To the contrary, scarce or expensive capital helps filter out bad ideas and improve imperfect ones. Great businesses— Microsoft , Dell, Hewlett-Packard , Walmart —were started with virtually no external funding or breakthrough ideas. Their founders relied on their wits and hustle until they found the products and technologies that could propel rapid growth.
.. Conversely, investors can do great harm by oversupplying capital to fashionable businesses that haven’t found a profitable trajectory. “You can call it the new economy,” says a skeptical CEO. “But I can’t take money from shareholders and give it to customers and call it a business.” Once indiscriminate investment has bloated a profitless venture, changing direction is almost impossible, as was evident when the internet bubble burst.