David Heinemeier Hansson

May 6, 2022

Celebrating the end of The Good Times

It's deja vu all over again for founders looking for easy money on soft terms to chase dreams of unicorns and waterfalls. With interest rates shooting up, a recession in the forecast, and three whirlwinds of economic hurt spinning at the same time, the fair-weather funding conditions are over.

Good.

See, The Good Times™ all too often serve as an enabling backdrop for short-termism and hot potatoes. A time for scammy SPACs, bonfires of cash, and endless, hyping gobbledygook about magic beans growing beanstalks into the sky. It is most definitely, absolutely, not the time to talk about the boring fundamentals of business. Like selling products and services for more than it cost you to make and deliver them (including all the costs, not just the ones you happen to feel should be counted).

The Good Times™ teach entrepreneurs that the only thing that really matters is inflating the fantasy figure known as valuation. Who cares about profits or losses? All that matters is what someone else will pay for your marginal shares. Not what those shares might offer in terms of claims on present or future distributions of cash.

And if anyone dares to question this logic during The Good Times™, all you have to do is say the passphrase: AMAZON - FACEBOOK - GOOGLE. Companies that wandered in the desert of unprofitability for longer than Moses, but eventually found the holy land of monopoly rents, and therefore prove that any company with a song about domination is naturally entitled to decades of extravagant losses (because surely they too are headed for nirvana!).

Never mind that the market is still chock full of companies all wondering aimlessly in that desert in search of such profits. And the unlikelihood that they'll all become the next Amazon, Facebook, or Google. Just jam the pipeline full of more dreams, and surely it'll happen!

Until the jamming jams the dam. Like now.

When the gravy gets spooked, and you have to get by on your own cooked cabbage until you can afford better, that's when you learn the basics. Because you have to. Lessons that'll come handy even when The Good Times™ inevitably resume.

It's good to dream. But it's also good to wake up. We need both dreamers and realists to make progress. The dreamers search for the sunny beach, the realists pack an umbrella.

May the change of seasons bring you jolly and cheer!