurs alike. He argues that the solution to the population crisis is not found in minor tweaks, but in a fundamental reallocation of social resources. To maintain a vibrant, innovative society, we must reduce the financial and opportunity costs of child-rearing for young people. This includes direct cash support, tax rebates, and cultural shifts that value large families.
Ultimately, Liang believes that the pursuit of novelty and the continuation of the human lineage are intertwined. By investing in the next generation, we are not just fulfilling a social duty; we are fueling the engine of human progress. As he continues to advocate for these changes through his research and at Cosmos, Liang remains a rare voice bridging the gap between high-stakes entrepreneurship and the foundational science of human populations.
