The grandmother forcibly placed the banknote in Yuri’s hand.
“It’s okay! When elders give, you just say ‘thank you’ and take it.”
Reluctantly taking the money, Yuri bowed her head again.
“Thank you, grandmother.”
“Alright then. The old man will take his leave now, so you young ones have fun and enjoy yourselves together. Have a good time doing whatever you youngsters do, like going on dates or something.”
It’s not a date though.
I waved goodbye to the grandma walking away with her back turned.
“Take care.”
Then I asked Yuri,
“Do you know her?”
“She’s the grandmother who used to live next door. She used to run a business where the gallery department store is now. She always treated me kindly since I was little.”
“Did she live here even before the reconstruction?”
“Yes. It used to be a small 8-story apartment back then.”
Anyone who wasn’t a resident found it hard to come in.
“Does she still live here?”
“Yes. Now she lives in the building next door. Including her children’s, they own three homes.”
“Wow.”
Even the smallest unit costs 2.3 billion won. With three units, it’s nearly 7 billion won.
I thought she was a rural grandma, but turns out she’s incredibly wealthy. That’s why you shouldn’t judge people solely based on appearances.
When I showed interest, Yuri shared a few things with me.
Around 40 years ago from now, the grandma obtained an apartment through a loan using the money she earned from her business.
She didn’t particularly have an investment goal at the time. She never imagined that Cheongdam-dong would become such an affluent neighborhood. She just wanted to have her own home and later bought another unit hoping her children would live nearby.
Neighbors sold their houses and moved out, but the grandmother continued to hold her ground. As decades passed, the apartment deteriorated. Water leaked from the ceiling, and rusted pipes let out discolored water.
When talks of redevelopment began, the property value soared. Before actual redevelopment could take place, numerous procedures had to be followed, including approvals from authorities, agreement from association members, selecting a construction company, and more.
In the meantime, someone sold their unit for around 1 or 1.5 billion won.
“Do you know how much the apartment price was originally?”
“How much was it?”
“It was 18 million won.”
“······.”
Over 40 years later, the redevelopment started. The old, small 8-story apartment was torn down, and a new high-rise building stood in its place. The floor area ratio more than doubled, turning two units into three entrances.
“Not just the grandmother, but everyone who lived here before benefitted from the redevelopment. My father mentioned how competitive it was even before the redevelopment began.”
It was a large apartment complex in an upscale area in Gangnam. With 2,000 units, the construction cost alone would easily reach one trillion won. The construction company would have made significant profits.
I pondered deeply. The media reported on how much premium was added to the apartments sold. The buyers were happy to see their property values rise.
But there were people who truly made money—those who already owned the land and property before the redevelopment, along with the construction company.
Redevelopment is not charity. The selling price is set to secure sufficient profits for the association members and the construction company. The buyers are essentially consumers.
The current price for this apartment is 2.3 billion won. If you bought it during the pre-redevelopment phase, it might have been 1.5 billion or less.
The greatest profit was made by none other than the grandmother we met earlier, who bought the apartment for just 18 million won.
Companies are the same.
Typically, corporates aim for listing.
When a successful listing occurs, the founding entrepreneurs, initial investors who believed in those entrepreneurs, and institutions involved in the IPO rake in massive profits and celebrate.
Investors trading listed stocks are fixated on the fluctuations, whether they rise or fall by a few percent.
If you want to invest in a successful company, it is better to invest in it during its early stages rather than after it goes public to maximize profits.
The vague thoughts wandering in my mind have now been consolidated into one.
I’ve been completely barking up the wrong tree all this time. So, despite looking at stocks endlessly, nothing came to mind?
This time, it became clear to me.
As I stood still, lost in thought, Yuri looked at me.
“Why’s that, senior?”
I smiled slightly.
“I think I finally know what to do.”
Yuri seemed puzzled.
“What do you mean?”
“I think I should be off now.”
“What? Without even having coffee?”
“Let’s have it next time.”
I’m too impatient to leisurely drink coffee.
About to turn around, I hesitated. Every time I meet this one, I feel like I gain something little by little.
“Thank you,”
Yuri asked in confusion.
“What’s going on?”
“If things work out, I’ll treat you to an expensive meal later.”
***
I sent a text to Hyunjoo noona on my way back home.
“I have some information. I will send the list, so please send it as soon as you check.”
When I entered the house, Taekgyu was playing a game in the living room.
“You’re home early.”
“It’s not the time to be playing games now.”
“Then what time should we be doing?”
“We know what we should do.”
Taekgyu immediately stopped the game he was playing.
“What’s up? Did you see something as an Oracle eye?”
“Not at all, just listen to me.”
I talked about the grandmother I met at Cheongdam-dong apartment.
Two apartments worth 18 million won each have turned into three apartments worth 23 billion won after 45 years. Even roughly calculated, it’s a 150-fold increase. Considering the inflation rate over the years, it must have been a tremendous rate of return.
“If we liken a completed apartment to a listed company on the stock exchange, sales would be like an IPO. An old apartment before redevelopment is like an unlisted stock. Assuming the property value continues to rise, which would yield a higher rate of return – buying after sales ends or buying before redevelopment is decided?”
Taekgyu’s eyes widened in surprise.
