YouSaid · the spoken record

Mike Tian

lines on the record: 65
first: 2021-09-06
most recent: 2021-09-06
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“It's never too late to get started. I wish I got started earlier. And whenever it comes time to learn about a particular thing or to do a particular thing, I usually think it's like, oh gosh, I should have done this like three years ago. Why didn't I? So the fight against procrastination, I suppose. And it's like, oh, I can always do it later. That's something you constantly have to adjust against, I guess.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think perseverance. More so than anything else. And also, if you set your mind to it, there's nothing you can't do. I mean, it sounds kind of lame, but for example, if you're investing, you have to learn about all sorts of different things in many, many different domains. An opportunity is often found in the cracks between different domains. Having a breadth of knowledge often lets you frame a particular situation in a different way. But being able to learn all these different things, it doesn't come easy, really honestly. It's a lot of effort, but you really have to convince yourself it's like, okay, if I really set my mind to it, I can understand this. With that, as a starting point, you're generally successful, or at least you would learn enough about it in order to be dangerous, so to speak.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“So many mistakes to choose from. Typically, I will say my biggest mistakes are just being too stubborn. Or just not changing my mind fast enough. And the other category of mistake is probably just doubling down on mistakes, which I've actually gotten better at over time as well. I find that usually just really knowing when to change your mind, that's a huge part of investing that's probably underappreciated by most people.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“It sounds lame, but I probably have to say Warren Buffett, it's got to be one of them. I mean, that was probably my original entrain to investing, reading all his letters and books and whatnot. longer term investing, focusing on quality, other things that he says around governance and whatever else, especially in my formative years had a tremendous amount of impact on me. The second I would honestly say probably like all the stuff at Morningstar. And it's not just one person, obviously. You can say like Pat Dorsey or something like that, who's a director of research there, but that overall ecosystem, I was just so thankful to be there, especially when I started my career to be able to be inducted into that very particular way of thinking about economic modes, thinking about quality and whatnot. There was just tremendous amount of preparation, I suppose, for what we do at WCM today.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think a lot of people have very fixed mindsets. If you only have one way of looking at the world, and that's like the one lens you apply to that thing, typically that kind of annoys me, honestly. For example, there's people out there like, oh, DCFs, that's an overused example, but that's one example, right? But there's many people who have very fixed mindsets when it comes to applying a particular mental model to certain things. And they're just incapable of seeing the situation from a different angle. And that from an investment side, that's probably my biggest pet peeve.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“I do take a long walk with my wife every day. Started during the COVID because we cooped up all the time and is a way for us to get exercise and whatnot, but it's actually been really, really good. We kind of go out usually for about an hour in the evenings. And we can talk and do things. And honestly, it's been tremendous on multiple levels for me.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's kind of lame, but learning about all sorts of different things, I will say. I have pretty broad interest in a lot of different areas. And I try to learn something every few months, honestly. More recently, I've been really trying to educate myself on, for example, how semiconductors work. Earlier this year, I was doing a lot of reading on DevOps, just an example. But just really trying to expand your areas of knowledge is just fascinating to me. And I try to do it semi-disciplined basis, I suppose.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Born with a certain type of temperament, but it is also trainable over time as well if you're deliberate about it. And there is lots of things that we all do internally, like for example journaling or postmortems and things of that nature and a lot of that goes into being more self-aware and also being better at this temperament standpoint, how to better process large gangs or losses or mistakes. How do you behave under various scenarios, whether it's a very stressful scenario or if everything is going very well? And I think as you learn more and more about yourself, you're naturally going to try to make or you're naturally going to make better decisions in the longer term as well. And that is really the bottom line for the investment game. If I can improve my batting average or I guess my slugging percentage as well from a decision standpoint, I'm probably going to deliver performance for clients.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Changes because naturally this is a slow evolving thing and it's often death by a thousand cuts type of situation. But nevertheless, that is definitely a dimension we need to improve on in the longer term. And I think there's a lot to do there. And I guess lastly, I'll probably talk a bit about just temperament, which is not an area that gets, I feel like, a lot of ink in the investment management space, although everybody recognizes it's important. And just like culture, temperament is like a bit difficult to really describe. And I certainly feel that for myself, and I think a lot of other people on the team, it's always constant journey of self-discovery. You're constantly trying to learn more about yourself, your own psychology, and how you make different decisions under different circumstances and having that degree of self awareness really helps you.