"RIP Good Times": Silicon Valley's Cuban Missile Crisis

http://daltoncaldwell.com/rip-good-times-a-perspective

by bdb • 14 years ago

143 118 14 years ago

daltoncaldwell.com

foobooboo2• 14 years ago

"...the US financial system was literally melting down."

Really? The financial system was becoming a pool of molten goo, possibly spreading radiation all over its vacinity?

kposehn• 14 years ago

> The financial system was becoming a pool of molten goo, possibly spreading radiation all over its vicinity?

Metaphorically, I'd say that was fairly accurate if you consider the molten goo to be defaults and the radiation to be bank malaise and bad assets; it also managed to start the same reaction in the EU, which continues to this day.

StevenRayOrr2• 14 years ago

Even intelligent people that know the meaning of the word will make this mistake when writing casually. The English language would be much better off if we removed the word "literally" from it. Or, I suppose, if we all just decided to accept that "literally" now means "metaphorically".

In which case, please kill me.

giblfiz2• 14 years ago

do you literally want me to kill you now?

pyre• 14 years ago

  "...the US financial system was literally melting down."

is probably better written as:

  "...the US financial system was seriously melting down."

Adding literally is an attempt to make the statement stronger than just:

  "...the US financial system was melting down."

SomeCallMeTim• 14 years ago

If it's a "mistake", then it's one that has been made for 300 years:

http://www.slate.com/articles/life/the_good_word/2005/11/the...

Relevant excerpt:

'As is often the case, though, such "abuses" have a long and esteemed history in English. The ground was not especially sticky in Little Women when Louisa May Alcott wrote that "the land literally flowed with milk and honey," nor was Tom Sawyer turning somersaults on piles of money when Twain described him as "literally rolling in wealth," [...more...] Such examples are easily come by, even in the works of the authors we are often told to emulate.'

Given the caliber of authors that have used "literally" for emphasis, I have a hard time standing behind the concept that it's even poor style. We can decide that, moving forward, we'd like to clean up English and use "literally" differently, but calling it a mistake rather than a offense to modern style is inaccurate.

REGARDLESS, I thought this was exactly the kind of thread that Hacker News hated. :|

lifeisstillgood• 14 years ago

Literally kill you?

giblfiz2• 14 years ago

Definition of LITERALLY

1: in a literal sense or manner : actually <took the remark literally> <was literally insane>

2: in effect : virtually <will literally turn the world upside down to combat cruelty or injustice — Norman Cousins>

http://www.merriam-webster.com/dictionary/literally

StevenRayOrr2• 14 years ago

Definition of VIRTUALLY

1: almost entirely : nearly

2: for all practical purposes <virtually unknown>

http://www.merriam-webster.com/dictionary/virtually

tedsuo• 14 years ago

That's really funny, I didn't realize the hyperbolic use had become official at some point.

dalton3• 14 years ago

I think it's awesome that you just created a new hn account to leave this comment.

foobooboo2• 14 years ago

Why thank you, I've been lurking around for quite a while, but this did it.

moron• 14 years ago

I don't!

mdemare• 14 years ago

I see this usage of "literally" more as a dereference, or an unquote. I mean, it takes a dead metaphor and tries to bring it back to live. It means "hey, pay attention to this metaphor!"

If you'd say, "the financial system was melting down", that is such a stale metaphor that it might not even trigger any associations with nuclear reactors. "Literally" forces you to stop and think about molten goo and radiation.

And as such, I approve of it (although it is much preferred to use fresh metaphors than to resurrect stale ones.)

pbreit• 14 years ago

lit·er·al·ly/ˈlitərəlē/ Adverb:

1. In a literal manner or sense; exactly: "the driver took it literally when asked to go straight over the traffic circle".

2. Used to acknowledge that something is not literally true but is used for emphasis or to express strong feeling.

clebio2• 14 years ago

So, yeah, while misuse of literally literally bugs the shit out of me a lot, I'm fairly tossed up about whether it's worth bugging out over. The recent surfacing of the 'poisonous/venomous' distinction smacks of pop-culture faddism and as such, is just dull and tedious.

