10 ms·

Money Is Pouring into Tech Like It’s 1999, and That's Not Good

119 points by cyphersanctus 12y ago

ep103 12y ago
Theory: Wallstreet has limited other domestic outlets for their investment money since the 2008 crash, and is therefore investing heavily in tech. This will continue until either 1) more sectors of the economy recover present new and/or better investment opportunities or 2) a crash occurs. However, in the case of #2, which everyone fears, unless the conditions change and wall street gets a new location to place their money, tech will still be one of the best domestic investment opportunities, and we'll see a new climb in spending after said crash. That's my 2 cent theory, I'd love to hear some discussion on it.
- XorNot 12y ago
  Both will happen. A sudden withdrawal of cash from tech will manifest with developing companies (a lot of them) not making payroll, a sudden rout of closures, causing more money to flee tech because it now looks like it's crashing etc...
- howeyc 12y ago
  My theory is similar. We are in a "rise-all-boats" bull run thanks to the injection of cash into the economy from the Fed. The few "Buffet-like" value investment managers are saying there isn't much margin-of-safety in valuations any more. Also, other than tech, other sectors of the economy are "easy" to price. We pretty much know the growth of a utility company, real estate company, etc is going to be. They can only grow so fast, and the market guess within certain tolerances what it will be. On the other hand, tech is one of those fairy land sectors that is not priced on any reasonable metric (profits), but instead on hopes and dreams. Until all tech becomes priced based on profits (like Apple, IBM, Google, etc) it will continue to see large investments seeking outlandish returns. Right now it's an area where getting market share from others can happen quickly. It's pretty hard to grab market share from a utility (usually regulated monopoly) or a rent seeker (you need to buy the asset to rent it out yourself). Same goes for other sectors, only so many cars can be bought every year for example. Snagging eyeballs can happen quickly, can be fleeting (myspace) or more long-lasting (facebook). Hence the WhatsApp stuff (OMG, so many eyeballs there, just like facebook!!!).
  - dllthomas 12y ago
    "or a rent seeker (you need to buy the asset to rent it out yourself)" "Rent seeking" is a different thing than "renting out access to an asset". http://en.wikipedia.org/wiki/Rent-seeking http://en.wikipedia.org/wiki/Rent-seeking
- Tyrannosaurs 12y ago
  The question here is over what timescale would you expect to see the new climb? Isn't what you're really describing is just boom and bust which is pretty much business as usual, but you seem to be implying that it might just recover faster. But if that's true (I can sort of see the logic - essentially that Wall St won't learn it's lesson for which there is some evidence) doesn't it also follow that the next bust would just come faster? If the crash is really just what happens when the valuations defy reality then if the money comes rushing back faster, wouldn't that just come about again faster?
- Pxtl 12y ago
  That's pretty much it, isn't it? They pick something to start throwing money at until it explodes and destroys half the economy, and then they move onto the next thing. They're still doing real-estate here in Canada. When will we see a "Western heavy industry" bubble?
  - lmm 12y ago
    The western heavy industry bubble happened in the 1840s. And before, and after. A financial bubble looks a lot like the "hype cycle" for new tech - it's hyped up somewhere beyond its actual value, then crashes to below its "true" value, then recovers and becomes something actually useful. It happens to every new industry, or when circumstances change. There are signs the financial industry is running out of targets though (equities trading was pretty much commoditized decades ago, corporate bonds happened in the '80s, we've just seen the boom and bust for sovereign bonds and asset-backed securities. There's a little bit of interesting stuff going on in commodities and forex, but by and large all this money is sloshing around with nowhere to really go for returns), and the industry itself is shrinking. If anything we may have seen a finance bubble too.
troebr 12y ago
It's at least the third article that spun off from the WSJ article (if not even an older article/interview).
