This week’s podcast is about Hillhouse Capital and how they are buying and digitizing Chinese and increasingly Asian companies. I talk about their deals with Belle and Gree.

You can listen to this podcast here or at iTunes and Google Podcasts.

Here is my summary of digital operating basics (Dr. Ram’s book combined with some of my own thinking):

1. Scale and growth at small incremental cost.
2. Continuous personalization and customer-facing innovation.
3. A digital core for operations.
4. Ecosystem and connectedness
5. People, culture and work design create a social engine that enables innovation and execution – increasingly personalized for each customer.
6. Money-making at scale makes the company sustainable. It enables continuous innovation, including big bets where the ability to withstand losses is important.

Here’s the picture I use to summarize Value Point, which is the surgical addition of value to an investment.

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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.

Note: This content (articles, podcasts, website info) is not investment advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. Investing is risky. Do your own research.

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Welcome, welcome everybody. My name is Jeff Towson and this is Tech Strategy. And the topic for today, how Hill House Capital invests and digitizes companies in China. And this is actually a little bit different because Hill House is a very large private equity shop in China and Southeast Asia. They’re really covering the whole region now. So the playbook’s a bit different because this is PE. They do growth, they do buyout. However, I mean, their focus really since founding in 2005 was internet, media, telco. I mean, the TMT space, pretty much everything I talk about, major investor, Tencent, JD. And additionally, they’re well known for being very long-term capital. They don’t buy and sell that much. And they sort of go for the long-term and they’re really focused on quality. So people talk to them like, People think they’re kind of like a value investing Buffett type play. So either way, it’s pretty much everything I talk about, internet, digital companies, China, Asia, where it’s mostly about the quality of the company. So it’s kind of in the center of this, but it’s a PE version of it. Anyways, I’m gonna go through what they’re doing and their recent very large six billion plus investments in GRI and also in Bell, a major retailer. So I’ll go through some of their deals that they’re doing. And I think they’re gonna do a lot more. I think it’s a really good strategy. Now this is episode 100, which is pretty crazy to think about. It’s about one a week, so we’re almost up to two years since I started doing this. And I literally can remember sitting in a hotel room in sort of south of Bangkok in Samut Perkan, for those of you who are from this area. I was visiting a friend down there. I was kind of in a hotel near Paknam, BTS. I was just… hanging out and I wanted to get doing this and I bought a cheap mic and you know, started to sort of do the first podcast which weren’t very good but I was really kind of sick of what I was doing. I was I generated a pretty big following you know, a couple million followers, you know, lots of attention, as much as you can get as a business writer I suppose but the thinking was shallow and you have to sort of play a certain game if you’re gonna do the attention game. And you basically make articles that are about 800 words and you make videos under 10 minutes and that gets you much more traction. And I just thought it was very shallow thinking. I thought it didn’t add up. I thought most of what I was reading was not great. And the world was kind of being overrun by people doing this. It was like a sea of mediocre, shallow thinking. And I kind of walked away from it and said, I’m gonna… go the exact opposite. I’m gonna create very long form content with real depth, in my opinion. And it’s gonna add up so that if you stay with it, you’re gonna get dramatically better at this. That was the idea. So I started doing long articles, 2,000 words, 3,000 words. For those of you who are subscribers, that’s what I send out. I mean, they can be pretty long, I’m aware of that. And then I started to do podcasts, which were. you know, not interviews. People like interviews with podcasts because they’re kind of engaging to listen to and they’re really easy to set up. You just make an appointment. But to do an hour podcast where you’re just speaking, like a full lecture, which is all I do, it actually takes a lot of work to put together an hour’s worth of thinking. So I said, that’s what I’ll do. I’ll do podcasts for an hour. I’ll do long form articles and I’ll kind of walk away from the rest, but it’ll add up. and we’ll start to build a real body of thinking, in my opinion, about these ideas and go deeper than anybody else. That was kind of the idea. And I don’t know, I mean, looking back two years, a hundred podcasts, average about an hour, about 300, well, how many articles? About two to three, about 350 articles, most of them about 2,000 