Steve Hsu: Welcome to Manifold. My guest today is Taylor Ogan. He is the CEO of Snow Bull Capital, a hedge fund based in Shenzhen, China. Taylor, welcome to the podcast.

Taylor Ogan: Thanks for having me.

Steve Hsu: It's great to have you on. I understand that it was just earlier this year that you moved to China. Am I correct about that?

Taylor Ogan: Yep. January 2023.

Steve Hsu: And, you're a rather unique entity because you might be the only wholly foreign-owned enterprise in the hedge fund space based in China. Is that true?

Taylor Ogan: at least by Americans. Yes.

The government told us.

Steve Hsu: great. So, I wanted to start by just asking a little bit about your background and how you got into the hedge fund industry and then maybe culminating on why you decided to move to China.

Taylor Ogan: so in 2018, founded Snow Bull Capital in Boston originally. And, the plan was never really even to have a focus on China. Our focus centered around investing in green technology. So high tech, new tech, clean tech. And it just so happened that since 2018, China, Chinese companies have started really dominating those industries.

And so, the focus had to start shifting more towards Chinese companies. And. It definitely isn't popular among most American investors to kind of, you know, discuss Chinese investing opportunities, but we couldn't leave it out of the conversation. And if we tried to ignore China, it felt wrong. And so.

That's kind of how we focused more and more on China. And five years later, I mean, now we're, we're in China. We expected to be in China, but definitely not living here. We expected even three months out of the year. I mean, a significant amount of time, but then COVID happened. And we realized that the research was the first thing we noticed.

The research just fell off and equity Reese. I mean, everyone pulled their analysts out of China and a lot of them were never in China. They were in Hong Kong or in Singapore. And so, they would go on a China trip, oftentimes less often than we, and the research, it just, it was always bad, but it got. It just went to zero.

And so, we had no real grasp and trying to talk with executives from Chinese companies, Chinese IR it's. They don't like to do it over zoom or, you know, skype or anything. They want you to be there. And if you are there on a site visit, they'll open the doors to you. I mean, they'll, they'll answer so many of your questions, but they will barely even respond to email.

I mean, if you have WeChat, you may get a response, but so we had no communication with these amazing opportunities. And we also couldn't find, we didn't have a good feeling that we could find new opportunities. because we physically couldn't get there. And so, we started looking at ways of how we could cleverly get into China.

visa wise and, and then the U S started to, you know, kind of spiral down, I'd say in, in terms of innovation, during COVID. And I mean, all of the disinformation and people couldn't trust their own government. it was, it started just getting socially ugly for the United States. And so, we kind of looked at how China was handling a lot of this and, and it’s kind of, I'd say, I'd say it divided us.

our office was, like an outsider would say, wow, you guys are really pro-China. And, and it was, you know, we were, we needed to see like the daily COVID numbers, and you couldn't get that even in Boston. I mean, you had to, it was, there were large estimates. but, but China was just so transparent, and this may surprise a lot of people, but they really were.

And now we have the perspective that. They definitely were, and so China kind of reopened pretty quickly within itself, right? So not to outsiders and it's still I mean that you look at the tourism numbers in China. It's still not Nearly, like 20 percent of what it was pre pandemic. So, we really wanted to get to China and one night at dinner with my team.

I floated the idea of what if just for a year or two, maybe three, we actually moved to China. Now keep in mind, one of our analysts had never been to Asia before. So, and she actually was the first one who said, I thought you'd never ask. And so, it suddenly became really real. And like the next day at work, we started looking into, could, could we actually like to set up an entity in China?

Um. And so, each of those days got more and more serious, and we started having real meetings with the few firms that help companies do this, and they're mostly factories, right? They're not, you know, white collar firms. So, it was, we had to do a lot of things that really had never been done. And we started measuring our paperwork in terms of pounds.

So, and, and so the entire process took a year and a half from when, from that dinner to when we actually stepped foot this January in China. And, it was, we kind of expected that process. We were initially quoted for six months. So, for a year we had to be bogged down by thinking, basically tell, I mean, it's, it sounds crazy, but like telling family members, like some of them were elderly, like kind of having to say, but like, this is a very serious move.

And I mean, we don't have, no, one's married in my company. and so, you know, we didn't have to give up maybe as much as a company moving their entire headquarters to China would. but. And no pets, which maybe would have put like a flash on it. but it was, it really was like telling friends, like I'm moving to China.

I don't know when I'm going to see you next. It was, it's, it's more than just the business.

element. I mean, it is actually personal.

Steve Hsu: Is there anybody at your team that was opposed to the move, or did you lose any team members over the move?

Taylor Ogan: we, we, no one was opposed. We did have an analyst, Connor, who's great, who was not eligible for his visa. and so. We parked him at a company that needed some help internally. and he has been with this company twice. So, he's very happy and we're very happy to get him back once he's eligible.

but he didn't have enough working years out of college. And so, the Chinese are very strict about this. and, and so. Yeah, I mean I would call that a loss. but he I mean, I was just chatting with him a few minutes ago. I mean, he really wants to live here. so Yeah, we did have a loss. but the point is that the again a fly on the wall would see these only Americans and One of whom had never been to the continent before Agree and very seriously have conversations every day leading up to it for a year and a half about especially amid all of this, I'm moving to China so even the Chinese side like our counterparts in China.

We're like, are you sure? Like this is you know lockdowns and everything we were prepared We were prepared for not just three weeks of lockdowns, but also flying into Hong Kong and going through those lockdowns so that's kind of why it became extra personal like when we had to Say to our friends and families like it doesn't make sense for us to hop back and forth all the time like We would before COVID.

Now, we actually can do that. but we didn't know when China would really fully reopen. So, yeah, I mean, it sounds a little emotional, but it really, I think that's an important part of this. And so finally, and I will, the other thing is what delayed us another year is actually the U. S. The Chinese side was very fast.

they're, the consulate website would say this is, this document's going to take You know, three weeks and it would take like two and a half weeks. so the very accurate grant, I don't think they're processing a lot during that time. but yeah, the U S side was just so slow. And the sad thing is we kind of thought that we tried to not put that we are going to China.

Like this document needs to be authenticated because. It's going to China, as much as possible, which is really sad. And still we were delayed that long. So eventually in mid-January, we flew over land in Shenzhen and it was surreal, because it was such a long time coming and it was just, I hadn't been back in four years.

And, and you know, for one of my colleagues, she had never even. So yeah, it, we, we finally got here and the only regret that we have is not moving here sooner, even with the lockdowns, we would have done it and, it, the opportunities here are tremendous. And I think maybe I have a very unique perspective and just since, you know, 2023 is a huge year for.

Especially Chinese tech, even the EV penetration rate, like I can see that with my own eyes since I first landed here. so it's pretty remarkable in

such a short period of

Steve Hsu: Can I ask you just a couple of the weed’s questions about the logistics of what you went through? So, are you on something like a 10-year business visa or something like that?

Taylor Ogan: Yeah, so that is it, it renews every single year or two years after your first six months. So, I'm right now on a two-year work visa. it's not a business visa, it's, it's even better. and. Yeah. And our, by the way, our company is wholly technically our parent company is still based in the U S as a Delaware company doing business in Massachusetts.

but our Shenzhen, it's Shenzhen Snow Bull company. that is, that is wholly owned by our parent company. but that allows us some pretty unique things in China and some things we, I think we're going to be trailblazers, I have to say, in. crafting some, some frameworks that have never existed, because the Chinese government.

At the, you know, Beijing and even down to the district that our office is in they want people like us. They don't care if we're America. I mean, it's almost better because it helps bridge things. they're very supportive of us being here and honestly, we didn't know what to expect. We thought that even from, you know, counterintelligence perspective, like this could look bad, right?

One of our analysts worked at the state department. So, we were worried about that. and no, nothing has, we're a little slower at the borders just because they haven't seen many American passports.

So yeah, but no, it's been fine.

