저자: LiLu · 외국인
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결론: 이 강연은 개별 종목·자산의 1~3개월 가격 방향에 대한 예측을 거의 담지 않고, 가치투자의 원칙과 투자 철학(투자 vs 투기, 복리, 마음가짐)을 다룬다. [강연의 핵심 주장] - 가치투자의 기본 원칙은 네 가지: 주식은 기업의 소유권이다, 시장은 나를 섬기는 것이지 나를 지시하는 것이 아니다, 투자는 불확실한 미래를 예측하는 것이라 확률을 다루므로 안전마진이 필요하다, 장기 학습으로 자신의 능력범위(circle of competence)를 확립하고 그 안에서만 투자한다. - 원칙 자체는 단순하지만 실천하는 사람은 시장 참여자의 약 5% 이하라고 주장한다. 지식과 행동의 일치가 어렵다는 점이 강조된다. - 미스터 마켓 개념: 그레이엄의 비유로, 시장은 매일 가격을 외치는 조울증적 동업자이며 투자자는 그가 극단적으로 흥분하거나 우울할 때 이용하면 된다. 다만 실제 현장에서는 상대방이 더 똑똑하고 돈과 권력이 많아 보여 이 관점을 유지하기 어렵다고 설명한다. - 능력범위 확립의 어려움: 시장이 급변할 때 내가 옳은지 남이 옳은지 어떻게 아는가라는 질문을 던지며, 장기 공부와 자기 한계 인식이 필요하다고 말한다. [투자 vs 투기] - 주식시장 역사: 네덜란드 동인도회사 등에서 시작해 자본주의와 함께 복리 성장 구조를 만들었다. 기업이 장기적으로 성장하는 경제에서는 투자자의 수익도 복리로 커진다. - 투자는 기업의 장기 실적을 예측하고, 투기는 단기에 타인의 행동을 예측한다. 투기의 전체 결과는 제로섬이라 모든 투기자의 순손익 합은 0이라고 주장한다. - 투기는 필요악이지만 버블이 커지면 사회에 해를 끼친다(2008~2009 금융위기 언급). - 자산관리 업계는 정보 비대칭을 이용해 '무지세'를 걷는 구조이며, 장기 성과가 없는 전략이 많다고 비판한다. 불법적인 선취매(front running)로 단기 수익을 내는 경우도 언급한다. [투자자의 성품과 생활 방식] - 워런 버핏과 찰리 멍거의 사례를 들어 성품(temperament)의 중요성을 강조한다. 욕심과 압박이 없는 생활, 관리보수 구조(예: 일정 수익률 이하 무료, 초과분에 대해서만 성과보수), 고객 선별, win-win 관계를 제시한다. - 행복은 나를 사랑하는 사람이 실제로 나를 사랑하는 것이라는 버핏의 정의를 인용하며, 다른 사람과 비교하지 않고 자신의 속도로 사는 것이 중요하다고 말한다. - 좋은 투자자는 기다림 속에서 자연히 찾아온다며, 처음에는 자기 돈과 소수 지인의 돈으로 시작해도 괜찮다는 조언을 한다. [복리와 장기 관점] - 복리의 힘을 강조: 연 6~7% 성장도 수십 년이면 엄청난 배수가 되며, 중국의 40년 개혁개방 성장을 예로 든다. - 골프 비유: 조급하면 망친다. 평정심을 유지하는 것이 장기 성과의 핵심이다. [출연자 전망(자산별)] - 발언에서 삼성전자, SK하이닉스, 금, 엔비디아, 비트코인, 금리·환율 등 개별 자산에 대한 1~3개월 방향 예측은 확인되지 않았다. - 따라서 대상 자산에 대한 단기 예측 발언은 없다. [리스크·조건] - 강연은 특정 종목이나 시점의 매매를 권유하지 않으며, 단기 시장 예측의 불확실성과 투기의 제로섬 성격을 경고한다.
다듬은 글
If you stick to it for 5 years, you can basically continue. So, I'm very happy to have the opportunity to come back to Professor Zhang Lei Hua's class after 5 years. First of all, yesterday was Thanksgiving in the United States, and today is actually Thanksgiving in the United States. So, I would like to first thank Professor Zhang Lei Hua, our Mr.
Gene Chang from Himalaya Capital, and all the supporters and students here for their pursuit of value investing. So, I said that after 5 years, this is my first class, which is still a bit regretful. In the first class, we mainly talked about the basic theory of value investing, but value investing itself is a practical discipline.
So, actually, we didn't talk enough about its practice in the first class. So, this time, our class, mainly this lecture, mainly talks about practical issues in value investing. There are actually not too many basic concepts and principles of value investing, only four in total. One is that the stock is actually ownership.
The second concept is that the market exists to serve you, not to guide you. The third one is that our investment is mainly about predicting the future, and the future is unpredictable. So, what we get is mainly probability. So, we need some margin of safety in our investments. The fourth one is that you have to establish your own circle of competence through long-term study, and then invest within the circle of competence.
This is such a basic thinking framework. In fact, the logic is very simple and clear, and it is not difficult to understand. And many people actually know it, especially because the nearly 60 years of success of Mr. Warren Buffett, the most famous practitioner of value investing, has attracted phenomenal attention around the world.
So, the question is, under such a situation that everyone understands, why are there so few actual practitioners of value investing? In fact, I think no more than about 5% of market participants are true value investors. So, today we're mainly talking about the unity of knowledge and action, where is easier said than done.
Everyone is asking, why they encountered this or that problem in practice, and then, after encountering it, they will be attracted in other directions. Then, let's look at these four concepts. The first concept is actually an institutional concept. If equity, stocks, can become part of ownership, this is actually a problem of the system, a market, a country.
If he is willing to really protect private property rights, he will be willing to protect private property rights, the use of property rights. If he can't use it, it hardly becomes a real right. Still not working? It's still a little small, so I can't hear it. Oh, if that doesn't work, I'll just use the microphone.
Clamped where? So, it can only be like this. Okay, let's use it. Come. Is this better now? Good. Sorry, sorry. This is already unbearable. Right. So, that is but if a property right cannot be exchanged, it is difficult for it to become a property right. For example, cash is a property right because we can spend it at any time and turn it into what we want.
Therefore, the protection of equity exchange is indeed a big indicator of whether a society is willing to protect property rights and private property rights. It can do this. This is a social issue and has nothing to do with us investors. Of course, if society is willing to allow the system to exist, then of course value investing will exist.
So far in society, we have seen that it is indeed possible. The first one is that there is no problem. Then about margin of safety, it is actually a methodological issue and there is no special ambiguity. So, it seems that the problem is mainly in the assumptions of our Mr. Market and the construction of circle of competence.
The main difficulties lie in these two aspects. Mr. Market, let's recall that first Graham was talking about Mr. Market. What was he referring to? He said that you can imagine the stock market as a very energetic person who is not too harmful and not too smart. The first thing he wakes up every morning is shouting various prices to you.
And regardless of whether you're interested or not, he is full of energy and tells you a price every day. He kept shouting. Sometimes his brother's mood changes more intensely. Sometimes he wakes up with high energy and is particularly optimistic about the future. So, the price is very high. Sometimes, after getting up in the morning, he will be particularly depressed and shout the price very low.
So, most of the time you can completely ignore it. But, when Mr. Market becomes neurotic or particularly excited or particularly depressed, you can use him to buy and sell at once. This is the so-called Mr. Market concept that Graham first described at that time. The big problem everyone faces is that once you enter the market, you can say whatever you want in school and everyone will think it is okay.
But, as soon as you get to work, you realize that you and your counterparties are real people. These people seem to have at least a higher degree than you, more money than you, more power than you, and more experience than you. Then it seems that everyone is tall and successful and they are all your superiors.
So, you look nothing like the Mr. Market that Graham described. Then, when you are under his opponent, you are often wrong, at least in the short term. Then, after this period of time, you are constantly being taught by the leader and you feel like this Mr. Market, as if I have become Mr. Market. I feel like others are better than me.
So, you start to doubt all your problems. So, this is the first step and everyone will not be able to do it. Then the second one. What exactly does a circle of competence count as a circle of competence? How do I calculate that I really know it? When the market changes drastically, everything I buy loses money and everything others buy goes up.
How do I know that I am right and others are wrong? So, it seems that the circle of competence is not that easy to establish. So, it seems that these two points are probably quite difficult. So, today I will mainly talk about four issues focusing on its difficulties. The first question, I just want to talk about the stock market investment and speculation in the stock market.
The second question, I want to talk about what exactly is a circle of competence and how to establish it. Now, sure. You can come up front and sit in the front. No problem. My friends come from all over the world today, including those who fly from the United States and those who come from other places.
Thank you. So, my second question is to talk about what circle of competence is and how to establish a circle of competence. My third question is to talk about the character of investors. Both Warren and Charlie will say that the most important thing for investors is called temperament. Temperament, Chinese is not very easy to translate.
So, I will give it my own definition, which is called character. There are some things that are innate and some that are acquired. What is the character of an investor? How can self-cultivation be cultivated? Fourth, I want to talk about ordinary people, ordinary investors. If he's not willing to be a professional investor, for example, like Amy, how do you go about protecting and increasing your wealth?
It's for ordinary people. Those four questions, I hope cover the main aspects of value investing practice. Of course, we will spend the most time and let everyone ask questions, so we can discuss any questions about practice. But first of all, the first question is that as an investor in the stock market, you must face the stock market first.
What on earth is this stock market? Who are the people in this stock market? Everyone. What kind of behavior is everyone's behavior? So, where do value investors stand in the middle? The earliest stock market, the modern stock market, was probably about 400 years ago. The history is indeed not too long because before that, there were not so many business opportunities.
So, what was the biggest thing that happened 400 years ago? It was the discovery of the new world 500 years ago. The discovery of the new world brought about a period of rapid development for the whole of Europe for 1 or 200 years. The colonial era also began. So, some so-called modern companies emerged.
The concept of the company was at that time. The richest people at that time were the emperors of various countries. Soon, he had not enough money and then he had to recruit some nobles and everyone joined together to form some companies. So, the earliest modern companies appeared. The ownership of equity is dispersed.
So soon, because these companies are developing rapidly and he needs a lot of money, these kings and nobles will not be enough. Therefore, he hopes to find some way to use the savings of ordinary people. So, he will further divide the equity into very small pieces. The problem then is that these ordinary people find it difficult to set prices and don't quite understand how companies make money.
So, the way that I came up with at that time is that you can divide the equity into very small shares and you can join with very little money, but you can sell it at any time. The design mainly caters to the psychology of people in the middle of human nature who are actually greedy, lazy, and want to take shortcuts.
