Li Lu's Latest Interview: What Kind of Companies Can Succeed (Full Text, 13k words)

Ask AI · Why did Li Lu have an instant connection with BYD’s engineering culture?

Source: BYD Investment, Investor Notes, RMB Trading & Research

Full Transcript of Li Lu in Conversation with BYD Executive Li Qian

Li Qian: Li Lu, General Manager Li, it’s been a long time. I’m very happy that today, in Hong Kong, you’re able to accept my invitation to do this interview. This is a very important interview. Because over the years, we’ve experienced so many stories—between you and BYD, between you and others, and even including personally with me—this is a rare opportunity to revisit and review.

For you, you’re not only an important investor, but also one of our longtime friends. You’ve also been an important participant and witness in BYD’s development—through the capital markets and the company’s growth. You’ve also been a proposer of advice at many crucial milestones. We’d like to take some time to整理整理 our thoughts together with you, review the past, and look ahead to the future.

Do you remember when you first heard these three words—BYD—what kind of situation it was, and when you learned about it, what your first impression was?

Li Lu: If you count it, it’s been about 25 years.

Sometime in the early 2000s, I was reading a trade magazine. It was a technical publication. I saw a piece of news saying that a Chinese company was now starting to make rechargeable batteries for cellphones. Back then, Motorola was the biggest mobile phone company, on top of the world. According to that magazine report, it was using products from this Chinese company.

Of course, I didn’t pay much attention to the name at the time, but the fact that it was a Chinese company caught my attention.

Because earlier, I had just been researching an investment case: a well-known American battery company wanted to use lithium batteries to make rechargeable batteries. Back then, batteries were mostly single-use. Only a few Japanese companies could make rechargeable batteries.

So this incident really left an impression on me. I remembered the company.

Li Qian: So that was 2000?

Li Lu: Yes. Then, after two years, I found that this company started listing.

Then there really were reports that Motorola was using this company. I looked it up—it was in the U.S., right next to Motorola. There was an office in Chicago. I just called directly.

Li Qian: You’re amazing.

Li Lu: The person who picked up the call was Stella (Li Ke, Vice President).

At that time, I didn’t know she was that important. We chatted briefly. I was very interested in technical issues—very interested in how they solved that problem. She said, “Okay, our founder understands the technology very well. After our call, he will probably come to Chicago soon. I can arrange for you to meet him.” I said, “That’s great.”

Not long after the call, Mr. Wang arrived.

Li Qian: Was that after it was listed?

Li Lu: Yes. It was about during the autumn. I flew over. At the airport, they had arranged for a very small hotel. She said she’d arrange about half an hour, or an hour, to understand the situation. But when I met Mr. Wang, it was an instant connection—once we started talking, we talked for several hours. I even forgot about the time. That meeting truly made me understand what’s special about BYD.

After that, fairly soon, I decided to really start understanding the company. After understanding it, we bought our first batch of shares. Now it’s been 23 years, and those shares are still here.

Li Qian: Of course. I’m very clear about it. Things also move fast. It listed in July 2002. You probably met Mr. Wang in the autumn, and not long after that (you bought shares).

Li Lu: The company was founded in 1997. In 1998, the company began running operations. Back then, the scale was still pretty small.

Li Qian: You probably had a relatively heavy position. Compared with today, the amount isn’t that big, but the position was still okay.

Li Lu: Yes.

Li Qian: I remember it might have been around 10 percentage points in position size.

Li Lu: Right. Because our style is relatively concentrated, and we hold for a relatively long time—but we choose those companies that are relatively special.

Li Qian: I still remember it very vividly—you and most investors are not quite the same. Later, when I accompanied Mr. Wang and you met a number of times, for someone like me with a finance background, I basically couldn’t get much into the conversation. In an hour, even two hours, you and Mr. Wang kept discussing strategy, products, technology. Maybe the financial numbers were just barely touched upon in passing, mainly to understand the financial structure—not too fixated on cold financial data.

This point has always made me感慨 me a lot and I learned a lot. (Originally) real value investing should be such a process.

So, what kind of impression did Mr. Wang leave you with back then?

Li Lu: The impression was very deep. For the past three decades or more, what I’ve been researching is: what kind of company can succeed, what kind will fail, the process of enterprise development, and the business history. And throughout all that, you can’t do without the unique traits of the entrepreneurs themselves.

Generally speaking, businesses are an extension of the founder. At least in the early stage, that’s exactly the case—with a very strong founder imprint.

From our first conversation to today, it’s been over twenty years. We have had very in-depth exchanges every year. In some fundamental aspects, over these years, Mr. Wang has never changed.

