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Hillhouse's Zhang Lei: Be a Friend of Time - Part 1

Zhang Lei on long-termism

September 18, 2020 | About:

A natural optimistic entrepreneur, Zhang Lei founded Hillhouse Capital on June 1, 2005. More than fifteen years later, Hillhouse has become one of the largest and most successful investment firms in Asia. When describing Hillhouse, Zhang has famously said that "we are entrepreneurs who happen to be investors." Like Buffett and Li Lu, Zhang Lei is a value investor who's known for his deep research and super long term orientation. Unlike Buffett and Li Lu, Zhang Lei's success has largely come from big bets on industries that are going through rapid changes such as internet and biotech.

Personally, I have benefited enormously from Zhang's wisdom and insights. It was studying Hillhouse's investments a few years ago that I realized that value investing does not preclude investing in rapidly changing industries. Therefore, I was delighted when Zhang Lei's new book "Value" came out. In this book, Zhang Lei talks about his journey, his investment philosophy and a framework of innovation in value investing.


Zhang's book is centered on one key idea – long-termism. In the preface of the book, Zhang wrote the following:

"In a complicated world, the only eternal theme might be change itself. I often ponder the following questions: How can I find inner peace in such a complicated world? As an investor, how can I find the compass which will guide me through the uncertain cycles? As an entrepreneur, how can I continuously create value?"

Zhang's answer to the above questions – long-termism. But what does "long-termism" mean? Zhang gives his own definition, which encompasses the following four guiding principles:

  1. Only investing your time and efforts in things that create value in the long run.
  2. Studying the most effective thinking models and behavioral standards.
  3. Practice first principle thinking.
  4. Always seeking the truth.

Long-termism is not only a methodology but also a way of life. It is not only a guiding principle but also a great way to view the world. Individuals who follow long-termism can insulate themselves from the short term noise and temptations and become more rational over time.

Entrepreneurs who practice long-termism will reject playing the short term zero sum game and focus on continuous value creation. They will also constantly reexamine whether the moat is still intact and always think about how to widen the moat.

Investors who think long term will also focus on value creation – whether the companies that you investor your capital in are creating value for the society, and whether you create value for your partners. This should be the only criterion when making investment decisions.

For Zhang, following long-termism has helped him not only achieve outstanding investment results but also build life time friendships with some of the best entrepreneurs in the world. Indeed, Zhang's book is recommended by many of the most successful entrepreneurs, such as Pony Ma of Tencent (HKSE:00700) and Robin Li of Baidu (NASDAQ:BIDU), as well as impactful capital allocators such as Andy Golden, Chief Investment Officer of Princeton University's Endowment Office, and David Swensen (Trades, Portfolio), Chief Investment Officer of Yale University's Endowment Office.

Long-termism sounds great, but how does one practice it? Zhang suggests that we should pursue intellectual curiosity, intellectual honesty and intellectual independence. He also suggests that everyone should choose the investment style which fits his or her own personalities. And last but not least, we should embrace a win-win mindset and reject the zero-sum mindset.

Similarly to Buffett, Zhang says the best investment is the investment in yourself. We'll face choices in how to allocate our time and efforts, and which belief system we choose. They are all investment decisions to some extent. There's no right or wrong answers. As long as we stick with long-termism and be a friend of time, we'll never be alone.

In the next few articles, I'll summarize the key ideas and takeaways from Zhang's book.

Read more here:

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About the author:

A global value investor constantly seeking to acquire worldly wisdom. My investment philosophy has been inspired by Warren Buffett, Charlie Munger, Howard Marks, Chuck Akre, Li Lu, Zhang Lei and Peter Lynch.

Rating: 4.7/5 (6 votes)



Suntzu28 - 1 month ago    Report SPAM

Dear Grahamite. This is absolutely brilliant stuff. Thank you so much for summarising Zhang Lei's thinking. I'm trying my utmost to get a copy of Zhang Lei's new book too but its difficult to ship out of China. Would love to just buy a digital edition.

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