After returning to China, I learned about the game "Real Money Landlord," where three people play with two against one. From a fairness perspective, this is extremely asymmetric. This is very similar to how modern enterprises operate, with capitalists, entrepreneurs, and equity investors as the main players. They issue a portion of the shares at a high premium to stock investors. After a year, the equity investment gradually exits, completing the entire investment process, and the internal enterprise returns to peaceful coexistence between the owner and the manager.
The development of an enterprise has three stages: the start-up phase, the growth phase, and the maturity phase. Equity investors can choose to enter during the start-up phase and exit during the growth phase, giving up the pursuit of profit in exchange for liquidity premium. This behavior pattern can sometimes also influence capitalists, turning them and even entrepreneurs into equity investors. In such cases:
If this is the first round of the game, the winners are ranked accordingly: the highest book premium goes to the capitalist, followed by the equity investor, then the entrepreneur, and finally, the stock investor bears the transaction risk. However, from the perspective of liquidity, the equity investor exits at a premium and no longer bears the operational risks of the enterprise.
After returning to China, I learned about the game "Landlord," where three people play with two against one. From a fairness perspective, this is extremely asymmetric. This is very similar to how modern enterprises operate, with capitalists, entrepreneurs, and equity investors as the main players. They issue a portion of the shares at a high premium to stock investors. After a year, the equity investment gradually exits, completing the entire investment process, and the internal enterprise returns to peaceful coexistence between the owner and the manager.
Saying No to Winner-Takes-All
The exit of equity investment involves trade-offs. After painstakingly nurturing an enterprise 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 even more valuable, but if freedom is the goal, both can be abandoned. Here, "freedom" refers to the liquidity of capital, and the price of obtaining "freedom" is neither past profits nor future growth. What is it? It is the liquidity premium that the enterprise gains after going public.
If this is the first round of the game, the winners are ranked accordingly: the highest book premium goes to the capitalist, followed by the equity investor, then the entrepreneur, and finally, the stock investor bears the transaction risk. However, from the perspective of liquidity, the equity investor exits at a premium and no longer bears the operational risks of the enterprise. In the card game of modern enterprises, it is not always winner-takes-all; capitalists without "freedom" are likely to be shackled.
Equity investment values "freedom" far more than profit. In the trade-off between profit maximization and liquidity premium, equity investors prefer liquidity while capitalists prefer profit maximization. Therefore, the card game of "Landlord" is not always winner-takes-all. After a company goes public, the capitalist has the highest book asset premium, but due to the lack of freedom, their asset premium fluctuates with the stock price. 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 a carousel, and entrepreneurs can choose to leave perfectly after the equity incentives are realized. Only the capitalist lacks this freedom. In this round of "Landlord," the loser becomes the capitalist because the enterprise's pursuit of profit maximization is both an incentive and a shackle.
Saying No to Winner-Takes-All
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 skyrocketing price indicates that the premium obtained by companies after going public mainly stems 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 gains are premised on the sustainable growth of the enterprise, stock investors focus more on the trading premium of the enterprise, and equity investors focus more on the liquidity premium. I once said that trading value is the mainstream value of modern financial markets. So what is liquidity premium? It is a form of trading value, or what people often call asset bubbles. If I were to define asset bubbles, it would be: the liquidity premium generated based on expectations and transactions.
Definition of Bubbles
Exiting equity investment involves trade-offs. After painstakingly cultivating an enterprise 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 even more valuable, but if freedom is the goal, both can be abandoned. Here, "freedom" refers to the liquidity of capital, and the price of obtaining "freedom" is neither past profits nor future growth. What is it? It is the liquidity premium that the enterprise gains after going public.
The development of an enterprise has three stages: the start-up phase, the growth phase, and the maturity phase. Equity investors can choose to enter during the start-up phase and exit during the growth phase, giving up the pursuit of profit in exchange for liquidity premium. This behavior pattern can sometimes also influence capitalists, turning them and even entrepreneurs into equity investors. In such cases, the card game of modern enterprises is not always winner-takes-all; capitalists without "freedom" are likely to be shackled.
Definition of Bubbles
Equity investment values "freedom" far more than profit. In the trade-off between profit maximization and liquidity premium, equity investors prefer liquidity while capitalists prefer profit maximization. Therefore, the card game of "Landlord" is not always winner-takes-all. After a company goes public, the capitalist has the highest book asset premium, but due to the lack of freedom, their asset premium fluctuates with the stock price. 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 a carousel, and entrepreneurs can choose to leave perfectly after the equity incentives are realized. Only the capitalist lacks this freedom. In this round of "Landlord," the loser becomes the capitalist because the enterprise's pursuit of profit maximization is both an incentive and a shackle.
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 skyrocketing price indicates that the premium obtained by companies after going public mainly stems 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 gains are premised on the sustainable growth of the enterprise, stock investors focus more on the trading premium of the enterprise, and equity investors focus more on the liquidity premium. I once said that trading value is the mainstream value of modern financial markets. So what is liquidity premium? It is a form of trading value, or what people often call asset bubbles. If I were to define asset bubbles, it would be: the liquidity premium generated based on expectations and transactions.
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