Progress 1:

Acknowledging early mistakes - in today's case, not buying Vanke and Skyworth

Duan Yongping's early A-share investments were not representative of his mature investment system. He made a clear reflection on this in 2018.

Original statement by Duan Yongping on September 30, 2018

Looking back at the decisions to buy Vanke and Skyworth today, they were clearly not right. This can be seen from our understanding of 'discounted cash flow'.

At that time, I thought these companies were cheap. Actually, whether they are cheap or not is related to future cash flow, and has no direct relation to the past. For example, I thought the net assets of Vanke were very high (over 10 billion?). It s

Case Comparison:

At that time (in the early stage), when investing in Vanke and Skyworth, the main considerations were high net assets and low price. This is more like Graham's cigar butt investment method, focusing on the static book value of the company.

Now (after evolution): He realized that the essence of investment is to buy future free cash flow. If a large net asset cannot generate cash flow, it becomes a burden instead. This cognitive leap is the core of his investment philosophy shifting from

This means that some of his early successes may be mixed with luck and a shallow understanding of value investing. Today, he has excluded these opportunities with more profound criteria.

Progress 2:

The key turning point - selling Yahoo and buying Apple, I feel like "making progress"

This is an important operation that Jian Yongping explicitly described as 'progress'. It marks a shift in his investment focus from 'liquidation value' to 'future growth value'.

Duan Yongping said on July 11th, 2012

Take an example of 'progress': in the past, I always thought Yahoo was valuable and believed it was just a matter of time. Now I still think Yahoo is valuable, but I have replaced most of it with Apple because I think Apple is more understandable and

Is selling Yahoo and buying Apple an example of progress? I think it is because my understanding of Apple is far better than my understanding of Yahoo.

Case Comparison:

Sell Yahoo: Yahoo at that time had assets in Asia such as Alibaba, whose value was far higher than its market value. This belonged to the investment of "asset-rich type". Duan Yongping admitted its value, but it might need to wait for the market to d

Buying Apple: Apple is a cash cow with a strong business model that can continuously generate huge free cash flow. It does not need liquidation, and its value lies in the strong self-generating capability of its business.

The transition from searching for discounts on assets that are priced below their intrinsic value to embracing great businesses that can create sustainable value is a clear indicator of his evolving definition of value, which has shifted from hidden

Progress Three:

Maturity of Mentality - From 'Loneliness' to 'Plainness

The progress of investment ultimately manifests in mindset. Duan Yongping contrasts his vastly different inner feelings when investing in NetEase and GE.

Duanyon Yuankong (On March 5, 2010 on Netease Blog):

When I bought NetEase, I felt a bit lonely as if I was the only one in the world buying it. When buying GE, I was calm with a little excitement. I think I might have made progress.

Case Comparison:

Investing in NetEase (early stage): Despite his persistence, he felt lonely in the face of extreme market panic, and needed strong willpower to stand against the entire world.

Investing in GE (later stage): When facing similar panic, his mindset has become unaffected. This indicates that his belief in value investing has been fully internalized, and the emotional fluctuations of the market no longer affect him. This inner

Progress Four:

From 'Being Confused' to 'Not Touching It': Lessons from the Aviation Industry

Duan Yongping once invested in an airline company named FRNT and lost money. This experience gave him a deep understanding of his own ability circle and what he shouldn't do.

Duan Yongping said (March 27, 2010, NetEase Blog):

"I made mistakes in the past by doing things that I didn't fully understand." "The biggest mistake I made wasn't necessarily what I did, but what I did without understanding it. For example, I once bought stock in an airline company (FRNT) because I

The progress is reflected in that this failure made him carve the rule of 'not touching what you don't understand' into his bones. Later, he strictly avoided industries that he thought were complex and difficult to understand, such as airlines and ba

Investment follows the logic of Old Ba: First look at the business model and understand how the enterprise generates revenue. 95% of people focus on the market when investing, which shows their lack of understanding of investment. It is necessary to

—— Duan Yongping, September 30, 2018

The Definition of Business Model: Naive Truth

Duan Yongping's definition of business model is extremely simple and returns to the nature of business.