First, he is truly original. Later, Musk called this “first-principles thinking.” I call it scientific thinking—thinking like a physicist. Using first-principles to think about strategic issues, and using an engineer’s mindset to solve problems—then to land it and execute.

At the same time, he has firm will. He is not afraid of any difficulties, and he also dares to succeed.

At the same time, when it comes to people with a stake in the business, he always carries the mindset of a trustee and the responsibility of a trustee. Whether it’s shareholders, employees, distributors, or customers—this combination is actually very rare. It’s hard to find.

I was surprised by this: before the company went public overall, he had no VC. He pledged shares to everyone, and those shares were actually supplied directly by him. He didn’t have VC—so in practice there was no agency authority. But his shares kept decreasing, steadily giving them to everyone. That’s why it makes it easy for us to trust him, and to face all kinds of difficulties and challenges together.

Over these two decades, we’ve gone through countless difficulties, countless challenges, and countless tough moments. But I’ve never once doubted that our interests and the founder’s interests are completely aligned. All of his company’s various kinds of business—everything—was within the same company. There was nothing outside. Before dividends, apart from basic salary, he didn’t have other income.

All his energy, all the company’s IP, all his creativity—all of it was in the same place. Our interests with Mr. Wang are always on the same side—always together. That kind of combination is truly remarkable.

Use first-principles thinking to consider strategic problems; use an engineer’s way of thinking to solve real problems—resilient, never defeated, until success.

Use the spirit of trusteeship and responsibility to make everyone trust you, and to make them want to walk with you through mountains and rivers—until success.

In any era, such entrepreneurs are few and far between. Once you find one, it’s worth cherishing for a lifetime.

Li Qian: You have to hold on to him. You have to be him, right?

I’m also very感慨. In BYD—or in my eyes—Mr. Wang is like someone divine. He’s also a benefactor and guide who personally helped create life value for me in my life.

But I’m also感慨 that back then, Mr. Wang was only 36 years old, and you were also 36.

Li Lu: We’re both born in the same year—just two months apart.

Li Qian: You two are both from the same cohort: both 36. Earlier you mentioned that actually the essence of business shows what Mr. Wang was seeing—he had already seen through it.

For example, regarding sharing: throughout the years, his encouragement for the entire team and how he distributes interests—he has always been very generous and fair. And he has long-term considerations, because in that role next to him, I know where his long-term thinking is focused. For all kinds of interest relationships across the upstream and downstream chain, he is very clear on his own responsibility and担当.

Second, he has toughness and also an engineer’s investigative ability and an unbreakable spirit—this is the core.

Li Lu: The first time I met him, I strongly felt those traits in front—his will, his determination, his ability to withstand pressure, and his trustee mindset. Later, slowly, I felt it deeper and deeper.

But his first-principles way of thinking, and his ability to solve problems using an engineer’s approach—when we talked for several hours the first time we met, it deeply struck me. From start to finish, it has been like that.

Li Qian: Mr. Wang’s character is that he is never satisfied.

Li Lu: Yes, yes.

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Li Qian: When it listed in July 2002, we were just making rechargeable batteries, and it was a small company. But it was a company with very distinctive characteristics, and Mr. Wang is also a distinctive kind of entrepreneur.

But in early 2003, right at the start of the year, Mr. Wang detonated a big bomb for the capital markets. He moved into the auto industry, acquiring QinChuan Automobile. The stock price plummeted. On that day, the relationship between BYD and the capital markets basically entered an ice point. At the time, you were already an investor. What was your first reaction?

Li Lu: I didn’t have anything particularly special as a reaction. Because for someone who thinks using first principles, his business has no boundaries. His boundary is: as long as it doesn’t violate scientific principles or the basic laws of physics, he can do it. And when it comes to landing it, you need to use an engineer’s mindset.

So the issue I cared most about was: how can he actually achieve that? Is this business a good business? What is his underlying thinking? We kept exchanging and kept learning.

This industry itself is obviously a huge industry. There’s no doubt about that. Chinese companies have many advantages—no doubt about that either. But this is a particularly difficult business, and also a famous graveyard, burying countless pioneers.

Li Qian: Back then, many Chinese companies also tried to move into the auto industry, but in the end, they all got buried.

Li Lu: Including acquiring QinChuan.

Li Qian: QinChuan went under, right?

Li Lu: Yes. That was my basic reaction. I wanted to understand more about how to do it well, and whether there were different ways to do it.

When Mr. Wang acquired the company behind QinChuan, he was of course aiming at building cars. But from the beginning, he had already considered the development of batteries itself—he believed it could potentially support much bigger power demand in the future. The development curve of lithium batteries had already started appearing. That curve would eventually allow them to become cheap and have enough power to support a large carrier—cars. That’s first-principles thinking.

