Success once, twice, three times, or even ten times may involve an element of luck, but for Duan Yongping, who has sustained success and kept failures within a controllable range, it must be that he has seen and done something right on the level of the "great way."
Looking through Yongping's shares over the past 20 years on platforms like Xueqiu and NetEase Blog, I have compiled 100 excerpts into a document. It includes his long-term, multi-dimensional thoughts on business, management, investment, and cognition.
The great way is simple; it is not difficult to find that Duan Yongping's thoughts are straightforward principles, yet they hide "terrifying truths" upon deeper reflection.
About Business#
Running a business is like a diver; the fewer movements, the better.
An entrepreneur should focus 80% of their energy on 20% of the tasks, as these 20% will yield 80% of the benefits.
When I was CEO, I didn't have a time allocation chart, but I generally knew what was important. In short, do not let important matters become urgent.
Sometimes people ask me if I'm interested in a particular project, and I say I'm not interested without even asking.
I know my own capabilities and the scale of my business; I cannot afford to spread resources any thinner. I do not pursue opportunities that seem too good to be true.
Konosuke Matsushita once said that a business that does not make a profit is a sin, but the purpose of a business is not just to make a profit.
A business that does not make money is useless, regardless of its revenue.
Just like a non-profitable asset can sometimes be a burden, for example, building a hotel in a deserted area, costing 100 million, losing 5 million a year, with a replacement cost still at 100 million. Now, if I want to sell it for 50 million, who would want it?
So I coined the term "effective net assets." In other words, net assets that do not generate cash flow are essentially worthless (and sometimes even negative in value).
A good business model is simple: profits and net cash flow are always aligned, and competitors find it hard to take away. Think about whose business is hard to take away, and then think about why.
Needing many people (relative to revenue and profit) is a characteristic of a bad model.
Low prices are the easiest path, but also the hardest.
Unless absolutely necessary, using price as a weapon is always wrong. Few understand that low prices do not expand market share; being forced to lower prices merely helps maintain market share.
Companies that pursue "cost performance" are mostly looking for excuses for their low prices. Long-lasting companies probably do not emphasize the concept of "cost performance." The public has a scale in their hearts: good goods are not cheap.
If you can do one thing well, why do you want to do many things poorly?
How can you change the status of Moutai in the hearts of Chinese people? By pushing out more cheap non-53-degree liquor, including Moutai beer, red wine, even Moutai rice wine, Moutai mineral water, Moutai hotels, Moutai phones, Moutai air conditioners, and speeding up the launch, abandoning the five-year factory rule, and ignoring counterfeit liquor... In ten years, Moutai's status should be completely different.
"Time is a friend of excellent companies and an enemy of mediocre companies." You might think this principle is bland, but I learned it through profound lessons. — Quote: Buffett
Corporate culture refers to the pursuit of "above profit." "Above profit" and "beyond profit" seem to have a slight difference; "beyond profit" can be understood as a pursuit different from profit, while the purpose of "above profit" seems to be different.
It is hard to judge whether a corporate culture is good, but it is much easier to see a bad corporate culture.
When I was in the U.S., I went to the airport to pick up a colleague from BBK, expecting to wait for an hour, so I put in an hour's worth of parking coins. As a result, the colleague arrived half an hour early.
This raises a question: should I continue waiting in the car for that extra half hour or waste the extra coins? The conclusion is obvious; in real life, I would definitely drive away.
However, in actual decision-making, many people make the foolish mistake of continuing to wait: "I have already invested tens of millions in this; how can I stop? To save these sunk costs, I will invest another tens of millions," knowing full well that it is wrong yet persisting, leading to even worse outcomes.
On principled issues, one cannot detach from the nature of things; right is right, wrong is wrong, and right and wrong should not yield to interests.
I often think of a company from a personified perspective: I do not want to deal with people I do not want to invest in.
I avoid any company that claims it wants to achieve a certain market value.
Hiring external consultants to conduct strategic assessments of one's own company is certainly an interesting endeavor. It is hard to understand how someone can help when you do not even know what strategy to use, regardless of who they are.
