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Bull years and bear years
Instacart was built during a moment of deep exuberance in Silicon Valley, with bull years and bear years. The bull years felt great, and the company had a line about it: odd-numbered years would go great, and in even-numbered years it would get smoked.
Believing the hype
If you start to believe your own hype during a bull period, whether it lasts a year, a month, or a day, you are really unprepared to eat the glass that comes. Keeping equilibrium was very hard, and Instacart didn't do a great job of it as a company, or its president as an individual.
After COVID
After COVID, the company lost its way in the euphoria of the growth. The way people were treated started to change.
Why do good times breed careless risk?
Economist Hyman Minsky argued that long stretches of stability push people to take bigger risks, which makes the financial system more fragile. His financial instability hypothesis took shape in the 1970s and 1980s. His ideas drew wider attention after 2008, when commentators began referring to a Minsky moment. The term was coined by Paul McCulley of PIMCO in 1998.
How does overconfidence show up in leaders?
Economists Ulrike Malmendier and Geoffrey Tate studied CEOs in a 2005 paper in the Journal of Finance. They identified overconfident executives by how long they held company stock options past the point a diversified investor would have exercised them. Those CEOs invested more heavily, especially when they had cash on hand. Their sample covered large US firms from 1980 to 1994.
How did COVID change startup funding?
In March 2020, the US Federal Reserve cut its policy rate to near zero. Lower rates sent investors toward riskier assets, and venture funding rose sharply. CB Insights reported global venture funding above $600 billion in 2021, roughly double the 2020 total. The Fed began raising rates in March 2022.
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