"Li Guofei: Three Dimensions of Value Investment (Full Text of a 30,000-Word Speech)" is an article that many investors have read. It is full of useful information and has been widely circulated. During the reading process, looking in the rearview mirror, I found that my investment perception was very different from Li Guofei's. Here I will record the essence of the speech and my own opinions.

There are three dimensions in judging a good company: moat, evolutionary power and entropy reduction power.

1. Moat

To C companies are more likely to become giants. It is much easier to study To C companies than To B companies because they can be experienced personally. Energy companies in To B companies generally require various political resources (Yangtze River Electric Power), while non-energy companies in To B companies generally require very strong technology. However, due to too frequent technological disruptions, even large companies cannot take a single step. If you keep up, you may be out. If you must invest in a To B company, you should invest in a company with simple business and monopoly nature (China Shenhua).

In the production factor system composed of resources, technology, land, capital and labor, the role of technology is becoming more and more prominent. The market value of high-tech companies is increasing sharply, and the performance of resource companies has declined significantly. I am optimistic about three types of companies: Internet companies, financial companies and consumer companies.

The moat of Internet companies lies in very high transfer costs and network effects (and the resulting scale effects). The moat of a financial company lies in the stickiness of licenses and comprehensive finance to customers. The moat of consumer companies lies in brand and consumption inertia, which can bring spiritual satisfaction. Bringing "addiction" is the ultimate product power.

Li Guofei believes that the test yardstick for a moat is the right to raise prices. I disagree. Wal-Mart's low prices are also the company's moat. I think the right to raise prices is the yardstick of a brand, and a brand has two basic attributes: popularity and reputation. Its core is to bring excess returns to shareholders. A trademark that no one knows can certainly not be counted as a brand, but a trademark that is well known but has a bad impression cannot be counted as a brand, such as LeTV, Sanlu milk powder, etc. As part of goodwill, the real value of a brand is to create profits, otherwise it cannot be called a brand, it is just an ordinary logo.

2. Evolutionary force

I think there is a better theory to explain this aspect. I wrote in the public account article "Under the national system, the technology industry is ushering in a strong trend, and China's technology leader "Funds Worth Attention" mentioned that fund manager Liu Ping divided companies into four major categories based on the cash flow distribution created during the life cycle of the company: project type, product type, platform type, and ecological type. She believes that project companies are an elementary form, and product-based companies are prone to super hot stocks. Product companies can become one-in-a-thousand platform companies (the ultimate in manufacturing), and eventually evolve into one-in-a-thousand ecological companies (the only ones in the service industry). It is possible).

Platform companies often have strong barriers and scalability, and are the final form of the manufacturing industry. Their essence is a collection of a series of projects and product-based companies. Ecological companies will emerge in the later stages of the development of the service industry. Ecological companies have extremely high barriers, good growth potential, and distinctive characteristics: acquiring customers once, permanent sales, continuous cross-selling, and ecological empowerment. Ecological companies generally only come out of the service industry and are the scarcest assets.

The theory of enterprise evolution that Li Guofei saw is actually the performance of an enterprise at different stages. It is not easy for an enterprise to grow from the embryonic stage to the stable development period. A large number of companies will interrupt their evolution in the four stages. .

I also don’t agree with Li Guofei’s application of the theory about the centerless, selfless, and distributed world to the cognition of Internet companies. He used cases to explain his views: Take Tencent as an example, it was the first It is instant messaging QQ, which quickly reached hundreds of millions of users. They have the need to play games, and QQ games came into being. Hundreds of millions of people have the need to express their emotions, and QQ space has emerged, and there is the need to read news. , QQ.com emerged. In 2011, with the rise of the mobile Internet, WeChat was born, truly realizing the universal Internet for the first time. There was a demand for transfer payments, and WeChat payment emerged, and then there was a demand for financial management, so it emerged After Wealth Management, the mini program was officially released in 2017. I think it is a very significant evolution for WeChat, and its connection capabilities have made a qualitative leap as a result. I think that whether it is Tencent, Alibaba, Baidu, or Ping An, all ecological companies are "dispersed in form and spirit" and have very strong centralization. Moreover, the core of Internet companies is traffic, and the core of controlling traffic is the interface.

The evolutionary force I think is the ability of Internet companies to obtain traffic and create super products. With such abilities, they will soon become luxuriant and green. If one of the two abilities is missing, both will be a failure.

Hema, the example given by Li Guofei, is currently not satisfactory. The reason is that it does not have the ability to create traffic itself and relies too much on traffic import. After the traffic comes in, there is no super product to utilize the traffic, precipitate the traffic, and upgrade the traffic. There is no Offering high value unique value and no way to keep the pressure high on your opponents.

Li Guofei said that Ping An of China is not an Internet company, but a financial company. I also disagree. Ping An of China has 560 million Internet users, second only to Tencent and Alibaba, and more than Meituan. How can you say that? Isn't it an Internet company? The core of the Internet is data. Ping An's digital operation capabilities and data processing capabilities are among the best in the world. Isn't such an enterprise an Internet enterprise?

I think Li Guofei missed the point when he used evolutionary power to look at companies. The phenomena he saw were just different corporate forms.

