Shennanpeng chatted with Dalio for an hour tonight

Here comes the refined dialogue record .

Tonight? （6 month 23 Japan ）, Qiaoshui founder Rui · Dalio and shennanpeng, global executive partner of Sequoia , At the invitation of CITIC publishing group , We had an online conversation in Tiktok .

These two world-class investors , It is also a participant who has successfully traversed several economic cycles . For a long time 1 Hours of conversation , Shennanpeng and Rui · Dalio's new work from the latter 《 principle ： Dealing with the changing world order 》 Talking about , To the historical cycle 、 The current situation 、 Investment trends 、 Topics such as science and technology entrepreneurship and the Chinese market were discussed in depth , The topic seems macro , But it is closely related to most people .

There are frequent golden sentences on the scene , The investment community excerpted some wonderful views for the first time , To readers ：

• Talking about the causes of the current world macro situation , Dalio summed up three points in his historical experience ： Monetization of debt 、 There is a great gap between the rich and the poor 、 Big power competition .

• Talking about the core idea of investing in China , Shen NANPENG said ： The core of investment is not assets but people , Always be in awe of the market .

• Dalio shares another principle ： Pain + reflection = progress .

• About the impact of the macro environment on the venture capital industry , Shen NANPENG said ： Technology development has its own cycle , It is not synchronized with the macroeconomic cycle . Although the technology market has ups and downs , But we should believe in the potential of technological innovation .

• As an American who has fully experienced the course of China's reform and opening up , Dalio sighed ： unfortunately , I find that many young people do not really understand the great changes in China's reform .

• Shennanpeng talked about the growth of investors ： Be like an artist , Find out what you are really interested in .

• Leading bridge water 40 years , Dalio set a principle for the team ： Be creative and choose the best （idea meritocracy）, Always make sure that really good ideas win .

• I have experienced many cycles in my investment career of more than ten years , Shen NANPENG thinks ： In the face of market fluctuations and technical cycles , Founders prefer investors who can give them consistent support .

• For investors “ self-improvement ”, Shen NANPENG thinks ： Investors need to quickly understand the development of cutting-edge technology on the steep learning curve , In order to maintain an advantage in the competition .

Observe the current situation from the historical cycle

Shen NANPENG ： Your new book 《 principle ： Dealing with the changing world order 》 The most changeable economic cycle in history is analyzed , And discussed how we should deal with the current situation . The Chinese version of this book has been published by CITIC publishing house . What prompted you to write this book ？

Da Li ： I am a global macro investor , I get information by studying history , To determine how to respond to the current situation . In my 50 Years of investment experience , I have found three factors driving the current situation , These three events have happened many times in history ：

First of all , The creation of huge debts , And the major reserve currency countries in the world monetize their debt by printing money . second , Internal conflicts among countries arising from the huge gap between the rich and the poor and the gap in values , This has led to populism on the right and left , Exacerbated the current political and social conflicts in the United States and some other countries . Third , Big power competition , On the one hand, the United States led began 1945 The world order in , The other is the rise of China and other powerful countries , These powers are on a par with the United States .

To examine these factors , I studied the past 500 Years of history , And decided to write it into a Book , Share my gains with you .

Shen NANPENG ： You just talked about the widening gap between the rich and the poor in the world , From a historical point of view , How serious the current situation is ？

Da Li ： The current global gap between the rich and the poor has reached a level of 1930-1945 The highest value since . In proportion , front 10% Of people have roughly the same wealth as the rest 90% People who . The huge gap between the rich and the poor also leads to the opportunity gap , The rich have more opportunities than themselves , And their children will benefit more , This provides the basis for populism . Traditionally , This kind of populist who fights for the people , It appears against the background of the huge gap between the rich and the poor and the gap in values , This is what we have seen , This is typical .

Shen NANPENG ： In terms of large-scale money printing , Compared with the period of excess liquidity in history , What is the current situation ？

Da Li ： I will explain the current situation by explaining the concept of large cycle .

The United States at the end of World War II 1945 year , Established most of the world order , Because the United States has the world 90% Of gold and half of GDP, It has military hegemony and global dominant currency . When the new world order develops , We have ushered in a period of peace and prosperity . During this period , Individuals and businesses will become more willing to borrow , Bet on the future . We will see debt relative to GDP growth , This is a natural cycle .

But the scale of wealth accumulation is uneven , This is one of the characteristics of the economic system , So while accumulating wealth , The gap between rich and poor is rising , And challenge the current social order . meanwhile , Other countries have experienced post-war recovery and strengthening , The strength gap with the world's leading economies has gradually narrowed . At this time , Debt is mounting , But there is not as much hard currency （ Like gold ）, Therefore, the internal conflict of a country will occur . This internal conflict and currency issue became a political issue , International competition thus emerges .

