Fast is slow. Do the right things, and do things right.

**lzhang** Tue Jul 03, 2007 1:14 am

Fast is slow. Do the right things, and do things right.
Fast is slow. Do the right things, and do things right.

In the sunshine of northern California, on this Saturday, June 30, 2007, Hua Yuan Science and Technology Association, (HYSTA), an entrepreneur organization founded in the Silicon Valley, hosted an event, the Journey Of A Successful Entrepreneur, Investor, And Remarkable Philanthropist --- "Fireside" Chat With Mr. DUAN Yongping. The host of the event is Mr. Jack Xu, Vice President of HYSTA, Vice President of Engineering & Research, eBay Fellow, eBay Inc., former CTO of Netease, Inc.

The event started at 2pm in a conference room of Orrick, Herrington & Sutcliffe LLP, a business law firm. Mr. Xu, sitting side by side with Mr. Duan, asked a series of questions on his early business career in China, his investment experience here in the US, his charity activities, and other questions interesting to the audience, in areas like personal life, religion, society, culture, etc. The "chat" lasted for about 1.5 hours, followed by an hour-long Q&A with the audience. The whole session was mostly in Chinese. As a participant of the event, I would like to share some of my experience with other people here.

Readers might have known Mr. Duan very well. As an entrepreneur, Mr. Duan achieved great success by building up two most famous consumer electronics brands in China , SUBOR (Xiao3 Ba4 Wang2) and BBK (Bu4 Bu4 Gao1) from 1989 to 2000. When he joined SUBOR in 1989, it was only a factory with less than 20 workers, 2M RBM debt and only 3K RMB cash. Under his management, in 5 years, Subor became a leading manufacturer of "learning computers" and game machines in China by 1994 and made billions RMB profit by 1995. Mr. Duan founded BBK electronics in 1995 after he left Subor. BBK gains large market share of DVD players' market in China, and occupies a major market in Russia. It is also a leading brand in telephone and stereo market in China.

Mr. Duan "retired" from daily adiminstration and served as a board memeber of BBK, and in 2001, he immigrated to the US for personal reasons and became a Bay Area resident. He had never set foot in any stock markets before that. As an independent investor, Mr. Duan has made successful investments in NetEase, UHAL, etc. Those successful investments have generated tens-time return with hundreds of million USD for him. William Ding (CEO of NetEase) and Jack Xu (former CTO of NetEase) got to know Mr. Duan as close friend after his investment in NetEase.

Mr. Duan attributes his great success to Warren E. Buffett, a famous billionaire investor, from whom he has learned value investment. In 2006, Mr. Duan won the auction to dine with Mr. Buffett for about $600K to say thanks to him. The Warren Buffett lunch is a charity auction held every year, and the winner's payment for it will be donated to a San Francisco charity. As a philanthropist, Mr. Duan and his wife established their family's charity fund "Enlight Foundation" in 2005. Mr. Duan and William Ding donated $40 million to Zhejiang University , among which, $30 million came from Enlight Foundation. Enlight Foundation also donated a library to the company Mr. Duan's parents used to work at. Another charity activity is that Mr. Duan and William Ding set up a $4 million fund in Stanford to help Chinese freshmen with necessary economic support.

Mr. Duan received his Bachelor degree in electronics engineering from Zhejiang University and studied Economics in Master degree program at People University of China.

Some remarks from Mr. Duan on investment and my comments. Personally, I think Mr. Duan is very humble and humorous.

Fast is slow (欲速则不达)

Mr. Duan has a famous yahoo message board id, fastisslow, which, to be fair, should mean "more haste, less speed," a well known Chinese idiom. He emphasized it many times during the conversation. When we drive to work from home, we are usually reminded by family members to "drive safely"; nobody wants us to drive fast and get accidents, while in investment, people are eager and encouraged to get rich quick! But that is just a recipe to get rich slower, or worse yet, get wiped out faster.

During his dinner with Mr. Buffett, Mr. Duan asked a question, what would Mr. Buffett do if he had lots of cash, but could not find many opportunities (as is true for Mr. Buffett right now)? What would Mr. Buffett do if he had very few cash, but just found a great investment opportunity, would he use margin, or otherwise get some loan? For the first question, Mr. Buffett said to do nothing, which was the most difficult thing to do. For the second question, Mr. Buffett said not to use margin, no loan. As Mr. Buffett said, he knew he would be rich, very rich, when he was young. So what is the point to get 2% faster this year or next year? There is no need to be hurry. You only need to be rich once. A long string of fabulous numbers times 0 is always 0, so you do not want to be rich again.

Interestingly enough, in the Q&A session, just like magic, one guy asked a question, "how to get rich quick?!" Mr. Duan answered, "as always, people are asking the same question, which means I have just wasted my time to talk without any effects on people's mindset."

