So I consulted the CEO of a very well-known and well-known IT company in China, and he told me that it was a Ponzi scheme, and explained his reasons, so I stopped my friends from joining LeEco and sold the company to someone else. Today, I owe this industry leader to thank for me, and for my friends.

Many media said that although LeEco was mythic, it was not a "Ponzi scheme", because it raised money to do the right thing. Regardless of whether it is doing the right thing or not, the games that constantly rely on borrowing new debts to pay off old debts, and never paying off those debts, are actually Ponzi schemes.

Today's more advanced Ponzi schemes, of course, will not be so stupid as to do nothing and make money there, they will be packaged with feelings and the future. However, today's Ponzi schemes often have three characteristics:

First, establish a network in some luxurious places and give investors a reputation for making money. It could be a dividend, or a stock that keeps rising.

Second, keep attracting new people in.

Usually, a good business is self-hematopoietic, so once the investment has reached a certain level, there is no need for new investment. Even if it is needed, the original investors will continue to provide investment because they see the prospects, and there is no need to find a group of new people to join every time.

Third, profits are realized by doing accounts, and there are problems with cash flow.

A company's profits can be deceived by making false accounts in the short term, but the cash flow is real, and the company cannot operate without it. Therefore, it is a Ponzi scheme to rely not on management, but on the so-called capital operation and constantly attracting investors to increase the cash to ensure the company's operation.

A while ago, some students from the study tour asked me that the blueprint of such an ecosystem shown by LETV is very large, which requires huge investment, and Musk in the United States has a very large paving, but he succeeded, and LETV just broke the capital chain. So, will LeEco succeed in the U.S.?

I told him that China's start-up environment is much better than that of the United States, and if it doesn't succeed in this environment, it won't work anywhere, not to mention that China's stock market system has helped it a lot.

I introduced Enron in letter 149, and it took less than a week for the stock price to fall from more than $100 to below $1. There is no limit to the decline of the U.S. stock market, let alone a suspension of trading. In other words, if LeEco arrives in the United States, it will die faster. In China, even if it comes to this point, maybe the "national team" will come to the rescue, and there is still some possibility of survival.

Of course, when it comes to Musk's Tesla, we have to talk about how it is different from LeTV. Tesla has produced the best electric cars in the world, and more than 200,000 of them are on the road. To this day, its technology is still the best among electric vehicles. As for the rocket launch engaged in by Musk, it is also the best technology among private companies.

So how much has Tesla raised in total to do this? Taking advantage of the convenience of being an investor, I have checked all the financing it has received over the years, and the situation is as follows:

In the first round (angel round), Musk and several angels invested, the amount was not disclosed, but very small, in the order of one million dollars to ten million dollars.

In the second round, Musk led the pitch, $13 million.

In the third round, Musk led the round and added Google's two founders and several individual investors for a total of $40 million.

Fourth round, $45 million.

Fifth round, $40 million.

There are some very small investments in between. Finally, in January 2009, when Tesla's first electric vehicle, the Roadster, was delivered, it raised only $187 million. Due to the financial crisis, it was difficult to continue to raise funds, so Musk invested $70 million of his last 100 million personal assets in Tesla. This money allowed Tesla to successfully convert Mercedes-Benz's Smart small car into an electric car, and as a result, in May 2009, it received a $50 million investment from Mercedes-Benz (about 10% of the shares).

In other words, Tesla only took about $300 million from investors in total, plus $226 million from the IPO (initial public offering), which is about $500 million. Since then, it has not mortgaged its equity to find investment at every turn.

What is the biggest difference between LeEco and Tesla? The former is too opportunistic, often telling myths that can turn the world's economic pattern upside down in one fell swoop. For more than ten years, everyone has seen that the world with or without Tesla is different, and today everyone has also seen that with or without LeTV, what the world should be like, or what it should be.

However, the founder of LeEco did not fail, because he created LeEco almost empty-handed, and it is still the case today, and there is nothing to lose, but investors and employees are lost.

If it were in the United States, LeEco might have gone into bankruptcy. The next question is how to divide the remaining assets. This brings us to the company's capital hierarchy.

The order in which the capital of a listed company with limited liability is repaid from the top (first repaid) to the lowest level is as follows:

1. Senior Debts / Senior Notes

Debts and Senior Notes are both translated as senior debt (bonds) in Chinese, Debts This kind of debt is collateralized by real estate or cash assets (such as government bonds) when borrowing money, while Senior Notes can be or not, just to say that it is repaid first.

In the United States, you can't borrow money against your own stock, because a company's stock can fall to zero at any time. In China, a listed company can borrow against shares, which is extremely dangerous, and the banking system could collapse if the stock market goes through the cracks.

As the first senior debt to be repaid, it usually has a lower interest rate because the risk and reward are proportional.

2. Bonds / Notes

This is a general bond issued by a company. In the U.S., it is common to use assets that are not your own stock as collateral. The interest rate of a bond usually depends on the company's credit rating, and if the credit rating is low, it is a contractual bond, and many financial derivatives come in the form of Notes.

For example, Goldman Sachs wants to bet on the rise in oil prices in the next 12 months, it will issue financial derivatives based on oil prices, if it rises, how much return it has to guarantee, if it does not rise, it has to guarantee a bottom, this is Notes. If Goldman Sachs fails, Notes will be liquidated in a similar order to regular bonds, after senior debt.

3. Preferred Stock

These are non-tradable shares that are issued in a directed manner and pay dividends, and they cannot be traded directly on the stock exchange (and can of course be traded privately). The price of preferred stock does not change with changes in stock prices in the market, and its price depends on interest rates, past interest payments, and changes in the company's credit rating.

For example, Citibank now has a credit rating of A+ and a 6% dividend on preferred stock, and if the credit is downgraded to A, people will worry about whether it may have trouble paying interest, and the price of preferred stock will fall. For example, if the U.S. cuts interest rates, Citibank's preferred stock will pay more dividends, and its price will rise. These price movements have nothing to do with changes in the stock market.

Venture capital invests funds in private companies, generally in the form of preferred shares. However, these preferred shares can be converted into common shares and then traded.

4. Common Stock

This is a stock that can be bought and sold in the market.

Well, if a company goes bankrupt, pay off the senior debt first, then the bonds. If there is still money, it is the holder of the preferred stock who gets the money back. Whether people at each level can get 100% of the money depends on how much money the company has left. As for the owners of common stock, they usually don't get a penny back, because bankrupt companies are always insolvent.

It is precisely because common stock is the least safe that Warren Buffett took preferred stock when he invested in Goldman Sachs and GE (General Electric Company) in 2008. Before 2008, I used to buy Citibank's preferred stock. Then Citibank was about to collapse and had to rely on a government bailout, and the stock was diluted four times, which means that the price fell by 75%. However, my preferred stock was eventually taken back without a penny.

Therefore, you may have seen that LeTV's big creditors have begun to seize its assets to protect their interests. Because they're taking senior debt, or bonds. Shareholders (including the so-called "loose cattle") are all ordinary shares, so if LeEco liquidates, these shareholders may lose all their money. In fact, this was the case with Enron's shareholders back then.

If LeEco is in the United States, the first thing to be paid before paying off any debts is the employee's salary and benefits, which is not negotiable. Today, LeEco's wage arrears on the grounds that its assets are frozen may still work in China, but not only will it not work in the United States, but it will also be taken to court, and in the end it will be miserable.

At least judging by the results so far, LeEco should be glad that it is a Chinese company. Of course, for shareholders, knowing the company's capital level and knowing that their shares are repaid at the end, they may be more cautious.