Organizations & Teams

Reading guide

Ben Horowitz’s book on business culture follows The Hard Thing About Hard Things. He does not offer a universal standard for the “best culture,” because none exists. His point is that culture manifests in concrete behavior, not slogans on a wall. Unlimited snacks and a gym are amenities; value statements help shape culture but are not culture itself. “What you do is who you are”: culture appears in everyone’s actions. The book argues that culture is the most powerful productive force, capable of overcoming seemingly insurmountable structural constraints and even changing behavior across an industry or society.

Reading guide

Robin recommends Liu Jianguo’s book to technical professionals: a former Baidu manager recognized for outstanding management examines management and entrepreneurship challenges. Robin adds that management principles apply broadly, but technical people have distinctive commitments: pursuing new technology and designing products from their own perspective. Working in isolation, they may build something they admire without considering each detail from users’ perspective, leaving abundant unused features and desired features hard to find. The book describes seven “demons” at the technical-versus-management crossroads: uncertainty about the road, confusion over whether to manage, not knowing how to enter management, wavering about returning to technical work, anxiety about technical competitiveness, doubts about personality fit, and insecurity about performance. Settle your inner direction before managing with full concentration.

Reading guide

Good leaders have views but stay open, adjust when appropriate, acknowledge weaknesses, ask questions, keep improving, and stay connected to team members. Technical leaders often mentor colleagues and have more experience in some areas, but cannot know everything. When facing the unknown, they should still support people and guide them toward solutions. It is normal for team members to be stronger in some areas: their combined knowledge exceeds any leader’s. Good technical leaders admit ignorance and ask apparently stupid questions. Better to look foolish and learn now than remain ignorant throughout your career. “Ask a stupid question and you may feel stupid; do not ask, and you stay stupid.”

Reading guide

Many founders distrust everything teammates do, repeating instructions to prevent surprises. But employees may simply think differently. Working on the front line, they may have better ideas than senior leaders. Growth requires trial, error, and improvement; without mistakes, people cannot see shortcomings or know what to improve. Trust each employee as a capable person responsible for their work. Merely allowing mistakes is not enough: share the consequences when they happen. Robin adds: “The founder’s progress alone is insufficient; the team must move forward together. Allowing mistakes is part of learning. Demanding perfection may stifle employees’ room to grow. Give them enough trust.”

Reading guide

Observe not only how a company performs in good times, but whether senior management can lead it out of trouble. Robin’s long-term assessment of Netflix’s team is positive: DVD-by-mail disrupted Blockbuster; streaming disrupted its own DVD business; then it invested heavily in original content. It transformed substantially at least twice. During the first-quarter share-price plunge, he retained confidence in a battle-tested team that had challenged giants and reinvented itself. The shares later rebounded 50% from the bottom. Beyond price increases and account-sharing enforcement, Netflix was entering advertising, linking viewing time to performance. Past growth came from subscriber numbers; future growth would come from keeping subscribers with video and games, turning longer attention into greater returns. Written in 2022.

Reading guide

Robin jokes that he may soon be removed from FITI’s mentor database after telling a team to revisit why they started: not every venture must keep growing, raising capital, and listing. A grand dream helps in a FITI competition, but is it the life you want? Another option is a lean software company with annual revenue of 50–60 million, twenty-some employees, annual profit of 15–20 million, good benefits, modest growth alongside customers, and several million in annual shareholder dividends. No endless pursuit of acquisitions, overseas expansion, and listings, nor investors interfering after financing or small shareholders watching after listing. Life involves choices: more people can build practical businesses, solve problems, create value, and serve stakeholders without immersing themselves in grand dreams.

Reading guide

Robin: “Find a business model that works in the real world over the long term, rather than scale built solely by burning VC money. When spending stops, you may fall from heaven back to earth because you have not created real value or solved real customer problems.” The reprinted observation is equally sharp: new consumer brands can reach 100 million more easily than ever, but annual sales of 1 billion are harder and 5 billion less likely than ever. VC-backed projects may race to 100–200 million, stall at 300–500 million, then shrink. Burning VC cash, promotion on Xiaohongshu, and loss-making livestream sales create no defensible niche or position in consumers’ minds. Stop the stimulant and sales contract, morale falls, talent leaves, and a vicious cycle begins.

