
What the bubble got right (2004) - sakunthala
http://paulgraham.com/bubble.html
======
lhnz
Horribly out-of-date in parts. The 'substance' has evaporated.

    
    
      "I thought it would be useful if I explained what a nerd was.
       What I came up with was: someone who doesn't expend any
       effort on marketing himself."
    

I always considered Paul Graham a 'nerd' despite his excellent essays
marketing his intellect to nerds. (A positive is that he seems very humble; he
does not recurse very well, and so had to create a Y-Combinator for this
purpose. For somebody that doesn't appear to believe in marketing this man
sure knows how to signal to me.)

I also don't see dressing informally as a very positive signal anymore. Many
nerds have lost their right to wear formal clothes and they've just not woken
up to that reality yet. Companies want their executives to wear suits and ties
but their engineers have a new uniform: "no uniform". You can tell you're
wearing a uniform, because there is a reputational cost to rejecting it. My
slightly rebellious slant is to just pick the opposite of what everybody else
is doing and do that.

~~~
_delirium
I've definitely noticed that with the clothes. As a programmer, you have the
right _and obligation_ to wear an informal but fairly regimented and slightly
embarrassing uniform (e.g., cargo shorts + thinkgeek tshirt), which cements
your social position. You basically cannot dress "nicely" without people
judging you, from both above and below.

~~~
marquis
I'm a rather fashionable young woman thanks. It doesn't bother me in the
slightest when I meet someone whose clothes don't fit the stereotype, perhaps
you are in a more cloistered environment?

~~~
hobs
I wish it was not the case, but when it comes to this behavior, the social
norms are not within our personal control.

I mostly like the informal dress, but have been told more than once (by
executives) that it makes me appear like someone who cant be trusted with
authority. When I dress up, many of my ilk feel uncomfortable around me.

Wear what you like, but I have learned time and again that whatever clothing
choice you make, everyone is always judging it and making decisions based on
that judgement.

~~~
marquis
>but have been told more than once (by executives) that it makes me appear
like someone who cant be trusted with authority

I'd consider that a cloistered environment, when you are judged by others on
physical appearance. It really sucks, but I also worked hard to make sure I
have my own authority. Would you still trust Richard Stallman, wearing a soggy
full-size panda-pyjama suit and carrying a small stuffed pink elephant while
singing "bye bye blackbird" quietly to himself? Probably!

~~~
hobs
I was going to say "trust him with what?", because while Stallman can be
respected on some bounds, I wouldn't trust him to do anything but develop
software.

I take your point that where I work might be considered a cloistered
environment, but the comment about people judging your appearance is a world
wide phenomena, not something that lives in one workplace.

For example:

1\. Recently HN had an article about a younger guy who added a fake beard to
his freelancer profile, and noticed he received more gigs as a result.

2\. Attractive people get more opportunities in life
[http://www.businessinsider.com/beautiful-people-get-more-
job...](http://www.businessinsider.com/beautiful-people-get-more-job-
interviews-2013-9)

 _The average callback rate was 30% across all of the CVs sent out. For
attractive women, it was 54%, and for attractive men, 47%._ _Unattractive
women had by far the worst results, with a 7% callback rate. Unattractive men
had a 26% rate._

I could go on, but this is not a me thing, its a we (people) thing.

~~~
marquis
I totally get your point but you can choose to not have that validate you. I
put effort into my appearance because I really enjoy it, but more than
anything - anything at all - I care about how good my work is and I'd rather
be a hermit in a cave celebrated for my brilliant works. The outliers that we
love, generally aren't known for their attention to appearance first.

------
brc
I much prefer early pg to current-day pg writing. Hopefully handing over the
reigns will bring back some clarity of thought.

This is a good article which highlights several things I agree with:

>The prospect of technological leverage will of course raise the specter of
unemployment. I'm surprised people still worry about this. After centuries of
supposedly job-killing innovations, the number of jobs is within ten percent
of the number of people who want them. This can't be a coincidence. There must
be some kind of balancing mechanism.

 _precisely_. The whole 'technology gone done taken our jerbs' thing seems to
be popping up again lately - anyone taking this line needs to justify why
_this time it 's different_.

