Long-Term Thinking and Milestones: Are You Building or Consuming Every Day?

“Long-term thinking” and “milestones” In his “Friends of Time” New Year’s Eve talk, Dedao app founder Luo Zhenyu explained long-term thinking this way: compounding over time can produce remarkable results. With long-term certainty, a person can withstand external uncertainty. A sustained long-term goal lets an individual bring external resources together. In her Hupan University talk on “finding a place for oneself in long-term thinking,” Liang Ning said that it means meeting uncertainty with inner order. The world is uncertain—that is a fact—and what we can control is ourselves. For a company CEO, a long-term perspective is even more essential. As an article in Harvard Business Review put it, Amazon’s secret of success is a victory for long-term thinking. Bezos would rather focus on distant goals and lead with a long view. “Remaining steadfast in your beliefs rather than following the crowd is a rare quality.” Looking at Amazon’s market value today, the value of long-term thinking is clear. ----- ----- Zuoyebang founder and CEO Hou Jianbin’s understanding of “long-term thinking.” What is long-term thinking? Lately, I have been considering this: at its core, it means putting your own time and energy, and the company’s time, energy, and resources, into things that strengthen its competitiveness over the long run. The test is whether our daily work builds something or consumes it—or, put differently, whether we are consuming more or building more. Long-term thinking undoubtedly builds assets, barriers, and competitiveness. It directs us to strengthen our internal capabilities in some areas and accumulate value for lasting competition. Other tasks can be paid for and outsourced. In that case, money is the cheapest asset and the least valuable competitive capability: if something can be done simply by spending money, it does not distinguish you from your peers. ----- Long-term thinking about competitiveness: Every investment builds an asset. Consider spending across the education industry from a long-term perspective. Everyone appears to be spending heavily, but what is each company buying? If it is only customer acquisition, many companies get just 0.4 or 0.5 back after a campaign: spend one yuan and recover 0.4–0.5 yuan. That is not profit, merely revenue. If a business grows solely through such spending without building a position in users’ minds or accumulating brand value, it is simply buying some paying users and generating losses. That is all. Zuoyebang, however, has leverage within its app. Users remain active and stay over time because the use case is frequent. Users acquired through spending therefore continue using our platform, gradually raising monthly active users. The market for this tool may then concentrate around a central platform. Baidu and Douyin work this way; almost all utility products have this winner-take-all characteristic. Sustained early spending can eventually build a barrier in users’ minds and bring market share to a substantial level. Another metric for online education companies is the number of users paying full price. There is no continuing leverage on that dimension: course purchases and profit are enough to calculate the return on capital. In recent years, the industry began hiring teachers by poaching them from the market. Zuoyebang began recruiting teachers on campuses in 2017. Many teachers we developed ourselves now earn a million yuan a year, or even several million. That, to me, is long-term thinking. When an industry or company needs many tutors and lead teachers, we must build our own development and training capabilities, because those are long-term “assets.” If we only recruit from the market, where is our competitive advantage? Our teaching quality will merely match the market average. Only a distinctive ability to develop talent can win. Moreover, a few years ago, while other companies put teachers straight into classrooms after hiring them, Zuoyebang began separating curriculum research from teaching. Curriculum research accumulates assets and preserves content. I have not calculated how much more this decision cost than our peers’ approach, but in 2020 every education company can be seen building a dedicated curriculum-research team. My view is that entrepreneurs must break their foundational capabilities down layer by layer. Essentially, a company operates with people on one side and money on the other, using both to create more assets. If, after building a business, your only assets are still people and money, I am sorry, but you probably have not done it right. Under your allocation and management, people and money need to produce more, with greater value and impact. Long-term thinking about people is harder still. When I left Baidu, I brought 40–50 colleagues. Zuoyebang now has nearly 20,000 people. Recruiting is one of the hardest hurdles, in my view. At Baidu, I kept reminding myself to be humble: only 10% of assembling a team and recruiting business colleagues came from my effort; 90% came from the platform’s value. When we first started up, someone saw our rundown building from outside and declined to interview. I realized I had overestimated myself: incubating a team at Baidu had relied 99% on the platform and only 1% on me. Long-term thinkers may build their talent pool differently. My rule is six parts culture, three ability, and one experience. Culture means finding people who share our mission and values. That matters greatly to me. Someone who cannot accept criticism, for instance, would not fit a company where I encourage direct communication. Ability means learning ability, because the industry changes and develops rapidly. Only one part is experience. I used to conduct new-hire training myself. With 11 branches now, I can no longer do it in person, so it has moved online. Culture is our underlying language for doing things and handling situations, and it expresses the company’s direction. We seek solidarity as strong as metal and the frankness to sharpen one another like stones. We want users first, rather than personal advancement or merely reporting upward. At least, I practice that myself. I believe everything good comes at a price; only after paying that price can it stand firm. ---- Long-term thinking about development: Measure milestones for yourself. In a prolonged contest, every CEO needs to find their own milestones. To me, Zuoyebang’s milestones are not going public or ranking first in market share, but improvements in core competitiveness. Greater scale is the outward sign that capital providers and teams tend to value. The real core is the CEO’s increasingly clear understanding of what the company can do. Take online education, Zuoyebang’s industry. It is a long game. When we started, we considered three questions. Is the market big? Enormous. Does it have problems? Many: China has 180 million students but only 11 million teachers, so teachers are scarce. What can we do? A great deal. Several companies were building photo-based question-search tools. Despite considerable criticism, I remained convinced that photo-based question search was China’s largest technology-leveraged platform for providing basic education with abundant, high-quality, free, convenient teaching resources and answers. With too few teachers and uneven quality, it could solve major problems. The online-education contest has kept lengthening. After photo-based question search, Zuoyebang had established its market position by 2017, but that was not enough for an education company. We therefore used live classes to meet students’ learning needs. That business has now been refined for four years. My instruction to the photo-search team has always been: regardless of cost, however many activations this market records each day, Zuoyebang must capture 50% of them. Over the years, milestones demonstrating improved capability have included exceeding 80% market share in photo-based question search, securing our position on traffic. Our live-course re-enrollment rate now leads peers, establishing the product as well. When competition turned to scaling, we expanded to nine cities last year and 11 this year, and established ourselves there, too. The next milestones are integrating traffic and enrollment operations and improving brand strength and word of mouth. Finally, consider financing’s effect on this long contest. Is financing a milestone for an online education company? Undoubtedly, this market has attracted enormous capital, making “money” one marker of the contest. As a long-term thinker, I see it this way: raising children today differs from 50 years ago because their environment has completely changed. Startups are similar. Capital is an important variable, just as government relations and public opinion are. We must learn to dance with capital. Competition in education is intensifying. Its immediate cause is the arrival of capital, a major variable. Ultimately, capital comes because the market is maturing. People think harvest time is approaching. Once, nobody knew what seedlings could grow here; now several trees are looking promising. My priorities differ by stage—sometimes operations, sometimes management. “Capital” has not, in fact, been my single most important task during any particular period. We know clearly that business fundamentals remain the core. ---- There seems to be plenty of advice along the entrepreneurial journey, but CEOs must experience things to change; you cannot know the difficulty without doing the work yourself. Advice between adults is cheap. Even sincere advice may not get through. Yet I am proud of the human species, in large part because we keep experimenting and making mistakes ourselves, rather than following someone else’s path, opening up more possibilities.