The Wind Blows Jiangnan's Internet Finance Reading Notes

Jiangnan Cynic's "Wind Blowing Jiangnan's Internet Finance" really heard a lot about it, and I didn't get the electronic version until this week. Although the book was published in 2014, but put in the current environment to think about Internet finance, to observe the new things are very informative.

Especially its "written in front of the book nonsense", reviewing personal practitioners since the workplace insights, let a person friendly and intimate, such as a predecessor narrated. Two of the sentences struck me:

-- "Hibernation is when you can't change the general environment, you can only be quiet and change yourself. Allow yourself to learn more, do more thinking, write more, make more friends. Slowly waiting for the winter to pass, the arrival of spring. There are always many times when people have no choice but to wait ."

-- "A lot of things in this world is not the harder you work, the better, the premise of the effort is that you have to go with the flow, otherwise go in the wrong direction, you turn back only longer. "

With these two sentences alone, it convinced me that the author is genuinely telling you his opinion and his attitude.

The first part of the book is about "crying wolf" - the rise of Internet finance in China, and the impact on the traditional financial industry.

1. The author first discusses the rationality and necessity of the existence of financial intermediaries. The emergence of financial intermediaries is centered on three mismatches. The first is the mismatch of funds; the second is the mismatch of capacity; the third is the mismatch of information. And the intermediary is divided into "ability intermediary" (I can you can not) and "non-ability intermediary" (with comparative advantage).

Leaving aside the reasons of professionalism and non-professionalism, license and non-license, in the case of the same ability, the intermediary will not be replaced, which reflects the difference in comparative advantage. From this point of view, the "de-mediation" in the case of relative scarcity of resources, is not realistic. Economics has two basic assumptions: first, the rational man assumption, most people are in the constraints of the optimal decision-making; second, the scarcity of resources and human desire infinity assumption. Therefore, as long as resources are scarce, comparative advantage will not disappear, and the intermediary system behind it is bound to be irreplaceable.

2, the author does not agree with the "Internet subversion of finance", the Internet finance does not hold great expectations. For the past year, the author's overall view of the status of Internet finance is that "theory is greater than practice, gimmick is greater than the substance", the market failed to see too many real opportunities for Internet finance.

The authors believe that finance relies on the issuance of loans to earn interest, or investing in businesses to realize returns. When a financial institution finds a good project, ready to lend to it or invest in it, this time to find money, that is, sales, sales of a financial subject matter with income. Therefore, the production aspect of finance is the process of finding underlying assets and then preparing to lend or invest in them, and this process is the core of finance. Only by subverting this process can we say that we have subverted the financial institutions, and if we cannot realize the subversion of this link, then the subversion of other areas will have no effect on the financial institutions. Obviously, Internet finance has not done this.

The author also specifically mentioned a point of view: "Finance and entity to match the development, the more detached, the greater the harm. Therefore, finance is not the more efficient the better, when the two deviate from the time, there will be harm, if this time the Internet technology focuses on improving financial efficiency, it may not be a good thing for the economy. Accelerating monetary idling, while raising social costs, to summarize, Internet finance may not be a good thing for China's current, so the financial and Internet bubbles gradually hollowing out China's economic entity, which is the need to be vigilant." In fact, the author has always retained a cautious attitude towards innovations in finance. Looking back at the history of finance, the financial changes that can be called innovations in the past 100 years or so are actually extremely limited, and a large number of financial products that were once praised as innovations have either disappeared or directly triggered major earthquakes and were called off. The vast majority of innovations are extremely costly and bring about a great deal of social harm. the 2008 financial crisis is the most recent bloody lesson.

3. The author mentions that in the face of massive information, there are three dilemmas for individuals: the first dilemma is that they cannot fully collect the information because of limited time and limited ability; the second dilemma is that after collecting the information, how to judge which is valid information and which is invalid; the third dilemma is that after determining the so-called valid information, how to make investment decisions. In the process of solving the three dilemmas, the need for intermediaries and comparative advantage is reflected.

4, the author puts forward a point of view "the essence of Internet finance is shadow banking". And about shadow banking, the State Council issued [2013] No. 107 to the shadow banking name, the text pointed out: "shadow banking is the emergence of financial development, the inevitable result of financial innovation, as a useful complement to the traditional banking system, in the service of the real economy, rich investment channels for the population and other aspects play a positive role."

On the "shadow banking", the person put forward a figurative analogy - "fence theory": it is artificially set up a fence, isolating the inside and outside the crowd, and the wall is a double-edged sword. The wall is a double-edged sword: when the situation is good, the people inside do not want to come out, they spend their days drinking, do not care about the death of the people outside; when there is no meat to eat, the people inside want to come out but found that they can not come out, because the wall is too high, isolated from others, but also isolated from themselves, and the people outside the wall? When there is no meat to eat, those inside want to come out but find it impossible because the wall is too high, isolating others and themselves, while those outside the wall? "Wall theory" actually clear the structure of China's shadow banking, basically two categories: the first category is private finance, a large number of private institutions do not have a financial license is also engaged in banking; the second is a non-bank financial institutions, in the dry regulatory arbitrage and transfer of benefits "self-enrichment The second category is non-bank financial institutions, which are engaged in regulatory arbitrage and transfer of benefits "self-enrichment". Like trusts, brokerage asset management, financial products, etc., are doing this kind of thing, the essence of its banking business remains unchanged, but the cost is greatly enhanced. It doesn't matter when the economy is on the upswing, but once the economy is on the downswing, problems abound. So shadow banking in promoting the economy at the same time also brings a lot of problems, directly affecting the stability of the financial system.

