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2024.04.01 08:49
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Duan Yongping: The shortcut is the fastest way to get lost

There is no such thing as overtaking on a curve, focusing on the essence is the most important! Otherwise, even if you overtake, you will be overtaken back

Combined from Red and Green (written in 2020).

This article is a communication and sharing session by Duang Yongping with Chinese students at Stanford.

All of our success comes from "doing what is right + keeping a calm mind".

Keeping a calm mind means being rational, returning to the essence of things, doing the right things, and doing things right.

The Stop Doing List refers to doing the right things, but doing the right things means not doing the wrong things.

Many people often do things they know are wrong because they cannot resist the temptation of short-term benefits. For example, OPPO/vivo's Stop Doing List: no sales department (because there is no need to negotiate business); not negotiating prices individually with customers (all customers get the same price, saving a lot of time and energy for both sides, which adds up to a lot over 10 or 20 years); no OEM (OEM products lack significant differentiation, making it difficult to make a profit); no interest-bearing loans.

(Will never collapse due to a broken capital chain. Munger said that knowing where you will die means not going there, and most companies fail because they borrow too much money.)

Dialogue with Duang Yongping

1. What is the most important thing for you? Why?

Duang Yongping: The answer varies with age. Now it's family, love, and friendship. Do I need to explain why?

2. Without a sales department, what is your pricing decision mechanism?

Duang Yongping: Conduct market research, try to set the price as accurately as possible when going public, and adjust promptly if wrong. (Electronic products) The essence of competition lies in product differentiation, providing something that others cannot. Without differentiation, it becomes a daily commodity and can only compete on price, making it difficult to make money.

3. Have you ever tried to change your personality and way of thinking?

Duang Yongping: I don't think so, it's hard to change personality. According to a survey in Europe, CEOs of the Fortune Global 500 companies have all kinds of personalities, but they only have one common trait, which is integrity.

4. How should private enterprises in China respond to the challenges of a trade war?

Duang Yongping: It mainly depends on the enterprise itself. If you do well, it doesn't matter whether there is a trade war or not. Many poorly performing companies use the trade war as a fig leaf. For good companies, when a crisis comes, it is an opportunity. We don't borrow money, we have ample cash flow, so every crisis is an opportunity for us.

5. What is the logic behind investing in early-stage companies?

Duang Yongping: I don't invest in early-stage companies, only in listed companies. I invested in Huang Zheng for personal reasons, he is my friend, I know him and trust him. Huang Zheng is a rare and insightful person I know, he focuses on the essence of things.

6. Talk about the marketing methodology?

Duang Yongping: There is a misconception from the outside that we value marketing a lot. In fact, for us, marketing is not important at all, the most important thing is the product. No company has failed because of marketing failure. The failure of a company is fundamentally due to product failure. Of course, I'm not saying not to do marketing, in fact, we do marketing very well. Marketing is about using the simplest language to convey the information you want to spread (to your users) Here I want to emphasize that marketing is not essential, the essence is the product. The most important thing in marketing is not to talk nonsense. Corporate culture is the most important. Advertising can only influence 20% of people at most, the remaining 80% rely on the influence of this 20%. If marketing is not good, at most it will sell a little slower, but as long as the product is good, regardless of whether marketing is good or bad, the result will be the same after 20 years.

7. What opportunities do Chinese brands have in emerging markets?

Duan Yongping: I don't quite understand this, but I don't think there will be much difference, it's all about paying attention to user needs. Keep a calm mind, just return to the essence of things.

8. What happened at the Buffett lunch?

Duan Yongping: I do charity, and old Buffet (Buffett) also does charity. Whether I donate directly or through old Buffet, it's the same, so I bid for the Buffett lunch, just for charity, and also to learn from old Buffet. You don't necessarily have to have a meal, you can just watch old Buffet's videos, speeches, shareholder letters online. What old Buffet says is logically smooth, it's like enjoying music.

