Munger's greatest legacy to China: Don't underestimate BYD, don't underestimate Wang Chuanfu
On November 28, local time in the United States, Berkshire Hathaway issued a deplorable statement:
Charlie Munger died peacefully that morning at the age of 99 at a traditional Chinese medicine hospital in California.
In his statement, Warren Buffett wrote in a poignant tone: "Without Charlie's inspiration, wisdom and involvement, Berkshire Hathaway would not have been able to develop to its current position." ”
From 1965 to 2022, Berkshire Hathaway, led by Warren Buffett and Charlie Munger, achieved a compound annual growth rate of 19.8% in a half-century cycle, growing step by step into the world's largest financial investment empire.
Investors often say that they must survive several rounds of bull and bear cycles to be truly considered a real investor, and many investment methods can be considered to have withstood the test and been proven to be effective. Otherwise, you're likely to be just a person who walked through the powder magazine with a torch and survived by luck, and ended up falling into the abyss in the same way.
The cycle is unpredictable, the bull market will constantly domesticate your behavior, and those secret weapons that make a lot of money in the bull market will eventually become the poison that you will go bankrupt in the bear market. For example, "any correction is a good opportunity to increase positions" and "only long-termism that can handle volatility can make a lot of money". So, you relied on holding firmly all the way, not afraid of adjustment, and walked through the entire bull market, and finally lost all in the bear market.
In the American investor world, only Warren Buffett and Charlie Munger have survived the brutal test of several bull and bear cycles. Berkshire Hathaway's market capitalization has increased by 37,874 times in 58 years.
So, don't underestimate Munger's wisdom.
01 The fundamental reason for Munger's investment in BYD: Wang Chuanfu made him can't help but want to invest
For China's auto industry, Charlie Munger is also a name that has to be mentioned.
In 2008, under Munger's strong recommendation, Warren Buffett made a high-profile investment in BYD, bought it for 8 yuan, and the stock price soon skyrocketed more than ten times. At that time, the capital market didn't know who Wang Chuanfu was, but Buffett's heavy position directly rewrote BYD's fate and became the starting point of BYD's enhancement circuit in one fell swoop.
In other words, without the blessing of the god of stocks, the capital market is impossible to give BYD such a big face, the car itself is a capital-intensive industry, and a round of financing is not so easy, but with Buffett's golden signboard, BYD's road to the global electric vehicle industry leader has become smoother.
In May this year, in the article "Greed and Stolen Dreams: Will Warren Buffett Continue to Reduce BYD?", the electric giant analyzed the reasons for Berkshire Hathaway's reduction in BYD from the perspective of the underlying logic of value investment and free cash flow.
Of course, this is from an investment point of view, but the reasons for the reduction are not very complicated. Anyone who has only a little bit of news about Sino-US relations and a little basic international political common sense should know why.
In any case, Munger's initial investment in BYD did not conform to the consistent principle of value investing. Therefore, there is only one factor that attracts Munger, that is, Wang Chuanfu's charm is too great, so he can't help but want to invest. You must know that in the half century of cooperation between Munger and Buffett, he has made a total of three recommendation calls to Buffett, the third of which is to invest in BYD.
Charlie Munger commented on Wang Chuanfu: "It's a hybrid of Edison and Welch, he can solve technical problems like Edison, and at the same time solve business management problems like Welch." ”
Charlie Munger was born on January 1, 1924 in Omaha, Nebraska, USA. On October 18, 1931, Edison died, and three days later, the United States announced that the lights would be turned off for one minute in honor of this great man. Charlie Munger was 7 years old at the time, and he experienced first-hand Edison's unique influence in the United States at that time.
Jack Welch is a legend, in 1981 as president of General Electric, retired in March 2001, under his leadership, in the heyday of GE's 12 subordinate divisions, 9 were able to be included in the Fortune 500 at that time, in addition, GE's market value from more than $10 billion, in 2000 to $600 billion.
In such a comparison, it can be said that Munger generously gave Wang Chuanfu the highest evaluation of an entrepreneur in his life.
02 Munger's inspiration to China's auto industry: the core asset of an enterprise is the founder
Nowadays, whether it is investors or financial media, when analyzing a company, they often only focus on the industry cycle and business model in which a company is located, but not enough attention is paid to the founders.
In this regard, many people often have a misunderstanding that the lower limit of an executive is that there is a dog sitting on the stage and reading the manuscript written by the secretary. It's naïve to think that this may be the median of executives, not the lower bound. An incompetent leader is much more lethal to the enterprise than a dog on stage who can only read scripts.
