
Bubble or bust? Nobody knows anything - bjonathan
http://cdixon.posterous.com/bubble-or-bust-nobody-knows-anything
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charlesju
From Sequoia's perspective this was a win-win.

First off, the incentivize structure for Sequoia is simple. They want to raise
money, everything they do is based around raising more and more money.

So in 2008, when there was a chance of a depression, there were only 2
outcomes (the depression hits or no depression). If there was no depression no
one cares about what you said in 2008 because everyone is making money so
Sequoia can raise more money. If there is a depression Sequoia can refer back
to this presentation and say, "Hey! We called it." and then they gain
credibility and have an easier time raising money in a downturn.

It's a win-win for them.

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wcoenen
I find it strange that the Sequoia presentation doesn't talk about energy
prices and their effect on the economy. After all, the price of oil went
triple digits in 2008.

Historically, there is a strong correlation between spikes in oil prices and
recessions. In 2005 these guys were even wondering why a recession hadn't
shown up yet - guess they spoke too soon:
[http://www.frbsf.org/publications/economics/letter/2005/el20...](http://www.frbsf.org/publications/economics/letter/2005/el2005-31.html)

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billboebel
Something about the availability of money for entrepreneurs feels like a
bubble, but I suspect that it is not. I've been on both the receiving side and
investing side since 1999 and the pace of change in terms of increased
availability of money from angels is just weird. I suspect it is not a bubble
though and rather it is the early stage of complete disruption of power in the
investing community. And of course disruption = opportunity, so as angels we
should be investing more right now, not less.

~~~
trotsky
_I suspect it is not a bubble though and rather it is the early stage of
complete disruption of power in the investing community._

The thing is, every time there has been a bubble, one of the major arguments
always presented is that well, this time it's different so the traditional
measures don't apply.

In 1999 it was increased worker productivity (due to IT advances) that
supposedly supported the outsized P/Es. That turned out to just be a
smokescreen, of course.

It might even be argued that an excellent indicator of being in a bubble is
the existence of arguments about why it's not a bubble even though it looks
like one. That means you're at a stage where even the bullish market forces
admit that traditional metrics do not support the increased valuations.

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pshapiro
When there are no problems present, and you make predictions based on only the
effect you see, it's easy for you to be tricked about the present
circumstances. It's almost like saying that spring is here again because it's
65° in Brooklyn today... even though winter is right around the corner.

~~~
sabat
Or, perhaps more aptly in this case, it's like saying winter is here because
it got cold for a week in April. Sequoia's infamous presentation always struck
me as hyperbolic; "RIP good times", really? Forever? Long, long recovery?
Anyone who is that certain of the future is probably got some hidden agenda. I
don't know what Sequoia's was, but it was obvious that we shouldn't take it
too seriously.

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jdp23
going from "Sequoia's strongly-worded opinion in 2008 proved to be wrong" to
"nobody knows anything" seems to be a bit of an over-generalization

~~~
sabat
Maybe, but it still seems like a fairly valid point. The key is in Sequoia's
msg being "strongly-worded", which it was. The presentation read like the
author knew the future _for certain_ and that it was all bad news. In all
likelihood, some partner had worked himself up into a tizzy and then got all
the others whipped up too. Cuts were not necessarily advisable; I think a call
to arms may have been in order, but not the drastic acts of desperation that
they were calling for.

No one knows anything: it's true. The more I claim that I'm sure of what's
going to happen, the less you should believe me. That's this guy's point.
Sequoia was full of it. Downturn? Sure. Downturn with a slow recovery and soup
lines for a generation? Please.

