A few weeks ago someone pinged me on Twitter with a very interesting comment. He said that whilst he enjoyed learning about business from biographies as much as the next person, “reading books about weightlifting doesn’t shortcut actually hitting the gym, doing the reps, feeling the movement and developing the instincts.”
Of course, the great irony is that, as per the graph in the essay, global liquidity is now higher than it was at the peak of 2022.
We are in for some interesting times.
Yes I noticed that, although where liquidity goes matters, and some of it is just proportional to growth anyway. But rates are coming down. There is a lot of liquidity going into AI investments too.
I would invert the flood metaphor in this piece. ZIRP was a 300 year flood (at least) of cheap credit
By way of illustration, here is a chart of month end values for the Bank of England Policy Rate (on which the U.S. Fed Funds rate was modeled) for November 1694-October 2025 (early dates adjusted to align with the Gregorian calendar)
The record setting dip on the lower right that requires the Y axis to start at zero is ZIRP. The prior historical low was 2%, last sustained between the early 1930s and early 1950s, with a spike up to 4% in August 1939
The good news is, a) almost all businesses ever built while interest rates have been legible operated in capital environments more like today’s (4%) than like ZIRP’s, so if you’re building something, the world of economic history is your oyster, and b) the folks who were anointed as Kegan level 6 sages during ZIRP continue to get easier to spot as normal humans as time moves on
Data sources: https://fred.stlouisfed.org/series/BOERUKM for November 1694-January 2017 values, and Interest rates and Bank Rate: our latest decision | Bank of England for values since January 2017
A more excellent paragraph has scarcely been written. Wow! This brought a wild grin to my face 
@cedric, when you were thinking through structuring this piece, were there other arguments or framings unrelated to the capital environment that landed on the cutting room floor?
Wow, very perceptive. What made you ask?
I had to cut this way short, because writing about ZIRP compellingly took up all my word count. But I wanted to add:
It’s possible to get one exit, by building the right thing and being at the right place at the right time. After which you can hang out on social media and opine on all things business and folks will think that you’re good at business but actually you’re not, not really. Rob Walling has talked about this, wrt to the bootstrapped software space he hangs out in.
Also, Naval falls into this category. (Exercise left for the alert reader — but anyway it doesn’t matter, he’s rich and happy and that’s what you want to be; just be careful who you get advice from, and for what game you’re playing).
One thing I deeply enjoy about David Senra’s Founders is that he focuses on founders who run their businesses forever. (I don’t listen to Founders often because it’s like drinking Red Bull — which I also enjoy, but don’t drink, uhh, often.) Anyway Senra’s podcast is actually at odds with a strong subculture of Silicon Valley, which is “I just need to build a thing and ride the current wave and flip it at the first sign to get mine”, so I appreciate that he exerts a strong cultural force on it.
But flipping a business is still a valid way to play the game! Here’s Warren Buffett, in his original partnership letters:
You might be interested to know that the buyers of our former control situation, Dempster Mill Manufacturing, seem to be doing very well with it. This fulfills our expectation and is a source of satisfaction. An investment operation that depends on the ultimate buyer making a bum deal (in Wall Street they call this the “Bigger Fool Theory”) is tenuous indeed. How much more satisfactory it is to buy at really bargain prices so that only an average disposition brings pleasant results.
And here’s Roger Martin, commenting on Dollar Shave Club in an essay on 7 Powers:
in my experience, it is only a short period of grace until the competitor responds, in the vast majority cases. For example, Dollar Shave Club (DSC) had Counter-Positioning going for it against dominant incumbent Gillette — which would have been excoriated by its retail distribution channel if it had led or even very quickly followed with a direct-to-consumer shave club concept. But DSC’s market share success gave Gillette the legitimate excuse to launch Gillette Shave Club, which helped ensure that DSC would never earn a profit. But as the expression goes, for any turkey business there is a turkey buyer and Unilever paid $1billion for this ‘promising’ direct-to-consumer business. After seven years of razor-thin margins, Unilever sold DSC to private equity for an ‘undisclosed’ (i.e., minimal) price.
Of course, that isn’t to say that Buffett is above flipping a dud to an unwise buyer (“Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1”) or that DSC wasn’t a good outcome for its founders and investors … but the sentiment is understandable, and the possibility of such things happening is part of the shape of the game we play.
There’s also the idea that operational excellence might not matter in business except during downturns (or in specific business situations) … but I’ve already covered that at the end of my Deming essay. Anyway I have to go now to do more baby chores — what made you ask?
I’m not sure exactly…I distracted myself by asking what an exhaustive (but still succinct) list of the ‘Reasons to study business history’ might look like, and with two of the three items on your list related to the capital environment, I was curious how you selected the points and thought through the argument when writing. So I think I simply chalk it up to curiosity for ‘how the sausage was made.’ Sorry it wasn’t something more profound! (BTW, I say it’s a distraction because such a list is just the rationale for applying CFT to business, and to your point, the reader wouldn’t have said what he said if he understood CFT. The weightlifting analogy is increasingly maddening!)
That distraction aside, I’m glad the focus was on the ZIRP points. Overlooked and deserves awareness.
