We are entering a phase where scarcity is going to become a norm
After record funding of $600Bn+ globally, and $40Bn+ in India, startups are going to start seeing capital dry up. Equity markets that have only known one way, are going to move the other way.
As inflation spikes, interest rates will go up. The era of free money is over.
That means the era of money for everyone across the ecosystem is also over. Tech giants that have spiked in valuations are going to see it correct. It is not a question of if, but when.
A case in point of the opposite of scarcity is Elon Musk.
In just 2 years, his net worth has zoomed from $24Bn to $270Bn. In the process, the “abundance” of wealth has made us see some mostly random moves. The buying of Twitter is the latest, entertaining all of us but with no clear goal in sight.
If your wealth 10x in 2 years, I’d empathize with you being bored and not knowing what to do.
I don’t think any of this is sustainable. Musk continues to defy financial gravity. I think the low financial gravity is due to low-interest rates. Tesla, rather than being a stock, has become a speculative casino. How and when this ends is anybody’s guess.
It will end, though.
As Musk ploughs abundance at a large scale, startups do it at a smaller scale. Flush with money, startups have spent it everywhere. With no scarcity in sight, they have tested, marketed, and hired how they want.
Money wasn’t really a question.
Many founders and investors have not seen scarcity, but I think we are in for a phase where it is going to become par for the course. We are starting to see layoffs at the scale of 1000s, a signal that the abundance is over.
Winter is here.
I think scarcity is a good thing, not a bad one. It forces you to focus. It makes you think carefully. It drives you. The classic concept of jugaad, which India is so famous for, comes from nothing but scarcity.
The switch from abundance to scarcity will be swift and painful. Most companies that die, die of indigestion and not hunger. The past few years have seen many organizations overeat.
Overfeeding results in indigestion, which eventually results in death.
The ones that chose to remain hungry are likely to survive this period of scarcity. They will also know how to navigate and tool their organizations to scale with lesser resources.
Scarcity will hopefully drive a mindset change. It will make all of us in the ecosystem more focused on building sustainably. We don’t need to look further than 2017 to see how to operate in such a climate. It is hard but possible.
We will then not decide to buy Twitter.