Our philosophical starting point is one of the cornerstones of modern physics: the second law of thermodynamics, the law of entropy increase. It points out that in an isolated system, the degree of disorder (entropy) always tends to increase. This seemingly abstract law, mapped to the investment world, reveals two core truths. First, the long-term value growth of assets is essentially a nonlinear, anti-entropy creation process. A truly outstanding enterprise creates incremental value for society through continuous innovation, excellent management and effective capital allocation, just like building and maintaining exquisite order in disorder. This value creation process is not a smooth straight line, but an exponential transition at key nodes of key technological breakthroughs, business model verification or market landscape reshaping. Leishi Capital's investment is to find and accompany these organizations with strong "anti-entropy" capabilities. We pay attention to the depth of their moat, the strength of their innovation engines and the order of their management culture, and patiently wait for the turning point of nonlinear growth. Secondly, the investment process itself is accompanied by inevitable "entropy increase" or losses. Market noise, information attenuation, transaction friction (fees and taxes), irrational decisions caused by emotional fluctuations, and even the opportunity consumption of capital by time itself are all "frictions" in the investment system. Investors who ignore this are like illusions sailing in a vacuum. Therefore, one of the cores of our system design is to identify, measure and minimize these losses: reduce information entropy through extreme diligence, reduce transaction friction entropy through long-term holding, and counter psychological entropy through rigorous discipline. We admit that completely eliminating wear and tear is ideal, but clear understanding and active management of it are the boundaries that distinguish professional and amateur.

While acknowledging the complexity and inherent costs of reality, putting all your eggs in a basket is not courage, but recklessness. Lei Shi believes that investment is a systematic project and must pay attention to the combination and balance of strategies. We regard capital deployment as a dynamic, multi-dimensional offensive and defensive system, and its core components consist of three parts: 1. Active Income Engine (Alpha Pursuit): This is the combination of offensive forwards. Through in-depth fundamental research, industry trend insight, and forward-looking layouts, we aim to discover and invest in high-quality assets that can exceed average market returns (whether they are innovative companies in the primary market or companies with significant competitive advantages in the secondary market). This part of investment requires in-depth research capabilities and strong post-investment empowerment, and is the main source of creating excess returns. 2. Passive income and compound interest cornerstones (beta and cash flow): This is the midfield and backing of the combination. By allocating them to index funds that represent long-term economic growth trends, bonds with high credit ratings, or high-quality assets that generate stable cash flow, we build a stable foundation for the portfolio. It aims to obtain the basic dividends of market development, provide continuous cash flow "ammunition", and provide a buffer for the portfolio when market turmoil is in place, ensuring that the investment system has the ability to survive and reinvest in the long term. 3. Risk hedging and tail protection (gamma and insurance): This is a combination of defensive backs and goalkeepers. Using derivative instruments such as options and futures, or through long-short strategies, low-correlated or even negatively correlated asset allocations, we hedge unpredictable systemic risks and "black swan" events. This is not for speculation, but for the purchase of "insurance" for the entire portfolio. It recognizes the world's uncertainty and ensures that core capital and long-term investment logic are not permanently damaged in extreme market environments, thereby retaining the capital power to take advantage of miskill opportunities after crises. These three do not exist in isolation, but dynamically adjust the proportion according to the macro environment, market valuation and risk appetite to form an organic whole that combines offense and defense and moves forward steadily.

The execution of strategies needs to be placed in the grand context of the market cycle. More than 2,000 years ago, Shang Sheng Fan Li said,"If the highest value is high, it will be cheap; if the lowest value is low, it will be expensive." What is expensive is like dung, and what is cheap is like pearls and jade."This breaks the ancient iron rule that value returns periodically in the time dimension. This is not a simple motto, but a profound insight into the cycle of group psychology from greed to fear, and a simple expression of the mathematical and economic law of mean return. Leishi Capital internalizes this wisdom into core operational discipline. We respect cycles and systematically study economic, credit and industrial cycles. When the market is fanatical and pushes asset prices to "extremely expensive" places far higher than their intrinsic values, we uphold the calmness of "dung soil" and dare to reduce or withdraw without earning the last copper coin; When the market falls into panic and high-quality assets are sold indiscriminately to "extremely cheap" conditions, we decisively carry out strategic increases with a cherishing attitude of "like pearls and jade". This courage to act in reverse comes from our profound understanding of cycles and our independent judgment of the intrinsic value of assets. It requires us to confront human greed and fears, which are the most difficult parts of investing and one of the core sources of long-term excess returns.

However, it is easier to know than to act. Even if you understand all the above principles, investors may still lose to their own demons. In the process of investing, especially in the face of nonlinear growth and market cycles, the ups and downs of the yield curve (whether it is the account curve or the psychological expectation curve) will exert continuous and huge pressure on human nature: doubts strategy in the long consolidation or retracement, over-confidence in the ecstasy of soaring inflation. Lei Stone Capital believes that the strongest anchor in fighting this psychological oppression is the world view based on the laws of physics and the objective tools provided by mathematical statistics. Proficient and sensitive to knowledge of physical laws (such as entropy increase, leverage principle, system theory) allows us to understand the complexity and boundaries of the world's operation and avoid falling into blind optimism that "man will defeat nature" or simple misjudgments of "linear extrapolation". Being sensitive to mathematics and statistics provides us with a cool "language": evaluating winning odds and odds through probability thinking, understanding the correlation between risk and return through statistical distribution, and verifying the effectiveness of strategies through backtesting and data rather than relying on Intuition. As the market uproar attempts to disrupt our decision-making, we return to the mathematically constructed objective framework: What percentile of the historical distribution is the current valuation in? Is the potential maximum pullback within the tolerance range set by the strategy? Has a nonlinear phase of asset growth been triggered or is approaching? Replacing emotional anxiety with rational calculations is the cornerstone of maintaining inner peace and adhering to long-term discipline. Investing in a career is ultimately a practice that confronts one's own weaknesses, and mathematical literacy is the most indispensable weapon in this practice.