#362 Li Lu

0:00A few weeks ago, I was talking to John Mackey, the founder of Whole Foods, and he told me one of the craziest things anyone has ever said about the podcast. He had listened to over 100 episodes before he met, and he told me that if founders existed when he was younger, that Whole Foods would still be an independent company. He said that since the podcast and all of History's Greatest Entrepreneurs constantly emphasize the importance of controlling your expenses, he would have put more of a priority on it, especially during good times. It is natural for a company and I think for human nature to just not watch your costs as closely because everything is going so well.

0:31Andrew Carnegie had one of the best ways to describe why this is so important because he would actually repeat this mantra time and time again. He would say, profits and prices are cyclical, subject to any number of transient forces on the marketplace. Costs, however, could be strictly controlled. And in Carnegie's view, any savings achieved in the cost were permanent. That quote from Carnegie is something I was talking about with my friend Eric, who's the co -founder and CEO of Ramp. Ramp is now a partner of this podcast. I've gotten to know all the co -founders of Ramp and I've spent a ton of time with them over the last year or two.

1:01They all listened to the podcast and they picked up on the fact that the main theme from the podcast is on the importance of watching your costs and controlling your spend and how doing so can give you a massive competitive advantage. That is a main theme for Ramp. The reason that Ramp exists is to give you everything you need to control your spend. Ramp gives you everything you need to control your costs. Ramp gives you easy to use corporate cards for your entire team, automated expense reporting and cost control. Those last two words, cost control. There's a line in Andrew Carnegie's biography that says cost control became nearly an obsession.

1:36I believe if Andrew Carnegie was alive, he would be using Ramp because Ramp would give him everything he needed to control spend, optimized all his financial operations on a single platform. Make history's greatest entrepreneurs proud by going to ramp .com to learn how they can help your business control costs. That is ramp .com. The book that I want to talk to you about today is Moving the Mountain, My Life in China from the Cultural Revolution to Tiananmen Square, and it was written by Li Liu. Li Liu is the founder of Himalaya Capital Management, which he's been running for about 30 years. Lee also had a 20 -year investment partnership with Charlie Munger.

2:15Lee Munger is the way I came to know about Lee Liu because one time Munger was talking about the importance of patience and he told a story where he made 400 or he told the story of how he made about 400 or 500 million from reading Barron's Magazine for 50 years. And Munger said, I read Barron's Magazine for 50 years. The entire time, I only found one idea that I could act on, only one. I made $80 million on that idea, basically risk -free. And then I took that $80 million and I gave it to Li Liu and he turned it into $400 or $500 million. So Li Liu is known to have this cult -like following. He's known to have fantastic financial returns, but that is not what this book is about.

2:54Li wrote this book in his early 20s when he fled communist China for the United States. When the book ends, there is no possible way for Lee to know or predict what his future holds. And so I want you to keep that in mind as we go through what is going to be one of the most remarkably difficult childhoods that you and I have ever studied together. And so the book starts with Lee Lu when he's in preschool. And I need to tell you up front, this book is really hard to find. There's only two copies available on Amazon right now. One is for sale for like $300, the other for $600. So I need to thank Kenny Lee and my friend Moses Kagan.

3:30Kenny lent this book to my friend Moses and then he allowed Moses to send the book to me, which in turn allows me to make this podcast for you. So let's go ahead and jump into this unbelievable story. The last three -year -old besides myself was crying in the big room of the kindergarten, a boarding school for preschoolers. But soon even he would go and I would be left all alone. And then the hunger. I dreamt of eating lizard meat. The only thing I

4:00And so at this boarding school, this kindergarten, Lee is the only one without a family. So he's the only one that doesn't go home. So imagine he's probably four or five years old. And every weekend, all the other kids get to go home. Lee cannot go home. And we'll find out why he can't go home. He's going to be in like nine different, I think he moves around nine different times by the time he's nine years old. So it says the other kids had come back and would show off the goodies they had brought from home. They talked about the movies they had seen or the stories they had heard from their parents.

