Venture capitalist Chamath Palihapitiya is warning that corporate America will witness a slew of bankruptcies as two key trends unfold.
In a new episode of the All-In Podcast, the billionaire says that many companies survived over the past decade or so because of the Fed’s accommodative monetary policy.
According to the billionaire, the low-interest-rate environment interfered with natural market forces, but he now expects conditions to change as the Federal Reserve holds interest rates at or above the neutral area.
He also says that entrepreneurs are coming up with innovative ideas that will displace existing business models.
“The market was incredibly inefficient since 2010: artificially suppressed rates, a regulatory regime that disallowed any form of M&A (mergers and acquisitions) and consolidation. Now that those constraints are lifted, you’re going to see a lot of this creative destruction work its way through the economy. That’s one big trend.
The other big trend… I think this is another wave of competition that’s going to put a bunch of categories of business under duress, which is, our friend Travis Kalanick, who’s the founder of [Cloud Kitchens]…
Yeah, he launched a Chipotle competitor, and it’s apparently totally kickass and way better than Chipotle. And it just starts to show that there’s a wave of competition that’s also coming from completely different companies, you never would have expected going after a bunch of these businesses. So if you put these two things together, I think you’re going to see more, not less, bankruptcies. But I think the outcome is probably positive in that you clean out a bunch of businesses that were taking up time and resources, you should allocate a lot of the human capital that is in those companies to different businesses.”