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G&D: How did your unique experience as a Tian Square protest leader lead you to where you are today, running Himalaya Capital?

Li Lu (LL): When I first came to Columbia University, I was dirt poor. I did not choose to come here – I just ended up here because I had nowhere else to go, having just escaped from China after Tian. I was in a new country where I didn’t understand the language, didn’t know anybody, and didn’t have a penny to my name. So I was desperate and afraid. In retrospect, that is good inspira- tion for trying to figure out how to make money! I just wanted to know how to survive.

For the first couple of years, I really struggled with the language, but I eventually became much more comfortable. I always had this fear in the back of my mind of how I was going to make a living here. I didn’t even think about success at the time – I just wanted to pay my bills. I grew up in Com- munist China and never had much money to my name, and then all of a sudden I had giant student loans. So naturally I tried to make a buck or two.

One day, about two years after I arrived, a friend of mine who knew my issues said, “If you really want to make money you have to listen to this fellow. He truly knows how to make money.” I wasn’t sure what it was all about. I just remember thinking that there was a “buffet” involved. So I assumed that it was some kind of talk with a free lunch! I said it was a good combination – a free lunch plus a talk about how to make money. So I went.

“There are few people that switch in between or get it [value investing] gradually. They either get it right away or they don’t get it at all. I never really tried anything else. The first time I heard it, it just made sense; and I heard it from the best.”

To my dismay there was no lunch. [laughs] There was just a guy with the name “Buffett.”

Mr. Buffett really made a lot of sense during that talk. It was like a punch in my eyes. It was like I had just woken up and a light had switched on. His honesty came through right out of the gate. And I thought this fellow was just so intelligent – he could put very com- plex ideas into such simple terms. I was immediately drawn to value investing. By the time the lecture was over, I thought that this was what I was looking for; I could do this.

At the time, I couldn’t really start companies, and I didn’t want to work in a big company because of the differences in language and culture. Investing, on the other hand, sounded like it required a lot of reading and mathematics, hard work, and good judgment – I was confident that I could do those things well. And the fundamental principles of value investing appealed to me – buy good securities at a bargain price. If you’re wrong, you won’t lose a lot, but if you’re right you’re going to make a lot. It fit my personality and temperament very well. Warren used to say, “Value investing is like an inoculation (免疫) either it takes or it doesn’t.”

I totally agree with him. There are few people that switch in between or get it gradually. They either get it right away or they don’t get it at all. I never really tried anything else. The first time I heard it, it just made sense; and I heard it from the best. I guess it turned out better than a free lunch.

G&D: How did your investing process develop differently from Buffett’s?您投资风格的发展和巴菲特有何不同?

“There is some ement of a zero sum game in investing. If you y, somebody else has to sell. And when you sell, somebody has to buy. You can’t both right. You really want to be sure that you are better informed and better reasoned than the person on the other side of the trade. It is a competitive game, so you’re going to run into a lot of very intelligent, hardworking fellows.投资游戏中很重要的一部分就是做自己。因为投资中多多少少总有一些“零和博弈”的元素,所以你必须在这个过程中找到一个与自己个性相合的方式,并通过长时间努力取得优势。当你买入时,必然有人在卖出;反之亦然。两方中必定有一个人做了错误的决定。你必须要确定你比对手知道得更多,预测得更准确。这是一个竞争激烈的游戏,你会碰到很多既聪明又勤奋的人。

The only way to gain an edge is through long and hard work. Do what you love to do, so you just naturally do it or think about it all the time, even if you are relaxing, and even if you’re just walking in the park.Over time, you can accumulate a huge advantage if it comes naturally to you like this. The ones who really figure out their own style and stick to it and let their natural temperament take over will have a big advantage.在投资这场竞争游戏中取得优势的唯一方法就是在正确的道路上坚持不懈地努力工作。假如做的是你所热爱的事,你就会很自然地去做,即使是在放松状态下,例如在公园散步时,你也无时无刻不在思考着它。如果你找到了适合自己的方式,并且坚持下去,到达这种自然、自发地学习和思考的境界,随着时间的推移,你将会累积起巨大的优势。

The game of investing is a process of discovering: who you are, what you’re interested in, what you’re good at, what you love to do, then magnifying that until you gain a sizable edge over all the other people. When do you know you are really better? Charlie Munger always said, “I would not feel entitled to a view unless I could successfully argue against the best counterargument of the smartest opponent.” He is right about that.投资其实是一个发现自己的过程:我是谁,我的兴趣是什么,我擅长什么,喜欢做什么事,进而将这些优势不断强化放大,直到自己超越其他人,取得相当可观的优势。查理·芒格常说:“除非我能驳倒那些最聪明而和我持有相反观点的人,否则我不敢声称自己有了一个观点。”查理说的太对了!

Investing is about predicting the future, and the future is inherently unpredictable.
Therefore the only way you can do it better is to assess all the facts and truly know what you know and know what you don’t know.
That’s your probability edge. Nothing is 100%, but if you always swing when you have an overwhelmingly better edge, then over time, you will do very well.投资是对于未来的预测,然而未来在本质上却是无法预测的,所以预测就是概率。因此,你能比别人做得更好的唯一方式就是尽可能地掌握所有的事实,并且真正做到知己所知、知己所不知。这就是你的概率优势。没有什么事情是百分之百确定的,但是如果你每次挥杆(出手)时都拥有压倒性的优势,那么久而久之,你就能做得非常好。

G&D: How did you become friends with Charlie Munger? Do you have a friendship with Warren Buffett as well?

LL: Charlie and I have some very close mutual friends. Over time, we started talking about busi nesses, and then it evolved into a strong bond. I view him as a mentor, teacher, partner, and friend, all in one. I am also friendly with Warren, but not nearly as close as with Charlie because Warren is in Omaha. I admire him, and I learn more about him from his writings and deeds than through interpersonal interactions. I have a lot of interaction with Charlie, so I know him both as person and through his writing and personal deeds.

