100 Business Principles

1. About Good Companies

(1) A good business model combined with a good corporate culture is generally a characteristic of a good company. (2015-04-17)

(2) A so-called "good company" is one with principles, not purely profit-driven; it knows to do the right things (or knows what not to do) and pursues efficiency in doing things right. The process of doing things right is a learning process, and everyone makes mistakes, including good companies.

(3) Pursuing something "beyond profit" makes it easier to see the essence of things, making it easier to persist in doing the right things and less likely to make mistakes. This approach helps avoid short-term temptations and stay on the right track. While pursuing "beyond profit" is not a sufficient condition for a good company, companies with such pursuits are much more likely to become good companies, with the difference growing over time.

(4) The pursuit of "beyond profit" means putting consumer needs ahead of the company's short-term interests. When most companies face issues, they discuss profitability, whereas companies with "beyond profit" pursuits first ask, "Is this the right thing to do? Is this the money we should earn?" The difference is small in the short term but significant over 20 years. (2020-07-10)

(5) Integrity—this is the common trait of all great companies and the biggest "leak" in problematic companies. (2010-10-22)

(6) Truly good, sustainable companies are generally not focused on profits; profits are just a natural outcome. (2011-01-28)

(7) From a 5-10 year perspective, the CEO is crucial. From a 10-50 year perspective, the board of directors is important because they can find a good CEO. From a longer-term perspective, corporate culture is most important because a good corporate culture can maintain a good board. A "long hill" refers not only to the industry but also to whether the company itself can run a long race, making corporate culture vital.

(8) Good companies and entrepreneurs combine idealism and realism. Without idealism, they can't grow big; without understanding reality, they can't go far. Investing is a prime example. We can never find a perfect and cheap company (stock), and we always hold two opposing views (positive and negative) about our goals, but this shouldn't stop us from acting when necessary. (2011-03-08)

(9) The lifespan of a good product is very limited, but a good business model can significantly extend a good product's lifespan. (2010-04-03)

2. Good Business Models

(10) A business model is a model that generates net cash flow. A good business model is one that can generate a lot of net cash flow over the long term. (2012-04-08)

(11) A good business model shouldn't be consistently mediocre in profitability, but it might be in the short term. I believe that the definition of a good business model includes strong future profitability, and "future" refers to the entire lifecycle of the business.

(12) A business model is like a horse, the management and corporate culture are like the jockey, and the business results are the race results. However, running a business isn't as short as a horse race. (2011-12-31)

(13) In the long term (10, 20 years, or more), investing only in companies with good business models and good corporate cultures is likely to yield good returns and make investing enjoyable without constant worry. In short, if investors think about things in 10-20 year terms when making investment decisions, the results are likely to be good. Finding companies that you can understand for 10-20 years is very difficult, and having 10-8 opportunities in a lifetime is very fortunate. (2015-04-11)

(14) Enjoying the company's growth is far better than being swayed by stock prices. (2017-03-16)

Differentiation is the premise of a good business model

(15) A business model without differentiated products is basically not a good business model. A good company can continuously find users' "differentiated" needs. (2015-04-21)

(16) Differentiation is something users need but other competitors can't provide. (2018-11-05)

(17) Without product differentiation, it ends in a price war. (2015-03-03)

(18) The smaller the differentiation of products, the more likely they are to fall into price wars. Price wars lead to price reductions to maintain market share, so the result is that prices fall without changing the market share. (2014-09)

(19) A differentiation that can be maintained over the long term is a moat. (2019-08-02)

The moat is the most important part of the business model

(20) Investing is buying future cash flows (discounted), and the biggest guarantee of future cash flows (discounted) is the "business model." The strongest part of the business model is the "moat." (2012-03-30)

(21) A business model without a moat is not a good business model, but a business with a moat is not necessarily a good business model. (2012-06-24)

(22) The "moat" is an important means (not the only one) for judging a company's intrinsic value. Corporate culture is a significant part of the "moat." It's hard to imagine a company with a weak corporate culture having a wide "moat." (2010-05-25)

(23) Good business models generally have very strong moats. The moat is not unchanging, and understanding the moat is crucial for investing. Corporate culture plays an indispensable role in building and maintaining the moat. (2019-10-13)

3. Good Corporate Culture

(24) The "long hill" refers not only to the industry but also to whether the company itself can run a long race, making corporate culture very important.

