Chapter 3 〇2. Li Ka-shing: Seeking steady progress in a radical age

Li Ka-shing is the richest man in Chinese, and he is called "Superman Li" in Hong Kong. This title has been confirmed one by one in the many crises he has encountered in his life.Moreover, there is an interesting situation related to this, that is, Li Ka-shing often demonstrates superior "wealth creation power" when experiencing crises or economic recessions. After each crisis, his wealth not only does not decline, but always There has been an increase, as he himself said: "For so many years, from 1950 to today, in terms of personal (assets), there has never been a year less than last year." This was the case during the turmoil crisis in Hong Kong and the Asian financial crisis in 1997.

On July 29, 1928, Li Ka-shing was born in a poor family in Chaozhou, Guangdong; in 1940, he was forced to flee to Hong Kong with his parents due to life; in 1943, after his father died, he started his life as an apprentice, worker, and salesman; In 1948, he became the general manager of a plastic factory at the age of 20; in 1950, he used his savings and borrowed 50,000 Hong Kong dollars to establish the Changjiang Plastic Factory; in 1957, he took the lead in producing plastic flowers in Hong Kong, and won the The laurels of the "Plastic Flower King"; in 1958, purchased land to build the first industrial building and entered the real estate industry; in September 1972, established Cheung Kong Industrial Co., Ltd., and on November 1, Cheung Kong was listed on the Hong Kong Stock Exchange, and Listed in London and Vancouver successively for stock trading; in May 1974, Cheung Kong and Canadian Imperial Bank of Commerce jointly established Qiadong Finance Co., Ltd.; in 1979, Hutchison Whampoa, with assets of only 700 million Hong Kong dollars, took over 6 billion Hong Kong dollars , staged a snake swallowing elephant, and achieved the title of "Superman Li"; in May 1985, spent 2.9 billion Hong Kong dollars to purchase Hong Kong Electric Group, just like entering Hutchison Whampoa, so that no soldiers were killed; in 1986, he ascended the throne of Hong Kong's chief chaebol for the first time ; In 1988, he was named the richest Chinese man in the world by "Fortune" magazine, and remained for 6 consecutive years. In the 1996 "Forbes" list of the world's richest people, Li Ka-shing ranked third in Hong Kong with US$10.6 billion. In March 2007, Li Ka-shing ranked 9th in the 2007 "Forbes" Global Rich List with US$23 billion, and first in Hong Kong; in March 2008, Li Ka-shing's wealth reached US$26.5 billion.

Viewpoint: Seek development while maintaining stability, and never forget stability while developing.Credibility, honesty, sometimes more important than one's own life. No company can develop smoothly from the very beginning, especially for start-up companies. For the managers of the company, in the initial stage, when there is a crisis in product quality, the first thing to do is not to cover up the problem , but to be open and honest with customers and actively improve. Without learning from this lesson, I am afraid that there will be no Li Ka-shing today. background of the crisis In June 1950, the Korean War broke out. Western countries led by the United States adopted a policy of economic blockade against China.The entrepot trade is an important economic pillar of Hong Kong, and Hong Kong’s economy has been hit hard. This has become the biggest blow to Hong Kong’s economy after World War II. For a time, pessimism pervaded the banks of the Hong Kong River. The industrial policy is adjusted from the entrepot trade type to the processing trade type.

