
This Tech Bubble Is Bursting - randomname2
http://www.wsj.com/articles/this-tech-bubble-is-bursting-1462161662
======
andersen1488
These journalists, along with most people outside the tech industry, fail to
see the overall picture. 4 out of 5 of the largest companies on earth are tech
firms, and none of them were even close to that position 10 years ago.
Software runs the world and tech companies are the single largest driver of
the modern American economy, making the overall pool of companies that may go
belly up at any given time larger. Public consciousness just hasn't caught up
to that fact yet since it happened so fast.

~~~
refurb
I'd have to disagree. It may seem like tech is driving the US economy when
you're standing in Silicon Valley, but it's not even in the top 5.[1]

Energy, manufacturing, transportation, healthcare and agriculture have seen
the most growth lately.

Of course tech can play a role in all of those industries, but overall tech is
not that big a part of the US economy.

[1][http://www.investopedia.com/articles/investing/042915/5-indu...](http://www.investopedia.com/articles/investing/042915/5-industries-
driving-us-economy.asp)

~~~
rm999
Technology isn't just an industry - it's a way of doing things and is becoming
ubiquitous. When people think "tech" they may think of sharing status updates
or searching for a restaurant. What about driverless trucks (transportation),
gene sequencing (healthcare), industrial robotics (manufacturing), automated
warehouses (retail), solar research (energy), farm-specific yield optimization
(agriculture)?

This stuff is all being driven from within the tech industry, even when it
will benefit "other" industries.

~~~
zadig
I think the point the previous commentator was trying to make is the
distinction between the 'tech industry' a la Silicon Valley versus other
industries - and it would be unfair to credit the former with any innovation
in the latter. Pretty much every industry since we have invented fire has
grown through advances in 'tech'. So what makes a firm a 'tech' firm - in this
day and age it's hard to say, and I'm not sure if it's a useful exercise.

~~~
ChuckMcM
A "tech" company is a company that provides a good or service that is either
completely new and only possible because of a technological innovation, or is
a new company providing an existing service using a different vertical stack
based on technology which came available after the incumbents were started.

Uber is a "tech company" because as they are providing a new business model
for a livery service based on using an application to make a market that is
distinct from the previous market.

Facebook is a "tech company" because they are providing a business model
around sharing information between acquaintances (a social network) using an
application and a web site.

Fedex is not a tech company as they are augmenting but not replacing their
model or their processes. Foster Farms is not a tech company as they have not
fundamentally changed the way in which they raise chicken.

I go back and forth on Tesla or SpaceX. Consider Tesla, they are a car company
but electric cars have been around forever, their most successful incarnation,
the Golf Cart, has dominated golf courses for decades. It wasn't the "idea" or
the "product" that made the Roadster and then the Model S successful, it was
the execution on the vision. Similarly SpaceX rockets are just rockets with
better execution and better alignment with available technology.

~~~
eldavido
A better definition might be, how much revenue (measured % of sales) does this
firm reinvest back into R&D?

Let's try a few examples: P&G: Not a tech company. They spend tons of money on
advertising to get products on shelves and on TV that tons of Americans buy.
They can innovate in packaging and distribution, but honestly not that much.

Tesla: tech company. Spending tons of R&D. I don't know how much, but it's a
lot.

Pepsi: Not a tech company.

Your local grocery store: tight margins, probably not a tech company.

AmaGooFaceSoftPle: Billions/yr on new product development. Tech companies for
sure.

~~~
greglindahl
This search gives a nice summary of P&G's supercomputing-driven research:

[https://www.google.com/search?q=procter+and+gamble+high+perf...](https://www.google.com/search?q=procter+and+gamble+high+performance+computing)

It's not just packaging and distribution. Now it's fair to point out that P&G
spends less on R&D than tech companies, but it's not zero.

------
tarr11
If journalists keep writing articles about tech bubbles every few months,
someone is bound to be correct. Looks like this "trend" started up again in
2013.

[https://www.google.com/trends/explore#q=tech%20bubble](https://www.google.com/trends/explore#q=tech%20bubble)

~~~
api
I lived through 2001. This is not a bubble. As exhibit one I point out that
everyone has been calling bubble since 2012. Real bubbles have more rah rah
and less skepticism and more crazy.

I do see a slowdown but this is nothing like dot.com. Seems like a normal
correction and is not really separate from the rest of the economy being
uncertain. Nothing tech specific.

Bubble is an overused term. An inflated market is not a bubble, and a
correction is not a bubble bursting. Markets go up and down all the time.