But that process had to be long, and it required an engineer’s way of thinking to build it piece by piece. His idea was: first, make traditional cars and make it work; then, when the time is ripe—and when the batteries mature—stack them on top to trigger change.

At that time, I was also in contact with Tesla. Back then, Tesla was still not fully occupied by Elon Musk—he was still an investor. The founder at that time was Martin. They were also considering whether I should go. Some of my friends were big investors of theirs, and they also wanted me to join. So I was also learning about the whole process.

You could say that BYD and Tesla were almost simultaneously exploring the possibility of electric vehicles overturning traditional cars in two different countries. Of course, what ultimately happened in history is that these two companies truly guided this revolutionary change.

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Li Qian: By 2005, when BYD’s first car, the F3 fuel-powered car, came out, it should be described as a shot that ignited everything—using fuel cars to support BYD’s ongoing investment in R&D for its electric-vehicle program.

But to be honest, back then it was still “walking on multiple legs.” The batteries were still being developed. Cars were being invested in. And the key components were also starting up as contract manufacturing industries.

From the balance sheet perspective, back then the burden was still very heavy. R&D was also a direction Mr. Wang insisted on. At that time, when it reached 2007—if we still remember where the balance sheet stood—then it should have reached a critical point, like being stretched at the edge of a cliff.

I remember very clearly: we were trying to have the contract manufacturing business support things, but we also worried you might not be able to hold up. Against that background, we started the split-off listing.

For the split-off listing of BYD Electronics, you were also supporting Mr. Wang—splitting it off, and raising funds.

Li Lu: Yes.

Li Qian: Splitting off is a painful process, but we were okay. We remained坚定 and believed the world would reward honest and diligent people. By the end of 2007, we caught the last train. In the final second, we got on the car—December 2007.

Li Lu: Yes—we still managed to raise enough funds.

Li Qian: We raised 6.7 billion HK dollars. That allowed us to pass through the 2008 financial crisis steadily, and also to continue investing heavily in R&D.

Honestly, in 2008, for us, we didn’t really feel what people call the “winter” of the financial crisis.

And in 2008, we also had a bright highlight moment: you introduced Buffett to invest. I’d like to ask: why did you introduce Buffett to BYD? What were you thinking at the time? And why was it 2008—not 2007, and not 2009?

Li Lu: The whole process of our development is: our boundaries kept expanding, and we kept redefining the issue of manufacturing boundaries. We did a lot in the process, but ultimately those efforts were to enable us to continue our battery R&D during a transition period, and also to master the fundamental capability of manufacturing cars.

We were still thinking: one day, if this industry experiences a revolutionary paradigm shift, then we need to be in the most appropriate state to do that. Those things actually reinforce each other.

By the time of the financial crisis in 2008 to 2009, we were actually positioned okay. But from the perspective of the world economy—viewed from the U.S.—there really was the possibility of collapse. This included our stock price, all companies’ stock prices, and the stock prices of the entire Chinese market. We were indeed in a relatively good position.

I’ve always hoped that in the entire process of China’s development—especially in a special development like this—we could truly chart a road that predecessors had never taken before, a truly remarkable path. We still needed some special energy input.

If our R&D, if our manufacturing capability gradually keep moving forward, one day we could overturn the industry. To truly achieve that, we needed a lot of support—many, many kinds of support.

One very important kind of support isn’t only capital. It’s also reputation. Over these years, I’ve become fairly confident in Mr. Wang, in the company, and in our future development—confidence in all aspects. This has nothing to do with the stock price. It’s completely related to value creation for the company itself.

Once I built that kind of confidence, I also knew that to keep moving forward we needed some assistance from outside forces. We needed to do better on reputation. And what hit us the hardest at that time was actually reputation. If at that moment we collapsed in reputation, all our efforts and the company’s potential would be strangled in the cradle.

But at that time, the company’s development already had all the embryos of becoming a revolutionary and all the embryos of becoming an disruptor. External pressures, as well as the market’s perception—created a huge gap between the stock price and our actual abilities. At that point, it also brought investors a very good opportunity. Introducing an investor we trust and respect could become possible from the perspective of value.

Because over the years, in 2003 and 2004, Munger and I formed a relationship as investment partners. From then on, Munger became my lifelong mentor and a close friend, and also my business partner.

Through my fund, the Munger family already had at least four years of ownership by that time. Throughout the process, I kept introducing BYD—their dream, their capability, the expanding margins they kept creating, the opportunities they would face in the future, what the situation was back then, their intrinsic value, the stock price, and other pressures. All of those formed a commonality.

In 2008, the company also needed this kind of reputation support. This was a very good time for investing. Because price and value formed a huge gap, so this was a win-win situation.

