Interview Series #4 - Family Office Manager

Here is the fourth interview of our China Finance Interview Series. It is with a manager of a family office. In the wake of his father's business, Mr. Wang, as he shall be referred to in the interview, is now in charge of managing all investments on behalf of his family (with oversight from his father).

As this was the first time I had met Mr. Wang, your faithful correspondent was not able to get into as much detail as hoped, but hopefully this can provide our WSO monkeys with a more clear idea of a new generation of wealthy Chinese managers.

Could you begin by telling me a little bit more about your background?

My background is one that is becoming more and more common these days in China. I was definitely among the earlier ‘second generation’ entrepreneurs. My father was one of the first businesspeople in the country to open a really successful chain store. When he was ready, he thought about taking the company public on the [New York] Stock Exchange, but in the end he preferred to have the company be bought from him by another big company. They were trying to enter the China market. At the end, that company needed to close down their stores in China, but my father’s business is still operating to this day. As a family, we just own less of it than once before.

How is this lifestyle becoming more and more common?

Yes – in the 1990s, entrepreneurs really had their first taste of success. My father feels lucky to be among that group of people. He had done business in Hong Kong and came back to China. At that time, there was actually a chance of success for private businesses, unlike even 10 years earlier. I won’t go into it too much, but a lot changed.

[Conversation changed gears for a short while onto Deng Xiaoping's opening up of China]

So I grew up really knowing that I needed to take my father’s business on my shoulders and grow it. Or at least, I thought that this is what I would need to do. So from a very young age, as I saw him work hard on the stores, I would try to copy what he did. Not copy actually, but see what he did and then if I liked it, [I] would do it too. I never went to university. My school was running the stores since I was eight years old. (Smiles)

What are some of the lessons you learned from your father?

Hmm. I think two things. The first is to treat all of your employees well. No matter if she is the garbage man or the big boss. Because if you do, then your employees will work harder for you. But you should not be nice just because you want something back from them. People can feel this. This is fake. It is too bad, but many Chinese are like this now. They just want quick money. You should be nice because you want to be nice to that person and you want to work well with that person. My father would always give his employees double pay over national holidays if they wanted to keep working. If they wanted to go home to be with their families, he let them take an extra week vacation. By treating your employees well, they will go home and tell their families about how good their boss is. This generates a good feeling, a good reputation, and good business!

The second thing is to pay your bills on time. As a small business owner and then large business owner, my father always had bills to pay. Lights. Heating. Rents. This. That. This. He always paid on time because now other people trust that he does what he says he does. This is very important to being able to grow a business to a big one, because I think, just I think, no science behind it, that many small businesses become large businesses because of hard work, yes, but also because of one big customer. Or one customer that becomes your best customer and allows you to grow to big business. Trust is important for big customers.

Was there any big customer that transformed your father’s business?

Yes. Government offices. (Smiles)

That does sound like a good customer.

Mr. Wang: Yes. It was. But now it is different. I currently manage my father’s investment company. When he sold his family business, which was making doors, tables, chairs, furniture, he needed something to do with his time and money. So he began to invest his money in many things: real estate, machinery, and wood. Those were the three big ones.

Okay, real estate I have heard before. Many people have had some really successful investments in real estate. But machinery and wood intrigue me. Could you please describe those a little more?

Wood is a good business! And it is one my father knew well. There are always houses going up and always houses coming down in China. Some people like to feel that they live in a modern place, but many people in my father’s generation believe old houses are better. When houses are being torn down, you can go in for very cheap and remove expensive wood that is imported wood. In 1920s and 1930s much wood was imported here to Shanghai and now is quite valuable. You can use this for furniture and carvings, but also for doors and decorations in the home. Very cheap to get and spend a little time fixing it and sell at very good price. Also it is a very volume-driven business. Usually many houses go up at one time, so many people in one area will buy. When houses come down, many come down at one time, so getting lots of good wood is easy.

Machinery is also good business. Many Chinese are moving to cities and so more products are needed. Machines that make all sorts of every day use items are in high demand. Margins are not very high, but again, like wood, volumes are great. In China, you don’t need to sell at a high margin to make a lot of money. There are so many people here. (Smiles)

You mentioned you currently manage your father’s investment company. What do you do on a day-to-day basis?

I am the general manager of the holding company, so I oversee all of our portfolio investments. We do not really invest in financial [products] or anything too complicated. We are much more interested in preserving our wealth for the next generation and so investing in things we can see and feel and touch are more desirable. I meet with the managers of our businesses on a daily or weekly basis to see if I can help them in any way, to see if we should increase our investment, decrease, or stay the same.

So the managers of these ‘various businesses,’ will come and meet with you face-to-face, so you have a better idea of how the businesses are operating, correct?

Yes. Face-to-face meetings are better than phone meetings. You can tell if someone is telling you the truth or not. (Smiles) Some of our portfolio holding companies are in central and western China as well, so I will fly there once every two weeks to speak with those companies. Much of our business out there is in wood and real estate, with machines and factories closer to [Shanghai] where the population is increasing more quickly and more people move to cities.

Great. Anything else you'd like to add?

We all get rich. Some people just get rich with money. Others have rich family life. It doesn't matter.

[Interview has been edited for clarity and condensed]