
'We're in a Bubble' - dwaxe
http://blog.samaltman.com/were-in-a-bubble
======
minimaxir
I'm disappointed to see this from Sam.

After Twilio filed for IPO, someone wrote a "here's what Hacker News said
about Twilio," which only focused on the hilarious-in-hindsight but negative
comments about the startup
([https://news.ycombinator.com/item?id=11786464](https://news.ycombinator.com/item?id=11786464)).
Naturally, it got massive retweets from venture capitalists who espouse the
haters-gonna-hate attitude.

As dang notes in that other comment thread, this kind of argument doesn't look
at the other side at all: there have been some _seriously shady dealings_
going on with unicorn startups. IPOs are failing. And let's not get started on
Theranos.

~~~
rubiquity
Not to mention all of the unicorns supposedly worth billions that aren't
IPOing. Because IPOing would finally let the public decide what they are worth
(it would be a harsh wakeup call for a lot of them). Instead we're stuck with
their VC cronies stuffing self-serving valuations down everyone's throats.

By the way, I too am worth 2.5 billion dollars. What?! You want me to prove
it?! Get off my lawn!

~~~
coldtea
> _By the way, I too am worth 2.5 billion dollars. What?! You want me to prove
> it?! Get off my lawn!_

While I agree with the first part of what you wrote, when it comes to this I
can say:

You don't need to prove it (and those unicorns didn't prove it either). You
just need to be able to get some millions of dollars on your 2.5 billion self-
valuation, and you'll be as good as them.

Because they did that.

~~~
andyjdavis
>You just need to be able to get some millions of dollars on your 2.5 billion
self-valuation

Mathematically speaking you just need to get someone to give you a single
dollar in exchange for 1/2500000000 of 100% ownership, meaning that 100% is
theoretically worth $2.5 billion.

~~~
tedmiston
A classic post from 37signals:

PRESS RELEASE: 37SIGNALS VALUATION TOPS $100 BILLION AFTER BOLD VC INVESTMENT
[https://signalvnoise.com/posts/1941-press-
release-37signals-...](https://signalvnoise.com/posts/1941-press-
release-37signals-valuation-tops-100-billion-after-bold-vc-investment)

------
YZF
"Markets can remain irrational longer than you can remain solvent"

Or perhaps the more apt way of putting this in our times is: "Multiples will
be crazy high as long as central banks keep interest rates crazy low"

Rather than thinking about this in terms of bubbles I think it's fair to say
that the probability of getting very high ten year returns on the US stock
market at these valuations is low. The problem is there's no other asset that
will give you the chance of a better return. That's no coincidence.

Apple's P/E is 10.85 according to Yahoo Finance. That's _low_ given current
interest rates.

EDIT: The average Nasdaq P/E is 22.55 ... This is historically high but is
~4.4% vs. the 10 year treasury being 1.61% (and I say that painfully as I
attempted to go short at one point). That is basically the story right there.

~~~
JumpCrisscross
> _Multiples will be crazy high as long as central banks keep interest rates
> crazy low_

I have no idea how earnings multiples wound up with their pay-offs in the
denominator. (Since it makes stupid things look bigger, and by default,
anecdotally, most people agree bigger is better, I'm going to blame investment
bankers.)

Thinking of a 22.55 P/E as a 4.4% E/P, _i.e._ 2 percentage points above the
30-year's 2.4% [1] is hugely clarifying. (I personally prefer the Shiller CAPE
[2] for long-term broad-market assessments. It sits at 25.93, _i.e._ a 3.9%
yield or 1.4 percentage points over the 30-year.)

[1] [https://www.treasury.gov/resource-center/data-chart-
center/i...](https://www.treasury.gov/resource-center/data-chart-
center/interest-rates/Pages/TextView.aspx?data=yield)

[2] [https://en.wikipedia.org/wiki/Cyclically_adjusted_price-
to-e...](https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-
earnings_ratio)

[3] [http://www.multpl.com/shiller-pe/](http://www.multpl.com/shiller-pe/)

