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People just love rags-to-riches stories, and this is an amazing one.
As I have mentioned in the past, studying the lives of the ultra-successful people of the world is extremely inspirational and valuable. Whenever I have the chance to delve into the way of thinking of those people, I make sure to grab it.
Lately, I came upon the story of Li Ka-shing, one of the world’s wealthiest people. His life and business journey offer several lessons and insights to the aspiring entrepreneur.
Li Ka-shing is a Hong Kong business magnate, investor, and philanthropist. According to Forbes, he is the richest person in Hong Kong and the second richest person in Asia, with an estimated net worth of over $30 billion.
Li has an incredible rags-to-riches story, a testament to being master of your own fate. He and his family fled China for Hong Kong during the Sino-Japanese war. Shortly after, his father died from tuberculosis.
At age 12 Li quit school and started as an apprentice in a factory. By 14 he was working full-time in a plastics trading company. He went on to start his own business making plastic toys and everyday items, and later plastic flowers.
For the next decades, he built a mass empire reinvesting in his business and also betting on disruptive technology. Despite his older age, he was one of the first big investors in Facebook, seeing the vast potential of the company, and being rewarded for that.
A few days ago I watched a great, short interview he had given for Bloomberg. As with the case of LinkedIn’s founder, I urge you to watch the whole interview and after that study further his life.
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Here is the overview of the interview:
“An interview with Hong Kong’s richest man, Li Ka-shing. In this interview Li Ka-shing discusses his early interest in business, why cash flow is the most important thing and building his companies, CK Hutchison Holdings and CK Property Holdings. Li Ka-shing also talks of his foundation, Li Ka Shing Foundation, and the philosophy behind it.”
Sounds great. Here is the video embedded for you (courtesy of the great channel Investors Archive):
The interview, while very compact, provides tons of insights and lessons. Let’s run through it and discuss some of them.
1) The world changes and you need to be prepared (01:52)
Early into the interview, Li states:
“I have always understood that the world changes a lot. Just because you’re doing well now, doesn’t mean you should be set in your ways.”
A lot of business owners have fallen into this trap. They do well in business and then get casual about their ways. They forget their thrifty manners and go on to spend their money on luxuries while neglecting their businesses. Their demise is what then follows, and they often end up worse than they had started.
2) You should monitor your cash and cashflow like a hawk (02:10)
In your business, you should keep a healthy amount of cash and also monitor your cashflow closely. This will allow you not only to withstand the turbulence of business and even big crises, but also to grab opportunities that might arise because of those.
Li stresses that out:
“I am always very careful with my cash flow. That means I have the extra capital to get into another industry whenever I want to.”
Don’t forget. Running out of cash is one of the most common reasons that companies go bankrupt.
If you have payables that you need to pay now (e.g. payroll, vendors etc.), but you are not to receive money from your customers for a period of time, then you might get into deep trouble.
At the same time, when you have plenty of cash and see undervalued assets in the marketplace, you can pound and grab them to spur more growth in your business.
3) To succeed in life and business you need to constantly learn (03:17)
Well, not much to comment on here. I have always been a big proponent of lifelong learning. Li highlights this:
“When I was young I enjoyed studying… I was working and studying at the same time, so it was a race against time to learn more.”
How can you not succeed with this mentality? It was only a matter of time before he did.
4) You don’t need a bunch of money to start your own business (03:42)
Another great myth of business. You do not need an enormous amount of money to get started. You can start small and scale your business as you gain more revenue, and most importantly, more experience.
Li shares his early days:
“I started my own business in 1950. I only had some of my savings and some money borrowed from my relatives. I had about $6,500 to start my business.”
Now, how do you get a few thousand dollars? Easy. You work for another person for a short period of time, ideally in the industry that you want to launch your own business.
5) Compounding is an empire building force (03:42)
Another lesson hidden in the quote above is that compounding is a powerful force that you need to leverage. Li started with $6,500 and is now worth over $30,000,000,000. This did not happen of course in a few years, but after enough time compounding led to a vast fortune.
This means that, on average, his businesses were growing at a pace of 26% year on year. That is admirable, but also shows that growing your business for several years will lead you to becoming a millionaire, multi-millionaire or even a billionaire.
Of course, this is just an annualized figure. In real life, a successful business has tremendous growth during its first years, and then the growth rate declines as it matures. This is also confirmed by Li later on (04:48):
“My business had the fastest growth when I was around 27 to 30.”
6) Successful people never stop growing (05:02)
Li’s first business was a huge success and grew exponentially while he was still young. He mentions:
“Actually, before I was even 30, I was wealthy enough that my entire family wouldn’t have to work for the rest of their lives.”
Despite his enormous success, Li did not stop but kept growing for half a century in time. Successful and driven people do not cease seeking excellence and growth, it is how they operate and think.