So, it means that this is indeed part of our human nature. We all think that if this is possible, we all want to take shortcuts by nature. We all want to get something for nothing and get the most with the least. So, everyone has a gambling nature. Why gambling has existed at all times throughout human history.
Therefore, the earliest design of the stock market did cater to part of the gambling nature. But when I got up, I found that it was very successful. At the right time, the most important companies in the Netherlands at that time were called the East India Company and the West India Company. The East India Company in particular was indeed in a long-term development trend.
Money can be used to invest quickly and generate more profits. So, a positive cycle is formed. Then, more and more people began to be attracted to the stock market and they could buy and sell at any time. So, this formed another 111 transaction. That is to say, it was not only guessing the future performance of the East India Company, but more importantly, guessing the behavior of other people when they bought stocks.
So, it became very successful and then more and more companies started. But the stock market has a very wonderful function. It does have a positive cycle mechanism. As more and more people participate, it will attract more and more companies. Then, if these companies are in a long-term economic Such a process of growth will allow the company to further develop, create more value, create more products, and allow shareholders to have more wealth, and then have more wealth to consume.
So, you can imagine that it is a very positive cycle mechanism. Although it may have used a lot of gambling elements in human nature at the beginning, if it reaches a certain level, if the economy itself can continue to produce such companies, the mechanism can continue. Well, exactly 400 years ago, another system began to slowly emerge, which is the modern capitalist system and the current market economy we are talking about today.
Science and technology at that time also began to launch a revolution that lasted for hundreds of years, and it has not begun until today. Then, the combination of the scientific and technological revolution and the market economy has produced a phenomenon that has never been seen in human history. That is, the economy has begun to show a progressive growth pattern.
It has grown continuously for almost 3 to 400 years, bringing our human civilization to a new stage. Progressive returns are a scary concept. Most people don't know how scary progressive numbers can be. For example, if the company's profits grow at a rate of 6% or 7% for 2 years, how many times will they increase?
Does anyone have an idea now? You can talk about it briefly. Alas, most people don't think about the problem, mainly because it has happened in history and has never happened before in human history. A few hundred years ago in modern times, nothing had ever happened in human history that could be progressive and continue to grow.
Nothing had ever happened in the same direction for hundreds of years. That's what happened in the past 3 years. So, the stock market for 200 years is the stock market. Although it was first in the Netherlands, it really started to grow after the rise of the United States. Then you see it is 67%. We don't seem to have a very high return.
After 2 years, it can grow more than 1 million times, more than 1 million times. This is the scary thing about progressive returns. So then, such returns will attract more and more companies to come in, and more and more companies will come in, and the more they come in, the more they will attract more and more investors.
It is one in itself, and it puts all the elements and elements of the production society into it. So it does have a very, very wonderful function. So at the beginning, the design may not be like this, but the result is what it is. Therefore, the stock market has basically been divided into two types of people from the beginning.
One is speculating, the other is investing, and the other is predicting the future performance of the company itself. One is to predict the behavior of stock market participants and other people in the short term. So what is the difference between these two types of people? What is the biggest difference between investment and speculation?
We can say that its orientation is different. What is the difference in its results? If these invested companies encounter an economy that can grow progressively, their profits will continue to grow. If you are guessing other people's behavior in the short term, well, in the end, this behavior can only have one result.
That is, winning and losing must be equal. Why is it called a zero-sum concept? That is, winning and losing are equal. That is to say, the net result of all speculators in all markets combined must be zero. This is the biggest difference between investment and speculation. In the end, the net result of all speculation must be zero.
Of course, we cannot deny that some people may have a slightly longer chance of winning. Some people may just keep making leaps. never turned over. But in general, given enough time, the result of all the people added together is zero, because this is the zero-sum concept. Because people behave incorrectly in the short term, some market participation behaviors do not have any impact on the economy itself or the company's profit growth.
So, the most important difference we see is that there are actually two types of people involved in the market. Of course, for many people, for example, 80% of my investors and 20% of speculators may be just such a mixture. But among the mixed investors, about 70 or 80%, if they do the right thing, even if they only invest in the index, they will continue to grow in line with the characteristics of the modern economy.
But the other part of his gambling will definitely be included in all the actions of all speculators, and the final result will be the same. Everything will return to zero. Then, after you know the result, of course, you can choose. Am I willing to be an investor or a speculator? This is a personal choice, and there are indeed no likes and dislikes in it.
The only likes and dislikes are that it has a different impact on society. Then investors will indeed bring all elements of society into a positive cycle and help society enter what we call modern society. The so-called modernization, the so-called modern society, is actually a state where the economy begins to enter a state of compounding growth.
This is modernization. I have also written a long article on this issue called 16 Lectures on Modernization. You can refer to it for further reference if you are interested. Well, the speculative part is very close to that of a casino. From a social perspective, the most important thing is that he does not want the casino to be too big.
But without gambling, there's nothing he can do. The stock market doesn't exist, right? But it is investors who allow the stock market to exist and develop. Therefore, the speculative part of the two, which we call necessary evil, cannot be removed. Indeed, because this is part of human nature. You cannot deny human nature.
However, it is true that you cannot let it get too big. At any time, if the bubble is too big, it will cause serious harm to society. We have just emerged from the global financial in 2008 and 2009, and the damage is still fresh in our memory. So, this is the market we are talking about. So, if you understand the principle of zeroing, you can think of these speculators as Mr.
Market. Of course, he may have a PhD, right? He may have been very successful in speculation for a period of time, and he may indeed have more money and status than you. But in fact, you understand in your bones that all his actions will actually return to zero in the end. If your value concept is that you hope to contribute to society, then you don't need to show so much respect to him, even though he seems to be better than you in every aspect.
So, it's a question of values. But if you don't understand the truth, you'll always feel like you're missing out. You'll always feel like other people know more than you do, and they do it right than you do. So, where is the other situation? Why can such people exist for a long time? Let's go back to one of the characteristics of our asset management industry.
Although our asset management industry is a service industry, it has serious information asymmetry. The difference between investment and speculation is not easy to explain. All speculators have many theories. Yes, this K-line theory is a relatively low-level theory. Now, our latest theory uses AI. So, when we use these to explain it, most people can't think clearly.
It's about speculation. It's a very simple thing to zero out speculation, but I haven't seen the problem discussed in any official textbooks. In fact, it is a very fundamental problem, but no one talks about it. Why? Most of them actually don't have it. Think clearly, otherwise you will intentionally not talk about the problem.
What's the benefit of not talking about the problem? You can collect taxes. So, it actually collects an ignorance tax or an information exploitation tax, which is a big foundation for the existence of the asset management industry and the existence of the ignorance tax. Therefore, a large number of people are surviving mainly through information exploitation.
No matter what the future results are, as long as I can temporarily show that we are winning within a short period of time, I will immediately make various advertisements and the whole world will know. Then everyone comes to buy it. And no matter what the result is in the future, I get 1% first, and some people get 2%.
Anyway, after I take it, after I pay the tax, no matter what the result is, I earn the money first. This is indeed the case in the industry, and all charging standards are the same. Hey, just look. If it is particularly unreasonable, then there should be a share. There are real investors who can bring returns.
Yes, they will receive more. Others are not like this. It is the same for everyone, because no one can tell. Only a long time will tell. Moreover, everyone's theories are very complicated, and you can't immediately say that it will definitely not work. Therefore, it is important to understand speculators and investors.
So, the concept of Mr. Market is very very important. If you are unwilling to pay taxes, or if you are unwilling to live by collecting exploitation taxes, then you may have to stay away from speculation. If you believe in win-win and contribute to society, you may want to be an investor from the beginning.
If I can't do it, I don't want to be a speculator. This is why it is important to understand the concept and think it through clearly. Because as long as you don't think clearly about the concept, no matter what you think in school, your mind will be messed up as soon as you start working, and everyone explains it to you.
You immediately immediately feel as if everyone else is right, and my original idea is not quite right. The Mr. Market concept is really misguided. So everyone, remember, as long as you remember the zero probability of speculation, you will probably understand why these people have no long-term performance.
Basically, speculation has no long-term performance and cannot do much. It's not big, either. There are some short-term ones that are doing relatively well, more or less, that are actually relying on what we call legalized front running. For example, if we talk about my broker, every time I tell him what I want to buy, he buys something before me, builds a mouse warehouse, or something.
Of course, he will always You will always make money, but it is illegal. But if you come up with an AI method, you can guess who is buying and what they are buying on a large scale. The new index, MSCI, is about to enter the A share market. Before, when he started to buy, I would front run him and build a legal mouse position first.
This might also make some money, right? But it is true that it cannot be done on a large scale. Once it is done on a large scale, the whole society will become unreasonable. So if you look at all the speculative strategies, in the end, they will not be successful and have no long-term performance. Anyone who can become big and has long-term performance is basically an investor.
By the way, why is index investing also possible? Because if you invest in an index, it is basically a combination of investors and speculators. If the final result of the speculator is zero, then the result of index investment is actually the net result of the investor. Does that look like it mathematically?
This is why index investing works in the long term, but only where does it work? It means that the economy has entered what we call a modern economy. A modern economy is one that can spontaneously produce progressive and sustained economic growth. Moreover, the index can be relatively representative and relatively representative of all companies in the economy.
In this case, index investment can basically reflect the overall economic performance and business performance of the economy. As for that question, if you still have questions, we can talk about it later, about the market, about Mr. Market, about speculators and investors. So, let's move on to the second question.
For example, if you say that I don't want to do information exploitation and I don't want to do zero-sum, then I just want to be an investor seriously. So, how do I do it? Then go back to the circle of competence. Because as investors, we're trying to predict a company, that is, the general economic performance of the company you invest in the future.
That is a fundamental analysis, right? That is to say, figure out why the company makes money, how it makes money, how much money it will make in the future, the economy it encounters, what the competition is like, and what its position in the competition is like. It's in the process. It's a general term.
We call it establishing your own circle of competence. So, now the question is, I just started, so how do I start? I also understand the truth and I think it sounds good. So, how do I know the company and how do I analyze it? Because the company has seen too much and doesn't know where to start. Then after studying for a period of time, I may feel that I understand something, but I don't know if I understand it enough.
Then when can I buy a stock? At what price can I buy it? The question is also very specific, right? Everyone who has been in the industry will have questions, right? Of course, if you say you are sell-side, anyway, right? I will sell the stock at whatever price. I will just say the price. I don't know if it's true or not, but I just wrote it on the spreadsheet.
But if it was with my own money, that might be different. That might be different. So, the question of circle of competence is actually the core question for investors. How can we build something? Everyone is indeed different, because everyone has different abilities and different interests. So, I can share with you how I did it.