In the case of an outsider being clear, they might point out mistakes, but teaching oneself what to do is likely impossible. Additionally, letting problems find problems is unlikely to yield results.
If I believe a company is dishonest, I will not engage with it. The taboo areas are twofold: poor business model and poor corporate culture.
A typical characteristic of a poor corporate culture is frequently telling lies; you only need to look at how many lies they have told in the past to understand.
Here’s a little secret: anything that is priced fairly and not negotiable is good. The ability to negotiate is actually a very shortsighted and costly behavior for sellers.
The high cost refers to the inability to authorize and the potential for management loopholes, while shortsighted means that if bargaining is possible, it encourages repeat customers to haggle. For customers, any bargaining makes them feel they might be "losing out" because they think the price is still not low enough.
So, we stopped bargaining over 20 years ago. The benefits of not bargaining are simply too many; everyone should think about it.
Consumers, in the long run, are a very smart group. So-called marketing is just one aspect for a company, akin to a plank in a barrel.
Anyone who thinks a company is good because of good marketing is as ridiculous as believing a water-holding barrel is good because it has a plank called "marketing."
021.
If internationalization means learning good things from around the world, that’s fine. However, if it means desperately going to other countries to do business, it can be quite dangerous for most Chinese companies.
The benefit of debt is that it can lead to faster development. The benefit of not being in debt is that it allows for longer survival. Generally speaking, banks only lend money when they confirm you do not need it.
Be cautious during expansion. I call this "sufficient minimum growth speed," which balances sufficiency and safety. Most people use what they call maximum speed during expansion, and one careless move can lead to disaster.
For example, when driving to work, who would say, "Drive faster and crash"? Family members always tell you to drive slowly and pay attention to safety; they are not worried about you reaching your destination.
However, many media, the public, and even many companies have this mentality, encouraging fast driving and promoting speed, saying it’s okay to crash as long as you drive fast. How can one act like that?
It is difficult for those who do not understand business to understand business, just as it is hard for those who do not understand this sentence to grasp its meaning.
About Management#
The term culture can basically be interpreted as "things that lead to failure."
I have always believed that department heads who constantly force overtime have management issues, and company owners who do the same also have management problems.
Wolf culture will ultimately lose to human culture.
Training is expensive, but the cost of not training is even higher. Companies that do not understand this will not go far.
Old Buffett quoted Peter Lynch, saying that investments should be made in businesses that even a fool can manage, because sooner or later a fool will manage them. The implication is to buy businesses with good models, but Buffett still emphasizes that he hopes for a good management team.
Logically, two turkeys combined will not turn into an eagle.
The suitability of talent is often more important than mere qualification.
I often see reports of people offering large sums to incentivize employees, and there are even claims of people carrying money to the sidelines during games.
I do not know if it is true that "under heavy rewards, there will be brave men," but relying on giving more money to employees in business operations does not actually motivate them.
Money is actually a "health factor," not a "motivational factor"; it is something that is useless in excess and necessary in deficiency.
For example, if employees are already working hard, giving them more money will not make them work harder, but giving them less will lead to significant "destructive power." Therefore, how much to give reflects fairness.
The notion of giving employees "red envelopes" by certain so-called bosses is problematic because this "red envelope" is actually what employees should receive. I really dislike that "bestowal" feeling.
I remember in the early days at Subor, when the company was still small, I personally handed out year-end bonuses to many colleagues one by one. Sometimes someone would say, "Thank you, boss," and I would seriously say that the company should thank everyone for their hard work over the year. This is not just politeness.
In a company's failure, the entrepreneur bears the main responsibility; in a company's success, the credit definitely belongs to everyone.
I am an opposition figure in the company; I almost raise objections to everything. If people are not afraid of my objections, I will feel more at ease in whatever I do. What I fear most is when the boss says something and everyone says, "Good."
In any company where employees are nervous around leaders, problems will arise over time. Because employees in such companies often become irresponsible, hoping to leave decisions to superiors, which gradually lowers efficiency.
Unless the products of such companies are very focused, and the big boss can indeed oversee all major aspects, otherwise, problems will arise sooner or later. I think the issues Japanese companies have faced in some industries in recent years stem from this reason.