words. I mean, there is, if you go to my website, I always cite the… concept library and the company library, you can basically see a very large body of thinking and it all sort of builds on each other. Anyway, so that’s kind of what I’ve been thinking about in the last couple days, that it’s been a long road. I’m not sure what’s next. I’m gonna sort of think about what I’m gonna do next. So I’ll probably continue, but I think maybe make some changes. Anyways, that’s where I am. I thought I would just sort of bring that up 100. It’s kind of fun to think about. Thank you for those of you who’ve been here. for a long time. I know some of you have been here from the very beginning. That’s really kind of amazing. Like I’m always kind of amazed when people email me and they said, I discovered your podcast a week ago or a month ago and I’ve been binge listening like I’ve listened to 20. I’m like, dude, it doesn’t work that way. Like one that’s cool, but two, it’s too much content, too fast. You got to let it, you got to do it slow and steady, a little bit of content, a little, and it adds up and then you can absorb it. You can’t. binge watch this sort of content. But it’s kind of fun. Okay, anyways, let me get into the topic here, but I thought I’d at least mention that a little bit at the beginning here. Now for those of you who are subscribers, the stuff I’ve been sending out the last week, I sent you about Bosch Japan, which is the recruiting platform. Really interesting, I think as a company. which is actually a Berkshire investment. You know, I’ve been trying to sort of get my brain around clouds as a business model. Hence, Kingsoft Cloud is a China, but also Snowflake, I think, is a very good model. So I think between those two, the model is gonna become clearer, at least to me. Anyway, so that’s on the way Snowflake’s coming in the next day or so. The two concepts for today, digital operating basics, which I’ve talked about before, and then also value point. which is also in the Concept Library. I’ve talked about that before. I did a podcast on that called How I Learned to Love Softbank. Yeah, it’s podcast in an article. The link is in the show notes. So those will be the two sort of concepts for today. And we’re gonna cover Hill House, GRI, and Bell. And for those of you who aren’t subscribers, you can go over to jefftausen.com, sign up there. There’s a free 30-day trial, see what you think. A standard disclaimer, nothing in this podcast or in my writing or on the website is investment advice. The numbers and information for me in any guess may be incorrect. The views and opinions expressed may be incorrect or no longer relevant or accurate. Overall, investing is risky. This is not investment advice. Do your own research. And with that, let’s get into the topic. So first, a little background on Hill House. Pretty interesting company. I mean, for those of you who follow this space, should be on your radar. People know them because Kleiner Perkins does their yearly internet trends report by Mary Meeker. And they did start putting in a China section, which wasn’t huge, but it was well done. And it was basically those slides were by Hill House. You know, it wasn’t real in depth, but the quality was good. And it was everybody knows who’s really smart in this space. who’s not. And on the shortlist of really thoughtful digital China, digital Asia, is Zhang Lei, who’s the founder of Hill House. He’s on the shortlist. I mean, and you can hear it, he doesn’t publicize very much. He doesn’t speak openly about his investment strategy. They’re pretty quiet. But definitely on the who’s who of serious tech thinkers of Asia is Zhang Lei. You could also put Neil Shan on there and a couple other people. Anyways, so some of the basics. Zhang Lei born 1972 in Henan, center of China. It’s really a nice part of the country actually. Like everyone lives on the East Coast and the far West is kind of the boonies, but man the center sure is really nice. That whole Chengdu situation, the whole center is really quite pleasant. Anyways. I don’t know a whole lot about him. The basics, if you look up Wikipedia, you’re gonna hear something like this. Look, pretty good student. Goes to Renmin University, which is in Beijing. It’s kind of right near Beijing University. He gets a BA in economics. Okay, business, finance guy from early on. He goes to do an MBA and a masters in international relations in Yale. and basically graduates, finishes all that up 2002-ish. And what really happened that was important is somewhere along the way, he started engaging with the Yale sort of institutional, the Yale University Endowment, which is obviously a huge amount of money. So they have a lot of endowment. David Swenson, I guess, was involved. Zhang was working with him translating his book on portfolio management. And it was somewhere along the way he got involved with the university endowment. He ended up working for them, became an investment analyst, focusing on global emerging markets. So South Africa, Southeast Asia, and China, obviously. And then, you know, 2005, not too many years later, he moves to Hill House, to found Hill House Capital. It’s