"I understand, so your model is to focus on the clothing industry, find related industries on various planets, and then acquire them one by one to form a vast supply chain, ensuring that every link in the supply chain is profitable." Jiang Ye summarized, "Traditional clothing companies only make money by selling clothes, but you make money from cotton all the way to the finished garments, which results in huge profits."
"Exactly, we internally call it a 'hundred rivers converge' expansion. No matter what direction the mountains and rivers flow from, as long as they eventually merge into the sea of profit, we welcome it." Tian Rao nodded.
"I think you're downplaying it, only talking about the superficial aspects and not touching the essence." Jiang Ye shook his head.
"What do you mean by not touching the essence?" Tian Rao blinked. "What I've told you is all confidential information about our company, worth a fortune!"
"For example, when analyzing a battle, the reason for victory is large-scale, high-intensity artillery bombardment, winning with a massive number of shells. But shells are just the surface; the essence lies beyond the battlefield. For instance, how are massive quantities of shells transported to the front lines, how are they produced, how are the raw materials gathered, how are advanced artillery pieces developed, and how is the attention of scientific research forces focused on weaponry?" Jiang Ye explained. "What is superficial cannot be directly imitated, while the essence is something that can be copied. The superficial is the color of a car's exterior, while the essence is the car's engine."
"If we talk about what's beneath the surface... it would take three days and three nights to finish," Tian Rao smiled. "I'll give you a general idea."
"I can't remember the details, so a general idea is fine," Jiang Ye nodded.
"Which aspect would you like to know?"
"Many companies like to expand, and many companies like to venture into multiple fields. However, companies that expand blindly are prone to sudden collapse; eating too much and too broadly can endanger themselves." Jiang Ye said, "I want to know how you span multiple industries without collapsing?"
"It's impossible not to collapse. Even our familiar clothing business is prone to collapse, so unfamiliar businesses are naturally even more so. According to our internal data, the success rate of projects expanded externally in the past two years is only 10%, with 90% failing or stagnating." Tian Rao stated.
"With only a 10% chance of success, you must have lost your shirts!" Jiang Ye frowned. "Where does such large profit come from?"
"The trick is risk transfer," Tian Rao said. "My parent company never bears the risk; the risk is borne by the people below."
Jiang Ye's frown deepened.
"Let me give you an example. Suppose we plan to enter the Bi Rong Star market and send a branch company there. After a month, the branch company's management reports that the dye prices on Bi Rong Star are too high, and it would be better to acquire the local dye production base. After reviewing the detailed report, my parent company's management finds it profitable and signs an agreement with the branch company."
"What does the agreement entail?"
"It's usually a phased investment agreement. For example, in the first month, to acquire the dye production base, the parent company provides 30% of the acquisition funds, and the remaining 70% is raised by the branch company's management. The funds can be their own money borrowed, or profits left to the branch company; in short, they figure it out themselves."
"After the acquisition is completed, we assess the data. If the data is good, the parent company might bear 40% of the expansion costs for the dye production base, with the branch company bearing 60%. If the data is not good, we might only provide 5% of the costs, with them covering 95%."
"Once this dye base starts generating profits, we will create a long-term plan to determine the proportion of funding for base maintenance and set the profit-sharing ratio." Tian Rao paused. "Whoever contributes a larger proportion of funds receives a larger proportion of profits."
"Our approach has several advantages. The first is that the money we invest is disposable because the amount is not large, and we can stop at any time if things go wrong. Many companies get deeper and deeper into trouble because they invest too much and are unwilling to cut their losses, like gamblers."
"The second advantage is ensuring the loyalty and execution of the branch companies. This is because our parent company only invests a small amount to test the waters, while the people in the branch companies are gambling their lives. We have a fallback, but they don't. Therefore, they must find every way to fight the battle well." Tian Rao said, "What is the flaw of many large companies? The top desperately wants to make money, while the employees at the bottom desperately want to slack off, and good opportunities are lost at the grassroots level."
"Ninety percent of your branch companies lost their bets," Jiang Ye interrupted her. "What happened to them?"
"The bankruptcy rate, divorce rate, and suicide rate are very high," Tian Rao said after a moment of hesitation.
"My heavens." Jiang Ye's expression was shocked. "Tian Rao, the money you make... it's from sweatshops and then luring branch companies to gamble their lives..."
"They want to make money themselves!" Tian Rao pouted. "Sometimes, our parent company explicitly tells a branch company that based on the available intelligence, their project is likely to fail, and we reduce our investment ratio to 5% to indicate our stance. But some people in the branch company still want to take a chance."
"Returns and risks go hand in hand; to get rich, you have to take risks. How can others bear the risk while all the benefits are yours?" Tian Rao spoke rapidly. "Each branch company we send out has a different personality. Some branch companies are speculative maniacs, obsessed with conquering territories, experiencing rapid growth and collapse, while others are very cautious, staying in small shops and honestly selling clothes, ignoring other industries. These are all choices made by the branch companies themselves. How can they be blamed on me? I didn't force them to take risks."
Jiang Ye opened his mouth, wanting to say something, but hesitated and closed it again. After a moment, he nodded, "Continue."
"The trick I just told you is risk management and interest binding. I never bear excessive risk, and I'm willing to share profits with the people below, sharing their honor and disgrace." Tian Rao said, "What are some companies like? They transfer risk to the lower-level employees but want to grab all the profits, which greatly discourages the initiative of the lower-level employees. Our company has actually cultivated a large number of small bosses and wealthy employees. We are willing to share profits, sacrificing some profit for stability."
Jiang Ye nodded, "I understand."
"Besides these financial methods, there are also some technical methods," Tian Rao said. "For example... intelligence."
"Intelligence?"
"Our company invests a huge amount in intelligence; 18% of annual profits are spent on intelligence gathering." Tian Rao said, "Research and development funding only accounts for 5% of profits."
"Eighteen percent?" Jiang Ye was shocked. "Why is the proportion so high? I'm very curious about your intelligence system."