Wide Moat Investing Summit 2013: Bamboo Innovator on "Wouldn't it be nice if we can invest before the economic moat is obvious?"

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《竹经：经商经世离不得立根创新》
nnovatorBamboo
R.E.S.-ilience in Value Creation
“Wouldn’t it be nice if we can invest BEFORE the wide
economic moat is obvious?”
Bamboo Innovators bend, not break, even in the most
terrifying storm that snap the mighty resisting oak
tree. It survives, therefore it conquers.
www.valueconferences.com/reg/moat13/
July 9-10, 2013
KB Kee, Singapore
if we can invest BEFORE the wide

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nnovatorBamboo
Berkshire 2013 AGM Q&A: How Do Buffett and Munger View
Investments In Emerging Markets and What Kind of Companies
They Are Interested In?
Buffett: “Emerging markets aren’t our
specialty. If we were poor enough, we
might even consider doing that.” Munger: “It’s a great way to sell
investment advice – something in every
category. Lots of commissions, lots of
advice, lots of action.”
Buffett: “Whenever you hear people talk
about concepts, for instance, country by
country ideas, they are probably better
at selling than investing.” Munger: “Our experts really like Bolivia’.
You say ‘last year you really liked Sri
Lanka’.”
Buffett: “We usually think it is a lot of
baloney.”
Berkshire Hathaway 2013: Takeaways and Impressions from the
Annual Meeting, May 7, 2013 (BeyondProxy)
http://www.beyondproxy.com/berkshire-hathaway-2013

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nnovatorBamboo
Samsung/PSY “Halo Effect”:
Overly high expectations of growth
and quality for average corporates
Chaebol Governance Risk:
Expropriation and embezzlement
made easy from complex circular
shareholding structure
Death Arrows
Debt Timebomb:
Total debt (household + corporate +
govt) 283% of GDP vs crisis peaks of
278% (2009) and 227% (1998)
“Cheap Korea”!? Keep Calm with Bamboo Innovators
Samsung + PSY > Pyongyang
= “Cheap” Stocks?!

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nnovatorBamboo
“Wouldn’t it be nice if we can invest BEFORE the
Key challenge: Stocks are categorized
into moats AFTER they are obvious…
“Our advantage is intimately linked to categorization through analogy, a mental
mechanism that lies at the very center of human thought but at the furthest fringes of
most attempts to realize artificial cognition. It is only thanks to this mental mechanism
that human thoughts, despite their slowness and vagueness, are generally reliable,
relevant, and insight-giving, whereas computer “thoughts” are extremely fragile, brittle
and limited, despite their enormous rapidity and precision.” – Hofstadter and Sander in
“Surface and Essences: Analogy as the Fuel and Fire of Thought”

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nnovatorBamboo
Amazon has endured and outlasted critics who long complained about its high fixed costs.
Bezos build five $60M automated fulfilment centres in 1999 against the advice of experts: "for a company that only
had $1 billion in sales, spending $300 million on fulfilment centers is a very big investment."
In 2000, its estimated warehouse capacity was three to five times more than it needed.
In 2001, sales had fallen short of expectations, two of its distribution facilities were closing, and Amazon had to lay
off 1,300, or 15%, of its employees.
Pundits predict the death of Amazon.
Before Moat (BM): Before Amazon has an “economic moat”….
After Moat (AM): Tipping Points on Apr 11, 2001 & Aug 27, 2002
Before Moat (BM)
“Amazon is a tough one to figure. It could
affect a lot of businesses who don’t think
they will be affected. Amazon has millions of
happy customers. They can introduce to new
items. It could affect a lot of businesses.”
“It is almost sure to hurt a lot of businesses
a lot. Anything that can be easily bought
with a home computer or iPad. I think it will
hugely affect a lot of people. It is not
slightly terrible, but really terrible”.
Amazon’s Moat = “Network Effect”

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nnovatorBamboo
R.E.S.-ilience in Value CreationAfter Moat (AM): Tipping Point #1 on Apr 11, 2001
Tipping Point #1: Borders Group President and CEO Greg Josefowicz and
Amazon’s Jeff Bezos shake hands on April 11, 2001, announcing that
online retailer Amazon.com will take over Borders’ online bookselling
operations after Borders went online on May 7, 1998.
After Moat (AM)

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Tipping Point #2 came in 2002 when Amazon embarked on a strategy of broad discounting and free
shipping (for purchases >$25 on Aug 27, 2002) rather than spending money on marketing ads as
advised by experts, dramatically increasing sales, decreasing the operating leverage and risk associated
with Amazon’s fixed costs while more fully utilizing its newly-developed distribution network.
Remember Ray Kroc’s admonishment when he lambasted analysts for labeling the Golden Arches as
McProperty? Kroc is essentially saying that all the good real estate location are just debt and fixed costs
if you can’t sell burgers to earn cashflow.
“Indestructible Intangibles”: Trust and support from community of customers, suppliers, partners.
After Moat (AM): Tipping Point #2 on Aug 27, 2002
After Moat (AM)

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nnovatorBamboo
Before Moat (BM): Before Microsoft has an “economic moat”….
After Moat (AM): Tipping Point on May 22, 1990
Before Moat (BM)
Tipping Point: The successful launch of Windows 3.0 on May 22, 1990 that puts the computer in
every home was the tipping point event that resulted in Microsoft to have that economic moat
advantage in de facto standard switching costs to generate longer-term quality earnings persistence
that is often not fully appreciated by value investors with the net-net quant mindset.
Microsoft’s Moat = “Switching Cost”/ De Facto Standard

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After Moat (AM)
After Moat (AM): Tipping Point on May 22, 1990
“Windows 3.0 was the most successful software
project in history, selling more than 10 million copies
a month, and it's directly responsible for Microsoft
being where it is today. And David is responsible for
most of that success - if Windows 3.0 hadn't run
Windows apps in protected mode, then it wouldn't
have been the unmitigated success it was.”
- Microsoft’s Larry Osterman in “Farewell to one of
the great ones” on 2 Feb 2005
Microsoft probably would not exist if not for mid-career software engineer David Weise. In the formative years of Microsoft, Bill Gates
and Steve Ballmer could not get Windows 3.0 to work. Windows 3.0 was the platform software that the Office Suite, Outlook and other
apps run on. It was the keystone that allowed Microsoft to build a global empire. Yet, the centrepiece of Microsoft’s grandmaster strategic
plan was an abandoned project. Gates and Ballmer went for the logical survival plan: hooking up with giant IBM to develop OS/2. As retold
by Frans Johansson in the fascinating book “The Click Moment: Seizing Opportunities in an Uncertain World”, “Ballmer lobbied aggressively
to have Windows killed off completely. IBM was Microsoft’s life raft: if the company had sensed that Microsoft might keep working on
Windows as some sort of hedge, they might have pulled back. That would have been a disaster.” It made perfect sense for Microsoft to
partner with IBM. But great strategies are not based on what made sense. Rather, they are based on what sets you apart.

