Zhang Lei and Lu Qi: Positive-Sum Value, Iteration Speed, and Long-Term Partnership

Zhang Lei: Do the difficult but right thing, rather than what everyone else is doing. ---- Lu Qi: Let me share a few conclusions about the core of long-term value. First, black swan events often change human history. They have low probabilities but enormous impact. My own work now centers on the early-stage startup ecosystem, particularly technology-driven founders. We use a startup-camp model: we invest and help build their businesses as though we were cofounders. Our main effort goes into the zero-to-one stage and accelerating product-market fit. I keep asking what remains unchanged during the pandemic, what changes in the short term, and where uncertainty is especially high. Will that uncertainty last a year and a half or two years? How large is the window? I also believe the pandemic greatly accelerates some established long-term trends. It is as though we were suddenly given a much more powerful telescope: where we could previously see fifty kilometers, we can now see a hundred. Frankly, several sectors can already be viewed in much greater detail and clarity. Lu Qi: Let me explain my understanding of value. To me, value is the ability to keep satisfying human needs. Different industries may have different sources of value. My business now operates in the early-stage ecosystem, serving startups’ needs. We see two main needs for early-stage founders: first, survive; second, accelerate the process of achieving product-market fit. This is an era of extreme uncertainty. According to our systematic analysis and research, the only way to improve the odds of success is to increase iteration speed. ---- Zhang Lei: Competition drives progress. Otherwise, everything becomes a monopoly and nobody gives you good service or better products. To advance value, I think the first requirement is not to think in zero-sum terms. This is a positive-sum game. When you emerge as a competitor, others can be happy about it too, because you stimulate everyone’s innovation and help them improve. What, then, is the opposite of value? I think we first need to oppose two things: First, zero-sum games, in which everyone is merely a rival. To some extent, those rivals push you to improve. Second, trend chasing—the theory that you must chase every hot opportunity. I may not know what value is, but we need to know what it is not. It is not a zero-sum game, a gaming mindset, or trend chasing. Only after establishing those three exclusions can we discuss what value is. --- Lu Qi: My own entrepreneurial experience may be unusual. I was already 57 when I established my current business. Let me explain why. After decades working mainly on technology, products, and business, I first wanted a career I could remain capable of pursuing for another ten or fifteen years. From a broader, long-term perspective, I also wanted to identify where value creation had the greatest potential. My analysis led me to believe that, from a macroeconomic and historical perspective, China could become the world’s largest innovation ecosystem. All four core ingredients—talent, technology, markets, and capital—were essentially in place. My personal belief is that innovation is always the greatest source of human progress, and technology is innovation’s greatest driver. Starting from that view, how could we build an institution that both invests and helps founders go from zero to one, supporting them for the long term? That was the direction behind my decision to start a business. Over the long term, I prefer to seek the source of value. To me, the early-stage ecosystem has two essentials: good founders and technology that can be commercialized. That was my original motivation, even though I was already quite old when I began. --- Lu Qi: Let me discuss cycles. I think they need to be understood. Many listed companies, for example, explain a poor quarter by citing seasonality. But we never see one attribute a good quarter to seasonal factors. In our investment industry, capital markets are cyclical. When capital is abundant and you raise money as a founder, ask whether that really represents progress—your competitors may have raised even more successfully. When capital is tight, it is not necessarily bad: everyone faces scarcity, so successfully raising money can make you more valuable. That is my first point: take the right approach to cycles. Second, how do we respond to sudden disruptions? The pandemic is one, and it has accelerated two things: First, the rapid formation of habits. In consumer innovation, changing old habits and establishing new ones is extremely difficult. During the pandemic, many new habits formed quickly. Second, acceptance of concepts. The pandemic rapidly established things that might otherwise have taken five years to gain acceptance, such as widespread remote work. In these circumstances, prepare thoroughly for uncertainties, including cash flow and how to keep the business operating steadily. On that foundation, seize the opportunities created by acceleration boldly. Also remain sensitive to new trends that will emerge over the next long period after a disruption—for example, the pandemic’s long-term opportunities in medical testing and immunology. I therefore think entrepreneurs need a more systematic grasp of their situation: avoid being thrown off course by disruptions while understanding their noncyclical, structural effects, so you can seize the opportunities that truly belong to you. ---- Lu Qi: Entrepreneurship is a long, exceptionally difficult process, often with only a slim chance of survival. Choosing companions matters enormously. Its two essentials are moving fast and going far. Ideally, I choose someone I already know. Sometimes that is impossible, but detailed background checks are essential. Understand their original intentions and motivations, including their family’s financial circumstances. Our returns take a long time. If they need short-term income to support themselves, the fit may be poor. First, then, understand whether motivations align. I also look for complementary abilities. The person must have a strong desire to learn and a strong capacity to iterate. In our work, iteration speed is effectively the speed of progress. Going far requires shared values. Without that, you will not get far together. We now see ourselves as companions. Founders are at the forefront of changing the world; they take risks and commit for the long term. At MiraclePlus, we intend to act as their cofounders, doing our best to build a community that offers more sustained companionship. ---- Lu Qi: The person who impressed me most this year was Mr. Gates. Several things stand out: First, he has truly forward-looking judgment. Second, he has great courage. Despite the highly distorted American media environment, he dares to stand up, say the right things, and do the right things. Third, he acts. He has devoted tremendous energy, and his foundation has invested substantial funds in drug and vaccine development. In today’s very complex global situation, we hope for more people like Mr. Gates: farsighted, courageous, and able to put ideas into practice. Original article: https://mp.weixin.qq.com/s/qjbBr5N1pb3qj-3YulOKnA