The business model is the pattern of doing business, which refers to the way of generating net cash flow. A good business model is able to generate a lot of net cash flow in the long term.

——April 8th, 2012

Interpretation: This is the most fundamental definition. The essence of investment is to forgo current consumption in exchange for greater future consumption ability. Therefore, the ultimate consideration is how much net cash can be recovered in the

The business model is the way to make money. The best definition of a business model is - the business model.

—— April 8th, 2012 & June 24th, 2012

When repeatedly asked for a definition by netizens, his circular-seeming answer was intended to emphasize that business models are a holistic concept that requires personal 'enlightenment', containing the entire mystery of business that cannot be ful

Second

Features of a Good Business Model: Looking for the Winning Business

Duan Yongping's ideal business model has some common characteristics.

A good business model is simple. It's about having strong profits and net cash flow, while making it difficult for competitors to compete, even over a long period of time.

—— October 11, 2020

The business is described as very profitable and stable, with a strong competitive advantage that makes it difficult for competitors to challenge. Such a business can almost guarantee success, like Maotai or Apple.

The moat is what enables long-term sustained differentiation.

—— August 2, 2019

Interpretation: This is the core of a good business model. Differentiation means that users have reasons to choose you over others, and this reason can exist for a long time, so that pricing power is in their own hands and avoid falling into a cruel

A business model without differentiated products is generally not a good one.

—— April 20th, 2015

This is a 'filter' defined from the negative perspective. He often takes examples from the aviation industry and solar component companies, where products are highly homogenized and mainly compete on price and cost. The business model is very challen

Industries with large capital expenditures are not easy to produce good companies.

—— March 16, 2019

A huge capital expenditure will continue to erode a company's free cash flow. In order to maintain operations or expand, companies will need to constantly raise funds or reinvest, leaving less tangible returns for shareholders.

3.

Business Model and Investment Practice: How to Apply?

Duan Yongping not only defines a good business model, but also explains how to apply this concept in investing.

"The better the business model, the higher the certainty of investment or the lower the risk."

—— April 3, 2013

Interpretation: The core value of business model for investment decisions lies in its direct connection to risk and certainty. A solid business model itself is the best risk resistance mechanism.

I always use one investment strategy, which is to estimate the discount of future cash flow.

—— January 7th, 2011

Interpretation: The business model is the foundation for estimating future cash flow. Without understanding the business model, cash flow estimation becomes impossible, and all value estimations are like water without a source and trees without roots

"Understanding a company is not easier than earning a bachelor's degree. However, it is not worthwhile to spend too much time on companies that are difficult to understand. An important lesson I learned from Laoshi is to first look at the business mo

—— March 13, 2019

Interpretation: This is one of his most practical methodologies - using business models for initial screening. Before delving into financial reports and management, ask yourself: Do I like this business model? If it's not understandable or not someth

Section Four

Business Model vs. Corporate Culture: Which Is More Important?

Duan Yongping compares business models and corporate culture to the two most important factors in investment, and clarifies their relationship.

Right business, right people, right price. (The right business means business model, and the right people refer to corporate culture.) Price is not so important, while business and people are the most important, as said by Lao Ba.

—— September 30, 2018

It is clarified that business model and corporate culture are the two most important cornerstones in investment, while price ranks third.

The business model is like a horse, the management team plus corporate culture is like a jockey, and business results are like race results. It's just that business operation is not as short as a horse race.

—— December 31, 2011

This metaphor is quite classic. A good horse (a good business model) is the foundation for achieving good results, and an excellent rider (a good corporate culture) can fully unleash the horse's potential. But in the long run, if the horse itself is

In enterprises, good business models also need good corporate culture to maintain. A bad business model cannot be changed by a good corporate culture, such as in airlines.

—— General Discussion

This passage explains the dialectical relationship between a good business model and a good culture. A good business model needs a good culture to safeguard it and prevent it from being disrupted. However, a weak business model that is inherent canno

5.

Case Interpretation: What is the Top-notch Business Model?

