Sequoia’s Advice to startups has been the subject of speculation for the past few days, but now VentureBeat has posted the actual slide show from a recent major meeting where startups were told to prepare for some seriously bad economic stuff and a recession that could last for many, many years.
I was particularly glad to see the slide noting that people have been using home equity as a “piggy bank”.
My current take on the huge Government actions trying resurrect the prosperity economy is subject to change faster than you can say “The Dow’s Down 500”. However I would like to hear more talk about how the economy got too big for it’s britches and most of us, and certainly the country as a whole, have been living pretty large for no good reason, fueling both economic growth and personal living off of home equity that …. ain’t … here …. no …. more. We’ll need to work harder and get less for awhile, and perhaps forever as the rest of the world catches up to our levels of prosperity. Welcome to the new global economy.
Another factor I’m confident about is that the banks are going to act very opportunistically with the new sources of funding, though I’m not sure what form this will take. Assume, for example, that you run a totally solvent bank and have managed risk appropriately. Yet you know the feds are about to absorb disproportionate risks in order to get the macro economic juices flowing. Your best play is to lay low for awhile, waiting for potential free money, lower risks, and most importantly saving up the benefits of your solvency so you can scoop up smaller banks and deals as they become available. Although I assume there are some safeguards in place I think one of the Fed’s miscalculations right now is that the big bank players *want to play* when in fact the best of them *want to hang out and make a killing* as the insolvencies rip through the system and are removed at taxpayer expense. This behavior by solvent banks *also* increases uncertainties because nobody currently knows who is good to go and who will be dead later in the month. I *absolutely* agree with those calling for a massive increase in financial transparency throughout the banking sector – e.g. requiring banks to place much more itemized information about assets and liabilities online for all to see. This should be a condition of *doing business with the Federal Government*, which means every bank would be required to do it. The initial effect would probably be a massive shift in resources toward the healthier banks but this is where the Government, again with total transparency, could balance things out to avoid potential catastrophic failures.