
We didn't start the Fire (2.0) - raghus
http://www.youtube.com/watch?v=fi4fzvQ6I-o
======
Goladus
There's a huge difference between the current growth in the tech sector (which
involves a lot of ideas that are likely to fail) and the two recent bubbles of
my lifetime (dotcom and real estate, which are somewhat conflated in that
video as well). The main difference is rampant speculation with people making
tons of money on transactions way above reasonable market value. Real estate
and dotcom were characterized by a kind of mania. Large, risky investments
based primarily on the logic that values are surging and will keep surging
fueled the inflated valuations. When it's just Google, Microsoft, etc. making
strategic acquisitions there's much less cause for alarm. If there's a tech
bubble, it's either surrounded by a thick layer of substance or it's dozens of
tiny little insignificant bubbles that will burst before causing anyone any
harm.

Facebook and a dozen imitators going public with their stock prices
subsequently soaring out of control as people rush to get in on the action,
that would be cause for alarm.

Time Magazine covers are the wrong place to look for bubble clues.

~~~
pchristensen
And don't forget that most of the "ridiculous valuations" come from
acquisition or investment by a few companies that make huge piles of real
money in the real economy. If Google, eBay, Amazon, or Microsoft want a
company, it might be worth $50 million. If two or more of them want it to
compete with the others, then it might be worth $1 billion. If none of them
want it, it might be worth $1 million or less. Note that the product,
founders, revenue, profit, technology was not one of factors I listed. Just
the potential acquirers makes a 1000x difference. And it's ok for these
companies to spend money like that because _it's money they've already earned
from their primary business_. That's why it isn't a bubble. Call me when a
"pointless revenue-free Web 2.0" company goes public - then we might be in a
bubble.

~~~
drusenko
it's very easy to just throw out that acquisitions are of inflated value as
well, but as someone who's been in several acquisition discussions with big
name tech companies, i can guarantee that these companies don't take the value
of a million dollars lightly. these companies are either making strategic
acquisitions that are valuable for the tech or hires (valued at low millions),
or the user base or customer base, or a multiple of their revenues.

but the one thing these companies are _not_ doing?? "ooh, shiny startup!
here's ten million dollars!"

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sanj
MIT doesn't have a CS degree, only 6-3 or 18-C.

And doesn't offer honors.

Actually, the thing that I absolutely adore is that MIT doesn't do "honorary"
degrees. You earn it.

~~~
mhartl
Of course, "earn" is a matter of degree (no pun intended). I mean, MIT has
been known to grant "engineering" PhDs for things like this:
<http://philip.greenspun.com/panda/>

~~~
pius
Um, no. MIT didn't grant Phil Greenspun a PhD for writing a textbook. He did a
little something called grad school.

~~~
mhartl
Um, yes: <http://philip.greenspun.com/panda/thesis/>

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dskhatri
Since we are talking about "bubbles", here's an interesting read on possibly
the first bubble recorded: the Tulip bubble (
<http://en.wikipedia.org/wiki/Tulip_mania> ). Substituting hackers for 'tulip
traders' and web companies for 'tulips' makes for a humorous read :)

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maurycy
I think that most people miss the most important point. The market is the play
between players, and their expectations. A bubble is the situation when
players' expectations are disconnected from fundamentals and no longer have
any ground in the reality.

And while it took literally few months of good acquisitions to create this Web
2.0 hype, much much faster than any fundamental changes arrived, few
bankrupctes should be enough to kill it.

Of course, there's still a question what has changed fundamentally since the
last bubble? The infrastructure costs nearly nothing, the ad budgets are way
higher, as well as number of people using the Internet. However, the services
are still rather poor, and nothing paradigm shifting.

------
mgummelt
Ha, my CS professor is in the middle of this video

~~~
RyanGWU82
And my boss!

(My boss _is_ your CS professor...)

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jsmcgd
Talk about the 'bubble' has been going on for years now. Does this not
indicate that it isn't actually a bubble? Is industry growth really of bubble
proportions?

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awt
It feels like a bubble in many ways -- full employment (of programmers
anyway), tons of "me too" sites. Interestingly there's also probably another
recession coming on soon, which will probably have a negative impact one way
or another. If we're not in a bubble, we may be at the crest of some sort of
ripple or wave at least.

~~~
mmp
The reason behind full employment of programmers is actually pretty down to
earth.

Enrollment into CS programs dropped dramatically when the bubble burst, and
has remained low to this day, even though the market recovered in only a
couple of years after the crash. It's a matter of inertia, really: it takes a
few years for people's perception of the job market to adjust and 4 more years
to graduate.

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optimal
Nah, this is all about redistributing the gains of the previous bubble.

"The correct answer is, The Moops."

~~~
davidw
The Moors!

