New beats old in pandemic economy

Editorial | Mary Ma 3 Sep 2020

In the massively competitive business world, there are two essential elements to getting rich or super rich.

First, knowing that money grows money; and second, possessing the inborn sense of how to make lots of it.

Hong Kong tycoon Li Ka-shing and Berkshire Hathaway chairman Warren Buffett both possess these qualities in abundance.

But in this pandemic-affected economy, it could be argued that Superman has outwitted the Sage of Omaha.

Li's fantastic wealth, built over the decades of Hong Kong's breakneck growth, is legendary.

But it came as a surprise to learn that, if Bloomberg was correct, his investment in video-conferencing app Zoom Video Communications has swelled massively over just a few days to account for a full third of his fortune.

Although Li is known to have invested in a number of start-up ventures, we are used to associating his wealth to real-estate development, port and energy operations and supermarkets.

To some extent, his business composition is similar to that of Warren Buffett's Berkshire Hathaway.

Buffett is very careful and conservative. Li is also conservative, but he is open to advice from close associates, including his long-time confidante Solina Chau Hoi-shuen.

While Buffett earlier this year was learning how to use an iPhone, Li's private investment vehicle Horizons Ventures was placing bets on technology-based start-ups.

Li was among the first to put money into Facebook, which turned into a legendary investment.

Such seed money is separate from his main vehicles, CK Hutchison and CK Asset.

It would not come as any great surprise if many of the start-ups Li invests in eventually fail - that is only to be expected.

Yet he stands to receive immeasurable returns if just a few survive the gruelling take-off phase to eventually fly into massive success.

According to Bloomberg, Li has an 8.5 percent stake in Zoom. In 2013 and 2015, the tycoon took part in Zoom's funding exercises via Horizons.

When Zoom went public in March 2019, Li's stake was an estimated US$850 million.

Since offices and schools were closed by the coronavirus pandemic, demand for the Zoom app have increased exponentially and Li's stake is now worth about US$11 billion.

Like Zoom, businesses based on a new-economy model have mostly gained from the pandemic crisis as people have deserted Main Street.

I take with a pinch of salt the Bloomberg report that Zoom now accounts for one third of Li's wealth because, besides the listed CK vehicles, he has also maintained considerable private investments.

That said, I guess even Li was amazed to see how a video-conferencing app has become so valuable - more valuable, in fact, than energy stocks that humans can't live without.

As for Buffett, I have no doubt that it would be even harder for him to accept a shift away from the old economy.

After the US was hit by the pandemic, he unloaded many stocks to increase his cash holdings to a record US$146.6 billion at the end of June to await opportunities to acquire quality companies at bargain prices.

There hasn't been much progress since then.

It's well known that Buffett is fond of old-economy stocks including railways, banks, and food and beverage - with Coca-Cola probably being the most iconic of all his holdings.

As for the new economy, the Oracle of Omaha has not been as open-minded to its constituents as his Hong Kong peer.

What have we learnt from these legendary tycoons? Certainly, foresight and a readiness to face measured risks can make a huge difference.

And, in the spirit of Zoom, we have to learn to keep thinking outside the box.



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