Academics, scientists, and engineers generally understand these details (indeed, Dalton Caldwell almost certainly _does_ know the distinction, being as he was, I gather, a 'Founder/CEO of a Sequoia portfolio company'). Complicated, careful work (in nuclear physics or space launches, for instance) generally depends on this, no doubt.

But outside those domains -- in a personal blog, for instance, or when noodling catfish in the bayou, say -- splitting infinitives might be ok, or even a shibboleth. See Dave Chappelle's analysis on Inside The Actors Studio regarding speaking as a black American.

And, while I don't care to hurtle ad-hominems ad-hoc, if you _are_ going to be pedantic about the minutiae of someone else's considered work, it's possibly worth knowing that the word is 'vicinity'.

ricardobeat2• 14 years ago

For some reason this is one of the hardest to read comments I've ever encountered on the internet.

dannyr• 14 years ago

Dalton: I interviewed for an engineer position at Imeem a week before. I passed the interview & I was told that the offer letter was just waiting for your signature. It was delayed because you just had a baby.

Then days later, I saw the "RIP Good Times" presentation & I was told that the job offer was put on hold indefinitely. Weeks later, I read about the layoffs & the job was gone for good.

It was a blessing in disguise for me since I realized that I should learn a new language & framework (Python/Django) aside from .Net. Turned out well for me since there are more Python jobs than .Net in the area.

dalton3• 14 years ago

Yes, that all sounds about right. I am glad you think of it as a blessing.

Incidentally, all of the work I do now is Python/Django. The story of why we had a massive .NET codebase is a long story.

amix2• 14 years ago

The crisis is far from over and the financial systems are still in a Cuban Missile Crisis situation. Nothing has really improved since 2008 - other than the different governments pumping trillions of $ into the different markets. I think the crash of 2008 is a little taste of what's to come (that's at least what I am preparing for).

roc2• 14 years ago

To be fair: the delta has improved and that's not nothing.

A morass is certainly preferable to a calamity.

AJ007• 14 years ago

4 decades of famine or 1 typhoon?

What the actions of world leaders have effectively said is that we will sacrifice our economic growth in exchange for the ability to ensure that current debt can continue to be serviced.

koide2• 14 years ago

Would you care sharing what exactly are your preparations? I'm at a loss figuring what is a good way to prepare. I've moved some cash to the less troubled economies but, what else?

ricardobeat2• 14 years ago

Dig a hole underground and stock as much canned beans as possible.

roguecoder3• 14 years ago

Non-cash economies would be my answer. Find business models that don't rely on consumers having access to money, unless you are providing necessities. Say said it best: when there's not enough cash available to satisfy desires, people find ways around it. If you can arrange to be that way, you can still profit.

As for investments, pick your index, close your eyes to the ups and downs and pray someone in government realizes that when people are willing to give you a negative real interest rate you should take their money and do something productive with it.

amix2• 14 years ago

I don't have any debt and I don't plan to accumulate any debt. I don't live over my means and I have good savings. I am also very mobile and can live anywhere in the world since I don't own that many things and my work can be done using a computer and an internet connection. I do have some plans to own some properties, but this is only to diversify my investments.

A lot of people are living above their means or on a economy with no breathing room => I think this is a very bad strategy going forward.

Regarding my startup I am trying to build a profitable and sound business that targets the global market.

ebiester2• 14 years ago

The issue isn't that Sequoia was wrong -- in fact, everything they said came to pass. It wasn't a quick recovery, and people spent less money on technical acquisitions. That didn't stop people from creating startups.

What the slide deck didn't account for is that there was nowhere for big money to put their money - everything was in trouble. So, people started to look for new opportunities, and Silicon Valley suddenly looked mighty attractive as a place for investment.

On Main Street, there are people who have been out of work for years now. It really was that bad, is that bad. We just happened to be under one of the few umbrellas in a storm.

tatsuke952• 14 years ago

You're talking in the past tense, like the situation is over. For all we know, it's just beginning.

