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Evergrande Xu Jiayin was once brilliant, and the 2017 Hurun Report showed that he was among the richest people in China with a fortune of 290 billion yuan. In the 2020 Hurun Global Real Estate Rich List, Xu Jiayin once again became the richest real estate person in the world with 231 billion yuan. But now, according to news media reports, Evergrande's debt is as high as 2.4 trillion yuan, ten times the wealth of the past, and it owes more than it earns. In just three years, the former "richest man" has become the current "first loser".
On the surface, it is indeed the reason analyzed by various experts and scholars, and its investment strategy and operation management have made major mistakes. Evergrande's bankruptcy is the result of capital risk. But in essence, it exposes a generally underappreciated truth: the biggest risk to corporate profits is moral hazard rather than capital risk.
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How to understand this? The ancients said that a gentleman loves money and has a way, and people must have a bottom line if they want to make money, and they cannot be without principles, which also implies the idea of investment strategy. There is also a saying that "poor people are good for themselves, and those who reach and benefit the world", the country carried out reform and opening up in the 80s, when a basic national policy was set, that is, to allow some people to get rich first, and then drive to help more people get rich, and the policy idea is derived from the words of the ancient sages.
But Evergrande's bankruptcy alone has created the bankruptcy of more people, and he did not help the rich but the poor. And judging from the past business history of the enterprise disclosed by the news media, he has a moral hazard problem very early.
We understand it with the story of "Romance of the Three Kingdoms". Liu Bei appointed Zhuge Liang, who was virtuous and died with all his might. Liu Bei said that Zhuge Liang could be declared emperor after he left, and of course Zhuge Liang would not rebel, and after his death, he arranged loyal ministers to support the national fortunes of the Shu state. Cao Cao appointed Sima Yi, a careerist who usurped the power of the Jin state founded by Cao Cao through a coup d'état when he was alive, which was tantamount to seeking wealth and killing people to seize people's property. Zhuge Liang and Sima Yi are both talents, and the biggest risk to monarchs is not who is highly capable, but their moral hazard, who can make your national fortune last longer or accelerate its destruction.
This principle is the same for business development. Many people complained that Li Ka-shing was engaged in real estate and took the lead in promoting the pre-sale system of buildings. However, Li Ka-shing invested in mainland real estate as early as the early stage of the national housing reform in the nineties, and when many real estate businessmen in the mainland grew up, he withdrew his investment in the mainland, and did not greed for this huge market profit. As a result, the pre-sale system of commercial housing is still a domestic real estate businessman greedy for market profits, and it is bad. In contrast, Li Ka-shing has higher financial ethics, knows the bottom line and principle of making money, and has both release and income.
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Some people also say that the stall of Evergrande is too big, and it is engaged in diversified operations, thinking that eggs should not be put in one basket. But the gentleman loves money and has a way, he does not understand the project, will not be easily invested because of this very profitable, and Evergrande's source of funds is obtained through high leverage, such as bank loans, Evergrande equity financial products bought by investors, accounts payable by suppliers, and house purchases by ordinary people. Evergrande borrows chickens and lays eggs, and it must be careful for all investors. If there is a little altruistic morality, it will not be able to pay a high dividend of 50 billion yuan when the company's funds have turnover problems, and after bankruptcy, it will engage in technical divorce and file for bankruptcy protection abroad. If you want to stop loss, shouldn't you find a way to cooperate with the national rescue policy and reduce the losses of all creditors?
Therefore, the biggest risk of capital operation is not capital itself, but the moral hazard of capitalists. Does anyone say that capital is ethical? The attribute of capital is the pursuit of profit, and Marx Capital said that in order to make 100% profit, capitalists dare to trample on all human laws. However, capital is only a financial tool controlled by capitalists, and how capital is used is related to the moral level of capitalists themselves. In China's modern revolutionary history, there are also many patriotic capitalists who proposed that "industry serves the country, industry saves the country" and contributes money and efforts to save the country and revitalize the country.
And you can see from the inside story of Evergrande's management exposed by the media, Evergrande's money-burning projects such as beautiful song and dance troupes, sports and football, hotel cultural tourism, and energy vehicles seem to give people the illusion of building an independent kingdom with palaces, luxury cars, beautiful women and playgrounds. If he has the idea of benefiting the country and the people, why not use the investment money of these projects to build the pre-sale building first, and which one is heavier and which is lighter is not weighed? This also shows that as an entrepreneur moral hazard issue, the interests of the group are not put first, but the satisfaction of personal preferences is more important.
Therefore, everyone can not only look at the profit figures of the capital on his financial statements to see whether an enterprise has made great progress, for example, in 2017, Evergrande's stock rose by 480%, leading domestic housing stocks, and Evergrande's stock data can show capital risk, but it does not reflect moral hazard.
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It is said that if virtue is not worthy of the position, there will be disaster. For individuals, at most, it's okay to be crazy about dogs and bricks. But for entrepreneurs, there is a moral hazard, and it is all the individuals and collectives that are unlucky. Moral hazard applies not only to entrepreneurs, but also to political officials, as in Sima Yi, the higher his position of power, his moral hazard will be exposed, and corruption is also a clear example.
How can it be seen that the moral hazard of entrepreneurs directly affects the fortunes of enterprise development? This can be expressed in his personal life, management style, superior-subordinate relationship, social entertainment, industry cooperation, etc., because no matter what a person does, he has a moral principle. Just like a scientist without a little moral principle, his scientific research is likely not to benefit humans, but to harm humans, which you can associate with biological weapons.
Whether a natural person's financial integrity is good or not, there is a credit assessment. For an enterprise, there is now a corporate credit rating rule, I hope this aspect can be taken seriously, and there is enough predictive effect on the moral hazard of the enterprise.
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