~~~
crystaln
Markets factor in growth.

~~~
eru
JumpCrisscross was talking about using 1 / n instead of talking about n
directly.

------
baristaGeek
For those of us who are young enough (30 or less) to not have witnessed the
internet bubble at a conscious age, we might be tricked to think that we're in
a bubble due to certain indicators. The NASDAQ index, the valuation prices,
the money poured into venture capital, etc.

To those of you like me I recommend you to read about what was happening in
95-99. The panorama was crazy, and today's context doesn't compare to the one
of those days.

At the end, if the macroeconomic environment changes, who cares? Yes, paying
attention to the macro is important and that may even imply changes in
strategy, but should you not start a startup because there's a bubble? Even
worse, should you (person who hasn't built anything but criticizes everyone
who builds something) try to convince your friends not to start startups
because we're in a bubble?

The main difference between today and 1999 is that digital products are
actually generating value in people's lifes. Please don't compare pets.com to
WhatsApp

~~~
hourislate
I was curious if you could tell me what value WhatsApp is actually providing?
or for that matter facebook or twitter? Are they on the bleeding edge of
scientific discovery?

I always felt they were like a social outlet for folks to waste time and their
only revenue stream was advertising.

~~~
nyxtom
Actually, this - I believe - is the entire premise why we have no bubble this
time around. It's because these companies _are indeed_ on the bleeding edge of
scientific discovery. The brightest minds in research work at these companies.
The research and development that comes out of these companies, that create
new open source work, and spawn out new markets in analysis, intelligence,
economics - all of the work from these companies fuels growth for every other
business out there who use any part of the technology stack to drive their
business model. Just my 2 cents

~~~
overcast
I'll give you Facebook, and MAYBE Twitter. But WhatsApp is a messenger
service, a space where tons of others have come and gone. I'm not sure what
bleeding edge they are sitting on in regards to scientific discovery.

~~~
hourislate
Facebook is worth more than all the major auto manufacturers in the world
combined. It is worth more than Boeing and Airbus and General Electric
combined.

Where do they make the majority of their money? Is it advertising? or is it
investments that they have made with public money? I am curious what their
profits look like that their valuation is 328 Billion dollars.

~~~
imtringued
That's because the VW stock price crashed because of "Dieselgate". The VW AG's
assets alone are worth €381.935 billion and they achieve a far higher revenue
of €213.292 billion (VW AG) vs $17.928 billion (facebook).

------
caffeinewriter
Just because the bubble hasn't burst yet, doesn't mean we're not actually in a
bubble. That line of reasoning irks me a bit, but still, it is laughable how
the imminent bursting of the bubble has been predicted for nearly a decade.

~~~
jrbapna
If a bubble lasts over 10 years, is it really a bubble?

~~~
maxerickson
Possibly, the defining aspect of an investment bubble is the popping.

~~~
jrbapna
But the term bubble, at least when used by the media, also seems to have a
connotation of bursting in the near future. If someone told me tech was in a
bubble, but the pop wouldn't be for another century, I would not define it as
a bubble. Even if the future pop was enormous.

~~~
vectorpush
What if the century long bubble concluded with a pop that resulted in total
economic collapse? I'm not suggesting that is likely, just that the defining
characteristic of a bubble seems to be the magnitude of the fallout after the
pop, not the span of time leading up to the pop.

~~~
jrbapna
Investors, especially those of public companies, are known to be short
sighted. Typical investors would never call it a "bubble" if they felt the pop
wasn't for another decade, let alone a century.

Perhaps both the magnitude and the time leading up to it are of equal
importance.

------
bdrool
If the intended insinuation of this essay is that somehow there _aren 't_ a
bunch of seriously over-valued companies out there, or that there _isn 't_ a
long-overdue downturn on the way, then I'm afraid I can't bring myself to
agree.

People young enough to have never been through a downturn in their
professional career are usually in denial right up until the moment it
happens. And the people who try to call the bubble early, as funny as it may
be to make fun of them as is being done here, are usually the ones who have
been through it before, see it coming early, and try to warn everyone, even
though no one ever listens (too busy enjoying the party!)

~~~
dpark
> _And the people who try to call the bubble early, as funny as it may be to
> make fun of them as is being done here, are usually the ones who have been
> through it before, see it coming early, and try to warn everyone, even
> though no one ever listens (too busy enjoying the party!)_

First, someone is _always_ "calling the bubble". At the bottom of the housing
market there were people screaming that it was going to keep dropping. People
have been calling the tech market a bubble for literally decades. And
conversely, there are always people claiming that we're nowhere near the top,
even when we are. It's not useful to listen because the reality is that no one
really knows. If you think we're the top of a bubble, then cash out and be
happy with your superiority.