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nnovatorBamboo
Waiting can be the poison in value investing and tipping point analysis is
the antidote. Investors often lose patience and conviction with their
stocks when they don’t perform in the short-term to produce a feel-good
comfort that we are right in our stock calls. That’s why fund managers
under pressure to deliver short-term results always ask their sell-side
analysts or the management, “Any upcoming catalysts?” This cannot be
more misleading when there is an insufficient understanding in the
scalability and resilience of the underlying business model. This is critical
because a lot of “catalysts” such as corporate news announcement of
“sexy” projects or M&As are, in fact, false signals created and released by
“insiders” (庄家) to inject “action” into the stock, luring investors in and
then offloading to them in a pump-and-dump cycle.
Serious institutional investors spend most of their time not in looking at
stock price screens or gaining “insider” knowledge of “catalysts” to
generate alpha or excess returns, but in analyzing the interaction of
business model dynamics with “tipping point” events so that they literally
hear and see the “clicking” sound when they occur to produce a resilient
compounder. Value investors need to have a systematic framework to
understand and identify “tipping point” events when they occur to stay
ahead of the momentum traders and colluding insiders on the investing
curve. Just like the tipping point events on May 22, 1990 in the launch of
Windows 3.0 that galvanize Microsoft’s business model and the launch of
the free shipping (purchases above $25) by Amazon on Aug 27, 2002 that
cemented trust and support in the community of customers.
Catalyst Vs Click

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Cigar Butts/Value Traps Vs Wide Moat:
Buffett’s “Marriage Test” + “Children Test”!
Warren Buffett and wife Susie ham it
up at a February Cap Cities
management meeting, with Disney's
Eisner (left) and President Michael
Ovitz learned of his plans. Disney
acquired Cap Cities/ABC for $19
billion in 1996.
Buffett’s “marriage test” to assess
management quality: “Tom
Murphy and Don Burke [of Cap
Cities] are not only great
managers, but they are precisely
the sort of fellows that you would
want your daughters to marry.”
Daniel Burke, left, and Thomas Murphy
organized the acquisition of ABC by Capital
Cities for $3.5 billion in 1986.
Drawing from the wisdom of Buffett’s “marriage test” by using the Bamboo Innovator framework,
value investors should ask this folksy question to assess the quality of the moat:
“Would you be proud and happy for your children if they work at this company?”
Parents wish for their children to grow from strength to strength to withstand the shocks of the bumpy
roads in life, just as value investors want the economic moat to keep widening for the company to
compound value resiliently even in crisis period.

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“If you gave me $100 billion and
said, ‘Take away the soft-drink
leadership of Coca-Cola in the
world,' I’d give it back to you and
say it can’t be done.” - Buffett
Robert Bosch (1861-1942) worked as apprentice at German
companies, in US under Thomas Edison, in UK at Siemens
1st breakthrough: Magneto ignition device (1887)
2nd breakthrough: MID to vehicle engine (1897, 1902)
Global expansion: 1898-1913
WWI (1914): Lost it all! Factories and plants all destroyed!
Never give up: Electric horn (1921), windshield wiper
(1926), power brake system (1927)
Boat engines, jet skis, garden and forestry equipment, gas
engines, water pumps and emergency generators…
2012: 11 billion spark plugs produced by Bosch
Ownership: 8% Bosch family, 92% Foundation (1938 will)
Resilience: The Ability to Replicate & Scale from Scratch &
The Indestructible Intangibles to Bounce Back From Crisis!
$68B
Sales
>$150B
Value
$48B
Sales
$173B
Mkt Cap
Burn and destroy all the
tangible assets!

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nnovatorBamboo
“The first rule is that you can’t
really know anything if you just
remember isolated facts and try
and bang them back. If the facts
don’t hang together on a
latticework of theory, you don’t
have them in a usable form.
You've got to have models in
your head. And you've got to
array your experience - both
vicarious and direct - on this
latticework of models.”
– Charles Munger, “A Lesson on
Elementary, Worldly Wisdom As
It Relates To Investment
Management & Business ”, USC
Business School, 1994
Mental Model: Bamboo Innovator
Bamboos Bend, Not Break in the wildest storms that snapped the mighty resisting
oak trees; it survives and therefore it conquers.
“Rootedness” in cultivating a culture of kindness, trust and
cooperation to contend with and heal creative dissent and
incentivize innovative experimentationsR Rootedness
E Emptiness
S Sheath
A “Good-to-Great” checklist
approach might overlook the
resilient Bamboo Innovators.
After all, there are much
larger impressive trees in the
forest. By comparison a
bamboo looks smaller,
thinner, and fragile. The list of
Bamboo Innovators is a
surprising one; many of them
are not the typical ones that
one would come across.
“Emptiness” like the empty hollow center of a bamboo in having
(1) “indestructible intangibles” which in turn derives its strength
from either a certain know-how or trust and support in the
community; (2) a “core-periphery” network; and (3) an “open-
innovation” business model in which both internal and external
partners co-develop new products and creations.
“Sheath” in leadership to create the context, adaptive-govern,
coordinate, synthesize and weave diverse networks and groups who
might otherwise be excluded into a coherent whole, rather than the
typical command-and-control “positional/title-based” leadership.
Empty hollow center
The nutrients and moisture that
would have been exhausted
making and maintaining this
empty center can be utilized for
growth of other culms. From a
builder’s viewpoint, the
architecture of the bamboo culm
presents a powerful configuration:
fibers of greatest strength occur in
increasing concentration toward
the periphery of the plant.

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nnovatorBamboo
Search Methodology for Bamboo Innovators:
“Emptiness” in Business Model
Indestructible
Intangibles
 Proprietary know-how
 Trust and support from
community of customers,
suppliers, partners
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Bamboo
Innovators
U.S.
Europe
Asia
Core-Periphery
Network
Open Innovation
 Both internal and external
partners co-develop new products
and services
 Scaling by empowerment and
decision-rights beyond the founder
 Scaling by technology as an
enabler and embedded into the
business model design
 RockTenn (RKT US)
 Balchem (BCPC US)
 O’Reilly Automotive (ORLY US)
 Sherwin-Williams (SHW US)
 Fastenal (FAST US)
 Qualcomm (QCOM US)
 Ecolab (ECL US)
 Bosch
 Novo Nordisk (NVO DC)
 Inditex (ITX SM)
 ASSA Abloy (ASSAB SS)
 ARM (ARM LN)
 Novozymes (NZYMB DC)
 Yunnan Baiyao (000538 CH)
 Kewpie (2809 JP)
 DKSH
 Great Wall Motor (2330 HK)
 ARB Corp (ARP AU)
 TSMC (2330 TT)
 CSL Limited (CSL AU)
550
Watch List
~15,000*
Listed Asian
Stocks
* Asia ex-Japan ex-China A-shares.
Includes India, HK, Taiwan, Korea,
Singapore, Malaysia, Thailand,
Indonesia, Philippines, Australia,
New Zealand, with a market value
of over $8.5 trillion. If Japan and
China A-shares were included, the
investment universe is expanded
to over 20,000 stocks with a
market value of over $15 trillion.
3.7%
1.8%