Reading guide

As physical retailers pursue online-merge-offline (OMO) commerce, they must grow store sales as well as capture online demand. 91APP product chief Li Kunmou describes three engines—a data-driven cycle, traffic-growth cycle, and OMO momentum loop—to connect websites, apps, and stores in an omnichannel member experience. Responsive-site advertising and app operations acquire new customers and increase repeat purchases. Online/offline coupons and points create seamless shopping. A distinctive “referrer engine” awards points, bonuses, and revenue sharing for store service, helping online and store sales grow together. OMO is more than integrating channels: it is digital, and even organizational, transformation.

Reading guide

Many factors cause startups to fail; running out of funding is probably the main one. Watch cash flow constantly and prepare more than one script in which fundraising succeeds and problems disappear. Smooth operations plus smooth fundraising are rare; setbacks, harder fundraising, core-team departures, and giant competitors are more common. Prepare for varied and worst-case scenarios. Stable cash flow keeps you from losing in the short term; the right talent is what lets you win. Find a way to attract exceptional people, as Liu Bei’s three visits illustrate. Different talent models have trade-offs: Netflix’s high pay, top performers, strict removal of low performers, and “not a family” approach is harsh but effective; others favor a family atmosphere. Make your culture clear and find people who fit.

Reading guide

Why did PayPal become so influential in Silicon Valley, even exceeding the Google of its era? Robin identifies four factors: an ambitious goal; exceptional people drawn together by it; a difficult founding journey, unlike Google’s relatively smooth one, dominated by survival battles that forged deep mutual trust; and, after acquisition, battle-tested people spreading through Silicon Valley with experience, skills, and unfinished ambitions to build new companies. A business like PayPal—successful through countless battles but without a perfect ending, ultimately sold to eBay—may be best placed to keep creating remarkable achievements.

Reading guide

Taiwan’s workplace culture has long emphasized managing up. Robin argues that, in a new era, broad peer recognition matters even more for leading a team forward. Google offers an interesting example: before promoting someone, obtain approval from at least five colleagues who may work with them. Bosses cannot observe every office behavior; coworkers can notice details such as rudeness or frequent lateness and offer relatively objective judgments. Securing their recognition before promotion makes future collaboration smoother. From Dedao’s audio summary of 矽谷模式 (The Silicon Valley Model, descriptive translation).

Reading guide

Wu Jun examines legendary KPCB investor John Doerr’s approach: invest in the future and the impact a venture can have on the world; then consider the founder’s DNA, seek companies in stealth, and emphasize network effects after investing. Doerr often asks entrepreneurs three questions: how will the world be different two years after receiving the investment? Why aren’t Microsoft or Google doing this? If a large company does it, what are your barriers to entry? Using Google’s shelved and restarted facial-recognition project and its complex-question answering system, the article explains the approach Doerr values: tackling old, previously unsolved problems from a new dimension. He does not judge people solely by outcomes. Despite failures with Segway and a new-energy fund, he maintains that money should be a tool not merely for making more money, but for changing the world.

Reading guide

In Build, Tony Fadell explains how Nest approached marketing. The central tool is the customer journey: list every way people discover the product, identify which parts of its story they encounter at each touchpoint, and build a messaging activation matrix that turns the right facts in the right places into advertising and content. Marketing must be honest—even a harmless lie can destroy trust, and every claim needs supporting data. It should also participate from the first day of product development. The “Why We Made It” page evolves alongside the product, giving marketing a voice in product decisions. Despite limited resources, Nest invested heavily in high-quality imagery; ten years later, Google Nest was still using those assets.

Reading guide

Wang Shuo outlines five features of cycles: everything important has them; they overpower people and institutions; each cycle rhymes without repeating exactly; live long enough and you will experience everything—ergodicity; and cycles are layered and nested, with individual fortunes often shaped by higher-level cycles. He distinguishes three types: positive-feedback bubbles in assets without income, reflexive loops in which share prices and profits reinforce each other, and credit-driven economic cycles that eventually reach a Minsky moment. Responses differ by horizon. In the long run, survival is victory: avoid maximum leverage in good times and endure without giving up in bad ones. In the short run, do not imagine you can reliably catch turning points; use a simple, sensible yardstick, such as Shiller’s valuation measure, to gauge whether levels are high or low. Be skeptical of any theory claiming precise turning-point predictions, including the LPPL model.