>One upshot of which is that the companies of the future may be surprisingly
small. I sometimes daydream about how big you could grow a company (in
revenues) without ever having more than ten people. What would happen if you
outsourced everything except product development? If you tried this
experiment, I think you'd be surprised at how far you could get.

 _WhatsApp_

~~~
pyoung
>'technology gone done taken our jerbs'

followed by:

>I sometimes daydream about how big you could grow a company (in revenues)
without ever having more than ten people.

Do you not see the contradiction there?

~~~
brc
No, definitely not.

A company with big revenues and a small staff means a very productive company
- someone delivering lots of value for very little work.

Whenever you have a productivity multiplier working away, jobs are being
created. The jobs might not necessarily be for the company, but the
productivity benefits show up somewhere.

It's easy to employ people - just pay lots of people to do low productivity or
negative productivity jobs. But to make a better society with better jobs, you
need productivity to go up. This requires people to lose their current (less
productive) jobs, but the forces created when this happens always create more
jobs somewhere.

Case in point....before Henry Ford automates his production line, cars are
built by hand slowly. It is a low productivity industry. He automates, and
builds many more cars, for much higher revenue per person, than before. The
price of the car drops as a result. More people can now afford cars, which
means lots more people can use this new tool to do _their_ job more
productively. Eventually all this increase in productivity increases
employment. There are specific cases of unemployment (coachbuilders, manure
collectors) but there is a rise in general employment.

~~~
pyoung
Taking your example a step further (and subsequently bringing it into a more
modern context), what happens to those jobs when Google (or someone) builds a
mass production driver-less car? Sure, a few thousand engineers will be
employed, but that's barely going to put a dent in the millions of
taxi/truck/delivery drivers that now find themselves out of work.

This is a matter of opinion, as none of us can predict the future, but I
believe that one of the purposes and goals of technology is to replace and
reduce the drudgery of human labor. If I was a VC, I would be investing in
almost any labor-replacing tech startup that came across my desk because the
market for the tech has already been validated (companies paying for the
labor) and you are bringing a more efficient solution to that market. You
believe that this process somehow results in more jobs. I believe, baring
massive changes in the education and social infrastructures, that this process
inevitably leads to fewer jobs.

~~~
brc
>what happens to those jobs when Google (or someone) builds a mass production
driver-less car?

Lots of people will no longer be employed in low-productivity jobs of driving
vehicles. That is exactly what will happen.

>as none of us can predict the future

Correct. And Henry ford didn't foresee Pizza delivery.

>You believe that this process somehow results in more jobs

The process creates higher productivity. Higher productivity leads to higher
living standards and more jobs in aggregate, though not for the affected
workers.

> I believe, baring massive changes in the education and social
> infrastructures, that this process inevitably leads to fewer jobs.

For this to be true, you must explain why _this time it is different_.