(25) For a company to sustain long-term operations, maintain competitiveness, and ensure longevity, it must have its own culture. Products can be imitated, but culture cannot.

(26) Corporate culture is part of the moat. Changing the CEO affects any company, but companies with strong corporate cultures can often select good CEOs, allowing the company to continue to thrive.

(27) The three most important points in investing: Right business, Right people, Right price (referring to good business models, good corporate cultures, and appropriate prices). The first two points are especially important, a good business model is built on a strong corporate culture. From a long-term perspective (or the perspective of future cash flow discounting), a reasonable price is sufficient. (2012-11-17)

(28) Corporate culture generally consists of three parts: mission, vision, core value. Mission is the reason for the company's existence; vision is the common vision of everyone; core value refers to core values, the big issues. (2010-11-12)

(29) In the early stages of a company, having a big vision is very important, with the difference being in how to achieve it. Using a consumer-oriented approach to achieve the vision is the main strategy. (2010-10-24)

(30) A good corporate culture can manage things that systems cannot, it's not a mysterious spell. Systems are mandatory, while culture is not entirely so. Establishing a good corporate culture is very difficult, but destroying it is very easy.

(31) A good corporate culture can help a company avoid making principled mistakes, reduce the likelihood of strategic errors, and thus go further. (2010-07-08)

(32) Correcting mistakes immediately, no matter the cost, is always the least costly option. A strong corporate culture doesn't mean no mistakes are made. A strong corporate culture often manifests in a relatively low likelihood of making mistakes, early detection of mistakes, and quick correction. (2011-03-25)

Fundamental Values

(33) Fundamental values mean "doing the right things" and "doing things right." (2019-09-23)

(34) People often know what the wrong things are; stopping the wrong things brings you closer to "doing the right things."

(35) Many people want to know the secret to making a company successful; in fact, the secret is not "what to do," but "what not to do." Good companies always have a long "stop doing list" of things they don't do. The "stop doing list" consists of two types: things that no one should do, like deceit, and things that shouldn't be done according to the company's mission and vision. (2016-10-12)

(36) Fundamental values are easy to talk about but hard to practice. It's easy to see when others lack fundamental values, but harder to reflect on our own. We might occasionally reflect on ourselves, but we need to keep striving. (2010-03-24)

(37) "Not taking advantage of others" is part of fundamental values. When people talk about "win-win," they might instinctively think it's okay as long as they don't suffer a loss. Later, they realize that not suffering a loss often requires taking some advantage. Only with the mindset of "not taking advantage of others" can a "win-win" situation be achieved. Therefore, our company has a culture of "not taking advantage of others." (2013-02-19)

(38) As long as you stick to fundamental values, you will become very powerful over the years. There's a saying, "Return what you borrow, and you can borrow again," where "return what you borrow" is fundamental, and "borrow again" is actually utilitarian. When you no longer think about "borrow again," you truly have fundamental values. (2013-02-24)

(39) Earning money that shouldn't be earned is not fundamental. Although most people think it's okay as long as there's profit, our company knows that some money shouldn't be earned. If more companies were like this, consumers would feel much more at ease. (2010-03-29)

(40) If you earn fundamental money, you'll sleep well. Good health leads to a long life, and you'll eventually earn a lot of money. Most importantly, people who earn money without fundamental values are actually unhappy. (2010-03-25)

(41) "Haste makes waste" means doing the right things, or you might go in the wrong direction. "Speed is unbeatable" refers to the ability to do things right. (2014-07)

(42) Our company's communication costs are likely much lower than most companies', mainly because when facing challenges, we often first return to "what is the right thing," rather than stopping at discussing "is this the best (profitable) way." Although fundamental values might seem insignificant, the difference in 20-30 years will be evident in the state of our company compared to our competitors back then. I can think of dozens of competitors who seemed much stronger than us, from game consoles to learning machines to VCDs to DVDs. (2015-03-24)

(43) We always say, quantity doesn't matter, profit doesn't matter, the most important thing is to do the right thing, to find and meet the real needs of consumers. (2019-10-06)

(44) Fundamental values include and surpass integrity. Integrity means keeping promises, while fundamental values mean doing what should be done even without a promise (or not doing things that violate one's principles and values). Companies or people with fundamental values are always likable and trustworthy. (2010-05-21)

(45) The so-called "wrong things" are not always easy to judge. Many wrong things are learned through long-term thinking and others' and our own experiences and lessons, for example, our company doesn't do OEM for other companies. The so-called "doing the right things" is actually achieved by not doing the wrong things, which is why we have a stop doing list, meaning "not doing the wrong things" or stopping those wrong things immediately. Perhaps every person or company should accumulate their own stop doing list. By minimizing wrong actions and striving to do things right, the differences in 10-20 years will be significant. (2019-04-02)

(46) People often notice us for what we do, but we are largely who we are because of what we don't do.