Around 2008 to 2009, I started to push this matter.

Of course, we were also very fortunate. Later, it became possible, allowing our company to gain attention from all over the world in a relatively short time. When it truly became capable of becoming a disruptor, it had already gained such reputation. That reputation helped our own capability reach a stage, and then there was a massive explosion. It brought the company to an amazing new level.

This is a win-win situation. For Berkshire, it’s win-win. For BYD, it’s win-win. For China’s capital markets as well, it’s win-win. It was the first time the world understood that something miraculous, revolutionary, and technical was happening in China.

Li Qian: For me, this was a uniquely wonderful journey. At the beginning, when you talked about Buffett’s investment—when you conveyed that news to us—actually from my personal heart, I thought, “How could this be? How could this be possible?”

Later, in Buffett’s speech at the shareholders’ meeting, he also gave very high praise to Mr. Wang and to our team. Of course, back then it was highly confidential—even including me, only three or four people knew. During the more-than-a-month period, we didn’t do any hype. Our stock price was very stable, with no changes. To some extent, that also reflected that this was a team with professional integrity.

Li Lu: Yes.

Li Qian: The day we finalized everything, after the call conference ended, that night I stayed up until dawn preparing the agreement and preparing for the press conference.

Then the next morning, because I had early agreed with a domestic securities firm that they would bring 30–40 investment people for research. I actually stayed up the whole night too, but I had promised them I would receive them, so the next day I still had to go receive them.

Mr. Wang called me as well, asking, “Are you feeling okay? No problem with your body?” I said, “Mr. Wang, no problem. The agreement is basically finalized. We just need the stock price not to move on the day, and then the deal will be completed.”

Then after I seriously received them, half an hour later they wanted to visit the factory. I told them, “Sorry, my colleague will take you to the factory. I still have an important matter to handle.”

But what happened was: later that evening, the news came out. Buffett was investing. One of the investment people, or whoever it was, gave it to the reporters. The reporter wrote that in the news, it said that during the reception, BYD’s Secretary to the Board, Li Qian, said, “I still have one more important matter to receive.” It turned out that the important matter was Buffett’s investment in BYD.

We opened and closed at 8.04 yuan—priced at 8 yuan per share. On that Monday, when the market opened at 4 p.m. it was down? then it surged, later hitting 80. For me, it was one of the highlights of my life. And I also need to thank you, General Manager Li. You created the opportunity.

Li Lu: No. It was something we did together. Not just me. It was worth investing in.

Li Qian: This is also win-win—mutual pursuit.

Li Lu: That’s right.

Li Qian: Munger has also always praised you. His best investment was you. And in the whole capital markets circle, there’s no doubt that you are a great investor among Chinese people. This is recognized by everyone, and it’s also in my heart.

Li Lu: You flatter me.

Li Qian: This is also my admiration and high recognition of you psychologically. Actually, I think the more meaningful part is that you bridged China and the West.

It’s precisely because of this investment: the linkage between China and Western capital markets—especially a great investment company like Buffett and a company like Berkshire—with Chinese companies. Even more, I believe the impact far exceeds just making money.

To this day, BYD’s internationalization—our being able to complete in overseas markets in just two or three years what others take 10 or even dozens of years to do—I personally think it’s also closely related to that investment.

Today we’ve reached the global stage. Capital markets all around the world know BYD for multiple reasons. I believe this is also one of the important reasons.

Li Qian: After Buffett’s investment, BYD’s reputation grew rapidly. The stock price rose from 8 yuan per share to 80. In one year it rose to 80—making it one of the most watched “handsome kids” in the global capital markets, or if you will, in the Hong Kong capital markets. Our development in 2009 to 2010 also made a big leap forward.

But to be frank, back then our pace was a bit too fast. By 2011, Mr. Wang started to reflect on internal company meetings. At that time, we ran into all kinds of challenges. Actually, the income statement started to show problems—there were issues with profitability, and the level of investment was also large. The balance sheet also ran into challenges.

What’s especially important is that our upstream and downstream partners and customers were harmed. Our cars like the F6 and a whole series of models were not successful. Our dealers experienced incidents like “exiting the network.” Mr. Wang also reflected. He said that the past three years were actually an adjustment period.

As our most solid investor, during those years of process, did your thinking change inside you?

Li Lu: Yes. What we focus on is changes in the company’s long-term intrinsic value. The impact of the stock price on us is actually not that big. Whether it rose 10 times, or later dropped 80%—we didn’t sell a single share, and we didn’t buy a single share either. We remained with our original basic position.

But over those three years, the company itself underwent major changes. On one hand, it made rapid progress in many aspects. But on the other hand, within that rapid progress, it also committed a series of mistakes that an industry may make.