>"We just happened to be under one of the few umbrellas in a storm."

It's not different there. It never is.

ebiester2• 14 years ago

The first deluge is over. The economy isn't currently in freefall; rather, it is slowly growing. That doesn't mean the storm system has moved on and everything is sunny from here on out.

Further, an umbrella (sorry to extend a potentially leaky abstraction here) doesn't mean that you are immune to the storm. It just means that you deflect most of the rain around you.

But it's different for IT, much different. I was let go from multiple contracts, but the time I spent out of work was by choice, and I had two interviews a week the moment I put my resume out while friends in other sectors would have killed for even an interview. I was able to choose the job I wanted once I was willing to move out of my home city.

I don't have a star studded resume either, and I've seen mediocre and worse developers stay on because replacements couldn't be found.

It's different for IT, and programmers more specifically.

adventureful4• 14 years ago

The cold war continues (going with the missile crisis line), and it is thus the Fed is preparing for QE3.

I agree strongly with another comment: Sequoia was right, and then some.

Nothing actually got better, it's just that people think it did. A moment of respite from the turmoil is all the last two or three years represents. That moment of respite cost between $8 and $15 trillion depending on what you're counting (total deficits + Fed bailouts).

In fact, things are far worse today than they were at the height of the crisis, as we've loaded up on $6 or so trillion more in public debt we can never pay back. We've added about $400 to $500 billion more in student loan debt, and a few million college graduates are sitting on the sidelines without jobs and experience, and we've got millions more living on food stamps without jobs.

The only thing separating our system from absolute implosion is the global reserve currency that we're currently massively abusing at our leisure. If mortgage rates had to rise to their natural rates (absent Fed manipulation holding down both long term and short term rates), housing would quickly plunge another 1/3, and that alone would rupture the entire financial system and bring it to its knees.

The truth is, we look a lot like the imploding EU zone across the Federal and State levels. Except we've got the dollar, for now.

paulsutter2• 14 years ago

You're right, but we can be part of the solution.

As Max Levchin says, the long term question is not whether the US is printing too much or too little - it's whether we (that's us, here, reading Hacker News) can focus on real innovation, which causes real productivity improvements, and thus real growth.

That's the best way out and it rests on us.

cynicalkane2• 14 years ago

The Republicans were saying the same sort of stuff in 1929. America learned, at great cost, that macroeconomics matters. We'd do well to remember those lessons.

herdrick6• 14 years ago

between $8 and $15 trillion... (total deficits + Fed bailouts)

I was thinking that we got lucky and TARP ended up not costing much (not counting 2nd order effects pushed into the future). Also, I'm seeing 'only' about $5.3 trillion of new debt from 2008 to now: http://www.usgovernmentdebt.us/federal_deficit_chart.html

muzz2• 14 years ago

and this affects startups how?

photon13714• 14 years ago

cost between $8 and $15 trillion depending on what you're counting (total deficits + Fed bailouts)

I always cringe when somebody calls the Fed's actions bailouts. These are asset purchases by the Fed versus injecting cash into the monetary system. The Fed will have to unwind these at some point in the future. But essentially, what the Fed has done is that it has made a market for securities nobody was willing to make a market for.

Net "bailout" performed by the Fed: zero. Actually that's wrong - the Fed added around $78 billion worth of profit via its open market operations to the Treasury last year (it's obliged to do so after deducting servicing costs/salaries etc.)

Pray, what are the "natural" mortgage rates you're talking about - ie you mean rates absent Fed intervention (via Operation Twist)? There wouldn't be a mortgage rates market in existence if the Fed were not there to make one!

And no, you're not imploding like the EU. Their banks are woefully undercapitalized and can't lend to the corporate sector. Plus, they have one monetary policy and 17 different fiscal policies - that simply doesn't work!

Your banks and your corporate sector are flush with money. It's your consumers who are broke. Even then, they aren't broke - they are just not making long-term investments(ie purchasing durable goods) as credit has dried up and there is no good quality collateral left in the market against which people are willing to lend. Homes used to be the collateral earlier on - but that's no longer the case.