Steve Hsu: just for my own personal interest, because when I first heard your story, and your story is actually really unique. I think I bet during the whole COVID era, you're, you know, not even, I mean, beyond finance, you're one of very few companies that relocated to China during this period of time, probably. So, everybody else was going the other way.

So, I was kind of thinking through, like, how would you do this? And I was wondering, like, if you were some kind of like Cayman Islands registered entity, how would you Could you not just somehow get to China and operate there, but all the trades are executed abroad, and you're, you're telling, you're, you're making the trades from China, but you don't actually have to be a China based company?

What, like, would that, something like that have actually worked?

Taylor Ogan: You could do that, but not in terms of actually, like, getting a permanent residence. Actually, it's really hard. you'd, you'd be better off, like, I guess, pretending to

be a teacher or something. And, you know, but they, they even,

Steve Hsu: a day trading teacher.

Taylor Ogan: yeah, yeah, right. That would be a good movie. but they check that.

Like, they will send people and, like, take a picture of, like, you in your office to make sure that, like, you're actually there. I mean, they do that in the U. S. too, but, yeah, so it was, we, we also really didn't want to go offshore because. If things get nasty, China may fully contain itself and we still have to consider that.

So, because of that, there is no delisting risk. There is still actually a risk that American individuals cannot invest in certain companies. For example, SMIC, that, that hurts us. and so we're looking to establish even, I would say safer, structure in China so that we actually could, and this is all not to get around anything.

It's to be as pure, as legitimate as possible. And that will mean closing off access to American investors. And that's, another, another route that we are going towards, which is. It surprised us, but Chinese people, you hear about Chinese people wanting to move their money out of China and everything.

Certainly, some do, but they are surprisingly receptive to it. They've shown a lot of interest in having us manage their money by investing in Chinese stocks. When I say it, it sounds crazy because, like, my Chinese is horrible even, like, they, how, how, why, what, what do we know that Chinese people don't know about their own companies?

And it's the Western perspective, and it's something that I, I guess I've taken for granted, but it is very different, like, mainland born Chinese are, have very different perspectives than Americans. And, it translates into a lot of Chinese actually have, they have, they're too bearish on things that are happening before their eyes.

And I could give you a million examples, but, that's something that surprised us. And so that's even better for us. Like the, the risk, the risk that, you know, the anxiety that I feel every day is, is dwindling since I've been here. And I definitely did not expect that. I thought, you know, I'd have to put up with a lot.

but no, it's, it's actually, you know, especially in China, the purer you do something, the clearer your structure is. The better you're going to be and

that sentence may surprise a lot of

Steve Hsu: yeah. No, I, I think, I think I understand where you're coming from. So, it sounds like before you went to China, your LPs were all, Western or, yeah, and, but now you might be picking up some LPs that are, in, in China. When,

Taylor Ogan: Yeah, it would be a

separate fund.

Steve Hsu: I see. Before you went though, your exposure to China was always through shares that were listed on Western exchanges?

Or, okay, and now,

Taylor Ogan: good question.

Steve Hsu: But now, but now you're actually investing in the country. Yeah, if you could go into that a little bit.

Taylor Ogan: Yeah. So, we have been closed off from the share market. And even if you're familiar with V. I. E. Structure, variable interest entity, This, this is Cayman Islands owns a share of like Jack Ma's stake in Alibaba and so through, so like all of that, we, we got out of all of that as when we could, there were like two companies that we couldn't for a while, like there was no other, but you started seeing these secondary listings or dual primary listings from Chinese companies that were listed on NASDAQ or New York Stock Exchange that realized the delisting risk was getting too high. And so, they needed to have a secondary offering in Hong Kong. And so, we own a lot of Chinese companies, but we're limited to only owning companies that have H shares and we don't own the ADRs. We own the pure eight shares. a share market.

You know, granted it hadn't been doing so well, but there wasn't a lot of volume in it. And since, since really, I mean, we've moved here, you've seen, you've seen this Hong Kong stock connect with Shenzhen and Shanghai. Where you can own northbound and southbound, like these things and dual counters, like they're, they're really trying to open that up, but it's still very difficult for Americans to own a share.

And so, that was something that we didn't have. And so, this is us being here. There are even rules because I am just myself here living in China. If I live here for two years, it opens up a lot more for me to access right now. We can have access to that, but we'd have to go through local people.

And, you know, there's some, some trust issues from some LPs with, of course, with that. but yeah, after two years of me living here, it will be.

essentially, I mean, unfiltered.

Steve Hsu: Got it. So, this is probably a dumb question, but for the eight shares, there's no issue of converting. Like if you, if you sell, if you, if you, liquidate those shares and convert to dollars, there's no issue, right? There's no issue of getting your capital out. But, if you go fully into the RMB denominated shares.

then like there is still like you could make a huge windfall, but then like getting the money out could still be challenging. Is that true?

Taylor Ogan: Yeah.

it's, it's, it, it, it actually is challenging. and I know of ways, you know, that people go around that as much as they can, but I don't think they're going to last long. Like, the Chinese government is smart. They, they know. Uh what to look for and so that's another thing with opening a fund in China for China

Steve Hsu: sense. Yeah.

Taylor Ogan: by Chinese Is like I we had to have a discussion with my colleagues like hey if this Gets really successful and you have a lot of money, you know, that's going to be you know, you build your summer home in China because I don't I don't know what to tell you I don't know how easy it may be for us to get that money back to the U.S. but yeah, so that that definitely there is truth to that, and I also though see that changing in the next 10 years, hopefully five years, but there's no way that China can grow to be this big and still have things like

this, you know,

Steve Hsu: So, yeah, you know, we might have gotten a little bit too in the weeds in the financial and regulatory details for my audience, but, so maybe we could just, I, I was personally interested because I don't really quite understand what the best way to get exposure to Chinese companies is. So. That was a little bit for me and maybe not so much for my audience in general.

But

Taylor Ogan: yeah,

Steve Hsu: Let's, let's backtrack a little bit and talk about, I think, so I haven't been back to China since I was there this summer, right before COVID. I was in Beijing in 2019 and I haven't been back since then. And I'm probably going to go this summer, but, I'll look you up. But, a lot of my listeners probably haven't been there for even longer.

And so, for me, every time I go there, it's just amazing how much the place has developed. Shenzhen is one of the most advanced cities. I think I heard you talking specifically about, you know, robot taxis and drone deliveries being a real thing. Now talk a little bit for the audience, just about the wonders of stuff you see in Shenzhen from day to day.

Taylor Ogan: yeah, it's funny because I, let's say I tweet a video of, of a drone delivery. there will be people who comment, you know, they never can be positive comments. they’ll say something like, if they haven't been to China, I don't really care, I won't even entertain it. But there are people who say, I lived in China between 2012 and 2018, and like, you may be showing a little pocket of China, but that's not accurate, and you know it, and I know it.

And it's like, wow, I didn't expect the people, like, who really want to, like, harp in on this, be, like, have lived in China, or be Chinese. and so, it's, like, I don't know how else to, you know what? There, this is a little unconventional. This is how common drone delivery is. I don't, it's probably super washed out.

But, right there, in this park. Is the, is the nearest drone delivery to me.

We may even see one right now. you'll probably see a Ribotoxin. No, I actually don't see Ribotoxin right now. Which is surprising. and I mean, also look at all the construction. Like, this is, the drone delivery, the Ribotoxin, the, all of these things, it's real.

And so, I know it's not normal for other Chinese cities, maybe. But it's getting more normal. And so, if you go to Beijing, I'm going to Beijing in two days. I don't think that they have drone delivery. They have more robot taxis than Shenzhen though. It's one of the reasons I'm going. so like the, the cities vary.

The overall theme is I would say the period that you haven’t been the most unrecognizable you've ever seen. And because it was for me. And this was, I spent most of my time in China in Shenzhen. And it is like where I am right now the last time this building you saw was complete. we're not even built like I don't even think they broke ground when I was Last year and I was not, you know, it wasn't that long ago.

