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The better the business model, the higher the certainty of investment or the lower the risk --- Duan Yongping

What is the most important thing about (value) investment?

Duan Yongping: right business, right people, right price. (Right business, right people, right price) This is what Lao Ba said. The right business refers to the business model, and the right people refers to the corporate culture. Price is not that important, business and people are the most important. Culture has a lot to do with founder. Business model is the way to make money. You have to understand this by yourself. I can't tell you. Just like if you don't play golf, I can't tell you how fun it is. (2018-9-30)

Duan Yongping: Laoba Tongxie said that the business model is the most important. I have probably been thinking about this sentence for several years, and I am still thinking about it, but I do feel more and more that Lao Ba’s statement makes sense. A meal with Lao Ba is not in vain. This sentence is already worth 100 meals, right (actually far more than that)?

What is a business model? I can’t tell clearly. Maybe a professor at the university can give me a definition of literary point. But, I think I know roughly what that means.

If you still don’t understand what a business model is, then take a look at some of Lao Ba’s speeches at several universities.

Don’t understand yet? Then look at See's Candy, look at Coca-Cola, look at BYD, look at Apple, look at airlines, look at those "photovoltaic companies" that make solar wafers...

Still don't understand? Then start over and watch again. If you don’t understand it within 10-20 years, you can use this method, which is to “start over and read again.” What should I do if I still can’t understand it after 20 years? Let’s talk about that 20 years later. (2012-06-24)

01. Netizen: First look at the business model! The brightest guiding light.

Duan Yongping: Seeing this sentence shows that you have understanding. This sentence may be worth a lifetime of lunch. (2012-04-06)

02. Netizen: Brother Duan has talked about the importance of business model many times. So what is the relationship between business model and investment certainty? How does Brother understand that there are risks in value investing and there is value in venture investing? Both value investment and venture capital must consider the business model, so what is the essential difference between value investment and venture capital? What is the certainty of investing?

Duan Yongping: 1. The better the business model, the higher the certainty of investment or the lower the risk;

2. See the first point;

3 . See item 1;

4. See item 1. (2013-04-03)

03. Netizen: You said that Buffett told you that when looking at a company, you must first look at the business model. Can you tell me what you think about the "business model"? Definition (it seems you have never said it in detail), or which aspects of the business model to focus on. Thanks!

Duan Yongping: Why do so many people ask what a "business model" is? A business model is a business model, a model that generates net cash flow. A good business model is one that can generate a lot of net cash flow in the long term. (2012-04-08)

Netizen B: Netizens are all academics and must define everything.

Duan Yongping: There is nothing wrong with knowing the definition of everything. I didn’t tell me what business model is, and I really can’t find a particularly good word to explain it. After much thought, business model is the best. The definition is---business model. (2012-04-08)

Netizen J: By the way, it may be easier for most people to replace the "net cash flow" you mentioned with "free cash flow". Free cash flow = operating cash flow - capital expenditures.

Duan Yongping: In fact, for people who don’t understand, it’s the same no matter which way you say it. (2012-04-09)

Netizen: Why do companies with good business models have good returns on investment? Is it because of sustainable development?

Duan Yongping: You need to understand the definition of business model first. Simply speaking, a good business model means that the company can continue to make a lot of money. (2019-05-05)

Netizen: When I first started investing, I paid more attention to right price. The longer I invest, the more I realize the importance of right people. The right price can often be waited for, but the right people are hard to come by. If I opened a restaurant, I would not do business with someone who was dishonest and pocketed the money at the cash register. When you buy stocks, you become a shareholder of the company. You are also doing business in partnership with others. Choosing management should be the same as choosing partners. (2013-04-21)

Duan Yongping: Right business is the most important, because right people can be fully reflected in right business. The right price is less important because time can reduce its importance.

Netizen S: Right business refers to a good business model and cannot be equated with the company's future profitability. A good business model may make mediocre profits in the long term. Right business is neither a necessary nor a sufficient condition for a company's profitability.

Duan Yongping: A good business model should not make mediocre profits in the long term, but it is possible in the short term. I think the definition of a “good business model” includes strong future profitability, otherwise it’s not a “good business model” (otherwise, what does that mean?). The future refers to the entire life cycle of a business.

Quoting the essence of Buffett’s 31-year shareholder letter---1 (2012-02-17)

Unless it is experiencing huge growth in sales, a good company should by definition Refers to those companies that can generate large amounts of cash, (1984)

04. Netizen: How do you understand that good management is also reflected in good business? I have always been confused about which aspects of good business can reflect good management.

