Interview with Dr. Bin Li--by LI Xiaolin (October 1999)
Xiaolin Li: Thanks for talking with us. Today I would like to concentrate on your career and your thoughts on how we as alumni can help USTC. First I want to talk about your career. The most unusual move is that you joined Merrill Lynch in 1993. Please tell us if that's something you had planned all along or just an opportunity coming your way.
Bin Li: Many people have asked me this question and I often point them to one article I wrote about my experience in joining the financial industry (Dragon Slayer Went to the Street). Let me just give you some brief comments here.
I wanted to become a top scientist, such as another Einstein, since I was a small child. I went to USTC at the age of 15. That dream carried me all the way until I received my Ph.D from New York University. What I found out then was that the most exciting time in physics had passed us. The remaining important problems were either too complex, difficult or too tedious. At the same time, some fellow physics students in NYU found excellent job opportunities on Wall Street. I later became one of them. What I didn't know initially was that my training in physics soon helped me tremendously. Some of our papers were used by Merrill Lynch and other financial firms worldwide and had significant impact on the industry. Because of our work, finance is becoming more a quantitative science. That is extremely satisfying to someone who wanted to be a scientist for all these years.
XL: Indeed you built yourself a very impressive career in the finance industry. Within several years, you started to hold important positions in Merill Lynch. Merill Lynch of course is one of the most prominent companies on Wall Street. What's the critical thing that carried you up the corporate ladder so quickly?
BL: One thing people normally don't know about Wall Street is that VP doesn't mean much there. You become an analyst at the beginning, senior analyst later, AVP or assistant vice president after that, then VP. In the late 1980s when profits were low or even negative, Wall Street even gave out FVP or first vice president. Some people joked that the VPs really meant "almost a virtual person", "virtual person", and "full virtual person".
One thing that helped my career most was my exclusive focus on the research. That focus not only kept me out of the political struggles, but also enabled me to show world-class results. Some of my papers are so called million- dollar papers because they helped the firm generate millions of dollars. For example, once I wrote a two-page paper titled "The Holy Grail" with a colleague and friend. That's the first time anybody found a way of systematically arbitraging the global fixed-income markets. In the first trade by using that model we made about $110K in 4 days. Later on we made $20 million for the company in 1997. You see, all the training to systematically and quantitatively approaching problems really paid off.
XL: Apparently you were not satisfied with the positions that a lot of people would be very happy to live with for life. If we ask you to name one thing that brought you out of established firms, what is it? Now that you are your own boss for more than a year, is there anything on Wall Street that you still miss?
BL: If you stay in those established firms, you are forever working for the American capitalists. After a while, you feel your potential to develop is very limited. Some of my Chinese friends started to put most of their efforts into Qi4 Gong1 or else. We should find ways to fully realize our potential. After some years of preparation, we felt we were ready to start our own business. Our generation of overseas Chinese should be able to establish our own powerful enterprises, and build up a sound economic foundation.
Do I miss anything on Wall Street? I missed the excitement. The life on Wall Street is very exciting. We met all kinds of people and all kinds of challenges. For example, every day I was responsible for a few trades that were worth hundreds of millions of dollars. Sometimes we could make half a million dollars overnight. One I lost three hundred thousand dollars in twenty minutes because I bought some 20 million dollars worth of silver futures contracts. It's exciting and we were under tremendous pressure. We become tough guys very soon.
XL: What's the most appealing factor to you to become an entrepreneur? When did you start to have this idea of striking on your own?
BL: The most appealing factor is that you get a chance to build a company as successful as you can do it. Rather than settling for the Xiao3 Kang3 life with a big company, you can release all your potential and make a bigger impact. Of course we have the bigger vision of building up world class enterprises and helping the overseas Chinese community to establish a solid economic foundation.
I always use the Jews as an example. They have built a very strong financial basis. From there they wield substantial influence in all kinds of fields, including the political arena. I strongly believe we need to keep our root deep and have a sense of community. We participate in the mainstream society here in the US but shouldn't forget about China.
That's why we made Westport Financial LLC a collectively owned company, with mainly Chinese partners. My roommate and best friend from USTC days, Yifan Tang, and I are the controlling partners. Among the 60 some partners, 23 have Ph.Ds and 22 MBAs. Over 20 of them are USTC alumni. Our company started and operates several wholly owned subsidiary ventures. Tradetrek (www.tradetrek.com) is our main Internet venture in the US. We will get into asset management and other areas soon. We have the expertise and should use it fully.
