Saying No to Winner-Takes-All
The development of a business has three stages: the start-up stage, the growth stage, and the maturity stage. Equity investors can choose to enter during the start-up stage and exit during the growth stage, giving up the pursuit of profit in exchange for liquidity premium. This behavioral pattern sometimes also spreads to capitalists, turning even capitalists and entrepreneurs into equity investors. In this situation, in the modern corporate game, it's not always winner-takes-all; capitalists without "freedom" are likely to be shackled.
After returning home, I learned about the game of "Real Money Dou Dizhu." In a three-person card game where two players gang up on one, from the perspective of fairness, it is very asymmetrical. This is very similar to how modern companies operate. Capitalists, entrepreneurs, and equity investors form a trio that issues part of the company’s stock to stock investors at a high premium. A year later, equity investment gradually withdraws, completing the entire investment process, and internal peace between the owner and the manager is restored.
In the modern corporate game, it's not always winner-takes-all; capitalists without "freedom" are likely to be shackled.
Equity investment involves trade-offs when exiting. After painstakingly nurturing a company for many years, choosing to exit at its most glorious stage means not taking away the company’s profits and no longer sharing in its growth. This mindset can be interpreted through rewriting a famous poem: "Profit is indeed precious, growth is more valuable, but for the sake of freedom, both can be abandoned." Here, "freedom" refers to the liquidity of capital, and the price paid for obtaining "freedom" is neither past profits nor future growth. What is it then? It is the liquidity premium gained by the company after going public.
If this is the first round of the game, the winners are ranked accordingly: the highest paper premium goes to the capitalist, followed by the equity investor, then the entrepreneur, with stock investors bearing the trading risks. However, from the perspective of liquidity, equity investors exit at a premium and no longer bear the operational risks of the enterprise.
Saying No to Winner-Takes-All
Equity investment values "freedom" far more than the desire for profit. In the trade-off between profit maximization and liquidity premium, equity investors prefer liquidity, while capitalists prefer profit maximization. Therefore, the "Dou Dizhu" card game isn't always winner-takes-all. After a company goes public, the capitalist has the highest paper asset premium, but due to lack of freedom, their paper asset premium fluctuates with the rise and fall of stock prices. The capitalist must bear both the operational risks of the enterprise and the trading risks of stocks. After equity investors exit, stock investors will come and go like a revolving door, and entrepreneurs can choose to gracefully exit after realizing equity incentives, leaving only the capitalist without such freedom. In this round of "Dou Dizhu," the loser becomes the capitalist because the company's pursuit of profit maximization is both an incentive and a shackle.
Equity investment involves trade-offs when exiting. After painstakingly nurturing a company for many years, choosing to exit at its most glorious stage means not taking away the company’s profits and no longer sharing in its growth. This mindset can be interpreted through rewriting a famous poem: "Profit is indeed precious, growth is more valuable, but for the sake of freedom, both can be abandoned." Here, "freedom" refers to the liquidity of capital, and the price paid for obtaining "freedom" is neither past profits nor future growth. What is it then? It is the liquidity premium gained by the company after going public.
After returning home, I learned about the game of "Dou Dizhu." In a three-person card game where two players gang up on one, from the perspective of fairness, it is very asymmetrical. This is very similar to how modern companies operate. Capitalists, entrepreneurs, and equity investors form a trio that issues part of the company’s stock to stock investors at a high premium. A year later, equity investment gradually withdraws, completing the entire investment process, and internal peace between the owner and the manager is restored.
The liquidity premium of modern enterprises comes from the capital market. This premium is related to the company's profits, but there is no linear relationship. The fact that the Growth Enterprise Market (GEM) opened with a surge indicates that the premium obtained by companies after listing mainly comes from the irrational frenzy of investors, as the growth premium represented by corporate profits has already been reflected in the issue price-to-earnings ratio. In reality, neither stock investment nor equity investment has the profit motive of capitalists and entrepreneurs. Although their gains are premised on the sustainable growth of the enterprise, stock investors focus more on the transactional premium of the enterprise, and equity investors focus more on the liquidity premium of the enterprise. I once said that transaction value is the mainstream value of modern financial markets. So what is liquidity premium? It is a form of transaction value, which is commonly known as an asset bubble. If I were to define an asset bubble, it would be: the liquidity premium generated based on expectations and transactions.
The liquidity premium of modern enterprises comes from the capital market. This premium is related to the company's profits, but there is no linear relationship. The fact that the Growth Enterprise Market (GEM) opened with a surge indicates that the premium obtained by companies after listing mainly comes from the irrational frenzy of investors, as the growth premium represented by corporate profits has already been reflected in the issue price-to-earnings ratio. In reality, neither stock investment nor equity investment has the profit motive of capitalists and entrepreneurs. Although their gains are premised on the sustainable growth of the enterprise, stock investors focus more on the transactional premium of the enterprise, and equity investors focus more on the liquidity premium of the enterprise. I once said that transaction value is the mainstream value of modern financial markets. So what is liquidity premium? It is a form of transaction value, which is commonly known as an asset bubble. If I were to define an asset bubble, it would be: the liquidity premium generated based on expectations and transactions.
If this is the first round of the game, the winners are ranked accordingly: the highest paper premium goes to the capitalist, followed by the equity investor, then the entrepreneur, with stock investors bearing the trading risks. However, from the perspective of liquidity, equity investors exit at a premium and no longer bear the operational risks of the enterprise.
Equity investment values "freedom" far more than the desire for profit. In the trade-off between profit maximization and liquidity premium, equity investors prefer liquidity, while capitalists prefer profit maximization. Therefore, the "Dou Dizhu" card game isn't always winner-takes-all. After a company goes public, the capitalist has the highest paper asset premium, but due to lack of freedom, their paper asset premium fluctuates with the rise and fall of stock prices. The capitalist must bear both the operational risks of the enterprise and the trading risks of stocks. After equity investors exit, stock investors will come and go like a revolving door, and entrepreneurs can choose to gracefully exit after realizing equity incentives, leaving only the capitalist without such freedom. In this round of "Dou Dizhu," the loser becomes the capitalist because the company's pursuit of profit maximization is both an incentive and a shackle.
Definition of Bubble
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Shenzhen Ultrasonic