- ep103 12y ago
  was there a HN submission of that article?
cwal37 12y ago
I actually threw together some very lazy (just trying to do a little something every day) graphs on VC yesterday[1] if you want to see the dot-com bubble in terms of VC disbursements and number of deals. Both the old bubble and the recession are extremely visible. It'll be interesting to see what these graphs look like in a couple years when reporting catches up to 2013-2014. [1] http://btus.us/venture-capital-in-the-united-states-1998-2012/ http://btus.us/venture-capital-in-the-united-states-1998-201...
netcan 12y ago
An interesting twist in the current incarnation is this story is how big "private" money is taking risks on the tech sector. Overall, I don't really find this story convincing for a few of reasons, though I suppose there is plenty of room for disagreement. (1)T he first boom actually did get a lot right. The PC-internet revolutions was intense and did create a lot of new value. The mistake was treating it like a land grab where all major players would be established by the year 2000. (2) Scale does matter when we are talking about bubbles.Smaller means safer. (3) There is real revenue being generated by Google, Facebook and every reason to think it will be generated by Uber too. (4) Private money doesn't (I hope) break the economy in the same way that public money can. If VCs go bust there are ramifications, but these markets are not that liquid. There aren't margin calls going off and forcing fire sales. (5) War chests: The big boys and many of the up-and-comers have nice big war chests. They are obviously concerned about equity, but Facebook would be very hard to kill with a sharp decrease in stock price. Options might need to give way to bonuses, but the Facebook is no longer in the business of selling equity. They have plenty of cash. This goes doubly for Google, MSFT, Apple & a surprising number of no-rush-to-IPO mega startups like Uber , Airbnb, Dropbox Snapchat, etc. Their continued existence is not dependent on the market for tech stock. Bubbles are some sort of unstable financial complex that can be brought down as soon as the equilibrium is broken. In 99' the money was ultimately coming from IPOs and public markets. When that well dried, everything went bottom up. The recent financial crash was bullet on financial instrument tautologies, a system that created correlated risk. It could only continue to exist so long as everyone could maintain that the risk was much smaller than it was. Think of the companies in question. Most could continue to survive if investors hid in a hole for two years, that's robust. Smaller, younger startups would be in for hard times if investment stopped coming in, but 1,000 $10m (on paper) startups going under is a just 1,000 individual failures. This is correlated in the sense that a shortage of cash would effect them all, but it's not systemic in that their failure would extend far beyond the investors, founders & employees that understand the risk.
- AJ007 12y ago
  Even small start ups should continue to do ok -- the hardware overhead for early stage stuff now is so cheap it is nearly free. Models that require huge scale before the revenue comes in could be a problem. I self-funded so my opinion is likely wrong, but it seems like a lot of the excess money is going to questionable things in addition to paid growth (no clue how much Uber, Lyft, and others are spending, Groupon certainly took the paid acquisition to the extreme buying up huge chunks of available online inventory.) Luxurious offices are nice but hardly necessary for a serious coder or designer. Perhaps the most vulnerable are the start ups that already exist and are dependent on investor money to operate. In the event of a market pull back desperate companies should be easy pickings for the big boys to acquire talent and other interesting goodies. Leverage -- that makes bubbles very dangerous and unpredictable. Investor leverage is one thing, companies' own leverage is quite another. Last I looked (a year ago), tech was the best of the best by this metric. For public companies in other sectors, its a wonder if they would be worth anything in another major credit crunch. The corporations we keep hearing about having massive cash stock piles have liabilities to match. A concern would be Facebook's or Apple's market cap dropping 50%+ . Go to 0? No.
deleted 12y ago
[deleted]
mgberlin 12y ago