G&D: Do you have a favorite Charlie Munger quote?

LL: Oh, there are so many. We share a fundamental ethos about life and about approaching investing. So I learn more about how to conduct myself personally as much, if not more, than investing.

G&D: How would you define your circle of competence?您如何定义自己的能力圈?

LL: I let my own personal interests define my circle of competence. Obviously I know something about China, Asia, and America – those are things that I am really familiar with. I have also over the years expanded my horizon [in terms of analyzing businesses].我根据自己的兴趣来定义能力圈。显然,我对中国、亚洲和美国都有着一定程度的了解,这些是我比较熟悉的领域。这些年来我也在逐渐拓展自己的眼界。

I started out looking for cheap securities. When you start out, you really have no choice. You don’t have enough experience, and you don’t want to lose money, so what do you do? You end up buying dirt-cheap securities. But over time, if you are interested in businesses in addition to securities, you begin to become a student of businesses.刚开始投资时,我就是寻找廉价的证券。因为那时候也没什么其他选择,没有经验,又不想赔钱,那怎么办?只能买最便宜的股票。但是时间长了,如果你发现自己除了对股票感兴趣外,还对生意本身感兴趣,那你自然就会去研究生意。

Eventually, one thing leads to another and you begin to learn different businesses. You learn the DNAs of businesses, how they progress, and why they are so strong. Over time, I really fell in love with strong businesses. I morphed (变体) into finding strong businesses at bargain prices. I still have a streak in me that favors finding really cheap securities – I just can’t help it! 接下来你就开始去学习研究不同类型的生意。你会去学习生意的基因,它们如何演进,它们为什么如此强大。久而久之,我就爱上了那些强大(优质)的公司!于是我转而开始寻找那些价格优惠的优质公司。当然我的天性中还是有寻找廉价证券的倾向。

But over time, I’ve become more attracted to looking for great businesses that are inherently superior, more competitive, easier to predict, and with strong management teams. I’m just not quite satisfied with the secondary market. As I said, there is an aspect of the securities business that is zero-sum. And that’s the area in which I don’t feel entirely comfortable. I’m more interested, by my nature, in win-win situations.但随着时间的推移,寻找那些优质的公司对我更有吸引力了,这些公司更具有竞争力,更容易预测,并且有着强有力的管理团队和良好的公司文化。只在二级市场做投资已经无法满足我了。正如我之前所说,证券市场的一部分就是零和游戏。我对这个部分无法产生共鸣。从本性上来说,我对双赢的局面更感兴趣。

“The only way to gain an edge is through long and hard work. Do what you love to do, so you just naturally do it or think about it all the time, even if you are relaxing…Over time, you can accumulate a huge advantage if it comes naturally to you like this.”

I want to create wealth together with the business operators and employees when I invest. So that led me to venture businesses. I try to apply the principles of intelligent investing there, but I actually can contribute quite a bit, so it becomes a win-win situation.我想要和所投公司的经营者和员工一同创造财富,这驱使我在我的基金公司早期时开始做风险投资(创业投资)。我尽量遵循聪明投资的原则,而最终事实证明我也能对公司的发展贡献一些自己的力量,这就变成了双赢的局面。

Over my career, I’ve had the satisfaction of building a number of different venture businesses. Some of them became enormously successful, even after we sold them. You could say we sold them too early! I was the first investor in Capital IQ, and then look at what happened. If we would have kept it, we would have been far richer! It’s not like we didn’t make a lot of money in that investment. We did. [laughs] But I like it that way. I like to create some- thing that everybody finds useful. We created employment, and we created a beautiful product that’s sustainable, and everybody made a lot of money, even the people who bought the business from us.在我的职业生涯里,我有幸参与创建了几家不同的创业公司,其中有一些公司非常成功,在我们卖掉它们之后,依然经营得很好。你也许会说我们卖得太早了。我是全球市场财智(Capital IQ)的第一个投资人。如果当初没卖的话,我们可能会比现在富有得多!并不是说我们没在这个投资中赚到钱,我们还是赚到钱了(只是没那么多)。我觉得这样的结果挺好。我喜欢创造对每个人都有益处的局面:我们制造了就业机会,开发出一个优秀的、可持续发展的产品,每个人都从中受益,包括最终从我们手中买下全球市场财智的人(标普S&P)。

I like win-win situations. I do not complain about selling Capital IQ too early.
We made a lot of money on that investment, and we contributed a great deal. I remain friends with the founders. That aspect gave me enormous pleasure. But the venture side is hard to scale; you must put in a lot of effort. So, over time, I gradually moved into helping in a different way. Even in public securities, you can still be very helpful and con- structive. So, that’s who I am. I’m still learning, and I’m still interested. I’m still young, and still incredibly curious. So, who knows?
Hopefully, I will continue to gradually expand my circle of competence.我喜欢这种双赢局面。我从没抱怨过全球市场财智卖得太早,我们在全球市场财智上赚了很多钱,而且我们对它的发展也做出了很大贡献。更让我开心的是,至今我和公司创始人还一直是朋友。然而风险投资的问题是很难做大,你必须要投入大量的努力。所以慢慢地,我开始转向用一种不同的方式来帮助企业。我发现对那些上市公司,你也可以提供建设性的帮助。我就是这样,还在不停地学习,对事物充满兴趣。我还很年轻,有着强烈的好奇心。我希望能一直保持这种学习的劲头,继续扩大我的能力圈。

G&D: How were you able to figure out that Capital IQ would become so successful?

LL: In the beginning it was Bloomberg. We wanted to create something just like Bloomberg, and in the process, we grew to appreciate Bloomberg much more because it was so hard to compete with them. Then we realized the investment banking side was not fully penetrated.

