Greed and Fear

My friend Howard Lindzon sent me this great piece by Carl Richards. It is now hanging in my home office right behind my desk:


I believe we are on the upswing in the web investing space right now. There could well be a fair bit more to go. But we will get to the valley at some point. If you still own whatever you bought on the upswing, don't sell it there. Hold on until the next upswing.

Markets come and go. Good businesses don't. Thanks Howard for my daily reminder of that.


Comments (Archived):

  1. Martin De Saulles

    Nice graphic – simple but true. “If you still own whatever you bought on the upswing, don’t sell it there. Hold on until the next upswing” – how well did that work for people who bought internet stocks in the late 1990s? A lot of the companies just disappeared.

    1. fredwilson

      Great question. Our flatiron portfolio blew up in 2000 and we lost a thirdof our companies and sold another third at a loss. We held the best thirduntil things came back and got all of our capital back plus some

      1. sigmaalgebra

        Amazing. Wild ride. Lots of guts. Especially severe example of ‘triage’ and “No guts; no blue chips.”.

  2. Brendon Treanor

    Great stuff – nice example of pretty much every ‘less-than’ savvy investor’s strategies. It really is amazing how folks want in when things get hot, but then freak out when things cool off.Then again – it’s a lot easier to see peaks and valleys in a simple diagram as such, instead of trying to identify them in today’s global market.

  3. LIAD

    I can sense there’s something wrong with the drawing’s strategy.I just can’t put my finger on what it is.UPDATE: comment was an attempt at humour. Meant to be a JOKE. Clearly backfired.Please no more explanations.

    1. Matt A. Myers

      There’s lots wrong with the explanation in it if you don’t just take it for its humour. 🙂

      1. Guest

        OMG that was humor!

        1. Matt A. Myers

          I kind of had figured that, I was just trying to make a more obvious ‘helpful’ assertion. 🙂

          1. LIAD


          2. Matt A. Myers


    2. Tereza

      Because it’s what NOT to do, not what TO do, perhaps?Maybe the first one is ‘count your blessings and save’, and the second is ‘hang tight, this too shall pass’

  4. Harry DeMott

    “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” – Warren BuffettBaron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that “The time to buy is when there’s blood in the streets.”The time to buy is generally when everyone else is selling – and visa versa.In the market today – the question is whether or not these businesses that have been bidden up have real legs as businesses. Large organizations like Facebook aren’t going anywhere – but maybe their valuation will.I think the one difference today is that even with the mania in some of the smaller companies – they are better funded, closer to cash generative, and still have the opportunity to grow into valuations.

    1. ShanaC

      I guess I should bu more Tunisian businesses and think of investing more heavily ehre (states going bankrupt)

      1. Dave W Baldwin

        Since Illinois is the top example in that story, you may keep a reserve to be in position to buy one of the states. The very bottom of IL is Cairo that put however many downtown buildings on the block for $1 apiece….that is one dollar.

        1. ShanaC

          Problem – I wouldn’t do it because I think long term trends wouldn’t help meearn the money back in the medium term. The land would not be liquid forthe same reason it costs a dollar. I have a friend who I still thinkprobably can’t liquidate his position when he did this in Michigan (he’s agrad student at UM)There is an area in Chicago that I think if laws are changed favorably (andthey will over time from random pieces of gossip I have heard about the areaover time) will become extremely expensive, whereas currently they arerelatively cheap. If the debt crisis worsens, it may be worth it to buythose properties ( not that I have the money, I just think if I did, Iwould.) I’m in favor of the idea that over time we’ll be seeing morepeople, especially wealthier middle and upper middle class, and even upperclass in the city over burbs. So while interesting, I think I will pass.I wonder what JLM’s thoughts are about property going for a dollar….

          1. JLM

            I know JLM. JLM is a friend of mine. And JLM would buy those freakin’ buildings and dismantle them and sell them for salvage and get the hell out of town. JLM is all about the pay window.Too much coffee.

          2. ShanaC

            Now that is an awesome response (and I hope it was too much GOOD coffee)

          3. Dave W Baldwin

            My point about Cairo, IL is an analogy connected to the apparent discussions regarding states going bankrupt. In Cairo there were some conditions to doing the $1 thing, so if JLM wanted to do it on a multi property level, he’ probably have to take care of the barge that ran aground on the Ohio, probably 2 years back.The bigger metaphor is you have a town that sits at the confluence of the Ohio and Mississippi Rivers…and the place is a disaster. It has gone to the level of that $1 thing to try to do something. Now that we are talking about states, we need to get the fiscal house in order or we’re going to have another big transfer of money/favors that are truly not productive in the end.By the way, no offense to Illinois, but if you do business with the state, get your money upfront.

    2. George A.

      Why is everyone so scared to suggest that facebook might be a fad?I am not saying that it is…but the unanimous decree that it is not only a sustainable business but also one that has yet to tap its full potential feels a bit bubble-esque. Just the other day, Fred suggested that Facebook deserved a multiple of earnings that is well in excess of Google’s and Apple’s combined. And these are proven businesses…The reason I bring this up is that when people dismiss the notion that Facebook will succumb to the perils of the fickle consumer that have fallen giants like AOL, Yahoo, Myspace, Evite etc. it reminds me of the chart above.If we don’t study history…Be honest, when did you ever click a facebook ad?

      1. ShanaC

        actually, I have. Some startups have been advertising jobs on facebook….so clicking on the ad actually led me to their jobpage…

      2. kidmercury

        i wouldn’t call it a fad, because it has been enormously popular for at least 7 years now — at that point you’re a trend not a fad, IMHO.but i do not think facebook is a wise investment and think it will fail to live up to its market expectations (i.e. valuation). hundreds of millions of users or not, it still lacks a clear business model that everyone understands and is somewhat formulaic (i.e. google’s click on ads). fb credits could be it, but i’m not counting on it, especially with all the directions the company is spreading themselves in prior to having a clear business model.

        1. George A.

          was AOL or yahoo any less dominant in their prime? Even folks are starting to turn on Google as they have stumbled to retain their innovation leadership…and google possibly has the best business model of all time.would you not have given MySpace the same attribution of an engaged and highly invested user base back in its day?perhaps this is blasphemous, but some day, my guess is that it won’t be.

          1. kidmercury

            i like AOL and YHOO better than FB in their prime….AOL and YHOO had clear business models in an economy that was not on the verge of collapse. same cannot be said for FB.i suspect history will reveal that fb and myspace made the same mistake: abandoning their core audience. if myspace had built a focus around music, and if fb had focused on college networks, they’d look a lot more like linkedin: less sizzle, but more substance.

          2. George A.

            yup, I completely agree. I am less certain about the “end of days”, but as for the rest of it, I couldn’t have said it better.

          3. kidmercury

            i don’t mean end of days, i mean end of tyranny by debt. but for thosewho refuse to adapt, it will appear as end of days. sort of like howif you were a foreign being who knew nothing about humans, and you sawa pregnant chick giving birth, you would be like “damn wtf is going onhere this lady is dying omg.” but in reality, it is simply a newbeginning. filled with opportunity!

          4. Aaron Klein

            “some day, my guess is that it won’t be”You’re clearly right at some point, but AOL, Yahoo and MySpace all lost their way at some point when their founders either left or sold…Facebook has a good long run in front of it

          5. George A.

            over 20 years? because that is what it is going to take to justify the valuation.these network effects businesses unwind as fast as they wind up. If his friends leave facebook, so will Aaron Klein.

          6. Aaron Klein

            I think those investors are betting Facebook won’t lose their way for 20 years.I’m not sure if they’re right, but I don’t have to make that decision – I’m not a FB investor 🙂

          7. Harry DeMott

            I think the big difference is that when you went to AOL or Yahoo in their prime they were push networks – they were not two way. you went there and consumed whatever content they deemed worthy – but couldn’t contribute – couldn’t personalize, couldn’t really interact.FB is very different – it is all about personalization, interaction, contribution. As a static medium – it is pretty boring – but 600M people are posting pictures and making direct connections in a way never before seen – that is likely more enduring thant the one way nature of what has gone before.I read recently about the difference between Myspace and Facebook – and the answer came down to the fact that Myspace at some point became all about monetization and FB became all about growing the user base and increasing the user experience.No different than the Apple versus HP or Dell debate. Apple is all about user experience. Dell and HP are all about squeezing the last nickel of profit out of a commodity product.Companies that are seen to put the customer experience first tend to be more successful long term.

          8. George A.

            “Baby on Board” stickers were a cultural phenomenon, never got $60bn valuation.If engaged usage were directly linked to value, AIM would be worth more than AOL 10 times over. Revs are not linear to usage. only costs.The last great invention of a business model on the back of usage was google. IMHO, this is the exception, not the rule.