I entered the industry by accident. It was about 27 or 8 years ago. At that time, I was a student at Columbia University. When I first came to the United States, I had a lot of debt, and I didn't know much about doing business or how to make money. So, I was worried about how to repay the debt every day.
Because in our time, we were in the 1980s. At that time in China, everyone had no money. So, when we arrived in the United States, we still had these US dollars. Oops, it seemed like an astronomical figure. So, I was always thinking about how to make some money. Hey, one day, one of our classmates said, "Hey, there is a person giving a lecture there, saying that he talks about how to make money.
People can make money. Go and listen." Hey, the one I liked also offered free lunch. So, I said, "Fine, let's go." Later, when I went there, this classroom was a classroom just like the free lunch we had before. [snorts] This kind of lecture was different. Our free lunch usually had a long table with 20 or 30 people, right?
There was lunch next to it, and there was one person sitting in front. Hey, as soon as I entered this classroom, I said, "Where is this lunch?" He said, he said the man ordered lunch. The difference between buffet and buffet is just one T. At that time, I was just learning English and I didn't understand it either.
So, I thought, "My family calls it lunch. Why do you call it such a name? Also free." I said, "Since this guy dares to ask for a free lunch, he must have something in his belly." So, I just I just sat down, sat down and just listened. Hey, after listening to it, I suddenly felt that what this man said was much better than a free lunch, right?
In the past, my understanding of the stock market was that we were the first to watch the sunrise. I don't know if you have watched the drama. Anyway, there were all those who were doing stock trading in Shanghai in the 1930s, right? They were all intrigues and intrigues. They're all bad people anyway.
So, it feels like these stock traders are all bad people. Mr. Free Lunch looks like a good person to me. He doesn't look like a bad person in any way. He's very smart and speaks very sharply. I can understand the truth as soon as I hear it and feel that things can be done. Hey, I don't know why, but during the lecture, I suddenly felt that something could be done because I couldn't do anything else.
I felt like at that time, we were doing just fine with numbers. Anyway, I came from China and was pretty good at math, physics, and chemistry. So, after I finished, the first thing I did was go to the library to look for information and study this old gentleman. The more I researched, the more I felt that things really made sense and I felt that it was really possible.
Regardless of his theory, his practice, or the lessons he wrote, I can basically accept them all. So, I started thinking about how to go about it, how to find it. What is the margin of safety we have? That margin of safety thing must be cheap. So, what did I think about business at that time? I don't know much about it, but it means that we can still analyze a balance sheet, which is basically elementary school arithmetic.
So, at that time, I started to look at Value Line in the library. Value Line probably has thousands of companies in the United States. Its basic financial situation in the past 10 years is in it, and it also divides it into many different categories. There is one category among them, and you always have to look at some of the cheapest stocks, such as how high its PB is, and how high its PE is.
At that time, I didn't know much about PE or the company. So, I only looked at its balance sheet, its net assets on the books, and its value. So, I first took a fancy to a few stocks. It seemed that I didn't know what kind of business it was, but it wasn't losing money anyway. However, what is on the books is either cash or real estate, especially stocks or other stocks, and the market value is actually half.
So, at that time, I just believed that Mr. Market existed. Maybe because I didn't go to work anywhere else anyway, and I never saw those high-ranking people on Wall Street. So, I believed that it was him who might have made a mistake in the market. Then, I will look for these companies that are specifically located near us in New York, and I will go there to see if this is the case, whether the things on this account are really there, whether this company really has such a company and whether it is really doing things.
Although I don't know much about what he does. So, the first few companies I invested in all had net assets on their books, which was almost double the market value. That's because because because its margin of safety is high enough and the price is high enough, you dare to buy it. But you and I discovered another problem.
That is, after you buy it, your interest in the company suddenly increases, which is completely different from the previous theoretical interest. Just say that I just study here and never do anything. I always feel that this is not the case. It has nothing to do with me anyway. I just feel that I don't learn very deeply.
Hey, once I bought it, I felt that this company really belonged to me. So, I thought it was number one. Anyway, I believe in these things that Dad said. As for the first article, stocks are ownership rights. I really believe it. I feel that this is my company. So, I walk around and look at it every day.
If I have nothing to do, I'll go and see what they do on the weekend. Anyway, I don't have a clear idea of what to do. For example, one of the earliest companies was when he sold his shares, the company's main business to TCI, a cable company. It is the largest cable company. So, the price of its stock is double the market value at that time.
Then it still has some other various telephone companies and I don't know what they do. It has many licenses and in the end, its revenue is very low. Totally disproportionate to his market value. But after I asked about it, I was told that they spent a lot of money to buy these licenses. He bought them for a long time, so the value of the records in his book was also very low.
But it should be worth a lot of money. I don't know why it's worth, but I know that his TCI stock was twice as much as his company stock called Centennial Group at the time. Hey, I said that I would at least wait for it to double in value and become the same as its stock value. Alas, during the process, TCI stock started to rise.
Because TCI has acquired many other cable companies now, I suddenly became interested in this cable company, and I felt that this TCI company belonged to me, too. So, I started researching TCI. This TCI cable company is equivalent to local monopoly. It is in one place. After you have a cable license, others cannot come in.
Then, everyone paid your cable fee 1 month in advance, right? So, revenue is also very predictable. So, it can also go and borrow a lot of money. So, in fact, it is a very simple business to calculate, and it can buy some small cable companies with very cheap money. So, every time it buys, its earnings are increasing, and the losses are increasing.
So, it is actually a mathematical concept. So, it is relatively understandable. So, at that time, with cable, the company itself, TCI, was growing. But later, TCI cable became the AT&T cable we are talking about today, the most successful cable company in the United States. At that time, we're now talking about almost 30 years ago.
At that time, it was just beginning to show that it was different from other similar cables. But the most interesting thing is that suddenly these licenses are suddenly useful because at that time a new product came out called cell phone, which is what we call mobile phones. At that time, 30 years ago, mobile phones were a very new thing.
Well, he said that with the license they had, they could build a nationwide network and they could build it into a cell phone company. And he invited the president of AT&T, the largest telephone company at the time, to be the CEO of the company. This company is a little-known company. So this incident became a sensation all of a sudden.
After the sensation was over, of course, I was lucky. What I'm telling you is the history of my bad luck. All of a sudden, everyone became extremely valuable. So not only did the stock exceed the TCI price, but then it skyrocketed again, rising seven or eight times. I At this point, I felt completely unsure.
At this time, there was no margin of safety for me. After I sold out, the price continued to rise and I couldn't quite figure it out. I still don't fully understand this business. But But But But give me an experience. That is, I found that if there is enough margin of safety, you can dare to buy because you know something and I at least know TCI.
Then I discovered another problem. That is, after buying it, the person's mentality really changed. It's stocks. It's ownership. It's a psychological concept. It's a psychological concept. I didn't understand much about this before, but I didn't understand until after I bought it. It's really useless to talk about theory on paper.
After you buy it, you suddenly realize, "Eh, once I become the owner, I find that I care about everything." Hey, they were in that company. I remember one time when I went there for the weekend, the security guard wouldn't let me in. I ended up chatting with the security guard for a hour, and I said, "How did you hire this security guard?" I really consider myself the boss.
Hey, it's very interesting and helpful for me to understand. Then, because of things, I started to research cable companies and found that cable companies are very interesting. Then, I studied telecom company and found it very interesting. The interest started right away. Later, I realized that I only gave examples because this was my first very successful company, and I still remember it.
Later, there were many, but not much better. There were several similar companies, so I started to learn about them one by one. When I entered, it was because of the margin of safety, but after entering, I found that I started to be particularly interested in the business itself, because this thing told me, "The value of the company does not just come from the balance sheet.
It mainly comes from the earning power, right?" Mainly, what is our earning power called? It's just profit, profitability, right? So, then I became particularly interested in the company itself. I found that I didn't know much about such a big company. So, I looked for smaller companies near us in New York.
I could check out our own company when I had nothing to do, right? It's okay to talk to anyone, even the security guard at the door. They are hired by our family anyway, right? So, I found that people's mentality has changed, and they are interested in all companies. Then, what is the most special revealing thing to me?
It's also because of another company. Due to time constraints today, I won't go into details one by one. The company makes me particularly interested in gas stations. Just around here, we have a place, a gas station, owned by just two companies on the same intersection. Hey, I discovered that there is a gas station at an intersection.
Even cars park there, even if they're on the opposite road. The prices of the two are actually about the same. And as for the oil, they're all the same anyway, right? It's all the same standard. Hey, I feel very strange. You are also our company, so I have to check and see what is going on. Hey, I went to look and found that the company in the middle was a gas station.
The one with the most people was an Indian, an immigrant from India, and his whole family lived there. Then, when no guests come, he must take it out and pass a glass of water to others. As long as someone has guests, their whole family is there anyway, so someone must come out. Hey, take it. You don't want it.
It doesn't matter if you don't drink it. Anyway, I will hand over the water first, and then I will chat with you, and then it'll be free. If their children are there after school, they will help you clean. Then, the other family is a typical one, a white man. And then, he does not own it, but someone else owns it and hired him to work there.
Therefore, people are basically within him and never come out. He doesn't care about what happens outside. But people are not bad, and people are not bad, either. But for this little difference, I found that the traffic was at least three times as much. I counted it and just sat there for a few hours.
It was such a little difference. Hey, I began to understand that time management is also very important. Management is also very important, and whether the owner's mentality is also important. Well, through these things, I began to slowly understand a little bit how a company makes money and why it can make more than others.
You are the most typical company, completely homogeneous competition, no difference at all products. But, the service is a little bit worse, and the traffic is about three times worse. Well, the one over there does it because this is his only livelihood. He's an immigrant like me. If he can't bring in these customers with money, he will definitely have problems with his child going to school.
It'll be fine over there because he is Hal Steel, and he has nothing to do with him. He just gets his salary to pretend and work. So, that's the difference. So, at that time, I started to become interested in how the company itself is managed, what are the advantages of each company in the competition, which advantages are sustainable, and which advantages are not sustainable.
So, later, we started to find one or two people with particularly competitive advantages in small companies, such a company. Then, when we first started the company in 1998, it happened to coincide with the Asian financial crisis, and oil also fell below 10 yuan. So, we started to go to Asia and discovered some products called preferred stocks, a very special product in South Korea.
As a result, we created some very large companies, and I could buy them with about one to two times the PE. Then, when I arrived in Russia, when oil dropped from 25 yuan to a minimum of eight yuan a barrel, at that time, I I buy its reserves from the largest oil and gas company at a price of three to five cents, for example, if it was one yuan.
Don't buy its earnings. It's very extreme sometimes. So, I thought there might be no risk, so I bought both. After buying them, I started to be interested in a series of issues. Then, one by one, these interests began to make me understand and become interested in larger companies. So, what should I give an example of?
What I am saying is that you have to build your own circle of competence. In fact, if my experience can have some general meaning, it is for you. That is, the things you invest are things that you really know. So, the margin of safety is very important. That is, as long as you have the margin of safety, you understand.
It's not a big problem if you don't understand others. This is the first one. The second one is that once you start to look at the business from the owner's perspective, your feelings about the business will be completely different. But, if I can use it this way without investing and look at it from the perspective of a business owner, that would be the best.
But, human psychology is not easy. So, psychology tricks, these psychology tricks are quite useful. Once, why do we say that we cherish ourselves? Even that crappy broomstick feels pretty good. Then, this is human psychological tendency. Once you say it's mine, it goes anywhere. My own children are always compared to each other.
So, why do they look so cool, right? He also seems smarter than others. Of course, many children may indeed be smart, but everyone thinks so, right? Sky also thinks this place is better than anyone else, right? That's how human psychology is. So, once you turn yourself into an owner, you will find that your motivation for learning is completely different.
So, for the researchers in our company, the first thing I want them to do is to research a company. I say, "You are an uncle. You have never seen it." Suddenly, he passed away and left a large amount of money. Then he found you, and the company gave it 100% to you. So, what do you do now? Suddenly, you inherit a large amount of property, but you don't know what it is.
Then, you have to go to the board of directors. Hey, you have to participate in research, and you have to talk to them. You have to research the company with ideas in mind, and you'll be right. Of course, even if you do it, it is still different from directly owning it. You own it directly, especially when my net worth was still negative at that time.
At that time, I wanted to own it directly. My money was all borrowed money. The motivation given to you is different. The motivation given to you is different, but it's the same today. We study all companies from the perspective of 100% ownership. Then the first thing you do is go to the company, and then you have to talk to everyone.
Let me just say, if you meet security, you also have to talk. How is our security hired? Are people qualified? What's going on with our HR policy? That's all there will be. So, once you enter mentality, it's different. This is the second one. The third thing is that knowledge is indeed accumulated slowly, but an honest attitude towards knowledge is always required.
So, we call it intellectual honesty. The concept is very, very important. Because it is true that it is difficult for us humans to be objective and rational. We are all emotional animals and are very willing to believe what we want to believe. Things that are beneficial to us are often our predictions.
We always predict that the world will be good to us. Of course, I also understand objectively that this world is not arranged for you, but I always feel that this is a possibility. So, it is very, very important to achieve intellectual honesty. Then, knowledge is accumulated bit by bit through build-up.
When you use the right method, do the right things, and go on the right path, you will find that the degree of your knowledge accumulation is the same as the compounding growth of the economy. It itself has a compounding growth trend. If I had not made that that that that centennial investment back then, I might not know much about many businesses later on, but my understanding of these businesses would be particularly helpful to me when I encounter other businesses.
All these experiences can corroborate and accumulate each other, and later you will find that slowly you start to be very sure about certain things. The next thing that is very important to me is to let your interests dominate you and your opportunities to dominate you. Don't listen to what other people have bought, I should also study it.
You must use your own interests and your own opportunities. Other people's stocks and other people's opportunities are other people's business and have nothing to do with you. You have to take care of your own affairs. If you find an opportunity, then go study it. If you're interested in something, study it.
Then these opportunities and these interests themselves will take you forward and continue to build your knowledge bit by bit. There is no need to rush. So, the final result is that everyone's circle of competence is different. Everyone, for example, we are all value investors, but if you look at our portfolios, they are different.
We don't need to be the same, and we don't need to communicate more with others. That's what you want to invest in, but it will definitely not be too much because it takes a lot of time to understand everything. It takes countless time to understand every stock and every company. Therefore, the circle of competence you finally establish must be very few that can predict correctly with a high probability, and it must be within your own range of circle of competence.
This Kwang Yang must have something to do with wine. You don't spend time on other things. The problem is, so your circle of competence is within a small range after all. Don't think about other things. So, what really makes you money is not that you know a lot, but that what you know is correct. If you understand the stuff correctly, you will definitely not lose money in the first place.
These are some of my personal experiences, but we can talk about how everyone should establish their own circle of competence. Hey, how to overcome our various natural psychological tendencies and psychological misunderstandings? These are also very, very important issues in practice. If you really put it into practice, these problems will arise, but in our time today, I will go over them first.
After that, if you have any questions, we can come back and talk about these things again. So, next, I will talk about a question, that is, what kind of people are suitable for value investing? That is, is there a value investor who has a special character. Warren and Charlie have always said that what determines the success of a value investor is not his IQ or his experience.
Alas, the most important thing is his temperament. I translate it as character. What was he referring to? From my many years of personal experience, I also think this is the case. Some people are really not suitable and some people are naturally more suitable. What kind of people are more suitable for investing?
Because first of all, a person is a relatively independent person. That is, his scale is based on his inner scale and he does not pay much attention to other people's scale. For example, if you say some people are happy, they can always read it from other people's eyes and that's me, right? If others don't praise it, my purchase will be in vain.
Some people say that it's just this bag and I just see how beautiful it is. It doesn't matter how much I paid for it. I'm very happy just looking at it every day. That person is These two people are not the same kind of people. So, what does the first person mean by his independent personality? That is, his scale is an internal scale and he doesn't care much about other people's evaluations.
This is a character. There is no way. Some people are born like this and some people are born not like this. So, yes, yes. I think it is very important to be an investor, very important, because you have all kinds of temptations all the time, all the time and you have no other temptations but jealousy.
Right? How much money did so-and-so make, right? This he will and then and then yours. Yes, I won't go into details. Everyone understands. The second thing is that people can indeed be relatively objective. That is, the impact of emotion on them is relatively small. In fact, of course, each of us is an emotional animal, and we cannot completely get rid of the influence of emotions.
It will be the same. But there are indeed some people who can pursue the pursuit of objective rationality as one of their values and moral values. These people are more suitable to do this. Because because investment is actually about analyzing various issues objectively and then being able to judge what will happen in the long long term.
It is a very difficult question in itself, a very very difficult thing. If we are not just talking from the perspective of balance sheet, but talking about the company's own earning power, this is not one, especially the most important one. That is, competition is the most important. Once your company makes a lot of money, it will definitely attract a large number of competitors, and everyone will want to capture it, right?
Mr. Guo's company has made a lot of money, and everyone is jealous and thinking about how to defeat it and how to put his part of the money into my company to share part of it. So it is not easy. It can be said that 10 years from now, for example, whether Mr. Guo's company can still be so profitable and so high, this is not an easy task, and people in the company may not be able to say clearly.
And people in the company are often even more unclear. So you must maintain a very objective and rational attitude and be able to continue to learn, which becomes very very important. So it is also a very important character. The following character, 111, is also quite special. That is, it must be special.
People are both extremely patient and very decisive. This is a contradiction. That is, when he has no chance, he can do nothing for many years. But once he has the chance, he will suddenly become very decisive and can make a bet without any hesitation. I have known Mr. Charlie Munger for 16 or 17 years.
We have dinner at least once a week and talked many times. Hey, his subscription to Barron's magazine is an American magazine, a weekly magazine from the Wall Street Journal, which is specifically related to the stock market. He has been reading the magazine for about 40 to 50 years. And during these 40 to 50 years, he is the only one who has read it.
Of course, his purpose is to discover investment opportunities. So, how many opportunities did he discover during the entire 40 or 50 years of reading Barron's magazine? Can anyone take a guess? How many? 40 or 50 years? Just a few. Just one. He discovered it once, just once. But just because he wasn't, he didn't know it, and the opportunity came after he had seen it for more than 30 years.
It was only after he had seen it for more than 30 years that he discovered such an opportunity. 10 years passed after I found this opportunity, but I didn't find the second opportunity. Alas, but it didn't affect him to watch it. He always watched it. Because I have known him for so many years, I knew that he would definitely watch it when he came over the weekend.
He would watch every issue, every issue. This is a very special character. That is, he has extreme patience and can do nothing. But when he really finds an opportunity, he dares to invest all his spare money. But the investment earned him many, many times over. So, we won't go into details about the specific things he invested in.
Then, this is a very special kind of temperament. That is, you have to be extremely patient and study seriously when the opportunity does not come. But when the opportunity comes, you must have strong decisiveness and action ability. It's also quite a special one, but it is indeed an essential quality for a good investor.
The next one is actually why Mr. Charlie Munger did what he did. He is extremely interested in business. This is what we call money sense. Many people don't know that Charlie and I always talk about money. Money awareness is actually a strong interest in business. He naturally wants to think about how business makes money, why it makes money, what the future competition will be like, whether he can still make so much money in the future, and what the future will be like.
What it is, he always wants to understand. Interest is actually his main motivation for reading. But when an opportunity comes, or when there is no opportunity, you don't have to do anything, and you don't have to worry about it. But when the opportunity comes, you can make huge bets. So, these characters are not particularly natural or natural, but together, these characters can make you a very good investor.
So, some of these are innate, and some are acquired. For example, your interest in business can actually be cultivated slowly. However, the extreme patience and extreme determination and decisiveness that I just mentioned are not special and may not be able to be cultivated. Ordinary people, after looking at these things for more than 30 years, find nothing.
They have already given it to them and have looked at other things, right? Then after discovering this one, I always wanted to discover another one. Neither did he, nor did he, because I was very close to him. I observed it clearly, and that was indeed what it looked like. Then, even if you are very independent, it is not particularly easy, because most people will be influenced by others, and most people will really look at how others view problems.
A lot of my standards are right, right? I'm very concerned about what others think of me. If you are like this, it will be really difficult for you to persist. So, these these characters combined, I did not mention, for example, whether IQ is important. IQ is really not very important. It is indeed not very important.
And academic qualifications are not very important, either. If IQ is important and academic qualifications are important, then you Newton will become a stock god. But everyone knows that Newton almost went bankrupt just because of investing in stocks. It was when the South China Sea bubble was at its peak that Mr.
Newton invested all his savings, and in the end, he almost lost everything. So, Newton and Mozart are the same. That is to say, if you think you are more talented than Newton and Mozart, it is actually useless, and it is useless. You definitely don't need to have such a high IQ. You don't need to be that smart, and you don't need to be a genius.
Anyway, I definitely can't compare with them, and I don't want to. This is not right. I studied physics before, and for a while, I was always thinking about winning a Nobel Prize or something. Later, I realized that everyone in the physics department was smarter than me. Okay, forget it. The game is not my game, so I won't do it.
