This article is excerpted from a keynote speech by Song Xiangqian, Founding Partner of Harvest Capital, at the 12th BRICS Summit.

Established in 2007, Harvest Capital adheres to the value investment philosophy and is a specialized fund focusing on China's consumer and service industries. Representative investments include Jinmailang, Little Vegtable Garden, Dongpeng Beverage, Qiaqia Food, Jiayuan Food, Laiyifen, Xiaoguan Tea, Aimer Group, Aurigen, Babi Food, and Laoxiangji.

Song Xiangqian emphasized that the highest dimension of business competition often transcends morality, simplicity is the essence of the Dao, and behind a good brand lies the endorsement of the entrepreneur's character. The concept of a community with a shared future for humanity means that brands and products that become part of people's lifestyles can provide social benefits and create consumer surplus.

The following is an excerpt of the essence of Song Xiangqian's speech.

The essence for business is simplicity through virtue. This is an era where good people do business, and it represents the normalized logic of high-dimensional competition in the business world. "Simplicity through virtue" needs no elaborate explanation, and it is undoubtedly true that "for business, virtue comes first." Behind a company, a brand, or a very good product, there must be the character of the entrepreneur. A good company, a reputable brand, is inevitably guided by the right set of values.

All products and brands that coexist with the destiny of humanity and become part of people's lifestyles must be capable of creating consumer welfare and surplus value. Consumers are intelligent, and the market is objective. A company guided by values, in the long run, must be progressive and able to provide consumer benefits to the market. Therefore, this is an era where ethical business practices thrive.

Google's motto "Do not be evil," anchored in user-centric values, is essentially promoting the right set of values. Why does Costco insist on not taking more than a 10% profit margin? Essentially, it is because they aim to create benefits for consumers and contribute to a better life.

When consumers truly understand and experience that a brand is genuinely creating a better life, better products, and better services for them, they also genuinely support the brand. The brand then achieves the positive cycle of user mindshare and the correct business logic, creating a true positive loop for the value of the enterprise and the brand.

Resonance will bring opportunities for mutual success and collaborative development in one's career. However, this process is lengthy. Take Dongpeng Beverage as an example; before I invested, I continuously visited for 5 years, engaging in tea-drinking discussions, each lasting only an hour. During this time, the brand almost "strayed" twice. So, why did I finally choose them? The reason lies in our strong communication and understanding abilities, enduring patience, powerful empathy, and resonance with others. Built on a common dimension, it fosters high-dimensional trust and mutual benefit. Essentially, empathy is a deep understanding of corporate values, patient adherence to long-termism, and honest dedication to altruistic empowerment. It is also a commitment and pursuit of societal values.
Our investments fundamentally embody an industry investment in altruistic empowerment. I believe the ideological movement behind capital is crucial. What does investment really give? If it creates value, providing money is essential, but that's just the first step. It requires offering strategies, ideologies, and values. Resonating and building dreams with a mindset of mutual understanding and collaboration is crucial to jointly realizing dreams. Entrepreneurs are not just dream builders but dream chasers and torchbearers.
Dongpeng created a market value of over a hundred billion. In 2003, Lin, the head of the company, boldly purchased a state-owned enterprise on the verge of bankruptcy. In 2009, he entered the functional beverage track. How did he achieve success? He is not only a dream builder but also a dream chaser with a powerful sense of mission and vision. Dreams can manifest in reality, and after achieving financial freedom, finding a high ground for ideas becomes crucial. Regardless of our life's state and stage, giving meaning to our lives will be the most important thing. If you make the right choice and invest your heart, let time take care of the rest.
We happened to meet each other at the right time and "built" and "fulfilled" this dream together. Today, we are still on the journey of "fulfilling" dreams. Our goal is to thoroughly surpass Red Bull, making Chinese national brands, the pride of domestic products, truly shine as the world's light, standing tall among global brands.

Brands can be classified into three types: manufacturing brands that focus on offering good quality at a reasonable price; channel brands that prioritize strong distribution channels for effective sales; and mind-oriented companies, which fundamentally involve understanding human nature, the relationship between quality, channels, and brand, and establishing mental communication with users based on trust.
Mind-oriented companies excel at "seizing the trend, excelling in skills, and clarifying principles." Many startups in China may excel in skills but lack clarity in principles, making it challenging for them to scale.
What is the essence of business? In the past, people often understood the essence of business as transactions, the logic of selling goods. However, the world has changed today, with the rise of the young consumer group and the era of consumer equality. Young people are more discerning, rational, mature, and individualistic, with their own consumption preferences. With the advent of the mobile internet era, products now possess strong social currency, making information exchange crucial.
Why is the digital communication system so important? Platforms like Douyin, Kuaishou, Bilibili, and Xiaohongshu, along with outdoor advertising companies, have rapidly replaced traditional large-screen advertisements. This shift is due to the growing influence of the social currency of products, making information exchange crucial. In today's business landscape, understanding the social currency of business and its information exchange is essential to staying ahead in this era.
Kotler once said, "All media can be retailized, and all retail can be mediatized." Merely grasping the power of the digital communication system and applying modern marketing communication principles by Kotler does not guarantee success. The most critical aspect is establishing the third dimension of the product - the "trust relationship." Brands that can build trust are powerful entities, essentially occupying the minds of consumers and becoming a way of life. Only products and brands that become a way of life for consumers have the strength and resilience to endure through cycles.
Why choose Moutai for drinking, Apple for buying phones, or Tesla for electric cars? Trust in the brand is rooted in the trust of the values the brand creates and the connection it establishes. In this way, the entire dimension of business differs right from the beginning, and the evolution and iteration of the essence of business take a different direction.
Many traditional consumer and service-oriented companies in China still understand the essence of business at the transactional level. To truly have explosive power, competitiveness, and long-lasting vitality, one must elevate to higher levels and adapt to market changes. The modern consumer market is in the era of consumer equality, where the rise of consumers is driving the evolution of enterprises and brands, causing significant changes on both the supply and demand sides. In this era of rapid iteration and swift changes, the ability to capture changes must be strong, and aligning with the era and dancing with the trends is a rigid requirement for entrepreneurs and brands. Businesses and brands are essentially organic entities, and only by decoding the logic of organic growth can they obtain the ability and space for organic growth.

Today, in the market, new terms and concepts emerge endlessly. Therefore, on the entrepreneurial path, many entrepreneurs and business leaders are perplexed by new methods, new terms, and new concepts such as B2C, C2M, cross-border, integration, and the prevalent word creation movement in new economies, new consumption, new finance, and new services. Essentially, consumer services are about meeting people's needs for a better life. Isn't it all about satisfying the demand for a beautiful life? Why so many "new"?
However, we should understand "new" from another perspective. I personally strongly agree with Schumpeter's innovation theory. Social progress comes from the emergence of innovative ideas from businesses and entrepreneurs, whether it's disruptive innovation from 0 to 1 or incremental innovation from 1 to N. Even the power of incremental innovation is formidable, akin to building a tower with accumulated sand. So, the difference between "new consumption" and "traditional consumption" is essentially the difference between "innovative consumption" and "traditional consumption." It is fundamentally a difference in the cognitive and evolutionary abilities of innovative entrepreneurs and traditional entrepreneurs. It's about the ability to capture change, find constants, balance capabilities between change and constancy, and respect and revere the market. Completing advanced refreshing iterations, keeping pace with the progress of the times, and keeping up with the ability to adapt to changes in consumers, consumption structures, and consumption markets are fundamentally about refreshing thinking frameworks and iterating cognitive abilities. It is also about understanding and reusing the respect and reverence for the market and consumers – this is the fundamental difference between innovative consumption and traditional consumption.
Traditional consumption learns from innovative consumption, but what do they learn? They learn the ability to embrace change, iterate, renew, and evolve. What does innovative consumption learn from traditional consumption? They learn to be down-to-earth, to develop systematic business capabilities, and comprehensive marketing methods across all channels. They learn the ongoing refinement of supply chain and brand product capabilities, and they learn steadfastness, endurance, and the perseverance not to abandon achievements, ultimately progressing towards excellence. Both sides influence each other, undergoing a process of mutual stimulation and transformation.

Today is an era of overheated consumption with a significant bubble. From the perspective of the overall macro environment and industrial development, I believe it is correct. China's consumption has evolved from being unremarkable to becoming attractive today. A core consensus on the bright prospects of China's consumption has been established throughout society, recognizing the importance of consumption to the Chinese economy, which is a positive development.

As consensus solidifies, more money, resources, and talented individuals will enter this industry. With an influx of participants, there will inevitably be a bubble. Therefore, what investors and society need for stable development is the ability to navigate through the bubble. Amidst this bubble, removing the froth to still enjoy a cup of coffee represents true capability.

So, I emphasize that speculation and investment are two sides of the same coin, and bubbles and industrial development go hand in hand. I don't oppose bubbles, but I won't blindly follow them. Therefore, I stress that each company should have its own characteristics, consider both short-term and long-term perspectives, plan for the future, and outline brand maps and business blueprints with the end in mind. The ability for fast companies to proceed cautiously is essentially a superpower. Sometimes, accomplishing things contrary to human nature can lead to extraordinary results.

China is currently in the midst of transitioning from the third consumption era to the fourth consumption era. China is also a country with a highly developed segmented economy, housing a population of 1.4 billion people. Approximately one billion individuals can be considered part of a specific segment due to the uneven distribution of per capita purchasing power, leading to a high Gini coefficient. Social wealth distribution has resulted in a dumbbell-shaped society in China, where about 5% of the population controls 85% of social wealth, 70% of the population controls less than 10% of social wealth, and there is also a middle class of over two hundred million people. In the future, this middle class will need to evolve and expand to include an additional 400 million people.
Our middle class is essentially a soft class, becoming middle class due to housing. Excluding housing, in terms of real currency purchasing power, most of our middle class does not have a stable and long-term consumption capacity. In the future, two hundred million people will move from rural areas to urban areas, and the per capita income level will increase. The country will focus on achieving a plan for doubling the per capita national income. We need to truly transform the existing two hundred million middle-class population into four hundred million, with poverty alleviation and common prosperity initiatives, such as those demonstrated in Zhejiang Province, serving as pioneering efforts in this grand era of common prosperity. In the midst of this great era, I believe there are significant market opportunities, contributing to the rise of Chinese consumption and brands.
China is a country with a highly developed segmented economy, which explains the existence of platforms like Amazon, Tmall International, and even Pinduoduo. Why are there brands like HeyTea, Cha Yan Yue Se, and Mi Xue Bing Cheng? Each business format is designed to cater to different purchasing power demographics. Therefore, as an entrepreneur, strategic positioning, product positioning, and audience targeting are crucial. There is a huge market for high, medium, and low-end products in China, and the scale of the Chinese market is enormous. China is indeed the best stage and experimental field for consumer entrepreneurship.

Many companies used to start from the supply side, driven by the scarcity of goods in the past. In a shortage economy, having goods available was sufficient, and the production model was based on scale, with intensive advertising and distribution channels ensuring market demand was met. However, the market environment has changed, and the competitive landscape has evolved. With the development of consumer internet and continuous upgrades in industrial internet, the modern society has reshaped the ability to supply in response to the strong demand for personalized customization, especially among the younger generation.
The rise of consumer equality has shifted the dynamics. The business competition is now entering an era characterized by distributed operations, informatization, digitization, and the establishment of cognitive brands. In this age, data assets and digital intelligence have become unprecedentedly crucial.