          9. PhilipSugar

            Google was not built on the back of usage. It was built on the back of sellers.It effectively got between buyers and sellers.Buyers went to Google to find Sellers and if you are a seller its super valuable to find buyers.Google was able to PROVE (that’s really important) they really had buyers and sellers had to compete against other sellers in auction style bidding for buyers.

          10. PhilipSugar

            “I read recently about the difference between Myspace and Facebook – and the answer came down to the fact that Myspace at some point became all about monetization and FB became all about growing the user base and increasing the user experience.”That doesn’t bode well when you need to monetize to fit your valuation.

      3. fredwilson

        it’s entirely possible that facebook is way more sustainable than apple

        1. JLM

          Business is dynamic. It is not static. In 5 years, no successful business will be even remotely like what it was 5 year ago.The funny thing about both FB and Apple is that they are run by entrepreneurial CEOs.Investing in entrepreneurial CEOs running public companies has been a great winner for a long, long time.Did you buy SWA or Herb Kelleher? Either way was a big win.There is a pretty good little book out there written by a guy who has been doing this for years.The book is — Finding Midas — and stands for the proposition that entrepreneurial CEOs who own a significant amount of their own stock are a gold mine. The author Russell Cleveland is a practicing investment professional and has made huge returns doing exactly this.So, I suspect that both FB and Apple will continue to be good plays. I am worried about Steve Jobs’ health.

          1. fredwilson

            unfortunately we probably need to use the word were in the case of Applemy gut tells me Steve is gone for good from day to day at Apple

          2. JLM

            I truly hope not but I am sure that he would not be taking a leave of absence unless he were very sick. He is a pretty good fighter and I hate to see him laid low. I wish all men good health and prosperity. I suspect you may be right. It is a shame.

          3. RichardF

            I really hope you are wrong.

          4. davidgeller

            That nature of his disease suggests you’re probably correct.

          5. ShanaC

            I had a cousin (1st cousin once removed to be exact) who died of the same cancer he has. Personal bet is that it is back, and it is a kind of cancer that is extremely extremely virulent (said cousin died at age 33 – Jobs is lucky to be alive)

          6. William Mougayar

            Agreed. Entrepreneur CEO’s make the biggest difference for keeping a company at the edge of innovation and going forward. Operator CEO’s cannot do that. Under Mark Hurd, he cut HP’s R&D spending to levels lower than 10 years ago. Is HP as innovative as it used to be? Hell no.

        2. George A.

          Facebook versus apple is a high school rookie being compared to Michael Jordan.Apple could invent a $30 toilette brush and would sell 10 million overnight. call me when facebook can do that. I don’t love apple, but this pretty much a fact. They are the most enduring name in consumer tech. To challenge this, you will have to update your post in 23 years.

          1. fredwilson

            yes, of coursebut apple has not built a large networked of engaged usersthey can, and should, but they have not

          2. George A.

            I follow you. but what fundamental proof do you have that consumer engagement (a la web 2.0) yields a longer term relationship than plain old brand loyalty?To me, there are too few examples or prolonged consumer engagement in these networks to take it their enduring value for a fact.Myspace is obvious, but just look at web stats for Yesteryear, they had exactly the model you espouse. Now…slowly dying on the vine.

          3. fredwilson

            fundamental proof? not muchbut my partners and I are making over a billion dollar bet (at marketvalues) that internet based networks of engaged users yield strongerswitching costs than anything else in the technology stack

          4. George A.

            $1bn is certainly testimony to your conviction, if not efficacy.

          5. Harry DeMott

            Quick question Fred: If you had to replicate your portfolio at today’s prices with the new fund, would you? After all, you probably have deployed $100M or less into the existing portfolio – would you now pay over $1B for the same portfolio and feel as good about the returns?

          6. fredwilson

            do you believe that if you are not a seller you should be a buyer?

          7. Andrew Greene

            if you are not selling, then you are effectively buying at today’s prices.

          8. William Mougayar

            “but apple has not built a large networked of engaged users”Apple’s users vote with their wallets and buy Apple products.Facebook users vote with the time they spend there.Different types of engagements.

          9. PhilipSugar

            Facebook has the public very engaged.Apple has the consumer very engaged.The public doesn’t spend money. Consumers do.People get confused because I am the public and the consumer every day.However it is a switch in my head and I am not both at the same time. It is a split personality.When I am here, I am the public, when I am on Amazon I am a consumer.If you try and shift me to a consumer, when I am here as the public I have a major personality conflict.

          10. George A.

            Phil, I deeply admire your clarity of thought. sounds logical to me.I am curious: who leaves product reviews on Amazon, public or consumer?

          11. PhilipSugar

            Good point. The public. Its kind of like a diode. You can move me from my consumer state to my public/user state easily. They let me make comments….cool! They have a forum where I can look for answers? Great! They are trying to add value not trying to extract value. They’ve already done that.Moving me from my user/public state to my consumer state is much harder and causes much annoyance. Stop sending me fucking emails in the middle of the day clogging up my email box telling me there is some new book about herb gardening, because I stupidly told my wife my pay phrase. I hate mowing around that thing. I’ll show you. Bam….Report Spam Button, you’re ass is gone forever.

          12. William Mougayar

            Agreed, but if you talk to many under 20’s, Facebook is part of their daily routines. They are users, not “public”. The line blurs. If you’re a spectator, you’re the public, but the minute you’re engaged, you’re a user, no?

          13. PhilipSugar

            Substitute the word user for public, maybe that is a better word.My point is that it is hard to monetize users other than having them pay.I am a user of MS-Word and Microsoft makes money because I pay.I sure as hell don’t want to be “monetized” as a consumer when I’m using Word.I updated my post because of your comment. I certainly can give you credit but I’m not sure how to link to your comment without looking scummy. Funny I thought about this today.

          14. fredwilson

            my daughter who is a sophmore in college describes facebook much thesame way i would describe outlook ten years agoit is the central organizing system of her life

          15. PhilipSugar

            I agree, but how much as Outlook made monetizing their huge user base?I think what makes Facebook so powerful is that the are both users producing their own content and the public looking at others content.They are not going there to be consumer from other businesses and that will be a challenge when they try and monetize.

          16. Dave W Baldwin

            You are on right track with your investments. The only thing about FBook is in five years the landscape can be very different where the central organizer is truly the first thing on the phone in the mind of 90% of the customer.But at that time, the phone will be more dependent on the organizer….

          17. davidgeller

            Facebook, from a technology standpoint, is more easily reproduced than Apple and their product line. Its functionality can be recreated by dozens of teams of engineers today. Maybe not to scale – but given the right financing, easily.I suspect we’ll see big competitors to Facebook in a few years and it won’t have the same cachet it has today. That’s just speculation, but I can’t think of a single SaaS/ASP offering that has endured in the same way that a company like Apple or Microsoft has which have more tangible products that evolve over time.I love Facebook. My wife and I spend an increasing amount of time with it. But, I still see it as a one-trick pony. It’s a good one, for sure, but I think it will be usurped by something newer and shinier in the future. Maybe that will be a product. Maybe it will be a fundamentally new way of organizing communication threads.

          18. JLM

            Actually I find the Apple people to be cult like. Even my wife has started looking a bit weird with her new Apple big screen and iPhone. I woke up covered in chicken blood and with an apple in my mouth this morning. But, hey, it could be nothing!

        3. PhilipSugar

          I used to think the same about Amazon versus Yahoo or AOL.The two differences are people are consumers when they go to Amazon and the public when they go to Yahoo or AOL. (except when they search for products)Google then came in and:”stole their heat” Nobody had to be aware of search”built a better tool using newer technology” concentrated on the algorithm and cheap servers”had a leaner structure” in a garage, servers lashed together or cork-board and switches with nylon mesh.Stripped out all advertising to the public. No popups or content. They only advertised when you were consumingAnd kicked their ass. Now as the death march of layoffs continue, the remaining workforce is dispirited.Josh lamented that there wasn’t too much innovation in retailing…i.e. Amazon.That’s because its hard as hell to build a cool iPad or sort out the logistics and captial costs of enormous warehouses. A couple of guys in a garage could figure out how you could make your own website better than Facebook, tie it to your email and other networks in the way you want, and eventually really hurt Facebook.I recently wrote about that.

      4. Harry DeMott

        I think when you have 600M people worldwide spending some 20+ minutes a day on something it goes beyond fad and into cultural phenomenon.Is it possible that they never monetize these users and the valuation collapses – absolutely could happen – but the way people use Facebook – and the way Facebook has smartly hooked its social tentacles throughout the web with its Facebook Connect lead me to believe that they will be quite sustainable for a long period of time.I’m still of the belief that facebook integrates a lot of social services well and does none of them great – and that if all you want is e-mail, or picture sharing, or social games etc.. there are better places to go – but no one aggregates them better.So Foursquare will probably always be a better place based location service than Facebook Places – but I seriously doubt that Foursquare will have 600M users in 6 years.If you asked me whether to purchase Facebook shares at $60B (yeah the Goldman price was $50B – but with all their fees and lockups it is really $60B before you break even) then I would say no. Too much has to go right for it to be a meaningful winner from that price – and lots can go wrong. It doesn’t mean that it won’t be worth $300B someday – but it might just be worth $30B as well.

