I

In the late 1990s, tech stocks were booming. Personal computer ownership drastically increased from 23% in 1993 to over 50% in 2000, the Nasdaq rose over 400% in the same period, and startups did whatever they could to go public as fast as possible.

In 1997, there were 34 internet-related IPOs. In 1998, there were 45. And in 1999, there were 292.

But starting in January 2000, the market started a precipitous drop that wouldn’t end until the Nasdaq was down 80% from its previous high. By the end of 2002:

100 million individual investors had lost $5 trillion in the stock market. A Vanguard study showed that by the end of 2002, 70 percent of 401(k)s had lost at least one-fifth of their value; 45 percent had lost more than one-fifth. [source]

Times were bad; marquee startups like Pets.com and Webvan.com folded; and Silicon Valley was declared dead.

II

From 1998 to 2006, the average home price in the United States doubled, the fastest increase in US history. By 2005, the housing sector was the golden child of the US economy – about 40% of all job creation in the new millennium had come from the housing sector.

And then, shit hit the fan. The housing market collapsed, unemployment doubled from 5% to 10%, GDP fell as fast as it had during World War II, and, once again, Silicon Valley died.

As angel investor Jason Calacanis said in September 2008:

It’s my believe that the economic downturn will be much worse than it is today, and that 50-80% of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months.

Make a list of every Web 2.0 startup to raise an A or B round and cross 80% of them off the list, because they will not make it to their next round of funding or profitability.

He was right. Late-stage VC funding fell by as much as 50% throughout 2008. The fun was over.

III

In 2017, I moved to Silicon Valley to go to graduate school at UC Berkeley, and crypto fever was in the air. I joined Blockchain @ Berkeley and went down the rabbit hole at precisely the right time.

I saw Ethereum rise from $11.27 to $1,300, and Bitcoin from $185 to $20,000, by early 2018. (Could have been life-changing money, if I wasn’t a broke grad student.) The crypto hype train was unstoppable.

Until it fell off the tracks.

By September 2018, crypto prices were down 80% from their previous highs. Bitcoin was “worthless,” and headed to zero. The good times were over. Again.

Clark Moody @clarkmoody

🎶 On the 12th day of REKT-mas, my cryptos gave to me 12 markets crashing 11 feds indicting 10 hacked smart contracts 9 forks of Bitcoin 8 lambo repos 7 bankrupt miners 6 useless tokens 5 exit scams 🎵🎺 4 exchange hacks 3 rage quits 2 margin calls 💯 and a Bitcoin o-bit-u-a-ry

December 4th 2018

635 Retweets2,346 Likes

IV

It’s now 2022, and things aren’t looking so great.

I was lucky enough to spend two glorious weeks away from Twitter and the news during my honeymoon, but returned to a world yelling “fire!” Markets crashing. Crypto tanking. Society crumbling. Pandemic surging.

And yet… I’m not worried.

I am fully aware of how tough the tough times might be. People will lose their jobs. Startups will fold. And extended downturns disproportionately hurt people below median income.

But, speaking from the perspective of the Silicon Valley bubble, a return to Hard Mode is probably healthy.

We’ve been living in an increasingly unreal and disconnected world over the past 12 years. Capital has been abundant, and the good times have been really good.

When venture capital flows freely, companies pour money into growth. Growth begets high valuations. Sexy valuations attract talent to the West Coast. The luckiest among those souls become millionaires, and a few become billionaires who return their VC-lent money many times over, and the cycle continues.

But when venture capital dries up, two things happen.

First, a certain class of entrepreneurship is completely stymied. An economist might call their products “luxury goods.” People dunking on entrepreneurs on Twitter might call them “anyone who bought an NFT.” My personal moniker for these folks: “Maslow’s Bros.” Their products try to bring us closer to self-actualization – a worthy aim, but one that only makes sense when foundational needs can be assumed to exist.

And second, all companies remember the basics: that profitability matters, that solving real problems for the real world matters, and that the number one goal of a startup is to stay alive at all costs.

Going back to the basics is healthy. It’s no surprise to me that in each of the past few economic downturns, generational companies have survived and thrived. Google and Amazon made it through the dot-com bubble and became the two most important companies in the world afterwards; Airbnb and Stripe were founded during the 2008 financial crisis.

So, sure. The world is crumbling. But we’ve survived each downturn before this one, and we’ll survive this one as well. Or, at least the companies that are building real products that solve real needs will.

It’s time for entrepreneurship on Hard Mode, and I love it.

This is exactly what I signed up for.