Looking strictly at numbers in this situation is a bit like forgetting to account the inflation difference between 1800 and 2014. Of course the amount of money being invested in tech has grown enormously; in 1999 everyone didn't walk around with the internet in their pocket.
- potatolicious 12y ago
  And now everyone is walking around with the internet in their pocket, yet revenue seems elusive to a lot of very highly-valued companies. Lack of potential users is no longer an excuse, but we're still throwing billions at companies with no revenue model, and billions at companies with a revenue model but unable to get cashflow positive to save their lives.
idlewords 12y ago
It's not a bubble, but a blister. Lance it and it fills back up again.
funcSoulBrother 12y ago
I've discussed this at length with investors, entrepreneurs, and upper level management at large tech service agencies, and I'm not convinced that there is necessarily a bubble this time around. Accounting for the massive increase in bandwidth, CPU, GPU, smartphone ownership, software development practices, AI logic, and reliance on data compared to that of 1999, it's really a flawed model to draw 1:1 parallels in my opinion. While there will be a shift at some point away from software/web entities and into manufacturing (to catch up meatspace to webspace), it will be these tech entities that will largely lead the charge, to enhance their own offerings. The example put forth in the article is as flawed as the logic it purports to criticize: "SAYING WE’RE NOT IN A BUBBLE BECAUSE IT’S NOT AS HIGH AS 1999 IS LIKE SAYING THAT KIM-JONG-UN IS NOT EVIL BECAUSE HE’S NOT HITLER." Compared to 1999, the value drawn from these companies inside the "bubble" doesn't even remotely exist within the same qualitative and associative parameters.
calgaryeng 12y ago
I have a hard time even reading any of these pieces where a VC is complaining about high burn rates / valuations all while continuing to invest. "Because my competition will continue to invest" is not a good reason. You don't see Warren Buffet investing at valuations he believes are untenable, just because the market happens to be up.
- cylinder 12y ago
  That's what happens when you're an investment manager. You're paid to do something, anything. If you just sit on cash, your investors aren't going to keep paying your fees.
- serve_yay 12y ago
  Sure it is. VCs aren't the money guys, they just invest the funds of the money guys. Not investing really isn't an option for them.
  - lingben 12y ago
    VC's are paid to invest intelligently and get a return. But they have a conflict of interest because unless they invest, they don't get paid.
    - jamiesonbecker 12y ago
      That's for the carry. If the market crashes and their investments fail, their carry income will be zero anyway. VC's do get paid even if they don't invest via their management fee. It's certainly enough for them to live comfortably on while investing the fund over a ten year cycle. But, to your point, there's another dynamic here: if they don't invest (and thus have no carry), they will be less likely to be able to raise future funds. Just saying that it's not as simple as saying there's a conflict of interest. VC's do have a fiduciary duty to their investors and their income is tied, at least in part, to their ability to make money. Even if they lose all of the money, there is no direct cost except for possibly a quite substantial lost of reputation. The risk to entrepreneurs is not symmetrical. No guaranteed salary is available to entrepreneurs. Even if a portfolio company fails, VC's still receive a management fee. This system works surprisingly well, except when VC's are stupid or screw entrepreneurs. It's actually pretty amazing that it works at all, since really the middlemen hold most of the power as the distributors, but not originators, of the capital.
deleted 12y ago
[deleted]
- saraid216 12y ago
  I like that we have internet fundamentalists now.
  - lotsofmangos 12y ago
    They use calendars where the only month is September.
at-fates-hands 12y ago
>>>>In the same way, Gurley said, too much cash in the startup economy means weaker companies can survive without having to generate cash for themselves. Isn't this how business should work? Weaker companies lose and the stronger companies win? Those with good business plans, good marketing strategies and a solid product should be able to weather a crash. Also, those companies that actively plan for a crash usually do much better. Saving money, having a plan B in place and assuming its going to happen is a lot smarter than simply believing we're not in some kind of bubble and then losing everything when the market eventually corrects itself.
