Here is a post I drafted in 2008 I think. Though I never finished it, I thought I might as well share it since I haven’t actually blogged in a while. Looking back on it, I can see that my writing has changed quite a bit. It’s always a good idea to keep an archive of all your works so that you can see how you have progressed.
- Equity Investor vs Girlfriend/Wife
Equity investors are existing and potential shareholders in a company. They are considering whether or not to invest just as a woman would consider a man. Has he got the looks? Will he protect her? Will he offer her security – financial or otherwise? And if the woman is already in a relationship with a man (i.e holding shares in a company), should she stay with him? Or disinvest and find a better opportunity elsewhere?
Equity investors, are interested in the following two simple things. Let us look at how that compares to what women want.
1. Dividends (streams of income distributed to shareholders from company profits)
A girl wants attention, care, chocolates, hugs, diamonds, show of love – the equivalent of dividends.
2. Capital gains (earnings from buying shares at a low price and selling them at a higher price)
A girl may also want a capital gain. That is, they will use you to get somewhere higher. Office chick hooks up with a fat boss for a promotion. A wannabe model dates an ugly but established photographer to get her career off the ground (ugly could be the equivalent of undervalued shares?).
Another example, which is perhaps more novel, less conniving and less frowned upon, is a girl seeing a guy with lots of ambition and potential to be successful, and being attracted by it. Case examples are premiership or NBA players who are in relationships with their high school/college sweet hearts.
Some Equity Investors are interested in short term gains (go short with a one night stand) while others are interested in long term gains (go long with a meaningful relationship).
- Loan Creditor Group vs Record Label
This group consists of lenders of money, from short to medium and long term. These are usually banks but an interesting parallel example is a record label. When an artist is signed, a record label gives them an advance (a fat cash payment for being signed). What some artists are unaware of is that in receiving this advance, they sign away some of the rights to their music. Essentially, this acts as collateral.
So before the artist receives any income from their record sales, the record label will first recover the advance payment they made to them. After getting their money back, they will split the profits with the artist and all involved. This profit is essentially their “interest” on what was in fact a loan in disguise.
If the artist does not generate enough money however, and the advance is never recouped, they are in debt to the record label. If they can’t pay this back, bankruptcy awaits them.
Loan creditors, like record labels, are usually interested in answering two questions:
1. Will they get their money back?
How much cash will the artist generate in the future? Will it be enough to recover what I invested in them, with interest?
2. What collateral can I hold on to? And what is its Net Realizable Value?
A record label will want the rights to the artist’s future music. This is an asset with cash generating capabilities. Of course if the artist flops, then these assets won’t be worth that much.