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there is also a lot of room to improve in terms of how we think about corporate cultures, and this is just a very, very difficult area because it is so fuzzy. I mean, that is a criticism a lot of people have about researching corporate cultures. It is so fuzzy in subject interpretation. We've made a lot of progress in the last five plus years, but there is just a ton more to do. How do you better be able to recognize great founders, great management teams, and great cultures? There's many different interpretations of what that is, and I think we've gotten better, but certainly there's a lot more to go. And at the same time, just as importantly, how do you recognize in real time when a culture is perhaps breaking down a bit? And that's actually causing a problem longer term for the business. That is actually an even harder problem than recognizing a great culture in the first place. Because when you're watching a culture in real time, it's difficult to identify those means.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Going to have to evolve. A lot of these things are not going to be the same 10 years from now. We're going to have to abandon our deeply held beliefs in the face of a changing world, of changing empirical evidence on the ground. And that's not always easy to do, especially if you had success with a given mental framework in the past. But we have to be humble enough to change our mind about things.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Obviously we have to constantly learn and we talked about that a bit as well. You're always trying to build new mental models. You're always trying to expand your domain of knowledge. You're always trying to create those new connections, connected dots across industries, across geographies and so on and so forth. And that's an ongoing journey that will never stop because the world is constantly changing. And new domains of knowledge and interesting things are happening all the time. And at the same time, too, we have to recognize that a lot of the things that we think today in terms of mental frameworks that we have based on past experience.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, number one, I think our overall investment framework in terms of looking for companies with great motor trajectories and great cultures, that's fairly evergreen. But as we have talked about before, in terms of execution on that framework, there is a lot of wiggle room, a lot of room for interpretation, and that's something we can always try to improve on. How do we make better decisions in context of this overarching framework?”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“However, we don't have any of these things if we can't continue to deliver great performance for clients in the long term. And this is obviously really, really hard to keep up for an investment management business. It's not like an industry where anything is patented or anything like that. Knowledge is free that's out there. And a lot of people have been learning lessons that we've learned years ago. Broadly speaking, you can tell that there are a lot more quality growth investors out there than ten or fifteen years ago. So how do we perpetuate the track record that we've been able to accumulate for not just like one or two years, but rather for the next 10 years or even longer? And that's a really, really hard question. I guess I can probably go down a couple of different dimensions.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a great question, Ted, and it's obviously something that we've thought a lot about in the last five or ten years. So I guess first of all, what is the moat of a money management business? And as you know that this is an industry where most sources are rather tenuous. It's really, really hard to create a money management business that lasts 10 years, twenty years, thirty years, or even longer. I think we have some things that are structural that are going for us. We have a pretty solid brand. We have really good distribution channels, distribution partners, and things of that nature. We have a great client. And that is an asset that cannot be overstated in the investment management world.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I am Chinese, so that tends to help a bit. But it's hard. He just comes down to a lot of it is experience of having spoken to hundreds of management teams all over the world, having a baseline of what a good management team is like and how they behave and so on. A lot of it honestly is track record as well. What we really like to see is management teams that not only survive but thrive through adversity. Like if they've been through multiple rounds of very adverse conditions, fierce wars when it comes to competition major disruptive threats have emerged stronger than they were before. That is typically a powerful endorsement of the culture and management quality of that business. There's nothing like it.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, making that culture call correctly actually is pretty important in China, arguably even more important than elsewhere in the world, especially those traits of adaptability. Can you really roll with the punches when the environment is fast changing, with a competitive landscape is fast changing? And oftentimes if we make that bet wrong, then you probably have issues.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“A very common thing with a lot of our companies that were invested in the leading champion or whatever it is of a particular industry. Now the thing in China is that it's far more competitive than other markets. There's a lot of really hungry entrepreneurs that are rising all the time in order to take the crown away. And customers are even in the B2B space a bit more fickle than you've seen elsewhere in the world as well. The risk we're always fighting against for almost all of our investments is commoditization. When you have a robotics company or whatever it is, there's like literally hundreds of robotics companies in China chasing that. If you're going to invest in semiconductors, there's hundreds of companies in semiconductors doing that. It's almost like nowhere else in the world when you have that level of competitive intensity.