Peace of Mind

(47) Peace of mind means returning to the essence of things. At any time, especially when tempted, being able to exclude all external interference and return to the essence of things, distinguish right from wrong, and know what the right thing is. (2019-09-12)

(48) Peace of mind is neither purely idealistic nor purely utilitarian, but a pragmatic idealistic mindset.

(49) Running a business requires peace of mind. I believe the most important thing for a company is safety, not how big it becomes. Growth and profits are natural developments. Of course, a company must have profits; without profits, it cannot survive. But profit should not be the ultimate pursuit. If so, the company becomes profit-oriented. Earning money that shouldn't be earned will harm your future. A company should have pursuits beyond profit. (2000, interview with Youth Daily)

(50) Today is our company's 15th anniversary, and the chosen date seems to have some connection to commemorating 9/18, considering the strength of Japanese electronics. Now, with peace of mind, I know that our greatest competitor is ourselves. (2010-09-18)

(51) Many of my "simple" conclusions took a long, long time to reach; don't think I saw them at a glance. However, peace of mind can help one find the essence of things. (2010-03-22)

(52) Ordinary people rarely have peace of mind, including myself, so it's necessary to remind oneself constantly. Get angry for a moment, then return to peace of mind, focus on what needs to be done, and don't make any decisions out of anger. (2018-10-11)

4. Business Operations

Health and longevity are most important

(53) In our company's core values, the most important is, we pursue "healthier, longer-lasting." We didn't say "bigger." In 2000, Asia Weekly interviewed me, asking what kind of headline news I'd want about our company in 50 years. I said any news, indicating we are still alive, and I believe our company will be alive. (2007-07-07)

(54) The most important thing for a company is survival and development, not betting on one or two opportunities to "explode." That's not sustainable. (Interview with World Executive Digest, 2001-02-01)

(55) The massive collapse of small and medium-sized enterprises is always normal, happening periodically, even in developed countries. Actually, many medium and large enterprises also fail. Therefore, healthier and longer-lasting are most important. (2010-08-10)

(56) "Fast is slow," is my basic understanding of business, fast is not the goal, safely and timely reaching the destination is. This is plain truth, but very few actually achieve it. (2007, interview with Southern People Weekly)

(57) Our company will not aim to defeat competitors or pursue market share, sales numbers, or rankings. We aim to improve user experience and create the best products; everything else will follow naturally. (2017-03-21)

(58) I strongly oppose the concept of "core competitiveness." Management is a system, and balance is essential; nothing can be lacking. We describe "business management" as a barrel with seven staves, none of which can be short, but having longer staves is meaningless. The amount of water the barrel can hold depends on the shortest stave. To progress and sustain, a business must develop in all aspects simultaneously, which is most economical. (Interview with World Executive Digest, 2001-02-01)

Dare to be last, strive to be first

(59) All top experts dare to be last but do better than others. Our company's success is not accidental; we adhere to our "Stop Doing List," filter partners and suppliers, gradually forming a good circle, which is valuable in the long run.

(60) "Dare to be last" means "doing the right things," "striving to be first" means "the ability to do things right." (2018-09-30)

(61) "Dare to be last" refers to product categories, because it's difficult to guess market demand, but if others have clarified it, you meet that demand more certainly. "Strive to be first" refers to the ability to make good products, and you should never enter a field without that ability. (2018-09-30)

(62) Laozi said, "I have three treasures: diligence, frugality, and not daring to be first in the world." I think running a business is very simple, called "consumer orientation," which is easy to say but very few practice. Most are business or profit-oriented. If you think the market is big and the time long enough, it's never too late to enter. Suppose the market has a fifty-year span; what's the difference if you're five years late? No difference. (2008-01-08)

(63) Few companies can survive without innovation, but innovation must be consumer-oriented, not for the sake of being different. We call this differentiation. Blind innovation is dangerous, while consumer-oriented innovation is essential for a company's survival. (2010-03-08)

(64) Without differentiated "dare to be last," survival is impossible. The premise of "dare to be last" is providing differentiated products that your user base needs and others don't or can't provide.

