

Ask HN: Are bubbles caused by inaccurate data? - niche

Faux Valuation
A click is worth x
An application is worth n clicks * x<p>What happens when value is mis-attributed?<p>What I am really getting at; are there data indices out there? Like the stock market, but with data<p>1 Medical Record is worth ....
1 Verified Facebook user is worth...
1 minute of engaged use is worth...<p>etc etc<p>Call to action!
Relevant VC&#x27;s: please liberate and collaborate on this data to increase startup valuation transparency and benefit all beings
======
nostrademons
So, yes, but in a more general way than you're describing. It's more like
"Uber will displace car ownership, and the automobile industry is worth at
least a $trillion, so $40B is actually undervaluing Uber", and then if it
turns out that Uber doesn't actually displace car ownership the whole
valuation equation falls apart. Or sometimes it's using assumptions in places
where they don't hold, eg. "Google makes $X per search result shown, and
Facebook has more pageviews than Google, therefore Facebook should be worth
more than Google" even though people search when they're further down the
purchasing funnel than looking at social media and so search clicks are often
worth a lot more.

Anyway, capitalism is naturally self-correcting in this regard. People who
build their businesses on invalid assumptions go out of business; what's left
are the people whose assumptions turned out to be right. All bubbles
eventually pop. A lot of people view bubbles as a bad thing, but they're
really part of the normal operation of capitalism. If you believe that
somebody else is being an idiot, take the other side of the trade.

~~~
niche
^^^right on!^^^

------
MalcolmDiggs
I think the inaccuracies naturally swing in both directions (undervaluing
certain aspects of a business, overvaluing others), so in a calm marketplace,
this does not cause a bubble.

But when the natural level of inaccuracies is combined with human emotions
like greed and fear, inaccuracies can start swinging in one direction or the
other more prominently (and this trend manifests itself in the form of a
bubble, or a recession).