  5. kidmercury

    IMHO sell into the bubble, and buy the dip in metals! and appropriately valued startups that still represent a good buying opportunity, if your budget accomodates a portion for high risk/reward investing.but this post seems a little happy to me. i would like to balance things out and bring the mood down by reminding everyone the global economy (but especially the US economy) is broken. the web sector may succeed and be in a legitimate bull market (outside of the circle of bubble makers), but that market will only be sustained if the web sector is used to fix the macroeconomic situation.high levels of debt and corruption, coupled with low levels of saving, are the hallmarks of poor economies. those economies stay poor until they can solve the debt, corruption, and savings problems. if the people choose not to solve those problems for decades, than that means the economies stay poor for decades. if the web sector is to enjoy a sustained bull market, these problems must be addressed. ignorance is futile.9/11 was an inside job,kid mercury

    1. Matt A. Myers

      It’s true, it very much depends on the sector. Metals won’t go down in price (averaging out) until we start mining asteroids or other planets. 🙂

      1. akharris

        Gonna have to argue with you pretty heavily there. Metals are subject to long term price fluctuations like a lot of other assets. Actually, they’re probably a worse store of value (ex-gold, which is special) than other asset classes.Commodities don’t, themselves, have a beta component. They’re very useful as an inflation hedge – and can be wildly profitable if you have the right position – but metals can fall over the long term subject to changes in industrial need and consumer requirement.

  6. baba12

    The big battle in the U.S. is between GREED and ENTITLEMENT. Most Republicans support GREED and most Democrats support ENTITLEMENT’S.If you make between $500 K and $1.5MM you are definitely leaning towards a Republican.If you make over $2MM a year you are able to afford to be a Democrat. Now if you make below $500K then your voice does not count. So Upswing downswing matter only to those in that group.

    1. Dave W Baldwin

      This is where I get out on the fringe. Simple truths tell us the only way to achieve a sustainable growing world economy is for those at less than $500k to be enlightened and take part in riskier investment. Of course, that means due diligence and eliminating the cluster involved with rules.Along with that is for those below $500k to expand earnings (entrepreneur) which will be doable as we move through this decade.It is a matter of reducing the worship of old money as happensin so many communities and push the creation of new revenues backed by collateral and, better yet, not depend on a government favor.

    2. JLM

      What sheer utter nonsense.You should read a very interesting book — WHO REALLY CARES — by Arthur C Brooks.It is very enlightening about what liberals and conservatives say about philanthropy and what they actually do.It stands for the proposition that there is a huge gap between what liberals say they want to do FOR those less fortunate and what conservatives ACTUALLY do.Stating the obvious, the conservative actually GIVE substantially more than their more vocal brethren by a very significant amount.The book is unimpeachably well researched.The big battle in the US is between those who are productive and those who would seize their productivity to redistribute it to those who will not try to be productive.We have a great country and our productive countrymen have built a great country — the highest standard of living in the world. Now the poachers and looters would destroy this system which has produced the last best hope for mankind.Ayn Rand had it right. John Galt where are you?

      1. baba12

        I will say this that the great country and the productive men you talk of also have not made real efforts to build a fair and equal society either.So as much as parts of what you say are accurate there are many areas in which are lacking. We claim to have equality for all yet the reality is not necessarily the case.As for the libertarian view espoused by Ayn Rand “Where is John Galt” oh it brings back memories of reading Atlas Shrugged and other works by Ayn Rand….But I don’t buy into the looters and poachers want to destroy this system mantra you espouse.If at all looters and poachers are fighting to try and make it a fairer system than it is.I am not a Liberal nor a Conservative, I am a progressive and I believe that there is a role government plays that it is has not been doing so for the last 40 plus years in the U.S.We should have a drink and discuss this sometime…

        1. JLM

          One of the most naive assertions ever made is the concept of “equality”.What our Founding Fathers said is — “…all men are CREATED equal.”A man is responsible for his own outcomes.We are entitled to “…life, liberty and the PURSUIT of happiness.”What so called progressives believe is a man is entitled to the same equality and happiness as someone who gets off their butts and works for it.The big difference between liberals, progressives and conservatives is that conservatives want an opportunity to earn a bit of money through hard work and the liberals/progressives want to take the work of another and give it to someone who has not been as industrious under the guise of “equality”.To pursue happiness one is going to have to get out of bed and get into the game and not poach and loot and shoplift the labor of better men.Life is a bitch and then you die. All men are created equal and all are entitled to pursue happiness but you have to do your own heavy lifting.

          1. kidmercury

            wanted to chime in on this beef between JLM and baba12. my verdict is that it’s a draw — i’m siding with neither.agree with JLM philosophically, but evidence suggests government is taking from the rich and giving to the very rich. witness goldman sachs bonuses.agree with baba12 that if you’re a poor ass fool making less than 500k you’re a nobody whose voice doesn’t count, but disagree with “progressive” ideology. government redistribution efforts have grown side by side with income inequality, suggesting that government is not contributing to the solution.9/11 was an inside job,kid mercury

          2. JLM

            There is no question that the Obama administration is Wall Street’s bitch but it is more obvious than anybody is really willing to say. The entire Treasury Dept is made up of Goldman guys. Goldman is running the Treasury Dept and routinely leading a guy who cannot figure out Turbo Tax by his nose.These rich cats float in and out of government with a perfumed air of noblesse oblige meanwhile feathering their kindred spirits and colleagues fortunes.However Wall Street is not the friend of entrepreneurial riches. If you have ever taken a company public and gone through the Thursday afternoon pricing ritual, you know that Wall Street is the worst kind of whores — they negotiate the price, they get paid and the CLIENT gets screwed.Most of the money that went to AIG went to shore up counterparty deals and AIG was just a conduit.

          3. Dave W Baldwin

            Good debate, but JLM’s last comment shows the big problem.

          4. Harry DeMott

            Love it.I figure the government should figure out what it is good at – and leave off everything else.Should the government be int he business of defense? No doubt – there’s a service of the government that provides to each of its citizens equally. Should they be in health care? Somehow, I doubt it. Interstate roadways? Probably. You could go down the list and make a decision on each. Is the government better at collecting and investing for our retirements that we are? I have a very hard time believing that. Should the government provide some sort of social safety net for those who are in serious need? Probably – but they should probably try and get something concrete in return in the form of work.What I would like is for someone to come along and give me a good definition of equality before trying to redistribute taxes in the name of equality.I figure government is not much different than Goldman Sachs – it is a big company always trying to cover its ass and get bigger. Goldman Sachs just happens to operate a hell of a lot more efficiently. A business school professor once told me that the number one goal of any organization was self preservation – the number two goal is growth – everything else comes afterward.I rather hate the argument about the death tax and the landed gentry and how they continually run the country. When someone works all their lives – and is taxed all their lives on the work they performed and any success they have had – why should the government take another bite at that apple (and a 45% bite at that!)Ever look at the Forbes 400? How many people on there read inheritance -and how many took a risk – worked hard and made it on their own. Bill Gates was born Equal to a lot of people born that same year – yet he is one of the richest people on the planet. Why is that? Is it perhaps because he was smarter? Worked harder? Took a chance? Kept rolling the dice and kept winning? Or did he inherit that $40B (or whatever it is)How about Steve Jobs? Dropped out of schoolZuckerberg? Another drop out.I’ve always had a sneaky suspicion that people who are angry at the rich are not necessarily angry at them personally: they are somewhat jealous that these folks worked within the system in place to succeed where others never even tried. If you choose to skip college and work at McDonalds I figure you have no rational right to be angry at Goldman Sachs or Bill Gates. You’ve gotten exactly what you prepared for. In a world market, there are 20,000 young Chinese people who are probably better qualified to flip those burgers who are happy to do it for less money – and we want to scream about human rights – and how everyone should be equal.Hell – everyone should be allowed to live up to their potential and everyone should be willing to accept that their results in life are going to be governed by that potential and just how hard they are willing to work at maximizing that potential.Everyone wants to be rich – and the ultra wealthy sure look happy – but look at the history of lottery winners in the US. A larger than expected proportion have gone on to miserable ends. They say money can’t buy happiness – it sure can help – but peoples jealousy is what, to some large degree, makes people unhappy with their current situation – and their unwillingness to do anything but complain about it just furthers the problem.Long rant – but this equality debate always rankles me.

