CHAPTERS
- 0:00 – 9:56
Li Lu's Foreword on Charlie Munger
The episode opens with Li Lu's foreword to the Chinese edition of Poor Charlie's Almanack. He describes meeting Munger, how Munger became his investment partner in 2004, and Munger's habits of inversion, curiosity and rationality.
- •Munger became Li Lu's investment partner in 2004 and then his mentor and friend
- •Munger starts by inverting: he wants to know where he'll die so he never goes there
- •Buffett's 'two-minute effect' and the BYD example show how fast Munger grasps a business
- •Buffett credits Munger with moving him beyond Graham's buy-cheap-stocks thinking
- •Li Lu likens Munger to a Confucian scholar-official, a businessman with a literati soul
- 9:56 – 14:13
Building a Homemade Li Lu Autobiography
The host explains that last week's episode covered Li Lu's early life, so for this one he compiled Li Lu's lectures and interviews into his own handmade book, as Munger did with Rockefeller transcripts. He starts with Li Lu's 2006 Columbia lecture and why Li Lu gave it.
- •Only one book exists on Li Lu and it covers his early life
- •The host transcribed and ordered Li Lu's talks chronologically into a binder
- •Munger kept printed transcripts, such as the Rockefeller interviews, in binders
- •Li Lu says a Buffett lecture at Columbia changed his life when he was desperate and penniless
- 14:13 – 22:23
Be an Owner and Know Whether You're the 5%
Li Lu learned from Buffett to see himself as a business owner who doesn't trade constantly. He says most of the market is built for traders, so you must discover whether your temperament fits the small minority, and he explains how time in Julian Robertson's office showed him he was not a trader.
- •Owners don't trade all the time, which matches Munger's 'sit on your ass investing'
- •General business advice is useless unless it is authentic to who you are
- •Li Lu says about 95% of the market is for traders and value investors are a small minority
- •Sharing an office with Julian Robertson's fund managers showed him he didn't fit the trading style
- •Buffett: 'We don't read other people's opinions. We wanna think.'
- 22:23 – 24:55
Insatiable Curiosity and Betting Big on a Handful of Ideas
The host describes the traits Li Lu says a researcher-investor needs, chiefly insatiable curiosity and reading everything. Research yields only a handful of opportunities, and when they appear you bet heavily, as with Buffett's bucket quote and Munger's Barron's story.
- •Li Lu describes the job as being an academic researcher or investigative journalist
- •Li Lu likened his reading to Churchill 'devouring entire shelves'
- •Buffett: 'When it rains gold, put out the bucket, not the thimble'
- •Munger's Barron's story: one insight in 50 years led to the money he gave Li Lu
- •Asked how much he put into Timberland, Li Lu answered 'a shitload'
- 24:55 – 34:29
The Timberland Case Study: Digging Through Everything
Li Lu walks students through Timberland, starting from the Value Line survey and a battered stock with no analyst coverage. He read every court document and investigated the founding family, even joining a board with the founder's son. The investment rose seven times in two years and he sold when the analyst meeting room filled.
- •Reading Value Line cover to cover builds an encyclopedic base that speeds up later work
- •Timberland was depressed by the Asian crisis, had no analysts and a family-controlled structure
- •He read every court filing and visited stores, the community and the church
- •He joined a board alongside the founder's son to learn the family
- •The stock rose seven times in two years and he sold when the room was packed
- 34:29 – 40:14
Li Lu Confronts Columbia Students About Effort
Li Lu quizzes the students on companies from Value Line and is disappointed that almost nobody did the homework. He stresses accurate and complete information, rare great ideas, and that you must actually do the work. The host stresses effort and judging how a business actually functions rather than how it is labeled.
- •Only one student raised a hand when asked who did the homework
- •His employees never went to business school, and he finds them easier to train
- •Don't be fooled by labels: ask how a business actually functions
- •His mantra is accurate and complete information
- •He expects no more than about ten tremendous insights in 50 years
- 40:14 – 46:48
Missed Opportunities, Punch Cards and Munger on Opportunity Cost
Li Lu names his biggest mistake as the money forgone on an idea he understood but did not bet on. The host connects this to Buffett's 20-punch card and to Munger's 90-second video on Li Lu, which frames decisions as opportunity costs.