China must witness the rise of the power of value investment, and we can no longer engage in simple quantity movements and scale advantages. The underlying logic for the growth of the Chinese economy needs to be unveiled, requiring many individuals with ideals and capabilities to break through bottlenecks one after another. What kind of business movement is this at its core? This is a new era of enlightenment in Chinese business civilization similar to the "May Fourth Movement." Therefore, you can see that China's A-share market is a young market with a strong sense of enlightenment. 85% of the A-share market is retail investors. How many retail investors have seriously read the prospectus? How many can fully understand the three financial statements? How many can comprehend the company's business model and market positioning?
China has entered a great era of unprecedented changes, and the capital market has also witnessed a major transformation not seen in a hundred years. The U.S. capital market has only 5% retail investors, with 95% being institutions. China's future capital market participants for the next 20 years should also evolve into institutions. After institutionalization, headiness and value-oriented investing, long-termism, and value investing will no longer be slogans but common choices for mainstream market institutions. Out of 1.28 billion economic entities in China, there are less than 5,000 listed companies, with 4,500 in the A-share market. The real cream of the crop, what are the results? Among them, around 2,000 companies have a market capitalization of around 5 billion, with over 500 fluctuating around 10 billion.
The total number of Chinese companies with a market capitalization over a hundred billion is a little over 100, and most of the time, the market has engaged in quantity movements rather than quality movements. China especially needs the opening, reform, and support of the capital market. Therefore, I strongly support the registration system reform and the opening of the capital and factor markets. The capital market must empower industries and real economy, truly enhancing the return on investment and industrial engagement, to fundamentally solve the problems of idle capital and industrial revitalization.
In the future, the underlying logic of China's capital market will undergo a fundamental change. The Matthew Effect will dominate the market, possibly not the Pareto principle (80/20 rule), but rather a principle where the strong continually become stronger under a 1/9 principle. The era of emerging super companies is approaching. On the market side, investment is increasingly evolving towards institutionalization, research will be institutionalized, industrialized, and profound, asset allocation behaviors will be institutionalized, consumer behaviors will also become centralized and branded with the rise of institutional forces. Following this, institutional investment strategies will change with time, and all resources will accelerate towards mainstream institutions, towards the head, marking China's true entry into a structural upgrade, shifting towards a brand revolution, quality revolution, and a quality-oriented nation.

Market value is not managed into existence; rather, it is created by the company. Prices always fluctuate around value, and market value management essentially involves managing the core value of the company, which ultimately points to the long-term fundamentals of the company.
Of course, the market will also experience normal fluctuations because it operates through ample trading, with speculation and investment coexisting. China's economic transition period will be a challenging exploration, and the market needs to navigate the development pattern of frothiness. We should allow the existence of bubbles and reasonably permit certain speculation. A healthy, orderly, mature, and stable market is one that keeps bubbles and speculation in a relatively controllable space and also drives speculation to be conducive to value investment. The true effectiveness of the market relies primarily on value-driven principles.
Corporate value is divided into two levels: internal value management and external value creation. Undervaluation of value is also quite common; otherwise, how would there be value investment and buying-side institutions? The market is not entirely balanced and efficient; there is a part that is imbalanced. Thus, many companies may have undervalued or overvalued market values. This requires external value creation, allowing the market to truly understand its business model and value. Through the ample bargaining of market transactions, the true value of the company is eventually discovered. This is the essence of a true market economy. In this process, value also needs to be managed, released, and recognized reasonably and correctly.
I do not oppose market value management, but most of the market value management has gone off track. We should advocate for legal and compliant value creation for companies, demonstrating value management. Market value management is fundamentally a movement of value creation, not just a simple movement of market price discovery.