Do the right things and do things right

Those are the principles Mr. Duan emphasized numerously during the conversation. Basically, the same principles apply to business, investment, or even playing golf. For a project, whether it is the right thing to do is the first question to ask. If you do it, you should do it right, but if you can do it right or not is a question of your ability. Have the right things to do, you still need to improve yourself to do it right. If the mission is beyond your ability, you should not take it in the first place. To be a successful entrepreneur, you should not take advantage of any other people, you should be fair to your customers, your suppliers, your employees. Be fair to others as from the standpoint of other people, not think of being fair to other people from your own point of view. You can never be fair if you think that way. His companies have very little bad debt, an uncommon situation back in China for many companies, because they only do business with trustworthy people, and they build their own trustworthiness with fairness to other people.

When you find out what you are doing is not the right things to do, you should stop it right away. Any cost of stopping doing it is the smallest cost, no matter if it is for a failed business project, or a faulty investment. When you lose $2M in a failing business project, and wishfully think you can get it back by adding another $2M into the project, you are just acting like a gambler in Las Vegas.

Courage on investment
Q: Did you need any courage to buy NetEase when it was facing delisting?

A: "I do not need any courage, actually I do not have any courage in investment. When you are buying something with more than $2.5 cash per share for 80 cents, you really do not need any courage. Delisting is not a real risk for me. My company is delisted already --- it never goes to public anyway. If NetEase was delisted, I would be very happy to buy all the shares, take the company private and liquidate the company for more than 100% gain.

"On the other hand, for some high price stocks, one does need enormous courage to buy them.

Luck and opportunity

"You do need some kind of luck to have the opportunities for those great investments, but not everybody can hold them for ten-times, hundred-times gain. You need to understand what you are doing, you need to understand the business. I understand NetEase's online game business as I have been in the game business for many years and know the market is huge and they are doing great. It is not hard to understand UHAL's business and their business is stable. Its $50 NAV is on sale for less than $5. But I could not get to know anything about UHAL if my friend did not mention it to me. When I asked some American people if they know anything about UHAL, they thought I treated them as idiots. UHAL has enormous brand value.

"Couple of years ago, I was wondering if Apple Inc. was worth to buy in its teens, with $12 cash per share. I never studied it thoroughly, and I hate to use my wife's Mac. Just a month ago, I tried to use an iPod my broker sent to me for free couple of years ago, I regretted that I did not try the iPod earlier. If I tried, I probably would do more research on it, and would probably buy Apple Inc. at the time when I was just wondering. For Apple Inc. I do not know how long I can hold, but definitely for several times gain. It needs great courage right now to buy Apple Inc., though.

About Fresh Choice, Inc.

I noticed that Mr. Duan had a large holding of Fresh Choice, Inc. before the company filed bankruptcy from SEC filing, but did not know why he bought it and how the company went to bankruptcy afterwards. As people asked a question in the Q&A session on this issue, my questions are clear.

He bought it for two reasons. First, Fresh Choice had CF of about 60~80 cents per year at the time, and with price of less than $2, it was a great deal. Any Bay Area resident could not miss Fresh Choice Restaurants. Even now, almost every major mall here has a Fresh Choice Restaurant, and we dine there every week. I think Mr. Duan also noticed that their business was at least OK. The second reason was that the company was relatively small, so he could buy him a board member with just a few million USD. He wanted to know how a US company was managed, how it worked, etc.

Finally he became a board member, but the equity was wiped out in the end. The management team failed for two reasons, according to him. First they raised the price to `improve' its performance. Second they were still expanding, tried to open some new restaurants. Those were suicidal actions according to his experience in consumer markets. He said humorously, "Maybe Americans are different." It turned out all people were the same in response to raising price. His role in the company was greatly limited by language barriers and other reasons, so he could not do anything on those problems the management team had. Anyway, that was his tuition he had intended to pay...

References

http://www.hysta.org/event_detail.php?id=201

http://www.confuchina.com/11%20wenxian/01%20jingbu/10%20lunyu/13%20zilu.htm
《论语·子路》子夏为莒父宰，问政。子曰：“无欲速，无见小利。欲速则不达；见小利则大事不成。”
Zixia, being the governor of Jufu, asked about government. The Master said, "Do not be desirous to have things done quickly; do not look at small advantages. Desire to have things done quickly prevents their being done thoroughly. Looking at small advantages prevents great affairs from being accomplished."

**lzhang** Tue Jul 03, 2007 1:16 am

Hi All,

Do not know if there is still something going on for this Content. Just post something for the last weekend to share with fellow investors. Happy investing!

**blast_investor** Tue Jul 03, 2007 1:23 am

Yes, the contest is on for you to win the points.