So we basically applied what we learned about Bloomberg and created a similar product for the investment banking side. Over time, we also penetrated different businesses like private equity. We learned quickly that we couldn’t really compete with Bloomberg.

G&D: You don’t short stocks at Himalaya, correct?喜马拉雅基金会做空股票吗?

LL: That’s right; not any more. That change occurred nine years ago. Shorting was one of the worst mistakes I’ve made.我在九年前(2003年)就放弃了这个做法。可以说做空是我所犯过的最大错误之一。

G&D: Is your lack of a short book due to your desire to be a constructive third-party for companies and their management teams?是因为你想对所投资的公司带来建设性的帮助吗?

LL: Yes. But also, you can be 100% right, and you could still bankrupt yourself. That aspect of shorting just frustrated me too much! [laughs]是的。但还有一个原因是在做空的过程中,你即使是百分百正确,也可能把自己弄得破产,这一点是我最不喜欢的地方。

Three things about shorting make it a miserable busi- ness. On the long side, you have 100% downside but unlimited upside. On the short side, you have 100% upside and unlimited down- side. I do not like that math. Second, the best short has some element of fraud. However, a fraud can be perpetrated for a long time. Of course you bor- row to short, so they could really just wear you down. That’s why I could be 100% right and bankrupt at the same time. But, you know what, you go bankrupt first! Lastly, it screws up your mind. Shorts just grab your mind and take away from the concentrated effort that is required to do proper long investing. So, those are the three reasons why I just stay away from shorting.做空的三个特点决定了它会是一个很悲惨的生意:第一,如果做多,你下跌的空间是百分之百,而上涨的空间是无限的。如果做空的话,你上涨的空间只有百分之百,而下跌的空间是无限的。我很不喜欢这种算术。第二,那些最好的做空机会往往有着做假的元素在里面,作假很可能会长期存在。因为做空一定要通过借债(股票),这一点就足够把你拖垮。这就是为什么我说即使你在百分百正确的情况下也可能会破产。而且通常你在确定自己正确之前就已经破产了!最后一点,它会把你的思维都打乱。做空的想法会牢牢地占据你的大脑,分散你做多投资本该有的专注。所以,出于这三点原因,我就再也不去做空了。

It was a mistake on my part. I shorted for a couple of years. I don’t discard peo- ple who are really doing well at shorting – it’s just not me. If I want to add a fourth reason, it is that the economy overall has been really growing at a com- pounding rate for 200-300 years, ever since the mod- ern science technology era. So, naturally, the economic trend favors long positions rather than short.做空是我曾犯过的一个错误。我是有过两年做空经历的。我并不鄙视做空做得很好的人,只不过我不是这样的人。如果要我再加上一点原因,那就是,近200到300年内,自现代科技时代开启以来,人类的经济总体一直在复利式地持续增长,所以经济的发展趋势自然更有利于做多而不是做空。

But you cannot live life without making a mistake. Every time I make a mistake I learn something.当然人在一生中不可能不犯错,我只是想能从所犯的错误中学到一些东西。

G&D: How were you able to get Charlie Munger interested in a company like BYD [a Chinese company which manufactures electric cars, batteries, electronics and solar equipment] given that Berkshire Hathaway typically shies away from technology-oriented companies?

LL: I don’t think that Warren and Charlie are ideological(意识形态). Neither am I. It’s really how much you know. The story of BYD is relatively simple. This guy, who is a really terrific engineer, started the business from just a $300,000 loan with no additional money until the IPO. He created a company with $8 billion in revenue and 170,000 employees and tens of thousands of engineers. He solved a whole bunch of different problems. So you have to admit the record is impressive. They also happen to be in the right industry and the right environment, and they get the right support from the government. Their engineering culture consistently demonstrates its ability to tackle big, difficult problems. It works. So it’s hard not to be impressed by the record the guy has. At the time we invested, we had quite a bit of a margin of safety.

They play in a big field with open-ended possibilities and have a reasonable chance of being successful. As I said, nothing is a sure thing, but this strikes me as having as good of a chance as any. Charlie was equally impressed by the company, which then led to the investment. Berkshire is not ideologically against technology stocks. They’re just against anything they don’t feel comfortable with. They have that $11 billion investment in IBM, which, I can argue, is a technology company. But I can guarantee that’s not how they think about things. It has nothing to do with whether it’s a technology stock or not.

G&D: Buffett admitted in a 2009 Fortune article that he doesn’t really understand BYD.

LL: That is true. Warren and Charlie have a great partnership and Charlie knows more about BYD than Warren. But I would not bet against the collective track record of those two. It’s not that they don’t make errors from time to time. Everybody is capable of doing that. They have a few, but very, very few over a long investment career.

G&D: Do you see the quality of BYD cars improving?

LL: This company is a learning machine. Think about it – they really didn’t get into industry until 10 years ago. They didn’t produce their first car until eight years ago. They are in a market where every single international major brand is competing, with an all-out effort, because it’s such a big market. So they never had any home advantage whatsoever because China’s auto market started out completely open with everybody competing. Yet there’s a little car company with very little money, and, in less than 10 years, it’s selling more than half a million cars a year and has carved out a position for itself. You have to say, the record is not too bad, and so there’s something to it. They also have an engineering culture and a can-do spirit. They consistently demonstrate that they’re able to tackle really complex engineering problems and come up with very practical solutions faster, cheaper, and better than most other people. That is an advantage in the manufacturing economy.

G&D: Can you talk about your investment process?能谈谈您投资的过程吗?