          5. ShanaC

            It may be that the unstated problem is what base needs do we have to cover to give the maximal amount of people that shot. If we reframed the argument as that, and came up with logic as why we think x,y, or z should be included we’d probably have a very different conception of government…

          6. JLM

            “Wanting to be rich” is like “the pursuit of happiness” — it is not enough.You have to actually work to become rich or make such a dogged pursuit of happiness that you actually catch that bitch.Aspiration is not the equivalent of perspiration.

          7. baba12

            I wish the statement “…all men are CREATED equal.” were really true. Coming from the founding fathers many of whom owned slaves is very interesting. Up until 1964 and passing of the Civil Rights act in this country or until 1992 for the abolition of Apartheid in South Africa that statement really meant jack .Really easy for someone who grows up in a privileged environment and I think it is perfectly ok to have that, every other person also strives for that privilege. Unfortunately if the rules of the game keep changing or if you don’t necessarily even play the same game to begin with then it is very difficult to say “…all men are CREATED equal.”Debating the aspects of working your butt of and thus creating wealth is great and fine, I doubt it that the person grows up in a certain part of the country or in the world for that matter is sitting down and is being lazy and thus is not creating wealth. That argument does not have much to stand on really. Opportunities that are presented to one group of individuals is not necessarily presented to the others and if the state does not make an attempt to provide that then we are not progressing much.I guess it is ok in your world view that if you work hard and are able to be one of the robber barons then it is ok after all they worked very hard.I think we will never get to a middle ground. If we lived in a truly civilized world then you would not need to have governmental agencies like the SEC, FDA or the EPA or the FAA etc to monitor the industries which if they really believed in working hard and doing the right thing always would not need any monitoring. But that has never been the case as left to ourselves many in business will find ways to not work hard and cut corners instead. SO if it wasn’t for the progressive movement we would have business run amok and get away with it. Afterall I guess you are against having any minimum wage rules or how long workers should work before they get some time to rest etc, you would leave that to businesses and it was that way till many in business misused that freedom.Has government gotten everything right? No, and there are reasons for that and we as a society a work in progress. But if we try and go back to how it was in the 18th and 19th centuries then we really have progressed a lot.I think there is a role for government and it is a pretty important one, time will tell how the pendulum swings towards the center.

          8. JLM

            Oh, please, you are speaking sheer poppycock.You are talking about entitlement and I am talking about a philosophy for living and governing.Not everybody can get the chance to be President. In spite of that, an extraordinary Black man got the job. With not a drop of slave blood in him. With not a iota of the shared American horror experience of being Black in America, the guy goes to Occidental, Columbia, Harvard Law.And yet, he and I both were blessed with being born in America [though just for the record nobody has ever questioned my citizenship LOL] and having 24 hours in each day and being able to breath the air of a free country and to pursue happiness as we each sought.I went to school in return for military service and he was a beneficiary of affirmative action. I support both paths to the realization of human potential.We were both CREATED equal and we both PURSUED the hell out of happiness and I am betting the guy likes where he has ended up and so do I.Is this a great country or what?

          9. PhilipSugar

            This insults every immigrant who has left a land with nothing and has built a great life here. It insults all of those that grew up here with nothing and have been self made. I have employed so many people that have come from nations with nothing and now live the American Dream. I am married to somebody who grew up in American with less than nothing and has an Ivy League Masters Degree earned with her blood, sweat, and tears..Bottom line is the government should be in business is for enforcement of laws (Environmental, etc, etc) and defense.As towards inheritance tax…..all I know is this: It is a circle….if you grew up with parents that didn’t work either because they were lazy rich or lazy poor you are screwed.

        2. andyswan

          We should take a tour of North Korea sometime. You’d be amazed at the PROGRESS. Equality as far as the eye can see! Just don’t mention all the greed that led to those tall shiny buildings and poor people with mobile phones south of the DMZ…..

          1. JLM

            N Korea is such a horrific evil regime that the average height of its citizens has DECLINED because of inadequate nutrition. Think about that. The people are getting smaller because their leaders are starving them.

          2. baba12

            why does it have to be at the extremes, if North Korea is a failed state that is a function of a dictatorial regime that has held it’s citizens at gun point.You don’t have to go that far, if we follow the libertarian view of governance and the role of the state here then many of the things we take for granted would not necessarily happened or if they did it would have been available to only a chosen few.McDonald’s success came after the interstate highway system was built by tax payer funded program. I am doubtful we would have the internet without the R&D investment made by the government.If it was not for the creation of State funded universities like the UC system etc knowledge would have been privy of the few who made it to the ivy league schools.So there is a role and a responsibility of the state to fund and nurture many things which empowers the citizens and also increases the wealth of the nation as a whole.I came for my graduate studies on a fully funded research scholarship paid for by the the tax payer funded NSF grant. I have contributed back more than ten fold the amount spent on educating me here in the U.S. I did get admission to the Ivy league schools but did not get any funding. Lets say that I went to a top 10 school in the U.S. and am grateful for that but also I have returned what was spent on me by the state.I just think that you have to have the government play the role of representing the people not the business.As for comparisons with South Korea etc, remember how much capital was poured into South Korea by the U.S. to get it to where it is now, and look at the monies poured into a Pakistan and see what it has produced

          3. andyswan

            I was speaking only to your goal of equality…..How else is so-called equality ( of reaults) achieved, if not through thesanctioned violence of the government?

          4. Dave Pinsen

            Rush wrote a (metaphoric) song about that years ago, The Trees:So the maples formed a unionAnd demanded equal rights.”The oaks are just too greedy;We will make them give us light.”Now there’s no more oak oppression,For they passed a noble law,And the trees are all kept equalBy hatchet, axe, and saw.

          5. PhilipSugar

            I agree with many of your points but…Spend time being an inter-city teacher, working in a prison, or doing charity work in a public housing project.You will become very jaded.

        3. Dave Pinsen

          “I am not a Liberal nor a Conservative, I am a progressive””Progressive” is what today’s liberals started calling themselves after they killed the brand of “liberal”.

      2. George A.

        JLM, I generally agree with you, but I am beginning to wonder if the inherited wealth, accumulated over two centuries, is starting to create a class system that didn’t exist when the FF were at their inkwells.Just read, wealth, war and wisdom. Interesting to note that Barton Biggs (a conservative) attributes much of the financial success in post war Japan to a single action that MacArthur took to put land back into the hands of the people. While devastating in the wealth that it destroyed, it was monumental in that it reset the tables for meritocracy.Like it or not, this is probably coming down the pike for the USA.

        1. JLM

          The brilliant move by MacArthur was not executing the Emperor and making the E stand next to him whenever he announced a new social initiative. MacArthur was an arrogant prick but he was also brilliant proconsul of Japan.The FF dealt with royalty — talk about a standing class system — and were able to see through that charade. Washington was related to the King.What the FF saw was the collission of good men and opportunity and unlimited natural resources.

        2. Dave Pinsen

          “I am beginning to wonder if the inherited wealth, accumulated over two centuries, is starting to create a class system that didn’t exist when the FF were at their inkwells.”The very richest Americans, with the exception of the Walton children, didn’t inherit their wealth (and Sam Walton’s wealth was built by him, not “accumulated over two centuries”).There is a widening gap between the rich and the poor today, but it’s not because of multi-generational inheritances. Today’s Rockefellers may still be wealthy, but they aren’t in the same ballpark as a Steve Jobs, a Sergey Brin, or a John Paulson.

          1. mikenolan99

            And since we are quoting Buffet:”Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline,” Buffett said. “A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy.”…

          2. Dave Pinsen

            The wealthy will continue to use insurance products to pay the inheritance tax. And Buffett’s insurance companies will continue to profit from that.

      3. Dave Pinsen

        “Ayn Rand had it right. John Galt where are you?”Sounds like you got Atlas Shrugged and Scooby Doo mixed up there: “Who is John Galt?” was the repeated question in Atlas Shrugged. Speaking of which, via my old blog, here’s Will Wilkinson on Atlas Shrugged and ‘Going Galt’ (spoiler ahead for anyone who doesn’t know the story): I can’t help but feel that threatening to withdraw from economic production, ala Atlas Shrugged’s John Galt, is a certain kind of libertarian-conservative’s version of progressives threatening to move to Canada. […] But insofar as this is all about taxes on the wealthy (as the link to Malkin suggests) it’s a bit hard to see tax rates somewhat exceeding the Clinton era’s as a move over some inflection point from the tolerable to the completely outrageous. And of course none of these folks designed an engine that would have created basically free energy (and made global warming a non-issue). In the individual case, “going Galt” smacks of a kind self-aggrandizement in the same way that climate smuggery does. Because, really, your marginal contribution doesn’t matter that much. By the way, Atlas buffs, the point of Atlas Shrugged is not that you are John Galt. The point is that you are not John Galt. The point is that you are, at your best, Eddie Willers. You’re smart, hardworking, productive, and true. But you’re no creative genius and you take innovation — John Galt — for granted. You don’t even know who he is! And this eventually leaves you weeping on abandoned train tracks.