~~~
roymurdock
It is not a bubble in that market caps are not "popping" \- disappearing
instantly, overnight, leaving shares worthless and dissolving fortunes. The
current tech market is more like a punctured soccer ball, slowly leaking air.
Regular people won't see this as a crash in their etrade portfolios; rather,
they will notice a long, slow decline in the value of their pension/retirement
funds.

~~~
abritinthebay
So... what you're saying is that it's a standard part of the normal cycle
where things grow for a while, plateau or shrink a bit, then grow again?

i.e. Not A Bubble.

~~~
roymurdock
Yeah, it's not a violent growth/crash cycle that people usually refer to as
the outcome of a "bubble" (1929, 1987, 2001). I.E. the velocity is different.

Right now it looks like a gentler reversion to the mean in GDP growth from the
peak of this 6-year business cycle, which was much less pronounced than
previous business cycle peaks.

But who knows - the failure of a large firm that was generally thought to be
solvent could set off another crash.

~~~
abritinthebay
It could, but if anything was going to do that then Yahoo would be the best
candidate and I don't see panic over that situation.

------
giaour
Shouldn't a bubble burst be sudden and definitive, like fancy tulip bulbs
being worth a king's ransom one day and close to nothing the next?

I guess "the high tech sector may experience a reasonably paced contraction"
wouldn't get as many clicks.

~~~
pj_mukh
You are more correct than you think. A reasonably (see:boring) contraction
with no real 90's style drama is more likely what is happening.

------
pj_mukh
If everybody is a couple of layoffs away from profitability or multi-year
runways, where are the big falls? Who is the Pets.com this time around?

P.S: Also mixed messaging ([http://www.wsj.com/articles/fidelity-in-reversal-
raises-valu...](http://www.wsj.com/articles/fidelity-in-reversal-raises-value-
of-many-tech-startups-1462041176?mod=e2tw)). Maybe its not all sky-is-falling
doom and gloom.

~~~
untog
I know it'll be an unpopular opinion, but I really think Uber could be in for
a big fall. Not because they haven't been successful, but because they've been
_too_ successful - they've opened the market up for themselves but also
competitors.

Most Uber drivers I ride with have at least one other ride share app open,
none of them have a loyalty to the company. In fact, many actively dislike it.
And riders I talk to aren't loyal either - they'll happily flip between Lyft,
Uber, and whatever else is available, depending on who is offering a discount
code that week. I don't doubt that Uber has a better investment in the future
(self driving cars and the like) but it remains to be seen if they'll make it
that far - that future is still a ways off.

By itself that wouldn't be so drastic, but Uber has taken on a _lot_ of
funding and obstinately refused to go public. It could put pressure on other
companies that are currently quite happily staying private, too.

~~~
potatolicious
Agree - Uber suffers from the same problem as Square. They created a new
product expecting it to be stickier than it actually turned out to be.

In Uber's case it turns out "better than a yellow cab" is a pretty low bar to
clear, and neither drivers nor consumers have much loyalty and are highly
price sensitive, creating a race to the bottom.

In Square's case it turns out merchants will gladly use a slightly-worse iPad
UI for payments if the fees are lower, and consumers don't really care
regardless. Again, race to the bottom.

Right now it looks like Uber is engaged in an epic price war in many markets
where the prices are unsustainably low - and these prices are sustained by a
combination of setting VC cash on fire and squeezing driver pay. Having no
insider information into Uber, I'm a bit skeptical that they're _that_ close
to be sustainably profitable.

~~~
uptown
Uber's problem seems to be that they need to raise prices and cut driver rates
once they've captured a market and driven out competition. Either that, or
they need to switch to driverless cars to eliminate that component of their
business - but that seems to be a ways off, and there's no reason to think
other players won't be just as successful when you're able to remove drivers,
one of the larger variables, from the overall equation.

[https://twitter.com/neilanalien/status/627873374505562112](https://twitter.com/neilanalien/status/627873374505562112)

------
velox_io
While I don't think that the bubble is bursting, it does seem that the values
some companies which have been massively overvalued, are being adjusted. I'd
much rather see this than companies loosing 90-99% of the value overnight -
That's a burst.

If interns are making $80k a year, I think most of us are safe (for the time
being).

~~~
akhilcacharya
There are many making around $102K now.

~~~
BookmarkSaver
What do you mean by "many"? And do you have a source for that?

Lucrative internships are generally like $25/hr. 102k is twice that.

~~~
akhilcacharya
"Many" meaning the 1000's of interns working at places like Facebook (~8k +
housing), Dropbox, and Jane Street.