“You were just a junior, and you ended up following me home?”
“Is that really important right now?”
What on earth did this kid hear?
I continued explaining, using an example.
“During the Industrial Revolution, new industries replaced existing ones. It’s like how cars emerged and horse carriages disappeared.”
It took over 100 years for cars to completely replace horse carriages. However, currently, the speed at which this happens exceeds imagination.
“Companies like Airbnb, which rent out spare rooms, have surpassed the value of hotel chains like Hilton, and car-sharing services like Uber have exceeded the value of traditional car companies like GM in less than a decade.”
Taek-gyu, after hearing the explanation, clicked his tongue.
“Is that the case with Airbnb and Uber?”
It’s understandable not to know well.
“In Korea, Airbnb is only allowed in a limited manner, while Uber is completely illegal.”
The competitors of Airbnb include lodging establishments including hotels, and Uber’s competitors are taxi companies. It’s natural for existing businesses to fiercely oppose as their livelihoods are at stake.
The government is aware of their opinions, so regulations cannot be lifted easily.
When cars appeared in the UK, carriage drivers vehemently opposed. They even passed a law claiming that cars couldn’t run faster than carriages.
Despite their efforts to delay change, they couldn’t stop it. It only resulted in the UK falling behind in the automotive industry.
In the US and Europe, it has become common to call for an Uber rather than hail a taxi.
I expressed my conclusion.
“I’m going to invest in startups.”
“What are startups?”
“They refer to newly established small and medium-sized businesses that jump into new businesses with ideas. Both Airbnb and Uber started as startups and have now grown into unicorns with market caps exceeding tens of trillions.”
“Unicorn, like that horned horse in fantasy?”
“Exactly.”
A Unicorn refers to an unlisted startup with a valuation exceeding $1 billion. It was once considered only imaginable to surpass $1 billion before going public.
But now such companies are emerging rapidly. This is one of the phenomena of the Fourth Industrial Revolution era.
“The survival rate of startups is extremely low. About eight or nine out of ten are expected to fail within three years. Remember the dot-com bubble?”
Taek-gyu shook his head.
“I don’t remember.”
Well, we are not from that generation.
“In Korea, it is better known as the Kosdaq bubble.”
Around the end of the 20th century,
People were ecstatic when the internet world opened up. At that time, the internet was seen as a limitless new continent full of possibilities.
Just like the daring individuals who crossed over to the American continent (slaughtering the indigenous people) to establish their own nation, courageous people charged into the internet world without fear.
It felt like immense wealth would pour out once they planted their flag there. Investors enthusiastically poured funds into this vision.
The dot-com bubble crossed the Pacific Ocean and landed in Korea.
During the process of overcoming the IMF crisis, Korea was focusing on building IT infrastructure and nurturing ventures. It was a new investment opportunity.
A frenzy swept across the nation with the Kosdaq boom. Investors scrambled to buy shares of internet-related companies.
Everyone, from a mother holding a baby to a retired monk, appeared in the market waving money, shouting to buy Kosdaq stocks.
Even companies unrelated to the internet saw their stock prices skyrocket just for being listed on Kosdaq.
One prominent example was Saerom Technology. Its stock hit the daily limit increase, leaving many investors frustrated that they couldn’t buy in.
Fueled by investors’ enthusiasm, the stock that was 2,500 won soared to 300,000 won. Companies that hadn’t made a profit rose to the 7th position in the industry rankings.
However, bubbles eventually burst. (If they don’t burst, they wouldn’t be called bubbles in the first place.)
Contrary to investors’ expectations, internet speeds and both hardware and software technologies were inadequate at that time.
Expectations and hopes drove stock prices up, but companies failed to deliver promised results. Unable to sustain themselves with profits, many companies started facing bankruptcy when investments dried up.
The Kosdaq, which had reached its all-time high, plummeted by over 70% in no time, turning many stocks into scraps of paper.
Despite efforts to establish various investor protection measures and changing index calculation methods, the Kosdaq has not been able to recover even half of its previous peak to this day.
The dot-com bubble vanished as quickly as soap bubbles. However, it did leave behind something.
“Although most companies that received investments at that time failed, there were a very few solid companies that survived.”
Those companies survived even in the dot-com bubble and went on to embrace the advent of the internet era. As technology progressed, more startups emerged. They planted their flags in the land where competitors were perishing, beginning to mine for gold.
“The dot-com bubble was a byproduct of the third industrial revolution. Now, we’re in the era of the fourth industrial revolution.”
Startups diving into the new industries are emerging rapidly. Most may fail, but a few will survive and grow into large corporations, leading the economy in the future.
“Our task is to pick out the companies that will survive.”
“Is that possible?”
“It’s not easy, of course.”
Investing in a successful startup can bring in a lot of money, but nobody rushes into investments lightly.
The reason is simple.
It’s challenging to identify the companies that will grow even after passing through rigorous screening to go public.
Investing in what was believed to be a good company, only to see it get delisted with shares reduced to worthless scraps, is a common occurrence.
What about startups in their early stages now?
Finding a startup among numerous others that won’t fail and will grow is like finding a needle in a haystack.
“But we have something others don’t.”
Taekgyu murmured.
“Oracle Eye.”
I snapped my fingers.
“That’s right.”