It is a common misconception that after you “make it”, you will chill in the beach. That seldom happens. Successful people are so passionate that they can’t just stop and do nothing.
It is a paradox that those that dream of “making it” and chilling at the beach ever after, never accomplish anything, while those that accomplish a lot, do not have any interest in laying on the beach all the time.
7) You have to know your industry better than anyone else (05:24)
Another huge lesson here. Successful people make sure that they are the most educated when it comes to an industry they want to attack. They educate themselves, and also make sure to recruit other intelligent people with experience in that field. This is a huge competitive advantage that the average entrepreneur usually neglects to do and is then crashed by the competition.
Li says about outsmarting competition:
“Whatever industry I get into I buy books about that industry. That’s what I’m like.”
8) You need to allocate time and energy into strategic thinking (06:05)
When Li had achieved some initial success, he allocated time to think about his next steps. He says:
“I was actually spending 20-30% of my time in the factory and the rest of my time devising what I should do in the future. That’s the truth. Up to this day.”
Planning for the future and strategizing your next moves are some of the most impactful and most valuable activities you should engage into. Make sure to allocate enough time so that you study trends, devise your strategy and think about the future.
9) You need to remain humble however successful you might become (07:02)
Remaining humble is something that you should never neglect, no matter how rich and successful you might become. This is the only way to keep good people around you and prosper in life.
As successful as Li has become, he could have been the most arrogant person in the world. Yet, here is what he says on this matter:
Remember, as wealthy as you might get, there are other people that are wealthier than you. So, it does not make sense to be a jerk about. Stay humble and grounded.
10) Be frugal and protect your capital (09:01)
Next comes an incident that also touches the lesson of humility. During the video shooting, the reporter interviewing Li Ka-shing notices his watch, an uninspiring piece that he mentioned cost him a few hundred US dollars.
What kind of lesson does this give?
Here you have a man worth billions, yet not willing to flash his wealth and definitely not caring about what others would think of him or his watch. Powerful.
11) Be willing to give back once you have made it (12:47)
While on his trajectory to vast wealth, Li realized that something was missing. Even though he was rich, he was not feeling fulfilled. One night, while thinking about it, he discovered the solution.
He went on to set up a foundation and pledge a third of his assets to it. In fact, Li went against Chinese tradition that dictates that people leave all their assets to their children and family after their death. He mentioned that he views his foundation as another child of his.
12) Always be seeking growth and improvement (15:52)
This is something that I mentioned above and a lot of times on this blog. You should be striving to become better and better each day. The path to excellence and achievement is one that lasts a lifetime.
Li states emphatically:
“This is my life. I seek improvement ceaselessly. I don’t stop, even at this age.”
This man always sought improvement. From his younger years, to his older self. That is why he has become enormously successful. It pays to follow his lead.
13) Prepare your business for the next day (18:50)
Towards the end of the interview, Li is asked by the reported when is he going to retire. He does not give a definitive answer, but mentions that he could retire whenever he wants since the company does not depend that much on him.
Li has already trained his two sons in business and he has also gathered an army of executives that could take over after his departure. He has taken the time to prepare the next chapter of his company.
Whenever you wish to sell your company for a lump sum, or keep its ownership but transfer the operations to somebody else, it is crucial that you have taken the necessary steps to prepare your succession.
This usually involves setting up processes for everything within the business, but also hiring capable and trustworthy people to whom you can transfer authority and responsibilities. It is not an easy task, but is something that has to be done to ensure a frictionless transition.
14) Take calculated risks in your business and investments (20:25)
In another incident during the interview, Li shows a stock certificate for AIG, the world’s largest insurance company that came tumbling during the latest financial crisis and almost went bankrupt.
He mentioned that he holds the certificate as a reminder to his sons who will take over the company, and shares the lesson behind it:
“You need to be very careful to manage the company. Also, don’t invest like gambling.”
The message is clear. You need to be extra careful when managing your company and to take only calculated risks that have limited downside and unlimited upside. Don’t be a gambler, invest wisely and cautiously.
15) When you are happy, you can go on for ever (22:26)
The interview closes on an uplifting and positive tone. When asked if he is happy going on for that long time, Li responds:
“I’m happy. If I weren’t’, I wouldn’t have been doing this for so long.”
Building a happy, productive life might take some time, but once you do, it fuels you to go on and on.
Li Ka-shing is a super-successful and wise man. He has amassed a huge fortune over the years, and most importantly tons of valuable experience.
In this interview, he provides some lessons and insights about what it takes to become rich and successful.
The common themes emerge again: study a lot, be industrious, manage your business wisely, protect your capital, remain humble.
Don’t forget to check out his interview, it is definitely worth your time.