It was against this background that the 20-year-old Li Ka-shing resigned from his job as the general manager of the plastic trouser belt company, and used his savings and borrowed 50,000 Hong Kong dollars to start a business. In the summer of 1950, he established the Changjiang Plastic Factory to produce plastic toys, etc. product. However, Li Ka-shing's first fortune was a "war fortune", which also conforms to the old saying that the times make heroes.At that time, in the late period of the War of Liberation, a large number of people fleeing the war poured into Hong Kong, causing the population of Hong Kong to soar. By 1951, the population of Hong Kong had exceeded 2 million.The arrival of these people has brought a large amount of capital, technology and labor to Hong Kong, and at the same time expanded the consumption capacity of the market in Hong Kong.Therefore, although the Changjiang Plastic Factory’s buildings and machines were dilapidated at the beginning, and the factory site was located in a corner of the mountainous area of ​​Hong Kong, but with cheap and abundant labor force and a market in short supply, as a processing industry, it complied with Hong Kong’s economy in the transition period, and Li Ka-shing himself The plastic industry is very familiar with the road, so the products are sold quickly and smoothly, and orders come in. In order to expand production, the newly recruited employees are arranged to work independently after a short training, and they work in three shifts at the same time. With the customer's order.The young business owner was smooth sailing, so proud and ambitious that even he himself didn't expect it to be so smooth.

But at this moment, an unexpected storm hit the unprepared young business owners.A customer claimed that Changjiang's plastic products were poorly made and had serious quality problems, and asked to return the products.Li Ka-shing, who was awakened by this pot of cold water, realized that it was his own aggressiveness, blindly pursuing quantity and ignoring quality. Now that something went wrong, he had to honestly admit to the customer that the quality problem of his products was indeed a problem, but at this time , in addition to this customer, Li Ka-shing also holds orders from many other customers, and some customers are still calling to urge the goods.On the one hand, the customer refuses to accept the product and demands compensation for the loss; on the other hand, the customer cannot provide the problematic product to the customer, and faces a fine for breach of contract due to delay in delivery.Li Ka-shing is in a critical situation.Li Ka-shing understands that for a new manufacturing company, product quality is almost the most important capital for its development. Quality problems will undoubtedly damage its reputation, and a damaged reputation will eventually lead the company to the road of death.Li Ka-shing in the crisis felt the difficulty of starting a business.But there are more serious things waiting for him.

At this moment, customers have returned products one after another and claimed for losses; the warehouse is full of returned products with poor quality, and the backlog of products has caused a tight fund, but the raw material supplier is still urging the payment for raw materials according to the contract, and Li Ka-shing cannot afford it. To pay the due amount, these raw material suppliers threatened to announce Li Ka-shing's "loan payment scandal" to the outside world, and the banks were also moved by the news and came to demand loans.In an instant, the Yangtze River was on the verge of bankruptcy.The battered Li Ka-shing finally made the decision to lay off employees, which in turn caused low morale within the company and floating hearts.

Li Ka-shing once again fell into the great tribulation of life. At this critical moment, Li Ka-shing realized the truth from the dialogue with his mother, calmed down, and began to take remedial measures. He first held a staff meeting, acknowledging that his business mistakes had dragged down the company, damaged the company's reputation, and implicated the workers. He hoped that the employees would help him and tide over the difficulties together.The emotions of the employees are appeased, and the rear area stabilizes. Then, he went to visit customers, raw material suppliers and banks one by one, apologized to them, and frankly admitted that the company was facing an unprecedented crisis and might go bankrupt at any time, and asked them to forgive his mistakes, relax his compensation, and repay him. The term of the loan guarantees that the loan will be repaid within the time limit.Li Ka-shing's frankness won the understanding and support of most of them. The bank agreed to relax the loan repayment period, and the raw material supplier promised to pay 70% of the payment for the purchase of raw materials. Some customers not only made concessions, but also made suggestions with Li Ka-shing. Solve quality problems.

Subsequently, Li Ka-shing thoroughly checked the backlog of products in the warehouse, separated defective products from qualified products, and handled them separately, and personally sold products to customers just like he did when he was a salesman. After a series of hard work, the company began to make money, and its debts were gradually repaid. In 1955, the company began to make profits. After overcoming this difficulty, the Yangtze River Plastic Factory has turned around and entered a new stage of development. In the spring of 1957, Li Ka-shing went to Italy to bring back plastic flower production technology, seized business opportunities, took the lead in plastic flower production in Hong Kong, and successively captured Hong Kong and European and American markets. At the end of 1957, Changjiang Plastic Factory was renamed Changjiang Industrial Co., Ltd. In 1958, Changjiang's turnover had reached more than 10 million Hong Kong dollars, and its net profit was more than 1 million Hong Kong dollars.The plastic flower won the first pot of gold for Li Ka-shing, and finally won the crown of "Plastic Flower King" for him.And this year, Li Ka-shing was only 30 years old.

