What’s Your Frame of Reference for a Downturn?


This post is by Brad Feld from Feld Thoughts


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A lot of people are predicting that 2018 was the peak and the beginning of a downturn / recession / whatever-you-want-to-call-it.

I’m not a predictor so I have no idea. I try not to pay attention to the macro (as I’ve said many times), but I do think it is important to have a frame of reference about it.

My frame of reference has a few components.

First, it’s going to be incredibly noisy out here on planet Earth. The year 2018, especially in the United States, was full of endless, chaotic noise that carried very little signal. It was either noise for noise’s sake (and page views), or misdirection (like in the movie Swordfish).

This isn’t just politics. It’s everything. And it’s going to get noisier. So, the search for signal gets harder, more complicated, and more important.

Next, the indicators are trailing, not leading. By the time

are prognosticating on the direction of things, the prices of crypto, interest rates, IPOs, the stock market, P/E multiples, and everything else, it’s too late – you have already missed the moment you are probably searching for. So, put all this stuff in the noise category. This is really difficult, especially given our natural human tendency to try to anticipate and react to things in order to win (or believe we are winning.)

The core of my frame of reference is that I’m playing a very long game. At 53, I’ve already been through a lot of downturns – both large and small ones. Some of the big ones impacted the things I was involved in directly (like the collapse of the Internet bubble) and were incredibly brutal to my world. Others, like the global financial crisis, were adjacent to my world. I didn’t even notice many others. But, in all cases, the downturn ended. And, with the benefit of hindsight, there were huge opportunities even in the downturn.

Ultimately, we all die. I’m currently reading Tolstoy’s A Calendar of Wisdom: Daily Thoughts to Nourish the Soul (I’m on January 31st – I read it in the bathroom.) One thing is clear when reading between the lines – the downturn doesn’t care about us.

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