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maurycy
Funny. But is there really a bubble?

~~~
corentin
A bubble happens when people buy something (stock, real estate or even tulip
bulbs!) that they know is overvalued, on the ground that some "greater fool"
will arrive later in the party and buy it at a still higher price. It's a kind
of Ponzi scheme; at some point, there aren't greater fools anymore and the
last players lose.

What we see now may be some misguided investments, bad companies, etc.
Obviously, all the crap will end up being cleared at some point. But it's not
necessarily a bubble.

------
jmtame
This is great for a laugh ;)

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sabat
Cute. But I have to remind the makers that "bubble 1.0" was a _stock market
bubble_. We are not in a stock market bubble. The people who are putting money
into Facebook are not stock market investors.

~~~
alaskamiller
Better bust out your TI-89 and crunch out some P/Es. I'll give you a couple to
start: EBAY, GOOG, AAPL, YHOO, JAVAD.

~~~
sabat
JAVAD (Sun) I will give you.

Are you really trying to say that Apple is over-valued?

The stock market bubble (1.0) was based largely on over-valuation of companies
that had no profits and no proven business model.

All of the companies you list -- perhaps save for Sun, is it profitable? --
are doing quite well, thank you. Whether they deserve their P/E ratios at the
moment: that remains to be seen. But this does not compare with the massive
number of over-valuated companies circa 2000. The NASDAQ, for example, sits
today at about $2600 -- at the peak of the bubble, in mid-2000, it broke above
$5000.

We are not in a bubble of any kind.

~~~
alaskamiller
What's ridiculous is that we're arguing over semantics. I'm going to tell you
right now, this is an economic bubble as defined by the mere fact that
companies are being valued (privately or publicly) too high. Skype. YouTube.
Facebook. Venture funding has been giving quite a lot of money to a lot of me-
too sites with little differentiation or real value or even business models.

Just because it doesn't match the hysterics exhibited back in the 90's doesn't
disqualify this. And it seems your only argument has been that. I also found
your analysis of dot-com companies back then to be lacking.

Personally I don't think it really matters, there are way more important
economic issues that needs to be addressed, be it the real estate bubble,
credit meltdown, or the war America is engaged in.

Also, for what it's worth:
[http://online.wsj.com/public/article/SB116679843912957776-fF...](http://online.wsj.com/public/article/SB116679843912957776-fF7CtrdMDTE4n1h5Ju5pv0HKhgM_20071227.html)

And PS: I own Apple stock. And yes, it is greatly overvalued. And I love it.

~~~
Goladus
Arguing over semantics is not ridiculous at all. Semantic misunderstanding is
at the root of many disagreements.

In this case, the video uses the term bubble specifically as it was used to
describe the tech bubble in the late 90s. The video offers a number of cues to
suggest this is the intended meaning of the word.

There will always be overvaluations and undervaluations in the stock market.
That's the nature of investment risk. What's missing here is a widespread
pattern. This is like worrying that Xerox was overvalued for their Palo Alto
Research lab-- a valid concern for Xerox stockholders maybe, but no concern at
all for the rest of the world.

------
sabat
I guess what irritates me is how ignorant these Bubble People are. Any economy
can take a downturn, but if you can't tell the difference between Facebook
(overhyped but useful service) and Pets.com (worthless), and you think that
growth = bubble, you're ignorant. I'm sorry about that, but it's true.

~~~
alaskamiller
Pets.com had a legitimate business model: they had a niche market, invested in
logistics, and they sold stuff over an e-commerce site.

If anything, bootstrapping something similar nowadays and being successful at
it would make you look like a genius (a la woot).

What they did fail to do was exercise discretion with their spending. The
strategy back in the dot com days was to over-spend in order for the marketing
to tip them over. That was the strategy for Amazon from DAY 1 and it took them
almost 10 years to make a profit. But Amazon survived because of good
leadership while Pets.com obviously didn't because of bad leadership.

And as for Facebook, gee, a supposed 15 billion dollar valuation? Advertising
models that's outright creepy? That's growth?

The first bubble was a catastrophe because it involved public money. The
second bubble is going to be a headache because it involves private money. But
nonetheless when the value of something is way more than the intrinsic value,
it's a bubble.

~~~
Goladus
_The first bubble was a catastrophe because it involved public money. The
second bubble is going to be a headache because it involves private money. But
nonetheless when the value of something is way more than the intrinsic value,
it's a bubble._

It's improperly termed "A bubble" and every time someone calls it that, it
will only make the particular headache worse. When people lose money on bad
ideas, that'll hurt, but it'll happen on an individual basis. Calling
Facebook's valuation a bubble is like Chicken Little saying the sky is
falling. If enough people really start believing Chicken Little, there will be
problems; but the sky isn't going to fall.

~~~
alaskamiller
You're right. Everything is a-okay!

~~~
sabat
Obviously Goladus doesn't know about all the layoffs in the tech industry over
the past year. Everything is not a-okay, and the scores of programmers sitting
at the freeway onramp at University Avenue holding "Will Code for Food" signs
should be a lesson to all of us: don't enjoy prosperous times, because they're
secretly a bubble that's _out to get you_.

~~~
drusenko
maybe you can direct all those "will code for food" programmers this way. i
don't know of many startup companies who _aren't_ trying to hire...

~~~
cstejerean
there's a reason they'll code for food. if they were competent they would code
for stock options. (except that you could go hungry trying to eat your stock
options)

