Chapter 1222 The Good Man Zhao Fusheng

Ignorance and weakness are not the main obstacles to human survival; arrogance is.

Liu Qiangdong came to see Zhao Fusheng for a simple reason: he had some doubts that needed Zhao Fusheng to resolve. Even though he knew full well that his current status was far removed from that of the master of Future Group, he really wanted to know why Aipu Investment had withdrawn from this investment, and why Future Investment was willing to pour such a large sum of money in.

That was a full fifty million yuan, a figure Liu Qiangdong had never imagined before. Even though, because of this financing round, his nearly sixty percent stake in Jingdong Mall was suddenly worth over a hundred million, he still felt somewhat lost. He didn't understand what the truth behind this matter really was.

If there is such a thing as truth, it must be an expression easily distorted, concealed beneath layers of truths. People easily hide themselves and readily accept the safest answers, but truth always lurks in corners where you least expect it, catching you off guard and drenching you in its reality.

Liu Qiangdong was very afraid that one day he would become a mere spectator, even though this company was founded by him personally.

Control of a company is a matter of life and death for the enterprise.

He had to be cautious.

"Heh, quite an interesting person." Zhao Fusheng smiled and said to Dong Chenxi, "Since that's the case, please invite him over."

Although this Brother Dong, in the era of Weibo's popularity, tried to act like a public intellectual, often striking a pose of giving back to society, in Zhao Fusheng's view, he was no different from other capitalists. He had all the vices of the rich, only he accidentally capsized in Minnesota.

Soon, a figure that Zhao Fusheng had only seen on the internet and television in his previous life appeared before him. Of course, Brother Qiangdong at this time looked vigorous and strong, his eyes bright, and although his expression showed some anxiety, it was clear he was a confident man.

"President Liu, hello." Zhao Fusheng chuckled and said to Liu Qiangdong.

"Chairman Zhao, hello." Although it wasn't his first time meeting Zhao Fusheng, Liu Qiangdong still felt that despite this young man being younger than him, his aura was no less impressive. In fact, it made him think that such a businessman truly embodied the demeanor of a real big boss.

"I wonder if there's something specific you'd like to discuss today, President Liu?" Zhao Fusheng smiled and said to Liu Qiangdong. "Is it about cooperation? Don't worry. Although I don't directly lead Future Investment Fund, Miss Dong has been with me for many years. You need not have any concerns about the professionalism of Future Investment Fund. Since we have promised not to interfere with the company's normal operations, we certainly won't."

Given Zhao Fusheng's age and experience, he could fully guess Liu Qiangdong's purpose, so he simply put the other's concerns on the table. Although this might be a bit direct, Zhao Fusheng really didn't have the mood or time to beat around the bush with Liu Qiangdong.

Sure enough, upon hearing Zhao Fusheng's words, Liu Qiangdong was first startled, then looked utterly bewildered. He truly didn't understand—could the other party really be so optimistic about the future of Jingdong Mall?

"What, don't you believe me?" Zhao Fusheng saw Liu Qiangdong silent, smiled, and asked him.

But for some reason, Liu Qiangdong felt that at that moment, Zhao Fusheng's aura was somewhat overwhelming.

"It's not that I don't believe you."

Taking a deep breath, Liu Qiangdong, worthy of being a future mogul, quickly calmed down, looked at Zhao Fusheng, and said seriously, "Chairman Zhao, I know that compared to Future Group, Jingdong Mall is just a company that has just started. But I really want to know how you can guarantee that my control over the company won't be harmed by the emergence of a major shareholder like you. After all, this is only the first round of financing. I believe that, barring accidents, Jingdong will develop better and better. Then a flood of investments will pour in, and I..."

He didn't continue, but Zhao Fusheng already understood his meaning. In the end, Liu Qiangdong valued his control over Jingdong.

"What do you think your significance is to Jingdong Mall?" Zhao Fusheng looked at Liu Qiangdong with interest, answering the question indirectly.

Or to be more precise, instead of answering Liu Qiangdong's question, he asked him a question in return.

Liu Qiangdong was silent for about half a minute, then said gruffly, "I think no one else can lead Jingdong to success except me."

Zhao Fusheng laughed. It had to be said, this man who fulfilled the dreams of many netizens, his confidence alone was enough to command admiration.

"Since that's the case, let's use the AB share system." Zhao Fusheng said calmly. "Jingdong Mall's equity structure will adopt the AB share system. If you lose control of Jingdong, you can take the money and leave."