Second, what are you, as an employee, going to do if you think the tech bubble
is going to pop? Sure, you should be saving, but you should do that anyway.
You shouldn't be over invested in tech, but that's also always true. What
meaningful steps should you take if you believe a tech bubble is about to pop
that you should not take anyway?

~~~
icebraining
Isn't it common in SV to accept jobs paying lower than market value in
exchange for equity? Presumably, if one thinks the bubble is about to pop,
they should avoid those jobs in detriment to offers from "safer" big
companies.

~~~
dpark
I think this is probably in the list of "think you (shouldn't) do anyway". If
you're a normal employee with a small amount of equity, the reality is that
you are overwhelmingly likely to _not_ cash in big even in the event of a
successful exit. If you're being paid in large part with equity, then you're
probably being underpaid, not a great decision in any market.

But you're right that knowing a bubble is about to pop might certainly
dissuade many people from entering this kind of risky, lopsided employment
deal.

------
spitfire
Over the last 16 years we've seen several boom/bust cycles in speculative
markets driven by interest rates.

First the bursting of the first tech bubble. Then Greenspan's housing bubble
in 2001-2007. Then interest rates were held abornmally low, for 80 months
straight, which is something that the world has _never_ seen.

Would we have seen this tech boom if interest rates had been say 5% and
capital had somewhere else to flow?

I'm pretty wary of "The music hasn't stopped playing, so it can't possibly be
a bubble" arguments. Lets watch what happens as rates go up and venture backed
tech has to compete with other returns.

------
rrggrr
Those aged 65 and up control most of the investment capital in the United
States. This is not a risk-taking demographic regardless if the capital is
family money or managed money. It is a demographic that wants to preserve
capital in exchange for modest returns.

The same can be said for pension plans who formerly invested heavily in
alternative investments, and who now must ensure fund stability as pension
payouts peak in the coming years.

Foreign investors and sovereign funds are under increased pressure to keep
foreign currency at home, particularly in China and Russia.

Interest rates are poised to rise, held back by a US Federal Reserve loaded,
cocked and ready to fire; thereby increasing VC carrying costs.

The global political environment is not favorable for economic investment.
Highly publicized bellicose rhetoric and outright conflict is pervasive.
Investors loathe the uncertainty and anxiety this creates.

 __So, this time its different __

I suspect there may be strong returns to be had in M &A, particularly after
Microsoft's aggressive bid for LinkedIN. I note even Twitter is performing
well today*. I imagine there may still be strong IPO's, like Twilio seems
positioned to be. But, I believe we're entering a less liquid and lower alpha
period in investing.

I can't say I have special knowledge on the topic, other than being a close
observer.

(Disclaimer: I do own TWTR)

------
profmonocle
> One analyst predicts Facebook will easily be worth $200 billion by 2015.
> Right on! And by 2020 it could be the first company with a $1 zillion market
> value, so buy-buy-buy, everybody!

Decided to look this one up. It hit $200B in late 2014, so that prediction was
impressively spot-on:
[https://ycharts.com/companies/FB/market_cap](https://ycharts.com/companies/FB/market_cap)

~~~
hourislate
They are worth more than Boeing and Airbus and GE put together.

Actually they are worth more than all the big auto manufacturers in the world
combined.

Incredible. What were their earnings?