Duan Yongping used the companies he invested in to provide a vivid display of the top-notch business model.

On Apple: "The most powerful thing about Apple is its current platform and business model. Based on my understanding, I cannot see who can break it."

—— Around 2012

Apple has built up strong user stickiness and pricing power through its closed-loop ecosystem of hardware, software, and services. The core of its business model lies in user locking and continuous consumption.

On Maotai: Maotai is liked by many because it is a unique and good liquor. People who like it will still like it... It is really rare to see a business model that is not afraid of inventory.

——February 13th, 2013

The core of Moutai's business model lies in scarcity, strong brand awareness, and stock appreciation over time, which are extremely rare in the entire business world.

On my own company (BBK/OPPO/vivo):"Our company's business model was really not so good in the past until we built smartphones. (Now) it is an Internet portal, a platform."

—— May 5, 2019 & August 1, 2019

He pointed out frankly that when he was in the electronic consumer goods industry in his early years, the business model was generally competitive. However, smartphones, especially with the mobile internet ecosystem, upgraded their business model to

Duan Yongping: Recognizing the 'Mirror of Demons' in Corporate Culture - Not Just Hanging on the Wall, But Engraved in Our Bones | Investment Cases of Being Resolute to Leave Due to Cultural Decay

The Irreproducibility of Culture: The Most Direct Touchstone

When asked if corporate culture can be imitated, Duan Yongping made an excellent rhetorical question:

Can a business model be copied? Try copying Google or Apple? A good business model includes corporate culture, which is very, very difficult to copy.

—— Duan Yongping, May 31, 2013

This statement hits the nail on the head. You can copy a product, a process, or even an entire team, but you cannot replicate the shared beliefs, values, and behavior patterns of a group of people. This is the core characteristic of corporate culture

II.

Identify the Three Core Dimensions of Corporate Culture

Duan Yongping's discourse can be found in his blogs and speeches over the years, but systematically speaking, he judges corporate culture through the following three dimensions:

Listen to what they say, and observe what they do - consistency in words and actions is essential

Huh, it's up to you to judge whether the business leaders believe it or not. If the top leaders don't believe it, then it's a no-go.

—— Duan Yongping, April 4, 2010

This is the most fundamental step. Instead of focusing on what is written on the company's official website or brochure, observe how the company behaves, especially during critical moments.

Case in point: Duan Yongping admired Ma Yun and Alibaba's handling of the 'Wei Zhe event'. In 2011, due to supplier fraud issues, Alibaba CEO Wei Zhe resigned for his mistake. Duan Yongping commented:

The right thing to do is to correct it as soon as possible when realizing the mistake, no matter what the cost is, it will be the smallest cost.

—— Duan Yongping, February 21, 2011

In-depth explanation: When conflicts arise between Alibaba's value of customer first and short-term performance or the reputation of senior executives, Alibaba chooses to defend its values. This kind of bone-scraping behavior is a more powerful proof

Time is the best test - watch how it traverses the cycle

"A century-old store does not necessarily mean that it will survive to the 101st year. It's like not using PE to predict next year's profits. Lehman seems to have a history of more than 150 years. But if you notice what the corporate culture of Lehma

—— Jian Yongping, April 4, 2010

In-depth explanation: When a company is going smoothly, its culture can easily be overshadowed by its performance. The real test lies in the face of adversity and temptation. When the industry is in downturn, will it stick to quality and reputation o

Focus on the 'Stop Doing List' - Why not doing something matters more than what you do

Duan Yongping attaches great importance to the Stop Doing List which he believes directly reflects the degree of the company's original intention.

Do the right things and do them right. When we find mistakes, we will correct them immediately, no matter the cost.

—— Duan Yongping, February 21, 2011

In-depth explanation: A company with a good culture will have a natural aversion to certain things. For example, the company under the leadership of Duan Yongping will never set up a charging trap for mobile phones because this is not their job. Inve

3.

