This week, billionaire Warren Buffett visited China, where he paid a visit to one of his more recent high-profile investments, BYD Co. Ltd. The Chinese car and battery manufacturer has hit a rough patch recently, with sagging sales and a stock down 35 per cent in the past 11 months. Still, it has been a big winner for Buffett’s Berkshire Hathaway Inc., which had seen its initial $230-million, 10 per cent stake in BYD swell sixfold in two years, resulting in profits of more than $1.2 billion.
The man largely responsible for those gains is Li Lu, a fund manager and investor who helped introduce BYD to Berkshire Hathaway, and who many now consider to be one of Buffett’s potential successors when the legendary 80-year-old investor steps down—whenever that may be—from his position as company chairman and CEO. It has been widely speculated that Buffett’s responsibilities will be split among at least three people at Berkshire when that inevitable day comes, and Li, just 44, has a remarkable life story, along with an intriguing financial background, to support his candidacy.
Born in Tangshan, China, Li moved in with relatives before his first birthday after his parents were sent to a re-education and labour camp. At the age of 10, he was reunited with his nuclear family following the Tangshan earthquake that killed an estimated 242,000 people. In the wake of the tragedy, his grandmother encouraged him to get an education, so he began to read and eventually made his way to Nanjing University where he studied physics and economics. In 1989, Li emerged as a key leader of the Tiananmen Square uprising. He helped organize hunger strikes, then watched as tanks and soldiers sent to control the situation attacked and killed hundreds of protesters.
Li fled to France, then later in 1989 came to the U.S. to speak about human rights at Columbia University. He wrote a book about his experiences and eventually received three degrees from the university—simultaneously. During his studies he dabbled in stocks, made his first fortune, and after graduation started his own hedge fund, Himalaya Partners. Li seemed to develop a certain swagger, once comparing the Dow Jones to sex in a 1998 interview with the New York Observer. “This market is not a man’s sex drive,” he said. “This market is a woman’s sex drive. It is really experiencing a multiple climax.” Li attracted affluent clients, such as Sting, bombed out when Asian stocks fell in 1998, then made it all back.
Later, through a human rights contact, he met Ronald Olson, a Berkshire director, who introduced him to Charlie Munger, the company’s vice-chairman. Munger and Li clicked, so much so that Munger gave the young investor a piece of his family fortune to start a fund to bet on beaten-down stocks. He recently told the Wall Street Journal that Li’s ascension to becoming one of Berkshire’s top investment officials was, in his mind, “a foregone conclusion.”
Still, Li’s only big investment win has been BYD. And as of June, his overall investments were down 13 per cent this year (albeit after a 200 per cent return last year). His track record might make Berkshire stockholders a little anxious. Yet if there is one thing Li appears to have mastered during his lifetime, it’s the ability to adapt in the face of adversity and succeed against all odds.