Ancient people have long explained the logic of making money. The "Records of the Grand Historian" by Sima Qian includes the Biography of Commerce, which documents Tao Zhu Gong's business philosophy. This guy used five strategic principles that were not only applied at the national level but also in his own business later on. He chose to operate in the central position of the world, engaging in commerce by leveraging supply and demand differences across regions and following market rhythms. As a result, over 19 years, he accumulated wealth three times and distributed money to relatives and hometowns three times, thereby making a profit and cultivating virtue.

Behind these strategies are three levels of logic: First, cycle thinking—using ships during dry seasons and carts during water seasons, which is a physical law; Second, value accumulation—selling when prices are high, buying when prices are low, and stockpiling when goods are intact; Third, arbitrage—goods will inevitably fall after rising significantly, and when they fall very cheaply, they will rise again.

The key is the concept of cycles. They are products of history and are filled with uncertainty about the future. Business cycles do occur, but you cannot predict exactly when they will happen. However, there is a timeline outline that can be grasped—roughly every few years, similar situations will reappear. At that time, Ji Ran observed agricultural cycles, estimating a 12-year big cycle, with six years of bumper harvests and six years of poor harvests, and prepared in advance based on this cycle to adapt and respond.

Modern investors think along similar lines. There is a saying: if you buy cheap stocks with everything well thought out, good things are likely to happen in the future. This is very important because it allows you to leave some redundancy in your capital positions. If you insist on betting on an absolutely correct future judgment and leverage your position to the maximum, it becomes very difficult to maintain flexibility in asset allocation. This is the core of value investing when utilizing cycles—investors need to consider how to maintain the sustainability of their strategies amid cycle fluctuations.