I've decided to study finance systematically because Finance is the way to my financial freedom.
My most recent learning is about the three functions of Finance, which are the abilities to process time into products, gather funds and risk diversification. Just for a heads up, I'm trying to convert my learning into my knowledge, so I won't be able to use many of the academic terms if that doesn't exist in my dictionary.
Function 1. Finance has the ability to process time into products.
"Time is money." What we are addressing in this topic is the time value of money. In the 90s, the car industry had reached its peak and the market demand is nearly full where it was so hard for the car dealers to make a sell. By that time, the market was trying to promote the car which worth $10,000. To make a sale, the dealers were eager to give out a 15% off discount deal; however, the promotions were not so successful.
Then one dealer became very creative, and his promotion helped him capture the market very easily. What did he do?
Instead of selling his $10,000 car with 15% discount, he claimed he sells his car "for free." The customer will pay $10,000 and in return, the customer gets the car with a $10,000 worth bonds. Therefore, $10,000(cash payment)= $10,000(bond) + 1 car which makes the car free. I know that you must feel there has to be some problem, but are you able to identify it? Yes. it is about the bonds.
The bonds with $10,000 worth in 30 years. Calculating after the putting in with the interest rate; the "current value" of the $10,000 was worth around $1,000 in that time. The result of implementing bonds in the promotion was a huge success. As a matter of fact, the dealer sold his car with $1,000 discount where everyone else had difficulty making a sale with $1,500 discount.
Function 2. Finance is able to gatering funds.
Money is the everyday life for sure. Pocket money, paycheques, some savings and more. But they are just money; not funds. The funds are the money you usually need when you make a big decision like applying for college, purchasing a house, or boosting a new project in business. Not only the funds contain a significant amount of money, but also it only gives limited time window for preparation. Now you should be able to tell where this is going to... RIght. Finance is the tool you need to gather funds efficiently. During the Civil War, the North was able to generate millions of dollars through issuing war bonds. People were encouraged to purchase the bonds to support the war, and this funding converts to military supplies against the South. On the other hand, the south had a "smart" move -- to print more paper money. As a result, the inflation rate was sky high in the south during the war. Later after the war, there was the famous quote for a general from the South, "我们不是输给了北方的士兵，而是输给了北方的金融" (sorry I cannot find the English quote from anywhere and I don't want to paraphrase, that is disrespectful. I insisted to quote this even its Chinese is because this quotation is very well-known; as to The Art of War to the Westerns.)
Function 3. Risk Diversification.
Risk upon individuals can be shared with the society through Finance. One good example of this is the insurance. In 2012, the states' farmers suffered the most devastating drought since the 50's. Before you feel sorry the farmers, let me tell you this, the farmers ended up having even better rewards than some good years because of their agricultural insurance. The harvests that year was very little, but the farmers were compensated with good money which was no far less than their regular income. Plus, since the supply of corps was down, the price went rocket high. This made the farmers and not only not harmed by the disaster but compensated very well due to the contributions from the society.
In summary, Finance has three key functions; which are the time value of money, ability to gather funds and share individuals' risk among the society. In my mind, the Finance is the tool for me to achieve my financial freedom. Before using this tool, my money comes from my income and my income comes from trading my time for money at work. Now knowing the tool, my plan is to make my money work for me. So I am working to get income, and money is also working to get income. Hopefully, one day I don't have to work for money, and my money can make enough money to support me. That is my definition of Financial Freedom.
This post took me three days to finish writing, and I feel bad about taking so long for my second post.