That's what the Fed is trying to do - lower mortgage rates (ie assume credit risk on your behalf - it can do so because it can print money - inflation is not a risk in this economy) to enable credit to flow in the economy so that the consumer can start becoming active again.

Deleveraging is painful - but it's not the end of the world as you've portrayed it.

Edit: fixed typos

adventureful4• 14 years ago

The Fed's actions were extreme bailouts. They've been busy bailing out almost everybody: home owners, Wall Street, Europe, the Treasury, the states.

Net bailouts performed by the Fed: trillions

http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-un...

They gave banks and others at least $7.7 trillion and there is zero proof that it was paid back. Citi had at least a $1 trillion blackhole on their balance sheet, and there is no possibility they were able to fill it. Bank of America was in the same situation, and their profits could never fill that. The Fed took over trillions in toxic waste mortgages to bail out the banks, and most of those 'assets' still sit on the Fed's balance sheet.

I'm sure the money supply continuing to skyrocket means the Fed isn't bailing anybody out. Surely those trillions aren't going toward bailouts for the government, Wall St, big banks, or the housing market.

http://www.shadowstats.com/charts/monetary-base-money-supply

The Fed is currently bailing out the US Government by buying 95% of all long term govt paper. The US Treasury has been bailing out California among other states, by using the Fed money. The US Government is completely insolvent without the Fed bailouts, it would have to slash 1/3 of all spending just to correct the imbalances in the system if the Fed stopped the QE programs.

The Fed is bailing out home owners, investors, realtors 24/7 using trillions in QE to push rates lower to prop up the housing market.

The Fed is pushing risk into equities and out of paper by driving rates down, which is providing a bailout to big institutional investors by keeping the stock market artificially high.

It's a bailout bonanza.

Natural mortgage rates would be the mortgage rates you'd get when you remove all Federal Reserve manipulation of short and long term rates. That is, when they stop all QE / monetization programs that are designed to specifically hold rates down, thus we have sub 4% 30 year mortgage rates.

It would be something closer to a historical norm, 6% to 8% would be a lot closer to normal based on the last 50 years, than 4%, for example. But if you know anything about any of this, you already know that.

damoncali4• 14 years ago

They dumped truckloads of cash on banks who were rather suddenly (??) severely undercapitalized. That's a bailout to most people.

leptons• 14 years ago

" $6 or so trillion more in public debt we can never pay back"

This statement makes all your other statements wreak of sensationalist bullshit.

adventureful4• 14 years ago

Not at all, it's accurate. We're going to stack another $5 trillion on in the next four years.

Since when are facts sensationalist bullshit?

From this day four years ago to now, we've added roughly $5.89 trillion to the public debt ($9.869t to $15.765t), and that doesn't count all of our liabilities, that's merely a fraction of it represented by the so called "public debt."

I'd love to see the math on how you propose we ever pay back the $11 trillion in new public debt added from 2008 to 2016/17. Clinton ran the biggest surplus we've had in a very long time ($236b), and it was fake, because it didn't include the money borrowed from inbound Social Security money for the non-existent trust. If we could magically run that Clinton surplus rate from 2017 to 2102 (about 85 years), we'd finally pay off the $20 trillion in public debt we're going to have four years from now. That assumes we never once slip up again, and constantly pay $236 billion per year strictly toward only the public debt.

So, a mere 100 years of record surplus' ought to do the trick.

guelo• 14 years ago

Calm down, the US government can never run out of dollars, they own the printing presses. I am not being sarcastic.

raheemm• 14 years ago

The history of 1929 crash has shown that stimulus is the best medicine for financial turmoil.

Austerity was the first medicine prescribed by president Hoover and it failed. FDR initially provided stimulus but he had to abandon those due to political sentiments similar to the ones you echo. What finally ended the depression is the stimulus from the overwhelming spending on WW2.