4:26And so from the very beginning, Lee understands how different his life is from his classmates. I was scrawny. I wore the same jacket and pants all year round. My clothes were covered with holes and patches. I was always dirty. And so immediately he starts to get bullied by his entire class. They somehow had learned that my parents were people with problems. Your father's a spy and your mother's a landlord's daughter. Remember, this is communist China. You're nothing but a bastard. The children would start to chant, bastard, bastard, nobody picks you up. Bastard, bastard, nobody picks you up. My kindergarten was like a prison.

5:01Every day we got up, dressed quickly, and washed. Then the whistle blew, and we lined up to go to the dining room. Then we sat at the long tables with our hands behind our backs. The teacher made a speech. The big kids would then recite some of Chairman Mao's quotations. The teachers would control the children by making them hate each other, by encouraging factions. That was what you could do when you had authority. The teachers beat the children with whatever was at hand, fly swats or sticks and a bamboo switch. At meals, we had to sit still while the teacher put the food in our bowls. If you ate too fast, you would be hit and you had to eat everything.

5:39I was scared to death. And so throughout this entire book, there's multiple examples of Lee being different from everybody else around him. And so at this time, there's when he said, I dreamt of eating lizard meat. is because at this boarding school, they were overrun with these giant lizards. And all the other kids said, if the lizards touch you, they're poisonous and they'll kill you. And so this collective brainwashing is a major theme throughout the book. And so instead of actually looking in as what we're being told true, all the other kids just accepted it. But Lee did not. And so one time he had a bunch of lizards come on top, like they called all over him.

6:13And he's like, well, nothing happened. There was no poison. And this is the result. My courage grew. I was no longer afraid of lizards. gradually I grew in confidence. Gradually I realized that the most important thing was confidence. If you had confidence and believed you were right, you would feel stronger. And so that's the first indication of an important part of his personality is like, I want to seek the truth. He's intensely curious. He wants to gather information and have an accurate reading on the world. And he is a fighter. And so there's other kids in the same grade that are given authority by the teachers and they're called officials.

6:47There's a first, second, and third official. and they typically bully and try to intimidate the other kids. And this is what happens when they try to do that to Lee. The first official swaggered over to me, clenching his fist, but I was prepared and hit him first, knocking him to the ground, which completely crushed his position as the number one leader. The second and third officials looked at each other and then ran away. This greatly enhanced the status that Lee had with his other kids and our small society arose from the very bottom right to the top. Yet I retained a deep sense of inferiority from my lack of contact with the outside world.

7:19Wait till he learns how to read. That changes his entire life. Because at this point, he's completely thinking about it. He has no family, no money, no resources of any time, of any kind. Doesn't leave. He's the only child not to leave the walls of the kindergarten. Everything he does, everything he learns is completely controlled by others. He has no idea what's going on with the outside world. And you see right from the very beginning, he develops these instincts and these skills that become very valuable if you want to be an investor, right? When other children were talking about what they saw and heard on Saturday night and Sunday, I felt inferior.

7:53I had no way of acquiring information. I had no home, no one to take me out, no food. So what does he do? When the kids come back, usually the little kids are bragging, like, I saw this movie and I ate this. He starts asking questions and changing just these sessions of people bragging about what they did for the weekend as a way for him to learn. I had to ask detailed questions to understand a story and often interrupted the storyteller. I developed a keen sense of imitation, narration, and imagination. I had a great thirst for knowledge. My inquisitiveness and imagination came from my shut -up life.

8:27These questions and answering sessions is the only way that he got information about the outside world that I had never seen. So when he is six years old, he's actually attacked by a giant swarm of hornets. And his response to this gives you an insight into his personality. It says the more violently the hornets attacked me, the stronger my will was to fight them. Eventually, he collapses and is taken to the hospital. And then it's at this point that we first get his introduction to his biological father. A week after I left the hospital, my father came to collect me. We can't keep the child any longer, said the head of the kindergarten.