Reading guide

In an age of frequent black swan events, there is no master key. Zhang Lei nevertheless sees long-termism as a compass through cycles: commit time and conviction to things that create lasting value, learn the most effective ways of thinking, follow first principles, and keep seeking truth. For individuals, it offers clarity against short-term temptations and noise. For businesses, it provides perspective, rejecting zero-sum games and continually rebuilding a dynamic moat through innovation. For society, it is a passion that brings resources to education, science, and the humanities, sustaining a positive cycle. The article concludes that investment has one true standard: whether it creates genuine value that contributes to society’s overall prosperity. Flowing water does not compete to arrive first; it seeks to flow without end. Be a friend of time.

Reading guide

Once an investor meeting is secured, founders need three preparations. First, explain what they intend to do. Investors care about monetization and trends: not yesterday’s opportunities, already irrelevant; not today’s, already crowded; and not tomorrow’s, where mature opportunities favor large institutions. Their favorite is the “day after tomorrow.” Explain the industry’s past, present, and future, the opportunity you see, and your preparations. Second, demonstrate a distinctive edge. Barriers may come from advanced technology, industry experience, or—most often—people. With the right team, a second-rate idea can produce a first-rate outcome. Third, prove execution. Investors increasingly value the second-in-command who turns ideas into action. Use past achievements to show that you move quickly; even running in the wrong direction and correcting promptly is better than standing still.

Reading guide

Six lessons for first-time founders. Hire people more knowledgeable and experienced than yourself to fill gaps in your understanding; do not insist on being the smartest person in the company. Attend to both the big picture and details, balancing direction with execution. Assess every aspect of the business objectively: “getting many things done” is not the same as completing what matters; ask whether a decision is necessary and serves the ultimate goal. Consider opportunity costs, including the cost of not acting or acting later. Validate before investing: gather information, test in small steps, and iterate rather than spending months building something customers do not need. Finally, invest more once the approach proves effective. Apply the Pareto principle and deepen the one or two activities generating 80% of revenue rather than spreading effort too broadly.

Reading guide

Zhang Lei sets out four elements of Hillhouse’s approach. First, uphold an investment philosophy and a broad perspective. Its three principles emphasize ethical discipline and independence, restraint and depth in familiar areas, and doing the right things so like-minded partners naturally arrive. Consistency is not rigidity: Hillhouse fundamentally invests in change. Second, remain even-tempered and return to common sense. Returns should come from business profits and growth, not fashionable concepts or short-term games. He cites Bogle on long-term, risk- and cost-adjusted returns, and Buffett on not holding a stock for ten minutes if unwilling to own it for ten years. The best investment needs no exit. Third, preserve entrepreneurial spirit, put fund investors first, practice empathy, and support a positive cycle in the real economy. Fourth, develop talent and teams built on trust and mutual inspiration. Talent is an investment that never requires an exit.

Reading guide

When raising capital, your priority is not just to discuss the business but also yourself. First, you are the real competitive advantage. A Stanford survey of hundreds of investors found that founders, management teams, and their experience and passion were the most important investment factors. Introducing yourself reveals capabilities and values, helping investors assess company culture. Second, closeness builds trust. Baylor research involving 600 executives linked trust to leaders’ technical competence, conflict-resolution ability, and integrity. Share your background, inspiration, motivation, experience, and mission. A Harvard-administered global survey found all institutional investors valued ESG and how corporate purpose was communicated. Third, investors want to know whether you can withstand pressure. Nervousness may be read as an inability to handle difficult business decisions. Begin your presentation by speaking confidently about yourself.

Reading guide

Excerpts from 領導 (Leadership), coauthored by Manchester United’s legendary manager Ferguson and Sequoia Capital chairman Michael Moritz. Moritz divides the leadership lessons Sequoia learns from other fields into two categories. Internally, they concern recruiting, team building, standards, motivation, avoiding complacency, and removing underperformers. In portfolio companies, Sequoia is a minority shareholder alongside brilliant founders in their thirties who are driven and sometimes volatile; it can help only through persuasion, encouragement, sensible advice, and patience, with results that may not be immediate. Ferguson refused to define Manchester United by its opponents: the club’s destiny was shaped inside Old Trafford, and money could not buy success. The same applies in Silicon Valley. No company becomes great by continually reacting to competitors. Page and Brin built Google because existing search engines dissatisfied them. Successful founders focus on what they control and stay off powerful rivals’ radar for as long as possible. Novell, Netscape, and others learned the cost of attracting Microsoft’s attention at its peak; Google’s low profile meant that by the time Microsoft noticed it, it was too late to respond.