So, I mean when you see entire It's not neighborhoods. It's a district that is just TenCent and is building its own city a few miles away from here. I mean it is crazy. So yeah, you will not recognize at least some parts of some cities. For Shenzhen, it's like the whole city. They're even tearing down buildings that are like 20 years old because they weren't really, you know, it's a four-story building and, and they're building, you know, a new headquarters.

So, it's, you're not really seeing that in other cities, for sure, but, yeah, in Beijing, Shanghai, even Chongqing was like, this is how can this city really modernize that much? Oh, it has. It really has. So, yeah, it's, it's going to be unrecognizable to you, but I really encourage you and, and anyone, especially if you've never been to China.

but like the other thing is, I, if you haven't been to China really since COVID your opinion, especially on tech and innovation can't be complete. It's impossible. Even if you're not talking about Chinese specific innovation, it is, if you don't actually see it, if you don't hear people on the street talking about semiconductors, like that's just normal, at least in Shenzhen, that's normal.

And so, you really need to get a good pulse. and so, yeah, I really encourage anyone.

to come here now.

Steve Hsu: So for the, those internet people that you just mentioned, like on Twitter that, have, you know, everything about China has to be negative, there's a big, you know, meme or I guess propaganda idea in the Western media, which I'm sure you've seen, which is that, you know, the economy is close to collapse in China and things like this.

And granted, for sure, they're having some problems with the property sector. What's the general, what's your general feeling? Does it seem like, do you see a bunch of empty buildings with no one in them? And, does it seem like the economy is about to collapse?

Taylor Ogan: Yeah. I do see a lot of empty buildings. Because they haven't put the glass outside yet. they, the, you know, real estate is the biggest concern. and I will say the Chinese with whom I speak are, they're warriors. and. They, they really like, they'll send me a Reuters article about how China's economy is collapsing, and they'll be like, Taylor, check this out.

Like, what do you think? And I'm like, you, you're Chinese, like you, why are you sending me Western like media? And, and it is because the Chinese media doesn't really comment on the economy. Like it, it's like, they're not opinionated about it. Like Western media is, so yeah, I mean, China's collapse has been, people have been calling for it for the last 20 years.

I don't see any signs of it. I definitely have some, there's some sectors that I would just completely avoid. There are also some sectors that. I won't name names, but we probably are thinking of a lot of the same names. if you think about that company and this is, this is like a list of companies in five years, it would so much would have to go wrong.

Like we're talking full out war, China, complete crackdown on technology as we know it, like for it not to. For its stock price not to be higher than it is today, And I can't say that about American companies. I really can't even understand some of the darlings of the right NVidia Apple, I don't know and those are kind of deemed like safe Investments right now and that's no longer true.

And this may have been a different conversation six months ago. but we can get into specific technologies later if you want, but the economy as a whole, I don't see it. like you've probably read I will say what people do right now. They're calling Shenzhen like There's China and then there's Shenzhen.

So, I am living in a bit of a bubble, but I travel all over China and, and yeah, you don't see growth as much, but again, we're talking about growth. So, if, if GDP growth declines. Year over year. I mean, we're still talking about GDP growth at quite high numbers. Not, not 2010 China numbers, but we're, we're it's that maybe slow.

I don't call that slowing. and so the, I mean, there's. I live above a mall, which is kind of weird to say very common in China. but the Right now it's 9: 42 in the morning. There probably is a line 15 people long at Louis Vuitton.

Steve Hsu: Mhm.

Taylor Ogan: to get in like that is not What I think of right. It's not the best barometer either.

definitely not. But like when you see this all over, it is, it is quite crazy. I do think that there's some overdevelopment. but that's just companies thinking that they need a floor of an office building for their six employees just to have it, to have three T rooms. and now they're like realizing they maybe they shouldn't do that.

so there are vacancies. Like I would expect my office's rent to go down this year. Um a little bit but yeah, other than that, I mean it depends. As a whole, China's economy is not collapsing. It's not on the verge of collapsing. if.

when you come here, I

I think you'll see that.

Steve Hsu: You know, the, I just had a conversation, the, the, the, the episode of Manifold that just came out, most recently was with this MIT economist, Yusheng Huang, who.

Taylor Ogan: I listened to

Steve Hsu: the, the, the netizens, the Chinese netizens really don't like this guy because he does say some critical things about the Chinese economy and Xi Jinping and things like this.

But, you know, one of the things I said to him is that if you just follow innovation across many, many sectors in China, whether it's commercial air. Aerospace, space, EVs, semis, solar, you know, on every front, their technologies are advancing very fast. So, it's just hard to believe that that isn't going to pay off for the economy as a whole in the future.

And it's not little niche industries, it's industries that are going to employ a large number of people. So, yeah, so I, I can imagine there's going to be some difficult headwinds maybe from the property sector, but other sectors seem to be very healthy and, obviously you're right in the middle of it in sheen.

Taylor Ogan: Yeah. And I would say I've said very similar sentences to you many times in the last four or five months. It's hard to believe in a future, not just in China, but in Southeast Asia, in India. In Africa, in Central America, in the United States where technology does not tech, not the role that technology plays in our daily lives in 10 years will be unrecognizable from even what most people can predict right now.

And. To get there. We will get there. I promise you we will get there and even look at the last year like people's lives really are changing the way professors teach. It has completely had to change right so um it will be unrecognizable to get there. A lot of things must happen and they will happen.

And so, because they will play such a pivotal role in our lives, look how much people talk about cars, because it's the second largest asset that people own. It's like, sometimes I think, guys, stop talking about cars, it's kind of getting boring. But then I think back to, cars are pretty awesome, and, you know, it is, it has a lot of investment implications.

And so these things are going to be bigger than cars Like the amount of time that you discuss with your friends about like getting a new car It's not it's not really that much think about the role that technology even today plays But will play in 10 years in just the average conversation you have It is going to be you're going to spend you're going to have so many subscriptions You're going to have so the way, subscription models, like not like Netflix, like subscribing to entire things that we don't even have right now.

even like a battery as a service, like these are all things that, yeah, most people don't even think about, but you, you will, you will, this will be a part of your life very soon. And so, to get there, I think it, these things have enormous economic implications and. I see it as, especially with the US and China, China can get there without the US.

The U. S. can have a future if it closes itself off from China. But, if it wants to have the future that I'm talking about, it has to work with China. And I think, I hope, that we will get to that point. And it will be glorious and we'll be happy again. but,

Steve Hsu: It would be great.

Taylor Ogan: Like, I'm very positive.

Steve Hsu: As I said to Yusheng, it would be great if we could get back to a positive sum instead of a zero-sum game between China and the United States. So, it is still a positive sum because actually so many things are still going on in collaboration between American companies and Chinese companies.

It's just that, you know, the zeitgeist is kind of against it. So, it's, it's, it's kind of not something you talk about, but there's still very fruitful collaborations going on.

Taylor Ogan: very much. Yes,

Steve Hsu: Let's, let's maybe talk about EVs because I know you follow Tesla and BYD very closely. now, my audience is not expert on EVs, so don't assume they're experts on, you know, that they're insiders in this industry, but maybe, well, maybe I'll say a few things that there is this huge transformation that's already taking place in China, that the fraction of the car sales every year now that are EVs in China is pretty substantial.

I don't know what it is, 20%, 30%. Um.

Taylor Ogan: almost 40.

Steve Hsu: 40%. And, I think there's pretty good evidence that a lot of the most competitive EVs in the world right now are produced by Chinese companies. Maybe only Tesla, is the one that could be competitive with companies like BYD. and although I think the U. S., it's maybe a very risky move for these Chinese companies to try to export directly to the U.S., almost every other country in the world, including, say, Germany, Israel is getting tons and tons of Chinese EVs right now. So maybe Taylor, you can just say what, like, maybe give us your view of what's going to happen in space.

