Li Lu's 50th Birthday Speech:"Return to Simplicity, Honor Destiny, and Act Accordingly"

Born on the Eve of the Cultural Revolution in Tangshan, Hebei, I spent my childhood in foster families, enduring hardships, grateful for the kind mentors in my life, and dedicated to cultural exchange between China and the U.S. and value investing.

Author: Li Lu

Li Lu’s 50th Birthday Speech

In April 1966, on the turbulent eve of the Cultural Revolution, I was born in Tangshan, Hebei.

Being from an intellectual family, my parents, grandparents, and I quickly lost our personal freedom, so my childhood was spent in various foster families—from farmers to miners, and even in long-term daycare centers.

Looking back, from such a starting point, stumbling and nearly facing death several times, I have somehow made it to today. It is truly a marvel of life’s unpredictability.

The wonder of life lies in its unpredictability. I have crossed countless bridges, seen countless clouds, and traversed various treacherous terrains, unleashing various potentials.

Today, looking back on my journey, I have encountered so many kind and good people along the way—benefactors, mentors, partners, friends… Those who have understood my life, you are my roads, bridges, cars, and airplanes. Without your selfless support, encouragement, and friendship, it would have been impossible for me to travel this far until today.

At the age of fifty, whether you are in the distant sky or right before me, I am grateful and dedicate the great river’s waters to write a tribute of thanks to you. Thank you! Thank you! Thank you!

If I have made any contribution along this rugged journey, it is that this life path is indeed walked step by step by me. Woody Allen’s joke says, “Ninety percent of success is to show up,” and this is true.

On many of life’s obstacles, I might have stagnated or been complacent. But the voice inside me always told me, “This is not the end.” I have “persisted despite confusion” for half of the journey, and the other half has been a trial and error process.

The path forward is like walking on thin ice, cautious and trembling. Resentment, annoyance, greed, anger, ignorance, arrogance, and doubt—these inherent flaws of life have not spared me.

In fact, the hard wounds from childhood have required me to put in greater effort to counterbalance. Whenever I am troubled by negative emotions or stray from the path, I am fortunate to find my way back.

Socrates was right, “Unexamined life is not worth living,” or at least not lived well enough. “I examine myself three times a day,” and from time to time, I pause to reflect on the mistakes I have made recently.

Laws are not fixed, and circumstances are ever-changing. What was a correct viewpoint in the past may be wrong today. Therefore, over the years, I have developed a habit of re-examining myself every 5-10 years, sometimes requiring changes as drastic as a reformation.

Rational cultivation has helped me form this habit of “constant self-reflection,” and more fortunately, I have a few frank friends who keep me true to my name. Without their help, I might have long lost myself in various mazes of life.

Despite the difficulties and obstacles, I still persist in driving my own life’s journey, as it ultimately belongs to me and cannot be replaced by others. Having now passed the halfway mark, it is time to review the past and look forward to the future.

Confucius said, “At fifty, one knows the mandate of Heaven.” Without knowing the mandate, one cannot be a gentleman. Having brushed past death several times has made me believe in the fate of life and death; knowing the mandate of Heaven is not to be violated. The only thing I can do is to accept life as it is, day and night. In the first half of my life, I worked hard to gain what I could not, and in the second half, I will try to simplify and return to simplicity, honor the mandate of Heaven, and act accordingly.

In most professions, I might be a failure. For example, I am certainly a poor ballet dancer and could never become a basketball star. But my nature and experiences have allowed me to become a qualified investor.

I am grateful to my mentor, Mr. Warren Buffett, whose unexpected speech during my time at Columbia University twenty-five years ago led me to stumble into the field of investing.

Even more astonishing is that thirteen years ago, I met my life mentor, Mr. Charlie Munger, who has not only become my investment partner but also a lifelong teacher and friend. I often marvel at my fortune to receive such rich gifts from life; even Shakespeare could not script such a dramatic chapter.

