After returning home, I learned about the game "Real Money Fight Landlord." In this three-person card game, two players team up against one, which from a fairness perspective is very asymmetrical. This resembles the modern corporate setup where capitalists, entrepreneurs, and equity investors act as the main players, issuing a portion of shares to stock investors at a high premium. After a year, the equity investment gradually exits, completing the entire investment process, and peace is restored between the owners and managers within the company.
The development of a business has three stages: startup, growth, and maturity. Equity investors can choose to enter during the startup phase and exit during the growth phase, giving up the pursuit of profit in exchange for liquidity premium. This behavioral pattern sometimes also infects the capitalists, transforming them and even the entrepreneurs into equity investors. In such cases, in the modern corporate game, it's not always the case that the winner takes all. A capitalist who lacks "freedom" is likely to be shackled by "chains."
If this is the first round of the game, the winners are ranked accordingly: the highest account premium belongs to the capitalist, followed by the equity investor, then the entrepreneur, and finally the stock investor who bears the transaction risk. However, from the perspective of liquidity, the equity investor exits with a premium and no longer bears the operational risks of the enterprise.
A business’s development has three stages: startup, growth, and maturity. Equity investors can choose to enter during the startup phase and exit during the growth phase, giving up the pursuit of profit in exchange for liquidity premium. This behavioral pattern sometimes also infects the capitalists, transforming them and even the entrepreneurs into equity investors. In such cases,
Equity investment's pursuit of "freedom" far exceeds its desire for profit. In the choice between profit maximization and liquidity premium, equity investors prefer liquidity while capitalists prefer profit maximization. Therefore, the "Fight Landlord" card game isn't always winner-takes-all. After a company goes public, the capitalist holds the highest account asset premium, but due to the lack of freedom, their account asset premium fluctuates with the rise and fall of stock prices. The capitalist not only bears the operational risks of the enterprise but also the transaction risks of stocks. After the equity investor exits, stock investors will come and go like a carousel, and the entrepreneur can also choose to withdraw perfectly after the equity incentive is realized. Only the capitalist does not have this freedom. In this round of "Fight Landlord," the loser becomes the capitalist because the enterprise's pursuit of profit maximization is both an incentive and a shackle.
Definition of a Bubble
Saying No to Winner-Takes-All
After returning home, I learned about the game "Fight Landlord." In this three-person card game, two players team up against one, which from a fairness perspective is very asymmetrical. This resembles the modern corporate setup where capitalists, entrepreneurs, and equity investors act as the main players, issuing a portion of shares to stock investors at a high premium. After a year, the equity investment gradually exits, completing the entire investment process, and peace is restored between the owners and managers within the company.
The exit of equity investment involves trade-offs. After years of hard work nurturing the enterprise, choosing to exit at its most glorious stage means neither taking away the enterprise's profits nor sharing in its growth. This mindset can be interpreted by rewriting a famous poem: Profit is truly 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 of obtaining "freedom" is neither past profits nor future growth, but what? It is the liquidity premium obtained by the enterprise after going public.
The exit of equity investment involves trade-offs. After years of hard work nurturing the enterprise, choosing to exit at its most glorious stage means neither taking away the enterprise's profits nor sharing in its growth. This mindset can be interpreted by rewriting a famous poem: Profit is truly 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 of obtaining "freedom" is neither past profits nor future growth, but what? It is the liquidity premium obtained by the enterprise after going public.
The liquidity premium of modern enterprises comes from the capital market. This premium is related to the enterprise's profits but not linearly so. The fact of the GEM opening with a surge in prices indicates that the premium obtained by enterprises after going public mainly comes from the irrational frenzy of investors, as the growth premium represented by enterprise profits has already been reflected in the issue price-to-earnings ratio. Neither stock investment nor equity investment actually has the profit motive of capitalists and entrepreneurs, although their gains are premised on the sustainable growth of the enterprise. However, stock investors focus more on the transactional premium of the enterprise, while equity investors focus more on the liquidity premium. 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.
The liquidity premium of modern enterprises comes from the capital market. This premium is related to the enterprise's profits but not linearly so. The fact of the GEM opening with a surge in prices indicates that the premium obtained by enterprises after going public mainly comes from the irrational frenzy of investors, as the growth premium represented by enterprise profits has already been reflected in the issue price-to-earnings ratio. Neither stock investment nor equity investment actually has the profit motive of capitalists and entrepreneurs, although their gains are premised on the sustainable growth of the enterprise. However, stock investors focus more on the transactional premium of the enterprise, while equity investors focus more on the liquidity premium. 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.
If this is the first round of the game, the winners are ranked accordingly: the highest account premium belongs to the capitalist, followed by the equity investor, then the entrepreneur, and finally the stock investor who bears the transaction risk. However, from the perspective of liquidity, the equity investor exits with a premium and no longer bears the operational risks of the enterprise.
Saying No to Winner-Takes-All
Definition of a Bubble
In the modern corporate game, it's not always the case that the winner takes all. A capitalist who lacks "freedom" is likely to be shackled by "chains."
Equity investment's pursuit of "freedom" far exceeds its desire for profit. In the choice between profit maximization and liquidity premium, equity investors prefer liquidity while capitalists prefer profit maximization. Therefore, the "Fight Landlord" card game isn't always winner-takes-all. After a company goes public, the capitalist holds the highest account asset premium, but due to the lack of freedom, their account asset premium fluctuates with the rise and fall of stock prices. The capitalist not only bears the operational risks of the enterprise but also the transaction risks of stocks. After the equity investor exits, stock investors will come and go like a carousel, and the entrepreneur can also choose to withdraw perfectly after the equity incentive is realized. Only the capitalist does not have this freedom. In this round of "Fight Landlord," the loser becomes the capitalist because the enterprise's pursuit of profit maximization is both an incentive and a shackle.
Forum Signature: A Difficult Mistress, Stardust Stone, Fight Landlord
Shenzhen Ultrasonic