The Class of 1987

It seems like we’ve walked up to the edge of the precipice at least three times in the last 90 days with attendant 600 and 700 point drops in the Dow.

I remember the day, a little more than 20 years ago, when we actually went over the edge. October 19, 1987. The 508 point drop represented 22.6% of the value of the Dow. I was working in Chicago at the time in the options market. That day I saw grown men cry and people throwing up in the pits. The world wasn’t coming to an end. It came to an end. In a day, there was a massive destruction of wealth that people said could never be recreated, and predictions that business would never be the same.

But then you fast forward 20 years from that date. The Dow had crossed over 14,000, an increase of more than eight fold. Even in today’s more modest environment, the markets are five times higher than the day than the day we went over the precipice.

If you stayed fully invested since then, you’ve been handsomely rewarded. And while it’s difficult to assume this mantle now, it’s the appropriate one. And this is a message not just for my peers and colleagues who are investors, but also, and perhaps more importantly, for entrepreneurs who are trying to build business.

Now is not the time to pull in your horns. And if you are raising capital, it’s not time to succumb to the notion that investors have ceased putting capital at risk to build great businesses. Look at some of the members of the class of 1987: Invitrogen, with a market cap of $2.7 billion was founded then. So was PeopleSoft, which was acquired by Oracle in 2004 for $10.3 billion. Nextel, another $10 billion enterprise was also founded in 1987. McAfee Software, Gilead Sciences, Carlyle Group, Aeropostale Clothing, Ashworth, Castle Rock Entertainment, Cephalon, Bertelsmann Music Group, among other great companies were all started in 1987.

And that was when the world had come to an end. Imagine what you could do now when the world is merely teetering?