It's not the fact that a few thousand engineers replace millions of drivers.
It's the fact that the increased productivity drives down the cost of things.
The increased productivity also releases human capital and actual capital to
pursue new things and create new jobs. This leads to new jobs in entirely new
industries. It's comment to lament and say 'what are these new industries
going to be?'. But as already stated - nobody can see the future. We don't
know, but we must accept that it will happen, simply by looking at all of
human history. The fashionable argument currently is that you need to reform
education to make this possible, but other large-scale changes in technology
have happened when people usually didn't finish high school. When a person
needs to learn new skills, they generally find a way of doing so.

~~~
pyoung
>The increased productivity also releases human capital and actual capital to
pursue new things and create new jobs. This leads to new jobs in entirely new
industries.

Correct, but it doesn't necessarily result in an equal number of or more jobs
than before.

>but we must accept that it will happen, simply by looking at all of human
history.

This is where I think we disagree the most. I don't think history sets a good
precedent for predicting the future, especially in this current environment.
At no point in history have we had robots and AI. We still don't have that
now, and there are no guarantees that we will fully achieve AI, but in many
areas we are making humans obsolete and I expect this trend to continue. Using
your eariler analogy, what happened to the horses after Ford introduced mass
produced cars? They were turned to glue. In many ways, this is the issue we
are currently facing.

I do agree that highly skilled and entrepreneurial folks will create new
industries which could dramatically alter the economic landscape, but I am
still not convinced that this is going to result in full employment. These new
industries will still be taking advantage of the highly automated and
efficient technologies that other industries use and lower-skilled and less
educated people are going to find it increasingly difficult to find work.

------
grey-area
_Yahoo was a special case. It was not just our price to earnings ratio that
was bogus. Half our earnings were too...What made our earnings bogus was that
Yahoo was, in effect, the center of a Ponzi scheme. Investors looked at Yahoo
's earnings and said to themselves, here is proof that Internet companies can
make money. So they invested in new startups that promised to be the next
Yahoo._

This section seems eerily prescient in foreseeing the current bubble - replace
Yahoo with FB or Google, and it could have been written in 2013. Values are
supported by confidence in larger companies which subsist on the advertising
bought by smaller companies, which are funded in the hope of acquisition by
larger companies. When that confidence evaporates, things will collapse, even
the companies which provide true value, if they sell advertising and depend on
the entire ecosystem continuing to grow.

This bubble gets some things right too - there are of course many many
profitable and valuable communications and social networking companies (as
there were in the first boom, probably even more now), and Twitter, FB and
Google are not going to disappear any time soon, but if your income is based
on advertising or VC funding, this sort of bubble can be really damaging, and
when a crash comes, many worthy projects will be thrown out with the unworthy.

Perhaps bubbles repeat themselves too - the first time as tragedy, the second
as farce.

~~~
dredmorbius
The largest sources of advertising are the FIRE industries: finance,
insurance, and real estate. After that: retail, travel, jobs & ed, home &
garden, consumer electronics, vehicles, business, and gifts.

The problem I see here is that both FIRE and the consumer Web are largely
catabolic industries -- they're liberating some stuck capital, but I don't see
them as actually creating a whole lot in the way of new productive capacity.
Which means you've got two bubbles feeding on one another.

The good news is that it's not the incestuous Internet bubble of the late
1990s. The bad news is that it's a much larger piece of the economy. Perhaps
the only parts which have been growing appreciably.

[http://www.wordstream.com/blog/ws/2012/01/23/google-
revenues](http://www.wordstream.com/blog/ws/2012/01/23/google-revenues)

------
untilHellbanned
" I thought it would be useful if I explained what a nerd was. What I came up
with was: someone who doesn't expend any effort on marketing himself."

Sadly the personalities who dominate academia are increasingly anti-nerds.

------
michaelochurch
PG got so much wrong here.

 _(From #4, Youth) A 26 year old may not be very good at managing people or
dealing with the SEC. Those require experience. But those are also
commodities, which can be handed off to some lieutenant. The most important
quality in a CEO is his vision for the company 's future. What will they build
next? And in that department, there are 26 year olds who can compete with
anyone._

Some 26-year-olds are immensely talented, sure. Anyone who would argue against
that point is an idiot. Some people learn how to lead very early on. But the
ability to lead a team or motivate people and the ability to keep one's
company legal are _not_ commodities. Not even close. If your CEO is an idiot
or a naif then he can't evaluate his lieutenants, he will pick idiots to
manage the day-to-day, they will do shoddy work (or screw him over behind his
back) and he won't know, and disaster will ensue.

This has nothing to do with age, really, because there are many 26-year-olds
who can do those stereotypically "older" jobs.

On age more directly, the age discrimination culture is disgusting and
perverse in its half-assed homoeroticism (I have no problem with actual gay
people; my issue is with the chickenhawks who rule VC-istan, who identify as
heterosexual and are often married men, yet have creepy "I'll support your
career in order to look at you" relationships with 24-year-old, hipsterish
manboys with minimal talent. Hmmm. Nothing weird about _that_. Of the VCs who
backed Duplan and Spiegel, what do their wives think?) The '90s bubble may
have corrected for a previous (and surely pernicious) anti-young bias, but
this 2014-era, VC-istan age discrimination culture is just as disgusting and
stupid. Let's stop being crass fuckheads and just make age a total nonfactor
either way, ok?