serve_yay 12y ago
If you think too much money is bad, wait till you see what not enough money looks like.
zxcvvcxz 12y ago
On a macro level, a likely hypothesis for this trend is that there is nothing better to invest in than tech. But tech isn't moving fast enough (value is hard to create, not in a gold rush period), so we try to translate money into growth much more. Because otherwise that money's just sitting around! In an ideal world that money might somehow be invested in long-term societal growth than can yield high tech growth in the future, like education, or maybe investing in individuals for some long-term return on their income. More R&D at all levels. Just random ideas. Point is, it'd be nice to see some creative thinking with investment money rather than see it pumped into companies trying to sabotage each other's ride sharing apps, or out-sell their fundamentally identical crm services, etc.
- jpmattia 12y ago
  > On a macro level, a likely hypothesis for this trend is that there is nothing better to invest in than tech. I think folks are missing a bigger part of the macro picture: It is not just tech. Low interest rates and easy monetary policy have inflated many types of assets. By way of example, this is currently headlining on Yahoo Finance: http://finance.yahoo.com/news/some-powerful-voices-add-to-fears-of-a-stock-market-bubble-153542781.html http://finance.yahoo.com/news/some-powerful-voices-add-to-fe...
calinet6 12y ago
In the summary, “At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital,” Wilson said, “and start producing value the old fashioned way.” I do believe a significantly higher proportion of companies today are doing exactly that, and are quite focused on it, whereas they were not in 1999. That's a general and very un-scientific argument for why this bubble (which it still surely is) is not as bad. Sure, some companies have shaky monetization strategies; but you just can't say companies like Uber are not producing value (rumors of ~$10 billion gross revenue).
calinet6 12y ago
In the summary, “At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital,” Wilson said, “and start producing value the old fashioned way.” I do believe a significantly higher proportion of companies today are doing exactly that, and are quite focused on it, whereas they were not in 1999. That's a general and very un-scientific argument for why this bubble (which it still surely is) is not as bad.
bowlofpetunias 12y ago
People seem to have completely forgotten how completely nonsensical (and often completely clueless about tech, the internet and business) tech start-ups were in 1999 compared to now. The valuations and burn rate may be too high and up for a big correction, but most of the start-ups these days at least have some logic behind it by which they may be seen as potential hits. 1999 was largely mass hysteria with no foundation in reality whatsoever.
felix 12y ago
After trying to figure out if he was actually going to back up his argument anywhere - at some point I realized he was essentially saying that Uber is not different than Pets.com and stopped caring about the article.
squozzer 12y ago
It's easy to chalk this up to herd behavior but what's scarier is the real possibility that solid investment choices don't really exist in America anymore.
erroneousfunk 12y ago
Although the economy suffered a hit, does anyone remember what the job market was like for programmers after the boom? If this article is right (which I'm not convinced of), even to a smaller extent -- how do you think that will impact the current job market?
mililani 12y ago
Has anyone here personally lived, worked, and saw the dot com boom and bust in Silicon Valley? More so, do you happen to currently live and work here still? I have, and although I don't think the current tech boom is as bubbly as the late 90's, I do see a lot of similarities in the area. Traffic, though, is no where near as bad as it was back then. But, it's getting there. However, construction is at an all time boom. I have never seen more cranes nor construction in SF ever. I think we are back to heady times, and I would be really cautious as an investor in the next 2 years.