actually named by an avid. Avenue in New Haven, Connecticut, where Yale is. I guess it’s like a block from where the Yale investment office is. Anyways, he goes back, founds Hill House, $20 million. I think he got from Yale and David Swenson. Some more money comes in. But that was the right dude with the right idea at the right time, because if you’re going back to China 2005 to focus on… equity investing with a long-term focus, oh, and by the way, you’re going to focus on TMT consumer and others. Well, you’re in the, I mean, that’s a great idea, right? Because that’s the start of the internet age, you know, big surprise. He got investing in Alibaba, I’m sorry, Tencent in JD, and a lot of these companies made a ridiculous amount of money. Now, one, it’s about being smart, but two, it’s about being in the right place at the right time, which he clearly was. The company gets bigger and bigger, private equity, you fast forward to 2017. In one year in 2017, he does $26 billion worth of transactions, right? More than $50 billion of assets under management 2018. 350 investment in operating professionals, and they have expanded from mainland China down to Southeast Asia, right? So, you know. a gazillion deals you could dig into in all of that. I’m just gonna talk, and a lot of strategies, private equity, growth private equity buyout, but I’m gonna focus on the ones that have showed up in the last three to four years, which are about, let’s buy a company and then digitally transform it, which is kind of closer to what we’re talking about. Now, if you go to their website, what you’ll see is not much information. They don’t really talk a lot about what they’re doing. I’ve had some people I’ve known worked there, so I’ve kind of gotten a little information here and there, but generally not a lot. But if you go to their webpage, they’ll say, here’s our investment strategy. And I mean, it’s short, but it’s pretty clear. This is why people start to say, Zhang Lei is a lot like Warren Buffett. He doesn’t speculate. It’s all about quality, long-term holding of the best companies. So here’s what they say on their webpage is quote, quote, you know, quote, Quality is the foundation of our portfolio. To us, quality is defined by one question, is time your friend? Quality is a protective moat that allows companies to grow and thrive through unpredictable economic cycles. I mean, that’s pretty much all I ever end up talking. I mean, the whole time aspect is like, it’s a secondary effect. Like if you’re buying high quality companies that have protective moats, that have attractive unit economics, that are in the right market spaces, then time is your friend because in theory it should get better and better. If you buy bad companies, time is really your enemy because you got to get out of there. That’s sort of classic Warren Buffett thinking. I’ve pretty much said the same thing in the last couple of months about dealing with all the uncertainties in China. You can either get in and out fast just buy, sell, buy, sell, or you can buy the best quality companies and ride it out over five years, fly above the clouds. You know, they are clearly flying above the clouds here. Here’s another quote, quote, “‘Hill House’ recognizes that it is rare to find a high quality business matched with visionary entrepreneurs.” That’s kind of my standard good horse, good jockey, right? This is all Warren Buffett language. I mean, continuing, “‘When we discover something we are excited about, we are in it for the long haul. Hill House invests not only financial capital, but also operating resources and industry expertise to enable long-term success.'” Hill House invests across growth and buyout opportunities and so on. Okay, so they use the term solution capital, which is okay, we’re not just investing money, we’re investing expertise, we’re investing capabilities, it’s money plus something else. Now that is not Warren Buffett, that’s more like my old boss Al Walid, and that’s why one of the concepts for today is value point, which is… the idea that look, you come into a company and you’re not a passive investor putting in money and waiting. You’re adding value as quickly and as surgically as possible. So it’s money plus something else, money plus management expertise, money plus technology expertise, money plus a brand. The example I always give for value point is what my old boss, the Saudi prince used to do. He would buy a regular hotel in Kunshan or Cairo. and then the next day turn it into a Four Seasons or a Swiss Hotel, because he controlled those brands, bam, immediate increase in its economic value, then he moves on to the next project. Very surgical value add. Now what they’re doing, and that will bring us to the point for today, is they’re buying companies and then adding value through digital transformation. That’s kind of the playbook that we’ve been seeing. Okay, so let me go into the first of the deals, which is the privatization of Bell, which was announced in 2017 that a very large, for those of you who aren’t familiar, Bell is a, I’ll go through the details. It’s a really big retailer, physical retailer that sells shoes and