9. Now there are two models for mobile phone (companies), one is like Xiaomi that first captures users and then monetizes through other means; the other is like Apple, making money through the product itself. Which one is better?

Duan Yongping: First of all, from the perspective of capturing customers, Apple is better than Xiaomi; secondly, in the long run, no company makes money by being cheap. Cost-effectiveness is just an excuse for oneself. The focus must be on the users, it's not about whether we have to be high-end or low-end, just do what we can do well, meet the needs of a part of the population. Even Apple doesn't satisfy everyone.

We used to often talk about cost-effectiveness in the early years, until one time when I was discussing cooperation with a Chinese-speaking Japanese person and mentioned that our product had high cost-effectiveness, the other person asked in confusion, what is cost-effectiveness, is it the "sex-price" ratio? I was stunned at that time, feeling that the Japanese dictionary seemed to have no such thing as cost-effectiveness, and it took me a long time to realize that "cost-effectiveness" is actually an excuse for not having good performance. I hope our company will no longer use this term anywhere.

10. Future investment/entrepreneurship trends?

Duan Yongping: This question is a bit difficult for me. I personally don't care much about cutting-edge things, I usually lag behind and invest after understanding good companies. Cutting-edge things are what companies like Apple focus on, what I do is find companies like Apple.

11. With so many mobile phone companies, why is Apple the most successful?

Duan Yongping: Apple is rare, it focuses on what it does. Apple has a pursuit beyond profit, which is to make the best products. Apple's culture is very strong, with a strict "Stop Doing List", it must satisfy users, it must make the best products. We don't compare ourselves with Apple, because having some functions better than Apple out of 1000 functions doesn't prove anything. It's like CBA basketball can't beat the NBA, saying we have kung fu, it's just talk.

12. The relationship between the social "Stop Doing List" and investment? Eddie Wu: I am anti-social, socializing is tiring and time-consuming. I have very few friends in casual social interactions, it seems like I know a lot of people, but it's actually difficult to get to know them deeply. In my free time, I prefer playing basketball. Investing is just a hobby for me, on average, I can beat the S&P.

13. Why is it said that "those who dare to be the last in the world will strive to be the first in the end"?

Eddie Wu: All experts dare to be the last, they just do it better than others. The success of our company is not accidental. By sticking to our "Stop Doing List", screening partners and suppliers, we will gradually build a good circle, which will be very valuable in the long run.

Daring to be the last refers to the product category, because guessing market demand is often difficult, but when others have already identified the demand, if you meet this demand, it becomes more certain. (Daring to be the last refers to the product category, striving to be the first in the end refers to the ability to do a good job with the product. In other words, daring to be the last refers to "doing the right thing", striving to be the first in the end refers to the ability to "do the right thing".)

14. Have you made any investment mistakes?

Eddie Wu: I haven't made mistakes in investing, but I have in speculation. (Actually, I have made mistakes in investing, but they were very minor and I may not have remembered them at the time.) When speculating on Baidu, I got caught in a short squeeze and lost 100 to 200 million US dollars.

I follow the logic of Warren Buffett: If I can't understand something, I don't touch it. I may miss out on many good opportunities, but I ensure that what I seize are the right ones.

When investing, follow Warren Buffett's logic: First look at the business model, understand how the company makes money. 95% of people focus on the market when investing, which means they don't understand investing. You must focus on the business. Companies are meant to make money.

15. When do you sell Apple, and why?

Eddie Wu: You don't need to sell a good company!

16. What improvements have you seen in your circle of competence since coming to the United States?

Eddie Wu: The circle of competence is not about drawing a circle on the ground with a golden hoop and staying inside, avoiding the monsters outside. The circle of competence is about being honest with yourself, knowing what you know and what you don't know. With this attitude, if I can understand something, then it falls within my circle of competence; otherwise, it doesn't.

Apple's $1 trillion market value? I never care about that, I only care about its ability to make money. When I buy a company, I don't plan to sell it unless its profitability changes, or there is a better target that I understand well and is priced low.

