Don’t Lose Your Shorts When The Tide Goes Out
The last ~40 months have not been like anything I have ever witnessed in my entrepreneurial career.
Growth-at-any-cost businesses funded by trigger-happy VCs grew to massive heights only to get their valuations slashed by 80% or go to zero altogether.
Low-interest rates made borrowing money cheaper than ever, only to see interest rates go to their highest in 20 years less than 12 months later.
A world that rained money (literally) with the 2020 and 2021 stimulus saw everyday essentials like eggs, milk, and raw ingredients soar in 2022 and 2023.
The “roaring 20’s” have been one surprise after another. And with that, a lot of timeless wisdom has been transmogrified from example-less theory to verified proof.
So, what have we learned?
Nothing is free. There are a lot of debates as to what caused the record inflation, and what I am not going to do is impart my opinions here. What I am going to say is that anything you are told is free, is not free. One day it may come back and bite you in the ass. Remember that.
A rational mind during irrational times is one of the most valuable assets. 2020 and 2021 saw some of the most wild decisions being made. People taking out PPP Loans to finance luxury cars. Spending stimulus checks on purses, jackets, and phones. We saw businesses make insane LTV predictions to justify outrageous CACs. Employee counts swell, yet output remains flat. Overextending and losing focus on core competencies in order to raise more funding. The one thing that was in short supply during those years was discipline.
The world is unpredictable. The 20s have felt like a boxing match where another opponent hops in the ring and hits you over the head with a chair. Completely breaking the rules of what you thought was legal. Stay vigilant and stay disciplined. When the world is raining money, take some of that money and buy an umbrella.
Be more conservative than deems reasonable. The following 12 months are going to be ugly. I believe that on the inside we all hope that the world is just going to bounce back to how it was pre-pandemic any day now, but the path ahead is painful. Tighten your belt. Say no to risky opportunities, the world may call you dumb for it, but that is fine. It is better to be a living dog, than a dead lion.
In summary, be rational. Adapt with the times, but stay grounded. Remember that everyone wants to keep up with the Joneses until their house gets foreclosed on and their cars repossessed.
And just because everyone else is taking off their shorts in the shallow water does not mean that you should also. The tide will go out. And when it does, it is better to be sitting comfortably with your shorts nicely secured around your body rather than having them drifting out towards the middle of the ocean while you sit exposed on the sand.
The pain isn’t over yet, but we can survive.