Entrepreneurs who thrived during past downturns (like 2008) often become complacent. With higher overhead and a more comfortable lifestyle, they are less willing to do the hard, uncomfortable work required to win in a new down market, creating an opportunity for hungrier competitors.

Simply keeping pace with peers is not a valid measure of success. If peers are taking excessive risks in a bubble, matching their performance means you were equally foolish. True skill is outperforming in bad times while keeping pace in good times.

The 'bezel' is the inventory of hidden, fraudulent wealth that builds up during good economic times. Investor overconfidence, plentiful capital, and lax due diligence create the perfect environment for financial scams to flourish, with this phantom wealth only being discovered during a downturn.

During periods of intense market euphoria, investors with experience of past downturns are at a disadvantage. Their knowledge of how bubbles burst makes them cautious, causing them to underperform those who have only seen markets rebound, reinforcing a dangerous cycle of overconfidence.

Unlike prior tech revolutions funded mainly by equity, the AI infrastructure build-out is increasingly reliant on debt. This blurs the line between speculative growth capital (equity) and financing for predictable cash flows (debt), magnifying potential losses and increasing systemic failure risk if the AI boom falters.

Phenomena like bank runs or speculative bubbles are often rational responses to perceived common knowledge. People act not on an asset's fundamental value, but on their prediction of how others will act, who are in turn predicting others' actions. This creates self-fulfilling prophecies.

Post-mortems of bad investments reveal the cause is never a calculation error but always a psychological bias or emotional trap. Sequoia catalogs ~40 of these, including failing to separate the emotional 'thrill of the chase' from the clinical, objective assessment required for sound decision-making.

Widespread credit is the common accelerant in major financial crashes, from 1929's margin loans to 2008's subprime mortgages. This same leverage that fuels rapid growth is also the "match that lights the fire" for catastrophic downturns, with today's AI ecosystem showing similar signs.

Unlike the 2008 crisis, which was concentrated in housing and banking, today's risk is an 'everything bubble.' A decade of cheap money has simultaneously inflated stocks, real estate, crypto, and even collectibles, meaning a collapse would be far broader and more contagious.