Duan Yongping: No matter how good a driver is, it is difficult to drive a bad car well. (2013-04-22)

Netizen F: On the other hand, can we understand it this way: good management should have the ability to improve, change or even create new and good business models when necessary. Soon after Gree Dong Mingzhu took office, she made radical changes to Gree's original poor business model. She felt that the original bad car could no longer be driven.

Duan Yongping: That one is a bit rare. It is generally safer to invest after seeing a good business model. (2013-04-23)

05. Netizen: Is the process of establishing a "good business model" somewhat unpredictable? Because too many good products have disappeared because there is no good business model.

Duan Yongping: Very good business models are very rare.

(2013-04-23)

06. Netizen: Brother Duan, because I don’t know enough about financial reports, I care more about the conduct of managers. I once saw a sentence As the saying goes, "In investment, if you don't know the product, you must know the person." I would like to ask you, in addition to listening to his words and observing his actions, what else must be paid attention to when giving people a qualitative opinion?

Duan Yongping: If you don’t even know the goods, do you still need to know the people? Lao Ba made it very clear! (2013-11-15)

Netizen: Buffett said that when choosing a company, you must look at its management. Buffett said that when choosing a company, you must look at its essence, because sooner or later it will be managed by mediocre people. Isn’t it a bit contradictory?

Duan Yongping: What he talks about later is the business model. What I talked about earlier was management level. What Buffett means is that if the business model is good, mediocre people will not be afraid. (2010-04-01)

07. Netizen: According to Da Dao, it should be that if the business model is average, the company will have a hard time and thankless efforts, then the corporate culture It must be good, otherwise it will be difficult to last, it will be easy to cause problems and difficult to do well, and you will definitely die in the long run. If the business model is good, the life of the enterprise will be relatively easy, but if the corporate culture is not good or there are problems, it is easy to spoil the good business. As an entrepreneur, sometimes it is not easy to choose a business model, but you can build your own corporate culture; and as an investor, of course, you should try to choose the one that has both the cake and the eat.

Duan Yongping: Maybe I can give you a metaphor that may not be appropriate. The business model is like a horse, the management and corporate culture are like a jockey, and the business results are the results of the competition. However, business operations are not as short-term as horse racing. (2011-12-31)

Quoting Buffett: Mistakes I made in the first 25 years of my investment career 2018-01-20

I can give you more examples that I bought myself Bargain folly, but I'm sure you've figured it out: It's much better to buy an unusually good company at an average price than an average company at an unusually good price. Charlie has long understood this truth, and I have been slower to respond, but now when we invest in companies or stocks, we will not only insist on looking for first-class companies, but also these companies must have first-class management.

We learned another lesson from here. A good horse must be matched with a good jockey to achieve good results. Berkshire Textiles, Hochschild, and Kohn (Korn Department Store) also have good horses. People with both talents are in management, but unfortunately they are facing a quicksand-like dilemma. If these people can be placed in companies with better health, I believe they will have better results.

I have said several times that when a high-performing manager encounters a company with a bad reputation, the latter usually prevails and the management's reputation is ruined. I wish I hadn't worked so hard to create a bad example. My previous behavior was like what Mae West once said: "I used to be Snow White, but now I am no longer innocent." ”

Netizen: Can I ask Mr. Duan a question? Mr. Ba said that the horse is more important than the jockey, but I think in your choice, you seem to attach great importance to the jockey, for Ali, for GE, and for Vanke. All of them reflect your requirements for management. I understand that you have really run a large enterprise. So, which one do you think is more important, the quality of management or the company's industry itself, or how to balance it? Asked for advice.

Duan Yongping: Buffett said that the business model is the most important, but it also requires the right people to manage it well. When I emphasize people, it means that the business model has been seen, not that the business model is unimportant. I don’t know which one is more important, but I know which one is important when one doesn’t work.

(2010-05-12)

08. Netizen: I have a question about Good business, such as the real estate industry. Companies in the real estate industry are generally in debt. The rate is high, not very popular, and not a good business model. However, the real estate industry should still be a differentiated industry. For example, Vanke, which Mr. Duan bought, should be considered a good company in the real estate industry. From the perspective of whether there are good companies From the perspective of business model, it seems that companies like Vanke have been excluded. Can a company like Vanke in the real estate industry have a good business model? How to judge whether a company has a good business model? Are there necessary and sufficient conditions for judging whether it is a good business model?