sports apparel, but historically it’s been a big shoe company. Okay, so 2017. Bell International, which is listed in Hong Kong at the time, announces a privatization offer of 6.8 billion dollars led by a group, but Hill House was the leader. Also CDH was there. They basically bought the company. They used quite a bit of debt, so this was a buyout, and it was the largest sort of deal on the Hong Kong exchange. Now the background of Bell, it’s been around for a long time founded in the 1970s in Hong Kong. They really focused on footwear with a vertically integrated model in that they design the shoes themselves, they procure the supplies, they manufacture, they distribute, and they do the retail, hence all the stores, and they own sort of these leading footwear brands that are all within these Bell stores which you can see all over China. I think it’s pronounced Bell. I’ve always assumed it was that. Maybe it’s got some French pronunciation, but anyways, you see them everywhere in China. There’s about 20,000 of these stores. And they just do a lot of marketing, branding, and they have these big traditional retail channel. They go public in Hong Kong. They acquire some other footwear brands along the way. They kind of expand their chain stores. 2015, about 14,000 stores. Revenue of Bell at that time, 40 billion renminbi. So about seven billion US dollars. And Bell basically was the king of shoes, right? Okay, now what happened is 2015 onward, well really before that as well, but e-commerce starts to really bite, right? Things start to move online in China. We also see foreign footwear brands coming in and Bell starts to sort of suffer. Revenue and number of stores start sort of trending down. Their business at that point, 2015-2016, is really halfway between, revenue-wise, between the footwear business and then a sportswear and apparel business. And within that, I mean, basically… Their sportswear and apparel business is just retail distribution of Nike, Adidas, Puma, Converse. And the Nike and Adidas stuff they carry, that was like 85% of their revenue in 2016. Now in their footwear business, 90% of the revenue is coming from their own company owned brands. If you’re curious, Joy and Peace, Millie’s, Tata, Teen Mix, blah, blah, blah. There’s a bunch of these names. Okay. So you can kind of see that they had this interesting mix of a company and that’s really the situation that Hill House jumped into and was really the lead architect of putting this together. So Hill House announces their deal and they basically said it has everything we want, we’re gonna do Omni-channel, things like that. Here’s kind of what I think they did. Well, first of all, they did the buyout, they used 50 plus percent deal. dead Hill House took over operational control of the company. They split it into two companies. One of them they took public, the sports apparel company just went public not too long ago. But at the time of privatization they paid about 20% over market price, pretty standard for buyout and privatization deals. And I mean this was about technology. I mean that was what this was about. You know this is a big retailer. They understand the world has changed. They know it’s gonna be a major effort to become an omni-channel digital first retailer. The founders were quite old at that point, were kind of not up for the fight, and also, I mean, they didn’t have the people. No one on their management team really understood software. They didn’t have any sort of expertise. So Hill House coming in, one of the reasons I like deals like this, value point deals, because often, the seller is glad to have you. It’s like they’ve got a problem and you’ve got the solution. You know, a no-name hotel in Cairo, which is struggling, they are happy to have a guy like Alwaleed come in and buy 20, 30, 50, maybe percent, and then turn it into a Swiss hotel. That’s a win-win-win. This is similar. I mean, they obviously wanted Hill House in there. They must have. Okay, so you leverage in technology. And you start to do a couple things. And this is where the other concept for today is the digital operating basics, which I’ve gone through in previous podcasts. I’ll go through it a little bit more because it looks to me like what Hill House did was pretty much just the digital operating basics. It looks very similar to me. Here’s what was kind of published that they did is, you know, number one would be digitizing customer engagement. not shying away from the physical stores, not closing the physical stores, but instead using those as a point of strength, saying, look, we have traffic. People do walk into our stores every day, but we don’t know anything about them. We don’t know what they want. We don’t know who they are. And we are not able to match the products and services at the moment they enter, such that we maximize sales. So it’s like we got a lot of traffic. but we’re not converting into sales because we’re doing it with a brute force, non-digital way. So we will sort of take the foot traffic and they have something like six million daily customers walking into their stores. We’ll digitize it, we’ll sign them up, we’ll get them into the