The Man Who Brought Charlie Munger to China: Publishing's Golden Decade Is Over
Publishing has no pricing power. JD treats books as a loss-leader, selling them at a loss, because to JD the industry's tens of billions in revenue is just an advertising budget. Shi Hongjun says publishing will become a marginal industry — but also a more "noble" one.
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JD made books a loss-leader, and publishing lost its pricing power
Shi Hongjun says the core variable in the end of the golden decade was the rise of distribution channels. JD treated books as a loss-leader product; Liu Qiangdong said internally that the book sales department would not be allowed to turn a profit within three years — if it did, he would fire them. The point was to crush Dangdang with low prices. The entire publishing industry was only worth a few tens of billions at the time, so losing 400 million as an advertising expense was no problem at all for JD — but publishers couldn't take it. Buying in at 50% off and selling at 40% off: publishers thought it was irrational, but the other side was using an entire category to attack your single category. The NDRC also wouldn't allow price protection, viewing it as the opposite of fair competition. The result: publishers have no pricing power, and when the 618 sales come around, it's the publishers who give up margin, not the platform.
— Shi HongjunReading is anti-human, and people have lost the abstract study
Shi Hongjun thinks e-books actually had little impact on print books; what was really taken away was attention and time. Flipping through WeChat Moments or scrolling short videos on your phone and it's gone in an instant; reading requires a quiet environment and a solid block of time — it's anti-human. As he puts it: many people don't even have a study at home anymore, but the more critical thing is that they increasingly lack an "abstract study" — the mental space that lets you settle down and read. He reads on WeChat Reading himself, and within maybe three minutes he wants to check WeChat. Without an immersive reading environment, the whole industry suffers.
— Shi HongjunPublishers survive without the market, so no one does the dirty work
Almost all publishers in China are state-owned and belong to the ideological sphere, so you can't look at them through a purely market logic. Shi Hongjun points out a counterintuitive fact: you almost never see a publisher go bankrupt from insolvency — if one really went under, the provincial propaganda department wouldn't stand for it. Many publishers are doing very well financially. A big chunk of revenue comes from textbooks (People's Education Press, for example, is far larger than CITIC Press), and another chunk is called theme publishing: the propaganda department gives you money to put out a set of books, or a research institution pays for a publishing project, and the margins are very high. The more this is the case, the less anyone is willing to do the books that genuinely have to be sold in the market — promoting one book means contacting at least a hundred-plus organizations, and with over a thousand titles a year, it's just too exhausting.
— Shi HongjunPublishing is a marginal industry, but it will become more and more noble
Shi Hongjun says publishers need to know their place: don't assume the whole world has to read, because some people genuinely don't read; and don't assume books are the only channel for receiving information. He believes publishing is a marginal industry, and will increasingly not be a mainstream one — its functions will be broken up by many channels. A WeChat Reading annual pass is very cheap, the piracy industry never stopped, and you can read plenty for free in public accounts. But marginal doesn't mean bad: the further we go, the more print books may become the most high-end thing, read only by elites; buying a print book carries ritual and class distinction. He says this is one of the reasons he left publishing, but to put it another way, publishing will become more and more "noble."
— Shi HongjunThe English Poor Charlie's Almanack is a coffee-table book; the Chinese edition we shrank
Shi Hongjun says he had no idea who Charlie Munger was when he took on the first book — it was Liu Liu who introduced him: there was a man in America who was extraordinarily good at investing, and his Chinese student wanted to publish a Chinese edition as a birthday gift. The English edition of Poor Charlie's Almanack is a "coffee-table book," a large format meant to be read on a coffee table, and in his view not a book that sells to a mass market. He liked it at first sight because he felt it wasn't about investing at all — it was about life, about how to succeed, about how to master a system of knowledge. When it was published in 2010, the first edition was the large format; a month or two later they decided they couldn't publish it that way, and only then changed it to the small format now on the market — in the US it's still that large format to this day, which is why it sells so few copies. All the Chinese editions combined come to roughly 1.15 million copies.
— Shi HongjunMunger ignoring people isn't rudeness — he's always thinking about his own problems
Shi Hongjun first met Munger in 2009 at a hotel in Beijing. Li Lu made the introduction; he went into the room to introduce himself to Munger, and Munger seemed to look right through him, just talking about his own matters. Most people would think the man was being rude, but Shi Hongjun says no — he was simply focused on that one thing, and no one could get a word in; he had to finish what he was saying. This year, visiting his home, it was the same: the moment they walked in he was talking about Apple, because he had probably met Cook the day before. Shi Hongjun says it feels like he is forever thinking about something, and whether he hears what you say is not certain. This year, at 99, Munger sat there and talked with them for nearly two hours, in remarkably good spirits, completely unlike the usual impression of an old man.