8:58When we agreed to take him, we were doing you a favor. We would not normally accept a child of such terrible family background. My father carried me away on his bicycle. They can do, and he's talking about the government of China at this time, They can do anything to you if your background is bad. My mother was from a land -owning family, and that's bad. My father listened to a foreign broadcast on the radio and someone overheard it, so they accused him of being a spy. That's even worse. Since the Cultural Revolution, all intellectuals have been considered useless. My parents, who had gone to universities, were put into the lowest category.

9:35Shortly after I was born, my parents had to send me to foster families. and then I went to that kindergarten. Even now, my parents couldn't keep me. They were both under political attack and couldn't even have a home of their own. My father took me to live with Da Pa. So that translates to Big Dad, which is what you and I will call him. Big Dad and then Big Mom and their six children. My father and Big Dad had met in the coal mines. Big Dad is a true friend to Le Lu's biological father. and he agrees to take him in even though he has six sons and a wife to support. They live in a tiny little two -room shack, I guess is what you would call it.

10:19They had very little money to the point where all their clothes, including Leeloo's, had to be made by Big Mom and the kids had to go out in the street and work. They had to feed themselves. They had to raise their own chickens. And so they would go, including Leeloo and the other sons, would go out in the streets picking up tree branches for firewood and collecting thrown away cabbage for the chickens. He is in a terrible environment for anybody, much less a six -year -old. And so a lot of the neighbors are impoverished. There's a lot of drinking. One of their neighbors is drunk all the time.

10:51He beats on his wife. There is all kinds of violence. And so there's a fight that breaks out. And during this fight, somebody tells Lee that your father is a spy. And so this part is absolutely heartbreaking. Imagine a six -year -old saying this to you. After the fight, Big Dad punished all of his sons except me. I cried and asked him, aren't you my dad? Why do they say my dad is a spy? Are you a spy? Big Dad said, I am your dad. Just ignore what they said. But there is this other man, Leeloo says. I also call him Pa. I said, who is he? Is he a spy? He had spent so little time with his biological dad.

11:27He's not even sure who his father is. Big Dad sighed and said, don't think about it, child. You stay here. Nobody can do anything to you. If anyone wants to bully you, you have me here. I felt pained at my heart. And then another main theme of the book is the fact that humans, if they put into positions of power and authority, will usually abuse that. He's constantly seeing the contradiction and the hypocrisy between what the state is telling him and what actually happens. And so there's a family in the community called the Zangs. And he says, when I think of the Zangs, I think of true evil. So these are people living in the neighborhoods, but they have close relationships with the government.

12:06And so they call them the director of the neighborhood committee. And so the government sends the directors of the neighborhood committee ration tickets. Ration tickets were required to buy such things as meat, fish, and vegetables. But if the Zangs did not like you, they could simply tell you that they didn't get enough tickets from the district government and essentially starve you. They also had close connections with the local police, which gave them further power. And this is his description of Aunt Zang. She was cold and cruel and always found a way to hurt people. And so the neighborhood he's growing up in is inhabited.

12:37It's really close to the coal mines. It's inhabited by coal mine workers. That's what Big Dad does. He says, one day there had been an explosion in the mine. Dozens of miners were trapped. Big Ma looked stunned. Her husband was among the dozens of miners stuck down there. So Big Ma and Leeloo go to the mines and this is what happens. We saw about 10 miners emerge pushing carts. On the carts were bodies. We found Big Dad on a cart. His face was blue, his mouth, nose, and ears full of coal. He was cold and hard. Big Ma collapsed. This family had lost its pillar. And so did Leeloo. Remember, his dad, who he thinks is his dad, said, don't worry, I will protect you.

13:17I am here for you. The family had lost its pillar. What would they do now? A family of six children and a mother. The family collapsed. We had nothing left. Very soon, the family had nothing to eat. I could no longer stay with them. Think about that. That's an entire story in four sentences. Everything I'm reading to you happens over many, many pages. But those four sentences tell you an entire story. The family collapsed. We had nothing left. Very soon, the family had nothing to eat. I could no longer stay with them. Remember Big Ma and her six sons. We'll go back to them in about three years from now.