119 points by cyphersanctus 12y ago

ep103 12y ago

Theory: Wallstreet has limited other domestic outlets for their investment money since the 2008 crash, and is therefore investing heavily in tech. This will continue until either 1) more sectors of the economy recover present new and/or better investment opportunities or 2) a crash occurs. However, in the case of #2, which everyone fears, unless the conditions change and wall street gets a new location to place their money, tech will still be one of the best domestic investment opportunities, and we'll see a new climb in spending after said crash. That's my 2 cent theory, I'd love to hear some discussion on it.

XorNot 12y ago
Both will happen. A sudden withdrawal of cash from tech will manifest with developing companies (a lot of them) not making payroll, a sudden rout of closures, causing more money to flee tech because it now looks like it's crashing etc...
howeyc 12y ago
My theory is similar. We are in a "rise-all-boats" bull run thanks to the injection of cash into the economy from the Fed. The few "Buffet-like" value investment managers are saying there isn't much margin-of-safety in valuations any more. Also, other than tech, other sectors of the economy are "easy" to price. We pretty much know the growth of a utility company, real estate company, etc is going to be. They can only grow so fast, and the market guess within certain tolerances what it will be. On the other hand, tech is one of those fairy land sectors that is not priced on any reasonable metric (profits), but instead on hopes and dreams. Until all tech becomes priced based on profits (like Apple, IBM, Google, etc) it will continue to see large investments seeking outlandish returns. Right now it's an area where getting market share from others can happen quickly. It's pretty hard to grab market share from a utility (usually regulated monopoly) or a rent seeker (you need to buy the asset to rent it out yourself). Same goes for other sectors, only so many cars can be bought every year for example. Snagging eyeballs can happen quickly, can be fleeting (myspace) or more long-lasting (facebook). Hence the WhatsApp stuff (OMG, so many eyeballs there, just like facebook!!!).
- dllthomas 12y ago
  "or a rent seeker (you need to buy the asset to rent it out yourself)" "Rent seeking" is a different thing than "renting out access to an asset". http://en.wikipedia.org/wiki/Rent-seeking http://en.wikipedia.org/wiki/Rent-seeking
Tyrannosaurs 12y ago
The question here is over what timescale would you expect to see the new climb? Isn't what you're really describing is just boom and bust which is pretty much business as usual, but you seem to be implying that it might just recover faster. But if that's true (I can sort of see the logic - essentially that Wall St won't learn it's lesson for which there is some evidence) doesn't it also follow that the next bust would just come faster? If the crash is really just what happens when the valuations defy reality then if the money comes rushing back faster, wouldn't that just come about again faster?
Pxtl 12y ago
That's pretty much it, isn't it? They pick something to start throwing money at until it explodes and destroys half the economy, and then they move onto the next thing. They're still doing real-estate here in Canada. When will we see a "Western heavy industry" bubble?
- lmm 12y ago
  The western heavy industry bubble happened in the 1840s. And before, and after. A financial bubble looks a lot like the "hype cycle" for new tech - it's hyped up somewhere beyond its actual value, then crashes to below its "true" value, then recovers and becomes something actually useful. It happens to every new industry, or when circumstances change. There are signs the financial industry is running out of targets though (equities trading was pretty much commoditized decades ago, corporate bonds happened in the '80s, we've just seen the boom and bust for sovereign bonds and asset-backed securities. There's a little bit of interesting stuff going on in commodities and forex, but by and large all this money is sloshing around with nowhere to really go for returns), and the industry itself is shrinking. If anything we may have seen a finance bubble too.

troebr 12y ago

It's at least the third article that spun off from the WSJ article (if not even an older article/interview).

ep103 12y ago
was there a HN submission of that article?

cwal37 12y ago

I actually threw together some very lazy (just trying to do a little something every day) graphs on VC yesterday[1] if you want to see the dot-com bubble in terms of VC disbursements and number of deals. Both the old bubble and the recession are extremely visible. It'll be interesting to see what these graphs look like in a couple years when reporting catches up to 2013-2014. [1] http://btus.us/venture-capital-in-the-united-states-1998-2012/ http://btus.us/venture-capital-in-the-united-states-1998-201...

netcan 12y ago

An interesting twist in the current incarnation is this story is how big "private" money is taking risks on the tech sector. Overall, I don't really find this story convincing for a few of reasons, though I suppose there is plenty of room for disagreement. (1)T he first boom actually did get a lot right. The PC-internet revolutions was intense and did create a lot of new value. The mistake was treating it like a land grab where all major players would be established by the year 2000. (2) Scale does matter when we are talking about bubbles.Smaller means safer. (3) There is real revenue being generated by Google, Facebook and every reason to think it will be generated by Uber too. (4) Private money doesn't (I hope) break the economy in the same way that public money can. If VCs go bust there are ramifications, but these markets are not that liquid. There aren't margin calls going off and forcing fire sales. (5) War chests: The big boys and many of the up-and-comers have nice big war chests. They are obviously concerned about equity, but Facebook would be very hard to kill with a sharp decrease in stock price. Options might need to give way to bonuses, but the Facebook is no longer in the business of selling equity. They have plenty of cash. This goes doubly for Google, MSFT, Apple & a surprising number of no-rush-to-IPO mega startups like Uber , Airbnb, Dropbox Snapchat, etc. Their continued existence is not dependent on the market for tech stock. Bubbles are some sort of unstable financial complex that can be brought down as soon as the equilibrium is broken. In 99' the money was ultimately coming from IPOs and public markets. When that well dried, everything went bottom up. The recent financial crash was bullet on financial instrument tautologies, a system that created correlated risk. It could only continue to exist so long as everyone could maintain that the risk was much smaller than it was. Think of the companies in question. Most could continue to survive if investors hid in a hole for two years, that's robust. Smaller, younger startups would be in for hard times if investment stopped coming in, but 1,000 $10m (on paper) startups going under is a just 1,000 individual failures. This is correlated in the sense that a shortage of cash would effect them all, but it's not systemic in that their failure would extend far beyond the investors, founders & employees that understand the risk.