(65) "Consumers are rational" means in the long term, as the saying goes, "fair and square." That is to say, whether or not consumers seem rational now, we must believe they are rational. Otherwise, your business may have speculative or even unethical behavior. (2010-03-26)

(66) Almost all big companies start as small companies, and the most important thing is having a consumer-oriented mindset. (2011-02-21)

(67) "Dare to be last" also implies "don't take on tasks beyond your ability." (2019-10-20)

(68) "Dare to be last" is especially important for smaller companies. Our strength is not strong enough to compare with world-class companies. Therefore, I first look at what products large foreign companies are making and which products sell well, then I make similar products, which greatly increases the success rate. Early or late market entry is relative and temporary. Entering the market is only the start of competition; later entrants have disadvantages but also great motivation and goals to surpass predecessors, seeing opponents and markets more clearly and making fewer mistakes. With the right breakthrough, you can concentrate your forces, quickly enter, and quickly catch up.

(69) We enter a market between the growth and maturity stages of a product. Most of our products enter the market at this stage, with telephones being an exception as they entered at the maturity stage due to enormous market potential. We don't enter a market in the early growth stage of a product because we can't see if it truly has a market. We wait until the product has a good upward trend before entering.

We analyze the market and product from several aspects: market potential, including profitability analysis of the product; existing and potential competitors and detailed strength comparisons. The most important thing is about comparative analysis in detailed aspects, not just saying the opponent is strong or weak. If we believe we can stand in this market, we enter. (Interview with World Executive Digest, 2001-02-01)

(70) "Dare to be last" is not universally applicable; we also fail at times. But every time we enter a market, we have a "peace of mind." "Peace of mind" means seeing opportunities and risks clearly and knowing if the company can bear those risks. For us, failure means only the failure of a product or plan, without fundamental impact on us. We don't gamble everything at once; if we fail, the whole company won't be in trouble. (Interview with World Executive Digest, 2001-02-01)

Focus

(71) The "chicken rib principle" refers to Mao Zedong's "concentrate superior forces to annihilate the enemy" principle, also known as the focus rule. Our products are those international big companies find tasteless, like their "chicken ribs." They wouldn't bother using a fist to swat a flea, but we have an advantage here and can do better than them. (2011 internal speech)

(72) Single focus is easier, meaning higher efficiency in doing things right and lower probability of mistakes. Achieving "single focus" is very difficult because market demands are diverse. (2011-04-09)

(73) Each of our business units is highly independent and specialized, very focused on its field of expertise. We don't diversify for the sake of diversification. (2010-03-09)

(74) OPPO and vivo's combined annual revenue is $40 billion (2018), so the "chicken rib principle" no longer applies. (2019-03-26)

(75) I've always said I've never seen a successful diversified company, except for GE. Now, it seems time has proven otherwise. (2018-10)

(76) "Value for money" is just an excuse for insufficient performance. Focus on users, not on high-end or low-end; just do what we can well, satisfying a segment of users. Even Apple doesn't satisfy everyone. (2018-09-30)

Marketing is not the essence; the product is the essence

(77) Marketing is not the essence; the product is. The most important thing in marketing is not to lie; corporate culture is most important. Ads can influence at most 20% of people; the remaining 80% are influenced by that 20%. Poor marketing means slower sales, but as long as the product is good, marketing quality doesn't matter in 20 years. (2018-09-30)

(78) Any product initially has mostly followers; the key is the first 20-25% of people who understand. (2012-04-26)

(79) "Winning at the terminal" is like the last bun that fills you up. (2012-08-31)

(80) "Brand" is the imprint (impression) of all the company's past actions (products) in consumers' minds, good or bad. (2019-08-20)

(81) We launched the OPPO brand far earlier than imagined. We started designing it in 2000, mainly for long-term considerations. When we go global, we can't use the BBK brand, so we need an international brand. Thus, it wasn't designed by Chinese but Europeans, with voice tests in each country, including websites and everything else, over a long time. (Interview video with Financial Talk, 2010-03-22)

