The Most Interesting Investor Who Ever Lived

Summary

This video delves into the fascinating story of Li Lu, one of the greatest yet least-known investors of all time. Born during China's Cultural Revolution, Li Lu survived numerous hardships, including the 1976 Tangshan earthquake and persecution after participating in the Tiananmen Square protests. Fleeing to the U.S., he stumbled upon a lecture by Warren Buffett, which sparked his interest in value investing. Li Lu later founded Himalaya Capital, achieving remarkable success by applying Buffett's principles, earning 36% annual returns from 2004 to 2009. His story is not only inspirational but also rich with investing lessons.

Takeaways

• 🌟 Lee Lu is one of the greatest yet lesser-known investors, with a remarkable track record of generating almost 30% annual returns.
• 📝 Lee Lu's journey from China to the U.S. is extraordinary, beginning with his escape from the Chinese government after the Tiananmen Square protests.
• 🌍 Lee Lu was born in 1966 during China's Cultural Revolution and survived the devastating Tangshan earthquake in 1976.
• 📚 Lee Lu stumbled into a lecture by Warren Buffett, which profoundly influenced his investment philosophy, emphasizing intrinsic value and long-term thinking.
• 🏛️ Inspired by Buffett, Lee Lu adopted the concept of intrinsic value, viewing stocks as ownership in businesses rather than mere ticker symbols.
• 📈 Lee Lu's investment career began with student loans, which he successfully grew into a million dollars by applying value investing principles.
• 💼 Lee Lu founded Himalaya Capital in 1998, focusing on investing in high-quality businesses below intrinsic value during the Asian financial crisis.
• 🔍 Lee Lu emphasizes the importance of understanding economic moats and competitive advantages in businesses to sustain high returns on capital.
• 🤝 Charlie Munger became a mentor to Lee Lu, helping him reshape his fund's structure to focus on long-term investments and client commitments.
• 💰 Himalaya Capital achieved an impressive 36% annual return from 2004 to 2009, growing investor capital twentyfold since its founding.

Q & A

Who is Lee Lou, and why is he considered one of the greatest investors of all time?

Lee Lou is a highly successful investor, managing $15 billion and generating almost 30% returns per year. Despite his achievements, he is relatively unknown compared to other famous investors. His success is attributed to his deep understanding of value investing, a philosophy he adopted after attending a Warren Buffett lecture.

What significant event in Lee Lou's early life symbolized the challenges he would face later on?

In 1976, when Lee Lou was 10 years old, a 7.6 magnitude earthquake hit his hometown of Tangshan, China, killing an estimated 300,000 people. This event was symbolic of the seismic shifts in China's economic and political landscape, which paralleled the difficulties Lou would later overcome.

How did Lee Lou's involvement in the Tiananmen Square protests impact his life?

Lee Lou participated in the Tiananmen Square protests, making him one of the most wanted students by the Chinese government. This forced him into hiding and eventually led him to flee China, first to France and then to the United States, where he sought political asylum.

How did Lee Lou's encounter with Warren Buffett influence his investment philosophy?

Lee Lou attended a lecture by Warren Buffett at Columbia University, which fundamentally changed his views on investing. Buffett's approach to viewing stocks as ownership pieces of businesses and focusing on intrinsic value inspired Lou to adopt value investing as his core investment philosophy.

What is the concept of 'intrinsic value' in investing, and why did it fascinate Lee Lou?

Intrinsic value refers to the true worth of a business based on its profitability and net assets. Lee Lou was fascinated by the idea that short-term stock price volatility creates opportunities to buy stocks below their intrinsic value, allowing investors to profit as prices eventually align with true value.

What challenges did Lee Lou face when starting his own investment firm, Himalaya Capital, during the Asian financial crisis?

Lee Lou founded Himalaya Capital in 1998 during the Asian financial crisis. Initially, his fund lost 19% in its first year, leading many investors to withdraw their money. However, Lou held onto his investments, which later surged in value as the Asian economies recovered.

How did Lee Lou's friendship with Charlie Munger help him overcome challenges in his investment career?

Charlie Munger advised Lee Lou to restructure his investment fund by locking in long-term contracts with clients and closing the fund to new clients most of the time. This advice helped Lou stabilize his fund and focus on long-term investments without the pressure of short-term performance.

What is the significance of the 'economic moat' concept in Lee Lou's investment strategy?

An economic moat refers to a company's ability to maintain competitive advantages that protect its profitability from competitors. Lee Lou focuses on investing in companies with strong economic moats, ensuring that they can sustain high returns on capital over time.

Why is volatility not considered a risk by Lee Lou, and how does he view it instead?

Lee Lou believes that volatility is not a risk but an opportunity. He argues that the real risk is the permanent loss of capital. If a business is strong, short-term price fluctuations are irrelevant, and volatility provides chances to buy great businesses at lower prices.

What has been the performance of Lee Lou's Himalaya Capital since its founding?

Since its founding in 1998, Himalaya Capital has grown its invested money 20 times in size. From 2004 to 2009, the firm earned 36% per year in returns net of expenses, demonstrating Lee Lou's exceptional investment acumen.