Taylor Ogan: Sure. Yeah, I'll try to talk as broadly as I can. yeah, almost 40 percent of new passenger vehicle sales in China are, they call it new energy vehicles, electric vehicles, which includes battery electric vehicles and plug-in hybrid electric vehicles, not mild hybrids. People think of it like a Prius, like that's not an electric car.

Yeah, no, it's not an electric car, but I think this is mostly Americans. They don't know how-to plug-in hybrid electric vehicles. Are basically an electric vehicle, a BEV with a little range extender gas tank, to alleviate range anxiety. So, yeah, PHEVs are very real, very much an EV. In fact, a PHEV, a 2023 BYD PHEV, the least efficient TONG, driving for a year.

It, and over its lifetime, including the emissions that, you know, where it took to actually make the car, will be better for the environment than a Tesla, the most efficient Tesla 2023 driving in Europe over its lifetime. If we assume the same lifetime, that's pretty crazy. So yeah, that should hopefully squash people who say PHEVs aren't EVs, but anyway, almost 40 percent of EVs. of new car sales are electric in China. you can see it. They make it very easy. It's good for car spotting because the license plates are green instead of blue. And so, we kind of talk about green plates. The green plates are just, it's like not even a neighborhood. Like, let's say you have a really wealthy neighborhood and a very not so wealthy neighborhood in the same city.

Well, normally to observe a car trend, The same trend wouldn't be good for it to be a real trend. It would have to happen in both communities here. It's happening at all levels. It's happening at the most expensive cars like people are literally Selling their, their Rolls Royce for, for like a hi fi because it's just cooler.

The tech is just better. it has these neat tricks that, and then at the same time in the other communities, they are very attractive. You're not, most people don't know about them. because you know, they're not the sexiest cars, but they are also electrifying at a very rapid rate. And, and both actually in all price segments, it's like.

The lines are essentially the same,

in terms of EV.

adoption. So,

Steve Hsu: what I say to my American friends who don't follow any of this, and maybe if they're a certain type of American, they think all Chinese stuff is crap. And so, these Chinese EVs can't be any good. I just tell them, do the following thing, go to YouTube, type in BYD EV, and you'll find an Australian guy in Australia or a British guy in the UK or a German guy in Germany, reviewing the car, like a guy who makes his money from his YouTube channel, reviewing the car that you could buy in Munich, which is made by BYD and saying, this car is, you know, competitive. They might say, you know, it's this good or this good, but you can see the car is a quality car and people in those countries believe that.

So right away, you should just realize, wait a minute, this is not how the world was a few years ago, right? There, China was nowhere near the number one car exporter in the world, but now they're, they might be. So, that's that, that's the, the, the way that I can get people to upgrade their understanding very quickly is just to find a YouTube video where it's a Westerner in a Western market, reviewing an exported Chinese EV. And then they'll suddenly realize, wait, the world changed in the last few years, and I didn't catch it,

but of course, you're

Taylor Ogan: Let me see if I can... If I can even surprise you with this, I have a lot of friends who work at automotive companies and some of them are legacy auto companies. Some of them are the newest ones, and a lot of them are Americans. They have torn down, you know, obviously they're not going to publish this.

They have torn down the Chinese cars, the Chinese EVs and their engineers are terrified. And surprised and just so impressed to hear that you're not going to hear that that often, but I keep hearing this and I'm, mostly I like to ask like the logistics of how they get them. But I mean even the new Huawei phone is like hearing about how the US intelligence agencies were trying to figure out how they could like it. How do we get someone to wait in line at a store to actually get one of these so we can tear it down?

So, they relied on YouTube to tear it down. Hilarious. But, the, the, these, legacy auto companies, they're, they're tearing down these Chinese cars. People at Tesla are tearing down These Chinese cars, and I don't want to accuse anyone of reverse engineering, but they are blown away. And that is something that, you know, you can, you can appreciate the build quality by looking at an average car in a parking lot.

I do it all the time. and, but, but then you have to ask yourself, why is it that these Chinese cars are so consistently well built? And it's simply because, well, 90 percent of it is because it is built with robots, and I've toured these factories. and, you know, I wish that these companies would really showcase their factories more.

I understand why they don't, but, you know, I was just at a factory in Changzhou last month where it was 98 percent automated. That kind of rate of automation you don't see in factories. it is. Almost and I actually would accuse them of being a little bit over automated because like I mean Did you really need to buy the kooks?

you know three-million-dollar robots to pick up the car and move it over here like probably not but yeah, the Automation and it's also why the batteries the Chinese batteries are so much better. Why? The iPhone right now, the new iPhone, is having some issues because it's built in India and it's more, you know, hand assembled. Chinese factories are the new Japanese, the new Toyota factories.

and. Not so ironically that they have a lot of Japanese robots in them. but that is, that is why the build quality, that is why the range has gotten so good because they're able to, to jam a lot more things into it because they have this precise manufacturing. And, it is, it is hard to explain.

just how it's like, it really is like a symphony. Two months ago, I saw 15 to 18 robots working on one part. It was, it was crazy. You just see these sparks flying. You couldn't even get within 10 meters of it, but they like it. I can't believe that humans are this smart, that they've created something to do a task that they're not capable of.

And you know, it's.

Steve Hsu: The thing with AI is that, you know, you have to have an algorithmic process that does it, but once you have it and you can validate that it works at a slower speed, but then once it's really working, it seems instantaneous to humans. So, in the same way, if you have a concert of robots cooperating to do something, the human can't even tell what's going on.

But of course, the engineers who designed it did it in a systematic way. And then, of course, now it's, you know, now it's running super, super fast. So, yeah.

Taylor Ogan: And another way I explain this, and I think you would appreciate this. I said this to some of my friends and they're like Taylor. Why did you just tell me? I don't I don't understand what you're saying. it is very cool for me as a human to see AI or a sensor show me something that I can't see with my eyes and so for autonomous vehicles The technology is LIDAR and I commute almost every single day to work and from work in a robo taxi Just because like that's just how life is here.

Um And I, I love it. And, you know, it's work, but I, I, every single day I'm blown away by what the LIDAR picks up because not only would I have to turn my head on a swivel to sometimes see these things, but it is also seeing through buses because the LIDAR is mounted up higher, same thing with radar. It's, you know, it's, it's bouncing off of the lead car and seeing a car, two or three cars ahead of you, like to have a complete obstruction. And then have so much visibility, something about it just is, is so, it's a very interesting feeling. and I don't know if you've ever experienced something.

Steve Hsu: Yeah, it has a completely different set of sensors than what we're used to using when we drive. We have researchers, I'm in Michigan. Michigan State has a pretty strong autonomous vehicle research program and also a lot of LIDAR experts, actually, so I'm familiar with what you're talking about.

And the interesting thing for me was that Elon actually thought he could go without LIDAR. And he said, well, if humans can drive with just You know, vision, ordinary vision, surely, we can get the AI to do that. That may have been a mistake. I mean, obviously the dust hasn't completely settled on that strategy.

But, yeah, to me, it's like giving to the engineers. I know the professors who work on autonomous vehicles here at Michigan and Michigan State, they're, they're like, give us all the info feeds we can possibly get at a particular price point. and the AI will incorporate all of that into its decision making.

Taylor Ogan: Yeah. And, you know, with that decision, that for a lot of people in the industry is what really, Elon Musk. Because it was in, in Elon's, in Elon Musk, you know, history. It will go down as possibly the worst decision technology wise that he made because he, I mean, I know people now who were involved in those conversations really early on, even the original room that he was in when he was told about, you know, AP one right with mobile, before that, so I know, I know the entire history of it.

That was an Elon Musk decision. And there were people who said, Elon, you can't do this, especially when human lives are at stake, and he fired them. So, you know, my respect for him went down a lot after hearing this and following, and now, you know, we can see the New York Times has posted things, Wall Street Journal, Washington Post, about, you know, the paint it black video where they first showed in 2016, this Tesla is driving itself, the human's only there for, you know, that video was completely faked.

we know there was a crash during that. So like, yeah, the can of worms is opening up, but LIDAR specifically, I consulted people who are experts. You know, I didn't study this in university. Like I have a LIDAR is a very complex thing. so we had to consult a lot of people and now we actually do. Like I can have an entire dinner with a LIDAR engineer and like, we can only talk about LIDAR.