Reading guide

Xiong Fei of Matrix Partners reflects on founder assessment. During the 2017–2018 wave of returnee-led “copy to China” startups, many investors bought into stories about overseas comparables worth tens of billions of dollars without thinking them through. Other founders were less skilled at grand narratives but understood users, worked on the front line solving real problems, had spent years developing and testing their ideas, committed themselves fully, and attracted well-regarded friends and colleagues. Xiong argues for a dynamic assessment of people. If running a company with a few dozen employees has a difficulty of 10, a company with hundreds may be 10 times 10 squared; management complexity rises geometrically, and differences between founders become apparent. Openness and learning ability determine whether a founder can grow from handling a difficulty of 10 to handling 1,000. Robin adds that growth shifts interactions from individuals to teams and departments. As a Taiwanese saying puts it, it is easier to raise a top scholar than a capable businessperson: academic and research ability do not necessarily reveal management ability, which is often more important to entrepreneurial success.

Reading guide

Andrew Chen’s newsletter explores the dark side of being data-driven. Data measures yesterday rather than tomorrow and can produce analysis paralysis: intuition may provide an answer in seconds, whereas A/B tests take weeks. The tyranny of the majority can reduce a product to a compromise around averages. Noise and false signals abound, correlation is not causation, and historical data struggles to predict a future that has never occurred. Startups competing with giants such as FAANG need intuition, speed, and bold moves rather than copying those companies’ data processes. The ideal is to be data-informed, neither blindly data-driven nor data-ignorant.

Reading guide

Cai Yu examines Hefei’s investment-based approach to attracting industry. When BOE considered locating there, Hefei backstopped RMB17.5 billion. When Sharp intervened, Hefei offered to accept both projects, prompting Sharp to withdraw. It also invested in LCD and plasma technologies to hedge competing technical paths. Investments in ChangXin, GigaDevice, and NIO followed. The RMB7 billion NIO investment involved a NIO China joint venture, a RMB420 billion revenue commitment, an IPO within 60 months, and clear exit arrangements. The underlying approach is to follow a coherent industrial strategy, buy promising assets when they are out of favor, and train investment-promotion teams to conduct due diligence like investment managers. Robin suggests that Kaohsiung, Taichung, and Taoyuan could learn from this ambition. A city should first answer four questions: Who am I? Where am I now? Where do I want to go? How should I get there?

Reading guide

A Caijing article discusses the “one-person unicorn” in the AI era. Li Zhifei used AI to produce 40,000 lines of code in two days; Sam Altman described “one person plus 10,000 GPUs.” Pokee AI, associated with Zhu Zheqing, raised a $12 million seed round with only six people. A view attributed to Sequoia suggests hierarchical organizations are giving way to dynamic collaboration. Highly capable generalists and lean AI-powered solo businesses are emerging, while Chen Yiran comments on the employment market. Cal AI, built by high-school students including 17-year-olds, reportedly earns $1.12 million a month. Robin reminds venture capital professionals that they, too, must keep pace with the times.

Reading guide

In his 1998 shareholder letter, Bezos emphasizes fearing customers rather than competitors: customers remain loyal only until someone offers them something better. Hiring involves three questions: Do you admire this person? Will they raise the team’s average level? In what area are they a superstar? Goals for 1999 include expanding distribution and systems capacity, building the brand, broadening product categories, and strengthening the bench and processes. The letter again attaches the 1997 letter to remind shareholders of the company’s original commitments.

Reading guide

Robin recommends the 2016 shareholder letter as a must-read. Bezos describes Day 2 as stasis, followed by irrelevance, painful decline, and death: a company must remain in Day 1. Four essentials defend it. First, genuine customer obsession: customers are always “beautifully dissatisfied.” Second, resist proxies: processes and market research cannot replace closeness to customers. Third, embrace external trends—then, machine learning and AI. Fourth, make decisions quickly: act with about 70% of the information, disagree and commit, escalate misalignment promptly, and avoid one-size-fits-all processes.

Reading guide

Cai Yu reviews Yang Haoyong’s battle between Guazi and Renrenche, where capital-driven momentum was a key weapon. A month-long stealth expansion into 40 cities and more thanRMB 100 million in advertising produced a gap of 1,700 versus 700 transactions. A Series A of over$200 million then constrained the rival’s fundraising options. Spending created barriers, and capital momentum drove the market toward a 9:1 split. Do not take comfort in “just do your own job well” or “the market is large enough for everyone.” Cai also cautions that capital is only the foundation; data and algorithmic moats form the deepest layer.