Whether stimulus triggered by war or via the fed, its the only way to resolve financial turmoil. The time to address deficit/debt is when the economy is strong, as was done in the mid to late 90s.

gaius3• 14 years ago

Stimulus has to go on stuff that has lasting value greater than the value of the stimulus. That is the mistake that Gordon Brown made - you can't just slosh money around. The WW2 stimulus worked because when the dust settled, there was an industry expert at mass production, a trained and disciplined workforce, and a pent-up demand for exports.

In other words, what is at least as important as how much. You can't just blindly spend your way out.

temphn6• 14 years ago

This is the mainstream view.

The alternative view is that FDR made the Great Depression great, with arbitrary orders like NIRA and attacks on business. He ruled for four terms and the Depression coincidentally lifted after his death. Out of necessity business was given a freeer hand during the war, sort of like Lenin's NEP in the 1920s. With FDR's death that free hand continued. Read "The Forgotten Man" or John T. Flynn if interested in this point of view.

  By the middle of his second term, much criticism of   
  Roosevelt centered on fears that he was heading toward a 
  dictatorship, by attempting to seize control of the 
  Supreme Court in the Court-packing incident of 1937, 
  attempting to eliminate dissent within the Democratic 
  party in the South during the 1938 elections, and by 
  breaking the tradition established by George Washington 
  of not seeking a third term when he again ran for re- 
  election in 1940. As two historians explain, "In 1940, 
  with the two-term issue as a weapon, anti-New Dealers...
  argued that the time had come to disarm the "dictator" 
  and to dismantle the machinery."[1] These criticisms 
  largely ended after the Attack on Pearl Harbor.

In key respects, Pearl Harbor was to FDR what 9/11 was to Bush. It shut down criticism and gave him two terms.

Because victors write history, we need to be skeptical of presidents surrounded by war propaganda, whether Bush or Obama or FDR. Did a president lead us through war and depression? Or did he get us into war and turn an ordinary recession into a depression?

bconway• 14 years ago

In fact, things are far worse today than they were at the height of the crisis

Are you sure? The President was just on TV this morning saying "The private sector is doing just fine."

gaius3• 14 years ago

Interesting, and disturbing, that Sequoia only suggest reducing head count in the engineering department (slide 47).

tatsuke952• 14 years ago

Perhaps they know something you don't.

What are you implying?

anigbrowl• 14 years ago

I read that to include cuts to general and administrative expenses, as well as underperforming marketing and business development. I think engineering was at the top because it's the core asset, while products and other functions are less and less unique to a given firm.

hexis• 14 years ago

"I remember getting an email from Sequoia asking for my personal presence (ie don't send a VP in your place) to some sort vaguely positioned mandatory meeting."

By what mechanism can an investor in a firm, presumably an investor with less than 50% equity, make attendance at a meeting mandatory for the CEO of said firm?

klodolph• 14 years ago

"Mandatory" is a surprisingly vague concept, even when used by people with real power.

freshbreakfast2• 14 years ago

Dalton, I don't know if you remember this, but I used to a major imeem fanboy, wrote a personal blog (freshbreakfast dot com) to count the ways I loved imeem, the links for which I spammed to team/all/dalton/steve/gina/matt@imeem.com.

Anyhow, I ended up becoming employee #2 at Ustream. So I was at that presentation, doing them a favor running a private live stream for the CEOs that couldn't make it. Not to sound creepy, but I observed for your reactions quite a bit at that Seqouia meeting, and I even introduced myself to you after the presentation. It's true, your mind seemed to be elsewhere, but you were still very kind.