system, and then we’ll try and convert that huge traffic into sales by basically putting the right products in the right locations. and giving sales staff the tools they need to ensure that the customers get what they want. So it’s like, let’s improve the operations across the board. Let’s become data-driven and also let’s try and personalize as much as we can. So it looks to me like they’re doing digital operations, a lot of convenience, also a digital thing, and then lots of customization. All right, now why would that make sense in a shoe store? I mean, Luckin Coffee tried the same thing and it didn’t really work that well. Other stores you could think of like selling electronics. It doesn’t really work that well. This is sort of a new retail area where it’s like, we need a product category where we can bring digital tools to the table, but it also has an experiential aspect. You can’t just buy this stuff online. You’ve got to go to a store. Well, shoes are quite good at that. Shoes, furniture, supermarkets, kind of the department stores, these are areas where online merge offline, new retail, has really gotten traction because you really do need the physical assets and the digital assets together. You can’t be a purely online player. So I don’t think it was an accident that the type of retail product they targeted was shoes. I would have gone for shoes, furniture, grocery, department store, maybe makeup, things like that. Those tend to be sort of OMO online merge offline. I gave you a list of the digital operating basics. I’ll put those in the show notes again. What were listed on there? Have a digital core. Have the core of your operations be digital and data driven. Clearly, they’re doing that. Use that information. to innovate and personalize each individual users. That’s clearly what they’re trying to do when they say we wanna get the right product in front of the right person. They’re going for customization. And based on that, they’ll convert more of their traffic into sales. I mean, it looks just like the digital operating basics, almost point by point in what they’re doing. And sure enough, you fast forward a couple of years and it worked quite well. The sports and apparel business really did. improve. I mean you can literally see it’s like turn around. This shoe business, it’s a little harder business. The sports apparel business went public. It’s listed now in Hong Kong under Top Sports. Largest sportswear retailer in China, but I mean let’s say 15 to 20 percent market share and then you have Nike and Adidas and others. So it’s not dominant but it’s very very big. The market cap. When I checked earlier today about 7.6 billion US dollars. The financials are good, growth is good, profitable. It turns out that was a really nice business and yeah, it was a really well done deal. Buy out the company, use some debt, split it up, digitally transform the two businesses, take one of them public pretty quick. You know, win in the short term because the way the finances work. you know, they’ve made money in the short term. But more importantly, they end up with a high quality business in the long term that they can grow. So it’s sort of win-win. Anyways, I think it’s a great example. I’ve been sort of joking for years in my class in Shanghai that if I was gonna start a private equity shop in China, what I would do is I would start buying retailers and CPG companies with a team of experts who are really good at e-commerce. And just go. one after the next and buy them, digitally transform them, and basically do this type of play. Because there’s a lot of retailers, I would do that in Bangkok too, by the way. I’d do that in a lot of Southeast Asia. I’d just snap up a lot of these companies, because I think this is a pretty common picture that we’re seeing, and this is a pretty good playbook for how to profit from that. Anyways, that’s case number one. Okay, now GRI is the other company, really. Pretty interesting company, especially for those of you who aren’t maybe that familiar with China. I mean, Gris is a state-owned entity. It is a classic, big Fortune 500 globalist Chinese state-owned entity. There’s a bunch of these companies out there, in industrial and other spaces. Based in Zhuhai, which is a really great city right across the border from Macau. You can kind of take ferries back and forth to Shenzhen. It’s a really nice area. I like Zhuhai, it’s very green. You can go right up to Guangzhou. Anyways, obviously the Zhuhai government’s always been involved in green. They make air conditioners. That’s been their market for a long time, and big air conditioners and small air conditioners and personal ones and apartment ones and office buildings and all of that. And you can figure out the total addressable market pretty easily because you know how many people you have in China. You know how many apartments they’ll need. You know how many air conditioners per apartment. And then you know how many office buildings. I mean, you can get your brain around that number and it’s not surging, I mean, but it’s a big, big number and they’re the biggest player in that market. And if you add up globally, I mean, it