Traditionally , When such international competition becomes more intense , There will be an intensification of the economic war . economic 、 Monetary and capital sanctions are not new , But what has happened throughout history . for example , Eve of World War II , The United States has frozen Japanese assets , And limit Japan's oil imports , The economic pain Japan suffered led to the bombing of Pearl Harbor . Because there is no international tribunal to resolve the differences caused by these conflicts , Therefore, economic war is likely to lead to the recurrence of military war , The world's leading powers set rules after the war , A new cycle begins . This model has been used throughout history .

From this we can see the large trajectory of the period . I think there is a typical order , When we understand the trajectory of this order , Then carefully observe the development of the current situation , We can match the two . This is not necessarily inevitable , But it can provide us with a good reference . for example , What happened in history can help us understand that today , What are the consequences of economic sanctions .

Stagflation is now , How to allocate assets effectively ？

Shen NANPENG ： The Fed's balance sheet has expanded considerably ,2008 Year is 1 Trillions of dollars ,2020 Year is 4 Trillions of dollars ,2021 Year is 9 Trillions of dollars , In just one year, it created 5 Trillions of dollars . Almost all central banks in Europe and the United States , Are raising interest rates dramatically . At the same time, there were geopolitical conflicts and the COVID-19 epidemic .

All of these things happen at the same time on an unprecedented scale . Swiss , What risks do you think will arise in the financial market ？

Da Li ： I like to explain this problem in a mechanistic way . What has happened is that there is not enough money , Printing money increased , This leads to a decline in the value of money relative to goods and services , Inflation is rising . Rising inflation leads to a decline in people's purchasing power , People have less real wealth . When we think about what is a safe investment , People think that holding cash is a safe investment , Maybe holding safe government bonds .

Not anymore . In order to avoid the economic losses caused by inflation , The government will take away some of the purchasing power they have given , If the Fed sells 1.1 Trillion dollar bonds , And let interest rates rise , This leads to a decline in people's purchasing power , There is a stagflation environment , Both stagnation and inflation will damage people's purchasing power . This is where we are now in the cycle , This is a typical case .

The only way to raise living standards is to expand production , Living standards cannot be improved by printing money and providing credit , Because credit is always repayable . One person's debt is another person's asset , So the balance between the two must be set , Otherwise there will be problems . We were in this situation , It is still in the process , Those who hold debt instruments will suffer heavy losses . So people can't raise interest rates enough to curb inflation , Nor can the holders of inflation - affected assets be reimbursed , If the interest rate is so high, it will inevitably have a negative impact on economic activities . Therefore, the mechanism of stagflation will cause its inevitable impact .

Shen NANPENG ： Based on the economic trends and conditions we just discussed , Do you have any suggestions for future investment strategies ？

Da Li ： It depends on what people invest in 、 What can I invest in . But in general , Globally , Cash investment , In other words , Short term or longer term government bonds and general bonds , Will bring negative real benefits , Inflation adjusted earnings . Therefore, these assets are not suitable for holding .

So it's important to have a diversified portfolio , A balanced portfolio . We have a strategy , be called “ 24 / 7 strategy ”, The basis is to balance different asset classes , Because wealth will shrink in some places , Growing in other places . for example , In an inflationary environment , You hold Commodities 、 Anti inflation assets such as gold , This will offset negative returns on other assets . therefore , It is important to have a balanced portfolio at the outset . Once you achieve effective diversification , You can maintain a good return with very low risk .

therefore , First of all , Don't just hold assets like cash ; second , Reasonable diversification , To create a balanced situation ; Third , If you are a global investor like me , In different places 、 Diversified investment between countries and industries .

Shen NANPENG ： Specifically, in terms of different asset classes , What are the main categories , Global investors should hold ？

Da Li ： The way I think about this is , It's like four quadrants , There are two main variables . The two main variables are inflation and growth rate , Will rise , It's going to go down as well . Assign... To each quadrant 25% The risk of , Then associate in each quadrant , What assets do you want to own .

for example , If the growth rate is faster than expected , The first quadrant , You should have equity and credit spreads , Because when this condition exists , Credit spreads fell , Equity increase , This will be what you want to see . If in the other quadrant , The growth rate is falling , You should have anti inflation assets , Usually bonds , High quality bonds . If you are in the upper right quadrant , If inflation is higher than expected , You should have inflation adjusted assets , For example, commodities 、 gold 、 Inflation linked bonds, etc . In the lower inflation quadrant , You have to make the same trade-offs .