So, I'm not a complete idiot now, but, it was, it was so crazy to see people in the technology industry who were like, I can't believe it. Not just that he said this, but that people still want to work for him after he said that. and, and so, but the cool thing about LIDAR specifically is that when he said that the cost of a LIDAR, a [unclear] 128 lines, was like 28, 000.

Right now, a LIDAR unit is less than five hundred dollars. The technology hall of fame Will have a dedicated section to LIDAR and that is something that I don't think a lot of people appreciate. You can really only buy one car in the United States. It's not even turned on. So, Americans don't really know much about LIDAR.

They know that everything looks ugly and everything is now in China. We really want data on this and just, there's no, no one keeps track of this, but we estimate that 10 percent of new energy vehicles, new, new energy vehicles, have LIDAR. And it is like, again, when I first moved here in January, I saw very, I was taking pictures of LIDAR.

I mean, I was taking pictures of LIDAR like I would take pictures of Tesla in 2012 when I saw one. So, it was still so rare, but now it is becoming, this is crazy, it is trendy. To have like a little LIDAR bump on your Neo or like, oh, you can't buy that Lee without like, you got to get the LIDAR. It's safe.

Like, come on, you're buying this for your family. You need that safety. And some of it's actually a little like overblown because some of these companies aren't really doing much with the sensor right now. they will in the future, but, yeah, it is, it's crazy that in the United States, you only have Tesla pretty much for electric cars.

And that's even such a small percentage in China, you have most, almost most new energy, new cars are electric. Then you have in the U.S people don't know what the word LIDAR is in China. People are kind of poking fun at each other because they didn't get a car with LIDAR. Because it's cool.

and it's safe and it's super high tech. I could make a bunch of comparisons like this. but yeah, LIDAR is suddenly sexy.

Steve Hsu: When, I mean, from the perspective of engineering professors who do research on autonomous vehicles at Michigan universities, and this is going back a few years, when LIDAR was super expensive, it was, it was, it was, it was too expensive to be placed on an ordinary car. But for the research vehicles that we were using, they had LIDAR and the whole question was, what is the cost curve of LIDAR going to look like?

And now we've reached the point where, yes, you can afford to have it in almost every car. And so, for sure, it's going to happen. and the people who invested the time to build the software that can really use the LIDAR signal, the information that's gathered by the LIDAR, those people are going to build much better autonomous vehicles than the people who didn't invest in that.

Let's

Taylor Ogan: I have a question. what, what, what was the consensus of those who thought that it would fall to, I don't think anyone thought that it would go sub-1, 000, but like

sub-5, 000. What was the reasoning?

Steve Hsu: would have to go back and look at this, because this was a few years ago when I was the vice president for research and part of my portfolio was actually allocating money to the autonomous vehicle researchers on our campus. So, they could do this work. And, I remember having lots of LIDAR discussions with them.

And the whole, and so having to read up on it myself and the whole question is, what is that cost curve going to look like? And I think the most ambitious, most optimistic people probably were not optimistic enough. About the cost decline for LIDAR, and so it's one of these great stories. Now, I don't know to what extent it's Chinese companies that are driving the cost curve for LIDAR.

And maybe you're going to tell me it is, but it's just amazing because with complex new technologies, you never quite know how fast it's going to get cheap. And that's often the real constraining thing. Question, but what you're telling me now is like, we're going to see a ton of LIDAR in the future.

Taylor Ogan: Yeah. And I think I made this prediction, I think in 20, 2018 that China may require LIDAR in some respects, and I think the deadline was 2025, so we still have some time. I'd maybe push it back a little bit, but you never know. but it is, it is, it may be seen as the safety belt, you know, the seatbelt of the automotive industry.

And especially like when it, when it's so cheap, this is also why Elon Musk is an idiot in a lot of ways. He was wrong about it because he was told how much it would cost. Now it's at a point where he, you most certainly could have it. He toys, you know, 3, 000 between the price of full self-driving capability.

so you definitely could. Why doesn't he? And people have quit over this because there have been very recent conversations. Hey, Elon, let's, let's, it's time to put the LIDAR in the car and like you're fired. so, LIDAR, it may be politicized. I hope it isn't. but American companies, Luminar, have great LIDAR, but it has yet to scale.

actually, I just got an email from their IR that, first. The scale test was successful. but that, you know, we'll see it in some Volvo's first and, and then.

Steve Hsu: that's a Chinese, that's a Chinese car

though.

Taylor Ogan: Yeah, I know, I know, right? I know the team well, they're in China often. they, yeah, the, the great company and great technology and, and some of their engineers will actually, one was just inducted to the, I think the Florida Hall of Fame of inventors or something for his role in, in developing LIDAR for, you know, much cheaper.

But the,

Steve Hsu: you're talking about the National Academy of Inventors. I'm one of them, I'm also in that group.

Taylor Ogan: Really? Congratulations. I didn't know that. Yeah. So, so American companies, like, yeah, they, they've, they've made a lot of progress and definitely are responsible for this. I'm kind of surprised that academics didn't pursue it, they were just buying it, I think, and not really reinventing it as much and.

Those who were Waymo pretty much poached all of them so that they could develop their own in-house ladder. It is also like people don't talk about it because we don't know the cost but like it's not like they're at You know fifty thousand dollars a unit right now. They clearly have brought it down tremendously and their ladder is really good but the Chinese companies quietly have done this, and this shows especially for Huawei it just shows like Jokingly in the office in, I think, 2019, we said, Watch Huawei.

This is before they were, I mean, they had like an automotive division, but it was mostly like for, you know, their, their OS in a car. and we said, Watch Huawei. Just, just make LIDAR. Like, just do it itself. And it did. And I, we should have bet each other because it did. And. Then DJI, the drone manufacturer based in Shenzhen, also always based in Shenzhen, it also just came out of nowhere and made its own LIDAR, like automotive grade LIDAR.

and now what we do have a bet on is BYD will do this in house. And right now, it's invested in a few LIDAR companies, so, um... That kind of complicates it, but they definitely could. And I would expect them to develop their own LIDAR. And I mean, a company in which they invest just, just sold 20, 000 LIDAR units last month, take that people who said it wouldn't scale.

So, it, you know, this is the Chinese are doing some really great things. The, the, the tech, like it's one of those things that you develop the tech. And it, do we really need to improve it past this? Like, then we're going to start having energy consumption concerns. And like, we don't need a point cloud, mostly because we don't have the software to do a lot of what they want for level two, which is, you know, still you have to monitor the car.

but for taking the driver out of the loop, everyone agrees. LIDAR is essential. and so, yeah, this is what's happening with the Chinese. Companies faster. And the other thing is the process, the software iteration really, really shortens when you have a huge fleet. Of cars with this sensor, right?

So, it's not just like, you know, a university driving around its campus loop with LIDAR and saying like, all right, now pop out of the trees and oh, yeah, pick you up now. It's like we can, you have to download all the data. So, there's a big misconception that you just have all this data, like whenever you want.

Now you have to, you have to download the data and it's, it's a lot, and you're not going to send that over, you know, cellular, but, it's, it's a lot of data potential. And you could just tap the fleet for an hour and just get a million edge cases now with a new layer, and that is LIDAR. So, Tesla's even using it to ground truth to confirm its guesses.

it’s like, it's, it's just cool that there is a sensor that gives you truths, you know, whereas everyone in, in really computer vision machine learning is saying like, well, let's keep trying to guess. Let's keep trying to guess. Well, now that the sensor that you would only use in testing is so cheap that you can just buy one on the internet. And you can use it yourself. So that's, that's really cool that that has happened in just the last four years.