LL: Ideas come to me from all sources, principally from reading and talking. I don’t discriminate how they come, as long as they are good ideas. You can recognize good ideas by reading a great deal and also by studying a lot of companies and constantly learning from intelligent people – hopefully more intelligent than you are, especially in their field.
I try to read as much as I can. I study all of the interesting and great companies, and I talk to a lot of intelligent people. You know what? In some of those readings or conversations, ideas just click. Then you do more research and then you get comfortable or you don’t get comfortable.


G&D: Are the people that you talk to fellow investors or are they people like customers, suppliers, and management?您一般是和投资界的同行聊天,还是顾客、供货商、管理层之类?

LL: All of them. I don’t talk to as many investors – very few. I am more interested in talking to people who are actually running businesses and entrepreneurs or CEOs or just good businessmen. I read all of the major newspaper publications and annual reports of the leading companies. I get a lot of ideas out of those too.


“You can recognize good ideas by reading a great deal and also by studying a lot of companies and constantly learning from intelligent people – hopefully more intelligent than you are, especially in their field.”

G&D: How do you assess if the management is being forthright with you? How useful is it to speak with the management?您如何评估公司的管理层是否诚实回答您的问题?与管理层交谈有多大用处?

LL: Well, management always has a big influence on your success, no matter how good or how bad the business is itself. Management is always part of the equation of making the company successful, so the quality of management always matters. But to assess that quality is not that easy. If you can’t assess the quality of management, you may have to make a decision in spite of that. That’s just part of the process. So you have to figure out other ways such as looking at the quality of the business, the valuation, or something else until you can justify an investment.无论生意本身好坏与否,管理层永远是公司成功等式的一部分,所以管理层的质量总是很重要。但是要评估管理层的质量并不容易。如果你无法判断管理层的质量,那这本身也是一个结论,你可以将这个结论和其他因素(如生意的质量、公司的估值等)一起考虑,作为决定投资与否的依据。

If you do have a way to assess the quality of the management team, either because you’re an a stute student of human psychology, or you have a special relationship with the people, then you’ll take that into consideration. Why wouldn’t you? The management team is part of what really makes a company.如果你可以正确评估一个管理层的质量,说明要么你非常敏锐,深谙人类心理学,要么就是你和那些人有特殊关系。如果是这样,你当然要把管理层的质量纳入你决定的过程。它会提高你预测的准确性,因为管理层是构成公司的一个重要部分。

But, it’s not that easy. It’s not that easy to have an in- depth, solid understanding of the management team. Very few people are able to do that. I admire people that say, “Hey, look. Whatever the information, whatever the kind of presentation they make, I will never be able to learn about man- agement beyond that. I know it’s a show for me, so I might as well just discard it.” I respect that.但是,要深入、准确地评估一个管理团队绝非易事,鲜有人能真正做到。所以我也很佩服一种人,他们有勇气说,“反正不管我得到多少信息,不管他们给我做多么漂亮的展示,我对管理层的了解也就止步于此。我知道这是场秀,所以我干脆完全不去考虑管理层的影响。”我很敬佩这种态度。

Investing is about intellectual honesty. You want to know what you know. You want to know, mostly, what you don’t know. If understanding the management team is not in the cards, it’s not in the cards.投资需要对知识的诚实,你需要知己所知,更重要的是需要知己所不知。如果对管理团队的了解不是你手里的一张牌,那它就不应该被纳入你的考量。

G&D: What is your domestic versus international allocation?您如何分配(美国)国内和海外的投资?

LL: I don’t have a preconceived notion about allocation. I let the opportunity dictate where I end up. I just happen to have more interest in Asia and the U.S., so that’s where I end up. I do not feel that interest in Europe. I do not feel that in Africa. But I approach it with an open mind. I want to really find the best com- pany at the best price, run by the best people and avail- able to me at the time I am looking. Those don’t necessarily always meet, and it’s OK.对于投资的地区分配,我并没有什么先入为主的标准,而是跟着机会和兴趣走。恰巧我对亚洲和美国更感兴趣,所以我的投资也在这两个地方。相比之下,我对欧洲和非洲就没有那么感兴趣,但还是以开放的心态关注它们。我的目标是找到那些由最优秀的人管理的最好的公司,并在市场上出现最好的价格时出手买入,长期持有。这些条件并不会总是同时满足,但没关系(你可以耐心等待)。

You start out by holding cash, and that is a pretty good opportunity cost, because it doesn’t go down. So any time you find an investment, it has to be an improvement on an overall risk-adjusted basis. You may find some very interesting things, and now you’ve got a basket of a few interesting securities plus cash.That is a pretty good opportunity cost, and the next time you add another security, it better make the portfolio better than the existing one. You just constantly improve your opportunity cost.


G&D: Is your fund open to new investors?

LL: The fund has been closed to new investors for nine years. However, we will open it up a bit this year. We have more opportunities than we have money around, but that’s rare. I usually don’t want to increase our size. My ambition has never been to run the largest fund. I never wanted to earn the most money out of a fund. I just wanted to have, by the time I finished my career, one of the best track records on a risk-adjusted basis. If I achieve that, I will feel very good about myself.

“That way we’re all in the same game together. … That ethos is what makes Charlie and Warren so special. They believe in fundamentally earned success.
That’s why, despite their enormous success, nobody criticizes them very much.”
rare. I usually don’t want to increase our size. My ambi- tion has never been to run the largest fund. I never wanted to earn the most money out of a fund. I just wanted to have, by the time I finished my career, one of the best track records on a risk-adjusted basis.
If I achieve that, I will feel very good about myself.

That’s my goal, and there-fore the compensation structure of the fund reflects that. Over time, I switched into the best compensation structure I knew in the industry, the original “Buffett partnership formula”. We don’t take any management fee. We provide a 6% return for free to our investors and then take 25% after that. I don’t invest anything outside of the fund. I put all of my investment capital into my funds. So it’s a true partnership.There are very few conflicts between the general partners and the limited partners.