~~~
imtringued
Airbus has 4 times the revenue.

~~~
soared
Facebook has insane yoy growth though.
[http://www.statista.com/graphic/1/268604/annual-revenue-
of-f...](http://www.statista.com/graphic/1/268604/annual-revenue-of-
facebook.jpg)

------
mark_l_watson
Well, that is the problem with people predicting the future: they may be
correct on fundamentals but the world is a chaotic place and predicting just
when something will happen, even if it is likely to happen in the future, is a
bad bet.

I personally believe that the current economic regime, requiring constant
growth (and large growth) for health is not sustainable. Am I willing to bet
on when the next big economic crash will occur? No.

------
gedrap
I don't really get the point.

So at the moment, today, tech industry isn't dead / crashed . So we can find
people who said that it will and point at them that they were wrong. And if
the crash comes tomorrow, are we going to say 'well, it was predicted soooo',
do the usual post-fact rationalization on how obvious it was, etc.

But so what? We can do exactly this for any prediction whatsoever. Wars,
financial crashes, economical and political events, etc. People, from cab
drivers to executives and ministers, make wrong predictions all the time.

I honestly don't see the point of it, other than highlight that someone was
wrong and... feel good about yourself that you were on the winning side this
time?

Should we stop predicting? Yeah, probably. But the ending 'And now Trump
thinks we’re in a tech bubble too, so maybe it’s true.' doesn't really deliver
this message.

------
coldtea
One difference between a bubble and a declining market segment is that the
bubble bursts -- abruptly.

So it doesn't matter whether people repeat prophecies or doom for a long time
or not -- unless it's actually a bubble, it won't ever burst. At worse it will
start declining slowly.

That's why the arguments like "it hasn't burst all those years so it's not a
bubble" don't get it either.

Being a bubble is not something that has to do with duration (whether it lasts
for a long time or not) -- it has to do with the non-linear effects of the
burst.

Of course it the burst never comes, or it's instead some gradual decline, then
it's not a bubble.

~~~
VladKovac
So you're telling me you can only tell if it isn't a bubble if the market
steadily declines eventually? Also how much should it steadily decline by
before we're sure it's not some local decline phenomenon unrelated to the
bubble?

Whatever "bubble" means, it should probably only be used as a description of
an abrupt crash in retrospect, otherwise we're always in a non-falsifiable
bubble state. Saying "We're in a bubble" really just means colloquially "I
think this market segment is overvalued", probably not much more than that.

~~~
coldtea
> _So you 're telling me you can only tell if it isn't a bubble if the market
> steadily declines eventually?_

No, that's just its defining characteristic. You can "tell" by other signs too
-- but they could be misleading.

> _Whatever "bubble" means, it should probably only be used as a description
> of an abrupt crash in retrospect, otherwise we're always in a non-
> falsifiable bubble state._

That's the case with every phenomenon that depends in the final result for its
definition. E.g. is an act X "beneficial"? We might have some heuristics, but
we can only certainly know from its effects after it is completed.

------
jasonjei
The Microsoft LinkedIn acquisition seems to have positively signaled investor
confidence, in spite of calls that the sky is falling. Whatever odds there
were for a "bubble burst" are probably lessened by this purchase.

~~~
notadoc
Maybe, or it's a sign that companies are recognizing they are richly valued
and want to take advantage of that while it lasts.

MSFT has a P/E of 38, for example

If I had to guess, I think we'll see a lot of M&A activity at some very high
prices from other companies that are richly valued.

~~~
imjk
That's true. Even during the dotcom bubble, internet incumbents used their
high valuations to leverage questionable acquisitions. Yahoo's purchase of
Broadcast.com for over $5B being the most notable example.

------
reilly3000
The only real indication that we are in a bubble is the frailty of the future
of digital advertising. I don't think there are many hypervalued hardware
firms. Advertising hinges on corporate and consumer purchasing power which
seems to be healthy if slightly waning, and to a certain extent the personal
tolerance of ads and highly abundant Web content. Outside of the US the
appetite for both continues to grow year over year. While display on publisher
sites has many weak spots, search and social ads a solid footing on most
advertiser's budgets. They won't dissappear overnight. What will?

------
Dwolb
This post suffers from confirmation bias which feels weird coming from a
writer whose entire accelerator is founded on principles which exploit other
peoples' biases (e.g. others are biased toward teams with traditional
credentials whereas YC evaluates more on accomplishments and building things)

------
alekratz
If you say "we're in a XYZ bubble" for long enough, you'll eventually be
right.