AJ007 12y ago
Even small start ups should continue to do ok -- the hardware overhead for early stage stuff now is so cheap it is nearly free. Models that require huge scale before the revenue comes in could be a problem. I self-funded so my opinion is likely wrong, but it seems like a lot of the excess money is going to questionable things in addition to paid growth (no clue how much Uber, Lyft, and others are spending, Groupon certainly took the paid acquisition to the extreme buying up huge chunks of available online inventory.) Luxurious offices are nice but hardly necessary for a serious coder or designer. Perhaps the most vulnerable are the start ups that already exist and are dependent on investor money to operate. In the event of a market pull back desperate companies should be easy pickings for the big boys to acquire talent and other interesting goodies. Leverage -- that makes bubbles very dangerous and unpredictable. Investor leverage is one thing, companies' own leverage is quite another. Last I looked (a year ago), tech was the best of the best by this metric. For public companies in other sectors, its a wonder if they would be worth anything in another major credit crunch. The corporations we keep hearing about having massive cash stock piles have liabilities to match. A concern would be Facebook's or Apple's market cap dropping 50%+ . Go to 0? No.

deleted 12y ago

[deleted]

mgberlin 12y ago

Looking strictly at numbers in this situation is a bit like forgetting to account the inflation difference between 1800 and 2014. Of course the amount of money being invested in tech has grown enormously; in 1999 everyone didn't walk around with the internet in their pocket.

potatolicious 12y ago
And now everyone is walking around with the internet in their pocket, yet revenue seems elusive to a lot of very highly-valued companies. Lack of potential users is no longer an excuse, but we're still throwing billions at companies with no revenue model, and billions at companies with a revenue model but unable to get cashflow positive to save their lives.

idlewords 12y ago

It's not a bubble, but a blister. Lance it and it fills back up again.

funcSoulBrother 12y ago

I've discussed this at length with investors, entrepreneurs, and upper level management at large tech service agencies, and I'm not convinced that there is necessarily a bubble this time around. Accounting for the massive increase in bandwidth, CPU, GPU, smartphone ownership, software development practices, AI logic, and reliance on data compared to that of 1999, it's really a flawed model to draw 1:1 parallels in my opinion. While there will be a shift at some point away from software/web entities and into manufacturing (to catch up meatspace to webspace), it will be these tech entities that will largely lead the charge, to enhance their own offerings. The example put forth in the article is as flawed as the logic it purports to criticize: "SAYING WE’RE NOT IN A BUBBLE BECAUSE IT’S NOT AS HIGH AS 1999 IS LIKE SAYING THAT KIM-JONG-UN IS NOT EVIL BECAUSE HE’S NOT HITLER." Compared to 1999, the value drawn from these companies inside the "bubble" doesn't even remotely exist within the same qualitative and associative parameters.

calgaryeng 12y ago

I have a hard time even reading any of these pieces where a VC is complaining about high burn rates / valuations all while continuing to invest. "Because my competition will continue to invest" is not a good reason. You don't see Warren Buffet investing at valuations he believes are untenable, just because the market happens to be up.

cylinder 12y ago
That's what happens when you're an investment manager. You're paid to do something, anything. If you just sit on cash, your investors aren't going to keep paying your fees.
serve_yay 12y ago
Sure it is. VCs aren't the money guys, they just invest the funds of the money guys. Not investing really isn't an option for them.
- lingben 12y ago
  VC's are paid to invest intelligently and get a return. But they have a conflict of interest because unless they invest, they don't get paid.
  - jamiesonbecker 12y ago
    That's for the carry. If the market crashes and their investments fail, their carry income will be zero anyway. VC's do get paid even if they don't invest via their management fee. It's certainly enough for them to live comfortably on while investing the fund over a ten year cycle. But, to your point, there's another dynamic here: if they don't invest (and thus have no carry), they will be less likely to be able to raise future funds. Just saying that it's not as simple as saying there's a conflict of interest. VC's do have a fiduciary duty to their investors and their income is tied, at least in part, to their ability to make money. Even if they lose all of the money, there is no direct cost except for possibly a quite substantial lost of reputation. The risk to entrepreneurs is not symmetrical. No guaranteed salary is available to entrepreneurs. Even if a portfolio company fails, VC's still receive a management fee. This system works surprisingly well, except when VC's are stupid or screw entrepreneurs. It's actually pretty amazing that it works at all, since really the middlemen hold most of the power as the distributors, but not originators, of the capital.