But as financial reform continues to advance, the end result is bound to push the wall. And the result after the wall is removed is also bound to be the complete disappearance of private finance. Imagine traditional financial institutions from the inside out, business accelerated sinking, and ultimately defeated is the private finance before the use of traditional financial institutions can not cover the opportunities and areas formed by the advantages. At this time, everyone stands on the same line of financial business competition, and the Internet will become an instrumental application to help some financial institutions to defeat some other financial institutions.

5, the author combed the domestic Internet financial model, a **** divided into five categories:

First, the P2P and crowdfunding model characterized by disintermediation: pat loans, Renren loans, crowdfunding network.

The author for P2P point of view: (1) China in addition to pat loans, there is no pure platform P2P. real P2P, is to help people with money to lend to borrowers, help is the core issue. And China's P2P do things is to borrow money from investors, and then lending to people who need money. The former is risk-free, pure aggregation and matching, and the latter is to do aggregation and matching under risk. This difference determines that China's P2P is a financial institution, it earns a spread income with risk. (2) P2P has its survival rationality, behind the reflection of the financial repression under the strong financial regulation. (3) The biggest problem of P2P without regulation is the moral problem brought by information opacity. (4) The survival dilemma of P2P lies in the model problem. the core problem of P2P is that it can't answer the proposition of wind control. The wind control technology also can't decide the customer's post-loan behavior. In addition, the author's analysis of the two cases of Lufthansa and Yixin is still relatively spot on.

On crowdfunding. The authors say that the crowdfunding model is very meticulous in publicizing project information, and the business model also requires great clarity before it is possible to raise funds in the market. At the same time, but also because it is the nature of equity, does not guarantee the capital does not guarantee the return, for investors, with great risk uncertainty, so the difficulty of raising are increased, more importantly, because the project subject matter requirements are clear, so that false subject matter is easy to be identified, it is not easy to set up a false subject matter to extract funds, which makes the crowdfunding model of the operator can only be withdrawn through the crowdfunding project proceeds. In terms of business model, crowdfunding model requires a longer period of time for brewing and cultivation, and needs to be quiet and slowly precipitated before it can obtain higher returns. Crowdfunding model in China to carry out the difficulty of the first push the financial market as a whole fickle.

The second is to help realize the transfer of funds as the characteristics of the Internet payment tools: third-party payment (Alipay).

The third is the sale of financial products characterized by channels: Balance, Oriental Wealth, and Numis.

Fourth, price comparison websites characterized by financial information matching: Rong360, Good Loan. The model is to financial institutions and product information matching as the basis of the characteristics of the platform model, the core of the platform model is decentralized. The website is only an information platform, and summarizing matching transactions is its core. The author is not too optimistic about this model. He believes that the platform model needs to have two basic conditions, the first is the massive bilateral demand of the market, and the second is the demand and supply have the ability to realize one-to-one correspondence. Only if both sides are scattered, massive, and not strong market players, will there be a point for the platform to exist. Finance is difficult to meet this characteristic, resulting in the existence of the platform has little meaning.

Fifth, other small-scale fragmented Internet financial services applications.

The second half of the book is entitled "subversion?" . Obviously, the authors have made their position clear in this question mark. Precisely, Internet finance should be "changing" the operation of financial thinking and operation.

1, in the financial field, small intermediaries how to intervene? The first mode, that is, relying on the basic ecological advantages to intervene in the financial field. In the future, there will be a large number of small intermediaries based on the ability to take advantage of the advantages or platform advantages, forming a financing intermediary ecosystem. The second model is to rely purely on the ability to intervene in the financial field. To be precise, a large number of surviving small loan companies and guarantee companies are typical of this model. Compared with the two models, the author is more optimistic about the first model. Because the second model is based on individual ability, and individual finance depends on the sky, the only thing that can fight against the ultimate risk is actually the institutional advantages, and it is difficult to fight against the risk by relying on ability alone. The first model is relatively simple, in the basic ecological advantages of the field, it is not a head-on confrontation with the traditional financial institutions, but depends on the entity based on the derivation of a new financial model, relatively low risk. In the future, there will be more financial attributes of the industry will consider the use of the Internet to establish an industrial ecosystem to intervene in the financial sector.

2, the author also used a large part of the introduction of the Internet payment technology on the impact of finance. Space limitations, will not be expanded. However, he wrote more about the war between Alipay and WeChat Pay. One of the sentences is worth thinking about: "payment industry, the ultimate competition is not technology, but the application scene. More application scenarios, in order to have more payment possibilities. Detached from the payment application scene, payment is difficult to survive. The reason why Alipay went to the first, because of Taobao. ...... Now WeChat has gone far beyond the concept of socialization. A client that covers a population of up to 600 million people can theoretically cover all types of human behavior, thus generating more imagination. In terms of payment application scenarios, WeChat has been much larger than Taobao's payment scenarios. At this point, the terrible thing about WeChat payment is revealed, that is, to realize the real nowhere to pay." In short, the application scene is the battlefield of Internet payment, who occupies more application scenes, who can occupy the high point of Internet payment.

3, the author of the second half of the book are analyzed on a case-by-case basis, due to the five years of Internet development and change is too big and too fast, some of the then seemingly correct argument to now see is not appropriate. So here is also not in the specific development.

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