— Shi HongjunMunger's secret: make your understanding worthy of your wealth
Shi Hongjun's observation is that Munger made sure his level of understanding and the progress of his knowledge could keep pace with his wealth. Many people get the chance to become rich, but if their understanding doesn't match their wealth — especially those who get rich overnight — most of them are finished immediately. Munger used knowledge to make himself a wealthy man, and on the other hand he kept evolving: at 99, he understood Bitcoin and new energy (because he invested in BYD), and his judgments were quite ahead of their time. Shi Hongjun says there's no trick or secret formula, just Munger's line: every day, be a little better than you were when you got up. He also mentions that Munger flies economy because he wants to stay embedded in life — fly business class or a private jet and you have far less contact with people.
— Shi HongjunFriends aren't about quantity; friendship also has a cost
Shi Hongjun says one of the biggest things that struck him after reading Poor Charlie's Almanack and Munger was about circles of friends. He went to business school and did an EMBA, and one of many classmates' goals was to make more friends, but Munger made him feel: friends aren't about quantity; what matters is whether you can be friends for the long haul, because friendship also has a cost — make a friend and it's over in six months, and the cost is high; but if it's a friend for life, that's right. Munger and Buffett only first met in 1959, and only became true colleagues in 1975. Buffett said the two of them settled it with a hug — no agreement, no contract. Shi Hongjun also mentions that Munger said he was embarrassed to go fundraising, but his existing clients and friends naturally became investors — that kind of inner trust is hard to come by.
— Shi HongjunIn their own words · checked verbatim
If your book sales department is not allowed to turn a profit within three years — if you turn a profit within three years, I'll fire you.
如果你们做图书销售的部门 不允许你们三年之内有盈利 如果你们三年之内有盈利的话 我就把你们开掉
Shi Hongjun23:08
I think publishing is a marginal industry. Don't treat publishing as a mainstream industry.
我认为出版社是个边缘行业 别把出版社当做一个主流行业
Shi Hongjun30:18
I never asked about the US, but I know that's what it is, because look at America — if you go to an ordinary bookstore, you won't necessarily see it. Expensive, big, and inconvenient to pick up.
美国我没问过 但我知道就是它 因为你看美国 如果你到一般的书店去 不一定能看到 又贵又大 拿起来又不方便
Shi Hongjun36:19
Make your level of understanding — or the progress of your knowledge — worthy of your wealth.
让自己的认知水平 或者让自己的知识的一个进步 能够配得上自己的财富
Shi Hongjun57:31
Friends aren't about quantity; what matters is whether you can be lasting friends, because friendship also has a cost.
朋友不在意多 是否能够做持绝的朋友 因为做朋友也是需要成本的
Shi Hongjun1:06:34
Between me and Munger, it was settled with a hug. We had no agreement, no contract. That's what a friend is — a friend you can trust.
我跟芒格之间 是用一个拥抱解决的 我们没有协议 没有合约 这才是朋友 可信任的朋友
Shi Hongjun1:07:34
Figures
| Cumulative Chinese sales of Poor Charlie's Almanack | About 1.15 million copies (all editions combined) | 36:19 |
| Chinese rights fee for The Da Vinci Code | Four to five thousand US dollars | 13:05 |
| Chinese rights fee for The Kite Runner | Less than ten thousand US dollars | 13:05 |
| Sales of The Day We Broke Up After Graduation | 300,000 copies in under a year | 11:04 |
| Sales of Civilization, Modernization, Value Investing, and China | Close to thirty or forty thousand copies | 50:29 |
| Translation fee for Poor Charlie's Almanack: The Essential Wit and Wisdom of Charles T. Munger | About four times the publisher's standard rate | 53:31 |
| Production cycle for Poor Charlie's Almanack: The Essential Wit and Wisdom of Charles T. Munger | Roughly three years or more | 54:31 |
Glossary
- Coffee-table book
- A large-format, beautifully bound book meant to be leafed through on a coffee table, usually not a mass-market read.
- Malthusian trap
- Population grows exponentially while food does not, so at a certain point famine and war break out over insufficient food and everything returns to the starting point.
- Two-track analysis
- A Munger thinking tool: analyze a problem simultaneously along two tracks — rational factors and subconscious/psychological factors.
- System 1
- Kahneman's fast-thinking system, operating automatically on intuition and the subconscious — energy-efficient but error-prone.
How to listen
Founders and investors interested in publishing and the business models of content industries; long-time readers of Munger and value investing; anyone who wants to know how a book actually goes from acquisition to bestseller.
Listeners with no interest in either the shift in publishing's distribution channels or the details of Munger's life can skip to the Munger section after 33:11.