13:55Now he's about seven or eight years old when this is happening. His parents are being, quote unquote, rehabilitated by the Chinese government. And so for the very first time, he's going to live with his parents. They live together in a single small room, no bigger than a room in a student dormitory is the way that Leeloo describes this. My family finally had space of its own. Every few weeks, my mother would come in from the commune where she's living and working and a guest being rehabilitated. and we would get together. I called the days when we were together the days I have a home, but I felt awkward with my parents.

14:30They were strangers to me. And so Lee does the math for us. He says, by the time he's almost nine, I had lived with at least nine families. And this is the beginning of this intense desire to learn, to learn how to read, and to make money so he can support himself and the people he loves. I felt superfluous, being shunted from house to house and gradually inferior. Perhaps the world did not welcome me. I wanted to grow up fast so I could make money and support Big Ma. One day, my father's institute told him that he'd be sent away for six months. My mother was still living in the orchard commune, and none of my parents' friends could take me in any longer.

15:11And he is saved by the generosity of a teacher. He's got a bunch of atrocious teachers, but he's got a few that have great hearts and that actually care about him and want to teach him and help him. One day at my school, teacher Wang said to me, I hear you're leaving us. Do you still want to learn to read and write? I told her, I want to study. She said, you cannot leave here. You can live in my home if your family cannot take care of you. And this is going to be one of the most important sentences of the book because it's going to be the foundation upon which his future wildly, wildly successful career is going to rest upon.

15:44I had begun to love reading. And yet in every new environment, he finds the same reoccurring theme, that those in authority, that those in power routinely abuse the people that they have power, control, and dominion over. And so there's this kid in the neighborhood called Fatty. Fatty's father was the chief of the Bureau of Electricity, so he's a very important person. And Fatty is a bully, and Lee is a fighter. and so when Lee sees Fatty beating up a girl, this is what happens. Fatty was furious, dragging the girl along by her hair. She screamed in pain, so I went up to Fatty, slapped his face and said, let go of her.

16:24I bit his hand. I seized a stone and began hitting him on the head. Fatty had hardly expected a skinny boy like me to fight so fiercely and effectively. And since Fatty's family is powerful, they try to take revenge against the family of the teacher that's letting Lee stay there. He has to go and apologize, even though he doesn't want to. And he says, I felt like a jinx. Wherever I went, bad luck followed. In despair, I cried. I said in my heart, wait till I grow up, fatty. See how I will settle accounts with you. It seemed that my childhood was over. I was no longer carefree. I lost all interesting games.

16:55I wanted to see and learn so many things. I started to observe, study, and understand people. I became more and more reserved and introverted. And so what he's describing is he did not have the luxury of a childhood. He was forced to grow up fast. and somehow his life continues to get even worse. Li Lu survives the 1976 Tangshan earthquake. The Tangshan earthquake is the deadliest earthquake in human history. Over 300 ,000 people are going to die. The earthquake was so loud and powerful that in its immediate aftermath, everybody in the neighborhood thought that the atomic bomb had been dropped on them.

17:33It's completely dark when it happened. There's no electricity, and Li is running for his life, and he says, suddenly I tripped over something. My hand touched something fleshy. It was a severed arm. I blacked out and fainted. He wakes up. I looked around in the daylight. All the buildings were gone. I ran as fast as I could towards the place where Big Ma and her family had lived. Their house had caved in, but the roof survived. Someone had dug a hole in the roof to look inside. When I looked down through the hole, I saw six pairs of blue and black legs lying there. All their upper bodies were crushed under the roof.

18:10The last time I'd seen legs of such color was when Big Dad died. As soon as I saw them, I almost blacked out. The heads of Big Ma and the children had been crushed. Their brains were everywhere. Big Ma was kneeling over the two little ones. When the earthquake came, she must have knelt over their heads to protect them with her back. Now, whenever I think about mothers, I think of Big Ma kneeling over the children. He's 10 years old when this is happening. So the entire town, gone. So he is sent to go live with his mother at the commune, at the orchard commune that she's at. And we see the same thing.