- •Li Lu's biggest mistake was the money forgone, not money lost
- •Insight takes years of study, such as 15 years on one industry
- •Buffett's 20-punch card forces weighing every decision against alternatives
- •Munger says he gave family money to an outsider once in 95 years, to Li Lu
- •Munger says decisions are about opportunity costs and one great option simplifies life
- 46:48 – 53:02
Bloomberg, Pricing Power and When Not to Sell
Asked what drives his decision to sell, Li Lu analyzes Bloomberg as a business you shouldn't sell, citing switching costs, network effects and near-monopoly pricing power. The host ties this to Bernard Arnault's raising of Tiffany prices and to Munger's remarks on untapped pricing power, and the lecture closes on change creating opportunity.
- •Li Lu moved from selling when he wouldn't buy at the price to holding great businesses
- •Bloomberg has high switching costs, universal use and a winner-take-all dynamic
- •Its customers don't care about a price increase because trades can mean millions
- •Munger says untapped pricing power is the ultimate no-brainer, as at Disney and See's Candy
- •Change equals opportunity, so you must keep relearning
- 53:02 – 1:02:10
2010 Columbia Talk: Continuous Study, Sam Walton and BYD
In his 2010 talk Li Lu describes his two-year study of Buffett and his first-year 19% loss, and says an edge comes from years of continuous study. The host links this to Sam Walton's slow learning before rapid expansion, and Li Lu advises understanding one business as if you inherited it. He then discusses temperament in panics, BYD and staying within his circle of competence.
- •After reading everything on Buffett, Li Lu lost 19% in his first year managing money
- •Intrinsic passion matters, which echoes Munger's remarks on intense interest
- •Sam Walton ran one store for five years before expanding fast
- •Imagine you inherited 100% of a business to learn to think as an owner
- •Li Lu says BYD took 10 years to understand and he declines questions outside his circle of competence
- 1:02:10 – 1:06:58
2012 San Francisco State Talk: Gambling Psychology and Opportunity Cost
The host covers Li Lu's 2012 talk at San Francisco State, starting with a YouTube comment on his humility. Li Lu explains why few follow Buffett's approach, citing human nature and gambling, and repeats that great opportunities are rare, so investing is opportunity cost.
- •A commenter says Li Lu flew in to speak after a cold email and went straight back
- •He says it is human nature to love gambling, so few investors bet rarely
- •He urges studying the great examples to know what to look for
- •A student's 'high hurdle rate' remark proves his point about human nature
- •Any alternative must be justified against the opportunity you already have
- 1:06:58 – 1:14:50
Graham & Doddsville Interview: Finding Your Style and Strong Businesses
From the 2013 Graham & Doddsville interview, Li Lu says the game is to discover who you are and magnify it, letting his interests define his circle of competence. The host reads Buffett's eulogy crediting Munger as Berkshire's architect, and Li Lu describes his shift from cheap securities to strong businesses, his Capital IQ lesson about Bloomberg, and BYD as a learning machine.
- •Li Lu says to find a style that fits your personality and magnify it into an edge
- •'I let my own personal interests define my circle of competence'
- •Buffett's eulogy says Munger told him to buy wonderful businesses at fair prices
- •Competing with Bloomberg through Capital IQ showed how great it was
- •Li Lu says Buffett and Munger aren't ideological about technology, and he puts all his capital into his funds
- 1:14:50 – 1:16:35
2021 Fireside Chat: Don't Study Other Investors
From the 2021 Columbia China Business Conference chat, the host highlights that Li Lu spends his time studying industries and companies rather than other investors. The host explains this as trusting your own judgment built through work and as another application of opportunity cost.
- •Li Lu says he studies industries and specific companies, not other investors
- •The host says trusting your judgment requires doing the work
- •The opportunity cost of studying other investors is too high for him
- •Li Lu argues that the future is hard to predict, citing the Civil War and Japan and Germany after World War II
- 1:16:35 – 1:21:22
Li Lu's Reflections on Turning Fifty
The episode ends with Li Lu's essay on turning fifty, in which he credits the many people who helped him and says he guarded against envy, resentment and self-pity. He describes self-examination and reinvention, learning the art of subtraction and focus, gratitude for Buffett and Munger, and wanting younger friends as teachers.
- •He credits kind strangers, mentors and friends as his bridges and roads
- •He guards against envy, resentment, greed and self-pity, which the host links to Munger and Buffett
- •He examines himself and relies on friends to point out blind spots
- •At fifty he is learning subtraction and focus and sees investing as suiting his temperament
- •Quoting Norman Lear, he wants young friends as new teachers
