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 phase and exit during the growth phase, forgoing the pursuit of profit in exchange for liquidity premium. This behavioral pattern sometimes also influences capitalists, turning even them into equity investors. In such a scenario, in the modern corporate game, it's not always "winner takes all." Capitalists who lack "freedom" may find themselves shackled.
If this is the first round of the game, the winners are ranked as follows: the highest paper premium goes to the capitalist, followed by the equity investor, then the entrepreneur, with stock investors bearing the transaction risks at the end. However, from the perspective of liquidity, equity investors exit with a premium and no longer bear the operational risks of the enterprise.
After returning home, I learned about the game "Fight the Landlord," where two players team up against one. From a fairness perspective, it's highly asymmetrical. This is very similar to how modern enterprises operate, with capitalists, entrepreneurs, and equity investors sitting at the table, issuing part of the shares to stock investors at high premiums. A year later, equity investment fades out, completing the entire investment process, and peace is restored between the owners and managers within the company.
### Definition of Bubbles
If this is the first round of the game, the winners are ranked as follows: the highest paper premium goes to the capitalist, followed by the equity investor, then the entrepreneur, with stock investors bearing the transaction risks at the end. However, from the perspective of liquidity, equity investors exit with a premium and no longer bear the operational risks of the enterprise.
Equity investors' decision to exit involves trade-offs. After painstakingly nurturing a company for years, they choose to exit at its most glorious stage, neither taking the company’s profits nor continuing to share in its growth. This mindset can be interpreted through a rephrased famous poem: "Profit is indeed valuable, but growth is more precious; if freedom is the goal, both can be abandoned." Here, "freedom" refers to the liquidity of capital, and the price for obtaining "freedom" is neither past profits nor future growth. So what is it? It's the liquidity premium the company gains after going public.
Equity investment values "freedom" much more than profit. In the choice between profit maximization and liquidity premium, equity investors prefer liquidity, while capitalists prefer profit maximization. Therefore, the "Fight the Landlord" 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 stock prices. The capitalist not only bears the operational risks of the enterprise but also the trading risks of stocks. After equity investors exit, stock investors will come and go like revolving doors, and entrepreneurs can also choose to leave perfectly after their equity incentives are realized. Only the capitalist lacks this freedom. In this round of "Fight the Landlord," the loser becomes the capitalist because the company's pursuit of profit maximization serves as both an incentive and a shackle.
Equity investors' decision to exit involves trade-offs. After painstakingly nurturing a company for years, they choose to exit at its most glorious stage, neither taking the company’s profits nor continuing to share in its growth. This mindset can be interpreted through a rephrased famous poem: "Profit is indeed valuable, but growth is more precious; if freedom is the goal, both can be abandoned." Here, "freedom" refers to the liquidity of capital, and the price for obtaining "freedom" is neither past profits nor future growth. So what is it? It's the liquidity premium the company gains after going public. In the modern corporate game, it's not always "winner takes all." Capitalists who lack "freedom" may find themselves shackled.
Equity investment values "freedom" much more than profit. In the choice between profit maximization and liquidity premium, equity investors prefer liquidity, while capitalists prefer profit maximization. Therefore, the "Fight the Landlord" 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 stock prices. The capitalist not only bears the operational risks of the enterprise but also the trading risks of stocks. After equity investors exit, stock investors will come and go like revolving doors, and entrepreneurs can also choose to leave perfectly after their equity incentives are realized. Only the capitalist lacks this freedom. In this round of "Fight the Landlord," the loser becomes the capitalist because the company's pursuit of profit maximization serves as both an incentive and a shackle.
### Definition of Bubbles
The liquidity premium of modern enterprises comes from the capital market. This premium is related to the company's profit, but there is no linear relationship. The fact that the Growth Enterprise Market (GEM) opened with a sharp increase shows that the premium a company gains after going public mainly comes from investors' irrational frenzy, as the growth premium represented by corporate profits is already reflected in the issue price-to-earnings ratio. Stock investment and equity investment actually do not have the profit motives of capitalists and entrepreneurs. Although their returns are premised on the company's sustainable growth, stock investors focus more on transactional premiums, and equity investors focus more on liquidity premiums. 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 profit, but there is no linear relationship. The fact that the Growth Enterprise Market (GEM) opened with a sharp increase shows that the premium a company gains after going public mainly comes from investors' irrational frenzy, as the growth premium represented by corporate profits is already reflected in the issue price-to-earnings ratio. Stock investment and equity investment actually do not have the profit motives of capitalists and entrepreneurs. Although their returns are premised on the company's sustainable growth, stock investors focus more on transactional premiums, and equity investors focus more on liquidity premiums. 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.
### Saying No to Winner Takes All
After returning home, I learned about the game "Real Money Fight the Landlord," where two players team up against one. From a fairness perspective, it's highly asymmetrical. This is very similar to how modern enterprises operate, with capitalists, entrepreneurs, and equity investors sitting at the table, issuing part of the shares to stock investors at high premiums. A year later, equity investment fades out, completing the entire investment process, and peace is restored between the owners and managers within the company.
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