        1. JLM

          No actually that was a lament for our own John Galt. Where is John Galt when we need him?Operating from memory here and being handicapped by an engineer’s familiarity w. literature in general — the teaching point of Ayn Rand’s or perhaps Dagny Taggart’s John Galt was that he led a revolt of the productive against the looters. Because the looters made war against the productive class through government fiat.Unemployment was rampant in Ayn Rand’s world because the looters were redistributing the wealth and productivity of the productive class (Rearden Steel?) to their unproductive friends.Until the country literally collapsed and who should appear to save things but John Galt.So I call not for “who is John Galt” but rather where is he when we need him so badly?The sad thing is to see how chillingly accurate Ayn Rand’s great novel is to the current happenings.Now, where is Howard Roark?Poor Eddie Willers was the bridge between the second raters and looters and the producers. A guy who was smart enough to know that the country needed Dagny Taggart and her ilk but not smart enough to be one himself.In the discussion of taxes, it is not the income tax alone — it is the state and city taxes, sales tax, property taxes, excise taxes, inheritance taxes, fees, tariffs. The cumulative tax burden on the Eddie Willers of the world is over 70%.We are all government workers but without benefits.

          1. Dave Pinsen

            What Rand got right was that not every business leader is a Hank Reardan or a Dagny Taggart. Some are James Taggarts or Orren Boyles (i.e., influence peddlers and crony capitalists). What Rand got wrong, I think, is that there is also a spectrum between the Hank Reardans and Orren Boyles — businessmen who create some value, but also profit through the power of the state (via government contracts, regulations bent to their benefit, etc.).As for today’s John Galt, I thought that was supposed to be Rick Santelli. Has he left for the Gultch yet?”The cumulative tax burden on the Eddie Willers of the world is over 70%.”No way it’s anywhere near that high. For middle quintile earners, their effective federal tax rate (taking into account all federal taxes, including income, social insurance, and their share of excise and corporate income taxes) is about 15%. Doubtful that city & state taxes add up to even that much for median earners, even in high tax states.

          2. JLM

            Eddie is making $250K and is paying 35% plus 3% surcharges FED, 6-8% state, 7.5% SS, 8% sales tax on 75% of disposal income, 10-15% equivalent property taxes — bingo, the guy is being taxed to death and we still have gasoline, excise, air, etc.

          3. Dave Pinsen

            If Eddie is making $250k, he’s in the top quintile, not the middle quintile, and his effective federal tax rate (again, including all federal taxes including his share of excise and corporate taxes) is about 25%. Still nowhere near 70% after you add in the state & local stuff, but could be close to 50%.

  7. Matt A. Myers

    Warren Buffet: “Would you want to own it 10 years from now?”E.g.: If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.That’s the safest way, with less risk.

    1. fredwilson

      such a great point. i love it.

      1. Harry DeMott

        Yeah, and it’s not only would you want to own the stock for 10 years – the real point Buffet makes is : would you like to own the business for the next 10 years if the markets were completely closed to you? There’s a real difference.

  8. Roland Haddad

    Greed is the natural human motive to be an entrepreneur and make money. Accidentally, we build new industries and we push humanity to new heights. Downswings are our reminder that we’ve been too greedy in an industry and should refocus our energy on new things.

    1. LIAD

      completely disagree.Greed doesn’t, necessarily, play any part in entrepreneurial motivations.

      1. Neil Braithwaite

        Nail on the head Liad! I believe a true entrepreneur is driven by a free spirit and competitive nature. It’s only when financial success is attained does greed get a chance to rear its ugly head. However, on-lookers will most often confuse greed with the competitive nature of the true entrepreneur.

    2. fredwilson

      “greed is good” Gordon Gecko

      1. JLM

        Greed is a very unfortunate choice of words. It should arguably be industriousness.I am appalled that folks in America seem to be embarrassed about their own success. This whole Obama notion that the top 1% OWE something to the balance of the country as a result of their success as a punishment for having been successful is nonsense.Sure you should pay your fair share and sure taxes should be a bit progressive but we have to stop demonizing the top 1% and sending them all the bills. They are already paying such a disproportionate amount of the country’s taxes as to be laughable.We should be celebrating success at every opportunity.Of course, there are excesses that just make one cringe.You can do more good works with a fat checkbook than a thin one.In the end, we will all be judged by what we did with our talents. If your talent is business and making money — rock on cause God is going to hold you accountable.OK, the comment about God was a bit over the top. Let’s go w/ St Peter!

        1. akharris

          Speaking as someone who very much respects many of the achievements of the top 1%, I don’t think the quest is demonize them, but to call a spade a spade a lot more often.We’ve created a framework of policy that creates outsized rewards relative to the risks taken by many of the 1% crowd. Look at the hedge fund industry – make a billion dollars, take it home, lose a billion? Well, then it’s not your money, it’s someone else’s. You just get to start over without having to pay it back.While I am cognizant of the argument that this group is simply doing a great job of exploiting the rules in the system as dictated by incentives – it doesn’t hold as much water when those rules were created by the exploiters themselves through a huge amount of influence over the government through lobbies.Great, now I’m soundingly like the Kid.

          1. Aaron Klein

            “a framework of policy that creates outsized rewards relative to the risks taken by many of the 1% crowd”The market will fix that, and it’s already done so in many cases.There are a LOT of ex-hedge fund managers who will never manage money again.It’s when the tide goes out that you can see who was swimming naked.

          2. JLM

            “It’s when the tide goes out that you can see who was swimming naked.”BRILLIANT! Witty! Insightful! Sheer genius!Well played.

          3. akharris

            buffett strikes again

          4. Aaron Klein

            Oh I can’t take credit – I believe that is Warren Buffett’s quote.I hope to someday write a quote that JLM finds to be brilliant!

          5. JLM

            I already find YOU to be brilliant.

          6. akharris

            Yeah, plenty who won’t, but a lot who are and will. And it’s not about putting them out of business – if I made $300mm by going down in flames and can never manage money again? Don’t care that much.I agree with a lot of what the Fed and the government did in response to the crisis – but they’ve also eliminated moral hazard. That’s a dangerous precedent.Just for some clarity – I’ve spent a lot of time analyzing fund returns. The number of funds that are basically just buying and levering the S&P and then selling that return stream at 2&20 is very very large. A lot of those guys got creamed, blamed it on “the hundred year flood” and came out the other side smelling like roses.

          7. Aaron Klein

            Eliminating moral hazard is dangerous. Highly so. JLM’s comments re: Goldman and AIG as a conduit are spot-on and take that to an even worse level.The investors who threw money at the hedge fund managers that allowed self-enrichment at those terms are the ones who were harmed. They also have only themselves to blame.Unless they were lied to. And in that case, we have perfectly good fraud statutes and those hedge fund managers should be prosecuted to the fullest extent of the law.

        2. PM

          While a bit far afield from Fred’s post, this notion of the top 1% (or 2%, or 3%, pick any one you like) being punished for their success is just plain folly. Those wealthy few are the greatest beneficiaries of a country and economic system that made their success possible, one which as of yet has not been replicated anywhere near the scale it has in the U.S. Perhaps in western Europe, where total taxation is far higher on wealthy persons?At least you did not call a top federal marginal rate of 39% on multi-millionaires as “confiscatory.” That always generates a laugh, while destroying whatever credibility the argument once possessed.Now they who have reaped the greatest rewards are being asked to shoulder a greater share of the costs of a democratic republic run by the rule of law, with respect for the rights of property holders like them.In light of the fact that societies that place the burden on those least able to sustain it ultimately crumble, this seems like a pretty good investment on the part of those with the most to lose.

          1. Harry DeMott

            If the top 1% are asked to shoulder a heaver and heavier burden for their success in life – then the outcome is pretty clear and to see it all you need to do is look at the incentives for the people involved:We live in a 1 man 1 vote society and so by definition the top 1% are going to be outvoted by the remaining 99% – and so to make sure that their interests are represented they hire lobbyists and use tax shelters and offshore trusts to keep what they have earned.The lowest 25% – 35% don’t pay any taxes and are completely subsidized by the top 1% – and want to keep it that way – and while they cannot afford lobbyists and fancy trusts created by fancier lawyers – they can elect politicians sympathetic to their cause.All of this is pretty logical given out system.What would be interesting is to see a system where you got rid of income taxes and ran everything on a consumption tax with some sort of slight graduated credit. that way, you could be as rich as Warren Buffett – but if you lived like him (same house for 50 years – nothing fancy, ate at cheap restaurants etc….) you wouldn’t be taxed so high – just on what you consumed.Everyone says this is regressive because it looks at taxes as a % of income. To me it is the definition of fair: everyone pays equally for what they consume from society.

          2. JLM

            In fact the original plan for the funding of the Federal gov’t was based solely upon fees and tariffs. Tariffs paid to conduct international business. Fees paid for the conduct of commerce in gold, bonds and slaves.

