Recently, I rediscovered some of Duan Yongping's investment philosophies and found his criteria for the "money-printing machine" business really worth pondering. Duan Yongping places the first step of investing on the business model, focusing on finding businesses that can generate abundant cash flow over the long term and are difficult for competitors to copy.

His framework is actually quite clear, and I’ve summarized it. First and foremost are cash flow and profitability. Duan Yongping straightforwardly states: buying a company is essentially buying the discounted value of its future cash flows. A good business is characterized by profits and net cash flow that remain stable over time, continuously generating cash. This is the most fundamental aspect.

Next is the moat, meaning a sustainable competitive advantage. Duan Yongping emphasizes that a business model without differentiation is basically not a good model, because profits come from a lack of competition. Companies with strong differentiation make customers dependent on them, thus avoiding price wars.

Then, look at capital efficiency. Duan Yongping particularly favors businesses that can maintain high returns without requiring continuous massive investments—light assets and high returns are the ideal state. Conversely, businesses that need ongoing large expenditures to sustain operations are what he calls "hard businesses," which, even if profitable, are not very elegant.

Risk resistance is also crucial. A good business model is less likely to be replaced by technology, impacted by policy shocks, or affected by changes in consumer preferences. Duan Yongping describes such a model as "long slope, thick snow"—the long slope representing a long industry lifecycle, and the thick snow representing high profits and high retention rates.

The final point is pricing power. The ability to raise prices without losing customers is a fundamental principle of a good business model in Duan Yongping’s view. Apple’s ability to continuously increase prices and Moutai’s stable price hikes both demonstrate genuine pricing power. This power comes from irreplaceable value, not from monopoly status.

Honestly, using Duan Yongping’s framework to evaluate companies, very few pass the test. But once you find a business that meets these characteristics, the long-term returns can be quite substantial.