Regarding the corporate structures of Tencent and Alibaba, Tencent's "prince system" is because it has abundant traffic, but cannot make profits and needs to be empowered. The company can mainly grasp the core traffic interface, while Alibaba's " "County system" is because its traffic is not sticky enough and faces strong competition, but its own profitability is strong, so it needs to aggregate traffic and import the traffic from the traffic interface. In the era of data and the Internet, data is connected and algorithms are the core. This should be common knowledge. It is not a wise choice for Tencent's major BGs to maintain data and business independence.

3. Entropy force reduction

What is entropy? Entropy is the concept of the second law of thermodynamics and is used to measure the degree of chaos of a system. Nature transfers from high temperature to low temperature at any time. In a closed system, as time goes by, the temperature difference will inevitably decrease, and its entropy will inevitably increase. The system will move from order to chaos. In the end, the temperature difference will be zero, and the system will degrade to A lifeless, lifeless state (known as entropic death). This law means that the development pattern of all things in nature is from order to chaos, and finally to destruction.

Is it possible to avoid entropic death? Yes, it is to establish a dissipative structure. The dissipative structure is an open system far from equilibrium. Through constant exchange of matter and energy with the outside world, the entropy will decrease (that is, "entropy decrease"), and the system will transform from a disordered state to an organized state. Ordered state, this new ordered structure is the dissipative structure. This structure has three main characteristics: one is far from equilibrium, the other is openness, and the third is nonlinear development. Nonlinear development means that the development of the system is not smooth, and sometimes there will be sudden evolution or collapse, and the growth curve will therefore change. The stages are very steep.

The general trend of this world is that entropy increases, but artificially creates a small environment where entropy decreases. In this small environment, growth can be reversed to a certain extent and vitality can be maintained.

Li Guofei believes that to build the company into a dissipative organization, the following three points must be achieved:

1. Promote the company away from balance;

2. Promote the company to be more open;

3. Concentrate resources on disruptive opportunities, thereby making the company's growth curve steeper. This means that management must have foresight about the future, and once it detects major opportunities, it must dare to concentrate resources to promote the company's sudden development.

These three points are what I call the three laws of entropy reduction. (Comment: The establishment of entropy reduction relies heavily on management. We are back to the problem of ships and crews. A company with excellent management is great, but people will change and people will make mistakes. It is difficult to concentrate resources to exert force. It means huge risks. Countless companies have fallen into the abyss because of one wrong step, so we must pay attention to it.)

In practice, Li Guofei believes that the company should continue to develop new businesses. (Comment: Is this really good? Li Guofei If all successful people are used as cases, is it survivorship bias? Is the reason why these successful people are successful really because of their continuous new business? Maybe it is just an accompanying phenomenon)

Li Guofei also criticized Tencent. The restraint after the 3Q war was deemed unnecessary. This is typical of those who do not understand business or politics. I think that if Tencent did not exercise restraint in the past, it would certainly be able to develop rapidly, but it would also create huge hidden dangers for the enterprise. It's short-lived. It's important to show strength, but restraining desires is the key. Historically, too many companies have been short-lived because of lack of restraint.

On the one hand, Li Guofei praised Tencent's "prince system", but on the other hand, he strongly opposed its decision not to hold a controlling stake in its investment sector. I really can't understand how a person can have such contradictory thoughts.

In practice, Li Guofei believes that the company should increase technology research and development and replace old technologies with new ones.

In practice, Li Guofei believes that the internal horse racing mechanism encourages internal competition.

In practice, Li Guofei believes that internal integration is needed to break the company's business stability and adapt to the adjustment of the company's strategy. (Comment: I think that if a company frequently adjusts its strategy, either the external environment changes too quickly or the company’s strategy is not a strategy at all)

Regarding the comparison of the two corporate mechanisms, Li Guofei believes that “the county system "It is very conducive to improving the company's vitality. The core of this organizational system is "instability." The core of Tencent's "princeship system" is "stability". In a period when Internet traffic dividends, especially mobile Internet traffic dividends, are booming, the social, gaming and e-commerce fields are developing extremely rapidly. There are many good opportunities and employees on both sides are working very hard. All business models performed very well. But today, the good jobs that make easy money are basically gone. Alibaba’s unstable model forces management at all levels and employees to work hard, but Tencent’s stable model makes it easier for people to relax. The company vitality will be lost. (What do you think of this issue?)

Judging from the full text, Li Guofei is a very offensive person, worships the strong, and highly recognizes the powerful corporate governance of Huawei and Alibaba. The wolf culture is high. Frequency cites these two companies as cases to illustrate its point of view.

But I think it is biased. A successful person is successful in all aspects. Even something that was done poorly may be considered to have made a huge contribution to the company's success. Survivor bias and accompanying phenomena can greatly mislead investors' judgment. I think Li Guofei can be the general manager responsible for execution, and the chairman responsible for strategy. A company will be unlucky.

As I write this, I can’t help but pull out its “Comprehensive Rethinking Tencent’s Strategy”. There are many discussions and disputes on the Internet. You can take a look.

Li Guofei is very famous, and this speech article is also very famous. I originally wanted to select the essence of the content and share it with you in the form of reading notes, but the more I read, the more I feel that "the Tao is different and has nothing to do with it." "Conspiracy", the title of the article changed again and again, from the essence version to the review version, and then to the "critical version". Reading the article with questions and not worshiping it has always been my principle.

Of course, this article is also my personal opinion. Everyone is welcome to criticize and correct me.

My WeChat public account: Guhaisi Meditation, welcome to follow and chat about investment together.