18:51The people in power, they preach equality. We're all the same. And yet they do everything in their power to live differently than everybody else. Life at the Orchard Commune, where I had gone with my mother and brother, appeared peaceful and balanced. Everyone seemed to be eating and drinking like anyone else. But behind the facade, the crude inequality made me furious. The party's secretary had set up a separate tent for his own family. The cook prepared food separately for his family. The secretary's family had better food because all of the relief goods were sent to him first. They consider these relief supplies to be their own property.

19:27The party leadership had said that we're all the same, that we should never take a piece of thread that was the public property, that we must be honest. He is realizing that they are all brainwashed, that the official propaganda does not match the reality on the ground. He sees this over and over and over again during his young life. And listen to how they described the death of their leader. This is when Chairman Mao is going to die. While he's in school, one day, the loudspeaker, which had been silent for weeks, suddenly came to life. Now important news is to be announced. Now important news is to be announced.

19:58This one sentence was repeated for half an hour. And then finally, a heavy voice spoke. The great leader of the Chinese people, the founder of the Chinese Communist Party, the great teacher of the revolution of the world, the red sun in the hearts of the Chinese people, the chairman of the Chinese Communist Party, and the chairman of the party military committee comrade Mao passed away due to an incurable disease. And he details the reaction to the people around him. They're crying and mourning. It's like you would expect their reaction is like almost if your child had died. The government had complete control over the flow of information.

20:36And the kids were indoctrinated and brainwashed before they could even read. And so at this point in his life, he's back to living with his mom and his dad in this tiny little shack. And it says, winter was coming. Nothing was more important than acquiring a warm house. And so in order not to freeze to death, they have to build this thing called a kang, also known as a kang bed stove. So this is a traditional heated platform used for sleeping in the northern part of China where the winter climate is very cold. And so other people in the community realized that Li's dad is very good at building these kangs.

21:06And so they come to him and ask him for help. My father became well known in the area as an expert kang maker. Everyday day people came to ask him for help. I was enchanted by my father. He was like an enigma, a riddle to me. Before the earthquake, I had never lived with my parents as a real member of the family for very long. So these trips with my father to build the Kang helped me understand him better. Everywhere he went, people praised him. He was good at everything. I began to be proud of him. He was a first rate bricklayer, an excellent house builder, and an expert in building Kang. And so it's during this time that he's living with his mom and dad that he finds insight into their past lives and why they were ostracized and why he was sent away.

21:46And so he finds this suitcase full of pictures and writing. He says, I found pictures of foreign architecture, bridges, churches, and people in strange costumes. I saw pictures of a young man with glasses wearing a white Western suit. He looks so elegant and handsome. There were several photos of that same young man rowing a boat or hunting with a gun. The more I looked, the more mysterious I found the people and places in the photos and the more excited I became. Then it

22:32And so for the first time in his life, Lee is now getting the information he needs to understand what was happening to him. So he talks about the fact that they studied abroad, that a lot of those pictures came from the Soviet Union. They told us about their childhood, their courtship. My father came back from studying in the Soviet Union. My mother talked about her life. And the fact that intellectuals, which his mother was one, were sent to do farm work as some form of ideological remolding. The life they described seemed so different from mine. It was a mystery to me. They were proud of their life in the 1950s.

22:59It sounded like another world. I felt I could learn a lot from them. From that night, I felt I had a home, a father and mother. I felt I had a history and a goal. And so this is where we see Lee's intense, intense dedication to learning, to reading. It's going to serve him wonderfully in his future career. In fact, there's a great Financial Times article about Lee. I actually might do another episode on Lee after this. But it says, Lee's mantra became accurate and complete information. I'm reading from the Financial Times article right now. Lee's mantra became accurate and complete information.