Such quadrants are a guide to how to achieve balance . Investors should balance these factors . This is just the beginning , Once you have balance , You have to manage this balance . This means that no matter what happens , Your risk is controlled , This is determined by the nature of equilibrium . Then you take tactical action according to the changes in the environment . This is true all over the world .

Shen NANPENG ： If you want to make a good diversified investment , Apart from China and the United States , What is the third country or region you will choose ？

Da Li ： I will examine three factors , This may be related to the three things I mentioned at the beginning . First of all , Whether the country is financially stable , That is, income exceeds expenditure 、 Have a good income and balance sheet ？ second , Is there an internal conflict in this country that could lead to chaos or disorder ？ Third , Is there any risk of external war or similar chaotic factors in this country ？

Usually the country I want to choose meets these conditions , For example, in the development of technology . ASEAN countries home , Some countries in Southeast Asia , India , In the Middle East There are also some interesting developments , Especially Saudi Arabia and Abu Dhabi , Because they have financial resources , Their situation is also changing in terms of internal conflicts . So I will be interested in these places .

How to view China's investment environment and potential opportunities

Da Li ： Sequoia has many successful investments in China , You can see it up close . Can you tell me how the situation is now , What's the environment like , What is the opportunity ？

Shen NANPENG ： We are fortunate to be able to work with many great entrepreneurs , They have created great value for investors . In the process , We have also made many mistakes in our investment , And try to learn from these mistakes . There are failures caused by technical risks , There are failures caused by poor implementation , There are also challenges arising from the volatility of the open market . Facing the market , We need to be in awe .

For many people , What we do is manage “ assets ” Financial services , But what we do is “ people ” The business of , Both internally and externally .

internal , We provide good career development opportunities for our team members , This is based on their strengths 、 Interest in , As a team, we continue to learn and grow . foreign , It is different from secondary market investors , We have different self orientations . Our positioning can be summed up in one word —— service , We serve entrepreneurs . The way we cooperate with them will largely determine our performance , This will also form our brand and reputation .

Venture capital and growth investment are our main products and businesses , And we are highly focused on the field of science and technology , Its path is different from that of hedge funds or traditional mergers and acquisitions .

As I listen to you describe the macro environmental challenges , I feel very lucky , Because changes in the macro environment have relatively little impact on some of our venture capital businesses . The challenging macro environment will certainly affect many enterprises , But technology development has its own cycle , For example, in the past ten years , With the improvement of safety performance , The fall in cost , Lithium batteries are widely used in electric vehicles and energy storage industries , Not only in China , And around the world . The timing of such a technological breakthrough has little to do with the rise and fall of the economy , Completely different skills are needed to predict emerging technology trends , This is an important part of our work .

Da Li ： Did you find out , When there is a lot of liquidity , Buying assets is expensive ？ Do you think the decrease of liquidity is having some impact , Just like the impact on other technology companies around the world ？

Shen NANPENG ： in fact , In the past five years , Most of the time we see a lot of liquidity , Not just in the Chinese market , And around the world , Especially in the field of science and technology . Because of that , Investors are finding corporate valuations increasingly expensive , At the same time, the enterprise also gets more funds , Even more than they would have needed , This also makes the competition more intense .

Current 6-9 In the months , The global technology industry tends to be peaceful . We see for the first time , Investors can get a more reasonable valuation when actually investing in private enterprises . To be frank , The competition among technology companies themselves has become more rational . I hope this will lead to a healthier environment , Not only conducive to scientific and technological innovation , And it's good for investors .

Shen NANPENG ： You have been to China many times .20 Years ago , What is your impression of China ？ It seems that the last time you came to China was 3 Years ago ？

Da Li ：1984 year , I was invited by China International Trust and Investment Corporation to come to China to talk about the financial market . At that time, China was completely different from today , At that time, China International Trust and Investment Corporation was the only one to deal with the outside world “ Window company ”. There are no cars in the street , People ride bicycles , Most people live in Hutong , The situation is very backward . But the Chinese are always smart , With a mentality unlike that of people in developing countries , There is great potential .

Now? , Whether in artificial intelligence or cloud computing , China has made great progress , China also has the second largest stock market in the world . Since I first came to China , China's per capita income has increased 26 times , Life expectancy has increased 10 year , The poverty rate ranges from 88% Down to 1% following . Like you, I have seen the vigorous development across the country . China is now a considerable big country in all respects , I have not only witnessed this , Also experienced the evolution of China for some time . I think this is the largest economic evolution ever ,13 Great changes have taken place in the lives of hundreds of millions of people .