Recalling the years when he was engaged in the plastics industry, Li Ka-shing said: "Fund is the blood of an enterprise and the source of its life; reputation, honesty, and life are also life, sometimes more important than his own life." After this crisis, Li Ka-shing immediately He set his own motto: Seek development while maintaining stability, and never forget stability while developing.This became the operating principle of his life. Opinion: Optimists see opportunity in disaster; pessimists see disaster in opportunity. The so-called opportunity exists in the crisis, which is true for aggressive talents, that is, we all know that "opportunities always favor those who are prepared". With a proactive heart, the industry and even the entire economy When there is a problem with the climate, you will be favored by the opportunities that are full of disasters, and Li Ka-shing obviously knows it well.

background of the crisis Li Ka-shing entered the real estate industry when he won the title of "King of Plastic Flowers". Before that, the real estate industry was not favored by many people in Hong Kong. With rapid development and a sudden increase in the population from 2 million in 1951 to 3 million in the late 1950s, the market demand for office buildings, commercial stores, industrial plants and residential housing continues to rise, but this industry is not optimistic, resulting in The increase in housing cannot keep up with the demand. For several years, Hong Kong has been experiencing a housing shortage.The impact of this is also quite obvious in the industrial industry that Li Ka-shing is engaged in. Due to the unexpected and rapid development of Hong Kong's industrialization process, there is a shortage of industrial buildings. It often happens that the owners of factory buildings are only willing to sign short-term leases, and take the opportunity to raise prices when renewing leases. , the users are miserable, and Li Ka-shing, the owner of a rapidly developing factory, is also deeply affected and distressed.