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R.E.S.-ilience in Value CreationKorean Bamboo Innovator 70: Who Are They?
>$9bn (1.3%)
$0.9 to 9bn (7.2%)
$90 to 900m (31.1%)
<$90m (60.4%)
Bamboo
Innovators
4%
The Korean stock market
has approximately 1,800
companies with total market
cap of US$1,189 billion, the
13th largest in the world (as
of December 31, 2012)

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nnovatorBamboo
>US$10bn
3, 4% US$5-10bn
5, 7%
US$1-5bn
32, 46%
US$300m-
1bn
21, 30%
<US$300m
9, 13%
Market Cap Sector
Consumer,
31, 44%
Internet/
Mobile, 11,
16%
Media, 6,
9%
Tech, 5, 7%
Healthcare,
6, 9%
Industrials,
5, 7%
Auto, 2, 3%
Energy, 1,
1%
Others, 3,
4%
Korean Bamboo Innovator 70: Who Are They?
>US$20m,
8, 11%
US$10-20m,
13, 19%
US$5-10m, 18,
26%
US$1-5m, 27,
38%
<US$1m, 4, 6%
Daily
Liquidity
Price/Book>5.0x, 9, 13%
3.0-5.0x, 16,
23%
2.0-3.0x, 21,
30%
1.0-2.0x, 21,
30%
<1.0x, 3, 4%

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nnovatorBamboo
Around 30% of GDP
The 10 top chaebols (conglomerates) make up more than half the value of the 1,800
companies on the Korea Stock Exchange. The 30 largest chaebols accounted for at least
84% of South Korean exports, according to Federation of Korean Industries.
The father of Korea’s newly-elected 18th lady President Park Geun-hye was the late
military strongman Park Chung Hee until his assassination in 1979. Under his autocratic
rule during 1962-79, Park allowed the chaebol to flourish and attain their dominant
position in the national economy, now Asia’s fourth-largest.
The Mighty Korean Chaebols & the Samsung “Halo-Effect”
“A Korean president lasts for five years, but
Samsung’s power is forever.” – Local saying
Samsung Electronics:
>$200bn market cap

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nnovatorBamboo
Chaebols’ Well-Deserved Corporate Governance Discount
Low Dividends, Embezzlement/ Tunneling/ Expropriation Made Easy
By Complex Circular Shareholding Structure
Chey Tae-won, Chairman of SK Group, South Korea’s
third-largest conglomerate by assets, spent seven
months in jail in 2003 for accounting fraud, returned
to helm after release, then was pardoned in 2008. He
was found guilty of embezzlement in Jan 2013.
1997/98
Asian
Financial
Crisis

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nnovatorBamboo
Chaebols’ Well-Deserved Corporate Governance Discount
Spectacular Failures of Daewoo (1999) & Woongjin (2012):
Massive Hidden Debt in Circular, Complex Shareholding Structure
Yoon Seok-geum is the founder and chairman of Woongjin Group,
Korea’s 32nd-largest conglomerate. Woongjin Coway, the flagship
cash-cow vehicle, has climbed over 10-folds since 2001 to over
US$2.1 billion in market cap. On 27 Sep 2012, the group’s building
units, Woongjin Holdings and Kukdong Construction, filed for
bankruptcy. “Sympathy turned to antipathy, however, once people
learned how the once-promising corporate group drove itself to
near dismantlement through diversification beyond its capacity.
Trouble began when Yoon bought the building company paying
US$600 million, nearly twice the optimal price, in 2007 just prior to
the breakout of the Lehman Brother’s fiasco. Banks and nonbank
lenders are left holding the bag of up to US$3 billion of loans, not
backed with sufficient collateral.”
Yoon and wife and several large shareholders have disposed of
their equity in the group (in Feb for over US$1 billion), handing
losses to minority investors.
20121999
Daewoo was the 2nd largest chaebol
in Korea then, ahead of Samsung

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From 2007 to 2012, Korea’s $350 billion
National Pension Fund (NPS) increased its
investment in the top four chaebols by four
times to $46.6 billion
During this period, the ratio of Korea total
debt (households, corporates and government)
to GDP rose to a record high in 2012 at 283%,
higher than 227% for the 1997-98 Asian
Financial Crisis and 278% in 2009 when the
global financial crisis peaked
NPS to increase equity investment from
current 25% to 30% by 2016, or US$150 billion
into the stock market
Propping by Korea’s $350 Billion National Pension Fund
(NPS) in the Top Four Chaebols by 4X from 2007 to 2012
$46.6bn
$12.1bn
Samsung,
Hyundai, SK, LG

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nnovatorBamboo
The Potential “Great Chaebol Restructuring”:
The Case of Samsung and What It Means for Value Investors
Complex Shareholding Structure:
Lee family kept control of crown jewel Samsung
Electronics (US$200 billion market cap) through a
complex shareholding structure, cleverly using debt and
the least amount of its own capital to control a massive
empire
Upcoming Restructuring Changes:
Financial subsidiaries hold big voting stakes in non-
financial ones like Samsung Electronics
Lawmakers propose to remove voting rights from
financial companies that hold stakes in non-financial
affiliates. This would reduce intra-group share of voting
rights to <10%
Samsung may need to spend US$1.3bn to eliminate
circular shareholdings; Hyundai Motor US$6.4bn,
Hyundai Heavy US$1.3bn
Implications for Value Investors:
Non-financial cross-shareholders of Samsung
Electronics will become more valuable, such as Hotel
Shilla (008770 KS), Cheil Industries (001300 KS), Cheil
Worldwide (030000 KS) and they benefit from selling
their stakes in the financial affiliates to reinvest into
their business
Financial affiliates, such as Samsung Card which
appear cheap, may become cheaper

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nnovatorBamboo
Abenomics! Adverse Impact of Weak Yen on Korean Exports?
KOSPI vs JPYKRW + ST negative impact on Hyundai-Kia and Buffett’s POSCO
Hardest hit are Korean automobile, steel and electronics manufacturers that compete neck-and-neck with
Japanese firms in major markets around the world
Korea Automotive Research Institute estimated that a 10% drop in the value of yen against the won will decrease
sales of local automakers by 12%
According to a recent survey of 789 Korean exporters by the Korea International Trade Association, 40% of
respondents said the weakened yen will hurt their competitiveness
1Q13: Hyundai Motor sales +6%, OP (10.7%); Kia sales (6%), OP (35.1%); Buffett’s POSCO sales (10.6%), OP (4.7%)

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nnovatorBamboo
A KIKO (Knock-In-Knock-Out FX Option) Comeback?
Many Korean SME exporters were bankrupt during 08/09 when they hedge against a
rising won via KIKO and the forex options turned into heavy losses as won fell

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nnovatorBamboo
KOSPI vs JPYKRW (Longer-Term Chart: 1985-2013):
Weaker yen/Stronger won is better? Winners are those with pricing power
at home and overseas
Abenomics
(Nov 14,
2012)

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Korean Productivity Ranked #28 Out of 30 OECD Nations
Chaebol Dominance Stifles SME Entrepreneurship and Innovation?

