Li Lu’s story reads like a movie script.
He grew up in China. Became a student leader in the democracy movement. Stood in Tiananmen Square when the tanks rolled in. Fled the country as the CCP crushed the protests and started a new life in America with no money and no home to go back to.
“I didn’t know anybody,” he said, “and I didn’t have a penny to my name.”
Two years later, a classmate at Columbia Business School — who understood the young refugee’s financial struggles — told him about a speaker coming to campus who supposedly knew how to make money. Li Lu agreed to tag along. In large part because he heard the word “buffet” and assumed the lecture came with a free meal.
“To my dismay,” he later told the Graham & Doddsville newsletter, “there was no lunch. There was just a guy with the name Buffett.”
Empty stomach aside, that day changed the entire trajectory of Li Lu’s life. Buffett’s words hit him like “a punch in my eyes” and he was, forever after, in love with value investing. Fast-forwarding a bit, he graduated and went on to found Himalaya Capital, earned Charlie Munger’s trust so completely that the legendary investor handed over a chunk of his own family’s fortune for Li Lu to manage, and was (for many years) even considered the odds-on favorite to one day run Berkshire Hathaway’s stock portfolio.
Li Lu shared this story — and many other thoughts and opinions — in a 2013 interview with the Graham & Doddsville newsletter (published by students in the Value Investing Program at Columbia Business School) and, for my money, it remains one of the best windows into the mind of this fascinating man.
Here are some things I learned from a recent re-read of this interview…
“The most important thing in our business,” said Li Lu, “is intellectual honesty.” What he means by that is to know what you know, know what you don’t know, know what you don’t have to know, while also understanding there is much you don’t know that you don’t know. A Rumsfeld-ian framework for rational thinking.
Know — and embrace — thyself. The money game is often one of self-discovery and the best investors magnify their particular idiosyncrasies and habits to gain a sizable edge over everyone else. “Do what you love to do,” said Li Lu, “so you just naturally do it and think about it all the time. You can accumulate a huge advantage if it comes naturally to you like this. The ones who really figure out their own style and stick to it and let their natural temperament take over will have a huge advantage.”
Your edge is not so much raw intelligence as it is the compounding effect of genuine fascination. If you’re thinking about a business model in the shower, or mentally sketching out a company’s competitive moat while walking the dog, you’re not exactly “working”. (At least in the sense most people mean it.) But you are banking thousands of unpaid hours of pattern recognition and knowledge accumulation that someone grinding unhappily through spreadsheets will never catch up to. As Emily Sundberg pithily put it, “You can’t compete with people having more fun than you.”
Get comfortable doing nothing. “I want to really find the best company at the best price, run by the best people, and available to me at the time I am looking,” said Li Lu. “Those don’t necessarily always meet — and it’s okay.”