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a pretty much monopoly. It makes a huge margin and it grows pretty quickly. The company's name is Wowwall. So those are some very random examples I gave you, but they exist in China. There's nothing like it anywhere else in the world. Maybe the United States, but that's pretty much it.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rice because bread is a newer entrant to China, so that the consumption is going up over time. And some of the byproducts from East is actually pretty useful in animal and human nutrition was actually being used as a sodium substitute if you want to eat less salt or flavorant in that sense. That's just another example. Actually, fairly profitable business. I kind of mentioned earlier that we were involved in some of these pharmaceutical services companies in China when it comes to an Asimchem or a Wushi where investors in a company that believe it or not makes dust mites. So if you have an allergy, what do you do is that if you want to, you can take a drop of basically pulverized dust mites on your tongue. And over time, your immune system will get used to it and you wouldn't have the allergy anymore. Okay, believe it or not, there is a national champion of”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“As a throw a few things out there for you. We're investors in a company called Hansan Technologies. And what they are is a near monopoly maker of critical financial software for brokerages, banks, the stocks change, and things of that nature. Obviously, extremely sticky business with 99.9 renewal rates and pricing power and the regulatory tailwind because the financial market opening up, more compliance and things of that nature generates a lot of opportunities for them longer term. Obviously a fairly profitable business as well. Just one example. We're invested in this company called Angel East, which has like a 40% market share in East in China. And it's actually a big company, just East, but they make a lot of East. And in China, there's this nice tailwind of people eating more bread over time because bread is like a new thing.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“In China, that you don't actually find a lot of emerging markets because there's not enough specialization in a small emerging market in order to create these local champion companies. And it's really in those types of businesses that I think we have the most compelling type of investment opportunities longer term.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“In emerging market strategy, we actually have a policy of being relatively close to benchmark weights when it comes to GEOs, so we're pretty close to that. We're like 40-something percent, I think it is, for Greater China. Even if I weren't somewhat constrained by that, I'm actually really excited about opportunities in China. Now, it's not necessarily in these Internet companies, but China is a very, very large market. And I think a lot of people here don't really realize just how big it is because they're used to seeing the names that are in the news all the time. But there's thousands of listed companies in China and the market caps are like in a, you know, I want to say it's like 15 trillion or something like that. It's just tremendous. It's the second largest market in the world and super liquid. And in China, it's a sufficiently large economy, so there's a lot of specialization. And there's a lot of really special companies, really interesting companies, what we call like niche champions that you find.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Research process, I will say, is very similar, honestly, to what we do elsewhere in the world. I started my career obviously here in the United States, but a lot of the skills I've learned over my career are very applicable in China. Now you do have to interpret certain things that you read here differently, and you have to recognize that the environment is just in general faster moving. The competition is generally more intense, but overall the things that we do elsewhere in the world, like talking to customers, suppliers, competitors, partners, talking to the company, doing all the normal things that we do around the business, it's pretty much very similar.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“or Maitan, for example, the traffic in China for various reasons is more fungible than it is in the rest of the world. And it can be, so platforms with very powerful traffic drivers can sometimes direct that traffic in unexpected places to drive competition and disruption. The capital environment in China is very benign, so that it's pretty easy for a lot of these companies to raise huge amounts of capital and to burn that capital over time and so on. So there's really a lot of reasons that we were actually uncomfortable with the multi trajectories of a lot of the businesses we could be talking about, and so we didn't have them. And of course, there's this whole ADR situation, which we were never super comfortable with from a governance or a capital allocation standpoint. So for all those reasons, we kind of avoided a lot of the problems, I suppose. We really find a lot more opportunities elsewhere in the China market.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“And a lot of that in the consumer internet space especially is really because consumer habits change really, really fast in China. Think about the rise of a bite dance, literally from nothing to like a massive giant company in like three, four years. That doesn't happen pretty much anywhere else in the world. And there are drivers for that, I think. Number one, like I said, I think consumer habits are just maybe a bit more open in China versus elsewhere. But also you have just massive density of users in China getting to 100 million users or a certain amount of critical scale is really, I wouldn't say really easy, but it's certainly far easier in China versus anywhere else in the world. And that drives disruption. Traffic is more permissuous in China because you have WeChat ecosystem to drive the rise of PDD, for example.