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nnovatorBamboo
Beneath the Korean Glitz & Glamor…
Massive Household Debt to Buy “Chemyon” (Face)

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“Halo-effect” of Samsung/PSY = Overly high expectations
in growth and quality for the average corporates
Chaebols’ corporate governance woes
- Low dividends, embezzlement, tunneling and expropriation
risks that stem from complex, circular shareholding structure
Geopolitical risks from North Korea
Property and household debt time-bomb
Weak financial and banking system reliant on wholesale
external funding (high loan-to-deposit ratio)
Korean pension fund (NPS) propping up the Big Four
chaebols
Accounting and language differences
Militant labor unions; workforce that has low
productivity (28th out of the 30 OECD nations) and is overly-
stressed (75% workers feel that their jobs have driven
them to depression)
Highest per-capita suicide rate in the world; younger
workforce reliant on parents’ inheritances
Korea: The Impossible Country!
The world is not enough! Aggressive,
willingness to change and ambitious desire to
globalize business
- Interestingly, the Korean stock market is the first in Asia to
bounce back from both the 97/98 Asian Financial Crisis and
the 07/08 Global Financial Crisis
Soft power in consumer and media appeals to
the world, which is rare for an Asian country
Technologically-advanced infrastructure spawn
a unique ecosystem of domestic companies

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nnovatorBamboo
Berkshire Hathaway acquired FlightSafety International (FSI) on Oct 15, 1996 for $1.5 billion in cash and stock. FSI
was founded in 1951 and listed its shares in 1968
Valuation: P/B 2.5x, PE 18x, Price/Sales 4.6x
On the day of announcement, FSI 3Q earnings fell to $18.9m on “lower profits from a training contract”, “a cutback
in activity in activity at the company’s training centers during the summer Olympics” and “a costly startup requiring a
major investment and opening a training operation in China.”
It was only the second time Buffett used Berkshire stock to make an acquisition. FSI was also Berkshire’s largest non-
insurance business, representing 28% of non-insurance earnings. Buffett’s only condition was for founder Albert
Ueltschi (79) to continue to run FSI, which he did until he handed operations over to Bruce Whitman in 2003.
Berkshire’s longtime shareholder Richard Sercer introduced Buffett to Albert. Albert, who owns 37% of FSI then,
choose to take payments in Berkshire stock which jumped 5-fold in value from $31,700 to $159,000 per share. Albert
passed away on Oct 18, 2012 at 95.
Now FSI generates over a billion dollar in sales.
Remember Buffett’s FlightSafety (flight simulator)?
Is there a similar business model in Korea?
Buffett (1996): “FlightSafety is a business
that I like, run by a man I like and admire.” Bruce Whitman
Albert

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Remember Buffett’s FlightSafety (flight simulator)?
Is there a similar business model in Korea?
Buffett (1996): “Not having
the best in pilot training
would be like taking the low
bid in selecting a doctor.”
High profit margin but also high capex
Buffett (1996): “The company operates in 41
locations, outfitted with 175 simulators of planes.
Simulators are not cheap - they can cost as much
as $19 million - so this business, unlike many of
our operations, is capital intensive. About half of
the company's revenues are derived from the
training of corporate pilots, with most of the
balance coming from airlines and the military.”
Post-acquisition, capex during 1997-99 was
20% of assets or 36% of sales, twice the rate
before it was acquired
Long accounts receivables period
Neither “Value” nor
“Growth” stock!
Valuation: P/B 2.5x,
PE 18x, Price/Sales 4.6x
In the five-year period
prior to BH’s acquisition,
FSI revenue grew from
$267m to $326m in 1995
at an annualized rate of
5.1% and profit rose at a
CAGR rate of 6.5% to
$83-84m. Hardly a
growth stock
Oct 1996
Acquired
1951
Founded
1968
IPO
2013
13 Yrs 28 Yrs 17 Yrs
Critical service in solving a major problem (65% of
airline accidents due to human error)
“Emptiness”: Know-how in translating one-to-one tacit
training by Albert to machine-based to software/
internet; trust and support from community developed
from decades of educating pilots. The indestructible
intangibles help fend off rival Singer’s SimuFlite who has
far greater tangible resources
Once business model overcomes high capex, network
effects and customer stickiness kick in
Scalable globally with recurring revenue
Why is FSI a Bamboo Innovator/ Resilient
Compounder?
Sources of “Emptiness” in Bamboo Innovators
“Indestructible intangibles”: (1) Know-how, (2)
Trust and support from community
“Core-periphery” network: (1) Technology to
scale, (2) Empowerment
“Open-innovation” business model

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http://www.economist.com/blogs/gametheory/2011/09/screen-golf-korea
Golf Simulator: Bringing a Rich Man’s Game Affordable for
the Masses and a 10X Price & Technology Disruptor
Making available to the masses once expensive products and
services that used to be affordable by only the rich = Compounders
Ford/ Toyota, Wal-mart, Coach, Charles Schwab, IKEA, Luxottica,
Swarovski, Tiffany & Co, L’Oreal etc
Golf remains a sports for the wealthy, and even harder for Koreans
to blow at least US$200 on a weekend round of golf when his credit-
crunched wallet resembles dried fruit. Golf simulation is 10x cheaper

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http://www.youtube.com/watch?v=RlsJ5_R2ocI

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0.9 1.7 2.6 4.3
10.4
27.3
93.5
104.9
159.5
189.5
245.4
0
50
100
150
200
250
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
US$ million
Golfzon: Hit 10th-year milestone and “Mission”:
“To make golf enjoyable and accessible to everyone, no matter where they live or
how privileged they are”
Indirect beneficiary from the 2007/09
Global Financial Crisis (GFC) as golfers
switch to simulators and Golfzon,
who continually introduced
innovative new products and
services, consolidated market share
42% market
share
84% market share