Looking back, the mistakes BYD made over those years—actually, in the past—why is this industry a famous graveyard? There’s a reason for that.

In different stages of development, other companies have also made similar mistakes. Many have failed, and some have completely disappeared.

So this industry is first and foremost a challenging one. But one of the most important things for us is: during the whole expansion process, what we still wanted to do was to expand our understanding of the car itself—our understanding of all its components—and our control over large-scale production. We’re still thinking: if batteries develop to a sufficient stage, this revolution will still happen.

But during this process, we have many industries that need to be raised for the future—industries that nurture each other. Yet in the process of nurturing, the industries you nurture are also nurturing other industries. That’s particularly difficult and exhausting, and it’s filled with challenges and risks.

During those three years, our understanding of this became even deeper. This gave us a huge lesson. But it’s also growing pains—this is a process we must go through. I didn’t think there was anything particularly special about it.

Because almost every automaker has to go through such mistakes. If you can’t cross that hurdle, you enter the graveyard. If you cross it, you become a later great company. So our real test is whether we can cross that hurdle.

In this regard, we need to go back to the trust we had originally. I believe in our team. I believe we have many innate advantages. And I believe in our learning ability.

Actually over the years, another thing is: everyone keeps a steady mindset. That means we don’t take ourselves too seriously, no matter how others evaluate you.

As a matter of fact, I don’t think I’m some sort of miracle worker. And I don’t think Wang Chuanfu is some sort of miracle either. The mistakes we have to make, we must make. The lessons we have to learn, we should learn. We should always keep learning from mistakes. Best of all is learning from other people’s mistakes—not stuck in your own mistakes. The cost of learning from your own mistakes is higher.

Make mistakes, face reality through learning, and never give up. Keep moving forward. This is the fundamental requirement for a company to keep going.

We’re not learning from others. We’re pioneers. Once you become a pioneer, later learning becomes much easier. Being a pioneer is very, very hard. You have to create a market that doesn’t exist. So you must have many different capabilities. But exactly how much capability is enough—that degree is hard to measure.

So when exploring these issues, sometimes errors are necessary, and the cost has to be paid.

Li Qian: Every successful company goes through a series of phoenix-from-the-ashes transformations. It’s impossible to achieve everything instantly.

So I still want to express my deep gratitude to you. Your guidance has been inspiring for my life. I remember that around 2011, I was a bit unable to hold it together. I didn’t run away from the various failures, and I didn’t give up either. I was thinking: the company must change. We need solutions.

I don’t know if you remember. At that time you were in Los Angeles. I went to Los Angeles and to your office. We also talked deeply for two or three hours.

Li Lu: Yes.

Li Qian: Maybe at that time I was also younger, and my way of expressing things was more direct. I was looking for a life raft, hoping to help the company become better. That conversation was full of inspiration and significant meaning for my life. Because I got my satisfactory answer—or rather, I hoped you would keep encouraging me, and I got it.

Using the first-principles you just talked about, you told me: “In the past, I’ve met many Chinese entrepreneurs to exchange with me. I know all those best entrepreneurs well. But there aren’t many entrepreneurs like Mr. Wang—so resilient, with such an endless thirst for scientific exploration, with such a sense of boundaries.”

Just because of that, you believed BYD would only keep getting better. That was the biggest encouragement you gave me during those two or three hours. I still remember it very clearly.

Later, in the capital markets—because when you mentioned that one industry supports another, especially using the auto industry to support other industries, and because Mr. Wang is also very firm in his character—no matter how operations are going, R&D investment must not be abandoned.

Li Lu: It’s still like this today.

Li Qian: Still like this today. So in those years, my pressure was also quite large.

From the A-share listing in 2012, to issuing a “dim sum bond” in 2013, to a lightning private placement in 2014, to raising 15 billion yuan through A-shares in 2015—through all these processes, I had a lot of交流 with you. Thanks again for the encouragement you gave me.

Li Lu: I need to thank you. Thank you for, throughout this process, nurturing the capital markets—to cultivate patient, long-term investors. For a growth-oriented company, this is crucial. You insisted on doing this over so many years, and you did it very well. And you also built other people’s trust in you. You did it very well indeed. I also want to express my gratitude to you.

Li Qian: In 2014, something interesting happened. One day at around 1 p.m., the stock price suddenly, for no reason, dropped by a few percentage points—10-something, 20-something, 30-something. My office phone, my mobile phone—there was no way I could handle all the calls anymore. At the time, it was very interesting: many very firm long-term investors called to ask me. They asked me one question: “Li Qian, does the company have a problem?” I told them, “The company doesn’t have a problem.” Then they became firm and dared to buy.