In order to get rid of the strife of real estate developers and gain insights into the broad prospects of Hong Kong's real estate industry, an idea broke into Li Ka-shing's mind: Why can't I be a real estate developer?The idea was quickly put into practice. In 1958, Li Ka-shing purchased land in the North Point Industrial Zone of Hong Kong and built a 12-story industrial building; in 1960, he built a second industrial building in Chai Wan, Hong Kong. The two industrial buildings have a total area of ​​120,000 square feet.During this period, not only was his own factory house satisfied, but Li Ka-shing also benefited a lot from it.According to statistics, in 1959, the industrial land in Hong Kong was only 104.85 Hong Kong dollars per square meter, but by 1980, it had risen to 29,549.03 Hong Kong dollars per square meter, an increase of 280.8 times.However, during this period, the real estate industry in Hong Kong was full of ups and downs, and the situation continued. Faced with these crises, it was a disaster for many people. For Li Ka-shing, it was the accurate grasp of opportunities, which revealed his extraordinary business wisdom. . First, there was a wave of bank runs. In June 1961, Liao Chongxing Bank, run by Chaoshan-born banker Liao Baoshan, bought a large amount of land to build buildings, and almost all the funds for investing in real estate came from depositors' deposits, resulting in the deposits of depositors being emptied out, triggering a depositors' run. Sudden death due to cerebral hemorrhage due to this trend made Li Ka-shing, who is also from Chaoshan, aware of certain risks in investing in real estate, but this incident has not been taken seriously by Hong Kong banks and the real estate industry. In 1962, the Hong Kong government amended the building regulations and decided to implement them in 1966. This made real estate developers with land in their hands rush to build real estate before 1966 in order to avoid losses when the new regulations were implemented, in order to get rid of them. This brought about a round of real estate investment boom in Hong Kong. In order to get a share of this boom, many banks also stepped in, providing loans to real estate developers, adopting the mortgage system, and even investing directly in real estate business.For a time, real estate speculation was unprecedented, and professional speculators came into being. In 1965, Mingde Bank, a small Hong Kong bank, participated in real estate speculation, resulting in a lack of liquidity and loss of solvency. It eventually went bankrupt due to a run. Its bankruptcy further aggravated the panic of depositors. The run broke out and spread rapidly to other banks, resulting in the collapse of Guangdong Trust Commercial Bank, and many banks, including Hang Seng Bank, fell into crisis. Low-cost property prices plummeted, real estate developers supported by banks went bankrupt, and countless people lost their money. Hong Kong's real estate industry was in a slump.During this process, Cheung Kong Industries will inevitably be affected, causing certain losses. By the end of 1966, Hong Kong's property market began to pick up, and a new dawn appeared in the real estate industry.But at this time, the Cultural Revolution that broke out in mainland China hit Hong Kong, triggering anti-British sentiment in Hong Kong. In 1967, the violent suppression by the British side triggered the "May Storm" in Hong Kong's history. The rumors of "recovering Hong Kong" led to the first large-scale immigrant wave in Hong Kong after World War II. A large number of properties were sold cheaply by immigrants, and the newly built buildings were even neglected. , at a loss.Li Ka-shing, who owns several properties, is also worried and keeps an eye on the development of the situation.In August of that year, Li Ka-shing gradually obtained news from the mainland from different channels. He firmly believed that extreme chaos will lead to governance. When he was still at a loss, he made an astonishing move, adopted the strategy of "people abandon me, take advantage of the low price", took the opportunity to enter the market, refurbished the bought old houses, rented them out, and built properties extensively.Subsequent developments proved that Li Ka-shing's judgment was correct, and the "May Storm" finally subsided. In 1970, Hong Kong's real estate industry picked up again and became more prosperous.By the early 1970s, the property owned by Li Ka-shing had grown from the original 120,000 square feet to 350,000 square feet, and the annual rental income alone was HK$3.9 million. In June 1971, Li Ka-shing established Changjiang Real Estate Co., Ltd. to fully develop the real estate industry. In July 1972, Li Ka-shing changed Changjiang Real Estate to Changjiang Industrial (Group) Co., Ltd., and it was listed in Hong Kong on November 1 of the same year. The listing of Changjiang was a great leap in Li Ka-shing's career. For its future development, Provides a steady source of funding. During the two crises in the early stage of Li Ka-shing’s career in the real estate industry, he remained unmoved by huge profits when speculation prevailed, adopted a method of steady expansion, and developed steadily. "The optimist sees the opportunity in the disaster; the pessimist sees the disaster in the opportunity." The business philosophy, when the real estate is in low tide, seizes the opportunity, takes the opportunity to enter the market, and finally establishes and achieves its position in the real estate industry. Viewpoint: In terms of business development, keep cash reserves more