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R.E.S.-ilience in Value CreationGolfzon: Dominant Golf Simulator Company in Korea
Established in May 2000, Golfzon is the dominant 3D virtual reality golf simulator company with over 84% domestic
market share, an increase from 42% in 2007 and 61% in 2008. The remaining 15-16% market share are split quite
evenly amongst four other companies
Extensive customer base: Golfzon membership is around 1.2 million, doubled from 2010, and accounting for more
than 50% of the golfing population in Korea, or more than 70% if golfers with no Golfzon membership are included.
Distribution reach of 5,000 Golfzon stores with over 20,000 simulator installations. Golfzon also operates 20
Golfzon Academy Golf Driving Range (GDR) (directly-owned and franchise), 17 Golfzon Market (offline retail market)
and 5 Golf Factory (collaboration with US Golfsmith) and Golping (online golf shopping mall)
Golfzon satisfied a critical market gap: Lack of golf courses in Korea and esp Seoul to accommodate its growing
golfer population. Actual golf courses are located in provincial rural areas which are 2-3 hours drive away from Seoul

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Golfzon rolled out its first golf simulator (P-model) in 2002 and introduced upgraded versions S-model (2004),
Live Tournament (2006), N-model (2008), the important R-model (Jan 2011) and VISION model (Feb 2012).
Advanced golfers stay away from screen golf due to lack of accuracy but VISION model was a breakthrough to
capture all three segments from basic to intermediate to advanced. VISION sells for W45m (US$40,000), 60%
higher in ASP than the older version W28m
“Emptiness” in business model lies in leveraging advanced virtual reality technology and accurate golf ball
trajectory to create the same experience as playing on a real course, including a “Digital Caddie”, first offered as
a free beta service online and now a paid item
Nearly half of its 474 workforce are in R&D and employee stock ownership is 2.3%
“Emptiness” in Virtual Reality technology to continually
introduce innovative products and services

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Monthly number of unique visitors (UV)
at golfzon.com has surpassed 500,000 Page views at golfzon.com tops 500,000
“Emptiness” in trust & support from community of loyal
customers to go into new areas
SBSgolf.com used to be the most popular local golf portal site until 2008 when it was disrupted by Golfzon
Golfzon has started in 4Q12 a public field booking business by capitalizing on its loyal online customer base
with a nationwide country club database at its fingertips too
The growing customer data will become an important asset to utilize in various golf-related businesses such as
golf course management and golf product sales
Golfzon also runs an online golf shopping mall Golping (www.golfzon.com/golping)

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Michelle Wie
The Most Dominant Golfer In the World Right Now
Park In-bee poses with her trophy while her parents,
Kim Sung-ja, left, and Park Gun-gyu, kiss her after
she won the U.S. Women's Open golf tournament at
Sebonack Golf Club in Southampton, N.Y.

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5 of the Top Ten Lady Pro Golfers Are Koreans!
35 Players in Top 100

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R.E.S.-ilience in Value CreationScreen Golfer Qualified to Compete In Pro Event

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Skidding Golf Course Revenue Coupled With
Thriving Virtual Game

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nnovatorBamboo
R.E.S.-ilience in Value CreationFaddish Nice-to-Have or Zeitgeist-Like Starbucks?
Can it enter the zeitgeist (spirit of the age/time) to become part of the social fabric and culture?
Does it allow the unique individuality of a person to be expressed and yet ubiquity will not dilute the quality of the expression/image?
Koreans are sick and tired of “norae-bang” (singing bars) as entertainment outlets from a stressed work-life as the zeitgeist in the
unraveling of debt excesses in consuming these expensive giddy services become guilt trips. Golf simulation offers a refreshing and healthy
entertainment alternative over the past decade in Korea while preserving chemyon (face) and is increasingly embraced by the middle class
as the economic situation grows grimmer.
“Just as someone who has eaten or drunk too much vomits it up again in agony and yet is glad for the relief, sleepless Siddhartha yearned
for a monstrous wave of nausea that would rid him of these pleasures, these habits, this whole meaningless existence and himself along
with it.” – Hermann Hesse, Nobel Laureate (1922) and German-Swiss author, in Siddhartha
"I think there is a world market for
maybe five computers.“ – IBM
Chairman Thomas Watson, 1943
"There is no reason for any individual
to have a computer in their home." –
Ken Olson, DEC President in 1977
"500 dollars? Fully subsidized? With a
plan? I said that is the most expensive
phone in the world. And it doesn't
appeal to business customers because it
doesn't have a keyboard. Which makes it
not a very good email machine." – Steve
Ballmer on the first iPhone

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R.E.S.-ilience in Value CreationTake Part in G-TOUR and Win US$1 Million Prize Money!

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Collaboration with US Golfsmith in Aug
2011 to operate retail stores to leverage on
Golfsmith’s expertise. 5 Golf Factory now
Golfzon’s intangible asset in brand
recognition value is generating synergy for
new businesses such as its retail which is
making relatively smooth progress
Might be a concern when Golf Factory and
the current 17 Golfzon Market compete
“Emptiness” in open innovation business model
Collaboration with Golfsmith to co-create new retail service

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Market Stats & Financial Summary
PE 10.7x, P/B 1.7x, ROA 13.3%
>US$10bn
US$5-
10bn
US$1-5bn
US$300m
-1bn
30%
<US$300m
Consumer
Internet
Media
Tech,
7%
Healthcare
Industrials
Auto Energy Others
>5.0x
3.0-
5.0x
2.0-
3.0x
1.0-
2.0x,
30%
<1.0x
Market Cap
Sector
Price/Book
Korea Bamboo Innovator 70
Date: Jun 26, 2013
Share Price: W58,600
Market Cap: US$623m
FX Rate: USDKRW 1,154
Daily Liquidity: US$1.9m
52 Week: W51,100-71,000
PE: 10.1x
PB: 1.7x
PS: 2.6x
P/CFO: 11.3x
Div Payout: 20%
Div Yield: 2.0%
Market Stats
Valuation Summary
YE Dec, US$m 2008 2009 2010 2011 2012
Sales 93.5 104.9 159.5 189.5 245.4
Net 38.1 42.3 58.1 43.0 64.0
CFO (Op Cashflow) 41.8 44.6 57.8 42.2 65.7
Capex -1.9 -2.9 -2.6 -35.5 -84.2
Profitability
GP Margin 61.2% 58.7% 55.6% 51.5% 56.7%
EBIT Margin 45.1% 39.2% 33.8% 25.2% 26.7%
Net Margin 40.8% 40.3% 36.4% 22.7% 26.1%
GP/TA 100.1% 72.4% 54.7% 30.3% 28.9%
ROA 66.7% 49.8% 35.9% 13.4% 13.3%
CFO/TA 73.1% 52.5% 35.7% 13.1% 13.6%
Growth
Sales Growth 12.2% 52.0% 18.9% 29.5%
Net Growth 10.9% 37.3% -25.9% 48.9%
CFO Growth 6.6% 29.6% -27.0% 55.7%
Ownership
Kim family 60.55%*
Treasury 3.9%
Employee 2.3%
KB Asset 9.6%#
Others 23.65%
*3 year lockup from IPO
Financial Summary
R = “Rootedness” in innovative culture?
E = “Emptiness” in business model durability & scalability?
(1) Indestructible intangibles in know-how and trust and support from community?
(2) Core-periphery business model via technology and empowerment?
(3) Open innovation business model?
S = “Sheath” leadership?
Cash vs Accruals 2008 2009 2010 2011 2012
WK% Sales -0.4% 1.3% 1.8% -4.5% -2.4%
Capex% Sales -2.0% -2.8% -1.6% -18.8% -34.3%
AR day 16 9 12 13
Inventory day 3 6 13 33
AP day 14 14 15 15
CCC 5 2 10 31
Leverage
Mkt Cap 506.7 697.9
Net Debt -11.7 -7.2 -33.5 -25.3 9.0
Debt/Book Equity -25.1% -9.9% -23.5% -8.4% 2.3%
Basic Valuation
PE 11.8 10.9
P/CFO 12.0 10.6
P/Sales 2.7 2.8
P/Book 1.7 1.8
R.E.S.-ilence Factors in Value Creation
Industry dynamics
Business transparency
Accounting quality
Corporate governance
Catalysts/ Tipping point
Valuations
Liquidity
Risk Factors
# KB Asset disclosed they have acquired additional shares on 26 Jun 2013 to increase their stake to 10.8% from 9.6%