That way we’re all in the same game together. I have zero incentive to take new money for the sake of taking new money because I don’t take things off the top. The minute that new money arrives, it begins to compound 6% on an annual basis against me, so I better be able to find something that is worthwhile and doing better. When I make money, I feel like I earn it, and when my investors make money, they earn it. It is just a better way to structure a business – you feel that everybody’s success is deserved. That ethos is what makes Charlie and Warren so special. They believe in fundamentally earned success. That’s why, despite their enormous suc- cess, nobody criticizes them very much. When you create the hundreds of billions in wealth for everybody while taking a salary of
$100,000 per year for more than 40 years, it’s hard to criticize them.

G&D: Are there industries that you completely stay away from?有什么行业是你绝对不会碰的吗?

LL: I’m not ideologically opposed to anything. I am against any ideology (反对任何意识形态). [laughs]

There are lots of things I don’t know. I’ll be the first one to admit. But it doesn’t mean that I’m not curious from time to time. Maybe I know some aspect of the story. That little aspect might even constitute the investment. I don’t know. I don’t want to rule it out, but I can say that when you present me an idea, I can quickly tell you whether it’s a “no” within a few minutes.

There are basically three buckets that Charlie has. “Yes”, “no”, or “too hard”. Most of the things fall in “too hard.” Some get a quick “yes” or “no”, but if it’s too hard, it’s too hard. So you end up not doing a lot. You end up really con- centrating on the ideas where you truly have the time and energy to fully understand the situation better than anybody.



G&D: How to you get comfortable with the risk/ reward of a high tech company like BYD that is undergoing pretty rapid techno- logical change? Do you think you have a good sense of what BYD will look like 10 years from now?

LL: Most businesses are subject to change if you stay with them long enough.
There’s not a single business that I know of that will never change. That’s the fascinating thing about business. Successful businesses have some combination of things that enable them to adapt to changes better than anyone else. In each situation, it’s slightly different.

“I think you want to avoid wrong decisions as much or more than you want to get it approximately right. If you avoid the wrong decisions, you’ll probably come out okay over time.”

Every company in today’s age is a technology company somehow, but the technology may not be on the cutting edge, and may not play an important role in the success or failure of the overall business.

Successful technology companies are the ones that are capable of reinventing themselves and dealing with change. Take the example of Intel. The whole business changes every 18 months.
Failure to change leads to quite a substantial disadvantage and yet they’re able to build their culture based on that change.

Take Samsung – their early memory chip business decreased in price by 1% every week, and yet they really developed a culture that precisely deals with that change. So when they apply the same culture to something like a cell phone, they get ahead very quickly.

Now they’re outselling Apple. So culture really plays an important role in those faster-changing environments, enabling certain companies to always surge ahead of everybody else.

G&D: Do you need to understand the technology on an engineering level to have a good sense of the risk/reward?

LL: It certainly is a plus, but not a must. If you were really a great engineer in the product the business is selling, obviously it’s a plus.
But it’s certainly not a must because no matter how good you are at a certain area, you’re not so good in other areas. The pace of change is such that whatever you are now specialized in will become obsolete. But that doesn’t disqualify you from making a judgment on how a company can develop a culture to deal with that. Successful companies are able to deal with change consistently by hiring the right people, building the right culture, and staying ahead of their competitors. That’s the aspect that really makes them successful. And that’s kind of a predictable aspect of businesses.

There is always a certain element that is unpredictable. And there is a certain element that is predictable. You want to have a little of both. But overall, I think you’re right. In a business that is subject to rapid change, it is a lot more difficult to make a reliable forecast. There is no question about that. But it doesn’t mean an investor cannot make a few predictions that could indicate that the odds are in your favor. You want to play when you feel very comfortable that the odds are in your favor. Many times, that’s searching among typically stable businesses where something has changed all of a sudden.

Take Eastman Kodak for example. It used to be one of the best companies; it invented photography. But look at where they are now. Take Bell Labs and AT&T. They used to really have all the power. They had monopoly businesses. Where are they now? Just a name. That is the nature of brutal capitalism. It’s the nature of the business. Things that appear to be predictable and stable are not. Things that don’t appear to be very stable actually turn out to be.

I think you want to avoid wrong decisions as much or more than you want to get it approximately right. If you avoid the wrong decisions, you’ll probably come out okay over time. But, I agree with you, it’s not easy and it’s not precise or a science at all. Hopefully one improves overtime.


“The most important thing in our business is intellectual honesty. What I mean is four different things:

  • know what you know,
  • know what you don’t know,
  • know what you don’t have to know,
  • and realize that there is always a possibility that ‘you don’t know that you don’t know.’”

G&D: How do you make your sell decisions?您如何作出卖出股票的决定?

LL: One should make sell decisions on one of three occasions.在三种情况下,你需要做卖出的决定。

1. if you make a mistake, sell as fast as you can, even if it’s a correct mistake. What do I mean by a correct mistake? Investing is a probability game. Let’s say you go into a situation with 90% confidence that things will work out one way and a 10% chance they work out another way, and that 10% event happens. You sell it. Then there’s a mistake that your analysis is completely wrong. You thought it was 99% one way but it was actually 99% the other way. When you realize that, sell as fast as you can. Hopefully at not too much of a loss, but even if it is a loss it doesn’t matter – you have to sell it.第一,如果你犯了个错误,那就尽快出手,哪怕这是一个正确的错误。那什么叫正确的错误?投资是一个概率游戏。我们假设情况是你有90%的把握,但是还有10%的其他可能性,结果那10%就是发生了,这就是正确的错误,此时你应该卖出。当然也可能你的思考分析完全错误了,你认为自己有90%的胜算,实际上刚好相反,一旦意识到是这种情况,你也应该马上卖出,最好这时还没有太大损失,但即便已经有了损失也不重要,因为你必须卖掉。