But actually, I didn’t have a bottom line either. Because the stock price performance in the capital market isn’t only about whether the company has a problem. There are also many external environmental factors. For example, first thing, I asked Mr. Wang, “Is there anything going on with the company that I might not know?” Mr. Wang told me, “No.” So then, I basically dared to respond to investors: “The company has no problem.”

Then rumors started flying: that Buffett was planning to reduce his stake, and that Li Lu was planning to reduce his stake. At the time, to be honest, I didn’t know where you were. But no matter what time it was at night, I called you. Coincidentally, you were probably on a plane in China at that time. You told me, “Li Qian, I’m on a plane.” I said, “Great—you answered my call.”

I said, “General Manager Li, look at what’s happening with the stock price.” You asked, “What’s wrong with it?” I said, “The stock price has already fallen by four or five tens of percent. There’s talk in the market that General Manager Li, you’re reducing your stake.”

At that time, you gave me a firm answer. You said, “Li Qian, it’s definitely not me. Second, I have full confidence in the company.”

With that answer, I dared to communicate to the capital markets: first, the company has no problem; second, General Manager Li hasn’t reduced his stake—Himalaya hasn’t reduced its stake.

We contacted Buffett—on that day it was the evening for us, and morning for Buffett. We found out he didn’t take any action. So the next morning at 7:00, Mr. Wang and I held a press conference. We clarified things to the market. By the end of the day, the stock price jumped back to 30%, and later it returned to its original position.

I also expressed my gratitude again. You bought more than 8B shares. Because you saw BYD’s value, and then you continued to support BYD.

Mr. Wang and I also felt a lot of感慨. At that time, the company’s operations situation wasn’t really that it had already hit a turning point. At that time, you were also helping to strengthen your confidence—firmly believing in BYD.

In 2020, our deep accumulation finally paid off. That year, two things happened. One was the pandemic. BYD showed our most typical efficiency in Chinese manufacturing: a campaign of “military-style operations.” Our face masks, and also the “Han” model launched in June that really ignited everything in one shot. During this process, what kind of exchange did you have with Mr. Wang? Since you are Mr. Wang’s close friend, and also a supporter and advisor, what was the nature of your interaction with Mr. Wang at that critical moment?

Li Lu: The end of 2019 into early 2020 was also a sudden event. The origin of the face masks was the earliest. After the Wuhan outbreak occurred, because we saw demand for this (the pandemic), we were extremely anxious. So I initiated an angel foundation in the U.S., mobilizing all kinds of people—human resources, material resources, financial resources—to support Wuhan.

At the time, the biggest challenge I encountered was that we couldn’t buy face masks. Getting face masks became extremely difficult. I looked everywhere. At first, there were all kinds of obstacles. We solved them one by one. After the problems were solved, in fact, we also raised money—we also put in a lot of our own money. But we still couldn’t buy enough masks. We bought very little. We brought in everything we could buy.

At that time, I was also with Mr. Wang during a vacation. I talked to him about what we were doing. He asked me, “What do you think are the most difficult bottlenecks and nodes?” I told him, “Face masks are my biggest bottleneck.”

He said, “Let me think of a way.” That very night, he returned immediately and mobilized all business units.

Li Qian: We held a meeting. We分工.

Li Lu: This time, it could be solved. To be honest, I was also surprised at the time. But indeed, after that, slowly, he really got it running. And it was also thanks to Mr. Munger’s help.

We established backing with costco as well—using credibility as backing. It’s an amazing company. The key is that our U.S. certifications were relatively complete, and in China they had already started to be used, and were very widespread.

So our first big order was 60 million face masks from costco. Because we already had Mr. Munger’s backing early on, we got costco’s first order. Then, after that, demand from all other places around the world came in. It all came at once. In the end, we sold tens of billions of masks globally.

This process was also very interesting. It once again proved that first, BYD’s manufacturing capability is truly boundaryless. The original thinking—first-principles thinking—engineering execution, and the trustee spirit: it was completely unshaken by difficulties and setbacks, and the firm will exploded at that moment. In a matter of a few months, from not having even a single mask, we became the world’s largest mask manufacturer—100k masks a day.

At this time, BYD’s cooperation with Berkshire—mutual trust and backing between China and the U.S.—played a huge role again. In such a short time, from consumers to various states to the U.S. federal government to countries in Europe, the world accepted BYD’s products quickly: its quality, its credibility. And it truly helped countless people.

This also verifies what you said earlier—that if you keep helping others, there really is good reward. Helping others benefits oneself—this is exactly how it is, vividly. In just six months, it was demonstrated brilliantly and fully, exactly so.