When a department in a company emphasizes that it is the most important, that department is often the weakest.
In my personal understanding, there is no absolute fairness—only fairness that everyone feels is fair.
As the rule-maker, the most important thing is to have a sense of fairness. Fairness does not equal equality, nor is it egalitarianism.
The key to delegation is the ability to tolerate mistakes made in the process of "doing things right." My personal understanding is that if I can make mistakes doing the same thing, why can’t others?
In some companies, if losses are caused by the owner's own reasons, they feel it is normal; but if losses are caused by subordinates, they often feel distressed.
I am someone who can equate the money lost by others with the money lost by myself; this tolerance is crucial for establishing a healthy corporate culture.
Only by having been in reliable places can one understand what unreliability is; the reverse does not hold.
If there are rules in an organization that everyone does not follow, in the long run, it encourages everyone not to follow the rules they set, leading to significant future troubles—like a common intersection without traffic police or traffic lights.
The approach to this is quite simple: either enforce your rules or abolish the unenforceable ones; it is best not to have a middle ground, otherwise, everyone will be very busy.
Even the best driver will find it hard to drive a bad car.
About Investment#
In fact, value investing is the only path to investment; there are no shortcuts or tricks.
If you want to take the easy path, I assure you, it is longer and more painful than the difficult path.
Many people can make themselves uncomfortable regardless of whether it is a bear or bull market.
Investment faith refers to: believing that in the long run, the stock market is a weighing machine; for those without faith, the stock market is always a voting machine.
"The worst investment method" is to talk about value investing while engaging in speculative activities.
Speculation can be a lot of fun, just like occasionally going to a casino, as long as you are prepared to lose money.
I often see people stepping outside their circle of competence, comforting themselves with the idea that "expanding the circle of competence" requires paying tuition. Most of those who lose money in the stock market long-term belong to those who do not know how big their circle of competence is.
In fact, everyone has a speculative heart, which is why faith is needed. My understanding of faith is "doing the right thing, doing things right," or knowing that if something is "wrong," do not do it.
Is there anyone who knowingly does wrong things? Just look around at how many people smoke, and you will understand. People love doing "wrong things" because these often come with short-term temptations.
What is most important for Buffett's success today is "not doing certain things."
I asked Buffett what one should not do in investing. He told me: do not short-sell, do not borrow money, and most importantly, do not engage in things you do not understand. The basic principle of investing is: do not invest in what you do not understand!
I find that people and companies that "do the wrong things" often continue to "do the wrong things" after they have survived by luck, much like a con artist who, after being caught, believes their con was not good enough and seeks to improve their con skills.
Doing the right thing means—when you discover a mistake, correct it as soon as possible; no matter the cost, it is the smallest price to pay.
Mistakes made in the process of doing the right thing should be strictly distinguished from the results caused by doing the wrong thing.
If you still do not understand, just look at what those who have always been smart but have not succeeded have been busy with over the years.
What is most important in investing? Right business, right people, right price (the right business model, the right corporate culture, a reasonable price). This is what Buffett said. Price is not that important; business and people are the most important.
My understanding of investing can be summarized as buying stocks means buying companies, and buying companies means buying the future cash flows of the company discounted, period!
Discounting future cash flows is not a calculation formula; it is merely a way of thinking. Munger said he has never seen Buffett calculate; I have not seriously calculated either; it is all "rough estimates." Just like when Yao Ming stands there, everyone can see he weighs more than I do; do we need a scale to know?
Buying stocks means buying companies, regardless of whether they are publicly listed. Just imagine this company as a private company, and without the fluctuation of stock prices, you will understand.
However, most people probably cannot do this. Objectively speaking, if you cannot view a company as a private company for investment, most will end up losing money.
When I buy stocks, I always assume that if I had enough money, would I buy the entire company?
There is a saying: "If you do not plan to hold a stock for ten years, why hold it for ten days?" This does not mean that the stock you buy must be held for ten years, but if you believe that a company will definitely not be good in ten years, you should not buy it now.
The so-called margin of safety should refer to one's understanding of the company, not the price.