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Interesting because we've been underweight China internet for a long time, which actually is surprising for me to say that just because you think we're high quality investors and those are most people consider them high quality businesses. But the truth is for a lot of these companies, we never got comfortable with the longer-term mode trajectory.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Managed around some of the recent events with some of the names that historically you might have owned, an Alibaba 10cent, things that were great businesses with widening moats that all of a sudden have at least some hiccup thanks to the government.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“To a medical device and things of that nature, healthcare. So we want to drastically reduce or just not have any exposure to things of that nature. And we want to be, to the extent possible, more or less either neutral or aligned with the government aims longer time, at least the spirit of the rules that the government's laid out in the longer term.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Lobbyists, you have all this back and forth consensus building, and so on. They can just snap a finger and get it done for better or worse. So the regulatory whipsaw is a lot more severe than what you have in the rest of the world. Now from our perspective, we definitely try to stay clear of the regulatory hotspots. I just don't think that's our competitive advantage. I definitely don't want to be in a situation where every night I'm going through and reading the government news and trying to figure out like, oh, what's going to happen to my portfolio companies the next day or something like that? I mean, that is a treadmill. I definitely do not want to be on. So we want to stay away to the extent possible, especially not really possible because the government touches everything. The stay away from the areas that are most exposed to government pressures. For example, now you have a lot of drug price tendering in China and tendering and also coming.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“That is a very difficult question. I certainly don't claim to have the answer for it. I think nowadays people came to the realization that the government has certain social aims that they have actually been telegraphing for a long time, but nobody took them seriously. And all of a sudden now people are taking them seriously as far as reducing the burden education, which is massive expense for a lot of Chinese families and ads, just enormous pressure to kids and things of that nature. Reducing inequality in housing certainly is another driver. And there's many others as well. Like right now, improving the treatment of contract labor when it comes to drivers and things of that nature is another policy aim that people have. Now, the thing that in China obviously is that you don't have all these checks and balances that you have in the typical Western rulemaking process or regulatory process where you have”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“I suppose of going to the second generation or finding a professional successor. And also Chinese companies in many cases tend to be much more centralized in terms of power. So you do have to take into consideration a lot more, I think, that founders, proclivities, their strength and weaknesses, and so on when you make a bit of a culture call, because that founder does have a greater sway, I suppose, on the culture and effectiveness of a company, probably than most companies you'll find elsewhere in the world.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Lot of the things we look for are really very similar to what we do globally. So, our approach to culture is that number one, there has to be alignment between the culture, the business, and what it needs to do in order to grow its competitive advantages over time. And obviously those things that need to do, those behaviors and values in a business isn't very different depending on their longer-term aims. But nevertheless, I think that is a universal truth. That framework of thinking about businesses, I think, is a universal truth. And we do that in China as well. Now, the difference in China, of course, is that you're dealing with these first generation founders for the most part companies in China are very young, which is actually kind of easy to forget when you consider the scale of some of these businesses, but they're very young, and the founder is generally a person in their 30s to 50s. They're still many years away.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you balance in your thought process of what will make an attractive business to own in your portfolio take an Alibaba that has been so powerful I think it all just comes down to the trajectory of the melt. The last thing you want to do is own a company that's really big, really profitable, but losing relevance and losing their competitive advantages slowly over time. Alibaba is a very difficult case because it's such a complex company. There's a lot of moving pieces, but certainly in core commerce, they have really lost a step in recent years. I would much rather take the more complex heavier one that's actually growing in terms of competitive advantage and relevance, even if it has much lower profitability today.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Strategically and operationally. Zask the gist where I was coming from. Really, there's two dimensions to it. Companies can be heavy on asset front or they can be heavy on an operational front, and ideally both. You can do both really well. That could be a powerful operational and strategic competitive advantage for you longer term.