depends if you’re talking corporate or hospitals or apartments, whatever, but it looks about 20% of the global market. And they’re generally ranked first in household air conditioning. Okay, so December 2019 announcement comes out. GRI Electric says that their controlling shareholder has changed. It was GRI Group. Whenever you look at these state-owned entities, there’s lots of different entities that all kind of own each other. GRI Group owned GRI Electric as the controlling shareholder. Their shares dropped from about 18% to 3%. and Hill House Capital jumped in and became basically the main shareholder. That doesn’t necessarily mean controlling, but we’re not talking 50%, but they’re kind of in charge and they’re considered the main shareholder. With more or less a similar, we’re gonna buy this company and digitally transform it. Now, I think what got… Hill House’s attention was kind of the unique situation for GRI. It had a couple interesting advantages over its competitors. Its main competitor was sort of Midea and Hire. One of the things it had is it had sort of vertically integrated over its supply chain in a really unusual way. It was kind of upstream and downstream integrated. several of its core distributors were invited to be part of GRI. So Jinghai is a joint venture of sort of GRI’s leading distributors from all over the country and it became the second largest shareholder. So it’s like the distributors that push these things out to the country are the second largest shareholder, which is, you know, it gives them tremendous reach. But at the same time, if the world’s going digital, It’s a little bit like Bell having 20,000 stores. That was a really interesting strength. Now it’s not clear if that’s a strength or a weakness. I mean, up until Blockbuster got killed, their biggest single strength was their stores. And then they became their biggest liability. So Bell and GRI, it’s kind of the same. They had these very powerful distribution channels. And in Bell’s case, it didn’t end up being a liability. It turned into a new type of strength. But GREE, it’s a question of like, is this all gonna be sold online in this big distribution vertical integration thing you’ve been building for a decade? Is that a strength or a weakness? Another interesting thing about GREE, they are a massive spender on research and development. I mean, it’s absolutely huge. Four national level R&D centers, 15 research institutes, 900 laboratories. 14,000 R&D personnel, you know, a billion dollars a year spent on this. And we kind of see a similar company with a lot of the manufacturing giants that came out of China in the 90s. Huawei is definitely similar. They got tremendous scale on manufacturing, 1990s, 2000, became the world leaders by just pure size. And then they started shifting more and more that money into R&D instead of saying, hey, we’re not just going to be big, we’re going to be the smartest. And we’ve never seen that before. We’ve never seen air conditioner companies that spend this much. We’ve never seen telco companies like Huawei that spend this much on R&D. And then companies like Ericsson and Nokia have to go head to head with them. And they’re just outgunned on the manufacturing and the R&D side. It’s a pretty common picture. Okay, so they were definitely doing that. Another third thing I think that is interesting here is unlike their main competitors, Gris was much more of a single product, single market company. The other companies had all expanded into, we’re going to do smart homes, we’re going to do home appliances, we’re going to do everything related to homes. And we’re going to go international, which you can. You can buy Madea and hire all over Asia. Gris was really about, nope, we do air conditioners. That’s our business. They really did sort of stick in that area. And that’s kind of the interesting scenario. The unique ownership structure. If you’re entering a digitally more competitive environment, e-commerce, omni-channel, that sort of thing, okay, Bell at least had private management that were owners. So they had somewhat of the right incentives. But in this case, I mean, you’ve got state-owned management, our company, and you’ve got management who don’t own any shares. I mean, you’re as far away from an entrepreneurial-driven company as you can find. So for them, great software people ain’t gonna work there. People who know AI, they ain’t gonna work there. So you’re sort of very uncompetitive on the labor and management side. So I think those four things, some were in there was what got Hill House’s attention. Okay, so what does Hill House appear to be doing? I’ve been sort of digging in trying to find out what they’re doing. It looks pretty much like the digital operating playbook again. more or less. Looks to me like they’re doing three to four things. I had a good student paper written on this actually, so this is actually, 50% is probably their thinking here. You know, it’s mostly about the distribution channel, right? Like the air conditioners aren’t gonna change that much, and they’re pretty good at making air conditioners. The digital aspect is not gonna change that dramatically. Maybe