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Why cheap despite world-class tech and market dominance?
Risk: Fear of market saturation and new hardware sales growth to decline
Number of roundings is growing
faster than new site openings
Daily average number of roundings is
rising, giving upside to new site openings
Golfzon screen golf sites have doubled from 2,400 in 2009 to the current 5,000, while membership have tripled
from 379,000 to 1.2 million. New store openings will grow at a slower pace to 5,800 to 6,000 by 2015
This means that new hardware sales growth will decline
Members per site are still increasing and the number of rounds they play (“roundings”) per site is also increasing
Key question: Possible for the business model to monetize loyal membership beyond hardware sales based on the
number of rounds they play? If not, stock will stay cheap!

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Golfzon vs Kospi Index
Listed on 20 May 2011 at W85,000,
Golfzon is down 29.4% vs Kospi down 15.6%

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Risk/Opportunity #1: Transition from hardware to
software-based business model has created uncertainty
Hardware contribution: 92% of sales (2008) to 56% (2012)
Sales: Hardware 56%, Software 25%, Retailing (Distribution) 16%, Others
(Golfzon Academy etc) 4%. In terms of OP, software contributes 50%
Prior to the introduction of the R-model (2011), previous models allow users
to play for free on 15 basic golf courses. The R-model charges a fixed fee for each
player to play on any course (W1,000 for 9 holes and W2,000 for 18 holes) and
has replaced old models. There are few resistance from customers to the new
charge system because of the dominant market share and loyal customer base
who are used to Golfzon’s system, posing high barriers to entry for competing
challengers offering golf simulators that do not entail any additional fees to
avoid paying additional network service fees.
The Important R-Model (2011)

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Risk/Opportunity #1: Transition from hardware to
software-based business model has created uncertainty
The new measurement is no longer hardware unit sales but rather the number of rounds played by its 1.2 million
customers at 5,000 sites
Fee-paying rounds as a percentage of total rounds played has climbed from around 20% when the R-model was
first introduced in 2011 to 90-93% currently, or around 12 million rounds per quarter
Golfzon’s network service/software offers value-add as it links up the simulator rooms and provides various
“Golfzon Live” content (“Digital Caddy”, billing service for paid courses, online golf tournaments/ranking (G-Tour)) and
online reservations via its homepage (www.golfzon.com). After deducting taxes and fees paid to site owners, Golfzon
secures at least W1,500 out of the W2,000 fee
As at 4Q12, there are 22,469 Golfzon simulators in 5,000 golf screen sites: the old N model 635 (3%), the new N+R
model 18,344 (82%), the latest 3R/VISION model 3,490 (16%)
Network service charges will likely be raised from W2,000 to W3,000 in 2H13 when it upgrades the quality of
screen golf images to HD (high-definition)

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In Dec 2011, Golfzon invested W48.2bn (US$43.7m) including W33bn bank loan, in the country club and public golf course Mt.
Sunwoon Lake Valley located in Gochang, North Jeolla province. The place is a 3-hour drive from Seoul and is famous for its historical
Korean hanok village to experience Korea’s traditional lifestyle. Thousands of people visit the mountain, where the golf course is on, in
the autumn when the leaves of the numerous maple trees turn red and to pray at the nationally-renowned Seonunsa Temple. Golfzon
acquired it from the distressed Taihan Electric Wire. Barring the bank loan, its cash outflow is estimated at W15.2bn (US$13.8m)
Sunwoon Lake Valley has sales of W7.6 billion (US$6.9m) and OP W3.7 billion (US$3.3m) (OP margin 48%) in 2011 but incurs high
interest expense. It is estimated that by repaying half of its debt, net profit is around W2 billion (US$1.8m)
Golfzon can offer an integrated golfing experience for its extensive 1.2 million loyal customer base in offering field services and also in
golf course management services (e.g. strategic alliance with IMG in Jun 2012)
Risk/Opportunity #2: Acquired in Dec 2011 a real golf
country club - lambasted as having lost focus

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R.E.S.-ilience in Value CreationRisk/Opportunity #3: Overseas expansion has been slow
Entered in May 2009 and now has 40% market share, according to Japan’s JETRO,
albeit a market still in its infancy as simulator golf is considered as entertainment
like pachinko pinball rather than as a substitute for real golf
Golf club membership Japan averages W40m (US$36,000) with weekend green
fees around US$100 for members and US$150 for guests, similar to Korea. Caddie
fees are US$100-140 per team
Golfzon has opened 5 directly-managed golf rooms in Japan and there are over
120 stores handling Golfzon simulators. Golfzon plans to sell its simulators to sports
bar, game arcades and amusement parks once it establishes its brand power
Entered in Sep 2011, targeting market gap in Canada’s prolonged winter season
4 Golfzon sites
Entered in Jun 2011 with 1 Golfzon site
Entered in Feb 2012 with1 Golfzon site
Overseas expansion has been slow and disappointing: W5bn (US$4.5m), or 1.8%
of sales in 2012. Cumulative overseas sales from 2009-2012 is W20bn (US$18m)