Steve Hsu: Incredible. And now, so coming, coming back to like the factory visit where you saw the robotics and I don't know, maybe you're calling on LIDAR companies as well. Is that the source of alpha for you, basically being able to actually visit these companies and see what they're doing? talk about that a little bit.

Taylor Ogan: It, it definitely, I don't want to say it's, it's all of it. but a site visit, especially for us, is the most valuable thing that we can do. I would rather have a site visit about something I know nothing about, and we've never done this, but I'd rather do this than, and not read the company's annual report.

Spend a month of due diligence on one company, which would be crazy and read every single filing they've ever had read every single call they've ever had. And it, it, it pales in comparison to what you can learn from a site visit.

Steve Hsu: And could you talk a little bit about like, okay, imagine you have a site visit. What's something that you learn from that visit, which could be like either a really positive signal for the company or a really negative signal? Like, what are some examples of what you might discover from the site visit?

Taylor Ogan: Sure. Normally I wouldn't even. broadly answer this. but at this point, like if anyone wants to compete, you know, and, and

Steve Hsu: They have to move to China.

Taylor Ogan: all the way out here and like, yeah, and they'd have to find, find this. So, yeah, I'll, I'll actually tell you about an example in detail. I don't, my colleagues may kill me after this, but, we were at a, I guess I'll leave out the company name.

but a battery factory, the most advanced battery factory in the entire world, outside of Chongqing. And battery factories are really complex and also highly secretive. And we, so there's like, there's not much prep you can do except just comparing it to the last battery factory that you toured or the, you know, a battery comparing like CATLs battery factory six months ago to a BYD battery factory right now, like even that comparison, I need to see the new cattle factory to really, They just, they change you so quickly.

but in this one factory, well, many factories, but at this site, we. It was there, their newest one, they wanted to showcase everything and, and they flew out the, basically all of the top engineers, not just for this particular factory, but for, you know, battery, their battery division. And, so we asked them all the questions that we had prepared, and then we really just observed.

And, and of course we'd ask questions specifically like, what does this machine do? It does, is this Chinese? Machine that and that's the big question. You know, is this an American machine? We didn't find any so that would have been a real concern. I mean look what's happening in you know semiconductors but so we're yeah asking specific questions about that, but um Like how long does retooling take?

And if you want it to theoretically change the density or even the cathode, makeup, like how long would that be, could you even do that in this factory? Could you even do that? Like, why are you, why is this factory in this province? Like as many questions as we could. And there was one part of the factory tour that we couldn't see.

And I've literally been strip searched, like not fully, but like. Like I had to roll down my dress socks and, to see a battery factory. So, like they, there's a no-fly zone over some battery factories in China. So, you know, it's a pride and joy of, of Chinese right now, kind of, they want it to be quiet, but, so they're very, they're very secretive, but once you're in one, they kind of, you know, you can, you're here, like we, we trust you.

you've signed enough NDAs, but there's one section of this factory that we couldn't see. And I didn't want to be inappropriate and really try to get in there. Cause there, there are other things that companies that they're like, oh, no, let's not, let's not go there. We don't have time, but this one was there.

Being kind of weird about it. And so, after the factory, we had lunch and I said, hey, why, why couldn't we see that part of the factory? And this is the part, if I say which part, it's kind of their secret sauce. I maybe should be careful in this specific part, but it was, it was one specific, yeah, it was one specific part, and it wasn't a part that I thought was particularly advanced.

I mean, the whole process is advanced, but it was, it was strange, and they said, I'm really sorry, Taylor, but we just, we can't, we can't show that to you. And I tried and I tried, and I tried. And then finally they said, to be honest. The person I was talking to, I've never even seen it. And so, I was like, Oh my God.

All right. And I looked at my team, and I was like, we are going to do a week's worth of work on this specific part of the battery manufacturing process. And so, we did. And, and in that we learned, we don't know what they're doing, but we then can talk, you know, upstream downstream. We can, there are suppliers.

Like we, we know from another meeting that. This company was bragging that we are involved in XYZ's newest battery factory and making a machine for this specific part. Now we really investigate that company and doing that unlocks a ton of alpha. I mean, these are companies that we wouldn't have even considered you.

You go to Like, you know, any of these like battery expos and you'd walk right past that, that booth and no one else is there, but that quietly is like holding up a lot of the innovation that's coming from, from the battery. So, that's just an example of how valuable site visits can be. And, and of course the conversations that you hear and, and really, if you ask good questions, you're going to get even better answers back.

If you really do your homework. Then they, they like that you're interested and know a lot about what they work on every day. And so, it, it just, it just Snow Bull from there. and we actually, when we do a site visit, we usually leave a day after for a buffer, because almost always, in fact, even this time I was just talking about, the next day was a Saturday.

And I said, I know you guys, the ones who like showing us around and making it all pretty, like they are flying back tonight. Cause you told me I'm staying in Chongqing. Because I always do this, can I come back, and I want to see the specific part of the pack assembly that we kind of skipped over. And so, the next day I went out and I saw it and like that was also super valuable.

So yeah, we all, it always leads to something else. and so that's why going out to the middle of nowhere, it seems in China, can really, really pay off.

Steve Hsu: So, if I could recapitulate that. So, so it's, when I asked you the question, I thought you were going to be primarily telling me like what you learn about the company you're visiting, but it seems like sometimes what you're learning is about their supply chain and then you discover another company that's super valuable that, you know, is integrated in their supply chain and has some unique, capabilities.

And then you,

that

Taylor Ogan: So, it's not just about, right. It's not just about that company. It's a, we've of course learned a lot about it, but yeah, we, we come back, our notes I've even dedicated in my notepad, a section where I just write companies. That I hadn't heard of and a lot of them are Chinese. And so, I write it in like 10 different possible ways.

But, yeah, like it, it, it always, and this is, this just was not true in the United States. Also, site visits are so complicated in the U S like they're so secretive about everything and, and they're like, no, like how, if you don't disclose how much, you know, you have in us, like we're not going to even entertain, like you can't even join our, our earnings call.

Like, So, yeah, the Chinese, they're very open arms about this stuff. And I mean, even Huawei, like there's no reason for me to go to Huawei. It is very hard to get a meeting at Huawei because I can't own them. But I can own a lot of companies involved with Huawei. And so that's like, that's another thing that, you know, an example of maybe I won't, I won't learn, I can't do anything with the value that I see at Huawei specifically.

But throughout its entire supply chain, there are so many more companies. And this, these are A shares. That's the other thing, like to kind of tie it all together. These are companies that aren't listed in Hong Kong that no American has heard of. I know because when I, when we research them, like sometimes we'll even search Twitter.

And it'll be like, like your guest two weeks ago, like sometimes it'll be only him. But, you know, no one talks about this stuff. And then you type in the Chinese name and like, of course there are message boards and like, you know, threads that people have and on it. but they're, they're just as highly technical.

and so yeah, then you have to go do a site visit with that company. And like if, if you were to read any like white paper on LIDAR, for example, it would, it would kind of be boring, I think. If you go and see, visit a LIDAR company, they say look what our car can... This car can see because of you.

Steve Hsu: They're engineers.

Taylor Ogan: different. So, it's just Yeah.

Steve Hsu: it. Yeah. Yeah. So

Taylor Ogan: yeah,

That's all we do pretty.

Steve Hsu: Can I ask?

Taylor Ogan: from coming to the company.

Steve Hsu: You, can I ask you like, I think one of the classic stories and standard stories in China is that people invest in property excessively because they're unwilling to invest in the stock market. And the stock market is just kind of a little bit crazy.

In terms of how efficient that market is. So, let's suppose you identify a company that's crucial to whatever BYD's battery supply chain, and that's an awesome company with a unique technology, and you're just confident they're going to have very good growth numbers in the next few years.

Are you then confident that by buying that stock, the market is actually going to cause the value to appreciate in the proper way reflecting their, you know, their growth and revenue and sales, or is the market they're just kind of crazy and you can't depend on it doing the right thing, even though you made the right prediction about their, their future growth?