2. you want to sell is when the valuation swings way too much to the other end of the extreme. I don’t sell a security because it’s a little overvalued, but if it is way overboard on the other side into euphoria, then I will sell it. If you are right and hold a company for a long time, you have accumulated a large amount of unrealized gains. A big portion of those unrealized gains act like borrowings from the government interest free and legally. So when you sell that position, you take all the leverage and you take a bunch of the capital out, so your return on equity has just become a little less.第二种情况是股票的估值突然波动到了另一个极端。如果估值一下子高到了疯狂的程度,我也会考虑卖掉。我并不会卖掉一个略微被高估的股票。如果你的判断是正确的,且持有一个公司的股票已有了相当长的时间,你已经积累了很大一部分非兑现的收益。这些收益的很大一部分就像是从政府合法拿到的无息贷款,所以如果在这种情况下卖出了,你把(政府给你提供的)杠杆取消了,再抽出一部分资本,那么你的股本回报率就会略微下降。(这是因为资本升值税的原因。)

3. when to sell is when you find something that is better. Essentially, a portfolio as I said is opportunity cost. Your job as a portfolio manager is to constantly improve on your basket. You start with a high bar. You want to increase the bar higher and higher. You do that by constantly improving the opportunity costs; you find something better. Those are the three reasons that I would sell.第三种要卖出的情况是你发现了更好的机会。说到底,投资组合就是机会成本,我之前也有提到。作为一个投资经理,你的工作就是不断改进你的投资组合。你从很高的标准开始,并且不断继续提高这个标准。实现这个目标的方法就是不断发现更好的投资机会,不断优化机会成本。这就是我会卖出的三种可能性。

G&D: In your 16 years running Himalaya, you’ve experienced three major financial crises: the Asian
financial crisis of 1997, the dot com bubble burst in 2000, and the financial crisis of 2008. How have you navigated these crises as a fund manager, and what have you learned from them?在管理喜马拉雅基金的16年内,您经历了三次重大的金融危机:1997年亚洲金融危机,2000年互联网泡沫破裂和2008年金融危机。您是如何掌舵基金度过这些危机?从这些经历中您学到了什么?

LL: That’s an excellent question. You know every time that that happens, they always bill it as “once in a century,” except these major events happen every five years in my case. [laughs] What is interesting about crisis is that it puts your intellectually honesty to the test.每一次金融危机都被说成是“百年一遇”,虽然我的职业生涯中好像每五年就会碰到一次。这些危机的有趣之处在于它们可以检验你对知识诚实的程度。

The most important thing in our business is intellectual honesty. What I mean is four different things:

  • know what you know,
  • know what you don’t know,
  • know what you don’t have to know,
  • and realize that there is always a possibility that “you don’t know that you don’t know.

Those four things are distinctly different. In a crisis, things emerge that test you on all four categories.


For example, during the Asian financial crisis, all of the sudden the world was saying, “how much debt do these companies have?! Oh my goodness, they really have that much of a dependence on debt! Oh my God, the whole country could go down!” Everyone was constantly in crisis mode. All of the things come out that you don’t normally care about and normally don’t pay attention to. Normally you think, “Well, that has nothing to do with my investment in this company.” Then all of the sudden, you say, “Oh Jesus, it has everything to do with my company.” Well, you are right or you are wrong. That crisis will put those questions to the test.比如说,亚洲金融危机发生时,一夜之间所有人都在问:“这些公司到底有多少负债?天哪,它们居然负债这么多!整个国家都要完蛋了!”每个人都持续处在危机模式中,那些你平时不太在意或并不关注的事情一下子全冒出来了。要是往常,你会觉得:“这些问题和我投资的公司一点关系也没有。”身处危机之中,你会突然说:“天哪,这简直和我投资的公司息息相关啊!”当然,你可能是对的,可能是错的,危机自会检验。

“The most important thing in our business is intellectual honesty. What I mean is four different things: know what you know, know what you don’t know, know what you
don’t have to know, and realize that there is always a possibility that “you don’t know
that you don’t know.”

That’s why people freeze in the midst of a crisis. People freeze because they were not intellectually honest before. They never quite distinguished certain issues or questions and put them into the appropriate basket. If you make an overall judgment, for example, of how the U.S. is going to perform over time through ups and downs, and you go into it knowing that there is a possibility something much worse could happen. Maybe it’s small, but when it happens, it happens. At that time, the question becomes “Is it an unknown unknown,” or do you know that you don’t have to know? You absolutely will be asked that question.这就是为什么人们都会在危机中不知所措,因为他们之前对知识不够诚实。他们没有认真区分不同的问题,把它们放进合适的类别里。比方说,如果你要对美国经济的走势做一个整体的判断,你应该知道历史上有发生过更糟糕的情况,而且这些情况是可能再次发生的。这个可能性也许很小,但它一旦发生了,就势不可挡。到那时候真正的问题是:“这种情况是我不知道的未知吗?”或者“你知道自己并不需要知道这些吗?”你一定会面对这些问题的。

So the financial system might be in trouble. Yes, a business needs financing, but I suppose if life goes on, my business will be there, however it will end up. So the question then becomes, “Do I have to know how the financial system will sort out its problems for me to predict my business?” That’s the question and that’s the question that you want to answer before a financial crisis hits.是的,危机来临时,整个金融系统都可能遇到麻烦。是的,企业需要融资,但是我能确定的是只要日子还继续,我的生意就还在,危机总是会结束的。这时候要问的问题是:“我需要搞清楚金融系统如何解决自身问题之后才能预测我的生意吗?”这才是真正的问题,是你在金融危机影响到你之前就需要回答的问题。

