market folly

Lei Zhang of Hillhouse Capital recently had a talk at Goldman Sachs filmed at the Builders + Innovators Summit in Asia.  Zhang runs one of the most prominent funds in Asia after starting with $20 million from Yale University and now growing into a $60 billion firm.


Lei Zhang's Talk at Goldman Sachs 2019

- He says entrepreneurship is about doing something you love, not doing what's trendy or for the money

- Unbelievable change and opportunities created in China over the past 30 years; highlights Chinese people's drive

- Hillhouse was named after the street at Yale Endowment where he previously worked, but in Chinese it also refers to a high vantage point of being able to see everything.  He says Hillhouse is a blend of eastern and western philosophies: being a long-term investor, being thoughtful, entrepreneurship.  Has 45 people on his team.  "We believe you do the right things, you build your reputation, you stand up for what you believe in... and entrepreneurs will find you."

- On what he looks for in people:  persistence, smart, teamwork.  But he emphasizes empathy and the ability to connect with people who are different from you.  Lifetime learning is also essential and not to learn to make more money but a genuine desire to learn.  Also added humility is a great trait.  He likes entrepreneurs who build a culture like a sports team... it's like family but you want to win.

-  "One of the most exciting things of investing in China is you're always embracing change.  And one of the most fascinating changes in the past has been the consumer internet."  First wave was Baidu, Tencent, Alibaba, but the core was connection (people to information, people, and goods).  Now the second wave is coming "Innovation 2.0" it's not just about connection, it's about leveraging AI, SaaS, lots of vision.  Likened it to the industrial internet.

- Belle shoe retailer was being attacked on all sides (especially with e-commerce from JD and Alibaba, etc).   Hillhouse invested and 3 years later it's seen double digit growth.  For instance, they made changes like put a sensor that could tell them that x shoe was getting picked up a ton of times but no one was buying it, so they can make changes faster.  They also brought in a lean manufacturing process (Danaher).  This helped with inventory so they had less to discount which helped maintain the brand.

-  "In investing at a Hillhouse level, we're always joking the best investment is the investment you don't have to think about (an) exit." 

Embedded below is the video of Lei Zhang's talk:




For more on this manager, we've also highlighted Lei Zhang old lecture at Columbia Business School.