Reading guide

Amazon’s first shareholder letter after its IPO was appended to subsequent annual letters. Its core is long-termism: put customers first; abandon projects without returns and increase investment in promising ones; choose cash flow over attractive financial statements; and retain talent through equity incentives. The letter reports 1997 revenue of$147 million, growth of 838%, a 58% repeat-purchase rate, and 1.51 million users. Bezos says the figures will be surpassed, but the long-term principles remain.

Reading guide

Professional-camera sales fell from 121 million units in 2010 to 8.3 million in 2024, but Insta360 captured 67.2% of the global panoramic-camera market and ranked first for six consecutive years. Self-taught programmer Liu Jingkang declined invitations from Zhou Hongyi and Li Kaifu, and moved from livestreaming software into hardware. After the VR bubble burst, he shifted panoramic cameras from specialist VR equipment toward action-camera use, admitting he had benefited from the market GoPro created. Two lenses addressed a key extreme-sports problem: capturing the moment matters more than framing it beautifully. Across ten years, Liu often followed Ricoh, DJI, and GoPro, but innovated in functions and use cases to pull ahead. Now DJI is following Insta360. Robin suggests Taiwan may be better suited to hardware or integrated hardware–software ventures than pure software, but their competitors will be Chinese manufacturers.

Reading guide

Dedao Headlines recounts LatePost's interview with Li Xiang, introduced by Robin after posts on Gome's decline and Ajinomoto's transformation. Three insights apply beyond the automotive industry. First, endgame thinking starts with an assumption about scale. Wang Xing and Wang Huiwen advised discussing scale before changes in technology, demand, business, and competition. Scale determines platform development—essential for production capacity—and what to develop in-house: standardized batteries and panels are left alone, while differentiators such as head-up displays, air suspension, and core chips require internal development. Second, avoid the “20,000-person trap” through a matrix organization with interlocking objectives: salespeople are also assessed by innovation teams, and selling one new product can count as ten established products. As Wang Huiwen put it, a team cannot reach a World Cup final on one specialty alone. Third, develop three fundamentals: language problems, or communication—Li used a hand-drawn A4 page to persuade Wang Xing to invest; mathematics problems, or measurement—product value equals product appeal times quality divided by price, with over a hundred quantified dimensions of appeal; and philosophy problems, or continually asking why, guided by Russell's truth-seeking and inclusive cooperation.

Reading guide

Yu Minhong argues that mobile internet and the age of intelligence create more opportunities, keeping entrepreneurship a major topic for another twenty or thirty years. There is no perfect time to start, but it must not be an impulsive decision: it is as consequential as marriage or choosing a city in which to settle. Joining as a supporting partner is easier because you do not provide the main resources. Four considerations follow. First, find a genuinely good project that excites you. Ask whether you can make it succeed, rather than whether someone has done it before. When Yu founded New Oriental, China already had tens of thousands of training providers; he trusted his affection for students, teaching ability, and potential for higher earnings. Second, secure funding. Debating whether to use 500,000 to start a business or buy a home suggests you have not clarified why you want to start. Strong projects can attract angels and seed funds; build a model for tens of thousands first. Third, build a team with a real decision-maker, fair rewards, clear responsibilities, shared expectations, and readiness for sustained hardship. Fourth, founders need leadership, decisiveness, and the ability to mobilize resources. In China, deploying people effectively can matter more than specialist expertise. Yu favors gaining experience first; starting immediately after graduation carries a much higher risk of failure.

Reading guide

Amazon's 2006 shareholder letter discusses incubating new businesses: expected returns on capital, potential scale, and differentiation that matters to customers. It uses the Joyo acquisition, FBA, and AWS as examples and explains why large companies need patience to nurture small seeds. The original English letter describes a fulfillment network of 12 million square feet, FBA storage at US$0.45 per cubic foot per month, and a community of more than 240,000 developers. The collected Chinese translation differs in units and headcount; see the source and verification note. The letter says even fast-growing new businesses often need three to seven years to become meaningful to the company as a whole. These are the experiences and strategies of that period, not current pricing or policy.