今天学习了金融三大定理，我尽量说“人话”把它表达出来哈。
金融三大定理/功能：1. 加工时间。 2.聚集资金。 3.分散风险
加工时间：“时间就是金钱”这句掷地有声的口号我们都知道，而金融之所以有加工时间的功能是因为其承认了时间是有价值的。这个加工能力可以理解为我们人类为自己创造了一台时间机器；它消耗时间然后将未来加工成截然不同的产品。打个比方：十年以前你拥有10万元RMB闲钱。对这笔钱的安置我们提出几个合理假设。1.消费。2.买定期存款。3.买股票。4.炒房。 可想而知，在十年以后的今天，当初消费了的10万元对现在的影响几乎不会造成增益效应（0收益）。那么如果当初买了定期存款，按照5%上下的利率，现在你拥有的就是17万上下的存款（7万收益）。然而如果你当初买了股票；10万的中石油在今天是4万（6万损失）10万的腾讯股票今天大概360万（额。。你算算）。最后提一提房子。07，08年的北京四环，平均也就1万/平，用十万做个首付贷款买个30平的房子，现在大概330万了吧。 由此可见，我们把时间轴拉回10年前的那天，我们拿着10万块钱在制作着属于我们自己的这台时台机器。就是这台机器将我们的“未来十年”打造成了不同的样子。 属于我的10年以前，那时候我才初中毕业，很久以后我知道我姐10年北京买房子好几万一平的时候，作为小城市里出来的孩子，我听着怎么看都是天方夜谭。十年前的我没有意识也没有能力甚至没有耐心对时间进行以10年为期限的投资。在25岁的节骨眼上（哦，刚刚过完生日，所以26了）我决定放下准备继续吃进口中的叫做“自我麻醉”的糖果。虽然不会抽烟也就无从谈论戒烟，但是我想的明白，放下懒惰和自我催眠的代价不是扎心的疼而是烦心的痒。走着看吧。啊哈哈 跑题了，现在回来。
聚集资金：我有80你有100，这些是钱，不能称作资金。资金是资源，更是稀缺资源。我们都常说或调侃自己没钱。但其实不是的，我们真正缺钱的时间都是少数，比方说筹钱出国深造，买房前，或者创业期新项目需要融资。这些时候往往是才是缺钱的时刻，筹集资金的难度很大，但往往这也是体现其稀缺性的地方。面对稀缺的资金，金融是一条行之有效的解决办法，俗称融资。当认知上升到一定层面，不难理解，经济比士兵更能决定战争的胜负。我们笑谈解放战争我们的小米加步枪打败了国民党的美式武器。理解这句话不能仅仅YY共产党的战斗精神；要明白，其实小米加步枪就是比美式武器厉害，是解放军的战斗力本来就强于国民党的客观事实。美式武器的强大火力毋庸置疑，但是其对交通要素对作战人员的文化素质和武器的养护修理都是有很高要求的 否则这套装备会成为一套只能哑火的钢铁。反观之，解放军的步枪那是相当的好学好用和好修，况且解放军的士兵文化素质和国民党的流氓士兵比起来也是只优不差。说了半天的“步枪”，其实是要说我们要学会透过现象看本质。那么我们现在聊聊“小米”共产党高的是土地革命，是大家打江山分田产的东西。翻身农奴把歌唱，大家获得了直接经济利益然后最终转化为解放军的战斗力。反观国共内战期间，国统区滥发纸币物价飞涨经济全面崩溃。。。都说共产党靠人民群众和小米加步枪打赢了英美支持的国民党，其实国民党的溃败从经济被共产党超过就已经写成定局。
分散风险：金融实现了相当程度上的风险和收益共享。大航海时代的开启成就了很多草根的暴富梦想，在金币的诱惑下许多人目标奔向海洋。然而造船技术的不发达，极高的造船和航海成本及很大的船毁人亡的的概率限制了人民追求财富的脚步。荷兰人曾经靠大海名扬世界，他们率先发明了类似“股份制”的实践，将造船和航行成本向民众寻求融资，大家通过购买“股份”来分享航海成功的收获，而一旦出现损失也是大家共同承担。实际上世界上第一家股份制公司荷兰东印度公司就在这个基础上产生的。后话中这家公司不仅商业地图庞大，甚至有能力攻占国家（印尼），中国历史上的鸦片战争和这家公司也有很强的关联。股份制极大的提高了东印度公司的融资和分散风险的能力，为它的扩张极大赋能。
这就是我今天所学习和理解的金融三大定理/功能也是我系统学习金融学的开始——金融世界观。
在三大功能的基础上，金融的负面效应也是组成完整世界观的重要存在 即“马太效应”和“道德沦丧” 前者代表信息的不平等带来的穷人越穷，富人越富。而后者的重要体现是次贷危机前以华尔街为代表的金融精英为了利益刻意兜售精心包装的劣质投资产品。
Time is always money... Good financial points
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