Page 127 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)
P. 127
COBACOBA
There was no such thing as venture capital. An aspiring young entrepreneur
had very few places to turn, and those places were all guarded by risk-
averse gatekeepers with zero imagination. In other words, bankers.
What this means, in effect, is that all historical data going back just a few
decades about how startups are financed is out of date. What we know
about investment cycles and startup failure rates is not a deep base of
history to learn from, because the way companies are funded today is such a
new historical paradigm.
Or take public markets. The S&P 500 did not include financial stocks until
1976; today, financials make up 16% of the index. Technology stocks were
virtually nonexistent 50 years ago. Today, they’re more than a fifth of the
index. Accounting rules have changed over time. So have disclosures,
auditing, and the amount of market liquidity. Things changed.
The time between U.S. recessions has changed dramatically over the last
150 years:
