There Are No "Sunset Industries," Only "Sunset Thinking"
Lang Xianping stated that whenever he went to a place, he was always asked the same question: which industry is currently the most promising for investment. And he would uniformly answer with "no industry has a future" to express his helplessness. According to his explanation, in fact, in fierce competition, it's not easy to do well in any industry. Lang Xianping believed that Chinese entrepreneurs were eager to become bigger and stronger quickly without being willing to refine their work and focus on cost control and improving efficiency. Or when they encountered difficulties, they would rush to transform, and he clearly did not admire this approach.
In Lang Xianping's view, many Chinese enterprises lacked not funds or technology, but severely outdated thinking. Many so-called prospect-less "sunset industries" were actually caused by rigid business thinking. "We don't have sunset industries, only sunset thinking." He used South Korea's LG as an example, saying that LG was in the traditional home appliance industry, which was also considered a sunset industry by ordinary people, with extremely low profit margins. Companies seeking high profits usually looked down upon it, but LG recognized that the industry had stable cash flow, and through strong cost control, reducing product defect rates, thin-profit but large-volume sales, etc., it quickly occupied the world market, created economies of scale, and achieved profitability. He believed that easily labeling a certain industry as a sunset industry and seeking industrial upgrading might result in handing over one's own market to foreign companies.
"Conservative" Operation Leads to Growth
Lang Xianping believed that the "psychological disorder of the Fortune Global 500" reflected the restless, speculative psychology of Chinese entrepreneurs. In his business philosophy, compared to short-term economic benefits, risk control was obviously more important. He believed that among the factors driving enterprise development, the transformation of entrepreneurs' business thinking was placed in the most critical position.
Due to weak risk management awareness, some entrepreneurs blindly entered industries they were unfamiliar with after possessing capital, talent, and other resources. He believed that capital, technology, talent, innovation, and other elements were very important for enterprises, but they must be correctly guided. If they fell into the trap of blind expansion, it would be difficult to have stable operations and achieve sustainable development, thus failing to ultimately stand out under international competitive pressure. "Becoming stronger and larger can only be the result of operation, not the purpose of operation."
He believed that when choosing an investment industry, entrepreneurs who considered how much money they could make from it were only second-class entrepreneurs. On the other hand, "solid, steady, step-by-step, meticulously managed conservative entrepreneurs" were his preferred choice. Lang Xianping even encouraged entrepreneurs to produce more "infeasibility reports" when investing, meaning completing the transition from a profit model to a risk management model.
Complementary Diversification Helps Defend Against Risks
In yesterday's speech, Lang Xianping pointed out that after developing to a certain point, Chinese enterprises often sought diversified development, but it was not easy to achieve ultimate success, "China currently does not have the environment for all to develop diversification." His data showed that Chinese enterprises pursuing diversification had only a 5% chance of achieving expected success. Even ignoring environmental institutional factors, "once a company enters diversification, its operations will lose control" was the norm, because multiple projects starting simultaneously required high capital demand, and once encountering a "blow," it was very easy to experience a capital chain break, Delong being a typical example.
He believed that for diversified development to succeed, the industries engaged in must complement each other to defend against risks and achieve the purpose of stable cash flow. "So-called complementarity means when I am good, you are bad, and when you are good, I am bad, we can offset each other." For example, engaging in low-correlation industries or businesses in low-correlation regions to effectively diversify risks, investing in several industries with different return periods, or operating a business with a stable return period to obtain relatively stable cash inflows.
Through case analysis of Hong Kong's Cheung Kong Holdings, Sun Hung Kai, Hon Kwok Industrial, and Hutchison Whampoa, Lang Xianping proposed that "the path taken by outstanding enterprises in the future should be low debt, low growth, industry complementarity, and cash flow as the foundation."
Lang Xianping's Memorable Quotes
● "How much money can I make by investing in a company?" Let me tell you, if you think about problems this way, you can only be a second-class entrepreneur. What you should think about is, once I invest in an industry and fail, which industry should I use to compensate?
● Dare to write infeasibility reports, finding various inexplicable reasons to say no to this project. When you really find that the reasons are not convincing enough to stop yourself from doing it, it's still not too late to start.
● Privately-owned enterprises that achieve fleeting success have little research value. Because many times it's due to good opportunities and hitting the right entry point. The truly valuable ones for study are stores that have been around for 50 or 100 years. Once such enterprises succeed, they inevitably grow larger, so it's not that they succeeded because they became big, but rather decades of strategic accumulation led to their success.
● If you ever get the chance to hear these entrepreneurs talk about their success stories and ask them how they succeeded, I believe their answers will be that they succeeded because of being conservative, not because of becoming bigger and stronger.