If you can answer that question honestly and correctly, you will do more after the financial crisis. Christopher Davis’s grandfather used to say that you make the most money out of a bear market financial panic – you just don’t know it at the time. It’s always the case. Less intelligent investors will be sorted out. Intelligent investors are the ones who are always intellectually honest. They can distinctly know whether they know or they don’t know, and know what they don’t have to know, and that there exist unknown unknowns. If you can really put things into those categories correctly, you will pass the test. Otherwise, you will have gotten yourself in trouble.如果你能诚实并正确地回答这个问题,那么在危机到来之后你会有更多作为。克里斯托弗·戴维斯(Christopher Davis)的祖父曾经说过:“在熊市的恐慌中能赚到最多的钱,只是你当时意识不到罢了。”事实总是如此。那些不够聪明的投资者就会被淘汰出局。而聪明的投资者是那些一直对知识保持诚实态度的投资者。他们清楚地认识到自己知道什么,不知道什么,不需要知道什么,和总有一些自己不知道的未知。只要你总能把问题正确地划分到这四类里,你就能通过考验。否则你就会陷入困境。市场是一个发现人性弱点的机制,在金融危机到来时尤其如此。只有对知识完全诚实,才可能在市场中生存、发展、壮大。

G&D: In 2010 panel at Columbia Business School, you mentioned that Asia’s role in the global financial system is becoming increasingly important. Can you talk about this view for our readers?您在2010年哥伦比亚商学院论坛中提到亚洲在全球金融系统中会扮演越来越重要的角色。可以再详述一下这个观点吗?

LL: Asia will become an important economic force, not necessarily just in a financial sense. The financial part is a derivative of Asia’s overall economic performance. Asia, and particularly China, is shaping up to become a bigger economic force in our global marketplaces because of the sheer size of it and the path that they’re on.亚洲会成为重要的经济力量,这不只是在金融领域。金融的部分只是亚洲整体经济实力的一个衍生物。亚洲,尤其是中国,由于它的规模和目前发展的道路,正在成为全球市场中一支重要力量。

China is on a historic path of continuing to grow into a modern economy. They still have a long way to go, but they have come a long way from the starting point. Because of the enormity (庞大)of the size of China, it will have a huge impact in Asia and the rest of the world. So China and the U.S. together would make the Pacific Basin somewhat of an economic center the same way that the Atlantic Ocean was around Europe and the U.S. A lot of opportunity will emerge. That doesn’t mean that it’s a one-way street or a smooth pass. All sorts of things could happen. It doesn’t mean you’re going to make money guaranteed. But it does offer a tremendous amount of opportunity to those who can navigate this development. The importance of China cannot be ignored.中国正走在发展现代化经济的历史道路上,前路还很长,但是它从起点出发也已经走了很远很远。考虑到中国庞大的规模,它必然会对亚洲和世界产生巨大的影响。中美两国会形成一个环太平洋经济中心,就像曾经联结美洲和欧洲的环大西洋经济中心。这里蕴含很多商机,但不会是条单行道,也不会一帆风顺。各种各样的情况都有可能发生,你也不是百分之百能赚到钱。但对于那些能够掌握这一发展的人来说,有很多的机会在等待他们。中国的重要性不容忽视。

“China is so big. It has all sorts of extreme phenomena. Yes, there are ghost towns, but there are also towns that are utterly, utterly crowded … China is a case of contradiction, as it has always been, and will always be; you’ll always find evidence of every theory you want to prove.”

G&D: Do you have any concerns on a real estate bubble in China? We saw a 60 Minutes piece about the ghost cities in China, and it was very striking.您会担心中国的房地产泡沫吗?我们看到一段60分钟的有关中国“鬼城”的视频,非常触目惊心。

China is so big. It has all sorts of extreme phenomena. Yes, there are ghost towns, but there are also towns that are utterly, utterly crowded. I mean, every space is occupied, and there are towns seemingly out of nowhere that have an enormous number of high rises that are all occupied. I remember, twenty years ago that Pudong was viewed as a semi-ghost town. Today, you cannot help but be impressed by the economic vibrancy there.中国实在是太大了,所以存在各种极端的现象。是的,中国有一些“鬼城”,有人担心房地产泡沫,但中国也有一些城市人满为患,我说的是那种所有空间都被占满的拥挤。也有些曾经不为人知的城市,转眼就高楼云集,越来越多的人入住。我记得20年前,上海浦东也算是半个鬼城吧,但今天你不禁为它繁荣的经济所惊叹。

We live in Manhattan, but think about it: there are 10,000 high rises in Shanghai that are taller than thirty floors, multiple times that of Manhattan – that is enormous. Manhattan probably has the highest concentra- tion of high rises in the whole world other than Shanghai. The scary part is that China’s not done. So, I say China is a case of contradiction, as it has always been, and will always be;
you’ll always find evidence of every theory you want to prove.我们现在住在曼哈顿,曼哈顿恐怕是除了上海以外全世界高楼密度最大的地方。但是想想看,上海有一万座超过30层的高楼,是曼哈顿高楼数量的好几倍。更可怕的是,中国还在继续发展中。所以我说中国是个矛盾体,一直都是,以后也会是。你想证明任何理论,都能在中国找到论据。

But overall, the economy still has a long way to go. They still have a sense that this is their time. It doesn’t mean that they don’t have problems; they have an enormous amount of prob- lems, but so does America, and so did America over the last 200 years.If you go through the American Civil War, the country killed two percent of its population. And yet, not only was it rebuilt, but it was rebuilt at a furious pace. And it went through two great world wars. After World War II, if you thought Japan and Germany were doomed, boy were you wrong.但是总体来说,中国经济还有很长的路要走。中国知道现在还是属于自己的时代,但这并不意味着它没有任何问题,它的问题也很多。美国也一样有一堆问题,200年来,美国一直都是如此,有着很多问题。如果你了解美国内战的历史,就会知道当时美国在内战中损失了2%的人口。但是美国还是以惊人的速度得以重建。之后美国还经历了两次世界大战。同样地,如果你觉得二战之后的日本和德国会衰落,那你就大错特错了。

G&D: Do you think real estate has gotten a little ahead of itself where there would be a need for a correction, or do you think that demand will just catch up?