On "vision", I would likewise say that the age correlation is probably 0.0
over the relevant range (20 to 65). However, many businesses don't require a
vision-- they require taking a known problem and executing well, and for
those, I'd argue that age is an advantage (but a very slight one) in those.

 _(From #6, Nerds) A nerd, in other words, is someone who concentrates on
substance._

Really? Because the current tech bubble is driven by fart (no typo) boys like
Lucas Duplan and Evan Spiegel, who aren't nerds. This round is actually
disgustingly conformist. It has the mechanisms of startups, but no soul. Sure,
you don't have to dress up if you work for one of these post-2008 VC darlings,
but you face closed allocation and corporate politics and cultish conformity
and boring problems, so what's the fucking point?

True nerds (by that definition) have no home in the VC-funded world these
days. It is now owned by the fratty shitscum.

 _(From #7, Options) Options are a good idea because (a) they 're fair, and
(b) they work._

I disagree. In a typical VC-funded tech company, an engineer makes $100k while
the VP/NTWTFK (Non-Technical Who-The-Fuck-Knows) working 11-to-3 and
bikeshedding makes $150k. That's 1.5x more. In equity, the engineer is getting
0.05% while the VP gets 1%. That's _20_ times more. The inequities in equity
are absurd and would never be tolerated in salary numbers. Gender and race
inequities are also much more extreme in the options/equity front.

 _9\. California_

You mean that dysfunctional broke state with extreme economic inequality?

 _Real estate is still more expensive than just about anywhere else in the
country._

That's a bad thing, and if you don't realize that, you're a dumbass with
little insight into how the economy works (101 lesson: _elasticity_ ).
Expensive real estate is what you get when regulatory corruption (NIMBYism)
meets the extreme inelasticity of housing costs: a 2% gap between how much
housing there should be and what there is can cause prices to go up 50% or
even double. The price/income ratio of housing is constant absent regulatory
dysfunction. Bay Area incomes are higher than the national average, but not by
enough to match the housing prices.

 _What makes the Bay Area superior is the attitude of the people. I notice
that when I come home to Boston. The first thing I see when I walk out of the
airline terminal is the fat, grumpy guy in charge of the taxi line._

Wait, so you can't launch a startup if there are too many fat people? Weird. I
know plenty of fat people I'd found with if they were so inclined, but what do
I know?

 _That 26 year olds with good ideas will increasingly have an edge over 50
year olds with powerful connections._

Now, the 26-year-old and 50-year-old with great ideas both get screwed over
because the VC and support and resources all go to the 26-year-old with
powerful (inherited) connections. (Or the 26-year-old with the creepy
chickenhawk relationship with the powerful 50-year-old.) Ageism begets
classism, because any 22-year-old who can get VC (in 2014, with the social
distance between VCs and peons at record high) had parental lift. What's
happening now is not an improvement.

~~~
onedev
I read about half way through before realizing that I was reading your
writing...you've switched up your spiel a bit recently I see. Usually it takes
no more than 1 to 2 sentences to figure out it's you.

This isn't meant to be negative btw. I just think it's funny how I can spot
your writing and ideas from a mile away.

~~~
sakunthala
Yeah, you start to think, wow, some criticism I hadn't considered before, then
you see the word "VC-istan" and move on.

~~~
michaelochurch
It doesn't bother me when people think I'm wrong or disagree, but just because
I use "VC-istan" doesn't mean my ideas are wrong.

VC-istan is the perfect descriptor for that ecosystem. "VC-funded world" is
too many syllables, "VC-land" sounds like a theme park, and Silicon Valley is
a geographical location more than an economic sector. Nothing works as well as
"VC-istan".

~~~
sakunthala
I meant that you're only person who uses that phrase, and it means I've read
the same argument before.

~~~
philwelch
No, this time he added in some vaguely homoerotic insinuations. His rant is
evolving; maybe in another year or two it will reach full fledged conspiracy
theory status.

~~~
__--__
Judging from these comments, it's already there.