~~~
dpc59
The thing is that the nature of speculation is to generate bubbles. Every
financial market is a bubble, financial products are always overvalued
(relatively to their current earnings) because people believe they will be
worth even more in the future. The real question that needs to be answered is:
when will the bubble pop? AFAIK there's no scientific way to answer that
question.

~~~
mrep
Yes and no. Speculation creates bubbles when people overestimate but not when
they underestimate.

Financial products are definitely not always overvalued either. Accounting was
created so that we can properly evaluate what a company's overall value
discounted for future earnings and they are pretty accurate (accounting was
never my favorite subject so that can probably be better defined)

------
adventured
It seems like it was just yesterday that everyone was arguing the Facebook
valuation from Microsoft's investment was impossible to ever live up to.

$15 billion. They'll do half that in net income in the next four quarters.

Interestingly the $125 per user figure quoted on the Gigaom article (the $15
billion valuation divided by their daily actives or total users at the time),
is now more like $195 per user (1.68 billion daily actives with $328b market
cap).

------
nikdaheratik
Whatever this is, it isn't a repeat of the late 90s. The term "bubble" doesn't
even mean anything except that alot of people, many of whom aren't even
investing or selling short, assume that the prices are way higher than they
should be.

The 90s was a typical gold-rush type of scenario where no one knew what
anything was worth, and so investment continued until someone figured out that
there was no one everyone could make money even if the entire _mountain_ was
made of gold and started betting against the herd.

Going by the cyclical pattern, we're overdue for a recession in the U.S.
However, no one knows how severe it could be, especially considering that the
"recovery" from the '08 meltdown was tepid at best.

As far as tech investing goes, the best way to make money is to back a number
of good looking horses and hope the wins pay for the losses. Which is the same
as it always was. If you're smart, you'll also diversify in case something
does happen to cause the entire industry to take a dive. However, short of a
major quake taking down most of SV, the number of different ways businesses
are trying to make money means that, IMO, it's more difficult for one event to
take them all down, unlike 1999.

------
aabajian
Anecdotal, personal, and completely my opinion, but my parent's entire life
savings is $750,000. That's about how much Mike Markkula invested in early
Apple ($250,000 in 1977 dollars adjusted for inflation). I like this figure
because it represents a serious amount of money - you _could_ retire off of
it, if you're frugal. So why take the risk of investing such a large sum in a
startup?

I presume that the objective of investors (who have much more money that
$750K) is to either to a) make money or b) make money and bring a new
technology/innovation to market. In a bubble I see more of the former (focus
on money) without the innovation piece. How many car sharing
(Uber/Lyft/Sidecar), food-delivery (GrubHub/OrderAhead/DoorDash), and credit
card alternatives (Venmo/Coin/Stratos) do we really need? Would the founders
of such companies put their retirement savings into starting these companies?
Maybe, maybe not.

Innovation is key to keeping a bubble at bay. Y combinator has quite a few
companies where the goal is to make money through innovation. These are
ventures dedicated to biomedical research (DNA sequencing/Gene Mapping), novel
algorithm development (AI/Machine Learning), improving social welfare (Water
Filtration/Education), etc. I'd be happy to see a world full of these, and I
wouldn't call it a bubble. It would be people pursuing ideas that could solve
real problems in the world. Ideas that are worth investing your (and therefore
an investor's) money.

I believe that innovative companies keep a bubble at bay precisely because
they are less likely to succeed. Investors must faithfully evaluate innovative
companies to see if their technology is feasible and if the market is ready.

~~~
jacquesm
The difference here is that if you're near retirement age and that's _all_ of
your money investing it all in a start-up is the worst possible thing you
could do with it given the stats.

------
datashovel
I have a hard time understanding precisely what gives these companies such
high perceived values.

In the end I have to believe people are measuring the value based almost
exclusively on the website's "traction". Frankly, I think "traction" is an
outdated metric (especially when it comes to the web).

I almost feel like I have to remind folks here (who are arguing against the
premise that we're in the middle of a period of extraordinarily excessive
valuations) that the web provides an almost frictionless environment to
change. If tomorrow someone launches a better LinkedIn, there is ZERO reason I
can't switch over (or use both) that same day).

In tomorrow's world I see individual engineers (or surely teams of less than
10) will have the capacity to build a product better than LinkedIn, at and
beyond the scale of LinkedIn, in their garage (thanks to the cloud). With
little to no investment.

In the future (by my estimation the not-too-distant future) $20+ billion for a
resume website will be unconscionable (if it isn't already).

------
draw_down
The strangest thing to me is how upset this makes people, even though it
doesn't affect them, at least not directly. Look at the quote about Facebook's
valuation- who gets so upset about that?

