On the Road to Recap | Hacker News Reader

On the Road to Recap

abovethecrowd.com

117 pointssferik9 comments

> The healthiest thing that could possibly happen is a dramatic increase in the real cost of capital and a return to an appreciation for sound business execution.

In which we'll start another cycle in about 4-5 years promoting "growth growth growth" and do the same thing over and over again. We're on track for our 3rd 7-year cycle (1995-2002, 2002-2009, 2009-2016), so if you're an entrepreneur and you time it right, the next 1-2 years is the best time to start because exits will be best around 5-6 year mark.

I think if we crash, we are going to crash harder than we did in 2008.

The stuff the government (and Fed) did in 2008 and since can't really be repeated. We could try even bigger fiscal stimulus (government spending rather than monetary policy), but there are too many people that will lose their shit over that happening. There's also not really any monetary policy tools that are left when money is free and the Federal Reserve owns trillions of dollars of household debt.

Tech will crash harder than 2008 (but not as hard as 2000).

The overall financial system will probably do a bit better, unless the student loan bubble blows at the same time. The dollar amounts in tech are tiny compared to the housing or student loan markets; there's just not as much room to go downwards.

I'm not so sure about this. What concerns me is not the private VC money in tech, but the public pension/retirement funds in companies like Twitter, Fbook, LinkedIn, etc. which are all ~70% institutionally owned.

Housing/student loan market seems pretty tight to me. Students loans cannot be discharged and house lending standards are under strict scrutiny due to 2008.

Would be interested to see any #s you have though.

The way I visualize it is thinking in terms of levers. And there are only two major levers - monetary policy and fiscal policy. Monetary policy is historically the more effective of the two at stimulating the economy. The problem is we have pulled the monetary policy almost all the way down. The only way to pull it further is negative interest rates, which is terrifying in its implications. On the fiscal policy side, pulling that lever costs in the hundreds of billions each time (e.g. TARP was ~$450 billion) and is less effective.

If the fed does nothing the party will continue. Institutions will need to chase yield and will still give money to VCs.

This essay is important. Many terrific insights into the distortion in the late-stage private markets. But also really strong language. Hearing a GP at Benchmark say 'This “you are so lucky to have this opportunity” pitch is eerily Madoffian' is astonishing.

Great time to start a capital efficient venture and as mbesto says exit in the next cycle. In the meantime, a world of pain for high burn ventures

Read it as "on the road to rehab" :)

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