And if that many full circles aren't enough for ya, today we're both trending on front page of Hacker News :-). This one's mine: http://news.ycombinator.com/item?id=4080074

dalton3• 14 years ago

Yes, I certainly do remember you. And I do remember you being there that day as well. I read the hypebot post this morning, didn't notice your name on the byline :)

freshbreakfast2• 14 years ago

:) Thanks man, means a lot coming from you. And great great post, really a privilege getting to peer into your thought process during a moment we nominally shared.

herdrick6• 14 years ago

I don't buy it. The world used to let highly interconnected financial institutions fail and we had sharper, nastier recessions (we called them 'panics') but they were over sooner. I think that, much like the reaction to the WTC/Pentagon terror attacks was worse than the attacks, the panicky reaction - bailouts and stimulus - has been much worse than the problem they tried to fix.

trevelyan4• 14 years ago

You should read Alan Blinder about "The Great Moderation" -- recessions since the late 1970s have been shorter and shallower than their predecessors. And far shorter and shallower than their counterparts under the gold standard in the 19th century. Also empirically, the reason the United States is doing better than Europe is because of the stimulus/bailout. It might be hard to think of the United States as a success story since it is only a relative one, but look at the much more dire situation in countries like Britain and Greece and Spain where governments were forced or choose to embrace austerity.

There is no reason the world cannot produce the same amount of goods as it was producing in 2007 - there are more rather than less people willing to work and the cost of borrowing money is very low. The only big outside constraint is energy costs, which are being offset by some fairly amazing reductions in the prices of alternative energy, including solar power.

So why the mess? The problem is a classic liquidity trap, a preference of investors for highly-liquid and safe assets that results in less money being spent in the private sector. This is visible in the way the borrowing rates of the Federal Government have fallen despite the best efforts of the Republican Party to drum up a debt scare the moment it fell from power and stopped spending the money itself.

Bailing out the banks did somewhat stabilize the banking system and probably prevented catastrophe. What remains necessary is getting out of the liquidity trap, which means increasing the amount of spending in the private sector. One way to do this would be having the government borrow at essentially zero cost and invest that money in public infrastructure projects which offer a return on investment. Another approach would be having the Federal Reserve declare an inflation target of 4% until the economic crisis is over. This would reduce the expected ROI from parking money in Treasuries and provide a greater incentive for firms to make private sector investments instead of just parking cash in the bank.

GFKjunior• 14 years ago

I only want to point out the absurdity of your first sentence "recessions since the late 1970s"

So the timeline for your analysis is ~30 years? That is not convincing to me, this current recession is already going on 4 years and shows no signs of stopping. The extreme cherry picking of data and reasoning like yours is exactly why I stopped studying economics in college, but hey at least you were able to throw in some partisan politics in your post right?

herdrick6• 14 years ago

Yeah, well, I suppose I should admit don't buy the classic liquidity trap theory either. If you put a dollar into T-bills, you drive the interest rate a little lower, which causes, say, 70 cents of other investors' money to leave in disgust. Where do they go? To other assets.

And it's only 70 cents only because the suppliers of new debt, the US authorities, are sensitive to interest rates too. Investors can, net, only buy as much debt as the government is issuing, right? So if the Federal authorities are so worried about a liquidity trap, let them limit their debt issuance! If they do that, then your dollar put into Treasury securities means a dollar worth of other investors' leaving. No more liquidity trap. (At least as far as "highly-liquid and safe assets" == US govt debt. They could find other safe and liquid harbors, perhaps Japanese govt debt.) But the Feds aren't doing that, thus, I think that "having the government borrow at essentially zero cost and invest that money in public infrastructure projects" would in fact be bad for real wealth and prosperity because that borrowing brings some more money to T-bills and away from other investments, some of which would be private investments, for example. Of course if those projects are needed on their merits, not as make-work, then great, do them.

The same is true of your example of "parking cash in the bank". Parking cash in the bank means making investments. Where does the bank put it? They invest it. A bank is not a destination for money, it's a conduit.

clarky07• 14 years ago

So I just looked through the slide deck again, and it seems to me most of what was in there should be standard advice AT ALL TIMES. Don't spend money on things you don't need. Watch expenses. Build a profitable company. This should be the default rather than here's 10 million see how many users you can get maybe facebook or google will buy you.

ivankirigin• 14 years ago

It would be awesome to see an update to each of the graphs in that presentation. Does anyone know if that exists?

confluence• 14 years ago

In reference to Sequoia possibly crying wolf.

In statistics there are 2 types of errors that one can make.