To this day, I have accumulated my own twenty-plus years of investment record, and after so long in the profession, I still work with dedication and enthusiasm.

Sometimes, I wonder how far I can walk along the path guided by Buffett and Charlie. They have unparalleled records of over fifty years of continuous growth. How long can I keep up? Can I earn money in China using only the cleanest methods and wisdom? I am not seeking asset size or management fees; I only wish to leave behind a clean investment record. Like a golfer’s scorecard, recording each round’s score until the end of life.

I clearly know that value investing, both globally and in China, is a career worth dedicating my entire life to.

In the past fifty years, I have split my career between China and the U.S. These two different experiences have often led me to compare the two countries—their different cultures and my own changes. For a long time, I had an identity crisis—am I Chinese or American? The clash between the two cultures was like two forces competing within me.

To resolve this, I delved deeper into the essence of both cultures. It was only in my forties that I slowly integrated these two forces into one peaceful coexistence, leading to enlightenment—I became both a pure Chinese and a hundred percent American, and 1+1>2.

Through the perspectives of both cultures, I am able to interpret the unique qualities of each civilization, to hear great music in the quiet and see the visible in the intangible. This trait allows me to navigate seamlessly between Chinese and American cultures. I now believe more in 1+1=11.

Therefore, I view the exchange and communication between China and the U.S., and their people, as my mission—to interpret each other’s stories. This will be one of my primary responsibilities in the second half of my life.

Thank heaven! I have three precious daughters. They are lively, lovely, wise, and kind. I am proud of them. Because of my deep love, I do not want to bind their freedom with too much inheritance.

I will encourage them to work with my wife EVA and me, through our family charity fund, to create a better world. With their natural cross-cultural advantages, I hope they will join me in enhancing mutual understanding between China and the U.S., especially at the grassroots level.

Additionally, the high-quality education I received in China and at Columbia University is a key reason for my achievements today. My colleagues and I will continue to promote education in value investing.

I also hope to have the opportunity to work hard to provide more young people with the chance to receive top-tier education without boundaries, which will be the direction of joint efforts for my family and colleagues in the future.

Turning fifty is a watershed for me. From this day forward, I am possibly closer to the end than to the beginning.

In terms of perspective on age, I appreciate Norman Lear’s insights. At 94, Norman is still active in many fields. In the U.S., his admirers range from those in their eighties and nineties to those in their twenties and thirties.

Once I asked Norman, “How old do you feel?” He replied, “I am always as old as the person I am talking to.” This is the coolest answer I have heard about age! Since then, I have paid special attention to the people I interact with.

From today, I officially enter my fifties. I urgently and sincerely seek young friends to walk alongside me, as you will keep me current and youthful.

My dear friends! May we all gain wisdom as the years increase, and may joy fill our lives!

Further Reading

Charlie Munger’s Evaluation of Li Lu’s Talent and Character

After the 2017 Daily Journal annual meeting, Charlie Munger mentioned two stories that highlight Li Lu’s investment talent and good character.

Q1: How did you assess BYD’s intrinsic value compared to its market value when investing in the company?

Munger: Valuing BYD was challenging. We learned something from it.

When we first invested, we knew that, given BYD’s situation at that time, venture capitalists would be willing to pay three times the price. From a venture capital perspective, BYD was very cheap. We believed that from a venture capital standpoint, BYD was worth investing in because Wang Chuanfu had already achieved some remarkable results.

Overall, BYD was a cheap stock at that time, but you needed a different vision to recognize its value. Li Lu discovered the opportunity in BYD, and without his help, I would have certainly failed to understand BYD.

After investing in BYD, I met Wang Chuanfu, even though he couldn’t speak a word of English. Wang Chuanfu is a genius. He is sharp, honest, passionate about his business, and loves his company. He can master cutting-edge technology and do things that others cannot.

