I agree, but it's also worth noting that the 2008 crisis took a couple years to go from a problem to a full blown catastrophe. At the end of 2006 it was evident there were problems with the sub-prime mortgage market. 2007 was interesting, as most people went along with their lives but you kept hearing about this growing problem that wouldn't go away. In 2008 people realized there was a lot of trouble but it was hard knowing exactly how much. The Fed bailed out Bear Stearns in March. It was in September of that year that they decided not to save the Lehman Brothers, which lead to the entire financial system melting down. At that point - two years later - it started to become clear to most people just how bad things were going to get (worth noting that this "RIP Good Times" presentation is from the end of 2008).

To compare it to COVID - 2006 was like January 2020, 2007 was like February, 2008 was like March.

So I agree with you that I don't _think_ we're anywhere close to the 2008 collapse. But catastrophes like that usually don't seem that way until you're at the point of no return.

That crisis took years because it had to work its way through mortgage defaults, to the bonds, to CDOs. Each step takes a while to unfold.

This is not the same mechanism at all. Rates have gone up and we're seeing a nearly instant reaction in the bond and stock markets. Speculation about a crash started essentially immediately after rates went up. There will certainly be overhang due to debt and VC and whatnot, but this is not the same as 2008. I think there's a better comparison to the dot-com crash, but even that analogy fails.

The thing is, most people had no clue about what the financial system had done in 2007. At the time it seemed like the housing market was going down (as housing markets do), and that there was a large amount of sub-prime foreclosures (which is why people were referring to it as the sub-prime crisis at the beginning), but there wasn't the sense that the entire financial system was about to fall apart. After the collapse there was a lot of talk about what the financial sector had been doing with things like mortgage backed securities and credit default swaps, but the average person wasn't aware of these things even as the crisis was unfolding.

Again, I'm not saying that I think this is what we're facing at the moment. The point is that it can be hard to know when a big crash is happening, because there are often a lot of problems people are only aware of in hindsight.

> what's fundamentally driving a lot of the panic are the "high" interest rates

A lot of crazy stuff that wouldn't pencil out without 0% (or near) rates went on for the last couple of years - and to some extent even prior to 2019. When you take away the punchbowl, as Buffett likes to say "we'll find out who's been swimming naked".

> Yes, inflation is high and that's concerning... This too shall pass.

We'll see how long this lasts. The stagflation that took hold in the 70s was difficult to get out of - it lasted for several years and was only finally killed with extremely high interest rates. I think the markets are afraid of this kind of scenario and it's a bit self fulfilling as companies pull back.

Yes, this is a different kind of beast than we faced in '08, but some of it is because we kicked the can down the road back then. Add in the Ukraine war and the effects that will have on global food and energy prices as well as current political instability in many parts of the world - this isn't something we faced in '08. It has some hallmarks of the 70s stagflation (middle east oil embargos kind of analogous to some of what we're seeing now) as well as the .com crash (tech companies were on a tear during the pandemic) and some aspects of '08 (housing bubble). It all seems to add up to a nasty recession. Probably not as bad as the '08 recession, but probably worse than the .com crash recession which wasn't much felt outside of tech - tech is a bigger part of the economy now so tech companies pulling back will be more widely felt.

My understanding is that the huge amount of corporate and household debt makes genuinely high interest rates quite untenable. Although I've just heard this, I don't have the expertise to make that claim myself.

What makes high rates “untenable” is exactly why they might ultimately be the only solution for a low-growth, high-inflation economy.

Don't forget government debt.

To add to this. In 2008, I had a small but genuine fear that society itself would start collapsing. You'd see headlines about bankrupt municipalities turning off their 911 service because they ran out of cash. There were genuine bank runs on major consumer banks where grandmas kept their checking accounts. Things felt close to the brink.

A lot of people forget that, because the recovery turned on so quickly in 2009. But nobody knew things would be so easy in the thick of November 2008.

+1.

2008 was genuinely terrifying for anyone who had a cursory understanding of the banking system. The whole thing felt like it was going to crash.

Right now stocks are down a little, and what were wildly overvalued software companies are coming down to reasonable valuations.

One thing's for sure: no matter what kind of downturn we're in, people become gripped by apocalyptic hysteria.

It’s only just getting started though. We have no idea how bad it will get yet.

We had interest rate, inflation, and QE wiggle room in 2008. We have nothing left to prop the ponzi up anymore. We’ve reached the end and I am genuinely worried about what comes next.

How do you think it will impact startups that essentially grew by incentivizing users and never achieved unit profitability? A funding crunch can’t be good for their survival

This is where I worry. My recollection of how the dot com crash unfolded was that first the bogus startups folded as expected. But they're part of a larger food chain. There were other b2b companies who had them as customers. And now they're out of money so they fold. Which affects other companies. And so on.

I often wonder which companies are Sun and Oracle this time around. Sun was doing a ton of revenue to companies with extremely marginal future prospects as the dotcom took off.

Amazon perhaps, though they have successfully penetrated enterprises.

I think we have to be careful with some of this narrative being a bit too neat.

I suspect Sun was walking dead long before the crash, and wouldn't have survived without an existential shift that it's not clear they were capable of making.

The silly money in the dot-com run up just dragged the process out a bit by masking/hiding the crisis, but I don't think it's correct to say the crash is what killed them.

Yeah probably not Amazon. Sun already seemed a bit on the outside looking in at that point. It could potentially be Oracle. Sure they're in a stronger position than Sun was at that point but there's a similar aspect of having lost mindshare in terms of the go to product in their class.

Few understand the domino effect.

A smaller domino can topple a much bigger one, which can topple a bigger one and so on.

Yep. I worked for a very big domino at the time. It didn't stop them from axing our division. Stuff starts to add up after a while.

In an era of belt-tightening, it's reasonable to expect that companies that can't even achieve a profit, including companies like Uber, will have to make changes and the people who have created lifestyles based on VC subsidies will have to face reality as well.

They're obviously toast unless they can find a big dumb backer who's still going.

I'm more concerned for startups that are early-phase watching their market evaporate, or are selling shovels to the now non-existant gold rush.

here in India, a bunch of 10-minute grocery delivery startups have raised literally billions over the last few months. All operations are extremely capex heavy - they have to create hundreds of dark stores in every city to service a 2-3km area.

Growth has been stellar, but what the numbers don't tell you is that the growth is simply achieved by subsidizing users. Delivery is completely free, prices are discounted, and they'll deliver any amount. I know people who will order half a dozen times a day for something as small as a pack of potato chips and a coke (order value: $1). Because why not if you're getting it for free?

What happens to these startups if funding dries up and free delivery is off the table is anyone's guess.

I think the other thread from YC on what it means for startups is on point.

"Survival of startups", plural, is not the metric of relevance. The strong will survive. The ones who were/are running on fumes are gonna have a bad time.

Yeah, this feels a lot more like 2000-2001 than 2008 to me as well. (And the lead-up felt very much like 1999.)

I disagree. I think what’s shaking up the markets is a fear that the fed will not return to QE - i.e. the QE experiment has failed and will be shutting down.

If however they do resume QE, expect markets to fly to new heights.

How did you feel about 2000?