Our classmate from the physics department is still here, and he later did better than me. This is because he is smart. There's nothing we can do about it. This person is different from other people, but in our game, we really don't need to be particularly smart, nor do we need a particularly high IQ, nor do we need too many academic qualifications, nor do we need particularly prominent experiences.
You're of no use to that in the company, actually. It's all useless, right? Jenny was happy when she heard this. We have nothing, right? Isn't that what you said? That really doesn't matter, because I've seen too many of these, and the ones with these are very unsuccessful. I am easily attracted by speculation.
Of course, his teacher said that we use basic fundamental analysis methods coupled with an understanding of the market. Anyway, we talk about it in the same way. The smarter you are, the better you talk about it, and the more hype you have, the worse the final result will be. Because he himself has no determination and no independence.
You see, Balder looks honest and honest now, and she still runs around naked every day, right? In the end, your vote was okay, right? She doesn't really care what others think of her, right? If others don't agree, don't agree. Just run naked, right? You have to be determined, right? It's really like that.
You don't need a major or an MBA, but you do need to have a strong interest in business. It's true that you don't have a strong interest in business. Of course, you won't be able to cultivate it if you take an MBA, but you can develop it without taking an MBA. Right. I think these these things are very similar to something else.
That is, I don't know how many people play golf, and it's quite similar to playing golf. The previous shot has nothing to do with the next shot. Each shot is independent. If you hit a birdie in the front, you can't predict what your next shot will be like. And then you have to keep a calm mind. If you get a little excited, it will definitely be ruined.
So, if you want to play golf, it will be good for cultivating the character of investors. Meditation is also very beneficial. It can help you understand your blind spots more clearly. Moreover, and that is to say, patience is also very important. So, there are some things that are indeed good for playing bridge, and there are some things that can help you increase your cultivation in this area.
Some of them are innate, and some are acquired. It is the same as golf, very similar. That is, if you don't do it for a period of time, you will really, really forget it. Once you break away from business, your sharp feeling will slowly disappear. It's also very similar to golf. So, what we are talking about is that some people, such as me, really do not have temperament.
So, my suggestion is that you should not force yourself to do things that you are not good at. You can find such people to help you vote, but you don't necessarily have to do it yourself. As for people, you always have to find something you are good at, and you like what you are good at. Yes, she really likes what Julie does.
She flies all over the world every day, which makes me tired just looking at it. People enjoy doing it, right? That's how she had to be. Everyone must do it. How many years has Yao Xue been doing nursing care for the elderly? It's been more than 10 years. Those things that everyone felt were bad for such a long time now feel good.
But in that process, it is very important that the person is happy with what she is doing, and she's not doing it for others. You must find your own game. Once you find the game, it's very fun. And it's especially fun during the learning process. So, what we're going to talk about below is an ordinary person, an ordinary investor.
Because many of you may not want to be a professional investor and may not have the opportunity. How can I protect my property and let it grow slowly, right? This is Amy's biggest problem, right? How do I do it? How do I do it? Yes, I think the first one is your alternative, which is cash. Don't forget that cash can also be the result of fundamental investment research.
Cash is a good choice when you don't find a better opportunity cost. It's definitely better than spending money on speculation. It's definitely better. This is the first one. The second one is outside. If a market, its equity can be compared. It generally reflects the general state of the economy and its index investment is still quite useful.
Because Because it's true. If the economy grows at roughly, say, 23% real growth plus inflation 23%, that's a constant growth of 45%. Then the average profit in its economy will be slightly higher than this. Slightly. That is, if your growth rate is 67%, the 200 years I told you will be a million times.
If it takes place in your lifetime, 30 or 40 years, it can indeed bring you pretty good returns. So, don't think about what others say about tens of percent, hundreds, or doubles. These people will come back to speculate once they hear it. Don't listen to these people. Don't listen. That is to say, things must be relatively reliable.
What things are reliable? Something sustainable. If it's not sustainable, don't listen to this. Therefore, index investing is also a good choice when the index can relatively represent the overall average performance of the economy. Of course, it would be best if you can find good investors. But, it is not particularly easy to find excellent investors, especially in the current domestic environment.
In fact, I really want to There is one in our country, for example, we have Grand Value, which is a small circle of value investors. There are some aborigines in it. Everyone is willing to put their own relatively real rate of return and how to get the rate of return to see if there are any long-term results.
Many investors nowadays turn their funds into products at every turn. I don't understand it at all. It's as if they are produced in a factory and they often create dozens more. It's as if no one with one or 200 products can't be called a successful investor. So, in the end, you can't figure out what the result is.
You don't know what the investment results will be and you can't judge. We have only had one fund for 23 years and it has never changed. 100% of my money is in this one fund. This, in this way, is relatively easy to judge. That is, you must be able to find such investors who are worthy of entrustment and are real value investors, which is also a very good choice.
Generally speaking, if you want to choose, first of all, he is not a speculator. This is very important. This first step must be seen clearly. The second is that he does have a certain character as an investor. And the third is that he has a certain in-depth understanding of his own profession, which is shown by having a relatively long track record.
Next, you have to watch him choose his own circle of competence. Within the circle of competence, if it is not a very competitive circle, then his circle of competence happens to be within a less competitive circle, and he will be more likely to get better returns. The next one is that people who are not that old yet may still be able to compound their money over a long period of time.
If you can find all of them that meet these conditions, you'll be lucky. You'll be lucky. But in general, the most taboo thing for individual investors is to be tempted by the market, just like Newton did. It is the most taboo to go in when the market becomes very hot and come out when the market becomes depressed.
If you don't participate in speculation, that is you invest in things you understand and don't do things you don't understand. As long as you do this, basically you will not lose money at least, which is very important. Of course, if some people are determined to do it themselves, that's fine, too. But for individual investors, time is relatively limited.
So, your investment must be relatively concentrated, and it must be a few stocks that you really know well. Don't be afraid of concentration, because your personal investor, your time, your energy, your experience may be within a few ranges. So, within the scope, you can only concentrate, and you must concentrate.
But over the long term, it can be done and these can be done. But the most taboo thing to do is to pay what I call information exploitation tax, which is not good either. For all of these, once you see that it's charging system is not that gentle, stop reading. Anything that is only good for managers must have problems.
It is all about exploitation and information exploitation tax. This must be good for them, but not so good for you. So, as long as you understand these few basic principles, you can make your stocks become rich slowly, slowly, and slowly over a relatively long period of time. At least, you can maintain your wealth and grow slowly, slowly.
In fact, hey, if you grow in the compounding way and grow in the right way, it will be very, very impressive over time. And most people have no faith in compounding. Because compounding things are not common in life. That is to say, for example, what is most likely to become compounding is your experience and your wisdom.
But most people have problems with their learning methods, so their knowledge cannot be accumulated and often ages. So, he couldn't even see the most basic things. So, basically, in ordinary people's lives, they have almost no experience with compounding and cannot see such examples. So, they don't think about it and it is difficult to imagine how powerful compounding is.
As someone who is interested in investing, the first thing that makes you different from others is that you need to understand the magic of compounding. It makes perfect sense for Einstein to call it the eighth wonder of the world. The more you understand the power of compounding, the more you understand how difficult it is to achieve compounding.
When you get an opportunity for compounding growth, even if it doesn't seem that high-end, such as six, seven, eight, or nine, it is the most important opportunity in your life. You must seize it. You must seize it. As long as compounding lasts long enough, it is the most important opportunity for your best life.
Everything you invest in must be something you understand. Don't invest in anything you don't understand. Okay, this is our advice to ordinary people. Finally, I just want to summarize value investing. Do you think it is a belief? It may also be a belief. That is, it is indeed yours, and it does embody a value concept.
That is, you are not willing to exploit others, first of all, right? You are not willing to do zero-sum. You are willing to do win-win things. You are willing to make money yourself, and it is also good for society. Then, you don't want to do something that is completely uncertain and relies entirely on gambling.
So, when everyone is speculating, you don't have to tell people good luck, because their luck can't be good. You can only say, "Have a good time," because it's all you know really have. So, what you spend money on is that if you can't have a good time, then your money is really wasted. So, in fact, when everyone goes to the casino, they are actually going to buy a good time.
However, many people are very depressed after returning, so it is a waste, and they become gamblers. In the end, they lose everything. It's okay if you just go there to have fun, but if your value concept is not a value concept, then you have to stay away from gambling in the stock market, and stay away from any gambling nature.
That means you will never do anything you don't understand. What you understand is that you can predict the right things with a very high probability for a long time. This is something you understand. If the conditions cannot be met, you would rather not touch it than touch it. So, like it is indeed a It can be said to be a value concept.
So, if it is a belief, you must be verified, and then you have to go through the test of despair. So, your feelings will definitely go up and down, at least in the beginning. But slowly, when you really make it a part of your life, you will become calm about these ups and downs. Then your interest is actually replaced by your strong interest in the business itself, and then your interest will lead you to slowly establish your own circle of competence, and then you can operate with ease within your own circle of competence.
Then you can stay away from other people. So, I found that the truly successful people are all investors, and the farther away from the financial center, the better their investment performance. For example, Omaha, Pasadena, Seattle, Beijing, Shanghai, New York, and Hong Kong are not necessarily the best places.
The farther away they are, the more helpful it will be for your performance. The less interaction you have with them, the better it will be for you. And these these these high-sounding people are actually just noise. Why is it called noise? Because his final result is net zero. So, if you remember one thing from today's sharing, you should remember all zero-sum concepts.
The result of investment is zero. This is a mathematical concept. Although people don't mention it often, it is actually what it is. It makes sense that people don't mention it often, because we still rely on collecting exploitative information taxes. There are so many people in the industry, so he doesn't mention it.
But, this is a very simple mathematical concept. The net result of all speculation and speculation is zero. Just remember that the next time you encounter one of these lofty sayings, you can definitely treat it as Mr. Market. Graham's description of Mr. Market is actually correct. So, what do I want to say in the end?
The whole process is actually very interesting. When I started, it was because of survival considerations, and also because I entered the industry by accident. But, after I entered the industry, I discovered that there are indeed many very fascinating things in this industry. It really allows you to learn new things forever.
You will obviously feel that your knowledge, insight, and judgment are really growing in a compound manner. So, not only do you experience the compounding growth of your assets and returns, which is a phenomenon that basically does not exist in real life, you can also experience your own abilities, your own knowledge, and your own insights growing in a compounding way, which is very, very interesting.
When I was young, I always thought about the meaning of life, not for myself or for society. Anyway, this was how we educated people at that time. But later, I discovered that the true meaning of life is actually the pursuit of true knowledge, because true knowledge can change life, destiny, and society.
And the world is completely different from people and other things we observe. One thing is that the real world we observe is basically a world of increasing entropy. In terms of energy, it always goes down from high, right? The big ones can always eat the small ones, and the planets that collide with them will crush the big ones and crush the small ones.