No bargaining, no debt

(82) OPPO and vivo's combined annual revenue is $40 billion, with no Sales department, no discounts, rebates, or special treatment for large or small customers. (2018-09-30)

(83) Our company doesn't bargain; all customers get the same price, regardless of business size or new or old customers. When I started the business, I found that "negotiating" was mostly about price. People spent much time negotiating prices, often requiring deception. For salespeople, price authorization was difficult, so they always sought higher-level approval, making leaders busy and inefficient. Therefore, over 20 years ago, we stopped bargaining. The benefits are numerous, so think about it. (2015-06-12)

(84) The benefit of debt is faster development; the benefit of no debt is longer survival. (2010-04-21)

(85) Loans and margins make money fast but lose money faster. Walking by the river, one can't avoid getting wet. Once wet, always wet, so why take the risk? Some opportunities must be missed; just ensure the right ones are seized. Most of our past competitors have disappeared; we still exist, perhaps for this reason. (2018-09-30)

(86) In 2012, OPPO and vivo faced great difficulties; we weren't sure we'd survive. We reached a consensus: if we fall, we must not fall ugly, must not owe employees or suppliers, and protect agents as much as possible. We didn't lose money in 2012 or 2013, but we lost a lot in the entire 2012-13 year, finally making it through mid-2013. (2019-05-22)

(87) There's no such thing as "overtaking on a curve"; focusing on the essence is most important! Otherwise, even if you overtake, you'll be overtaken again. (2018-09-30)

(88) Market share is the result, not unimportant but not blindly pursued; otherwise, there will be trouble. (2010-10-08)

(89) Expansion must be cautious; I call this the adequate minimum growth rate, balancing adequacy and safety, with safety at the core. Most people expand at the so-called maximum speed, and one slip leads to a crash. (2011-04-09)

(90) Running a business is similar; which failed company was killed by others? They all died by their own mistakes! All evergreen companies operate according to business rules. Only a professional nine-dan player can play professional nine-dan Go. (2001-11)

(91) There are no shortcuts or secrets. If you seek an easy path, I guarantee it will be longer and more painful than the difficult one. (2019-07-30)

5. Talent Development

(92) Hiring involves qualified and suitable people. Suitability means cultural fit; qualification means capability. People with mismatched values are strictly avoided. Troublesome employees are often qualified but unsuitable. A group of suitable ordinary people can achieve great things together. (2018-09-30)

(93) Suitability is often more important than qualification. Suitability is the alignment with corporate culture; qualification is the ability to do specific tasks. Qualification can be improved through training; suitability is hard to change. (2011-03-26)

(94) We generally don't hire senior management because it's hard to cultivate suitability. (2010-03-24)

(95) Training is costly, but not training is costlier. Companies unaware of this won't go far. (2013-10-28)

(96) Bonuses should be a contract, tied to performance, not a boss's gift. For example, under certain conditions, the company gives employees 20% of profits, distributed according to your performance evaluation system. (2019-04-26)

(97) Companies where employees fear leaders will eventually have problems because employees will lack initiative, hoping the boss will decide everything, reducing efficiency over time. Unless the company's products are highly focused, and the boss can manage all major aspects, problems will arise. I think Japanese companies face issues in some industries for this reason.

(98) Jack Ma said people leave for two reasons: low pay or feeling wronged. This is classic, describing hygiene factors and motivation factors well. Money is a hygiene factor, not a motivation factor; giving more doesn't help, but giving less won't do. Most people get this wrong because money isn't everything, but having no money is impossible. Motivation factors mean not letting people feel wronged and making work interesting. (2019-10-19)

(99) From the "hygiene-motivation" dual-factor model, if hygiene factors aren't met, people will leave. Hygiene's key is fairness. In 1989, I took over a factory with 3,000 yuan and 2 million yuan in debt, making billions by 1995. The boss promised a 70-30 profit split, later reduced to 20%, then 10%, repeatedly breaking promises. If he kept his promise, I wouldn't have left. Hygiene factors are fundamental.

(100) The key to delegation is tolerating mistakes in the process of "doing things right." My understanding is, I would make mistakes in the same situation, so why can't others? (2012-05-18)