Why is it an affront to you if some business guys can figure out a way to call
FB worth $33B? Of course now nobody would question that, because they're one
of only two games in town when it comes to advertising. But even before that,
why get so pissy? If the valuation is sooo crazy then bet against it. Why get
so upset that LinkedIn sold for $26B? If you think MS wasted their money then
let them waste it.

Why be so concerned that VCs are making bad bets? Let them! Are you a limited
partner? Then who cares?!

I get that people don't like the knock-on effects, rent goes up, engineers are
harder to hire. But I don't see why anyone should give a shit if a dumb VC
wasted their firm's money on a dumb idea.

~~~
maxxxxx
The VC is not wasting his own money but some people's pension fund money. In
addition they distort the market to make it difficult for regular companies to
compete with companies that run on investors' money instead of profits.

------
vasilipupkin
the fact that there are very few tech ipos is probably the best indication
that there is a bubble in common stock valuations of private companies, which
would not be supported by public markets. Why? because public markets have
many sophisticated players who can easily sell short and private markets
don't.

------
ijafri
I don't think the bubble thing is true for our time, nor it will be in the
near future, it's just tech has become more competitive than ever. I am too
young to know exactly the circumstance surrounding the last .dot com bubble
when did it happen ... but I guess, it could have happened, the VC had not
seen the full potential of the internet back then...

I can't buy the notion, that we will or ever see a bubble ... it's just ups
and lows just about anything in life ... because at this point and in future
internet is too larger to be vulnerable to it.

But that said, there is a little room left, for developers living in the mom's
basement., and that's truly sad.

~~~
louthy
> I don't think the bubble thing is true for our time, nor it will be in the
> near future, it's just tech has become more competitive than ever.

No disrespect meant, but this kind of thinking is exactly how bubbles happen
and everything gets out of kilter. Like people who believe house prices will
go up forever, so they leverage up - it's irrational exuberance (to quote Alan
Greenspan). But eventually this imaginary money that people believed to exist,
actually didn't, because the human beings that needed to work N hours to
produce that wealth haven't actually been alive long enough to do it. And
boom, it all resets.

I actually think one of the key tells for being in a bubble is so many people
denying we're in a bubble. The talk of it alone is enough to spread fear and
doubt. That moves markets. All that is needed is an 'event' that confirms the
fears, and boom. It could well be a failed IPO.

Who knows? Not I. I was one of the idiots that bought lastminute.com shares.

~~~
ijafri
Point I was trying to make, there is clear distinction between the bubble and
ups & lows.

~~~
louthy
Where are you making that point? I don't see it, what I see are a number of
comments denying that a) we're in a bubble, b) we'll ever be in a bubble,
because Internet.

> I don't think the bubble thing is true for our time

> nor it will be in the near future, it's just tech has become more
> competitive than ever

> I can't buy the notion, that we will or ever see a bubble

> because at this point and in future internet is too larger to be vulnerable
> to it.

------
gchokov
Hilarious article. The fact that Silicon Valley VCs can make money out of
extremely overpriced companies doesn't make them right. It's just an arrogant
read this time. Mr Sam - you should be ashamed.

------
crystaln
This seems to violate yc and Paul Graham's general disdain for sarcasm.

------
TedHerman
As other comments point out, whether there is a bubble (extreme overvaluation)
or not depends in part on the financial background. If you just look at
interest rates, they tell us that the future will be stable, the world is
awash in capital, and you'll have decades to extract the value of your
investment. For example, the $247 per LNKD user could be reasonable,
notwithstanding that only around 1/4 of these users reportedly are active. So
over 20 years, getting about a dollar a month per user will break even. And
this is just one aspect, since global growth trends and unlocking network
effects offer more value. But these metrics don't give the whole story. The
central banking infrastructure pumps capital into the world due to
deflationary fears, so can we really trust interest rates and assumptions of
stability and growth trends to determine whether the value of unicorns is
enduring?

An interesting aspect is Altman's position, argued by citing "they were wrong
time and time again" data points. His day job is to create new ventures, some
of which will presumably disrupt existing giants and lower their value. This
dynamic is dangerous to the assumption of stability in organizational trends
upon which value metrics are based. In some sense, there is overvaluation
(because new opportunities are undervalued), if not a bubble.

------
api
We just lived through two mega-bubbles: dot.com and real estate. Actually
three if you count oil. People now see bubbles everywhere and in everything.