LL: I put that in the “too hard” basket. I also put in the basket of “I know I don’t have to know.” It certainly is “I don’t know”, but I also know that I don’t have to know! I don’t want those things to worry me.

G&D: How do you view the overall attractiveness of equities today?

LL: I also put that into “too hard” and “I know I don’t have to know.” I only think about it when things go to an extreme. I don’t foresee that as going to the ex- treme, either way. In that case, I know I don’t have to know.

“I pay attention to those macro trends only in the hope that I can have comfort that
they’re a tailwind as opposed to a headwind. Now, how much they can help if they’re a tailwind, or how much they can hurt if they’re in my face, I don’t know.”

G&D: A lot of smart people believe that renewable energy is the next big revolution. You’ve done a lot of work on battery technology and BYD, so is that something that you think about beyond batteries? What do you think the energy revolu- tion will look like?

LL: I pay attention to those macro trends only in the hope that I can have comfort that they’re a tailwind as opposed to a headwind. Now, how much they can help if they’re a tailwind, or how much they can hurt if they’re in my face, I don’t know. But I want such macro trends to be behind me rather than in front of me. So that’s the extent that I want to know mega trends.

But as a concerned citizen, I’m intellectually curious about it. But it doesn’t mean that I’ll be able to know for sure how a given development is going to come about. In fact, we don’t know, and that’s why the free market with millions of participants acting in their own self interests will figure out a way. To predict ahead of time is not easy, and the good thing is that you don’t have to be able to do that.

If such trends are at your back, that’s fabulous, especially if you don’t need them to be at your back. If they’re really a headwind, you do want to examine them a little more. So that is how I view this renewable energy issue. I know that at some point, human civilization will have to find something other than fossil fuels. We don’t have enough fossil fuels, and we need to preserve them for agricultural and food security reasons. We also can’t afford to have the weather deteriorating the way it has been over the last few decades. Eventually it will catch up to us.

So for multiple reasons I understand why we need to figure out alternatives to fossil fuels. But am I qualified to make an informed investment decision based on that now? Probably not. But if that one happened to be at my back, hey I’m all for it.

G&D: Do you have any advice for students who are interested in getting into investment management, especially for those readers who can’t go and listen to Warren Buffett speak during their lunch break?您可以给那些想从事投资管理的学生一些建议吗?

LL: If you do get a chance to meet Mr. Buffett, I’d run to it if I were you. I wouldn’t even take an airplane; I would just run to Omaha! [laughs]

Start by learning from the best – listening, studying, and reading. But the most important thing in understanding the investment business is by doing it.
There is no substitute to actually doing it. The best way to do it is to study one business inside and out for the purpose of making the investment – you may not actually invest. But having gone through the discipline of understanding one business as if you own 100% of that business is very valuable.一定要向最优秀的人学习:聆听、研究、阅读。但是理解投资最好的办法就是实践,没有比这更好的办法了。最好的实践方法是选一家公司,以要投资的心态把它彻头彻尾研究个透,虽然你可能并不会真放钱进去。但是从假设自己拥有公司100%股权的角度去彻底研究一家公司的过程是非常有价值的。

To start, take an easy-to-understand business. It could be a tiny business – a little concession store, a restaurant, or a small publicly traded company. It doesn’t matter. Understand one business and what really makes it tick: how it makes money, how it organizes its finances, how management makes its decisions, how it compares to the competi- tion, how it adjusts to the environment, how it invests extra cash, and how it finances the business.作为初学者,你可以选择一家容易理解的公司,可以是家很小的公司,比如街头便利店,一家餐厅,或者是一个小的上市公司,都无所谓。试着去理解一家公司,明白它是如何运转的:它如一家公司,明白它是如何运转的:它如何盈利,如何组织财务结构,管理层如何作出决策,和同行业内竞争对手相比有何异同,如何根据大环境调整自身,如何投资盈余的现金,如何融资等等。

“Start learning from the best — listening, studying and reading. But the most important thing in understanding the investment business is by doing it. There is no substitute for actually doing it.
The best way to do it is to study one business inside and out for the purpose of making the investment.”

You should understand every aspect of one business as if you own 100% but you don’t actually run it. This causes you to be desperate to understand every aspect to protect your investment. That will give you a sense of a disciplined approach. That’s how you truly understand business and investing. Warren always says that to be a good investor, you need to be a good businessman, and to be a good businessman, you need to be a good investor in terms of capital allocation.如果你拥有一家公司100%的股权,哪怕你不是经营者,你也会竭尽所能去了解这家公司的方方面面来保护你的投资。这样,你就知道怎样做好投资了。这样你才能真正看懂生意和投资。巴菲特常说,想成为好的投资人,你必须先成为一个好的生意人;想成为好的生意人,你也必须成为一个好的投资者来分配你的资本。

Start by understanding one thing within your control that you can understand inside and out. That is a terrific starting point. If you start from that basis, you are fundamentally in the right direction of becoming a great security analyst.从选择一家自己能力圈内的公司并透彻地研究它做起,这对初学者来说是个非常好的起点。如果你能从这个基础开始,你就走上成为一名优秀的证券分析师的正确道路了。

G&D: It was a pleasure speaking with you, Mr. Li.


Source:Graham & Doddsville – Issue 18 – Spring 2013_0.pdf (

Graham & Doddsville – Issue 18 – Spring 2013

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