Equity investment's pursuit of "freedom" far outweighs its desire for profit. In the trade-off between profit maximization and liquidity premium, equity investors prefer liquidity while capitalists prefer profit maximization. Therefore, the game of "Landlord" is not always a winner-takes-all scenario. After a company goes public, the capitalist enjoys the highest premium on paper assets, but due to the lack of freedom, this premium fluctuates with stock price volatility. 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 carousel. Entrepreneurs can also choose to step away perfectly after realizing their equity incentives, except the capitalist lacks this freedom. In this round of "Landlord," the loser becomes the capitalist because the enterprise's pursuit of profit maximization serves as both an incentive and a shackle.
If this is the first round of the game, the winners are ranked accordingly: the capitalist with the highest premium on paper assets, followed by equity investors, then entrepreneurs, and finally stock investors who bear 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.
The development of a business 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 behavioral pattern sometimes also infects capitalists, even turning entrepreneurs into equity investors. In such cases, in the modern corporate game, it is not always a winner-takes-all situation, and capitalists without "freedom" may be shackled.
The liquidity premium of modern enterprises comes from the capital market. This premium is related to the company's profits, but not linearly so. The fact that the Growth Enterprise Market (GEM) opened with a surge indicates that the premium companies receive 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 motive of capitalists and entrepreneurs. Although their returns are contingent upon the sustainable growth of the enterprise, stock investors focus more on transactional premiums, while 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, or what people commonly refer to as asset bubbles. If I were to define asset bubbles, it would be: liquidity premium generated based on expectations and transactions.
Exiting equity investments involves making choices. After painstakingly nurturing a company for many years, choosing to exit at its most glorious stage means neither taking the company's profits nor sharing in its growth. This mindset can be explained by rewriting a famous poem: "Profit is indeed precious, growth is even more valuable, but for the sake of freedom, both can be forsaken." Here, "freedom" refers to the liquidity of capital, and the price paid to gain "freedom" is neither past profits nor future growth. What is it then? It is the liquidity premium the company obtains after going public.
After returning home, I learned about the game of "Landlord." In a three-person card game where two teams play against one, from a fairness perspective, it is very asymmetrical. This is very similar to how modern enterprises operate. Capitalists, entrepreneurs, and equity investors act as the house, issuing part of the shares to stock investors at a high premium. A year later, equity investment gradually fades out, completing the entire investment process, and peace is restored within the company between the owner and the manager.
The liquidity premium of modern enterprises comes from the capital market. This premium is related to the company's profits, but not linearly so. The fact that the Growth Enterprise Market (GEM) opened with a surge indicates that the premium companies receive 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 motive of capitalists and entrepreneurs. Although their returns are contingent upon the sustainable growth of the enterprise, stock investors focus more on transactional premiums, while 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, or what people commonly refer to as asset bubbles. If I were to define asset bubbles, it would be: liquidity premium generated based on expectations and transactions.
Definition of Bubbles
Saying No to Winner-Takes-All
Definition of Bubbles
Exiting equity investments involves making choices. After painstakingly nurturing a company for many years, choosing to exit at its most glorious stage means neither taking the company's profits nor sharing in its growth. This mindset can be explained by rewriting a famous poem: "Profit is indeed precious, growth is even more valuable, but for the sake of freedom, both can be forsaken." Here, "freedom" refers to the liquidity of capital, and the price paid to gain "freedom" is neither past profits nor future growth. What is it then? It is the liquidity premium the company obtains after going public.
After returning home, I learned about the game of "True Money Landlord." In a three-person card game where two teams play against one, from a fairness perspective, it is very asymmetrical. This is very similar to how modern enterprises operate. Capitalists, entrepreneurs, and equity investors act as the house, issuing part of the shares to stock investors at a high premium. A year later, equity investment gradually fades out, completing the entire investment process, and peace is restored within the company between the owner and the manager.
Equity investment's pursuit of "freedom" far outweighs its desire for profit. In the trade-off between profit maximization and liquidity premium, equity investors prefer liquidity while capitalists prefer profit maximization. Therefore, the game of "Landlord" is not always a winner-takes-all scenario. After a company goes public, the capitalist enjoys the highest premium on paper assets, but due to the lack of freedom, this premium fluctuates with stock price volatility. 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 carousel. Entrepreneurs can also choose to step away perfectly after realizing their equity incentives, except the capitalist lacks this freedom. In this round of "Landlord," the loser becomes the capitalist because the enterprise's pursuit of profit maximization serves as both an incentive and a shackle.
If this is the first round of the game, the winners are ranked accordingly: the capitalist with the highest premium on paper assets, followed by equity investors, then entrepreneurs, and finally stock investors who bear 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
The development of a business 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 behavioral pattern sometimes also infects capitalists, even turning entrepreneurs into equity investors. In such cases, in the modern corporate game, it is not always a winner-takes-all situation, and capitalists without "freedom" may be shackled.
In the modern corporate game, it is not always a winner-takes-all situation, and capitalists without "freedom" may be shackled.
Forum Signature: Crossing Time My Name is Lin Daiyu, Crossing Dark Souls, Playing Landlord
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