Reading guide

Fan Deng responds to a nanomaterials startup team: inventors face considerable entrepreneurial risk because they can love their invention more than the social problem the invention should solve. When difficulties arise, they seek to spread the invention everywhere rather than find the best solution, refusing to give up even after reaching a dead end. His example is an automatic car-cover device developed over ten years, whose creator sought investment at a valuation of 100 million. Fan declined for four reasons: assumed demand was unsupported; covering cars was infrequent; a rooftop device could be stolen; and carrying it in the trunk added weight and fuel consumption, undermining value. Real inventors begin with problems. Edison did not invent the light bulb, but his team found a suitable filament. Jobs did not invent the smartphone, but “redefined” it. Where Nokia insisted that computer functions required a computer keyboard, Jobs reportedly demanded one-button simplicity. The excerpt attributes to Bezos, via Allen Zhang, the question of whether innovation serves people or merely displays cleverness: will you show intelligence at any cost, or choose kindness? Inventions designed to demonstrate a founder's ingenuity rather than address a real problem will, in most cases, fail.

Reading guide

These book excerpts explain the central idea behind a “small and beautiful” business: profitability first. Rather than pursuing expansion single-mindedly, do everything possible to become profitable. The author was Pinterest’s second employee. In 2011, he left before cashing out his equity to launch Gumroad, a platform for creators to sell their work online. It attracted more than 50,000 visitors on its first day, then raised over US$8 million from prominent Silicon Valley investors and recruited dozens of employees from internet giants in pursuit of a unicorn dream. Once the funding ran out, growth stalled. Nine months of fundraising attempts failed, forcing him to lay off most employees. After moving to a quiet small city, friends helped him recognize that Gumroad had actually remained profitable and was appropriately sized for its target market. Thousands of creators used it to sell courses, ebooks, and software to supplement their incomes. It might have been a poor investment for Silicon Valley investors, but it was a valuable platform for its customers. He realized that many businesses raise substantial venture funding early because they have not found a sustainable profit model, falling into a cycle of pursuing size for its own sake. Entrepreneurship is like sailing: relying entirely on fundraising is like jumping into the sea, treading water, and waiting for a lifeboat. The sustainable approach is to build your own boat—profitability. Robin urges Taiwanese startups to establish that their business models can generate profits before expanding. As in the Buffett view he had shared, making money is the only way to develop sustainably.

Reading guide

Building on the three requirements for a good fundraising story—engaging, credible, and concise—this post explains its structure. The most suitable framework is the familiar confrontation between a hero and a villain, followed by a happy ending. That may sound overly simple, but its simplicity is precisely its fundamental strength. In an entrepreneurial story, the villain is not a particular person but a real problem: hunger, ignorance, disease, waste, inefficiency, or a poor customer experience. A business idea without a clearly defined villain cannot raise funding, because it does not solve a real problem. Google’s villain is the lack of ways to access information, its hero is its search algorithm, and its happy ending is the business empire built through tens of billions of searches. Uber’s villain is being unable to find a ride; its happy ending is a ride for everyone and income from otherwise idle vehicles. Great business stories, however, are never pure fiction. The next step is to substantiate the plot with examples and factual research. First, bring the villain vividly to life: an office worker leaving at 9 p.m., exhausted by clients and a boss, with no dinner arranged. Then introduce the hero—a food-delivery website—and explain just as thoroughly why it can win, whether through breakthrough technology or service innovation. A happy ending requires a reasonable market forecast: the market share to be gained, how long that will take, how much it will cost, how much will be earned, and the basis for every projection.

Reading guide

Zhang Xiaoyu’s case course tells the story of Orange Hotel. It may not be a success story about working with capital, but it is a very real one. After selling the company, founder Wu Hai wrote that he felt like a “surrogate mother”: he had devoted his life and youth to nurturing a child, only to realize, when the final strategic investor Huazhu took Orange over from its investors, that capital might be the child’s real mother. The account has three stages. First, capital enabled rapid expansion. Orange had only 25 hotels when Carlyle came in during 2012, but more than 200 before Huazhu acquired it. Expansion exposed the disadvantages of unfamiliar local markets, however, and the company moved from insisting on directly operated hotels to franchising and reliance on partners with local resources. Wu’s original commitments gradually changed. Second came the investors’ exit. In late 2016, Carlyle sought to exit, not simply to make a quick profit: its fund had only three years left, while preparing for a domestic listing would take a year and regulatory approval was highly uncertain. Wu knew Carlyle would not force a sale if he firmly opposed it, but said he should respect investors’ wishes and fulfill his role as a surrogate mother. In February 2017, Huazhu acquired Orange Hotel outright for RMB3.65 billion. Third is Wu’s character. When valuation negotiations with Carlyle stalled, he pledged all his options under a performance-based agreement: if the business performed poorly, all the options would go to Carlyle. He wanted to protect the share value held by early investors and his team. Each of his three ventures ended in a sale. He may not have been the greatest entrepreneur, but his loyalty and authenticity offer something to learn from.