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R.E.S.-ilience in Value CreationRisk/Opportunity #4: Capital allocation decision
Golfzon has US$51m in cash and US$61m in short-term debt, or a net debt situation of
around US$10m
Like many (or nearly all) Korean companies, Golfzon also has short-term investment
assets (comprising of stocks and structured products) at around W84bn (US$76m), the bulk
of which is invested during May 2011 (when KOSPI index was around its peak of 2100-2200,
now 1950). This is disappointing and a negative even though the market valuation of the
short-term assets has now exceeded the book value of investment
Most Korean companies are strong in operational execution but weak in their financial
management and capital allocation expertise
No perfect company. A mitigating factor is that Golfzon is very transparent in its
operational key data such as paid roundings, units sales (new and replacement) and so on

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Golfzon’s Golfzon Academy GDR (golf driving range)
business has grown to account for 3-4% of sales in 2012
with 15% OP margin in less than a year since its launch.
At Golfzon GDR, golf enthusiasts can improve their game
via Golfzon’s golf simulators in addition to receiving
instructions from resident pros. This could replace the
existing screen golf vendors. Golfzon may introduce a
franchise model
The distribution system comprises B2B that sells
supplies to screen golf ranges and B2C that operates
online/offline golf gear shops
New growth driver: Distribution (16%) and GDR retail (4%)
now accounts for 20% of sales

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R.E.S.-ilience in Value CreationGolfzon Vs Buffett’s FlightSafety International (FSI)
Market Cap
Sales
$1.5 billion $623 million
Net profit
PE
P/Book
P/Sales
Net margin
Capex % sales
AR Day
$326 million
$83 million
18x
2.5x
4.6x
20-25%
18-36%
Long
$245 million
$64 million
10.1x
1.7x
2.6x
26%
34.3%
13 days
Golfzon is 30-
50% cheaper
in valuations
Oct 96 numbers

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Golfzon Vs Entertainment Tech Companies:
Dolby, IMAX, RealD
Market Cap
Sales
$3.4 billion$623 million
Net profit
PE
P/Book
P/Sales
Net margin
Capex % sales
AR Day
$926 million
$264.3 million
16x
2.4x
3.7x
28.5%
18.1%
30 days
$245 million
$64 million
10.1x
1.7x
2.6x
26%
34.3%
13 days
Golfzon is 25-100%
cheaper in valuations
$1.7 billion
$284 million
$41.3 million
41x
6.6x
6.1x
14.5%
2.1%
182 days
$740 million
$247 million
$36.9 million
213x
4.7x
3.6x
14.9%
24.9%
80 days
GP/TA
ROA
42.5%
13.5%
28.9%
13.3%
36.2%
9.8%
42.6%
12.2%
Op Cashflow $390 million$66 million $73.6 million $43 million
Debt equity ratio (28.3%)2.3% (4.1%) 0.1%

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R.E.S.-ilience in Value CreationGolfzon Vs 3D Companies: 3D Systems and Stratasys
Market Cap
Sales
Net profit
PE
P/Book
P/Sales
Net margin
Capex % sales
AR Day
$354 million
$39 million
83x
7.1x
8.6x
11%
0.9%
68 days
$245 million
$64 million
10.1x
1.7x
2.6x
26%
34.3%
13 days
Golfzon is over 200%
$3.2 billion
$215 million
$8.5 million
156x
2.0x
8.9x
3.9%
6.0%
77 days
GP/TA
ROA
26.7%
5.7%
28.9%
13.3%
6.3%
0.5%
Op Cashflow $53 million$66 million $22.5 million
Debt equity ratio (14.1%)2.3% (8.5%)

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R.E.S.-ilience in Value CreationGolfzon Vs Gaming Companies: NCSoft and Nexon
Market Cap
Sales
Net profit
PE
P/Book
P/Sales
Net margin
Capex % sales
AR Day
$422 million
$61 million
48x
3.2x
6.9x
14.5%
15.5%
42 days
$245 million
$64 million
10.1x
1.7x
2.6x
26%
34.3%
13 days
Golfzon is over 25-60%
$5.2 billion
$1.3 million
$318 million
20x
2.4x
4.7x
23.4%
3.2%
59 days
GP/TA
ROA
27.7%
5.4%
28.9%
13.3%
31.1%
8.8%
Op Cashflow $109 million$66 million $535 million
Debt equity ratio (2.5%)2.3% (34.1%)

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Former Samsung employee Kim Won-il co-
founded Golfzon in 2000 with his son CEO Kim
Young-chan (YC Kim)
Kim family 60.55% (father 44.56%, son 15.99%),
Golfzon treasury 3.9%, Golfzon employee stock
ownership 2.3%, KB Asset 9.6%*, Consus Asset
0.5%, Goldman Sachs Asset Mgmt 0.36%, Others
23.65%
Kim family has a 3-year lock-up period from 20
May 2011, while affiliates and partners with a
2.76% stake during IPO have a lock-up period of 1
year after listing
Golfzon: Shareholding structure
Kim family,
60.6%
Golfzon treasury,
3.9%
Golfzon
employee stock
ownership, 2.3%
KB Asset, 9.6%
Consus
Asset, 0.5%
Goldman
Sachs,
0.4%
Others, 23.65%
YC KimKim Won-il
* KB Asset disclosed they have acquired additional shares on
26 Jun 2013 to increase their stake to 10.8% from 9.6%

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It's nice to have 1.2 million loyal customers as a foundation and community to scale further the total golfing experience. The
new VISION product, launched in 2012 after years of piling the foundation while all the short term imitators that Graham
mentioned had whittled away, has finally captured the last frontier of customers: the pro golfers using it as a training tool.
While FlightSafety is a critical must have, it is cursed with fewer powerful customers and long accounts receivables period. IMAX
and Dhoby were nice to have until the loyal customer base forced entrenched scepticism amongst powerful incumbents to shift.
Can understand totally the American perspective who's used to the latest tech gadgets that's made-in-America; I find it amazing
too that this nice to have fad has taken root in the tech crazy Korean culture, particularly during the 07/09 global financial crisis
when they doubled their market share from 40% in 2007 to 80% now as Golfzon made a rich man sports enjoyable, realistic,
and 10x affordable to the masses and now the pros, resulting in recurring cashflow with short AR period.
It helps Seoul is so stressed and packed, like a quarter of American population packed in New York but no golf courses within NY
and Seoul; the nearest golf courses outside Seoul are two to three hour drive to the rural provinces. As Buffett-Munger taught
us, a 80% market share is not twice more profitable than a 40% share, it is likely 10x more profitable.
I like the total decimation of the once dominant sbsgolf.com website to book actual golf sessions and get golf info, how they
went from 90% market share to below 10% when Golfzon.com springs forth from their loyal customer base, with 500,000
unique visitors every month. I get the skepticism which result in the tension in stock valuation in the fight between the short
term and long term investors.
It is nice that Golfzon is a non chaebol. Usually Korean companies cannot escape from the big shadow of the mighty Samsung
and chaebols - unless the offering is unique, genuine, authentic and embraced by millions of loyal customers, like Golfzon :)
Q: “Comparing a company that provides a mandated service
with one that's a nice to have, think this is a real stretch.”