          3. JLM

            What pure absolute hogwash!The wealthy did not make their money because of the country, they made it in SPITE of the country.More importantly, they not only made money, they created jobs.How’s that job creation thingy working out just now when the government is all focused on punishing the top 1%?The top 1% already pays 38% of all taxes while the bottom 50% pays only 2.7%.The top 10% pays 70% of all taxes.It is also worthy to note that that 38% is made up of substantial capital gains which are a tax on investment productivity.

          4. kidmercury

            if the government is so focused on punishing the top 1%… come the top 1% own more than they ever have? some stats.the answer, unfortunately, is that because government policies are designed to enrich the wealthy. inflation is the biggest tax and it is one that transfers wealth from the lower classes to the upper ones.9/11 was an inside job,kid mercury

          5. JLM

            Of course, you are looking a period of time in which even a 3-dicked dog could not have screwed things up.It should not come as a surprise to anyone that the segment of America that concentrates and invests its wealth is making more money than the segment of America which is not.

          6. kidmercury

            But WHY has investing been so easy during that time? And if investing in ourcurrent economy is as noble as you proclaim, WHY is unemplyment so high? Whyare americans fortunate to be employed working more and saving less? Why isthe stock market on a tear while unemplyment and cost of living arepainfully high? Why is there a bubble in silicon valley while energy andfood costs are rising?The answer is that monetary inflation is a transfer of wealth. Governmenttransferring wealth from lower and middle classes to higher ones. Not theother way around.9/11 was an inside job,Kid mercury

      2. vruz

        I think ambition, prosperity and industriousness are good. Greed is shortsighted and not very concerned about the means.I think Capitalism 2.0 is about the former, and Capitalism 1.0 was all about the latter.

  9. William Mougayar

    Easier said than done. How do you know when you’re in the high or in the low?Hindsight will pinpoint the highs and lows accurately, but knowing where in that cycle you are when you’re in it is the hard part.

  10. markslater

    they should be a straight horizontal line across it with “fred’s trajectory”love the pic

    1. fredwilson

      shouldn’t it be slowly and surely up and to the right?

  11. Neil Braithwaite

    If everyone were that smart, the line would be straight.

  12. howardlindzon

    when I saw Carl’s work I just said SMART. Glad you like it. It’s like when I saw Jenny’s work at iggyart and just started buying it and asking questions later.Thanks for being a great mentor.

    1. fredwilson

      artists are like stocks?

      1. howardlindzon

        nope. but interesting. its like if I see a product I love and check out the stock an I sometimes jiust see where it will go and its the same with art. I generally see it and than just own it if I feel it. i dont worry about what other people say.

      2. Harry DeMott

        If you follow the art market – you know they are. Themes come in and out – just like artists. They get bid up to unsustainable levels – and fall back as people unload. the only difference is that nobody hands their stock certificates and trade confirms on the wall and derives some pleasure from them.

        1. fredwilson

          i do, as howard can attestbut only the certs that were one day worth tens of millions and noware worthless

        2. ShanaC

          I know it is – I’ve always been surprised that more people don’t realize that there are banks that offer advisement on art speculation.Actually, it’s pretty bad work if I thought about it – not only are you trying to judge how tastes work, you are working in a really non-transparent market (you only get auction data). Except in rare cases, auctions only sell in contemporary after five years from the works exhibit/primary sale. Plus a huge amount of buy/sell is through secondary dealerships, which will cut different prices for different people if they think the buyer will cause the price to appreciate (open art world secret). Plus, the assumption only works if you think an artist is going to make a limited number of pieces and that his/her work quality hasn’t peaked/fallen.I’m with you on that, as a general rule, it’s extremely difficult to buy art for investment purposes. Buy it because you like it, not because you think the value will appreciate.

  13. ShanaC

    I think its cute. Though the artist in me wants to know if you can explain the concept without words…

    1. Carl

      Thanks ShanaC…I have tried to push to get this as simply as possible, but had not thought about seeing if I can do it without words, that is a great idea!

      1. ShanaC

        You are welcome. It is the former art student in me!Without words it is going to be hard – words have their own layer of symbolism (hence how the titling of works impacts their interpretation) It is going to be one of those pieces that looks like it is going to take a lot of thinking, so I wish you luck.(Also, good for you for going the simple route – a lot of art students/artists find that the hardest thing is taking down complexity a number of notches and knowing when to stop)

        1. Carl

          So true…ironic really that it is actual quite hard to make things simple!

      2. LIAD

        so hows about selling your work on Shoply Carl?

  14. RichardF

    I think pretty much everything in life is cyclical. What excites me most though is that long term we are on a tech upswing that’s going to be around for a while. This is the tech revolution. There will be more’s but there are some great companies and technologies being created at the moment.The advances that have taken place since the 2000 crash have been amazing. Most people could quite happily have lived without access to the net pre 2000, both fixed and mobile. For me that would be unimaginable now. The advances that are going to happen in next decade will be huge as long as the doomsday macroeconomic scenario doesn’t play out.

    1. PhilipSugar

      I agree with your assessment of the advances. I look at my ability to communicate real time, graphics, photos, info, search, commerce etc, think back to the late 80’s which is only twenty years ago…awestruck.If we didn’t have that things would be bleak. I do agree with Charlie we let China gut our manufacturing, I hate that we didn’t spend the money we spent “fighting the war on terror” go towards complete energy independence which would have neutered the Middle East, and let government spending get out of control. At least we have the best farmers on earth.If we can fix two out of the three, things will be strong.

      1. ShanaC

        If it helps, Adam Smith thought that the best way to be wealthy over time was to be a farmer. I also wish that our mainstream manufacturing was not gutted – but we pay high people costs (I think though that those costs will go up everywhere over time, and we’ll be stuck competing on quality)

      2. Dave Pinsen

        “I do agree with Charlie we let China gut our manufacturing, I hate that we didn’t spend the money we spent “fighting the war on terror” go towards complete energy independence which would have neutered the Middle East, and let government spending get out of control.”1) Having cheap and plentiful energy, from multiple sources, is probably a smarter goal than “energy independence” per se. For example, if we dropped our tariff on Brazilian sugarcane-based ethanol, we’d have cheaper gas and most Americans would be better off, but we’d be a little less energy independent, as it would put our corn-based ethanol industry out of business.2) A lot of folks who support energy independence in the abstract, oppose the actual policies that would make us more energy independent. You can’t take coal and nuclear off the table and get anywhere close to energy independence.3) Even if we were energy independent, government spending would still be out of control. Entitlement spending is what’s driving our deficits in the main.

        1. JLM

          We will look back at our failure to build nuclear at this time as one of the greatest blunders in the history of this country.Nuclear is not cutting edge technology and yet it would create thousands of excellent jobs in design, construction, operations and maintenance throughout the entire country while weaning us from foreign energy.Simply recirculating our own money in our own economy would be a huge impact on our balance of payments.There should be two nuclear power plants under construction in every State in the Union except for Rhode Island.

          1. Dave Pinsen

            Agreed about that. Brazil might be about to start building as many as 40 new nuclear plants, and they are already energy independent.

    2. ShanaC

      After looking up – all I can say is net-a-porter. Which just proves your point about cyclicalality

  15. Michael The Geek 


    1. fredwilson

      i love your avatar

  16. Dave W Baldwin

    In reply to some of the debate regarding manufacturing, we have to be honest with ourselves….it is too late.Yes, we have the lowest capital paid for human labor, across the border and inside our own country (immigrant). At the same time we have rising tech advances that push the machine further into human labor, both as replacement and/or getting more done quicker.So all areas of the nation need to face reality and look toward being up to speed in 2014-2015 with what is happening vs. spending a lot of money on things that make sense today, which means already in the rear view mirror.Many of the older leaders throughout the country cannot wrap their heads around the fact the Law of Accelerating Returns has many parallel roads…and now some of those roads are truly converging.

  17. Stephenzeek

    there is an interesting book on behavioral finance called “Beyond Greed and Fear”. It is as interesting as a book on finance can be anyway. Hersh Shefrin is the author. Had to read parts of it for a class.

    1. Dan Epstein

      I’ll second that. Definitely worth your time if you want to dig deeper in behavioral finance. Here’s an amazon link:

  18. akharris

    As Warren Buffett would advise: buy the cheap hamburgers.

    1. JLM

      Warren eats Dairy Queen burgers. The Hunger Buster cheeseburger in particular. You have to be from rural Texas to understand what that means.

  19. RpbatchAEC

    Wow! Great graphic!Without getting too preachy, I have to say that this graphic sums up one of my greatest life lessons in the past 20 years…. Anytime I feel myself being motivated primarily by greed or fear (and, yes, we generally know when that’s the case!), I am probably in the process of making a huge mistake!Thanks, Fred! Your posts always rock!Batch

  20. Dave Broadwin

    Cute. Along similar lines, one quip that has always stayed with me is “you can generate a lot of revenue selling $20 bills for $19.”