I personally wouldn't consider $25/hr to be particularly lucrative in the
grand scheme of things considering how highly paid many interns in SV/SEA/NYC
area. In my area, yes.

------
chmaynard
This is one of those articles that consists mainly of speculation, anecdotes,
and quotes from phone interviews. It's hard to tell if Mimms ever left his
office to do the foot-soldier work that serious journalism requires.

~~~
tbrownaw
With everything moving online, just how important _is_ going places in person
these days?

~~~
chmaynard
Gathering information online and by phone is probably not sufficient to find
out all the facts and to develop leads. For example, insiders may be reluctant
to reveal everything they know in phone calls and email. It's too easy to
eavesdrop on electronic communications.

------
zekevermillion
There is no bubble. There may be a dip in funding for companies of a certain
stage, which could be due to any number of factors. Fund vintage (funds raised
optimally at bottom of 2009 are now fully allocated); shift in focus away from
sectors (no money for social media); random variance in relatively small pool
of VC (tiny portion of total capital invested in small businesses).

------
amsheehan
How many people with a WSJ login actually read this before commenting?

~~~
chrisdalke
Tip: If you copy and paste the title into Google and choose the first result,
you can view the full article. The paywall only applies when the article is
redirected from another website.

------
roofer
Buy Credit Default Swaps for private tech unicorns!

~~~
ma2rten
How does that work exactly? Can you also do that as an employee of that
company to limit your risk?

~~~
hackerboos
I believe it was a joke - [http://www.venrock.com/why-you-cant-short-private-
company-st...](http://www.venrock.com/why-you-cant-short-private-company-
stock/)

------
broody
Burst already God damnit, I'm sick of this slow motion train wreck.

------
lowglow
If the funding bubble for startups has burst, fine, look to crowdfund startups
and projects that people actually want to use.

I wanted to validate ideas early and tighten the feedback loop for products I
was building, so we built Baqqer in the hopes it would create transparent
projects and companies that help grow community from day one. Less time
floating around until launch going "I hope someone uses or pays me for this."
and more time spent figuring out what people actually want.

------
typon
I honestly think this constant talk of tech bubble is the best thing that can
happen to this industry. It keeps people skeptical and allows the industry to
make course corrections. It's a much needed regularization.

------
jdauriemma
Credit is much cheaper than it was in 2000. It's simply not as appealing for
investors to make hasty exits when cash is so easy to come by from other
sources.

------
pfarnsworth
I have a feeling it's going to be a "soft-landing" in terms of the tech scene
in SV. I was hoping for a burst and a bit of a fall-out, but unfortunately
everything I'm seeing is that the bubble is deflating slowly which is allowing
for another round of inflation in the subsequent year, without the cleansing
effect of a true burst like 2000. That would be unfortunate because it will
mean that the next burst 5 years from now will be all the more painful, and we
don't currently get any relief from high housing/rent, traffic, etc.

------
tbsmartens
If we think about the future of technologies, I am pretty sure there is a
bubble:

[https://medium.com/@tbsmartens/is-iot-the-end-of-rocket-
inte...](https://medium.com/@tbsmartens/is-iot-the-end-of-rocket-
internet-2697f4b7a3d1#.r0mgmh3hy)

It´s all about singularity: How many services do you need that all do the
same? Not too many, not too many - and this realisations will hit everybody,
from ad-tech to server technologies to consumer services.

------
wellboy
not bursting, deflating

------
ryguytilidie
FINALLY someone predicts the tech bubble bursting!

------
Zelmor
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hathym
stock markets does not believe that yet.

~~~
adventured
So long as the Fed's policy is effectively 0% interest rates, that will
continue to support significantly inflated valuations (privately and
publicly). And the Fed isn't going to raise rates meaningfully (they can't),
they've been lying about that for years. At this point negative rates in the
US are more likely than any sort of normalization is.

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x3n0ph3n3
Drivel like this is why I refuse to pay for WSJ.

------
vonklaus
no, it isn't.

------
adjwilli
I guess I'll never know how exactly it's bursting since that information is
behind a paywall.

~~~
headShrinker
Google the article to get through the paywall. Or if you aren't poor like me,
buy the subscription. It's a pretty good newspaper.

[https://www.google.com/#q=site://www.wsj.com/articles/this-t...](https://www.google.com/#q=site://www.wsj.com/articles/this-
tech-bubble-is-bursting-1462161662)

~~~
JTon
The cost is $28.99/mo for anyone who's interested

------
draw_down
I'm sure there is a bubble bursting, whatever that means. But it's interesting
that this narrative always involves mentioning Zenefits, which is suffering
because it ran afoul of the law, not due to an economic downturn.