Q2: Among Berkshire Hathaway’s subsidiaries, some are not fully owned, for example, where Berkshire holds 85% of the shares and the remaining 15% belongs to minority shareholders. When such subsidiaries make large-scale investments, what impact does it have on the 15% minority shareholders?

Munger: Take Nebraska Furniture Mart as an example, where the Blumkin family is a minority shareholder. The Blumkin family likes managing the business and they are very wealthy.

Warren and the Blumkin family both live in Omaha. Warren treats the Blumkin family’s successors like his own children and lets them decide the company’s annual dividend policy. Warren tells the minority shareholders, “The entire dividend policy of the company is up to you. Whatever you decide, I agree.” Warren always deals with people he values this way.

Li Lu is the same. Let me tell you a story about Li Lu that you will surely enjoy.

General Electric has a reputation: it always makes a sudden twist in negotiations just when everything seems almost settled. By the time it reaches the final stages, the other party has generally invested funds and is aware that they have been duped, which is frustrating but unavoidable. General Electric’s sudden twist always seems to work.

Li Lu, in venture capital, used a “last-minute twist” strategy during an investment negotiation. The person he was negotiating with had previously worked with us, helping us make a lot of money. This was a repeat collaboration. The person was of great character and intelligence.

Now, let me tell you how Li Lu used General Electric’s strategy.

Li Lu said, “For this investment, I must make one final change.” How about that? Doesn’t it sound like General Electric’s approach? At this point, the investment was almost a done deal. This was not something I instructed Li Lu to do; he did it on his own.

He said, “Look, for us, this investment is a small amount of money, but you are investing your entire fortune. I must add a supplementary clause: ‘If we lose money, we will return your invested funds.’ Without this clause, I can’t sign the contract.” This was Li Lu’s sudden twist.

Think about it. In the future, who wouldn’t come to us if they need venture capital? Nobody told Li Lu to do this. Some people are just like that by nature.

This is very clever. It seems like a generous act, and it indeed is very generous. But it also brings immense benefits to oneself. First, it is the correct way to conduct oneself, and second, it is beneficial for oneself.

Berkshire Hathaway’s consistent good behavior has brought it investment opportunities that others cannot obtain. How many people can do this? Can Sumer-Rockstone do this? Can General Electric’s culture do this?

Q3: Ben Franklin once told us that adhering to ethics is the best strategy. However, in real life, people like Sumer-Rockstone, Carl Icahn, and Donald Trump, whose actions are contrary to those of Li Lu, have still achieved great success. How can this be explained? Is this not in conflict with what Franklin said?

Munger: Sumer-Rockstone, like me, also graduated from Harvard Law School, though he was a year or two ahead of me. In the end, he became wealthier than I am. You might think he achieved real success. I don’t see it that way. I believe money isn’t everything. I think Sumer-Rockstone is a counterexample.

General Electric, whenever it integrates a company into its supply chain, sends a letter to the supplier saying, “Dear Li Erguo, we will create brilliance together… (a series of such statements)… but we must integrate into General Electric’s supply chain… We plan to extend your settlement period from 30 days to 90 days.”

This is bullying suppliers. General Electric has a whole department dedicated to this, extracting more profit by squeezing suppliers.

There was a supplier I knew well, and General Electric bullied them too. The sales manager said, “Let’s stop dealing with them; let them go.” The supplier’s owner said, “Continue working with them. Find out which products we supply exclusively and that General Electric has no alternative.” He raised the prices of all these products fourfold.

I think General Electric’s ruthless squeezing of suppliers is wrong. There is this culture within General Electric where everyone competes to see who can extract more profit from suppliers. It’s excessive.

Overall, General Electric is a great company with excellent products and some outstanding employees. Jeff Immelt is a good person, but I disagree with General Electric’s practices.

The theory I adhere to in life is win-win. I hope suppliers trust me, and I trust suppliers. I don’t want to exploit suppliers indiscriminately.