When the whole world reaches a certain level, it will also go to death. Alas, but the human world is different. The human world can be turned into a world of decreasing entropy. It can go backwards. People can go from knowing nothing, being completely ignorant, to becoming a very knowledgeable person.
Through cultivation, a person can become a moral person, and a person who can contribute to society. Human learning can create so many amazing things that were unimaginable before. Moreover, since the arrival of humans, the entire world and Earth have changed, and it is now possible for us to leave the Earth and go into space.
In the future, it is completely possible that we will be able to make some changes in the universe as well. Before I made an investment, I mentioned that my first investment was a cellular network, which was a wireless phone network. At that time, I thought it was something, but I didn't understand it.
I didn't understand it at all. That was 26 years ago. Look, 26 years ago today, who of us could still live without our mobile phones? Mobile phones have changed too much, and the internet has changed too much. So, these are actually a small piece of true knowledge that can change the internet. In fact, it is TCP/IP, which is a protocol.
The entire computer is a zero-sum, plus a silicon diode to determine the zero-sum. Just such a change changed the whole world. Therefore, investing is particularly good. For me, my personal experience has truly made me feel the process of human entropy reduction. So, I learned to invest, especially on the right path, because the value investing method is actually a journey of entropy reduction.
In the process, you can indeed help create the world, and you can indeed achieve win-win results. You not only help yourself, but also help society. And these insights, supported by you, can make our world completely different from all other living things. So, I think this is a particularly wonderful thing in the world.
I want to share this feeling with everyone, hoping that we can go far together on the road of value investing. Thank you, everyone. It's sell-side, buy-side. It's actually a psychological change. I think when I first discovered it was because after I bought the first stock, I found that the company was really mine.
Human psychology is that people feel very different about the things they own. Then the sell-side situation is the same. That is, if I sell it, I always want to sell it, because my incentive mechanism is to sell it, and I always want to dress up my pig a little more beautifully. Anyway, I can call it a unicorn.
Anyway, it is a very good pig. Of course, it is also possible that the one you bought happens to be very good. If you cover Motie, it is indeed very good. But it is a psychological change. First of all, you have to get rid of it. That is to say, people do know it psychologically. Basically, the butt and the head are very consistent.
There's no way to do this, because if you don't do this, you will be too awkward. Can't stay anywhere. So, when you transition from sell-side to buy-side, because I found that many of my friends in the past were investment banks, and then invested, basically, they were not very successful, because they were always their investment banks.
The most important thing is to sell other people's ideas. And that's because they sold it so well that they convinced themselves. That is, everyone is like this because you just said don't lie to yourself because you are the best to lie to yourself. When you sell particularly well, you often sell it to yourself.
That's for sure. That's why I say objective rationality is particularly important. As for objective rationality, you need to adjust your position before you can change. So I think it's best to make some personal investments so that you can feel the psychological difference between the two before officially transferring.
After you make some personal investments, you will find that you really feel that the company is mine. And your ideas and sell-side ideas will begin to change a lot. The way you collect information is also different. You are basically asking us what our names are. The wireless messages you receive are all in English.
I don't even remember Chinese. The antenna, the antenna will start to turn. When your antenna turns, you will find that the information you collect is different. So I think the first step is to make some psychological adjustments. The best way to adjust it is to do it yourself first. You need to do it yourself before officially joining.
Do it yourself but use a value investing approach rather than a sell-side approach. The sell-side method is that whatever I want to sell is always the best. If you don't have any ideas, it will be difficult for you to succeed. So when you meet someone who sells insurance, everyone wants to develop you into a next player and you look like everyone else and you just rely on yourself to succeed.
There is nothing you can do about it. So yes, it is the most important. I think your first step is to break away from the original shackles when you feel a psychological change. But your original understanding of business and the company is all usable, all accumulating, all of it. But you find that when you use the owner's antenna to reorganize information, you will find that many information channels have changed.
The information has changed and your knowledge is still useful, but your thinking structure for organizing knowledge will undergo some very subtle changes. These changes are particularly important. If you don't complete this step, it will be difficult to pass directly. I have seen too many examples, especially when investment banks are doing well and some country or country is doing something wrong, they always want to do a PE fund, always want to do a VC fund, always want to do some kind of hedge fund.
Almost all of them are disasters. Almost all of them are disasters. It's just them. They're just so good at selling. So much so that he sold himself. There are many different people in the world. I have met many different people. The main reason is interest. The main reason is interest. That is to say, if a person can insist on doing one thing well in the end, it must be in line with his interests.
The direction that is easiest to succeed is actually the one that you are interested in and capable of. For example, some people may have a valuable investment temperament, but they are more interested in other things. So they do it for a period of time and study for a period of time, and then they are attracted to other things.
This is completely fine, and I think it's a reasonable decision. So, in the end, I think the most important thing for a person is not which industry can make more money. If you hold on to your thoughts, you will always go to your husband because there will always be others who make more money than you, and you will always have to use it to judge.
You must suffer a lot and walk away for the rest of your life. So, in the end, you still have to follow your own interests. If your interest is here, generally speaking, once you go down this road, you will go farther and longer. But if his interest is not here, I think what I see most is that it is indeed not his interest here, but what he learns here is useful elsewhere.
Because what we do is to predict, predict. Whether we understand or not actually depends on whether the prediction is correct or not. But right, the answers of industry was not revealed right away. It was revealed many years later. But if you are a very honest investor, you will always insist on reading the answer.
If you are an intellectually honest person, you will keep reading. So, you will know whether you really understand or not. But my our standard, for example, our own company standard, means that if you understand something, I have to know what the company will be like at worst in 10 years. It is best to be able to take care of yourself, but I have to understand what the company will be like at worst in 10 years.
If I can't do that, I can't quite say I understand the company. But my probability is very high, very, very high probability that I am right. Then I will have to follow it for 10 years to see if my prediction is correct. So, it is indeed a a difficult question. What's the hardest problem there? Human beings have many, many innate psychological tendencies.
Mr. Charlie Munger specifically lists 25 types in his Poor Charlie's book that we translated, but there may be more than this. These psychological tendencies are because our human brain is basically a result of natural selection design. The main function of the brain through natural selection is to produce more offspring and survive, but we live.
The middle life is actually the result of cultural evolution. In our highly civilized society today, a civilized and evolved society, alas, many of its parts are different from biological evolution. So, we carry with us those innate psychological tendencies. There are just a lot of flaws that prevent us from making judgments very objectively and rationally.
This is why we do encounter the questions raised by this classmate. Indeed, he thinks he understands them all, but he does not. He does not understand his blind spots. When he didn't have his own blind spots, he was proven wrong in the end. In fact, he really didn't understand much. So, that is to say, when you think you understand something, you must first know what I don't understand, because the things we understand are definitely limited.
So, let's talk about circle of competence. One of the most important concepts is circle of competence. It has a boundary. It is a circle. If you don't know where the circle is, and you say, I understand it, then you definitely don't understand it. That is to say, you also need to understand that when you know something is right, you must know when it will be wrong.
Mr. Charlie Munger has a standard that I think is quite useful. He said that if I want to have a point of view, I must be better than what I can find. The smartest opponents of this view can also counter the argument. I am worthy of having a perspective only under circumstances. I think this is still a good standard.
You can use the standard to judge whether you understand or not. You can think about it the other way around. Can I find the smartest person I know and refute what I so-called understand? And then I find that his thinking is not as good as mine and he refutes it better. It's possible that I can't say completely that you do understand, but you have to know when my understanding is wrong.
That is to say, I have to know that my abilities are indeed in a circle. If you don't understand where the boundaries of the circle of abilities are, in fact, you really don't understand because you can't understand everything. Of course, it sounds a bit abstract, but once you get to the specific point, many people in our company are here and each of them has experienced the questions I asked and they will definitely push you to the boundary.
If you don't push the boundary, you can't really understand what things are. You have to rely on intellectual honesty. And you really need to train constantly, which is difficult to do all at once. So, if you don't live in this way of thinking, it's really not easy to do it, but this habit is very helpful to a person's life.
For something to be useful knowledge, it must meet several basic conditions. First, it must be proven. Hey, it's logic and facts can support it whenever you see it. Then, it is indeed that it can be of sufficient use, can explain some things, and has strong explanatory power. At the same time, it also has relatively useful predictive capabilities.
So, we can say that among the knowledge we have in reality, it is the most useful knowledge, the most in line with the standards, and it is scientific knowledge. This scientific knowledge does meet all the standards I just mentioned, but most of the phenomena we encounter in reality have no basis in scientific theory.
Because the things we encounter are more or less related to people, and things related to people are more or less a probability distribution. So, in fact, when everyone learns mathematics, calculus is not too important, but statistics must be learned well. Almost all the problems you encounter in reality are statistics problems.
So, when we are faced with the problem you just mentioned, how to use which method, you still have to use scientific methods, but you must know that what you get is vague results. But, you would rather be vaguely correct than precisely wrong, but you still have to use scientific methods. Learning back and forth is still the most effective and best way to accumulate knowledge.
Also, what is most useful to me is to let your own interests be your guide. When you have a strong interest in something, you will accumulate knowledge in this area in a relatively short period of time and be more efficient than everyone else, and you will do it better than everyone else. Because when you finally use your knowledge, you still have to be in a competitive environment.
For a judgment, you still have to compare it with others. So, when you have a strong interest in something, when others are stopping, you must still be thinking about it. When others are satisfied, you may still be asking. So, this will allow you to get the most important edge. So, letting your own interests guide you, using scientific methods, slowly accumulating knowledge bit by bit with an honest attitude, is still the only reliable learning method I see.
That is to say, these two types of styles are actually part of acquiring knowledge because the level of management of a company is indeed a big variable. The longer a company's long-term development takes, especially in its initial founding period and in a rapid development environment, the founders and key business managers will indeed play a very, very important role in the company's value.
However, many things are formed by the competitive landscape of the industry itself and are not transferred by individual will. No matter how capable you are, if you are in a very, very poor environment, you will not be able to achieve better results. A person with relatively low qualifications can still do very well in a particularly good industry.
Many of our excellent state-owned enterprises actually have leaders who have never worked in a business at all, and this does not affect their performance. The specific situation of each enterprise is different, and each situation needs to be analyzed in detail, but the standards are the same. In other words, in the end, with the knowledge you gain, you must be able to accurately predict the situation many years into the future with a high probability.
No matter what method you use, no matter what angle you look at, no matter which aspect you look at. In fact, you have to cover these aspects. If you want to understand a company, you must understand its management, and you must also understand the basic rules of its industry. All of these are This is why it is relatively not so easy.