    1. Matt A. Myers

      There was a video clip that my Grade 10 highschool teacher played us in class. It was a similar parody talking about how a company made billions of revenue per year exchanging people’s money. When asked how they did it for no fee, they simply answered, “volume.”

  21. andyswan

    The more we embrace “social programs” that are punitive to production (i.e. income) AND make being completely unproductive a comfortable life, the more likely it is we will have a static class system. The “haves” making it difficult for anyone else to “have”, while placating the have-nots with a percentage of the loot.

    1. Matt A. Myers

      Are you stating this as a bad or a good thing?

      1. andyswan

        Your interpretation is more important than mine

        1. Matt A. Myers

          Well you use the word punitive, being punishment, with the cause of ‘social programs’ being referenced.It’s silly to think 100% of the population needs to be ‘100% productive’ (whatever that means) in order for things to work, or silly to think that it’s ever been that way for a society to be successful. It’s expected certain groups of a population won’t be ‘100% productive.’First you have children, and you have grandparents / elderly. The other people who aren’t productive are those who aren’t healthy (why aren’t they healthy?), or if they’re not educated for something that’s needed (why aren’t they educated?).Did you know people by default WANT to do things? People get bored. There are studies and research on it. People would rather work and be productive than not. People are happier when they have something to focus on.And then you have to question why the “have-nots” are “angry” for not being cared for. And then you can take a look at violence and crime rates, and compare how much the “haves” pay to sustain a false sense of security – which has its own dangers like police states and abuse of powers – versus the costs to taking care of everyone, giving them the tools to be self-aware, to be as educated as they are capable, to eat well, to be social, to be productive.Maybe all someone can do is sweep the floor, but it still takes a community to raise someone, a well-balanced person anyway, right? And of course with economies of scale, it’ll cost less per person to take care of everyone – and the added cost because there will be more people in the pool will balance out partly because you have more (quantity and probably quality wise) productive people.

          1. andyswan

            How about this…..those that agree with your philosophy can fund it.You guys can set up your own little utopia. From each according….and so on. Those that take risk and succeed can be immediately billed for the food, clothing, shelter, education and healthcare of someone else in the community that decided not to do much of anything…..and they’ll both agree that it’s the best move…”for society”. You can even have a commission of the smartest people to ever read a book to be in charge of centrally planning the allocation of all of the resources!It’ll be a productive, buzzing and healthy community. Staggering amounts of equality. I suggest California.The rest of us will deal with the inefficiencies of working, providing, trading and protecting in our own self-interest over here.People are free to move from your state to mine and vice versa, according to the lifestyle and society that fits them best.

  22. davidgeller

    How about “you can lose a lot of money chasing women…but you can NEVER lose a woman chasing money.”

  23. alasdairtrotter

    If this graph resonates for the majority of people, then who is the quiet winner on the other side of every Fear/Sell motivated trade?

  24. alasdairtrotter

    If this graph resonates for the majority of people, then who is on the other (winning?) side of every one of these Fear/Sell motivated trades?

  25. Gordon Bowman

    I love this graphic. So simple. Just added it to the wish list.

  26. adamkuebler

    Fred, I must say that the comments here are really good compared to almost every other blog. There are a lot of intriguing, well spoken thoughts which are backed up and debate is fairly civil. Most sites I avoid the comments like the plauge. But after reading through some of these comments, I may start coming to your site (from Google Reader… RSS is not dead!) to read and comment.And your content has always been phenomenal!

    1. fredwilson

      please do. we welcome all comers and all opinions as long as they arestated with respect and manners

    2. Aaron Klein

      Fred’s blog is one of the few that ALWAYS gets a click-through to Google Reader. The post is insightful. The comments only make it better.

  27. Dave Pinsen

    “Markets come and go. Good businesses don’t.”True. But as you know, it’s not enough to buy a good business — you have to buy it for a good price. For example, anyone who bought Cisco near the peak of the dot-com bubble is still underwater:….®ion=US

  28. css

    Thanks for posting this drawing. I just ordered mine after seeing yours. The “repeat until broke” is the best part.

  29. kagilandam

    I wonder why there are “Sinusoids” everywhere … flat, exponentially damped and elevated … science,engg, philosophy, history and what not? There is a theory similar to big-bang with sinusoids in 4D/5D which i never understood.Here again one more sinusoid for Market … I feel like shouting out loud …”these sinusoids are making me thirsty.”

  30. vruz

    when was the previous similar upswing? 2004? 2007?

    1. fredwilson


  31. Steven Kane

    i want one of those! is the edition for sale somewhere?”The goal is not, buy lowest and sell highest. The goal is, buy low and sell high.” — My dear late uncle, Benny Kane (1933-2005)

  32. paramendra

    True. But the hills and valleys are not going away.

  33. fredwilson

    a 3D graph?

  34. JLM

    The Chinese are laughing at us as we deliver to them the seeds of our own destruction.China is an evil dictatorship with plans for an increased international role that is based on hegemony not cooperation.There is not a single place where increased Chinese presence has been good for the locals or world — Tibet, Taiwan, Korea.Today they are a landlocked empire and we should keep them so for the rest of time.The Chinese are not our friend.

  35. Harry DeMott

    “And these are the same industries that finance our elections, and the 40 lobbyists for every congressperson in Washington.”I just spent the last 2 hours working with a guy on fixing that problem.Bring democracy back to the people – not the corporations and lobbyists.Pretty psyched about the concept and the initial implementation.

  36. Dave Pinsen

    I agree with you about the negative economic impact of our current trade relationship with China (I’ve mentioned Ian Fletcher to you before, I think — worth checking out his thoughts on trade). But I don’t think blaming American corporations makes much sense. It’s up to governments to set the rules of the game, and its up to corporations to play to win by those rules. And, for the most part, that’s what they do.Lobbyists have some impact at the margin (the larger our government is, and the more involved it is in our economy, the more lobbying you’ll have by businesses), but big American companies made plenty of money when our government was largely protectionist (as it was from pretty much the founding of the republic until the middle of the last century). As Fletcher notes, the motivation for dropping tariffs after WWII was mostly geopolitical (“as a gambit to prop up capitalist economies abroad and tie them to the U.S.”). That big picture decision wasn’t made by lobbyists.

  37. Dave Pinsen

    Charlie,You might find this blog post I just wrote of interest: “Michael Lind notices China’s mercantilism”. As I elaborate in that post, Lind is a prominent, center-left pundit, whose views on our economic challenges have evolved over the last couple of years. Now they’re closer to yours — and mine, to some extent.The center may be shifting. Interesting times.

  38. fredwilson

    well that would be great if i could do it

  39. Dave W Baldwin

    You could also use the caracitures from Monopoly. Have the avatar go up (not walking) and down the curves starting with ‘Payday’ then ‘Boardwalk’ then ‘(can’t remember one for selling)’ then the ‘Empty Pockets’…..In the background can be a head where the face changes expressions leading to frantic delusion as it spins around.

  40. Dave W Baldwin

    JLM, I’d like to share with you a bigger strategy that deals with how to handle China. Since I’ve already gone on a limb regarding one of the things needed to get the US on solid footing, I’d rather share in private.Feel free to DM my Twitter- DaveWBaldwin.You’ll like.

  41. PhilipSugar

    And we put Immelt who is transferring technology, and scoffed at me three years ago when I told him outsourcing really sucks for America at a meeting with Senator Tom Carper head of a new council on getting jobs.

  42. baba12

    Well but Mr.Richard Nixon opened up the door to China in 1972 and that was the deal made between the Business community in the U.S. and the corrupt Communist party of China. We wanted to squash the unions that had swung to one extreme, wanted to place where we could maximize profits at all costs, avoid environmental laws etc etc and marginally lower prices for the lambs at home.Well we succeeded in doing that and here we are 40 years later having decimated most of manufacturing in the U.S. ( why we should change definition of GDP). So what do we produce now: a lot of really high technology items, we still are leaders in many areas but those areas wont be needed if it wasn’t for the Industrial defense complex. For a simple example the F35 JSF being built by Lockheed has materials technologies deployed that the Chinese don’t have and won’t have for a long time but one has to ask what is the purpose of spending so much money to fund defense programs that I am not sure make us feel safe necessarily.I don’t like the way the Chinese play the game in general but then again they are learning from us and the Europeans and they have a different unit of measure for time.But we still do business with them and a lot of it. I don’t think anytime soon we will boycott “Made in China”.

