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Some notes from Li Lu's fireside chat with Bruce Greenwald for Columbia Business School:
What kind of business does he look for?
"Truly good business are those who can fend off competitors"
They have long runways of growth. They have enduring competitive advantages. Addiction and loyalty to brands are important. But they're good for a long time until they’re not.
"Truly good business are those who can fend off competitors"
They have long runways of growth. They have enduring competitive advantages. Addiction and loyalty to brands are important. But they're good for a long time until they’re not.
Business and Change
The most interesting thing about business is that the only constant is constant change. All great businesses change over time.
Management plays a key role in allocating capital to ensure they maintain a competitive advantage over time.
The most interesting thing about business is that the only constant is constant change. All great businesses change over time.
Management plays a key role in allocating capital to ensure they maintain a competitive advantage over time.
Small Businesses vs Large Businesses
Early on Li liked smaller businesses because he could understand them better.
Big business benefits from becoming more entrenched as they get bigger, still have large runways of growth, and take advantage of network effects.
Early on Li liked smaller businesses because he could understand them better.
Big business benefits from becoming more entrenched as they get bigger, still have large runways of growth, and take advantage of network effects.
How Li Lu spends his time?
Studies what makes industries and specific companies successful and whether it can continue
Insists on knowing them inside out, to the point he can predict what it might be like in 10 years from now, and judge what a worst-case scenario may look like
Studies what makes industries and specific companies successful and whether it can continue
Insists on knowing them inside out, to the point he can predict what it might be like in 10 years from now, and judge what a worst-case scenario may look like
Li Lu on investing in turbulent markets?
Instead of guessing the patterns of history and whether they will repeat he would rather select companies that can live through thick and thin and do well.
Those not only capable of dealing with uncertainty but can thrive too.
Instead of guessing the patterns of history and whether they will repeat he would rather select companies that can live through thick and thin and do well.
Those not only capable of dealing with uncertainty but can thrive too.
On management:
For most companies, management makes a big difference, through the culture they create, and their capital allocation.
In a # set of cases, management makes almost no difference. Some businesses are so good anybody can run them relatively well. Really rare though
For most companies, management makes a big difference, through the culture they create, and their capital allocation.
In a # set of cases, management makes almost no difference. Some businesses are so good anybody can run them relatively well. Really rare though
On Mr Market
Business doesn't change drastically by the hour, day, or week, so the short term shouldn't phase you.
Have a good temperament and you'll find that market's euphoria and crisis should serve you well.
Mr market is there to serve you not obstruct you
Business doesn't change drastically by the hour, day, or week, so the short term shouldn't phase you.
Have a good temperament and you'll find that market's euphoria and crisis should serve you well.
Mr market is there to serve you not obstruct you
On crisis:
Every crisis is apparently ‘once in a lifetime’ except they seem to happen every 10 years. Financial crisis' are driven by human nature which will never change.
As a product of evolution, humans are good at rationalization but not good at being rational
Every crisis is apparently ‘once in a lifetime’ except they seem to happen every 10 years. Financial crisis' are driven by human nature which will never change.
As a product of evolution, humans are good at rationalization but not good at being rational
Generalist or specialist?
Be a student and generalist in the interest of business.
You need an innate intensive curiosity about all kinds of business.
But be a true specialist in the companies you invest in, and a generalist in business to slowly expand your circle of competence
Be a student and generalist in the interest of business.
You need an innate intensive curiosity about all kinds of business.
But be a true specialist in the companies you invest in, and a generalist in business to slowly expand your circle of competence
Value Investing in China?
“remains one of the best markets if you’re a value investor”
Traders and investors are still not as mature.
There’s still a mentality of fast trading and high turnover.
This provides opportunities for patient investors who can take advantage of this
“remains one of the best markets if you’re a value investor”
Traders and investors are still not as mature.
There’s still a mentality of fast trading and high turnover.
This provides opportunities for patient investors who can take advantage of this
Advice for a new investor?
- Adopt an owners mentality. Try to learn and know everything that you can
- Maintain intellectual honesty. Know and acknowledge what you don’t know
- Study historical businesses and people. It’ll help you identify good opportunities and characteristics
- Adopt an owners mentality. Try to learn and know everything that you can
- Maintain intellectual honesty. Know and acknowledge what you don’t know
- Study historical businesses and people. It’ll help you identify good opportunities and characteristics
That wraps up my lessons and takeaways.
Lots of good nuggets of info throughout. Just gotta find it!
Watch the full thing here:
Lots of good nuggets of info throughout. Just gotta find it!
Watch the full thing here:
