On April 22, 2017, Ms. Jingbo Wang, Chairman and CEO of Noah Holdings, shared her insights with fellow members at Source Code Capital’s 2017 Code Class.

Ms. Jingbo Wang has been an entrepreneur for 12 years. This is her fourth 3-year period. During this time, she established the first Chinese wealth management company to be publicly traded in the U.S. She discussed her experience as an entrepreneur, shared her philosophy on running a financial enterprise, confronting the cost of supervision, establishing a foundation for a company to become a time-tested brand, selecting and managing people, and more.

Like Noah, every successful entrepreneurial company will have to start from nothing and then expand. Ms. Jingbo Wang condensed this process into three stages: the first stage is seeing a mountain as mountain, seeing water as water, seeing things as what they are; the second stage is seeing a mountain not as a mountain, seeing water not as water, seeing things as something they are not perceived to be by everyone else; the final stage is seeing a mountain once again as a mountain, seeing water once again as water, and seeing through all the perspectives. Entrepreneurs should have a deep understanding of each of these stages.

Source Code Capital Code Class 2017

Ms. Jingbo Wang’s full speech is as follows:

I’d like to take this opportunity to thank Source Code and Cao Yi for inviting me, and for giving me this opportunity to share some of my experiences as an entrepreneur.

Why do I say that entrepreneurship is like a butterfly emerging out of the cocoon after three years? Cao Yi said that this is the third year for Source Code Capital, and this is the third year for a lot of start-ups. Noah also received investment from Sequoia Capital in our third year, kickstarting our process of growing out of the small regional company that we once were.

I believe there are great opportunities in the financial management market in China. There are two reasons for this. First, China’s middle class is rising and it has potential to become the country with the largest middle class in the world by 2020. Second, the aging population, and a growing interest in financial management among the Chinese population, will both contribute to greater opportunities in this sector.

1. Without Knowing Operations or Wanting to Operate, Holding onto Licenses is Useless

I was recently enrolled in Hupan University and saw a few Chinese characters at their yacht club at Qiandao Lake. The characters read meant: “clean,” “quiet,” “enter,” “competitive,” “respectful,” and “reflective.” One of the characters is “clean,” as in pure. I think a good entrepreneur will have to have a pure heart and produce products that benefit the masses.

The process is “quiet,” as quietness can clear one’s mind for deep thinking. Then you need to have an enterprise and take the initiative. I have been in the business for 12 years, and my respect for the industry has only grown. As it is especially the case in the financial industry, veterans are the most cautious and will respect their surroundings the most. The last character means “reflectiveness,” as in, one needs to reflect on the tasks that have been completed, challenges faced, past successes and failures, and learn to draw from their past experiences.

In the 12 years my company has been running, it has gone through three stages. For the first stage, I was the product manager. I thought of some services that could be offered to people in the industry and wanted to make that available to customers. During the second stage, the company itself was a product, and for a long time, we focused on internal operations.

I believe that in the financial industry, it does not matter if you have amassed a large amount of insurance, banking or security licenses if you do not know management, or do not want to manage – all you will be making is some quick money. The third stage that we are in right now is a difficult stage to be in. What we need to do is figure out how to utilize a traditional company with good cash flow to incubate some new businesses, thus putting ourselves in a good position in the industry. We are still in the process of figuring that out. I think that the biggest risk to a company is when it does not have a general direction. Once you have a direction, the rest can be adjusted accordingly.

2. Fully Understand the Cost of Compliance in the Financial Industry

Before founding Noah, I had this deep understanding that in China, individual clients were not well-served. Furthermore, when we first started, we could not service clients with “shallow pockets,” so our target was high-net-worth clients. We were only able to establish a new Internet-based service ecosystem based on the demands of white-collar clients.

In these 12 years, Noah faced many temptations, but we had many adamant stances as well. In 2014, all you could hear was that the internet would overturn the entire financial industry. All we could hear was that the client experience was the top priority, and you needed to be “T+0” for everything. However, of all the “T+0” client experiences we have heard of, every one of them had to have some other money put in to cover for it. If you said the investment had an annual interest rate of 8% just for a day, the need for funding source would be great, and the risk would be high.

We also faced many issues, but what I think is more important, is the need to distinguish the temptations from the opportunities. Otherwise, we cannot have longevity in this industry.