than liabilities, require a balance between income and expenditure, and even make a profit. What I want is to strike a balance between stability and progress. In the process of enterprise development, nothing is more important than stable and abundant cash flow. As a leader of an enterprise, how to adopt active and effective financial policies to ensure the positive cash flow of the enterprise's book when the crisis comes?Look at what Li Ka-shing did. background of the crisis Since the purchase of land to build the first industrial building in 1958, Cheung Kong has grown into one of the two flagship industries in Li Ka-shing's business empire, which is on par with Hutchison Whampoa.For decades, Cheung Kong has become one of the largest real estate developers in Hong Kong by developing residential and commercial properties.However, this period was not peaceful. In 1985, Hong Kong entered the transitional period before the return to the motherland, and its real estate market entered a long-term rising stage. After 1991, driven by the rising demand in the Hong Kong residential building market, real estate prices jumped sharply. According to data, from 1984 to 1997 In the past 13 years, the price of residential buildings in Hong Kong has increased by 3 times.This long period of prosperity in the real estate market has led to the rapid expansion of many real estate companies engaged in residential development in Hong Kong, and Cheung Kong has also benefited from this.However, during this period, from April 1994 to the third quarter of 1995, due to the Hong Kong government’s series of measures to lower property prices, Hong Kong’s property market once entered a period of adjustment, with residential property prices falling by 30%. affected.After the short-term rise in the property market in 1996, the sudden Asian financial crisis in the fourth quarter of 1997 swept across Southeast Asian countries and had a huge impact on Hong Kong's economy. The stock market and asset prices have shrunk sharply, investment and consumption desires have been sluggish, Hong Kong's real estate industry has almost stagnated, and Cheung Kong Industries will inevitably be impacted to a certain extent. To some extent, it played a role in resolving the impact of the crisis, so the impact on Cheung Kong was limited. Li Ka-shing's crisis resolution technique made his personal wealth rise instead of falling after the crisis.Li Ka-shing expressed his coping strategy in one sentence: "In terms of business development, keep cash reserves more than debts, require a balance between income and expenditure, and even make a profit. What I want is to achieve stability and progress. Balance.” Among them, the core is to ensure cash flow and adopt a financial policy of “high cash, low debt”.This is also one of the many crises that Li Ka-shing has encountered in his life. Before and after the crisis that had a profound impact on Hong Kong's economy, Li Ka-shing adopted the main strategy. In addition to the "high cash, low debt" financial policy, he adopted The main business coping strategies include financing strategies when the stock market is high; expansion strategies against the market when the real estate market is low; The first is Li Ka-shing's "high cash, low debt" financial policy, which keeps Cheung Kong's asset-liability ratio at around 12%, and non-current assets account for more than 3/4 of its total assets.Even in 1996, during the short-term rise of Hong Kong's economy, housing prices rose accordingly, and the net value of current assets of Cheung Kong increased substantially, while its long-term liabilities maintained the original growth rate. As a result, when the Asian financial crisis broke out in 1997, Cheung Kong's liquidity Assets can be greater than all liabilities, and it is precisely because of the low debt ratio during the period of rising house prices that during the Asian financial crisis, although banks tightened credit, Cheung Kong successfully raised syndicated loans and issued notes for a total financing of 3.75 billion Hong Kong dollars , It has guaranteed a good cash flow and relatively abundant funds for real estate development. Next, let's look at Li Ka-shing's financing strategy when the stock market is high.In the Hong Kong economy, there is often a linkage between the stock market and the real estate market. This phenomenon is commonly known as "stock and land pull". That is, real estate developers go public one after another to the stock market for financing. The market value of real estate developers has also risen accordingly, and real estate developers have issued new shares to refinance accordingly; and in the sales of the property market, high land prices have promoted the rise of existing housing prices, real estate developers have made huge profits from it, and this has further promoted stock prices. As a result, the stock market and the real estate market will pull each other.One result of this phenomenon can be seen from the Hong Kong stock market before the Asian financial crisis in 1997. The Hong Kong Hang Seng Index was 6,967 points at the beginning of 1995, and reached 13,203 points at the end of 1996, an increase of 89.5%. , Since the end of 1995, Hong Kong housing prices have hit new highs almost every day after rebounding. From July 1996 to July 1997, the increase rate exceeded 50%.It was under such circumstances that Cheung Kong implemented equity financing in 1996, raising 5.154 billion Hong Kong dollars.At the same time, 4.178 billion yuan was raised through the issuance of shares by affiliated subsidiaries to