Reading guide

Robin compiles Liu Songbo’s views from Dedao’s 30 Lectures on Corporate Governance. Startups easily fall into disputes over interests because business models, the importance of resources, and individual contributions continue changing dramatically after the equity structure is set. Haidilao’s Zhang Yong and Shi Yonghong agreeing to transfer shares after initially holding 50% each is a positive example; the dispute between Li Ziqi and Weinian is a cautionary one. The solution is to leave room for adjustment in equity design. First, reserve an equity pool rather than allocating all shares at once. Second, use vesting, granting equity progressively against milestones. Third, prearrange exit mechanisms, including conditions and prices for recovering equity. Ning Xiangdong also proposes a “pivotal minority”: two shareholders with 50% each give up 0.5% apiece, allowing an impartial third party trusted by both to hold 1% and mediate disputes. The post closes with Xu Xiaoping’s observation: do not pursue shared interests through brotherhood; build brotherhood through shared interests.

Reading guide

Xu Xiaoping proposes three principles for equity design. First, hold a large stake without standing alone. Equal splits such as 50:50 or 3:3:3 suggest the team has no leader, but 98:1:1 does not create genuine partners either. A reasonable structure gives the largest shareholder at least 50% and the second at least 10%, with examples including 6:2:2, 6:3:1, 5:3:2, or 7:2:1. Second, earn equity before receiving it. Shares should not be handed over on day one, but earned through four years of vesting. After one year, a cofounder earns a quarter; someone who leaves or proves unsuitable takes only the earned portion. Third, add rather than take away. For a strong later recruit, issue options from an expanded pool rather than demanding shares back from early shareholders. Most startups reserve a 10–20% option pool on day one, preserving flexibility for future equity allocation.

Reading guide

In a July 2012 open letter to partners, Ma Huateng drew inspiration from Ren Zhengfei’s 管理的灰度 (Gray Areas in Management, descriptive title) and distilled Tencent’s fourteen years of experience into seven principles for creating a living organization. Demand alignment: user needs are the product’s core. Tencent product managers follow a 10/100/1000 rule—ten user surveys, following one hundred user blogs, and collecting one thousand user-experience reports each month. QQ Mail turned around after being rebuilt. Speed: take small, rapid steps and iterate quickly, accepting imperfection while moving rapidly toward perfection; nobody stays five seconds behind someone else in understanding. Flexibility: proactive change matters more than reacting to change. Redundancy: tolerate failure and some waste. WeChat emerged from competition among several internal teams. Openness and collaboration: lessons from the 3Q conflict mean a platform must choose what to do and what not to do. Capacity to evolve: Kodak invented the digital camera but organizational rigidity left it on the shelf; mechanistic organizations can become green deserts. Innovation: innovation is an outcome, not a cause, emerging naturally from the gray areas of a living organization.

Reading guide

Legendary Lockheed Martin engineer Kelly Johnson established fourteen innovation principles for Skunk Works. Give the program manager nearly complete authority; maintain strong but small project offices on both the military and contractor sides; and restrict staffing to 10–25% of a normal organization, ruthlessly controlling bureaucracy and unnecessary work. Use a simple, flexible drawing-release system and require few reports while thoroughly recording important work. Review costs monthly, avoid books running ninety days late, and do not surprise customers with sudden overruns. Give contractors greater responsibility and authority to conduct flight tests. Push inspection responsibility back to subcontractors: quality comes from design and responsible operations, not inspection. Agree specifications before contracting, explicitly stating important requirements that will not be met and why. Provide timely funding, mutual trust, and close daily cooperation. Strictly control outsiders’ access, and reward performance rather than the number of people supervised. Robin’s view: innovative R&D is difficult, but simpler working methods and streamlined processes can free researchers from organizational constraints and help them concentrate. Make innovation simpler, freer, and bolder. He particularly highlights rule six on accurate cost estimation and control.