Here are some things I think I am thinking about:

1) Shrinkage in the markets!  There has been a lot of chatter lately about the shrinking of the public markets. This NY Times piece says the shrinkage is a problem for everyone. It cites this excellent NBER piece by people much smarter than me. Long story short, there used to be 8,000+ public firms and now there are just 4,000+ and so the world is about to go kaboom (or something like that).

It’s true, No one likes shrinkage. But shrinkage is perfectly natural. In this case, I actually think the shrinkage is a good thing. Let me explain.

I do this thing sometimes where I trick my brain.¹ I believe that people always want to look at the world and find problems. We’re just hard-wired to do that. For instance, we believe the stock market is usually wrong or politicians are usually wrong or the world is usually worse than it used to be. This might all be true, but what I try to do now is ask myself “what if this thing is precisely right for this moment in time?” It’s kind of an extreme efficient market and rational expectations trick that I play on my own brain. It’s not a nice thing to do to your own brain because it’s almost certainly wrong to some degree. After all, the efficient market hypothesis is pretty lame and I don’t know how it’s a thing. But it gets you to think outside the box at times.

Anyhow, while I was tricking my brain into this view I realized that maybe the size of the public market is precisely right. Maybe, just maybe, it was all wrong back in the 90s. Maybe that market was a bloated pig with way too many small and low-quality firms that never should have gone public in the first place. And the data would seem to support this view. The decline is mainly the result of micro-cap firms disappearing. In other words, they never got big enough to sustain themselves as public firms. In other, other words, the public market never should have been 8,000+ firms because there weren’t 8,000+ firms deserving of being public.