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