21st Century Capitalism: Those Damned Venture Capital Firms!

Continued fact-finding search if a capitalistic America disappeared when Al Gore “invented the Internet”

It was the culture of consumerism, disposable income, and the legitimization of companies hoarding cash, and following an ethos of a fictional character in a 1987 flick, Wall Street, “greed, for a lack of a better word, is good”. A recession began a couple months before that movie’s release after Black Monday, where the Dow Industrials lost 22% on an intraday basis, and never saw record highs for at least a few years.

After nearly 6 years of growth, the markets were sputtering after October 1987. In July 1990, the Dow hit 3,000 via an intraday basis,  but to close past that mark, took till April of the following year! The tech industry was the worst hit, and in fact it began in the mid 1980s with the recession to the PC sector. This also stalled the growth of the Macintosh, as it broke even in 1987, 3 years after introduction. It wasn’t until 1995 where commercialization of the Internet, mixed with GUI computers like Windows based PCs and Macintoshes and standard networking equipment like Cisco, this lead to a big growth to only see it fall after the new Millennium – March of 2000.

The sector of the Information Superhighway was also legitimized capitalism but on an extreme level. Tech companies at this point weren’t “funded” by Midtown banks, but super rich firms out in the Valley called “venture capitalists”. This way of corporate financing again enabled competitive natures of businesses fighting their ideas into “profit”. For a number of years, many of the standing dot-coms didn’t return a “profit” or break-even on their bottom lines, or just their expenses. Cisco was turned down by every VC firm except for Don Valentine (a man not to write home much about.) In fact the couple who founded the Cisco used credit cards to use to build their hardware for a number of years.

Growth

Another failure of these go-go years, was the focus on “growth” and the redirecting of tolerance of risk, some companies ran themselves into the ground while “profitable” companies went defensive to protect the profits by taking risk aversive paths. At VC firms, later the Midtown banks were obsessed on “double-digit growth” originally quarter by quarter beginning in the mid 90s, than as the dot-com bubble burst, it was then annual and then the standards kept changing. Never in the history of Corporate America was there this amount of obsession to grow capital, to then accrued so much cash that so many have them hoarded in foreign accounts. Worse, is this “profit” that would originally be used to pay off debt that typically was the mainstream standard to Corporate America was completely written off by the time the new Millennium came.

The Fallout

As this obsession to the “growth sector”, this idea ultimately lead companies to have to reinstate their financials or go out of business and executives being thrown in jail, and creating an industry called corporate compliance to deal with the growing regulatory natures such as Sarbanes Oxley and Dodd-Frank law (now repealed by the Trump administration in the name of protecting “free markets”).

Another growing issue to our domestic economy is the ongoing issue of “late stage” companies that are going public on the markets later than other companies. Facebook was about to be a company of this class, but with some “shoplifting” of ideas stolen from Snap, and acquiring Instagram and WhatsApp, Facebook was able to evade from this stigma, leaving the company to be an ATM to the social media sector. Uber, Lyft and other companies who went public this year are facing issues keeping the stocks above their offering price because the demand was fading in the private markets. Going public turns these frozen assets into cold cash for anyone who invested early in these companies leaving Midtown banks and joe shomes being suckered as these investors are actually facilitating this transfer of wealth.

This lead into strange thing to occur in Northern California that the 80s or 90s couldn’t brag about.

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