Duan Yongping: A high debt ratio does not necessarily mean a bad business model, right? The debt ratio of banks is very high, but some banks are good. The term "real estate industry" is too general, just like saying whether the business model of the consumer electronics industry is good or not, there is no way to draw a conclusion. Competition in the consumer electronics industry is very fierce, but Apple has developed a very good business model, while other companies have a very difficult time. It is difficult to find necessary and sufficient conditions for investment, otherwise there is a formula available? A good business model and good corporate culture are my favorite investment goals. If there is a good price, it will be perfect. The market can sometimes be very crazy (very expensive or very cheap), and when there is an opportunity (very cheap), investing in a company with a not-so-good business model may have a good return within a certain period of time. However, in the long run (10 years, 20 years or more), if you insist on investing only in good business models and companies with good corporate culture, there is a high probability that companies with good corporate culture will have better returns, and this investment method is very pleasant, and it is not Need to worry all day long. In short, if investors think about what will happen in 10 or 20 years every time they make an investment decision, the final result will hardly be bad, otherwise it will be difficult to predict. It is very difficult to find a company that you can think clearly about for 10 or 20 years. It is very, very good to have 10 to 8 opportunities in your life. (2015-04-11)

09. Netizen: I would like to ask if DaDao's "understanding the business model" can be understood in this way: use your own set of methods to resolve it, Understand (grasp) its essence, understand its core competitiveness (difference), and then understand its trends or changes in ten years (further). Can we also understand future cash flows?

Duan Yongping: Pretty much. Didn't think of a simple way to describe it. (2012-06-26)

10. Netizen: Is corporate culture relatively long-lasting? Business models will change with changes in social technology. We must stand in the future. , discover, cultivate and establish business models.

Duan Yongping: A good business model is a business model that is not easily affected by changes. (2013-04-17)

11. 15th anniversary (blog time: 2010-09-18)

Duan Yongping: Today is the 15th anniversary of the founding of our company anniversary. Choosing this date seems to have something to do with commemorating 9.18. After all, the Japanese are very good at electrical appliances. Now with a normal mind, I know that my biggest opponent in business is myself.

Netizen: Congratulations! I have infinite respect for bbk (BBK), and it’s hard not to be a century-old store. I still look forward to bbk making an ipo at a certain age, so that we can have the opportunity to collect more and more, and sublimate the bbk complex in our hearts.

Duan Yongping: Try to do it for 103 years. However, the business model of a company like ours is not good and it is not a good investment target.

Netizen Y: Why is it 103 years? I don’t understand. I also want to ask what kind of business model is a better investment target. Can Mr. Duan talk about it?

Duan Yongping: Haha, because someone has 102 years.

The so-called good business model is probably the one with a wide moat. The competition in our business is too fierce, but maybe one day we can find a business model similar to Apple or Google, and we will be a bit powerful. (2010-09-19)

Netizen: Was your name BBK (BBK) inspired by BRK (Berkshire Hathaway)? In fact, your BBK is the best company with a moat. It’s a pity that you have no plan to go public. I really hope to have the opportunity to buy your company.

Duan Yongping: The pinyin of BBK is BBG, which sounds like BB machine. . We didn't know who Buffett was when we came up with the name. Our business model is not good and it is not a good investment target. (2012-04-06)

Netizen: I saw your comment about your company as “not a good business model, not a good target.” I'm still very touched. BBK has been around since 1994, almost 20 years ago. We have always been very healthy, we are basically No. 1 in our industry, our profits are also very good, and our reputation among consumers is also very high. Even if you think it is not good enough, I am thinking that the vast majority of domestic companies will be even worse. Including Gree, Midea, Anta, Lenovo, etc., they probably do not have good business models and are not good investment targets. In addition, a good business model must be the most efficient model. Hope to get your answer (2012-04-10)

Duan Yongping: Good or bad is relative. Our business model is indeed not a good business model compared to Apple's. However, our corporate culture is pretty good, so our survivability should be relatively strong. By the way, BBK was established in mid-September 1995, still 3 to 20 years away. (2012-04-06)

Duan Yongping: Our company’s business model was indeed not that good until we made smartphones. (2019-05-05)

Netizen: I heard you say, “OPPO and vivo’s business models were not good before, but now they are quite good.” I would like to ask what your point of view is?

Duan Yongping: Now it is the entrance to the Internet and a platform. (2019-08-01)

12. Blog post: "Warren Buffett's Autobiography: My Castle and My 5 12 8 2 Rules of Investment" (2010-05-28)

How do I pick stocks: The focus is on "what", not "when". The Coca-Cola Company went public in 1919, when the price was around $40. One year later, the stock price dropped by 50% to only $19. It looked like it was a disaster. Bottle problems, sugar price increases, you can always find one or another reason that makes you feel that it is not a suitable time to buy. Some years later, there was the Great Depression, World War II, the nuclear weapons race, etc. There is always a reason (for you not to buy). If you bought one share for 40 yuan at the beginning, and then reinvested the dividends (buying Coca-Cola stock), until now, the value of that Coke stock is 5 million. This fact overwhelms everything. If you get the business model right, you will make a lot of money.