Why read this book?#
Having worked in the industry for more than a decade, with over 4 years of experience in technical management, my passive investment experience has exceeded 5 years 👉👉 from a new investor to an experienced one.
During this time, I have encountered some problems that cannot be solved by knowledge and understanding alone.
For example, how to motivate team initiative? Rewards, punishments, and incentives, etc.
Or the direction and trends of the overall market, as well as future planning.
The more I think about it, the more blind spots I have.
Therefore, I need to slowly digest and settle these issues over time.
Coincidentally, someone in the group recommended this masterpiece, so I bought it and took a look.
The explanation of organizational authority in the first chapter covers many points that can be applied in practice once digested 🤔
Understanding Authority#
- Three principles for dividing authority:
- Economies of scale (coverage and efficiency of public services)
- Complexity of information (advantage of subordinates' information)
- Compatibility of incentives (effective mechanisms to motivate subordinates to achieve superiors' goals)
- Understanding the concept of "Housing is for living, not for speculation"
- RT. First of all, it is important to understand why housing prices are so high. They are the inevitable result of the rapid urbanization of a region's economic development at a certain stage.
- The leverage effect of land in the process of rapid urbanization
- Local governments use land as capital injection into financing platforms (such as urban investment, industry guidance funds, etc.) to leverage funds for urban construction services.
- The model of "injecting land-mortgaging land-urban construction-land appreciation-land transfer-debt repayment" has become the basic operating model for local governments to raise debt and invest in infrastructure through financing platforms, resulting in huge explicit and implicit debts.
- Rapid development of industrial infrastructure and influx of a large population, but neglect of livelihood construction and limited increase in residents' income levels
- Continuous appreciation of real estate, attracting a large number of investment buyers; monetization of real estate and the phenomenon of using land as a credit anchor
- So, why has China's GDP been growing rapidly in recent years? The main factors driving GDP growth (the three horses)
- Consumption -> domestic sales, disposable income of residents -> tourism contributes greatly to GDP, accounting for more than 10%.
- Foreign trade -> exports, cross-border trade -> in the first half of 2021, foreign trade was the main source of GDP contribution, accounting for more than 30%.
- Real estate -> a product of rapid urbanization, contributing about 17% of GDP, both directly and indirectly.
- Note: The contribution of real estate to GDP in Europe and the United States includes rent and taxes, and the contribution of second-hand housing transactions and loans is relatively small.
- From another perspective, our real estate industry structure is extensive and requires a series of reforms to achieve intensive growth.
- Serving people's livelihoods, benefiting the domestic circulation
- Reducing leverage, decoupling local government debt; in line with the direction of urban diversification and urban agglomeration development
- So, how to improve the industrial structure? Housing is for living, not for speculation. In my understanding, this is the core policy for the next five to ten years in China, leading the GDP structure towards sustainable intensive economic growth.
- Improve residents' disposable income and livelihood services
- Improve the factory model of foreign trade and address overcapacity issues
- Optimize the real estate industry structure
- So, what can be foreseen now in terms of improving the real estate industry structure? In my understanding,
- The housing market will shift from a seller's market to a buyer's market
- Sellers have two options
- Invest in the rental market
- Cash out and exit
- Pay taxes and contribute to GDP (currently, holding real estate does not incur taxes and does not contribute to GDP)
- Therefore, a property tax is imperative and will definitely target sellers.
- Will real estate continue to appreciate in the future? It depends on specific regions.
- In second- and third-tier cities where supporting facilities are not mature or there is no upgrading plan for them
- In core cities of first-tier urban agglomerations, especially in core areas, theoretically, there is room for appreciation.
- However, overall, housing prices will not rise, at least not faster than residents' income and inflation, weakening the investment and financial attributes.
- They will not fall either, at least not significantly, triggering panic selling, because housing prices are closely related to people's livelihoods and local economic stability.
- Regarding the imbalance in regional development
- Generally, the increase in housing prices should match the per capita GDP of the local area. For example, California's population accounts for about 12% of the United States, and its GDP also accounts for 12%.
- In contrast, provinces with large populations in the mainland, such as Henan, have a population larger than that of eastern coastal provinces and cities, but their GDP is much lower, resulting in a low per capita GDP.
- Therefore, planning the development of urban agglomerations and household registration reforms can help improve the imbalance in regional development, allowing low-income earners to enter high-income cities and develop the tertiary industry. The development of the tertiary industry is also conducive to attracting investment and talent introduction, optimizing land allocation, improving utilization efficiency, and making housing prices match per capita GDP.
- RT. First of all, it is important to understand why housing prices are so high. They are the inevitable result of the rapid urbanization of a region's economic development at a certain stage.
To be continued