There are a lot of things you need to know. So, why use the concept of margin of safety? Today, we talked relatively little about the concept of margin of safety. The main reason for margin of safety is that our predictions for the future are limited, and our knowledge is limited. If you have enough margin of safety and enough price protection, you can make a lot of money without knowing much about it.
Because why I started to give examples, I really don't understand that business at all. I got really lucky and made seven or eight times the money. In fact, I should have made twice the money, but because of the margin of safety, I dared to invest. Then, after you invest, you learn a lot. So, margin of safety is particularly important.
Just when you don't have much expectation or clarity about the future, you must choose those particularly cheap opportunities. When you choose different opportunities, cheapness is still the last word. It depends on how long you have. The longer the time, the characteristics of the industry itself are the most effective protection of economic modes.
The shorter the time, the more important the human factor. Every industry and every company has different sources of competitive advantage, and the degree of protection is also different. So, every company must have it. Although the final understanding standards we require are the same, the methods of analysis are the same.
But in fact, in the end, you spend a lot of time, and in the end, you will get an answer that I may have already got, which is that you can't tell most companies clearly, and you can't predict most companies. Many enterprises have their own changes. It does not constitute sustained competitiveness. For example, let's take the simplest example of restaurants.
At any time, every once in a while, there are always a group of restaurants in Beijing that are the best and the best for a certain cuisine. But you will find that they change after a while. So, that's it. Just because it's good now, it's really hard to guarantee that it will be good in the future. In fact, you can spend a lot of time getting to know this kind of company, but in the end, you will find that it is actually difficult for you to judge.
So, I think that, at least for me personally, I will spend my time in industries that, in my opinion, are more predictable. Then, among these industries, you can go back and take a look. Among the remaining companies, which companies are predictable because they are not only predictable because of the industry itself, but also because they are indeed excellent.
The meaning of excellence is that its return on capital is much higher than that of its peers. Much higher than its competitors. Then you find out in the middle, which things I am actually quite interested in. Maybe I still have certain abilities, or are already within my circle of competence. These are the things you should spend time studying.
So, looking back, there are about 100,000 listed companies in the world. If we look for them on a global scale, you don't actually need more than five to 10 companies at any time. So, the The and most important thing you do is to subtract. You can ignore many things. Many of these things are outside your scope.
The only important things you do are within your scope. If there are opportunities that belong to you, you must not make mistakes. But opportunities that do not belong to you, you can completely ignore. So I go back to what I said before. That is I need to know my own relatively well, and then I can be more picky.
Because once you understand it, you can wait slowly when the opportunity, that is when the price begins to enter the margin of safety that is sufficient for you to think the value is. Even if you are wrong, you cannot lose money. At that time, you can go out and attack on a large scale. So your research from this point of view is best to focus on things that you can really figure out and understand.
And since you have so few to choose from, you might as well choose the best. Of course, you can also choose the smallest one that I can catch, or you can choose the one that is already very cheap. If I can understand it, my margin of safety is enough, and I cannot lose money. So in short, what you invest in is certainty, and what you want to avoid is uncertainty.
When price can provide you with certainty, then price becomes your most important thing. When your own knowledge circle, your ability, and your judgment become your certainty, it is best if you study companies that are particularly good in themselves. In this way, you do not need to constantly change companies every few years.
You could last for a long time, and let the buoyancy of the company itself work for you. I have been engaged in business, in the broad sense of the word, for almost 26 or 7 years, and I have seen all kinds of very successful entrepreneurs or less successful entrepreneurs. I find a particularly interesting feature of the market economy is that it can release all kinds of people.
In a normal society, many of these successful entrepreneurs are actually very problematic. Even before the market economy was discovered, these people were reluctant to deal with him in life. And if he wanted to do the news about Wang Chun engaged, he would definitely fail. But the market economy will make it possible for any special person, any different person, any alien to succeed in the niche he finally chooses.
So, my final conclusion is that I never judge which prototypes or standard personalities can become outstanding entrepreneurs in a market economy. For example, if you follow the so-called general standards, you wouldn't think Jack Ma would be a very successful entrepreneur. I have known Jack Ma more than 20 years ago when he first established his company.
At that time, I did not think that he would definitely become a great entrepreneur. He has many great characteristics. So, but but the market economy is exactly what makes it possible for all kinds of unique people to create a business that suits them and then achieve great success in the process. So, my conclusion is that I don't have a unified standard for what kind of people have the qualities to succeed.
Oh, but you can analyze every company. When you analyze the company, you don't need to analyze the people. You will understand why people created such a company, and this company is very successful. Jack Ma may not care about very small things, but he will definitely do it. He knows how to manage and employ people.
So, the people he uses are very, very sensitive to details. Because Zhang Yong is a very unique example. Everyone will find one that suits them. Therefore, when judging a business, do not judge it easily because depending on what people are like, the business will definitely succeed or not. Well, I have also met many people who seem to have the right conditions, but in the end, the company's performance is very average.
We all may have experienced. You may be your classmates. If you look around, some people are stand out. The one most likely to succeed, but then also didn't do so well. This situation is everywhere, baby. So, I think we must go back to each enterprise and analyze the specific situation in detail. Yes, there was such a course when I was in school.
At that time, it was the only value investing course offered by Columbia University. At that time, Warren would come to teach once a year, and people would always ask him questions. Then, what he said is that the best way for you to learn is to work for the people you respect the most. In this way, you will learn very quickly.
After I listened to it, I decided to start my own company. It's a bit of a joke, mainly because I can't find a job. So I think people are different. Some people, indeed, do learn faster under the guidance of others. However, the disadvantage is that there are very few value investors in actual practice.
So such a company basically doesn't need people. If his company is very successful, you are like Warren. His company has more than 100 branches and employs more than 500,000 employees, but there are only 25 people in his headquarter. Until 7 or 8 years ago, there were only two investors, him and Charlie Munger, who managed more than 500 billion dollars.
So it was difficult to work for him. So now it is easy to get two young people 7 or 8 years ago, and they are not agents. They manage many of them themselves. We also manage many of them. We manage quite a few, but there are only a few of us. As far as it's concerned, of course it would be better if there was such an opportunity, but it's rare.
Especially good investors basically don't need to hire people. This is a paradox. Of course, if you study with him, you will indeed learn very quickly. So why do we start classes? Well, I just want to, and I will also think about it in the future. We will also build a value investor village in China.
Such a group of people can achieve relatively long-term independent results. It is not the kind of hundreds of products, just one fund and one management. A style that lasts for many years, and the result is our white list result. We should also look for such a style and let everyone see it. See it sincerely.
It is possible, and the result is possible. To be honest, if I had not seen Warren Buffett in real life, my understanding of stocks would still be based on Tao Yu's description in Sunrise. So, I would never enter the industry. Of course, I also want to work for him, but of course, he doesn't hire anyone, and we don't hire anyone.
So, in the end, I think the best way is to teach myself. However, self-study and some exchanges with people who have already gone a long way on this road are still very useful. So, that is to say, I basically don't give speeches in our school. I never give many speeches, but the only exception is that I often go back to my alma mater to share with the students about that course.
I didn't go to China to give a speech before our class. This is my second time giving a speech in China. Why not give a speech? In fact, it also has something to do with your investment. People's own tendency is to go back to the sell side, and sell side we just mentioned in Guangyang. He naturally has a tendency to sell.
Everyone always wants to dress up more beautiful than he actually is. Otherwise, why would we buy those clothes? Right. I always want to learn, be more knowledgeable, more judgmental, and more powerful than my actual results, right? These are human tendencies, and there is nothing I can do about it.
So, every time you give a talk, you will strengthen this concept, especially when you talk about some specific stocks. Every time you give a talk, every time you meet with investors, you still have some healthy doubts, because people cannot be 100%. You are 80% or 90% good, but you always say it is 100%.
In the end, if you talk too much, it will become 200% or 300%, and in the end, you will deceive yourself again. So, the more people you talk to, the worse the result will be. So, I basically never talk about it, but the only time I do it is to share it with students and classmates on such occasions, because there are really very few opportunities.
But, we don't necessarily talk about specific companies, but we can share some experiences. So, of course, what I'm saying is that your first choice is still to work for someone you respect. This is definitely fine. The second option is to study by yourself, and during the self-study process, you can find people you admire more, and then try to maintain a certain relationship with them.
Including classes like this, many of my friends today seem to have flown in from wherever they are, and some have flown back from the United States. It actually works, and I would do the same thing if I were in your shoes, because a little bit of sharing is particularly useful in practice, because knowledge is a practical discipline.
And in investing, it is a lonely process. It is making your own decisions. The more people you discuss, the more you become a committee member. Alas, your objectivity will be lost, and you will basically be unable to judge odds. Group dynamics will also arise. One thing about human psychology is very scary.
That is, our brains are not suitable for investment due to biological evolution. So, you do have a cultivation process. Of course, if if you have such an opportunity, of course, you must cherish the opportunity and seize the opportunity. But, when there are no opportunities, you can create other opportunities.
But the most important thing is to learn by yourself and experience this process yourself. Then I think you are eager to buy a stock and research it, or are you eager to research a stock and then buy it? No, don't get the order wrong. You need to study it carefully before submitting. So, in your question, I think you might want to ask where to find stocks with such low balance sheets.
Indeed, there may not be too many in the market now, but in fact, many markets in Asia still exist because I mean global, because you can invest all over the world. I assume you can invest. There are about 100,000 stocks traded every day. There are many in Asia. You can also research and learn about them.
Such stocks still exist. Such stocks still exist. That is, for example, my assets and liabilities, the company is in a profitable state, and it may be profitable for many years to come. Then, you can verify the net worth, such as stocks, securities, or real estate. For example, what you can see is, say, 100 minus all liabilities, then the company's trade right now is about 50.
Such opportunities are much less than when I started, but they are still there. It's strange that the market, all these little corners, have these things. So, if I want to start over and don't understand anything, I might as well start here, because at least I'm more confident. I can see and touch it.
I don't understand other companies, and I won't lose money. But in the market, we cannot study the problem with the funds we currently manage. So, I'm certainly not the most best expert on this. So, when you ask me a question, I'm sorry, I really can't answer you. But I know there are other markets.
So, in China, because these concepts actually influence Warren, because he is very interested in what kind of work, he will naturally be interested in those very strong companies. I am particularly interested in companies that are particularly good. Because of it work, these companies definitely make money much cheaper and better than those poor companies.
Well, in Warren's early days, he worked for Graham for more than 2 years, and then studied with him for about 2 years. So, Graham's view of the problem also strongly affects him. Because when Graham formed his theory, it was mainly during the era of the Great Crisis. He also laid some investments in the early 1920s and before 2009, but they were basically all speculations, and they were quite unsuccessful.
