Since the beginning of this year, I have shared the importance of respecting common sense in investment in several articles.

Such cases can often be seen in various business fields, and many of these cases are experiences that our generation has personally gone through and empathized with—only, at least for myself, when they occurred, I was still inexperienced and had no perception or awareness of these contemporaneous cases.

For example, I previously shared a case of investing in Evergrande Real Estate as a cautionary tale.

In recent days, I came across three past interviews with Pan Shiyi. Several points he mentioned in these interviews once again highlighted the importance of common sense in business investment.

Respecting common sense is not only the key to ensuring investment success, but sometimes it may also be crucial for preserving one's life and fortune.

The first video is from an early interview he had with Yicai.

In the interview, he stated (in essence):

As a businessman, the biggest risk comes from political risks. He can calculate economic risks, but once caught in political risks, there is no escape.

Therefore, he chose the real estate industry from the start, opting for commercial real estate, as this sector is the most market-oriented and least affected by political factors, avoiding significant uncertainties caused by annual policy changes.

Additionally, to mitigate the risks of economic fluctuations, he chose to focus solely on the commercial real estate in the central business districts of Beijing and Shanghai. This way, even if the national economy declines, the least affected areas would be Beijing and Shanghai; even if the economy in Beijing and Shanghai declines, the least affected would be the central business districts.

The second video is from his 2018 interview with Wu Xiaobo.

In this interview, he mentioned a disagreement with "Old Ren":

Regarding the price trends of Chinese real estate after 2018, "Old Ren" believed, based on the data he had, that real estate prices would continue to rise.

He, however, was not so sure and began to worry about the risks. There were two reasons:

First, a deputy minister from the Ministry of Housing and Urban-Rural Development mentioned that the per capita housing area in China had reached 35 square meters, already matching or exceeding that of developed countries.

Second, at that time, the bank loan interest rate was 4.9%, while the rental yield from the commercial real estate he owned was only 2%.

Just in terms of commercial real estate, if a developer takes out a bank loan to build commercial properties, the rental income is simply insufficient to repay the loan. At that time, some said that the rental yield in China had always been low, and he directly refuted this viewpoint in the video—since he started holding commercial real estate for rent, he personally witnessed the yield from his properties decline from an initial 20%-30% down to 2%. It was certainly not that low from the beginning.

The reason there were still many commercial properties under construction at that time was that developers were optimistic about continued price increases.

Thus, he felt something was off and dared not bet on future price increases.

The third video is from his 2018 interview with Changsheng.

In this video, he specifically mentioned that he had been continuously selling off his commercial real estate holdings. At the time of the interview, he had managed to hold half in cash, while the other half remained in commercial real estate. He also mentioned that he was not in a hurry to sell the remaining half of his commercial properties.

After watching these three videos, I felt three things from Pan Shiyi: conservativeness, caution, and exceptionally swift actions.

Regarding conservativeness, his viewpoint compared to Old Ren's is a typical example.

Old Ren's viewpoint now seems undoubtedly correct, as the peak of Chinese real estate prices was around 2021-2022, and indeed continued to rise after 2018.

However, even so, there are probably very few people who can manage to exit at the peak.

Pan Shiyi's choice to avoid risks within his capabilities rather than seeking to exit at the peak has already been quite successful.

His decision to focus solely on commercial real estate and to operate it himself is another example of conservativeness. This stands in stark contrast to the majority of residential developers who have effectively gone bankrupt.

His caution is reflected in the investment areas he chooses and his financial approach.

He chooses to engage only in commercial real estate, which is least affected by political risks, and focuses solely on Beijing and Shanghai.

This reminds me of Wanda, whose business model is very similar to SOHO, but Wanda has spread its footprint too wide, with Wanda Plazas even in second- and third-tier cities.

Looking back now, in the current and coming years, in such an economic environment, it seems that many Wanda Plazas in second- and third-tier cities will take a long time to generate enough rental income to cover the loans taken out during construction.

He frequently mentions various financial data, revenue figures, and return metrics in interviews, unlike many "big shots" who only talk about grand visions and future prospects.

In fact, Pan Shiyi has merely held onto common sense and returned to the essence of business.

More importantly, he had already converted half of his assets into cash by 2018. In that environment, he was probably ridiculed by many peers and "big shots." However, Pan Shiyi seemed unfazed by this in interviews, always smiling and accepting the mockery from others.

Perhaps this is what the idiom "great wisdom appears foolish" refers to.

What I admire most is that, among all the "big shots" I have seen in interviews, he is the first to mention "political" risks so early and to this day.

I suspect that in our unique environment, many "big shots" might not see this as a risk but rather as a "shortcut" to business success.

However, we have all seen the final outcome; he swiftly took his half in cash and left for another place, never to appear in any interviews again.

In the past 30 years of the real estate industry in mainland China, he is probably the only businessman who frequently appeared in the media but ultimately managed to leave safely.

In fact, I had seen two of these three videos before, but at that time, I did not have the patience to watch them to the end, nor did I remember any of the points that left a deep impression on me today.

The cards Pan Shiyi played early on were all open cards, widely disseminated through interviews, but how many people paid attention when these open cards were played back then?

We are all witnesses of this era. But among us fellow travelers, how many can see through the bubbles and adhere to common sense in these firsthand experiences and witnessed events?

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