Practical Guide for Investors

Summarizing the thoughts of Duan Yongping and identifying corporate culture can be translated into three specific actions:

Delve into the 'original archives': Don't just look at the latest chairman's letter. Go back and review the company's annual reports, press conference transcripts, and management interviews from the past 5 to 10 years. Evaluate their promises and see

Duan Yongping said, 'There is no need to have face-to-face contact with the CEO of a listed company. With the current advanced internet, it is very convenient to listen to his words and observe his actions.' (August 25, 2011)

In search of the 'cultural negative list': focus on whether the company has recognized and corrected major mistakes. Companies that dare to publicly admit their mistakes and are willing to pay for them usually have healthier cultures. Conversely, com

Using the 'personification method' to judge: This is a very vivid technique of Duan Yongping.

I don't have a specific format or formula to judge the corporate culture of a company. However, I often think of a company in a humanized way. If I don't want to deal with people, I won't invest in their company.

—— Duan Yongping, October 11, 2020

Imagine this company as a person: is he trustworthy? Is he visionary? Does he act with principles? Would you like to make him a long-term friend? If your answers are negative, then it's best to stay away from its stock.

Conclusion

Corporate culture is not a hollow slogan, it is the 'gene' of the enterprise organism, determining its health and ultimate form over the long years. Duan Yongping provides a methodology for 'gene sequencing'.

He warned us that a bad company culture will eventually hurt the enterprise itself in the long run, and once established, it will be difficult to remove such a culture. (2015-05-28)

As investors, our task is to develop a discerning eye and use the monster-spotting mirror of Duan Yongping to discern which companies are like-minded people who deserve to be accompanied for a long time and which ones are just empty on the outside, d

Duan Yongping's 'sell' discipline

When Corporate Culture Throws a Red Flag

Investment Cases of Culture Denaturation That Led to Withdrawals

"If I think a company is not honest, I won't touch it, like Tesla. The forbidden areas are mainly two: bad business model and bad corporate culture. The most typical characteristic of a bad corporate culture is often telling lies, you just need to se

——Duan Yongping, May 20th, 2019

In Duan Yongping's investment system, there needs to be a reason to buy, but discipline is even more important when it comes to selling. Among them, 'deteriorating corporate culture' is one of the most decisive signals for him to sell without hesitat

Case One:

GE (General Electric)

When “Going against Weldon” Undermines the Foundation

Duan Yongping used to be a long-term investor of GE and deeply influenced by Jack Welch's management philosophy. He valued GE's culture of putting Integrity above all. However, all these changed in the future.

Reason for buying: Based on the belief in the strong corporate culture established by the Welch era.

Selling moment and reason: Duan Yongping found that the core culture of GE was being eroded.

One of the key reasons for selling off GE was that one day I visited their company homepage and couldn't find any description of their culture as described by Jack Welch in his books. The CEO at that time even had a tendency to 'de-Welchify'.

"I bought GE products while reading the book Built to Last and the books by Welch. Jack Welch said that Integrity is the most important part of their corporate culture, but later I found it on the GE website."

—— Duan Yongping, January 20, 2018 and September 21, 2018

A profound explanation:

The disappearance of cultural anchors: For Duan Yongping, GE's official website no longer emphasizes core values such as Integrity, which is a strong danger signal. This means that a company's self-awareness and publicity focus have fundamentally shi

Cooking the books suspicions: He further questioned the integrity of the company's finances because their earnings are always spot-on. This overly perfect financial performance, coupled with the deterioration of corporate culture, left him feeling un

Final ruling: Although the stock price of GE has once been lower after he sold it, he doesn't look back anymore because the foundation of his investment - the trusted culture - has already gone. He said, I think it was not appropriate for me to buy G

Case 2:

Tesla

—— A typical example of always telling lies

Duan Yongping's criticism of Tesla is the most straightforward, which is a textbook case of his principle of 'not touching things that are not honest'.

Purchase experience: Duan Yongping disclosed that he has bought a lot of Tesla stocks.

The selling moment and reason: After personally using the product and deeply understanding it, he is completely disappointed with the company's culture.

After buying a Tesla car, I found many small defects as well as some major issues. I also learned that they explicitly stated their current intention not to make any improvements because the cars are still in short supply.