Stocks are "priced" by each buyer themselves; you can only buy when you feel it is cheap, which is actually unrelated to the market or others. Once you can understand this sentence, your stock investment career will likely have a good chance of continuing to make money.
Buying stocks has nothing to do with how much that stock was worth in the past, just as selling stocks has nothing to do with the buying cost.
The simplest standard for understanding a company is that you do not feel the need to ask others, "Do I understand this company?"
True investors are absolutely "unconcerned with others"; their focus is solely on the enterprise, and they do not care whether others are buying; they hope others do not buy.
Focus on the business, not the stock price.
I remember a reporter once asked me why I had the courage to buy NetEase back then. I said, "If something worth 10 dollars is being sold for 1 dollar, what courage do you need?"
This statement applies here as well: when someone insists on selling gold at the price of copper, you do not need courage; you just need to confirm that it is indeed gold.
However, when you do not even know what you are buying, that can indeed be a bit difficult, and at such times, you will look around at others' reactions.
Thus, speculation requires courage, while investment does not; in other words, when you need courage, you are in danger.
In fact, every stock has only one true buyer, which is the company itself.
No one can change the fact that over 85% of people in the stock market will lose money. If you insist on my advice, it would be best to stay away from the stock market, at least to avoid losing money; this advice can help 85%-90% of people in the stock market.
However, I know that no one will listen to this advice. The problem is that no one knows who those 85% are.
Things that seem free are often the most expensive, and things that seem cheap are often not cheap. This applies to buying things and often to investing as well.
Investment mentality should not be related to size. If you think of yourself as a small investor, you are likely to remain a small investor.
Golf has many similarities to investing. For example, the principles of swinging are very simple: 1. You cannot learn it, but you do not know it; 2. You often forget the principles while playing; 3. It is hard to maintain a calm mind to stick to the principles.
I hope you can understand that putting more eggs in more baskets is actually the best way to effectively reduce risk, even though it is very difficult to grasp this concept.
A long time ago, someone told me that the stock market is a casino; I said it is not, but they insisted it is.
I suddenly realized: for those who say the stock market is a casino, it is indeed a casino.
In fact, Buffett has not taught us anything. If we did not understand it in the first place, no one can teach us.
About Cognition#
Lack of patience is a manifestation of insufficient rationality.
Ordinary people generally find it hard to have an ordinary mind. An ordinary mind is actually an extraordinary mind because it is not easy to have.
An ordinary mind means returning to the starting point to consider everything. If you are not concerned with the essence of things, it is normal not to have an ordinary mind. Conversely, if you focus solely on the essence of things, an ordinary mind will naturally be there.
Many years ago, I played a game of Go with Hua Yigang, and there was a move that made me feel very uncomfortable. During the review, I asked him why I felt wrong no matter how I played.
He then told me that it did not matter how I played here because I had made a mistake earlier.
The difference between experts and other players lies in the lower error rate, not in how many good shots they can make.
Many so-called impressive people are simply those who have been diligently doing what they should be doing; it is hard to see where their impressiveness lies by looking at each individual task. Impressiveness is accumulated.
Knowing and believing in one's bones are two completely different things.
Not knowing is not easy; fearing to act is even harder.
We do not know "what we do not know."
Knowing how big your circle of competence is often matters much more than how big your circle of competence actually is.
A circle of competence is not drawn with a golden hoop on the ground, saying to stay inside and avoid going out because there are monsters outside. A circle of competence is: being honest with oneself, knowing what you know and what you do not know.
With this attitude, if you can understand something, then it is within your circle of competence; otherwise, it is not.
Do as much as your ability allows, rather than relying on courage.
Few are willing to simplify; most people think that it seems to lack sophistication, just like buying Moutai seems meaningless.
Learning to be simple is actually not simple. I understand very few businesses, and the difference between me and many others is that I admit I know little, which makes it simpler.
Simplicity and ease are completely different things. For example, a good golfer needs to practice for about 8-10 hours a day, year after year; it is simple yet tedious but absolutely not easy.