Li Qian: Before BYD made masks, the entire face mask production capacity in all of China was only 20 million per day. BYD drew the drawings in 3 days, produced the production line in 7 days. Starting from 5 million masks per day, we quickly went to 100 million in just over a month—5 times the entire face mask capacity of all of China. And it also made a huge contribution to the link between China and the world, and to China’s pandemic prevention as well. It also showcased China’s manufacturing capability and advantages. Overseas, it built a brand too, which really helped people.

Li Lu: Yes. At that time, the world’s production capacity outside China was also only 20 million per day. Add China’s 20 million, and the world’s total production capacity becomes 40 million. BYD alone, in the end, produced 100 million in six months.

Li Qian: Today, BYD is already a Chinese world champion. But BYD is also a company full of dreams. We’re transforming from a Chinese world champion into a global leader. What road do you think BYD still has to go? What difficulties and challenges will it still encounter? In technology, corporate governance, corporate culture, global responsibility, and so on—I believe it won’t be a one-step process.

I especially want to hear from you, this wise person. Based on human civilization history, the progress and iteration of technology, and the discovery of value—what thoughts and advice would you give BYD?

Li Lu: Wise person? We can’t say that. We would say that a truly great enterprise actually has no boundaries, and its development will not stop; growth has no ceiling.

We actually may have walked a very long road, but there is still an even longer one to go. At this point in time, China’s development has also started entering a new stage. All kinds of factors make our development over the next few decades even more worth期待.

First is what we call the concept of a global company: “multinational corporation.” The earliest industrialized countries—Europe—after World War II, and also the U.S., achieved truly real development where, though based on one country, business developed globally at the same time.

At this stage, Chinese companies are starting to have such opportunities, such energy, such capabilities.

The most important condition that China provides for these companies is that there is a huge, single, large market. It’s both single and unified. From the standpoint of regulation—and also it’s huge. At the same time, it’s a market that is open to the world.

These four conditions together mean that champions in the market can have the chance to become champions worldwide—and they will definitely be localized, becoming a part of local economic development, not only an export business.

So in this era, we see global companies based on China—global companies with Chinese roots. BYD is an important splash in this wave, not the only one. And this process has only just begun. There are still very long roads ahead—this is one aspect.

Another aspect: after 40 to 50 years of development, China now also has talent, technology, and market readiness in all aspects, and we’ve reached an era of explosive creativity. In this era, in almost all fields, companies that have original technologies, original products, and that define industries—truly remarkable companies—will emerge in dense clusters.

So in this era, for a company without boundaries, one that uses first-principles thinking to consider its future prospects, one that has an engineer’s culture, and also has labor dividends, engineering dividends, and an accumulation of technology—then the creativity it can unleash will be even more brilliant.

At this time, BYD is very fortunate. In this era, it already has reputation, technological reserves, talent reserves, scale advantages, product leadership, and brand reputation—all combined together. On top of that, our founder and our employees are still in a vigorous period.

Li Qian: It’s about the age group and energy.

Li Lu: Yes. I’ve known Mr. Wang for over twenty years. His life hasn’t changed much—still from early morning until late night, and then starting again the next day. When we travel outside together, especially as a team, the most important meeting of the day will always be at 11 p.m., hahaha.

It means once all daytime work is done, at 11 p.m. we start summarizing again, and then we sleep. Then the next morning, we start again with full energy and full drive.

So our boundaries are still very far away, and growth is still very much worth expecting. And at the same time, it’s also an era of quality and technology explosion.

However, even though we often lead in technology, in terms of fine-grained management, we are actually still at a very early stage.

We need to manage tens of thousands of engineers, and hundreds of thousands of employees, even up to a million. We have long product lines, and in multiple countries we need to explore a lot more before we can truly achieve fine-grained management. Only then can we truly put customers at the center, really make the products more refined and more detailed. And we have more than 100k patents, and we keep developing new directions in R&D.

So for these potentials to be realized, they’re always in a phase of expanding options. Therefore, our intrinsic value keeps growing. This is what investors value the most.

Look: we have had 23 years. During this time, the stock price has fallen more than 50%—at least seven or eight times. It felt like once it fell more than 80%.

Li Qian: Yes. The times it rose also happened fast.

Li Lu: Yes, and those times also happened. A 10x gain within one year has also happened.

So in this process, if you have a speculative mindset, it’s hard to truly enjoy the whole process.

So my basic approach in thinking is: whether you are a manager or an investor, you earn the money you should earn. What you should earn actually comes from the company’s intrinsic value being continuously realized and continuously growing, and then eventually when it’s recognized, that’s your share.

Of course, we also feel very lucky. Companies like this—very few, very few. If everyone’s companies were always growing, then the world really would be a tree growing all the way to the sky. That’s impossible. So companies like this are rare—凤毛麟角.