But I think it's a pity , Young people who have not witnessed all this , Perhaps we have not fully understood the significance of this great change , China has made great efforts to achieve all this . That's what I saw .

How to manage a top investment institution ？

Da Li ： One of the most important things about investing is to build an investment team , What are the most critical aspects of leadership and team building ？

Shen NANPENG ： I think the following are very important to the company managers ：

First of all , He himself has a strong desire to be a good investor , It's critical .

second , Investment requires the whole team to learn , And most importantly , Share your experience with the team , Especially the experience of failure , Because we can learn a lot from failure .

Third , To build strong data internally IT Ability , Many technologies and tools will be used behind the strong analysis and research ability , So that investors can make the best use of these resources .

Last , We act as a platform , Young investors should be well encouraged to develop skills based on their own interests , It's like an artist needs to be really interested in himself 、 Something inspirational ; If you force a person to do something , Or train him to do what he thinks is boring , He won't succeed .

Swiss , You have built qiaoshui into a world-class investment company , How do you do this ？

Da Li ： Let me start with something you feel the same way about , I think the most important thing is to create excellence and the connection between people . What it really means is , Meaningful work and meaningful relationships , The two complement each other .

I have a long sentence to describe this ： I hope to have an ideal creative merit system , I hope the best idea wins , No matter who the idea comes from , Whether it is high-level or grass-roots , The best idea wins .

Through extreme truth and transparency , Discuss everything in a completely authentic way , Including advantages 、 Disadvantages and mistakes you mentioned earlier , Everyone should be able to tell who is good at what , Who is not so good , Maybe that was a mistake , wait . As the organization changes , It is necessary to control the communication and continuity within the organization . When an organization develops from one stage to another , In order to maintain the continuity of the common pursuit of mission , I find it important to write down the principles . Whenever I make a decision , I write down the principles for making decisions , Whether investment principles or management principles , It's like a recipe , You can read . This is the recipe for my decision , I have found that we can all write down our own recipes in this way at the same time . This kind of communication can determine what is the best 、 Effective , Because corporate culture is our mission . In other words , Be familiar with your employees , They are different , Deal with these differences , Let employees complement each other . What are your employees like , How you get along with each other , Will determine the degree of success . I find these factors to be the most important .

I would like to say more about the principle , I would like to recommend this to the audience 、 I recommend it to you and me . I learned another principle ： Pain + reflection = progress . Conduct quality reflection , And write down the principles , How reality works , Write this down as a principle , Let you think more deeply about this , So that you can make this process run automatically , Enable you to communicate effectively with your partners . These recipes are important . Think about your decision criteria for introducing talent , If you don't write down these standards , You won't always use these standards , It will not be pressure tested , Don't look at the standards you use as a whole . I find it helpful to write down the principles , I suggest everyone do this .

Shen NANPENG ： I think creative selection is also the first skill I need to master . You talked about communication , This is the key element to build the internal culture of the enterprise . Considering the COVID-19 in the past two and a half years , Some changes have taken place in our business , At present, it is mainly through video communication like this , Instead of a face-to-face meeting . What impact do you think this change has had ？

Da Li ： There are good and bad . The advantage is that communication is no longer limited by form , There is a certain degree of freedom , Certain efficiency, etc ; The disadvantage is that there is no such warm interpersonal interaction . Our response to this is , We require employees to enter the office two days a week , These two days focus on the interaction between employees .

In other words , There are two kinds of work , One is the work that does not need to be done by employees themselves , The other is the work that needs to be done personally , This may not be limited to work , It's about the quality of communication . So we spent two days in the office , Special emphasis will be placed on the first kind of work , It can shorten the distance between people , In the other three days , We focus on other things .

How to adapt to new changes in technology and market ？

Da Li ： Technological change The etheric Happen at a fast speed , How do you maintain your ability to cope with these changes ？ In other words , When you don't understand a new technology , How you make your investment ？ How to maintain liquidity in a less liquid market ？ How to select the best technology in the case of great changes in technology ？

Shen NANPENG ： This is also a question we ask ourselves every day . The answer is , We must adapt ourselves to the rapidly changing technology market . We need to experience a steep learning curve , Learn how to understand new technologies . We must do so as soon as possible , To maintain an advantage in the competition .