Many "smart" people attribute others' success or their own lack of success to luck or "accidents," and they always find clever ways to convince themselves that this is indeed the case. The saying in "Kung Fu Panda 1," "there are no accidents," is quite reasonable.
If you do not constantly think about being extraordinary, the chances of making mistakes will decrease, and inadvertently being extraordinary may become possible. What I mean by not being extraordinary is not that the outcome is not extraordinary, but that you should not always think about being extraordinary. If you focus on the essence of things, there will always be opportunities to be extraordinary.
Those who can play golf probably know that whenever you want to hit further, it is the easiest time to make mistakes.
I suddenly recalled a saying from Buffett: if you are in a pit, at least do not dig deeper. Just look at how many people are digging pits for themselves to understand.
The courage to face reality rationally sometimes still pays off.
If you can think a few years ahead, the difficulty of (decision-making) will often decrease significantly.
The concept of "the way" is indeed difficult to teach; it must rely on personal enlightenment. Those who have no understanding of the way are useless to talk to.
Most people (often including myself) are not easily open-minded; it is hard to accept things that differ from what they previously understood. Even if the other party does well, they always find excuses not to learn from them, which is quite interesting.
Sometimes I find it strange that if someone is already very successful, I can understand their reluctance to accept new things because they have enough successful experiences and understanding.
In reality, I see the opposite situation; those who are not open-minded are often those who are not very successful. For example, someone who has traded stocks for 30 years without making a profit, when I mention Buffett, they would actually say... blah blah.
Change is not easy, but any time may be a good opportunity.
Giving up is not for the sake of gaining. I once used the phrase "what is borrowed must be returned; borrowing again is not difficult" to illustrate the meaning of being principled. "What is borrowed must be returned" is principled, but "borrowing again is not difficult" is actually utilitarian. When you no longer think about "borrowing again is not difficult," you truly become "principled."
Credibility is not just talk; you only know when you have to pay the price whether you are a person of integrity. Anyone can "talk" about credibility, but when it comes to "keeping" credibility, many people fail.
Kindness is not about holding a snake in your arms. Kindness is most reflected in not doing evil.
Generally speaking, evil people have their own evildoers; the most important thing is to stay away from them.
I do not think I am very harsh on others, but if someone messes something up, I will tell them face to face. Honesty is my responsibility. I know what I am saying, and the facts prove that I am usually right. That is the culture I try to create.
We are brutally honest with each other. Anyone can tell me they think I am a pile of dog poop, and I can say the same to them. We have had some intense arguments, shouting at each other; that can be said to be my best time.
The degree of fear is inversely proportional to the degree of understanding.
Speaking of loneliness, it reminds me of when I bought NetEase; from the beginning of my purchases until NetEase fell below 1 dollar for "three months," during those two months, perhaps half of the buy orders were mine.
At that time, I indeed felt very lonely, especially on the last day, when I bought nearly 500,000 shares at once. It is said that those selling that day were afraid of being delisted after three months. The buyer's thought was very simple: they believed they were buying the company, and whether it was listed or not did not matter.
Loneliness can indeed be priceless at times.
The complete saying "dare to be the last in the world" is "dare to be the last, and strive to be first among the last." Places where one cannot strive to be first among the last without capability should absolutely be avoided.
Not listening to the advice of elders leads to suffering now and later. After reading this sentence, most people still will not listen.
Being able to learn from one's own mistakes is already remarkable; being able to learn from others' mistakes is genius.
Pure idealists do not go far, and pure realists do not achieve greatness.
What motivates me? I believe most creators want to express gratitude for the achievements we benefit from that were made by those before us. I did not invent the language or mathematics I use; I do not cook most of my food, and I have never made a single piece of clothing.
Everything I do relies on other members of humanity and their contributions and achievements. Many of us want to give back to society and add a little something to the long river of history.
We can only express this in ways that most people understand—because we cannot write songs like Bob Dylan or plays like Tom Stoppard.
We try to express our deep feelings with the limited talents we have, to express our gratitude for all the contributions of those before us, to add something to the long river of history. That is what drives me.
As Bob Dylan said, if you are not busy seeking to live, you are busy seeking to die.
I hope you do not expect someone to explain something to you in one sentence.