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 game of "Landlord" is not always a winner-takes-all situation. After a company goes public, capitalists have the highest paper asset premium. However, due to the lack of freedom, their paper asset premiums fluctuate with stock prices. Capitalists not only bear the operational risks of the enterprise but also the trading risks of stocks. After equity investors exit, stock investors come and go like a revolving door, and entrepreneurs can choose to cash out perfectly after the realization of equity incentives. Only capitalists do not have this freedom. In this round of "Landlord", the loser becomes the capitalist because the company's pursuit of profit maximization is both an incentive and a shackle.
After returning home, I learned about the game of "Landlord". In a three-person card game where two teams fight against one, from the perspective of fairness, it is very asymmetrical. This is very similar to the modern business model, where capitalists, entrepreneurs, and equity investors sit at the table and issue part of the shares to stock investors at a high premium. A year later, equity investments fade out, completing the entire investment process, and the internal peace between the boss and the manager is restored.
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 game of "Landlord" is not always a winner-takes-all situation. After a company goes public, capitalists have the highest paper asset premium. However, due to the lack of freedom, their paper asset premiums fluctuate with stock prices. Capitalists not only bear the operational risks of the enterprise but also the trading risks of stocks. After equity investors exit, stock investors come and go like a revolving door, and entrepreneurs can choose to cash out perfectly after the realization of equity incentives. Only capitalists do not have this freedom. In this round of "Landlord", the loser becomes the capitalist because the company's pursuit of profit maximization is both an incentive and a shackle.
In the card game of modern enterprises, it is not always a winner-takes-all situation, and capitalists without "freedom" are likely to be trapped in "shackles".
Saying no to winner-takes-all
If this is the first round of the game, the winners are ranked as follows: the highest paper premium is the capitalist, followed by the equity investor, then the entrepreneur, and finally the stock investor who bears the trading risk. But from the perspective of liquidity, the equity investor exits at a premium and no longer bears the operational risks of the enterprise.
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 huge increase shows that the premium obtained by the company after going public mainly comes from the irrational enthusiasm of investors, as the growth premium represented by the company's profits has already been reflected in the issue price-to-earnings ratio. In fact, 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 transaction 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 the modern financial market. So what is the liquidity premium? It is a form of transaction value, which is what people commonly refer to 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 exit of equity investment involves choices. After painstakingly nurturing the company for many years, choosing to exit at the company's most glorious stage means not taking away the company's profits and no longer sharing in the company's growth. This mentality can be interpreted by rewriting a famous poem: Profit is truly precious, growth is even more valuable, but if it's for freedom, both can be discarded. Here, "freedom" is the liquidity of capital, and the price of obtaining "freedom" is neither past profits nor future growth. What is it then? It is the liquidity premium obtained by the company after going public.
The development of a company has three stages: the start-up phase, the growth phase, and the mature 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 sometimes also infects capitalists, turning them, or even entrepreneurs, into equity investors. In such cases, in the card game of modern enterprises, it is not always a winner-takes-all situation, and capitalists without "freedom" are likely to be trapped in "shackles".
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 huge increase shows that the premium obtained by the company after going public mainly comes from the irrational enthusiasm of investors, as the growth premium represented by the company's profits has already been reflected in the issue price-to-earnings ratio. In fact, 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 transaction 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 the modern financial market. So what is the liquidity premium? It is a form of transaction value, which is what people commonly refer to 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
The development of a company has three stages: the start-up phase, the growth phase, and the mature 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 sometimes also infects capitalists, turning them, or even entrepreneurs, into equity investors. In such cases,
Definition of Bubble
The exit of equity investment involves choices. After painstakingly nurturing the company for many years, choosing to exit at the company's most glorious stage means not taking away the company's profits and no longer sharing in the company's growth. This mentality can be interpreted by rewriting a famous poem: Profit is truly precious, growth is even more valuable, but if it's for freedom, both can be discarded. Here, "freedom" is the liquidity of capital, and the price of obtaining "freedom" is neither past profits nor future growth. What is it then? It is the liquidity premium obtained by the company after going public.
Definition of Bubble
After returning home, I learned about the game of "Real Money Landlord". In a three-person card game where two teams fight against one, from the perspective of fairness, it is very asymmetrical. This is very similar to the modern business model, where capitalists, entrepreneurs, and equity investors sit at the table and issue part of the shares to stock investors at a high premium. A year later, equity investments fade out, completing the entire investment process, and the internal peace between the boss and the manager is restored.
If this is the first round of the game, the winners are ranked as follows: the highest paper premium is the capitalist, followed by the equity investor, then the entrepreneur, and finally the stock investor who bears the trading risk. But from the perspective of liquidity, the equity investor exits at a premium and no longer bears the operational risks of the enterprise.
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