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Alibaba, and I now argue PDD did that versus Alibaba as well. Alibaba is a classic or we just want to be like the platform in the middle, make huge margins, and they are the most profitable e-commerce company arguably in the world. But they're losing market share versus all of these other competitors that are out there. There's actually other domains too. Carvana in the US has a very similar model, it's a very heavy model, but they can control the entire experienced act for the customer and the entire operational stack, and that leaves advantages for them in the longer term. It's not easy to do, but it definitely leaves advantages. Does the same thing in China and is taken a massive amount of market share? Now, of course, now the stock is down because the government maybe like New Kingdom or whatever it is, but it was a very clever thing for them to do. It's very impressive.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Actually, it makes a huge difference because what happens is that if you can do something operationally to save a penny per order, you scale that up over like a billion orders, that's real money. And it's those like an incremental improvement in terms of your efficiency, in terms of your cost, speed, whatever metric you want to do, that over a long time actually adds up to a really sustainable competitive advantage. And it's really not easy to do. It takes different mindset, I suppose, for companies to embrace that level of complexity, to embrace managing hundreds of thousands of people. But in a lot of really successful businesses, we kind of happens. We saw that Amazon actually in the US embraced that much more so than eBay and actually turned out to be a huge source of strength and advantage for them in the longer term. Maitan certainly did that.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Internet is that there is really a lot of value in being heavy. If you can do it right, that's one of the critical things. For example, in food delivery, Me Tuan is a very heavy business. Be it directly or indirectly, I suppose, controls like an army of God knows hundreds of thousands of writers, and so on and so forth. It's a very operationally complex business, which from the perspective of a founder is not a great thing many times. Imagine some of these founders, especially if you're a software guy, you're thinking like, all right, I just want to make really great software and all this other stuff around you, all right, whoever can take care of that, those are just a bunch of grunts. These writers are grunts. But if you want to operate a really good, complex business, there is art to being a bit more efficient than others, which in the case of food delivery.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sort of a different conclusion than I would have expected, and I'd love you to talk about the difference in how you view these heavy industries and light industries. So oftentimes when you talk to a internet business especially, they go to like, oh, we want to be a quote-unquote platform and just connect everyone around us. And we're going to be the nexus and therefore we're going to be the center of value. We're going to do this one thing and we're going to get paid a lot of money for it. And by the way, we're going to be asset light. We're going to be labor light and make really high margins. That's exactly the way that Alibaba did the business. And actually, I think it's potentially an original sin. It's the way that eBay thought. And it didn't really work out that well for them versus, let's say, an Amazon. Now what I've observed”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“World. In this case, yeah, it is. They want to bring innovations to market at a lower cost and a faster pace, and these CROs do do that for them, and that gives them stickiness and pricing power. I think the world has come around to our point of view, but that was one example of us greening a different mindset, I suppose, to Chinese companies. As a lot of the Chinese technology companies have blossomed in the last couple of years, it's easy to think about what might be a widening moat as one of these asset-light businesses. And certainly we've seen that around the world. I know you've done some work and thought process recently on the difference between some of the heavier industries and what that implies for MOTs and the lighter ones.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“To talk to investors in China about some of these pharmaceutical services companies, they will be like, oh, yeah, no big deal. These are just, they don't own IP, obviously. They're just service vendors. And if you want to invest in pharma, you're much better off with a drug company that earns generally higher margins and they own the IP. But from our experiences overseas, we know how valuable, how sticky some of these relationships are. We know the value that they bring to the table in terms of allowing the pharmaceutical companies to accelerate their innovation, and especially in a world in which Chinese pharma companies really need to step on the gas in terms of R&D. We had a variant perception there, and that's kind of driven by our global framework. Many times you do have to start with first principles. It's like, what does a pharmaceutical companies want? Is that the same in China versus the rest of the world?”