Duan Yongping Interview Transcript: What Does It Mean to Understand a Business?

No matter if it's Buffett or Duan Yongping, they often say that buying stocks is buying companies, and the most important thing about buying companies is understanding the business.

My previous understanding of "understanding the business" was being able to comprehend the business model, estimate future cash flows, and know the company's moat.

However, this understanding always felt like answering a question; I could provide some text and express personal thoughts, but deep down, I still felt like I was scratching an itch through my shoes, unable to find the real sensation.

In this interview, Duan Yongping once again used Apple as an example, but unlike before, he provided three specific judgments that allowed me to truly experience what he meant by "understanding the business" and how it is manifested.

In my impression, this part of his sharing had never appeared in his Q&A records.

This interview was quite remarkable.

In Duan Yongping's Q&A records, he often talks about Apple and some key characteristics he has realized about it:

This company does not pursue commercial interests to the extreme, but rather pursues user experience to the extreme, striving to bring different value to users.

He often cites examples related to Apple's ecosystem, customer stickiness, and so on.

But in this interview, he mentioned his three past judgments about Apple:

The first was when he said that Apple would definitely launch a large-screen phone.

Three years after he made this judgment, Apple indeed launched a large-screen phone.

Why?

He said it was a basic need for users; to provide a good experience for users is a necessary thing to do.

The second time he said that Apple would definitely not launch a television.

Regarding this judgment, he had two experiences in his own company. In both cases, the actual executors at the time wanted to try making a television. He said if they wanted to try, then go ahead; he wouldn't stop them.

As a result, after trying twice, his own company ultimately did not proceed with it.

Of course, Apple also did not launch a television.

Why?

He said televisions do not provide any value to users.

The third time is even more interesting.

More than a decade ago, there were rumors in the industry that Apple was going to launch an electric car, but no matter what internal information or photos circulated, he insisted that Apple would not produce an electric car.

In the end, Apple indeed canceled the electric car project.

Why?

He said it was not a technical issue, but he believed that electric cars could not provide value to users.

Regarding the value that Duan Yongping mentioned here, my personal understanding is the unique feelings and experiences that users can gain.

From Duan Yongping's three "definitive judgments," my current understanding of "understanding the company" is:

It is not superficial bragging, but rather the ability to internalize and understand the company's values and behavioral patterns, even being able to vividly imagine what the company will and will not do in the future according to its values.

This is the true "understanding," a kind of understanding that has made oneself a part of the company, deeply grasping the core of its values.

I think this is the most brilliant explanation of "understanding the company" I have heard so far.

In addition to Apple, Duan Yongping also talked about a company he claimed to not understand very well: Nvidia.

Previously, I thought I could somewhat understand Nvidia, knowing that its moat is the CUDA ecosystem, etc.

But Duan Yongping provided a different perspective to examine Nvidia.

His main point was:

He looked at Jensen Huang's speeches and views from over a decade ago, and then reviewed what Jensen Huang has done over the past ten years, and found that what Jensen Huang has done is exactly what he once thought.

So now, when he looks at Nvidia and the future of AI, he looks at what Jensen Huang is saying now, and he uses this to judge what Jensen Huang will do in the future and the future development of Nvidia.

For investors who have been concerned about electronic products and AI development, Apple and Nvidia have long been old topics.

However, being able to derive new viewpoints and discover new angles from these old topics is truly impressive.