minority shareholders. Through financing, the original net cash inflow of Cheung Kong became positive from negative.This also makes it still have a good cash flow after the outbreak of the Asian financial crisis and the tightening of market conditions. Look at Li Ka-shing's expansion strategy against the market when the property market is at a low point. Before the Asian financial crisis in 1997, since Cheung Kong hardly owned properties in high-quality locations such as the Central District of Hong Kong Island, its sales income has long been dominated by real estate development and sales, rather than the "real estate development + real estate investment (property development) common to Hong Kong real estate developers. Lease)" business model, but the Asian financial crisis has brought opportunities to change Cheung Kong's profit model. In 1998, Cheung Kong Industrial, which is mainly engaged in residential real estate, suddenly increased the development of rental properties, which increased its fixed assets by 423% in 1998 compared with 1997.Although the rental property is in a period of adjustment at this time, compared with the residential market, its demand is relatively stable, which can provide reliable rental income for enterprises.In addition, after the outbreak of the Asian financial crisis, Cheung Kong Holdings withdrew from the infrastructure business and instead developed the hotel and suite service business, which also provided the company with stable income and reduced fluctuations caused by unstable property sales .Furthermore, in times of crisis, Cheung Kong took advantage of the opportunities brought about by the reduction of competitors, expanded against the market, and aggressively bid for land.Two typical cases are that in January 1998, the Hong Kong government successively sold a piece of hotel land in Ma On Shan, Shatin and a residential land in the former police quarters on Canton Road through bidding.The Lands Department of Hong Kong estimated that the bidding price of the former should be 1.056 billion Hong Kong dollars, but since there were only two bidders including Cheung Kong, Cheung Kong finally won the bid with the highest bidding price of 120 million Hong Kong dollars, which is equivalent to The floor price is HK$2150/square meter.The latter is also due to similar reasons. The consortium headed by Cheung Kong acquired the land with an original valuation of more than 4 billion Hong Kong dollars at a price of only 2.893 billion Hong Kong dollars. This floor land price is only equivalent to 2,840 yuan per square foot. Finally, it is the first price reduction sales strategy for property prices.Under the impact of the Asian financial crisis, Hong Kong's property market has almost stagnated.The first sale of Luyin Villa developed by Cheung Kong Industrial Co., Ltd. happened to be at this time. At the beginning, Cheung Kong Industrial Co., Ltd. set a high price of about 12,000 Hong Kong dollars per square foot for stratified units and about 16,000 Hong Kong dollars per square foot for independent houses. , the internal subscription sale was in general, so it was decided to postpone the public sale for 4 days and announced a 20% price cut.Affected by this, property prices in Hong Kong's Tai Po District fell rapidly by 7%. The property markets in neighboring areas such as Yuen Long and Sheung Shui were also affected, and prices were cut one after another.Subsequently, the second phase of Tingtao Yayuan developed by Cheung Kong Industrial Co., Ltd. was sold at a price of less than 4,700 Hong Kong dollars per square foot, which was called "the shocking price in the market" by the Hong Kong media. Sales promotion, the first price reduction promotion behavior, also triggered real estate developers in Hong Kong to join the ranks of price reduction sales.According to data, by January 1998, residential property prices in various districts of Hong Kong had fallen sharply from their peak in the second quarter of 1997 to the level at the beginning of 1996, with a decline of more than 30% in general.The results of Cheung Kong’s first price reduction sales strategy are reflected in its announcement: “The Luyin Villa and Tingtao Yayuan Phase II projects launched in the fourth quarter still achieved satisfactory sales performance in the weak market.” The reason for this achievement, Li Ka-shing admits frankly, is because of "a marketing strategy that is flexible and grasps market trends", which is actually a strategy of taking the lead in lowering prices.Afterwards, a research report by Morgan Stanley affirmed this strategy: "Compared with competitors, Cheung Kong is more willing to adopt low-price strategies to speed up sales. The Hong Kong residential market has continued to decline since June 1997. It proved to be an appropriate strategy." It is the interaction of these strategies that enables Cheung Kong to maintain more cash reserves than liabilities, achieve a balance between income and expenditure, and make a profit. In the end, it is the balance between stability and progress that Li Ka-shing wants to see.It is precisely because Li Ka-shing adopts different coping strategies according to different market conditions in his business operations that his wealth often rises instead of falling after an economic crisis or recession, and can grow further, as was the case with the Asian financial crisis in 1997.In the "Forbes" global rich list in 1996, Li Ka-shing ranked third in Hong Kong's rich list with a personal wealth of US$10.6 billion. Growth, and once again sat on the chair of the richest man in Hong Kong.