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“KOL driven things that can find audiences on bite dance, on Tao Bao or whatever it is. Consumers are very eager oftentimes, I think, to try new things as well. So it's much easier for new brands to kind of appear. Just as an example, so the same mental models you use to assess some of these developed market things, it doesn't really necessarily apply in China. But there's also lots of places where you can use pattern recognition and using more of a global mindset to assess companies in China. And oftentimes we have actually quite a bit of success there. For example, we were super early into the contract resource organizations or contract drug manufacturing organizations as far as like Wishi AppTech, Wishi Bio, names like that, because we've been investing in these companies in the developed markets for years and years. Way back in the day when you”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Will say how we think about modes, for instance. It's fairly universal. The same mode sources that apply elsewhere in the world also apply in China. I think most people agree with that. Now, the difference is that we have to calibrate a bit more when it comes to certain of these forces that affect mode trajectory. There's differences in China versus the rest of the world. Let's say, for example, the consumer is actually a bit more fickle in China, I think, versus the rest of the world. There's very few good FMCG or fast-moving consumer good companies in China. You see the brand turnover, at least outside of the prestige or luxury space, is very fast. And unlike the rest of, let's say in the US, for example, in which distribution is difficult, is more bricks and mortar, and consumers have been ingrained in terms of buying certain brands for decades. China is not really like that.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Apply this broad framework you're talking about, mode trajectories and the subtleties of making the decisions to a lot of the work you're doing in emerging markets and say particularly with China topical for lots of reasons these days how have you approached taking the WCM framework and applying it to investing in China?”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, for sure, and it's something that's hotly debated, I will say, all these digital payments companies. I come at it from a more jaundiced EM view, obviously, and I see all these things playing out on EM and I surface these things. And there's guys here that come at it from a more developed markets view of the business, and they express some of these more initiatives that Visa has in place in order to extend its growth trajectories. Right now, I don't think there's a very clear resolution. But the fact is, because we have a very broad view across the world, we can surface all of these data points, and hopefully at some point there will be an emerging consensus as far as what's going on. It's very important for everyone to have a very open mind about things, and that's part of the culture that we have at WCM. There is people who love to visa for years and years and years and years, but you've got to change your mind. If you see enough data points that are outside the...”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Through some of the initiatives as far as getting into B2B payments, for example, which are going to be helpful, but nevertheless, I think the trajectory is worse than it was several years ago, and that makes us nervous.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's actually a debate that we've been having internally. So I can't actually tell you for sure. My personal opinion, which doesn't necessarily reflect the views of WCM as it were, is that the trajectory is narrowing here. The story is getting tougher to believe in today than it was, say, three, four years ago. A lot of that is honestly coming from my own seat in emerging markets and seeing the massive, massive growth in some of these new rails in places like Brazil and India and see how well they work and how quickly consumers adapt to it and really leapfrog the card rails. Makes me nervous. Consumers are a bit more sticky in their habits. So it's not going to be as quick of a change. But the runway is also getting a bit narrower in developed markets. I'm sure the cartrails are trying to extend that.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“And things of that nature probably plays a stronger role in terms of how we assess the mode trajectory. Of course, the cultural work is part of that as well versus, let's say, hard and fast rules in the ground or some sort of a checklist. You can use to balance some of these forces that you have.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“Longer term when you have buy now pay later what does that mean to the cart rails? We don't really know if the Federal Reserve launches instant ACH in the future doesn't be free to use. What does that mean for the cart rails? We don't know. These are all countervailing forces. You kind of have to make a judgment against. And it's really not straightforward in many cases. So how do we really do that for many of these stories? And a lot of it honestly comes down to experience and judgment and having the right mental model with which to assess a particular story. Usually it's some sort of a framing you have on a particular problem given a certain set of facts on the ground that lets you do it. Overall I will say there is not really like a scientific way that you have to have it. I will say some of the tool sets we've developed over the years as far as pattern recognition, typology.”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source
“In developed markets, the runway to further digitalization is probably narrowing. Who uses cash nowadays? I haven't used cash in forever. So that is somewhat going away over time. In emerging markets, there are a lot of new competitive forces to that. So emerging markets longer term is probably going to be a much stronger tailwind driver because you're starting at a more nascent stage and those economies are growing faster. But if you look, let's say, for example, in China, that market is heavily impacted by the rise of WeChatPay or Ali Pay. They don't really run on cardrails at all. In India, you have the same thing with UPI. In Brazil, you have picks, and there's other countries that are launching these new payment rails that consumers are probably going to adopt that are not going to be on the car rails. Even in developed markets,”
2021-09-06 · Capital Allocators · Mike Tian – Moat Trajectories and Investing in China at WCM (Capital Allocators, EP.212) · IDENTIFIED FROM THE TRANSCRIPT · source