We need to fully understand the cost for compliance in the financial industry, for the risk of the industry is lagging. For example, the passion people had for the internet within the industry back in 2014 was in many ways misplaced. It seemed like it would be easier to make money, but generated no core competitiveness, and was only a simple patch-up. Down to its core, the cost of supervision is the number one risk cost in the financial industry. You have to face this cost – it is unavoidable, and the demand for it will be higher and higher in the future.

3. To survive in the financial industry is to wait it out until all others fall

Jack Ma says that he likes the company operation model of Seattle, not Silicon Valley. The reason for him saying that, is that in Silicon Valley, businesspeople would sell a company in hand in order to build another one, but companies in Seattle such as Starbucks, Amazon, and Microsoft are all time-tested brands with long company histories. At Noah, we hope to do the same, making Noah a long-lasting, time-tested brand.

We are in a very interesting industry. You can be in this industry for a very long time – what you need to do is to wait it out, and when everyone else falls, you have made it and survived.

I used to work at a stock brokerage firm, but so many brokerages could not last after the 2008 financial crisis. I believe that you need to sacrifice short-term benefits for long-term benefits at all times, and constantly distinguish opportunities from temptations.

When we moved from financial management to asset-based finance, and from the traditional form of management to managing through the internet, lots of our strategies were trial-and-error. Along the way, you needed to constantly summarize the effectiveness of the strategies, and self-assess your own strength. Building up the strength of a company is a long process.

I used to be short-tempered, wanting everything done instantly, but now I have changed a bit. I feel that running a company is like raising a kid. My son is 12 this year. I want to correct his mistakes every day, but I have realized that he will not listen – maybe he will correct them eventually as he slowly gets older.

When executing strategies, my experience is that you need to aim high but shoot low. You must be willing to bend down and get down to business, not just dream big every day. Every dream needs to have an angle of attack, and the ability to compete with rivals and eventually win the war – I think that is very important.

4. Managing people is the most painful part, and competitive headhunting is useless 

Because I started talking about emerging from the cocoon after 3-years, a difficult task, so I’d like to share with you that my biggest challenge has been human resources. Loss of human resources, the integration of new blood into the company culture and using different people at different stages of development are painful challenges, but something you have to face head-on.

My personal experience of managing people comes in stages. First of all, when it comes to human resources, it is not the more, the merrier. Sometimes we all want to headhunt for the best talent, but we almost never do so from competitors. What often happens is that what you get are not the best people, and the best do not change jobs easily. What you end up with are mundane ones who will not learn and grow by themselves without you personally invested in their training.

My biggest issue is dealing with the unkillable rabbit, the ones who have followed you from day one – it is hard to let them go. So, I would keep on waiting, even though I knew that this person was not suited for the job. In the end, it was so difficult to even to face them, as I would turn and walk away out of shame when I ran into them on the staircase. That is not the right thing to do.

In this process, when there are staff changes, we see the greatest loss. Often when a head of a department changes, few people will leave in that department. I feel that when a new company moves into a brand-new stage, there is always staff attrition, but the ones coming in are often better replacements.

In brief, executing strategies and managing people should go hand in hand. When a company is progressing from one developmental stage to another, some staff turnovers might not be a bad thing. Sometimes you feel much better without certain people, because with some people, you get the feeling that their energy is not right.

I have personally been through this process. Earlier on, when we were about to be listed, we asked who we should give stocks to. Our COO said to everyone to motivate them, including the chauffeurs and the secretaries. At the time I thought, “great, it will make them happy.” However, in hindsight, this was not the right decision. We should have either concentrated the stocks or paid employees bonuses in monetary forms instead. In the decision of either becoming employee-owned or not, we have paid our lesson. Now that I am here, I want to share that with you.

Lastly, I feel that for the first three years of going through this entrepreneurial process, you have passion and excitement, and are willing to invest your efforts into it. But entrepreneurship is a never-ending process. It is like playing Plants vs. Zombies with my son, where, at the last stage, we find out that the zombies keep on coming, and there is no end.

However, you have done well in the process, and are a small lead in the industry. But it is both difficult and stressful to be good in the industry. If given the choice to go back in time and choose again, I do not think I would have become an entrepreneur. It is too tiring.

This the end of my sharing, thank you.