Over the next decade, the ceiling of consumer brands will be determined by the character and integrity of entrepreneurs themselves. Each consumer, as a fundamental unit in society, deserves to be reunderstood and respected from the perspective of lifelong value. The bottleneck for most companies often lies with the entrepreneurs themselves.
Furthermore, the selection of entrepreneurs should focus on individuals who are both good and capable among ordinary people. The growth of entrepreneurs should resonate with the growth of the business. When selecting company founders, the first criterion should be to choose someone good and capable among ordinary people. The key is to find individuals who understand and empathize with human nature. Such individuals possess strong empathy and social understanding, enabling them to comprehend what society truly needs. Over time, they will be rewarded by time and accepted by the market.
Selecting strong individuals from ordinary people is crucial. Given the right direction and time, such individuals will show remarkable progress. Companies and individuals are like organisms or compounds, and their greatest energy comes from the power of growth. This aligns with the company's culture and the mindset of being a champion's super companion.
Choosing strong individuals is important because if they make mistakes, it can lead to significant negative externalities. Therefore, in today's China, capital must have an attitude and warmth. Betting on social responsibility should be a more substantial consideration. Those of us who control a certain amount of social resources must fulfill our responsibility and obligation to build a better society.
The second aspect is the learning ability of entrepreneurs. The growth of an entrepreneur's character must match the growth of the business. Once there is a mismatch, the entrepreneur cannot guide the company properly. Therefore, the growth of an entrepreneur's character and mindset must be positive and healthy.
The competition between China and the United States is not only about national strength but also about corporate culture and values. It is a competition in commercial civilization and will be a competition in business ethics. It is a problem that needs to be urgently addressed in the development of China's commercial society, similar to the "May Fourth Movement" enlightenment era. The hope is for the fusion and development of different commercial civilizations from the perspective of a community with a shared future for humanity, mutually promoting improvement.

The current generation of entrepreneurs possesses a strong ability to embrace change, and their capacity to observe fluctuations is commendable. However, the ability to identify elements that remain unchanged is indeed not as robust, marking the first challenge. Every business has its underlying logic for growth, and it is crucial to identify the unchanging elements and the fundamental logic of business growth. Formulating methods to reuse these capabilities is essential to navigate the rapidly changing market dynamics.
Secondly, entrepreneurs must adhere to a philosophy of "starting with the end in mind" in terms of strategy and value creation for the company. Many entrepreneurs hastily choose a small brand or niche, engage in cross-industry ventures, adopt new terms and concepts, and plunge into entrepreneurship without considering the next 30 years. Taking a long-term perspective, designing the company's business model, determining gross and net profits, aligning operating costs around net profits, setting prices, and matching marketing strategies, product insights, and brand channel capabilities are crucial steps. Contemplating what kind of company, platform, and enterprise they aim to become, as well as understanding the company's value and operational state, is a process that, when reversed, can lead to various observation methods and different conclusions. This approach fundamentally influences and changes the path of a company's development. Initiating with the end goal in mind is essentially the process of seeking direction, strategic positioning, and anchoring values for a business.
The third issue is equally important. Many of today's new entrepreneurs are anxious, seeking rapid changes and innovations, and are preoccupied with financing. However, there seems to be a lack of understanding regarding the relationship between fast company growth and a slow, deliberate approach. Numerous entrepreneurs and investors tend to arm themselves with simple capital logics, often neglecting the vitality and long-term value of a company. While each company and industry has its unique characteristics and development rules, the fundamental logic of whether a company possesses long-term value and can address societal issues while meeting market needs remains universal. In this sense, all investments should fundamentally engage in the movement of creating value.

Elon Musk has already initiated plans for what humanity needs to do in the next few centuries, starting from today. China needs entrepreneurs with such a vision, and the world also requires individuals with this expansive perspective. This entails a grand outlook and efforts in terms of vision and the universe. Sometimes, we feel regretful when we observe our own entrepreneurs engaged in small-scale businesses, competing with ordinary people in selling vegetables. Why can't we allocate resources to explore outer space and pursue benevolent technological advancements? While we may not be able to reach Mars, we can certainly set our sights on the Moon. Gazing at the stars is a sentiment and a universal yearning for a better life and endless exploration of the unknown. Entrepreneurs and pioneers like Elon Musk will inspire generations of entrepreneurs and young people. Can you imagine his satellites orbiting the Earth with a Tesla onboard?
If more entrepreneurs and young individuals are willing to strive for such endeavors, humanity will undoubtedly have a bright future. I also want to share a message with the youth: working for money can be a difficult endeavor, but working for your dreams is the path to happiness. Start envisioning your own future now, contributing to civilization and paving the way for the future of humanity.