Therefore, the same company, led by the founders, and managed by the second and third generations and professional managers, are two species that are completely different, and may even be even greater than the gap between humans and apes.
The founder is the core asset of a startup, except for the track, the founder is everything.
If you're an investor, don't waste your life on mediocre opportunities. To make a real long-term investment, among the 5,000 A-share listed companies, the first thing to be eliminated is those companies that are not controlled by the founders, especially in industries with fierce competition and rapid technological progress. In a world of great contention, mediocrity is the greatest evil.
If you are a media person in the automotive industry, then the transformation of traditional joint venture car companies and fuel vehicle giants must be your focus on topics. From the founder's point of view, the fuel car giants were basically founded at the beginning of the last century, and after the death of the founder, they were either taken over by professional managers or controlled by the second and third generations. But without exception, the equity could not be concentrated and was greatly diluted.
This kind of thin control is not a problem when the environment is stable, but when the market faces a big shock or transformation, just like a car without a steering wheel, the direction in which the wheels turn depends entirely on what kind of pit the wheels press through.
From this point of view, the founders of these independent brands of Geely Great Wall, Li Shufu and Wei Jianjun, are still in their prime, and they have enough authority and ability to lead the transformation of the enterprise, even if it is not successful, it will be vigorous, and will not let the torrent of the times swallow itself like some large manufacturers.
And BYD's Wang Chuanfu is even stronger. Regarding the in-depth analysis of BYD's success, the author previously published an in-depth long article in the automobile news agency "20 years, 5 million vehicles - how does the "BYD flywheel" turn?", you must know that BYD's vertical integration model, Ford in the last century also adopted, in addition to the automobile factory, there are also their own steel plants, various spare parts supporting factories, and even the meat and grain eaten by workers are produced on their own farms, which is the real whole industry chain.
Everything has two sides of the same coin, vertical integration has high efficiency and low cost, but the requirements for the founder are extremely high, not only requiring the leader to have absolute authority, but also requiring him to always be on the front line of production and operation, and have strong control over all kinds of business. In line with this requirement, at present, there is only Wang Chuanfu of BYD.
03 In the second half of intelligence, don't underestimate BYD
At this stage, since the return of Huawei's mobile phone king in September, Yu Chengdong returned to the table with Xinwenjie M7, and the new energy battlefield that was already involuted has become more cruel. New and old concepts such as intelligent driving, 800V, AEB, in-vehicle GPT, urban NOA, and standard lidar are dazzling.
At the Guangzhou Auto Show, the M9, Ideal MEGA, and Zeekrypton 007 competed for infinite beauty, while the king BYD was gradually labeled as "intelligent and backward" by outsiders.
But in fact, according to the analysis logic above, as long as Wang Chuanfu is still there, don't underestimate BYD. In 2024, we can pay close attention to BYD's actions from the following 4 aspects:
First, intelligence.
BYD is not without investment in intelligence, tens of billions of R&D investment, thousands of people of R & D team, what is the actual landing effect? Can the level of assisted driving in each price segment keep up with the pace of new forces at the same price? Can Denza's "Eye of the Gods", the high-speed NOA at the end of this year, and the urban NOA in the first half of next year really reach the first echelon, so that consumers can really perceive it? In addition, can the combination of software and hardware of intelligence and chassis linkage in the cloud system be implemented?
Second, high-end.
In the previous in-depth article "Why is U8 looked up to - it is time to change the "stinky problem" of looking down on its own brand", the electric big coffee analyzed the idea of the high-end BYD brand, and it is enough to see the group's attention to high-end brands from Wang Chuanfu's personal visit to the Formula Leopard store. In addition, can the new models of Equation Leopard and Denza explode in the market segment? These data are worth paying close attention to.
Third, the technology fish pond and model upgrading.
Due to the vertical integration model, BYD's technology fish pond has been highly praised, and now it is necessary to pay attention to when will the technical reserves such as DM 5.0, second-generation blade batteries, and 4680 large cylindrical batteries be released?
Fourth, globalization.
In October 2023, BYD's overseas sales exceeded 30,000 units, and the proportion of overseas sales jumped from less than 1% last year to 10%, and in 2024, except for the Yuan plus that has gone to sea, the foreign name Atto 3, will the rest of the products continue to go to sea?
In short, believe in Munger's vision, in the intelligent second half, don't underestimate Wang Chuanfu, don't underestimate BYD.