17. How do you view the entrepreneurial concepts of "persistence leads to hope" and "Stop Doing List"?

Eddie Wu: The "Stop Doing List" is about doing the right things. If you realize you're wrong, you should change immediately. This principle still applies to entrepreneurship. (It means you must persist in doing the right things and correct the wrong things as soon as possible!) As for how to do things right, that's at the method level and can be solved through learning.

If you don't know right from wrong, if you don't have a sense of right and wrong, then it's very difficult to achieve anything in this lifetime. A sense of right and wrong needs to be cultivated and maintained by oneself, there are no shortcuts. For example, smoking, many people don't quit smoking not because they don't know it's bad, but because they can't resist short-term temptations 18. Why not see the media?

Duan Yongping: I don't want to give the public the impression that I control the company and steal the CEO's sense of achievement. It's important not to steal their credit, because in fact, I haven't been on the front line for more than 10 years. If I were still the CEO, the company might not have done so well.

19. How do you view the differences in the entrepreneurial environment between China and the United States?

Duan Yongping: The environment in the United States is slightly better. It's harder to do business in China. After doing your own work, you still have to do the work of a policeman, a firefighter, a security guard, it's troublesome...

20. You advocate not borrowing money, not using margin, what if you miss opportunities?

Duan Yongping: Borrowing money and using margin makes you earn faster when you win, but lose even faster when you lose. If you always walk by the river, how can your shoes not get wet? Once your shoes get wet, they will be wet for a lifetime. Why take this risk? (Some opportunities are always meant to be missed, as long as you ensure that you seize the right ones, it's enough.) Most of our past competitors have disappeared, but we are still here, maybe the reason lies here.

21. How do you view the smartphone case industry?

Duan Yongping: I don't understand it. But I know that good things don't need promotion. Look at smartphones, they quickly became popular. If your product is not quickly embraced by users when launched, it's definitely not good enough. You must come back and think about your own issues.

22. Advice for the career development of newcomers in the workplace?

Duan Yongping: Do your job well, don't keep jumping around. Many people in Silicon Valley like to switch jobs, but working at Apple for 30 years is better than most startups.

23. How do you view entrepreneurship?

Duan Yongping: If you don't even understand what you are doing, it's impossible to make investors believe in you. Huang Zheng is particularly good at constantly asking what does this mean, what does that mean, focusing on the essence of the problem.

24. (What is) corporate culture?

Duan Yongping: Corporate culture consists of Mission, Vision, and Core Values. "Mission" is why the company was established; "Vision" is where we are going; "Core Values" are what is right and what is wrong.

Recruit qualified and suitable people. Suitable means cultural fit, qualified means capability. People whose values don't match, should be firmly rejected. Those who create trouble for the company are often qualified but not suitable. A group of suitable ordinary people together, with concerted efforts, can also achieve great things.

25. How do you view Chinese companies' love for taking shortcuts to overtake?

Duan Yongping: There is a saying in Alaska, "shortcut is the fastest way to get lost." There is no such thing as overtaking on a bend, focusing on the essence is the most important! Otherwise, even if you overtake, you will be overtaken back.

26. How to judge whether a stock price is cheap or not? Eddie Wu: This is a question that only those who focus on short-term market trends would ask. I don't consider this question. I focus on the long term and avoid things I don't understand. Any approach that involves trying to time the market may be wrong. I don't look at the market, I look at the business. If you say a certain stock is expensive, how do you know? Looking back 10 years from now, everything probably seems expensive. But looking back from 10 years in the future, if you can understand and find a company that is cheap, just buy it.

27. How to understand the "Stop Doing List"?

Eddie Wu: It mainly talks about doing the right things. It's not a skill or formula, but a way of thinking: if you realize you're wrong, stop immediately because the cost is minimal at that time. I can't tell you what's right or wrong, how to judge right or wrong, you have to accumulate that knowledge yourself.