But after he learned from the experience in 1929, he began to systematically summarize a different set of methods. And then, the time he worked on mainly spanned from 1929 to the 1950s. So, when the stock market fell in 2029, when did it recover? The middle period was in the early 1950s, which was almost 17 years.
So, Graham's entire career, his entire process, covered the time when the US stock market was at its most depressive. As a result, the index was falling every day, just like our A shares. Almost throughout his entire career, the stock market only kept falling and he achieved outstanding results under the circumstances.
So, he can't make it too big. He was indeed in those companies, the ones that Warren later talked about as a test, but he couldn't grow big. So, of course, these ideas made him very successful at the time and of course, they had a strong influence on Warren. But, when Warren started doing it, it was in the late mid to late 1950s.
At that time, the US economy had come out of the big crisis. The entire economy was beginning to develop and those outstanding companies began to really exert their power. Therefore, Mr. Charlie Munger's influence on Warren was special and meaningful. Well, from the beginning, he had his own reservations about Graham's approach.
He wanted to figure out how the world works, what work doesn't work, and then repeat what it works and avoid what doesn't. So, Therefore, he is particularly interested in such excellent companies and he does not emphasize the need for large discounts because this is a quite interesting problem. It is not a big problem in China because index funds account for a small proportion.
It is a different problem in China than in the United States. The problem in China is this, because we have not yet fully implemented the registration system, we have no way to do very very strong clearing of these policies and delisting policies. Therefore, our stock index is not able to fully and fairly reflect the status of the economy itself.
That's the problem. I just think that the regulatory authorities may have to focus on solving the problem in the next few years. We have shifted from manufacturing exports to entry to consumption. Then consumption is the main focus, and the financing method must change from indirect finance to direct finance.
Then the role of the stock market will become greater and greater. As it gets bigger, you have to attract more people. If you want more people, you need to control the gambling component and the bubble component. You have to increase the investment component. The best and fastest way to increase the investment component is to use the stock index, which is the largest.
So, you have to make the stock index more fairly reflect the economy itself. So, on the one hand, in the case of substitution, it is possible to develop better ETFs that can fairly represent the current status of the economy. But, it is very arbitrary, very man-made, and not particularly easy to do well.
Therefore, the best way is to use market methods to solve the problem and get the market into a registration-based state relatively quickly. Delisting is done first, and listing is done slowly and gradually, so that its stock index becomes more representative. This is China's problem. So, the problem in the United States is that the stock index is getting higher and higher.
So, now the question is, to what extent does it start to have a positive and negative cycle that affects pricing? The reason why we need investors in the market is because investors are the ones who can really set prices for securities. If the market lacks a pricing mechanism, it will distort the entire financing.
So, the biggest problem with passive investment is that it does not do pricing. That is, what proportion of investors must be in the market to make a market more efficient. This is a problem faced in today's mature markets. Of course, our current stock index ratio has not yet completely affected pricing, but if this continues to a certain extent, there is indeed a possibility that investors who set prices will becoming smaller and smaller to the point where it loses its pricing function.
But I have always been worried about this. This is what everyone said. My personal point of view is not that worried because before the stock index came in, we had always had a lot of speculative speculative and value investing people. Just less. Then, I mean that I use value investing and fundamental investing separately here, but value investing is actually a more picky type of fundamental investors.
These people require a higher margin of safety, but their way of thinking is the same. In fact, in my opinion, these people have always accounted for a small proportion of the market. In the past, there was a professor at Columbia Law School named Louis Bernstein. He made a relatively systematic statistics on how many value investors there should be in the market.
But he calculated it to be about 5%, which is not a very scientific algorithm, but I have not seen anyone else doing more work in this regard. So, whether it is 5%, 74%, or 10%, the number is not too much anyway. Before the emergence of stock index futures and stock index investment, these people had always been the most central force in market pricing, but such large-scale failures did not occur.
Of course, bubbles and moon badges have always been there, except in 2008 and 2009, when it really reached a very extreme situation. So, I always feel that the problem may not become a relatively big problem in the stock market until many years later. But, the problem does not exist in China. The problem in China is that today's stock index is not enough to fairly represent the overall economic situation, and there is no alternative ETF.
That is to say, who can develop an alternative ETF? Being able to fairly represent the current economic situation, I think, is a great contribution to ordinary investors. The supervisory authorities need to do a lot of work in this regard. Investment is indeed a long game, a very long-term thing, and short-term performance is actually of no use at all.
We, the reason why I, Warren, am admired by everyone, is that he is really he is he is the performance of nearly 60 years, 60 years. Achieving long-term performance is particularly important. So, if you want to achieve long-term performance, you must first be in good health. One is 89, and the other is 96.
The two of them still work every day, and their enthusiasm has not diminished. So, I think the first one is particularly important, that is. And to live a long life, the most important thing is actually to do what you like to do. Of course, it is important to maintain good living habits, but the most important thing is to do what you like to do, and to have a normal mind.
They, if you look at him, he never goes, because all his practices are win-win. He has no pressure. Take the two of them, for example. 50 years ago, their salary was $100,000 each. 50 years later, it is still $100,000 each. If he were to collect a 1% management fee, he would now have 5,500 billion, right?
You can calculate what 1% is. If he charges 20% of something, something, a performance fee, performance fee, how much will his assets be? But in this case, he has to perform well every year, because some people want to withdraw. So, he will be under pressure. And since he has received fees, he has to serve things.
Then he will, of course, not be so arbitrary. He now has more than 100 billion in cash, and he doesn't need it. There is no pressure. So, he arranges his life in such a way that he lives in Omaha. If you go there, he may go to see you. If you don't go, he just does his own thing every day, eats the same thing, and then goes to work with something called a tap dance.
That's why he can have a long, long performance. Also, all his relationships with people are win-win, and he is really very kind to people. Because of us, I have known him for so many years. He is sincerely good to everyone, and is sincerely willing to help others. He has no ill intentions towards anyone.
It's not that he has no judgment. It's not that he thinks about these people. There are some people he doesn't like, but he just avoids them. So, he arranged his life to be very, very, very ordinary and very sustainable. So, this is particularly important. So, it is very important to have a good family and an environment surrounded by love.
And it is very, very important for your colleagues to be kind to others and not have any malice. Then, do everything you do in a win-win manner. You see, we never charge management fees and our first 6% is free. So, if you get an index fund, you don't have to pay a penny with us, right? When you get money above this, everyone wants you to get some money.
Because if it is like this, wouldn't you exceed index investment? So, we also learned it from Buffett. This is called Buffett formula, which is his fee structure. Let us live a normal life. I can come here and share with you. I don't have any pressure. That is also very important. Therefore, our colleagues are very friendly to each other.
We are very open and there is no hostility. Our relationship with everyone is a win-win relationship. And you never push yourself when doing things. Only do things you really understand and never do things you don't understand. So, you must be very calm when doing it. The ups and downs in the market will definitely affect your emotions.
Only in this case will you have a relatively long performance. So, a normal mind is particularly important. It becomes particularly important if you turn your life and your relationships with other people into a win-win situation and make it based on love. Then, it is also important to give frequently.
So, often helping others will indeed make everyone feel very good and live a happy life. So, Warren's definition of happiness is often the people who want to love me actually love me. This is his definition, and I think the definition is pretty good. If you use this method to organize your life, you will be a win-win for a long time, and you will watch your knowledge and abilities continue to grow progressively without pressure.
And then watch as this knowledge allows you to manage the funds. Grow slowly and progressively, and then allow those who entrust you, the investors, to have more wealth to help others. For example, we only give money to these universities and endowment funds, as well as those families that are used for charity.
We basically do not give money to the rich to manage money in order to get richer. We are very selective in choosing our clients, so that I feel like we are contributing to society. That is, if you organize your life in this way, you will do it calmly, not in a hurry, and live your life slowly and at your own pace.
Many of my colleagues and investors also told me, "You said that we also want to invest in your way, but the problem is that my investors don't do it. He always wants to think about how much money we will make in the next hour. We have already made or lost money in the last hour." So, I said, "You are not the investor." And he said, "If I were not the investor, I would have no investors."
How can I find investors like you? He said, "I had no investors when I started. When I started, I borrowed a little money myself, and I was still in the negative at that time." Charlie Munger has a saying. He said, "How do you find a good wife?" He said that your first step is to make yourself worthy of your wife, because a good wife is definitely not a fool.
So, the same goes for investors. In the many years since we started, it was my own money plus a few guest friends. So, I believe in you more. But, it doesn't matter. Then, slowly, as you do it for a long time, the right people will come to you. And then, you can choose those who are more suitable for you.
And then, you can start doing it slowly. You don't need to be fast, and you don't need to follow others. So, the most important thing to keep in mind is that you have to believe in the power of compounding and the power of slow progress. The power of compounding is a slow growth of 67% a million times in 200 years, which is not low, right?
Yes or no? Well, what? 2 weeks later, Mr. Guo will tell you your story. When you started making conscious, who knew you would reach this point? It's the power of compounding. It's the power of compounding. When we first started reform and opening up 40 years ago, who could have imagined that China would become what it is today?
In the process, it is actually an average, even a 9% increase, which does not sound too high, but 40 years, just 40 years. There are still some people here who are still alive 40 years ago, right? Not all of them are young people. In just 40 years, the world has been turned upside down. The change can be described as earth-shaking.
So, you must believe in the power of compounding. Don't be anxious, and there is no need to fight or compare with others. That is to say, the right person will slowly find each other. There is no need to worry when you can't find it. There is really no need to worry if you find it. So, if you have patience, a normal mind, and do it slowly, you will do better.
Why should I compare it to golf? The thing about golf is that if you get anxious, the ball will be broken immediately. Is anyone playing golf here? If no one fights, then let's not talk about it. Examples won't work. It means that as soon as your normal mood changes, it changes immediately. If you have a normal mind, you will do better and better.
This means living in moderation, exercising, using win-win situations, and using golden rules to organize your life. Then don't push yourself and do what you like. These sound like common sense, but when you are young, these common sense are not easy to grasp because everyone is anxious. In fact, the biggest difference is that when you were young, you were anxious.
Why are you anxious? Because I always compare myself with others. So-and-so among our classmates are not as good as me. Why are we doing this now? This is his life. What does it have to do with you? Everyone has to live their own life, and this life is actually very short. When I was young, I felt that life was very slow.
But when I'm a little older, the days fly by so fast that a year passes by. So, in this life, you must live your own life. Only by living your own life can you live happily, and only by living your own life can you truly make progress. Don't be afraid of being slow. Slow is fast. What Keith just said is what Adnan likes to say the most. I think he's right. That is, fast means slow. This is correct.
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