you control it with your smartphone, but not so much. I mean… the digital tools are gonna play out in distribution and developing an online business. I mean, that’s the big lever I think they’re pulling. So Hill House made about a $6 billion investment. And from what I can tell, the goal of that money is to create an integrated online and offline sales model, channel expansion strategy, and just bring in new growth points to sales. Yeah, you’ve got the offline stores, you’ve gotta build the online, and you’ve gotta digitize to some degree the offline. Now, what’s interesting is it looks like the online and offline markets for air conditioners are both kind of growing steady. It’s not like Blockbuster, where the offline channel disappeared. And it’s probably not like Bell, where the offline channel is really a big strength. It’s… probably somewhere in the middle, that both markets, the online market sales and the offline market sales are growing three to 5% each per year. So they’re both trending up more or less. It looks like it’s gonna be a both scenario. So clearly that’s gotta be their biggest lever, doing all that stuff, becoming more digitally driven, all of that. Okay, second one, product diversification. Yeah, going beyond air conditioners, like every other home appliance company has done. Smart homes, smart devices, smart locks, temperature control, refrigerators, blenders, all of that. I mean, non-state owned appliance companies all have pretty much the same playbook. It’s just a greed that’s only doing one thing. And even their competitors, HiAir and Madea, are all doing this. Air conditioning, washing machines, fridge. rice cookers, that’s kind of big, electric heating, microwaves, water heaters, vacuum cleaners, all of that. So that’s clearly, I think, what they’re doing. Management incentives, big deal, right? That’s, if the number one lever is the distribution channels, I think the number two lever is management incentives. Getting this out of a state-owned entity and more like a digital company. And then it could also be global expansion. You know, they do have that option. Their competitors have done that. You could pretty much just take the Madea playbook and copy it. And I think you’d be pretty close to what you wanna do. Anyways, but if you look at the digital operating basics, it’s pretty much the same thing. Build out the digital core, still start to build out your capabilities, start to increasingly… connect with the end consumer directly and gather data from that points and then try and innovate as much as you can, throw off cash and then reinvest that in innovation and R&D mostly pointed at the end user experience. That’s kind of the same thing. Anyways, I think that’s pretty much it. I guess a bit shorter today, just two cases. It’s an interesting strategy. Oh, and they’ve also started to do some pretty big deals in Southeast Asia, working with, I think Tencent and WeChat, they’ve done some stuff in Indonesia. And these tend to all be big ticket, private equity investments, you know, three, five, six billion dollars. So they’re playing with very large dollars and going after large opportunities. But I think the strategy is pretty straightforward, as far as I can tell. We’ll see. But the two concepts for today, yeah, digital operating basics and then value point, which is this idea of combining capital with some other type of very surgical value add, whether it’s a capability like technology, a brand, political connections, a management ability, things like that. Anyways, I wrote a whole book on that that wasn’t very good. I think it’s out of print now, thankfully. It needs some work. But yeah, it’s a pretty solid strategy I learned from the Saudi billionaire who… basically did private deals all day long, pretty much like this. Okay, as for me, I’m doing pretty well. I mean, I kind of, I guess, explain what I’ve been thinking about. 100 Podcasts, I feel pretty good about that. You know, I like to look back and sort of see the path and I, okay, I feel pretty good. I actually traveled a long distance and really put some thinking forward over the years. So yeah, that’s it. Hanging out here in Bangkok, hopefully things are going to open up a little bit. The shopping malls are open, but I don’t really go to the shopping mall because I don’t really shop. I mean, my sort of two things I like to do are go to the gym and maybe the movies. And the two things that are not open yet are the gyms and the movies. So that kind of sucks a little bit. I’m still doing push-ups in front of the TV, which is got old two weeks ago. And then I finished Ghosts of Tsushima, the new expansion, Directors Cut, Iki Island, which was fantastic. It was great. but it’s kind of a little depressing when you finish it because then there’s nothing more to play. I really like that game. I don’t know why I like it so much. Yeah, so that’s kind of been my week, but yeah, I hope everyone is doing well. I’ll be in town for a couple more weeks and then I guess it’s off to the EU and we’ll see from there. But that’s it. I hope everyone is doing well. Thank you for listening and I will talk to you next week. Bye bye.