deleted 12y ago

[deleted]

saraid216 12y ago
I like that we have internet fundamentalists now.
- lotsofmangos 12y ago
  They use calendars where the only month is September.

at-fates-hands 12y ago

>>>>In the same way, Gurley said, too much cash in the startup economy means weaker companies can survive without having to generate cash for themselves. Isn't this how business should work? Weaker companies lose and the stronger companies win? Those with good business plans, good marketing strategies and a solid product should be able to weather a crash. Also, those companies that actively plan for a crash usually do much better. Saving money, having a plan B in place and assuming its going to happen is a lot smarter than simply believing we're not in some kind of bubble and then losing everything when the market eventually corrects itself.

serve_yay 12y ago

If you think too much money is bad, wait till you see what not enough money looks like.

zxcvvcxz 12y ago

On a macro level, a likely hypothesis for this trend is that there is nothing better to invest in than tech. But tech isn't moving fast enough (value is hard to create, not in a gold rush period), so we try to translate money into growth much more. Because otherwise that money's just sitting around! In an ideal world that money might somehow be invested in long-term societal growth than can yield high tech growth in the future, like education, or maybe investing in individuals for some long-term return on their income. More R&D at all levels. Just random ideas. Point is, it'd be nice to see some creative thinking with investment money rather than see it pumped into companies trying to sabotage each other's ride sharing apps, or out-sell their fundamentally identical crm services, etc.

jpmattia 12y ago
> On a macro level, a likely hypothesis for this trend is that there is nothing better to invest in than tech. I think folks are missing a bigger part of the macro picture: It is not just tech. Low interest rates and easy monetary policy have inflated many types of assets. By way of example, this is currently headlining on Yahoo Finance: http://finance.yahoo.com/news/some-powerful-voices-add-to-fears-of-a-stock-market-bubble-153542781.html http://finance.yahoo.com/news/some-powerful-voices-add-to-fe...

calinet6 12y ago

In the summary, “At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital,” Wilson said, “and start producing value the old fashioned way.” I do believe a significantly higher proportion of companies today are doing exactly that, and are quite focused on it, whereas they were not in 1999. That's a general and very un-scientific argument for why this bubble (which it still surely is) is not as bad. Sure, some companies have shaky monetization strategies; but you just can't say companies like Uber are not producing value (rumors of ~$10 billion gross revenue).

calinet6 12y ago

bowlofpetunias 12y ago

People seem to have completely forgotten how completely nonsensical (and often completely clueless about tech, the internet and business) tech start-ups were in 1999 compared to now. The valuations and burn rate may be too high and up for a big correction, but most of the start-ups these days at least have some logic behind it by which they may be seen as potential hits. 1999 was largely mass hysteria with no foundation in reality whatsoever.

felix 12y ago

After trying to figure out if he was actually going to back up his argument anywhere - at some point I realized he was essentially saying that Uber is not different than Pets.com and stopped caring about the article.

squozzer 12y ago

It's easy to chalk this up to herd behavior but what's scarier is the real possibility that solid investment choices don't really exist in America anymore.

erroneousfunk 12y ago

Although the economy suffered a hit, does anyone remember what the job market was like for programmers after the boom? If this article is right (which I'm not convinced of), even to a smaller extent -- how do you think that will impact the current job market?

mililani 12y ago

Has anyone here personally lived, worked, and saw the dot com boom and bust in Silicon Valley? More so, do you happen to currently live and work here still? I have, and although I don't think the current tech boom is as bubbly as the late 90's, I do see a lot of similarities in the area. Traffic, though, is no where near as bad as it was back then. But, it's getting there. However, construction is at an all time boom. I have never seen more cranes nor construction in SF ever. I think we are back to heady times, and I would be really cautious as an investor in the next 2 years.