Taylor Ogan: You're very smart because that's an excellent question um it it's something that we are trying to figure out what we can do, especially, you know, legally and everything with. Like, if we publish research, if we, if we sniff this out and we publish research on

Steve Hsu: Yep.

Taylor Ogan: That's not really in our scope right now, but like others would see this and they would you know you would just put two and two together and certainly sometimes you can't say like because I was touring this factory, I learned about you know this and this but there are tons of ways that you can otherwise do it.

and why I'm confident to answer the first part is Unfortunately, when, when we look up these companies, I mean, these are companies that like, what's the ticker. All right. yeah. And how do you spell it? And then you, you look at the stock chart and you're like, of course, of course, someone else beat us to this.

You know, so I have, I have some, quite a lot of confidence because more often than not, that is the case. And especially like when you start to sniff out this, this, you know. What's happening with Huawei in the last two months. That is very often the case. And sure, a lot of those companies were cut after whatever, September 1st, when it was the first day of trading, after it was unveiled, then, then those companies soared, but if texted.

We chatted, a person who we may go into business with about this. I said, this is a good case study for our two teams to come together and learn from, because now if we had just known about these companies. They, they're, they're publicly traded. I definitely, and even if we didn't know about, because, you know, you go back, you back test all of this and pretend that we didn't know, but this is more like synergies between our two teams, like who from your research team, like, I want to know exactly what we would have done.

I want to know exactly what this person would’ve said, hey, on the latest —like, you know, the equivalent of MacRumors for Huawei. There, it is like the phone case companies got new molds and it really looks like a mate series. Like, you know, if, if we were to have sniffed some of that out, even if we hadn't, even if it was a complete surprise. We need to have an action plan on how we would have quickly come together Exactly where that spreadsheet is located and quickly have a meeting and say let's buy this because this is and it's when you look back it guaranteed that that company's stock price, we’ll go up considerably and they,

Steve Hsu: Well, I think you answered my question because you said more often than not, someone got there first, which means the market efficiency is kind of there and so you can rely on it. It will only get more efficient over time for sure.

Taylor Ogan: But more often than not it is over 50%, but it, I would say net, like if we, if we had a strategy to only invest that way, then I think it would be like in the last two years, like up 15%. Equal weighted. so that's not what I’m really going like we need to dive into it more and also that's just broadly like every single stock chart that I’ve looked up that I had never heard of the company before and there are definitely some macro elements to that but it needs to be All the time like I would say if we were this good about doing this with American companies or just western companies then we would It would you know be up 200 in the last two years so because it's just more obvious it is like that you can go on CNBC and you know, talk about it and but in China, like they're, we're kind of trying to figure out the equivalent and again, like remaining legal and right about everything.

but you know, this is, this is research. so we want more people to know this. Now, here's the thing that we're learning when discussing Chinese LPs. They all have a conversation just like this. And they'll be blown away. They'll be like, how, wow, how can you think like that? And it's like, I, I don't, I'm like the American school.

So, I don't, I can't point my finger at it, but, and because it's not just me, all of my colleagues think the exact same way. And I think if you get, if you ask even the typical college student, in the U S like. You kind of lined up everything and you heard about this company. You're not supposed to visit this part of the battery factory and then you stitch that together. You know, like how do you not stitch that together?

but the Chinese are like the top engineers like the smartest people, the executives of these companies and they're every single day. They're like blown away by this and it's, I don't know why, but then they're like, Taylor, what else, what other ideas do you guys have? And I'm like, I don't know.

I mean, let's keep, let's keep looking into companies because we keep finding more opportunities. so I think that a strategy like that is so foreign to the Chinese and it's convenient for us because There aren't others who are doing this, who are being excited about China, who are loud, who will go on podcasts, like because of all of that, maybe we could in the smallest way, change the way that, that at least equity research is done.

And therefore, you know, that drives volumes. And also, like you said earlier, it excites Chinese people about their own companies. Like, they, they really will, all the, like, I can give examples I definitely shouldn't say, but broadly, there are people who, it's their job, the Chinese people, who it's their job to invest in A share.

We'll go to dinner, and they'll ask me what I think about NVIDIA. By the way, about like the stock, like, and I'm like, do you even have a US dollar account? Why are you asking me this? Yeah, they probably do. That's why, but, but like they, there's, there isn't a lot of excitement to be honest. And I think that we can.

Again, in 10 years, there will be excitement. So much has to go wrong for there not to be. So, it's just, and there will.

be

foreign investors flooding in

Steve Hsu: you know, Taylor, the way I

would explain this to you because I'm older than you, is,

Taylor Ogan: Yeah, please.

Steve Hsu: A lot of people who are from China and they've seen it all, they've seen the economy go from, you know, you remember how shitty it was when you first went there as a student, right? Compared to the way it is now.

They're familiar. That's most of their life. So, they've seen when the Chinese products were shitty, they were all copied. When even at Beida and Tsinghua, the best researchers were not world class, that's their life, what they've experienced. So, they're not, they're not prepared for this moment where actually only now, only now is this inflection point happening where the Chinese companies are getting ahead in real innovation and efficiency of production and automation.

It's all new to them. So. You're young, so you're seeing this for the first time. This is the world for you, right? But for them, they've already lived through all this other crap, and they're conditioned to that. So, it's just going to take a while before they figure out like, oh, I see, Chinese companies can actually be world class, not, not fake world class, but really world class.

I'll tell you a very interesting story. So, in the 90s, I had a collaborator in theoretical physics who was at one of the main Korean universities. And I used to go visit him. And at that time, the Korean auto companies were not as far advanced as they are now. Now Kia and Hyundai are, you know, pretty competitive with any other brands.

Right. But at the time they were pretty shitty. And I remember talking to my Korean colleagues in Korea and I would point to a Hyundai, and I say, hey, that looks really good because, you know, they were pretty aggressive in their designs early on. I said, that looks like a nice car and the Koreans would just turn to me and say, you know what?

But the powertrain, the engine, it all comes from Japan. We can't do any of that yet. So, they were not ready to accept what I had said to them. I buy shares in Hyundai or Kia, and will that be a top global brand in 10 or 20 years? They would have said, no, we can't do it. We have to, it's, it's hollow. It's not real inside.

And a lot of the Chinese people you talk to live mostly through that era. And it's only now that you're in the right place at the right time, I believe, because I do think companies like Huawei and BYD are going to lead the world in their categories, but most Chinese people are not going to quit, they're not quite ready to accept that from you.

Taylor Ogan: Yes. And that's, I appreciate that perspective. And, I. It took us some time to develop that as well. it would have been nice to put it as succinctly as you have. It is fundamental to the future of my company in China . How do we, how do we benefit from that and how do we maybe change that?

At least convincing LPs is my favorite thing, right? So, like, I, I obviously like to talk. and so, so I'm very excited about that. But then what? Like, it also, in the U. S., it's very easy to identify. You have to take everything with a grain of salt. But when you talk to executives and top engineers at these companies, you need to identify the leaders.

Like, a lot of them will be very honest. because they're so smart. They don't have time to think about how I should trick him. but they'll say, you know, look, we're, we're number three. And it's like, Oh, interesting. I would have thought you were number one. Like now I have to go look at those two companies ahead.

But, in China, it is. I'll tell you two quick things. One, one story is I was talking to the chief scientist of artificial intelligence at, at Tencent. and I asked him, I said, who do you think leads in artificial intelligence?

I'm not an AI expert, but you literally are who leads in AI. The United States. And this was, you know, a recent conversation. And so large language models and everything was, you know, fresh in the mind and he said, h I've never thought of that. And I was like, I flipped the table. Like this, I think about this every single day.

Well, how do you not think about this? And, he said, I would have to say, I would have to say, the United States. Now, granted this, he was educated in the U S. So, it's a little caveat, but he got his PhD in the U. S. I should say. and I said, okay, interesting. Why, why do you think that? And he said, well, because in China, first of all, we don't have the close, like, relationship with professors.