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R.E.S.-ilience in Value CreationGolfzon: Summary
Resilient and scalable business model:
(1) Total golfing platform with dominant domestic market share of 84% with 1.2 million loyal customer base in bringing a
rich man’s game available and affordable to the masses in golf-mad, time-scarce Korea where golf courses are scarce in
Seoul and are a 2-3 hours drive to the rural provinces
(2) “Emptiness” and intangible asset in virtual reality technology has resulted in introducing continuous innovative new
products and services, including the launch of the successful VISION model in Feb 2012 to expand beyond basic and
intermediate golfers and capture the final customer segment which is advanced golfers
(3) “Emptiness” and intangible asset in trust and support from its community has increased the brand value recognition of
Golfzon to enable the expansion into new products and services such as retail (GDR and distribution in B2B and B2C to
Golfzon Market and Golf Factory), online (e.g. Golfzon.com, Golping), digital content (e.g. Digital Caddy), golf course
management and bookings. Golfzon.com is also the #1 golfing site with 500,000 monthly unique visitors and page
views and has totally disrupted since 2008 the previous leader sbsgolf.com into oblivion
Valuations: Undemanding and attractive valuations at PE 11.3x, P/B 1.9x, EV/EBITDA 8.7x, ROA 13.3%, div yield 1.8%. 18-
24 month valuation target: To double from $740 million to $1.5 billion (2X in 2 Years)
Catalysts (ST): (1) 2H13: An increase in network service (software) fees from W2,000 to W3,000, (2) Better than expected
adoption rate of new VISION model (launched in Feb 2012), (3) Better than expected retail and distribution sales, (4) Better
than expected online and digital content sales
The contrarian/controversial opinion (LT): A successful transition from hardware to software-based business model since
Jan 2011 will likely result in sharp PE re-rating upwards. Short-term investors are still counting the widgets (hardware unit
sales) by the quarter and share price is driven down 21% since IPO on 20 May 2011. Empirically, it takes two years for the
effects of a business model transition or a major acquisition to kick in
Key risks: (1) Overseas expansion might be slow, (2) Capital allocation decisions might be poor

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R.E.S.-ilience in Value CreationAppendix: Chaebol Origins

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Appendix: Samsung’s Expropriation of Minority
Shareholders in its Other Listed Affiliates
Samsung SDS sold a total of 3.21 million shares of its bonds with warrant (BWs) to Lee Jae-Yong, the son of the Samsung Group’s
Chairman, Lee Kun-Hee and three other family members at the per-share price of only 7,150 won. At the time of the controversial share
transfers, BWs issued by Samsung SDS were trading at 55,000 won per share in the over-the-counter market. Hence, the minority
shareholders of Samsung SDS lost, while the family of the controlling shareholder enriched itself. As a result of the deal, Lee Jae-Yong
raised his stake in Samsung SDS to 10.1 percent. Samsung Chairman Lee was also criticized for similarly handing over BWs in other
Samsung Group companies, such as Samsung Everland, Samsung Electronics, and Samsung S1 (012750 KS), to his son Jae-Yong, gradually
paving the way for an eventual transfer of group chairmanship - Korea Herald, May 11, 2000

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Bamboo: The hardiest and effective natural structure to evolve in
millions of years of restless experiment in cellular life on earth
Even through the strongest hurricanes, the bamboo will bend
but never break; when covered with snow, it will patiently
wait for it to melt down, and then rise up.
And in the end, the bamboo stands tall, green and beautiful.
For the Chinese, the bamboo represents the value of
“uprightness”.
Bamboo is an ancient resident of earth, here before people by some 100 to 200 million years. Its “root-like”
rhizome and “hollow” culm is perhaps the hardiest and effective natural structure to evolve in millions of years
of restless experiment in cellular life on earth, and the most efficient laboratory that has yet appeared for
braiding sunlight, water, and soil into forms which have for centuries proved immensely useful for human needs.
The bamboo culm combines a certain gentle capacity to yield with a strength that rivals steel. 52,000 pounds
per square inch were required to break a good bamboo. Walnut required 22,000 pounds per square inch, while
the steel commonly used for reinforcing concrete required about 60,000 pounds.
Bamboos bend, not break, and remain evergreen even with the onslaught of the atomic bomb. The world’s first
atomic bomb over the city of Hiroshima on August 6, 1945, has destroyed streets and houses, charred trees and
grasses to bits. Yet, one living thing stood out. In the very epicenter, a thicket of bamboo stood through the
blast, suffering only one side to be scorched. The sight was an immeasurable encouragement to the war-
shattered citizens. A portion of the bamboo plant is now housed in the Memorial Museum for Peace.

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R.E.S.-ilience in Value CreationContact
KB Kee
“Give me a lever long enough and a place to stand and I’ll move the world,” says Archimedes. The long lever
we choose to innovate in the world is hopefully the Bamboo; the place where we stand is Emptiness - when
we empty our heart of prejudices, pride and fear, we become open to the possibilities to innovate – and
Emptiness is rooted in Kindness and Trust.
Bamboo Innovator Institute is set up to establish the thought leadership of resilient value creators around
the world. Koon Boon has been rooted in the principles of value investing for over a decade as a fund
manager and analyst in the Asian capital markets. He was a fund manager and head of research/analyst at a
Singapore-based investment management organization dedicated to the craft of value investing in Asia. He
had been with the firm since 2002 and was also part of the core investment committee in significantly
outperforming the index in the 10-year-plus flagship Asian fund. He was previously the portfolio manager for
Asia-Pacific equities at Korea’s largest mutual fund company. He received his Masters in Finance (magna cum
laude) and double degree in Accountancy and Business Management (both summa cum laude) from the
Singapore Management University (SMU). He had taught accounting at his alma mater in SMU and lectures
at SIM University for working professionals. He had published cutting-edge empirical research in the Special
Issue of Istanbul Stock Exchange 25th Year Anniversary of the Boğaziçi Journal, Review of Social and
Economic Studies, as well as wrote articles about value investing and corporate governance in the media. He
had also presented in top banking and finance conferences in Sydney, Cape Town, HK, Beijing and in the
recent Emerging Value Summit 2013. He is also an internationally-featured value investor in TEDxWallStreet,
Greatinvestors.TV and BeyondProxy.com. He has trained CEOs, entrepreneurs, CFOs, management executives
in business strategy, macroeconomic and industry trends in Singapore, HK and China.
www.twitter.com/bambooinnovator
bambooinnovator@gmail.com
www.bambooinnovator.com

Wide Moat Investing Summit 2013: Bamboo Innovator on "Wouldn't it be nice if we can invest before the economic moat is obvious?"

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Wide Moat Investing Summit 2013: Bamboo Innovator on "Wouldn't it be nice if we can invest before the economic moat is obvious?"