The so-called AB shares are essentially a game of power. The core of AB shares is that same shares have different voting rights. Simply put, it separates voting rights from dividend rights.

Under the dual-class share structure of AB shares, a company can issue common shares with different voting rights, generally called Class A and Class B, i.e., AB shares. Typically, Class A shares have one vote per share, while Class B shares have N votes per share. Class A common shares are usually held by investors and public shareholders, while Class B common shares are often held by the founding team.

There is deep knowledge here. The history of the AB share system can be traced back to the 1920s, but there has always been opposition to the listing of AB share companies. People think that while it can prevent hostile takeovers, the separation of voting rights and dividend rights is too unfair to investors. It wasn't until the 1980s, with the emergence of leveraged buyouts and hostile takeovers, that more companies adopted different voting rights structures. In the late 1980s, the United States allowed the listing of shares with different voting rights.

After the millennium, a new wave of high-tech company listings further promoted the popularity of AB shares. For example, Google, Facebook, LinkedIn, GroupOn, Zynga, etc., all adopted dual/multi-class share structures.

Nowadays, more and more technology companies are adopting the AB share system. Because as a company grows, it needs capital support, and in the process, equity is continuously diluted, often causing the founding team to lose control of the company.

The most famous example is Steve Jobs. Before Apple went public, Jobs held only 15% of the shares. Although initially, due to his outstanding talent and strong desire for control, he maintained control over Apple, later, due to poor company performance, in 1985, the board voted to remove him from his position as general manager, effectively ousting him from Apple.

The reason for this setback was that Jobs did not have enough voting rights within Apple. If Jobs had adopted the AB share system at the time, the outcome might have been different. Of course, Jobs later returned to power at Apple, which is another story.

Later, Jobs reflected: 'I've seen a lot of terrible things happen to many well-run companies. These companies are like playing cards in the hands of gamblers, constantly resold, sometimes due to venture capitalists' decisions, sometimes due to others' decisions. I just want to have enough capital and shares to ensure that when these two companies encounter difficulties, they can weather the storm.' Therefore, designing a good control structure is very important.

Liu Qiangdong certainly understood what the AB share system was, but he didn't understand why Zhao Fusheng would do this.

"It's simple. I invest in Jingdong because of you and your team. I believe you can deliver results." Zhao Fusheng glanced at Liu Qiangdong and said slowly.

This was true. After all, as an investor, the biggest reason for putting real money into a company while willingly taking the risk of holding only a few voting rights and not interfering in operations is precisely because they see the company's future potential and the team's ability to realize that potential.

Whether running a business or investing in one, the focus is on the company's operating results, and everyone hopes to make the pie bigger.

In the mobile internet era, many companies are human-capital-driven. The value creation of a company relies more on talent than on resources or money.

In human-driven companies, the initial capital is small, meaning the company's existing value is not large. The creation of company value relies more on human capital to create incremental value.

One of Zhao Fusheng's most important insights about investment is that the purpose of investment is to jointly make the pie bigger, so that he can get a larger share, and the team is the fundamental factor in making the pie bigger.

Moreover, the AB share system is more conducive to doing big things. In fact, the core behind the AB share system is to target entrepreneurs and protect entrepreneurial spirit.

Entrepreneurial spirit is the greatest human capital. Ensuring the entrepreneur's status as the actual controller is crucial for making the pie bigger.

Economist Zhang Weiying once said that the person with the strongest entrepreneurial spirit must be allowed to control the company. 'When we invest, we don't actually know whether there will be returns in the future. There is a lot of information we don't have. We can't make decisions according to computer programs; we can only rely on our own judgment and imagination. Moreover, people are different; some have more imagination and judgment than others. Whether the market is effective depends on the most intelligent, judgmental, and imaginative people in the market, and how they make decisions. These people are entrepreneurs.'

The nature of capital is to pursue profit. So-called venture capital is about how to judge and select entrepreneurs. Investment involves risk. If you choose the wrong person and entrust capital to someone without entrepreneurial spirit, the business fails, and the capitalist loses. Conversely, precisely because capitalists must bear risk, they have the incentive to choose people with entrepreneurial spirit to run the business.

Control of a company is crucial. The AB share system, with its different voting rights for the same shares, ensures the founder's control over the company.

Zhao Fusheng felt that the AB share system was undoubtedly the most suitable for investors like him, because he only liked to see his invested money double continuously, but he was too lazy to bother with the company's operations. For him, as long as he could make money, how these companies developed was a matter for founders like Liu Qiangdong, Ma Xiaoyun, and Ma Huateng to worry about.