Our luck is that I discovered this kind of remarkable enterprise very early on, and this remarkable entrepreneur. And by following the company as it grew, and learning along with it, and being able to help a bit in between—this made us feel even more at ease.

Li Qian: You’re being modest. It’s your vision and wisdom that unearth. In other words, investment is the result of cognition. You invest in BYD because you believe. And thank you for BYD’s inclusiveness toward me.

Just like the book you wrote—《Civilization, Modernization, Value Investing and China》—it’s a book I really like. In it, you provide a systematic description of the evolution of human civilization, the iteration of modern science, and even the philosophy of value investing. It has inspired me greatly, in my life and in my investing.

Although the world seems a bit chaotic now, and there’s a network term saying the world is like a “草台班子”—you remain optimistic. You believe this unified global market is an inevitable result of human development. You also believe that Civilization 3.0 must continuously create the value that society and the world need. That’s the fundamental thing.

Your answer to my questions earlier should perfectly express this as well. As long as BYD continues to work hard and continuously create better and higher value for the world and for humanity—then that is our mission. We can contribute to world civilization, and we don’t need to worry about how chaotic the “草台班子” world is. We do our part.

We said so much just now. Mr. Wang has many unchanging characteristics. Today BYD is standing on a new stage in history. If in the past 20-plus years, so many things about your exchanges and friendship with Mr. Wang remained unchanged, but I’d still like to ask: what things have changed about Mr. Wang? It must have changed a lot.

Li Lu: I think the most admirable trait of Mr. Wang is his ability to learn—his continuous learning ability.

So learning itself becomes, after learning the method of learning how to learn, an endless advance in the form of compounding. I truly understand that over the past twenty-plus years, Mr. Wang’s understanding of business, his understanding of different technologies, his realization of long-term goals and short-term quantification, how he manages an ever-increasing number of employees and assets, and how the market faces complex problems—there have been astonishing changes. And that is the power of compounding.

But it’s not only Mr. Wang. Our company’s executive team is still in the company—(Li Qian adds: we are still sticking to it, still working hard). And our next-generation, younger organization itself slowly evolves into a learning organization.

We should say we haven’t completed this process fully yet. There is still a lot we need to learn. Because our growth rate—especially during rapid growth—will inevitably create many, many new problems.

Our experience over the past five years cannot be endlessly replicated. At this stage, adjusting and consolidating is inevitable. So if we have a realistic expectation for the future, the mistakes we will make—new mistakes—and the consolidation we will need—are all inevitable. There’s nothing too big about it.

These past experiences give us more confidence. When we face different problems and different challenges, we truly respond step by step.

When you travel a very long, long road, in fact it’s always your left foot forward and your right foot forward—left foot forward, right foot forward—step by step, like this. The key is to keep walking, keep walking, and then you can go very far. At the same time, steadfastly believe in the direction you’re walking.

My view is that based on rationality and common sense, optimism is still humanity’s best choice.

But it must be based on rationality, based on common sense. On that basis, a firm kind of optimism provides the driving force for us to keep going.

The impressions we’ve made in the past have helped us gain more confidence. We keep learning, we become more rational, we make more attempts, and we have clearer direction. But the firm footprints are still the only way to success.

So I hope I will still be able to see us walk another long journey together with BYD.

Li Qian: As a friend and partner who has walked alongside you all the way, I want to ask you to give BYD your next 30-year most sincere blessing or expectation.

Li Lu: I’ve already said it. I don’t have anything particularly special. I’m not a special person, and I don’t have special skills for writing inscriptions. Every day, step by step, one foot at a time—just go. You don’t need to think that far ahead. Every day, work steadily and move forward.

I really like Munger’s saying: when you wake up every morning, be a little smarter than yesterday, learn a little more. Do that every day—the power of compounding is unimaginably powerful.

There can be a lot of consolidation “out there,” but internal progress is something we can all feel ourselves. As long as every day we can learn just a little more than the day before, we can travel a very, very long road. This attitude is the根本根 for a company to last for a long time.

We say: it’s not only individuals. Build the whole company into something like a learning machine—so that it can keep moving forward in a compounding way. Then we can go on for a long time.

Li Qian: This is what I’m sending to BYD, and also to me. Thank you for having today’s more-than-an-hour plus交流. And thank you for the encouragement and support you’ve given me spiritually all along. I hope I will have opportunities to consult you in the future. And I also hope you will keep accompanying BYD. And we’ll keep going together—every day, becoming better than the day before, smarter than the day before. Thank you, Mr. Li.

Li Lu: Thank you very much. As a shareholder, I’m truly grateful to all BYD employees—whether those from today, those from the past, or those in the future. I’m very, very grateful.