They, they, the Chinese who are educated in the U. S. are obsessed with the access they have to people like you. Like, that is something that is unique about the United States. And it's something I didn't appreciate until I asked. And all of them say this, and so they, they, they say that academics are, you know, better in the US, but then he said, you know, look at, look at, chat GPT.

And I was like, I mean, I have enough conversations with smart people in this field to know that, like, let's not, let's not go on a full, like, you know, Chat-GPT specifically is going to change the world. I mean, I use it every day, but, you know, say for what it actually is. And he said, but he went somewhere. I didn't expect that, he said. America can just release that. And also, this week, China had just passed rules on regulation specifically for large language models and everything, which is so classic China and so classic United States, right? This is a very emblematic story. And he said they could just release it. They didn't have to get any approval.

They can just, they can just release it. And then they just start collecting tons and tons of more data. And that's, that, that is why the United States leads out later in the conversation. I was asking him about large language models. And I said, you know, I know Tencent's working on one and actually two.

And, you know, have you used it? When do you think it's going to come out? And he, he held out his phone and he was like, I use it every day. And I was, so I said. Wow. Like, how does it compare? Because some of the Chinese ones, like, aren't as great. and he said, oh my God, it's so much better than chatting on GPT.

And I was like, you just, your, your evidence was just that, you know, that chat GPT is better. You know, that's why America wins in the AI race right now. And he said, well, the thing is, we can't release ours. So, it's just, we can only use it internally. And I thought that was fascinating because in his mind, like in my mind, I come to a very different conclusion if we're just using that evidence.

and, and so that, that keeps happening. And it's like, like, oh, literally being in a robo taxi with no driver. And I'll ask like an engineer, hey, who do you think is ahead in self-driving cars? And they'll say, no one will put Tesla's number one, but they'll like to put Tesla in the top 10. And I'm like, you've worked for four of the companies who I have in the top 10.

How can you put Tesla there? And they're like, well. Because they can just release whatever the hell they want and if, like one state shuts it down, they just go to the next state and they'll find some mayor who will let them test in their city and like, that's what they think of as dominance.

They think of it, it's kind of like how Americans have this odd obsession with freedom. There are definitely reasons to love freedom, but sometimes they, people obsess over it, and they like it for reasons that are kind of crazy. But same, same thing here. Like them, they think that to be, to lead is to just run and break things.

And it's, it's just not how I see it. and I don't know, it's kind of a weird cultural thing.

Steve Hsu: A little bit of this is that grass is always greener. So, like, their number one headache might be, well, wow, I can get loads of really good engineers that I don't have to pay that much and they're awesome. And I can actually get plenty of computers and capital, but my main headache is the regulatory thing, or whether the government's going to be okay with what I do.

So maybe they're a little bit obsessed with that, whereas the American guy is like, wow, these Chinese guys have so many top engineers and they, they have, don't seem to lack capital and, you know, so it can always be something like that. I think the other thing, which you probably already know, but you'll discover if you don't already know it is that in a Confucian culture, everything is under promise and over deliver.

So, nobody's going to say, like, we're number, I mean, they're going to be much less willing, certainly than Elon to say, I'm number one, we're number one, ours is the best. They're actually going to. Even if they feel that internally they're not necessarily going to express it as energetically as an American would.

So that's a big part of it. Yeah.

Taylor Ogan: And, and I, that's why I kind of am also cautious not to try to change to, I don't want to be too much of a bull in a China shop, even though that literally is what I am. you know, it's, I don't want to try to change their culture. And they have one that's so much deeper than the one from which I come.

So, I, but at the same time, it's also helpful to have an outsider point out. You guys are great. Like you are, I was trying to tell an autonomous vehicle company this the other day. It was someone in, you know, they weren't an engineer, so maybe that's why, but I said, who do you think is like number one, two, three, four, five.

And she said, well, I think that we are, we are, I think we're number two and it was behind an American company. And I was like, oh my gosh, that's like, this is, that is crazy that you said that cause like, I wouldn't put them there, but like they're, they're every way you look at it, your company is better than they.

But I happen to put another Chinese company ahead of this company. And, and I'll say it, it was, I was talking to Baidu Apollo and, and I said, I put pony AI, which is also Chinese, ahead of you guys. And they said, she said, what, are you kidding me? They're just a startup. She said it like, like, you mean Pony, like the startup Pony.

And I, I said, I said, oh my gosh, wow, you, you like, it was kind of both things. Like, she thought that they weren't the best when they were way better than Waymo. And, but then she thought that they were better than Pony and Pony. So, you know what I did? I said, let's go downstairs. And I called a pony, and we wrote in it, and she Definitely went back and had many meetings about that and I explained the reasons like she I think was looking for you know at different things maybe but yeah It we kind of struggle with that every day.

And so, I think it's better to point out when companies are doing really well. And also tell companies what they need to improve.

The last thing is that the Chinese companies are so willing to work with each other. It is so, I want to say it's refreshing because American companies will be literally headquartered right next to each other. And we'll just pretend the other doesn't exist or like to make life hell for the other.

And in China, certainly, it's encouraged but it's like you see this with friendships, too. You see this with like executives will say oh you're trying to get a meeting with this other company that even could be their competitor. This has happened.

Oh, let me just reach out to them and I'll set up a meeting and it's like Wow, Americans are so conniving or maybe the Chinese don't think things through but like it they really like to cooperate. And be helpful and this is why I see a huge technological revolution happening right now. Like yeah, of course, it's been happening.

But like I mean on a chart the brink of the hockey stick curve for Chinese tech is this year probably next year Like it is just now happening. Like you can see the factories that are being built. You can see the policies that the government is coming out with like I think they're going to have a laissez faire approach If you look at like the ed tech space, it walloped us, but that was like overnight. No one saw that coming. But now they set the rules because it was getting a little too crazy. They set the rules and now they say go play. And the Chinese government doesn't usually say go play, but they know that this is the first time where you know, a lot of Chinese government officials are engineers This is the first time that a lot of companies have smarter engineers or are innovating faster than you know, what's going on at Xinhua or like it's this is kind of new for them.

And so, they are setting the framework and then now these companies are just they're going to play and they're going to play with each other and they're going to build teams, but they'll be okay if they trade players between them. Like it is because they're all going to the top.

and so I don't even see China doing this innovate or leave approach anymore.

Like even that it's like remembering a few years ago when there were too many EV companies, and the government was like. This is inefficient. Like let's, let's consolidate. And that was good. And now, like now I think there even could be like, could you have a lucid or a Rivian equivalent in China?

I, yeah, I think you actually can. because the environment is, is, is actually really welcoming to that. And we didn't see that until about a decade ago in China. So, it's, it's awesome where China's at right now, but it's so much more awesome to think about where China will be in the future.

And in ways that I think your listeners can even, really get excited about, like ways that, yeah, maybe LIDAR and stuff like won't change their specific lives, but ways that will change their lives every single day at a, you know, more than I would say, like large language models do now, like, and then that's a very substantial change, more possibly than what the smartphone, it's hard to say, but more than the smartphone, right.

Really did, you know, so it's, that's super exciting. And those technologies are even some that you and I may not even know exist, could exist, and I think that's the most, um. Exciting thing for me and hopefully we invest in companies that help make that possible.

Steve Hsu: Well, Taylor, this has been a fantastic conversation. I've used up a lot of your time, but I really enjoyed it. I'm sure we could actually go on for hours. I hope maybe I'll visit you in China at some point and we'll continue.

Taylor Ogan: Please do.

Steve Hsu: Yeah. Thanks a lot.

Taylor Ogan: It's kind of like it's kind of like therapy for me. I don't get to talk to too many people in the U.S. about this stuff. So, it's actually really great.

Steve Hsu: Well, love to have you back in the show. Also, that would be fantastic.