You shouldn't deceive users, you shouldn't deceive investors, every word is a promise, you should know that. When you seek investment, if you say you have no business, no skills, nothing at all, then you might as well ask your dad for money. You must have something to show to investors. If you are not clear about what you want to do, how can investors trust you?

As for how to do things right, it takes time to develop skill sets (meaning there is a learning curve, you have to allow for mistakes). Persisting with the "Stop Doing List" is accumulated over time. Compared to OPPO and Apple, we are doing the same things right, but there may be some differences in doing things right. However, we have accumulated experience, we are better than most companies.

There are no shortcuts with the "Stop Doing List", you have to accumulate it yourself, understand it yourself. Stopping when you find something wrong is crucial, resisting short-term temptations is important.

28. How to better raise children in Silicon Valley?

Eddie Wu: The most important thing is to give children a sense of security. How? By providing quality time, high-quality companionship, and helping them make friends. Quality time means being together and putting away your phone.

Unconditional love is essential. Chinese people tend to love conditionally, saying "You got first place, Daddy loves you very much," these two sentences should never be said together. Chinese people also tend to praise children for getting first place, which can put pressure on them. Children might think: if I get second place, will you not love me? When I raise children, I try not to say "NO" to them as much as possible, except for matters of right and wrong, or boundaries, let children explore boldly.

29. How do you view Lao Ba (Jack Ma)?

Eddie Wu: Lao Ba is a very good person. He is genuinely kind and sincere to others. He is very wise, able to get to the essence of any complex problem with just a few words. He is so wise, successful, and kind to others, I have rarely seen such a person among Chinese entrepreneurs, and very few among American entrepreneurs 30. Why sell NetEase?

Duan Yongping: Because Ding Lei is like a big child, I don't feel at ease leaving so much money in his hands, although the stock price proves that I may have sold it wrong.

31. How do you view Tesla?

Duan Yongping: Munger said that Musk is a proven genius, his IQ may be 190, but he thinks he is 250. But to run a company, you must be rational. In my eyes, Tesla is a company with zero value, sooner or later it will be over. Its culture is very bad.

32. How to build long-term friendships?

Duan Yongping: It is about dealing with people sincerely. What I learned from Lao Ba is that the most important thing in a person's life is friendship. So be tolerant to friends, be kind, be honest. But he didn't say you need to have many friends, having a dozen good friends is enough.

33. How to pass on culture?

Duan Yongping: There is no special secret, it mainly depends on selection, finding like-minded people. Because you cannot convince those who do not believe in you. When you talk to someone who doesn't believe in you, you can see it in their eyes. Then it's about talking about it every year, every month, every day, and eliminating the unsuitable ones at the beginning of the year.

34. How to choose people, including partners and employees?

Duan Yongping: Finding the right person at once is luck. The key is to have standards, eliminate when necessary, and disband when necessary. Know when you are wrong, have the courage to stop. The earlier you stop, the smaller the cost.

35. Can you give an example of your "Stop Doing List"?

Duan Yongping: I never think about the present. I studied radio, but I didn't do it because it's not what I love to do. When I graduated from graduate school, the job I found said how many years it would take to become a department head, you could get a house in two years, and you could get points for chicken, duck, fish, and meat. But I wasn't interested. So I left. Later, I went to Foshan Radio Factory. At that time, this company with only a few hundred people recruited 100 undergraduates and 50 graduate students. Everyone was dissatisfied, many wanted to leave. After I left, Xiaobawang was created in two years. When I went back to see, those people were all still there (only one person left).

Many people say "I haven't found a better opportunity", but in fact, they lack the courage to stop doing the wrong things. So the meaning of stop doing is to stop immediately when you realize you are wrong, otherwise, two years later, you might still be in that bad place. I have always been thinking about long-term things. Many people are just spinning around for immediate benefits, and they will still be spinning there in 30 years.

36. Misunderstandings about China by the United States?

Duan Yongping: Overall, Americans have a good understanding of China. I support political correctness because if you are not politically correct, how can you be correct? The current president elected by the Americans is very confusing to me, but I believe it will eventually get better 37. What is the most important thing in (value) investment?