A Type 1 error is when you aggressively reject the status quo for change, even if the status quo was just fine (crying wolf!). A Type 2 error is aggressive rejection of change for the status quo, even though the status quo isn't right any longer (not crying wolf!).

There is no way to escape these errors, and depending on evidence, you'll sway one way or another (these errors always exist and are complementary in nature). The financial crisis looked like it could blow up the world (there might be a wolf in the flock!). Assuming status quo - that nothing is happening (no wolf) - you might not prepare for it (a wolf), and if the world blew up you'd lose everything (wolf eats you!). Assuming change (hello wolf!), you prepare and adapt for the crisis where you have to lose a bit (growth/funding/employees sadly), but if it all goes down - you are prepared (wolf meet gun!).

This is an example of the precautionary principle at work, and based on my understanding, Sequoia did an outstanding job. The Federal Reserve also did a great job (during the crisis). I have no opinion about the lax rates in the lead up to the bubble - but I presume that was highly detrimental to our collective financial health! :D

Sequoia are the best in the business, they've been around the block a couple of times, and all they care about is making sure their companies survive. RIP Good Times was prudent.

Better to cry wolf, than to not do so, and be eaten while you sleep.

When the cost/benefit balance changes, assume catastrophe, minimise chances of a Type 2 error (bias yourself towards change - a Type 1 error), and plan for the worst thing that you can possibly imagine - think of it like paying for insurance against storm damage if the data shows a few too many clouds over the Atlantic.

A false positive error, commonly called a "false alarm" is a result that indicates a given condition has been fulfilled, when it actually has not been fulfilled. In the case of "crying wolf" - the condition tested for was "is there a wolf near the herd?", the actual result was that there had not been a wolf near the herd. The shepherd wrongly indicated there was one, by calling "Wolf, wolf!".

In terms of folk tales, an investigator may be "crying wolf" without a wolf in sight (raising a false alarm) (H0: no wolf).

A false positive (with null hypothesis of health) in medicine causes unnecessary worry or treatment, while a false negative gives the patient the dangerous illusion of good health and the patient might not get an available treatment. [1]

The future is very uncertain. Act accordingly.

Or as our ancestors would say:

If you hear any type of rustling in the bushes; always assume that it's a tiger trying to kill you. Temporary fear/worry is a good deal better than a permanent and painful death.

[1] http://en.wikipedia.org/wiki/Type_I_and_type_II_errors

[2] http://en.wikipedia.org/wiki/Precautionary_principle

tlogan• 14 years ago

VCs are similar to all other investors: they buy when it is high they sell when it is low.

BTW, whoever invested in or started social gaming and iOS companies during that time is golden now...

blacklooksgreat• 14 years ago

I don't fault your story or intentions, but this quote:

"That all sounds like bullshit to me. I was there, I looked in the partners' eyes, they weren't bluffing. They were trying to help us"

Really rings hollow with me. You may have believed you could stare into their soul to know their being, but these guys eat people like you for breakfast. You wouldn't see a knife to the back coming, so don't think you could look in their eyes and know they weren't bluffing.

SkyMarshal• 14 years ago

>That being said, I am glad that presentation ended up being wrong, just as I am glad the Cuban Missile Crisis did not turn into a full-blown nuclear war.

The presentation wasn't wrong it was dead on. It's just that the massive Federal Reserve intervention and US Government stimulus prevented the worst.

Similar to Y2K - lots of noise was made about it, while thousands of engineers worked around the clock fixing it, so that when it finally happened it was a nonevent.

In both cases, people who accuse the warners of crying wolf after the fact seem oblivious to the scope and nature of the problem and the effort it took to fix.

Though in the case of the financial crisis, it's not fixed. The trillions of non-performing debt has simply been shifted from private to sovereign balance sheets, and the crisis continues.

Some or all of it will default eventually, there's no way around that. It's only a question of whether it's a managed, orderly, gradual default, or an acute chain reaction collapse.

"RIP Good Times": Silicon Valley's Cuban Missile Crisis

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