As you suggested , I also think that the next decade in the field of investment will be very different from the previous decade , For us , What used to work , It will probably no longer be effective in the new era . If you want to adapt to the environment effectively , We should have a flat organizational structure , And an effective decision-making mechanism . This is very similar to the organizational structure of some of our most successful invested technology companies .

meanwhile , We need to adopt a consistent strategy , Have a long-term view of the market . The technology market goes up and down , As we have seen in the past year . But we should believe in the potential of technological innovation , such as In the field of new energy 、 Synthetic biology 、 Biotechnology Other fields . In hard times , We need to be sharp , Maintain confidence and continue to invest , Continue to help entrepreneurs explore how to overcome obstacles , Help them realize their dream of creating a great enterprise . Of the invested enterprise CEO Such board members and long-term shareholders are also welcome , With this consistent spirit .

Last , You need to love what you do . I am personally interested in new trends in science and Technology , They create new products for human beings . When I read the team's Research Report and participate in the discussion , It seems that I have returned to my college days , Study a new scientific or engineering subject . In fact, the methodology of a series of research problems is similar ： Why? ？ What is it? ？ How do you do it? ？ The two are comparable in methods . therefore The background of science and engineering training , It is very helpful for our business and investment . I like the learning process , Also full of curiosity to find the answer , Just like you look for answers through data and facts .

Shen NANPENG ： We are all adapting to this new environment . We just talked about exploring and discovering new important markets , You mentioned Southeast Asia 、 India and other regions . When you look at these markets and their opportunities , Will you visit these countries in person ？ How do you form your point of view ？ What data and information do you rely on to draw your own conclusions ？

Da Li ： There are three points ： data 、 Visit in person and communicate with the best experts in the field .

I have been a global macro investor for 50 For many years . Of course , Through data and other factors , I can get a lot of information about how a place is , But that's not enough , And with people like you 、 People who can go to the field for investigation should communicate more , This is a quick way to learn about the local situation . Besides , We do need to look directly at . These three points are very important .

Shen NANPENG ： Back to China business , I know you are building a team that operates in China , And launched products in China . How do these strategies differ from your global strategy ？

Da Li ： Yes , We have two offices in China , One is in Shanghai , One is in Beijing . In the past three years or so , We make onshore investments for Chinese investors .

My strategy is . First , There are some eternal and universal laws in all countries , Like the previous four quadrants . Things will develop according to this law , Because in all countries , Investment is a one-time payment to obtain future cash flow . Using the discount rate and future cash flow, you can calculate the value you want , This is an eternal and universal truth . So we have these eternal universal laws , For all countries , This is our starting point .

Then we delve into the local situation . For example, some policy changes in China will play an important role , This may also happen in other countries . So how to take this into account ？ How money flows ？ Who is buying what ？ Why buy ？ These problems are very detailed local problems . The way we deal with these problems is to analyze , The analytical criteria are still ： How about the manager , How about the balance sheet and income statement , wait .

The fact is that , For most of them , Eternal universal laws are helpful . Before you work with Sequoia , Sequoia has an investment philosophy , About how to make a good investment , After you worked with Sequoia , And integrate this concept into the local environment . Is that it ？

Shen NANPENG ： When we visit the United States 、 Chinese or European enterprises , You will find that the best technology companies have some common characteristics . Even you will find the world's top CEO There are some similar qualities . Often successful business models have some common characteristics , The same business model is often established all over the world , For example, there are a lot of successful software in the United States SaaS company , Many businesses are turning to “ Cloud ”,“ Software is conquering the world ”. This also happens in China , Maybe later than America 3-5 year , But the overall development trend is the same . When you look at these companies , You will find that the company presents the same parameters , These companies can be valued according to roughly the same rules , I find this interesting .

Now there is a new phenomenon ： In the past, some American companies could be very successful in the EU or China , Now more and more enterprises in China have successfully sold their products to the United States and Europe , So it is the same competitiveness that drives these successes . If a China SaaS The company wants to be successful , You must keep pace with your American counterparts in terms of product competitiveness .

Da Li ： Is similar to that of . The construction of the corporate culture of our two countries 、 Investment choices 、 Ways to deal with timeless universal rules and local situations , It's all similar .

Shen NANPENG ： Yes . You know, , We do venture capital and growth investment , There are also some M & A businesses , And your business is mainly in the open market , Various asset classes are involved , But I find our investment principles are very similar . When it comes to building financial services companies and investment companies , From team building 、 There are many common points to share from the perspective of cultural construction .

Da Li ： Yes . But I know our time is coming , Although I would like to continue to talk about the differences between us . For example, in terms of liquidity , This is the real difference between our industries . In my field , My thoughts will change at any time , It can be more flexible , More adaptable ; And in your field , You support entrepreneurs , It's more like their partner , So you can't change your mind easily . I hope we can discuss it again in the future .