Eddie Wu: right business, right people, right price. This is what Warren Buffett said. The right business refers to the business model, and the right people refer to the corporate culture. Price is not that important, business and people are the most important. Culture is closely related to the founder. The business model is the way to make money, which you have to understand by yourself, I can't tell you. Just like if you don't play golf, I can't tell you the fun of it.

  1. How to persevere in entrepreneurship?

Eddie Wu: My understanding is very simple, if you can't persist, then you can't persist. What you persist in must be something you can't let go of, and you will know it by then.

  1. How do you view Bitcoin/blockchain?

Eddie Wu: I am not interested in things that do not generate cash flow. I don't understand blockchain, I don't look at it, and I can't invest in something I don't understand. But just because I don't understand it doesn't mean you can't understand it, you should invest in what you can understand.

  1. How to discover and maintain a calm mind?

Eddie Wu: It is not difficult to maintain because it is already there (something within oneself). However, Jack Ma once said, "It is difficult for ordinary people to have a calm mind, so a calm mind is also an extraordinary mind!" To discover, you have to learn from losses. Without a calm mind, you will stumble if you are not rational.

  1. How to find something you love to do?

Eddie Wu: If you always stay in a place you don't like, you may never know what you truly like. So when you realize you are doing the wrong thing, you should stop. Try more, explore. When you do what you love, there is no concept of overtime, because you will find ways to work.

  1. I think failure is inevitable, success is accidental, is that right?

Eddie Wu: Success definitely has reasons behind it.

  1. If you had the chance to live again, what would you do differently?

Eddie Wu: I don't know, I haven't thought about this question. Maybe drink a little less red wine?

  1. What do you most want to tell your son?

Eddie Wu: It's not about what you say, it's about what you do (the most important thing is what you do). (This is what Warren Buffett said)

  1. How to distinguish between right and wrong things?

Eddie Wu: You need time to think. You may think for a long time, and one day suddenly have a flash of insight to realize whether it's wrong or right. When we were thinking of the slogan for Xiao Ba Wang back then, it took us half a year to come up with it. Many people are busy all day long, they simply don't have time to think, and may never understand.

  1. How do you view the trade war?

Eddie Wu: If you look at it over 10 years, this thing will definitely pass. If the stock market really has a problem, with Apple having so much cash, it will be even more powerful, so this is the time to buy good companies.

  1. How did you find the mission of your company's products? Eddie Wu: From a product perspective, it is slowly explored, if something is found to be wrong, stop immediately. For example, Apple's charger, it has been talked about for a year, but it hasn't been released this year. If it hasn't been released, there must be unresolved issues. If there are unresolved issues, it shouldn't be released.

48. Men are afraid of choosing the wrong profession. In the future, what would you choose among what will be popular, what you are good at, and what you like?

Eddie Wu: If you know: what will be popular + what you are good at + what you like, then definitely choose that profession. The problem is it's hard to know, so prioritize what you like. Having a lot of money is not a good thing, because making money is a great pleasure, and if you have too much money, you lose an important pleasure. Having just enough money is fine, doing what you love is more important.

49. What is the next breakthrough in human-computer interaction?

Eddie Wu: I don't know. But machines are definitely getting stronger, humans have already lost in Go, and you can't beat machines in speculation either. However, in investment, machines can never beat humans because machines cannot understand companies.

50. How to deal with differential pricing (offering different prices to different customers)?

Eddie Wu: If prices are inconsistent, firstly, customers will eventually find out; secondly, if customers find out they can negotiate, they will try to bargain with you in every possible way, wasting a lot of your time, which is troublesome. Having consistent prices will save you a lot of trouble. The key in product development is to capture customer needs, not prices. You can look at Airbus's John Leahy. (One person defeated Boeing! Of course, it's still based on the product!)

51. What (advantage) of Huang Zheng made you invest in him?

Eddie Wu: I have been friends with Huang Zheng for over 10 years, I know him, I trust him!