I no longer trust this company, and I cannot see how they can make money... I am not optimistic about Tesla, the problems that I saw later, and its culture is terrible.

In my view, Tesla is a company with zero value, and it will eventually fail. Luck won't always be there, so doing the right thing is the most important.

—— Duan Yongping, October 2018 & 2022

A profound explanation:

Product experience reflects culture: Small flaws in products may be understandable, but the management's attitude of 'not wanting to improve' exposes its disregard for user experience, which seriously deviates from the 'consumer-oriented' culture adv

The complete breakdown of trust: He believed that Tesla's management was 'often untruthful', such as when their financial reports would 'suddenly improve' when financing was needed. This culture of prioritizing cleverness over integrity is an absolut

Based on the issue of corporate culture, he drew the extreme conclusion that its value is zero, fully demonstrating in his mind that a bad culture is fatal to the company's destruction.

Case Three:

Yahoo

The collapse of culture leads to the disappearance of the moat

Duan Yongping's core purpose of investing in Yahoo is to hold its Alibaba assets, but he remains sober and vigilant about Yahoo's own corporate culture.

Investment logic: the Alibaba stock it holds is seen as a 'free option'.

Cultural judgment on Yahoo's main body: It has always been believed that its corporate culture is weak, which is a huge risk point.

Yahoo's corporate culture is weak, and it is difficult to have a good outcome when acquiring companies. If Yahoo acquires companies on a large scale for its comeback, its U.S. business will become worthless.

—— Duan Yongping, excerpted from the document of The Fall of Yahoo: A Lessons Learned

"The culture of Yahoo used to be not very good, and a bit messy. Now it's in the process of adjustment, and at least starting to focus. Overall, Yahoo currently does not have a strong and good culture, and it seems that it will not be easy to have in

—— Duan Yongping, June 20, 2010

Deep Explanation:

Risk Warning: He identified the cultural defects of Yahoo at the beginning of the investment and considered it as an important risk factor in the investment decision.

Culture Determines the Fate: Yahoo's ultimate downfall perfectly confirms his judgment that even with valuable assets (Alibaba shares), the collapse of the company's corporate culture (strategic uncertainty, talent loss, frequent leadership changes)

Case Four:

Fresh Choice

A Failed Firsthand Experience

This was an early attempt by Yan Yongping to invest in the United States, but it failed due to his inability to influence the poor corporate culture he encountered there.

Investment intention: to enter the board as the largest shareholder and learn about the operation of American companies.

Failure reason: Language and cultural barriers made it impossible to correct the management's wrong decisions.

"Some of their actions, such as continuing to expand and raising prices on products, are clearly wrong. I have been making products for many years and know it is a very foolish and quick way to commit suicide. But I can't say anything, I can't influe

It's like paying tuition fees. The experience I gained from this case is that the quality of a company is not only closely related to the management team, but also to the board of directors.

——Duan Yongping, excerpted from an interview record

Deep Explanation:

A hopeless defeat: This case made him deeply realize that when the decision-making culture of a company is short-sighted and stubborn, even if shareholders see the problems clearly, it may still be impossible to reverse the situation.

Deepening cognition: This experience made him more determined that it is necessary to evaluate the cultural quality of the board and management before investing, otherwise as an external investor, he will be very passive.

Case 5:

Kingsoft

Decoding Cultural Issues Through a Product-oriented Perspective

Although Duan Yongping did not directly mention selling off GoldSun, his negative comments on the company's corporate culture clearly indicate that this type of company will not be included in his investment portfolio.

There is something wrong with the culture of Kingsoft. The game cannot last long.

The game from Kingsoft has a very short-term focus, with 16 times experience boost on weekends (or even more), like there's no tomorrow.

—— Duan Yongping, July 9, 2010

Deep Explanation:

Products are a mirror of culture: Through the game product's 16 times experience overexploitation operation, he saw through its underlying corporate culture that was overly eager for quick success and lacked long-term vision.

Application of elimination method: This is the perfect practice of his theory that it is easier to identify a bad corporate culture. Without complex analysis, a short-sighted behavior is enough to make him exclude the company from his investment scop