  43. Dave Pinsen

    China is a one-party autocracy, not a dictatorship. And as governments go, it has done a pretty good job for the majority of its people over the last couple of decades*. We pat ourselves on the back because our reporters can ask our president tough questions, while China’s president ducks them, but which government is expanding its middle class and which is shrinking its middle class?In the last few decades, the Chinese government has lifted more of its people out of poverty and into the middle class than any government in history*. It’s also true that they have done so in ways that have been unfair to us (e.g., stealing intellectual property and artificially depressing their currency). I don’t blame the Chinese government for that though. I blame our government for letting them get away with it.By and large, China’s government does what it thinks is in the long term economic interest of its people. Ours doesn’t. That’s the crux of our economic problems.*Before that, it was one of the worst governments in history, pointlessly immisterating its people and murdering tens of millions of them in the Cultural Revolution.

  44. JLM

    Please send via e-mail. Thanks.

  45. JLM

    I could not agree more with you as it relates to your comments on China. I agree more with you than you do with yourself.The gradual movement of jobs to China is extremely shortsighted. We are now paying unemployment to folks who would love to have those jobs. This is a huge political problem.I am appalled that our government allows US companies to manufacture goods for the US market in China. The US companies want American securities laws, stock exchanges, intellectual properties, banking laws, access to credit, taxes — and the list goes on — but they want to be able to employ Chinese and not Americans.Never trust a hard dick or an American businessman when it comes to taking the easy way out.This is simply American political cowardice. Which is not going to get better by welcoming their dictator to a State Reception in the White House.The US is building weapons systems which are not truly focused and reactive to a real threat. I do not embrace the notion that weapons systems have to be continually upgraded. That is nonsense. We are in competition with ourselves. I would delay every single weapons system for 5 years.BTW, I do personally boycott Chinese goods to the maximum extent possible.

  46. JLM

    You have an extremely naive view of the motivations of the Chinese.This is a nation whose leadership is focused on hegemony and nothing less. The utterances of the Chinese Communist Party Organ on the eve of Hu’s visit to the US is perfectly illuminating.They are engaged in a struggle for domination and we are their only enemy. They have a considerable way to go and they underestimate American capabilities but they are not trying to start up a bunch of Sertoma’s in Beijing.This is a country which slaughtered over 70MM of its people since Mao and which has devised mobile execution vans to facilitate the execution of dissidents and criminals.When that single Chinese youth stood in front of that tank in Tianamen Square, the tank held the intentions of the government — a willingness to literally crush its citizens to maintain its control — and the young man held the aspirations of the Chinese people, of all peoples — to live free in the face of oppression.The Chinese are an evil empire and their truest intentions are seen in Tibet, N Korea, Taiwan and their lawless disregard for the rules of civilized nations.

  47. baba12

    I wonder if you are using a “Made in USA” product or just a “Designed in USA” product to write this comment. I have tried hard but I it is difficult for me to find a product that is “Made in USA”.Mine you growing up in India my aunts, uncles & some cousins used to all say that this was the place to be as you could do quality work and make a good living without cutting corners. That there was a “consumer resistance” that would not accept crap and a vigilant and less corrupt government that penalized severely any business shenanigans.The image of quality, ethics and a basic sense of playing by the rules was something of the past. In my 21 years in the U.S. I have seen a steady decline in all those things including the so called “German work ethic” that created so many of the engineering products I came to admire and aspire to emulate.It has been a rude awakening in many ways to the way we have diluted those values.So “hard work” is not something you do when you create a time series algorithm to sell a derivatives product that makes millions for a few while screwing many millions over.I did that for a living for a few companies never fulfilled me as I was not creating anything that I really valued..Now we are trying to change the way we build automobiles and how people shall use it. Lets see if that gamble pays of and we can have not just “Designed in America” but also “Made in America” back.

  48. baba12

    He is doing what is right for the shareholder, thats capitalism.Profit maximization at all costs.

  49. JLM

    Don’t get me started on derivatives another example of how the American government is Wall Street’s bitch.

  50. PhilipSugar

    So “hard work” is not something you do when you create a time series algorithm to sell a derivatives product that makes millions for a few while screwing many millions over.I did that for a living for a few companies never fulfilled me as I was not creating anything that I really valued..That is exactly why Wall Street needs to be regulated and taxed.On a personal note I completely commend you….but there are many that are willing to line up and do that job and not look at things from a moral viewpoint.That is one thing I want to stress when I wonder how valuable something like Facebook is I wonder about the valuation not the value…what they build is something INVALUABLE to people. The ability to see what your relatives are doing wherever you both might live……priceless. Absolutely priceless.

  51. Dave Pinsen

    Mine is a more objective view, not a naive one. I’m aware of the horrors perpetrated by Mao, and alluded to them in my previous comment. I’m also aware that China today is enormously different from what it was under Mao — are you aware of that?You are a citizen of the world’s sole super power and you rail at China for being “focused on hegemony and nothing less”? Put yourself in the shoes of China: a once-great, advanced civilization, that was humiliated and occupied by foreign powers in the modern era. It makes sense that they’d be touchy about their sovereignty based on their history, and they probably do seek regional hegemony at some point in the future (would that be more “evil” than our Manifest Destiny?).But they’re also smart enough to realize that U.S. naval hegemony in the Far East has been quite profitable for them in recent decades. If we weren’t deterring war in the region, China’s neighbors would be spending more resources arming themselves against her and less time trading with her. So I doubt the Chinese are in a rush to completely displace us in the region, though they do seem interested in having us take a step back. Which is again understandable given their history.”When that single Chinese youth stood in front of that tank in Tianamen Square, the tank held the intentions of the government — a willingness to literally crush its citizens to maintain its control — and the young man held the aspirations of the Chinese people, of all peoples — to live free in the face of oppression.”The Tiananmen Square crackdown was brutal and, indeed, evil. But you are extrapolating much too simplistically from it. It’s true that the Chinese government seeks to maintain its control (as do nearly all governments). But the way it has done so in recent years is by addressing the economic concerns of its people (e.g., raising minimum wages, creating jobs, improving infrastructure, etc.). And while I doubt anyone outside of the Communist party condones the brutality of the government’s crackdown in Tiananmen Square, it’s not entirely clear that most Chinese want the sort of American-style democracy those students were agitating for. They might prefer something more along the lines of what Hong Kong has.

  52. Martial Canterel

    You mean the “civilized nations” who as they were ruling China by force at the end of the 19th century and the start of the 20th century hanged signs “No dogs and Yellow Men Allowed” at the porches of their restaurants and clubs ***in Beijing***?Or maybe the “civilized nation” that martyred The Philippine?”U.S. attacks into the countryside often included scorched earth campaigns where entire villages were burned and destroyed, tortured, and concentrated into camps known as “protected zones.” Many of these civilian casualties resulted from disease and famine. Reports of the execution of U.S. soldiers taken prisoner by the Filipinos led to disproportionate reprisals by American forces. Many U.S. officers and soldiers called the war a “nigger killing business.””Or maybe you are talking about the “civilized nations” who grew their economical hegemony during 400 years by treating black Africans worse than dogs?Enlighten us further please. How “evil” was China with the “West” for the last 500 years? And now, think further Mr Righteous, How did Western Powers treat Africa, Asia, and the Americas indeed? Evil? Do you see anything in your own eyes?Or maybe you were thinking about the “civilized nations” that tore the World to shreds, and burned and gassed, and killed and maimed, and raped and just annihilated all what is civilized in any human heart between 1914 and 1945?China ***may*** be as ruthless one day, but for now, your “civilized nations” have not an inkling of competition in this regard; not in China, not in Iran, not in Russia, not in any of the useful idiots excuses.For me , more probable, your “civilized nations” = greedy and murderous nations, not wanting to let go of their victims; or maybe, going in your direction a bit, not wanting to share any part of the loot. These nations wants us to believe their scapegoating infantile rhetoric.”Few people think, yet all would have opinions” (Berkeley)

  53. Dave Pinsen

    When Immelt became CEO of GE, it’s stock was trading at about $40. Today, ten years later, it’s under $20. You call that “doing what is right for the shareholder”?

  54. Dave W Baldwin

    The bigger issue per Dave Pinsen’s point is finding out that GE was also part of the bailout.In the bigger picture, we need to push newer companies to produce growth via truly needed/useful product at a price the bigger market can afford and be more stringent regarding bottom line. If we deliver to the consumer something that improves their productivity, we stand a chance at growing the economy in many niches.This will coincide with the arrival of marketing (the way it should be) via the Social Web and increase the volume of product/money exchanged that has real value. Otherwise, we run into a lethargic time frame as folks begin to see those that benefited off the public dough (hate/envy) with the same politicians promising things they cannot deliver. That increases the problematic hate/envy dragging down production.It is more important to look at what we can offer the playing field in the next 3-4 years that can be of real benefit to everyone and not have the US second guessing ourselves into oblivion as far as China goes.

  55. Dave W Baldwin

    Sorry, I don’t know how to find your e-mail. If you direct it to my twitter @ DaveWBadlwin I’ll get it or to [email protected] I’ll get it. There is a way to do this looking at things realistically and forward moving.