I have been thinking about running my own business after working for two years. It took a lot of time to be prepared. Charles Wang (founder of Computer Associates International) did very well. Jerry Yang (founder of Yahoo!) was such a great fortune. Since early 1980s, many people have come from China and a lot of them are well established. Now people from the mainland as a whole are ready for big actions. We have been working with interested parties to found a Hai2 Wai4 Chuang4 Ye4 Yuan3.
XL: Please tell us how you picked your team and how you are building it. Where did you get your initial financing?
BL: Since our goal is to be successful together, we didn't want a family- owned business. We want an opportunity for all overseas Chinese to build entities together (Liu2 Xue2 Sheng1 Gong4 Tong3 Chuang3 Ye4). We welcome anybody with the ability and determination to join us as partners. The partnership format has been extraordinarily efficient so far.
Our initial financing came from partners. Besides, nobody gets salary in the first year.
XL: I want to talk about Tradetrek for a minute. The web page says it is a Personalized, Real-time, Intelligent, Dynamic and Educational (PRIDE) financial site. Who are your expected customers? Specifically speaking, how do you want to differentiate yourself from discount brokerages such as E*Trade and Schewab?
BL: We want this site to attract everybody, not just professionals or day traders. If you have a 401K plan, put your portfolio on this site and find out how much risk you are taking. For starters, we have charts and quotes. For experts, we have artificial intelligent comments, forecasts, pattern recognition tools and so on. We are really trying to give you what Wall Street insiders and professionals are using.
Of course there will be competition. But I have to remind you there is a lot of intellectual property behind this product. Being a small guy, we are much nimbler that our Wall Street rivals. They have their existing systems and technologies to deal with, we can just put in what we know are the best.
Now Tradetrek.com has been a great success. Yesterday (Oct 27, 99) we just got a few million dollars of funding for Tradetrek at the valuation of $30 million. The next round of funding will come at the valuation of $75 million. We spent about $500,000 to build this company. When people saw the site, they are surprised that we have built such a world class Internet company in such a short time with very limited resources. When we told people from E*Trade (an online discount brokerage) what we have done so far, they asked how it was possible! Sign up yourself and you will see.
XL: On one hand, you are running your own company. On the other, you have published many papers. Do you consider yourself more a scholar or an entrepreneur? Is there anything keeping you up at night?
BL: When I worked on Wall Street, I was doing a lot of research. Although I traded occasionally, I was mainly a scholar. Now I am more an entrepreneur than anything else.
Running your own business is a complex affair and you can be assured I have a lot of things to worry about. We as a small guy are doing a big project. Instead of finding a niche market as small firms usually do, we serve the mass market. In this way we can achieve a much larger scale of success. The good news is we are doing very well. At this very moment, after two weeks since we launched the Tradetrek site, we have 2366 people signed up. We are hoping we can recruit 10,000 users by Thanksgiving. Tradetrek's pageview per day already exceeds 100,000. This is tremendous. This solid performance contributed to our success in raising funding. We broke a record. We got the capital commitment one week after started to raise funds.
The next big thing for us is to build the company to the truly successful and mature stage, namely the IPO. We believe we have a superb product. Building a successful company is totally another matter. We need to prove to the world that our vision can be translated into a great business.
XL: Let's talk about our second topic. What do you think we as alumni can do for USTC?
BL: We are planning to go public in two years. At that time, we would definitely donate money to USTC. There lots of other things we can do. For example, we can give lectures on Internet and finance in USTC. We sometimes meet top leaders from China and I will remind them not to forget about USTC.
From USTC's point of view, it is better to relocate to Beijing or Pudong. Those places are where the action is. But from the government's point of view, it is better to keep USTC in Hefei. The fact that USTC is in Hefei has a huge impact on surrounding areas. It all depends on from where you are looking at the situation.
XL: From our previous interviews, an idea came up that AF work with some companies owned by alumni to offer some summer internship positions. Are you interested? What kind of skills will you be looking for?
BL: Summer internship is very important to starters. Without good experience, you can't find good jobs. We are planning to grant some summer internship positions. USTC students and alumni are especially welcome. We like people who are smart, can work hard and have Internet and database skills. Since Tradetrek is a financial web site, some basic finance knowledge will be helpful. Engineering, economics, physics, computer, business and other related majors are preferred.