------
datashovel
One of my most memorable "bubble talk" moments was when I was living in South
Florida. To clarify, that's only to say it's easy for me to recall given the
unique circumstances of the conversation, not that it was particularly
enjoyable for anyone involved.

A bunch of my co-workers and I were out to lunch with a new member of our team
(management level). The conversation turned to the real estate boom that we
were in the middle of. The new guy had already, during the conversation, let
us all know he had made a nice chunk of change in real estate recently, and
was in the middle of looking for a new house with his wife. They apparently
had their eye on a few really nice waterfront properties. That sort of got a
few folks talking "bubble". He laughed it off and smugly told us all that
(paraphrased) "in reality the market is just going to keep going up."

Famous last words, he ended up closing a few months before the crash.

------
selectron
Markets can stay irrational for longer than you can remain solvent. Just
because the bubble hasn't burst, doesn't mean we are not in one. Of course the
converse is also true, just because the market has been going up doesn't mean
it will go down. It will be interesting to see what happens if the Fed ever
raises the interest rates.

------
baron816
Can anyone point to a bubble where everyone was, for years, constantly asking
whether or not it's in a bubble?

~~~
barely_stubbell
1999: The "Dot-com" bust; Alan Greenspan is famously quoted for using the term
"Irrational Exuberance" in 1996 (3 years prior to the bubble burst)

~~~
blastrat
the internet boom (and I mean boom not bubble) started to flicker in 94,
gathered steam in 95, and really got going by 96. Saying that was the time to
bail out, before 97 98 or 99? I would not say that Greenspan "called" it.

bubbles are caused by collective overinvestment; that means that a lot of the
ideas can be good ideas: if everybody else also doesn't invest in them at the
same time. It's a bit of tragedy of the commons, it's the collective knowledge
that's lacking in individual decisions.

------
akjetma
I wonder if the frequency of "We're not in a bubble" articles tracks its
counterpart over time.

------
andyfleming
I don't think the bubble is just going to "burst". I think the rapid growth in
technology is real. The market may correct itself some, like it is right now
(particularly with investors), but I don't think there is going to be a great
tech apocalypse.

------
newacct23
The 2008 bubble was caused by fraud, what is the current bubble caused by?
Most people are saying we are in a bubble because all of these companies that
are making 0 dollars are worth extremely large amounts of money. Everybody is
aware that these companies aren't making money however and still believe the
company is worth an insane amount of money.

If everyone is willfully deluding themselves and see nothing wrong with it,
for what reason do we believe that it will change in the future and that the
bubble will pop? And the current situation is different from the 2008 crash in
that people _know_ what they are buying into, companies that don't make money,
and they don't care.

~~~
kaonashi
Why do bubbles collapse at all?

When valuation changes cause widespread insolvency, imo.

That was possible in 2008 because household debt levels combined with the
subprime scams create underwater households that could no longer keep up with
payments.

Who would become insolvent when tech stock valuations change?

------
daveguy
Final argument from the article: "now Trump thinks we're in a tech bubble too,
so maybe it's true."

To which I say: "Even a broken clock is right twice a day."

------
zxcvvcxz
Let's put it this way -- if everything were fine and companies had strong
fundamentals, we wouldn't need some investor to tell us otherwise.

------
dredmorbius
[https://archive.org/details/memoirsextraord13mackgoog](https://archive.org/details/memoirsextraord13mackgoog)

[https://en.m.wikipedia.org/wiki/Extraordinary_Popular_Delusi...](https://en.m.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds)

But this time is different.

------
jrbapna
As the rate of innovation continues to increase exponentially, these so called
"bubbles" will only grow bigger. The future will have A LOT MORE companies
valued at 1000x revenue, not less. Think about all the new industries poised
to exist just in the next decade: A.R. V.R. A.I., Bionics, Space, etc etc.
Exciting times we're living in.

------
dsmithatx
The truth is things probably have been overvalued for while. Bubbles pop when
enough people fear and start to sell. A good article on this should create a
graph of how many articles over time have been jumping on the tech bubble
bandwagon. Anecdotally I've noticed a massive increase in the past few months
by more respected business people.

------
halis
Companies get acquired now whether they've ever had a viable plan to make
money or not. Sounds like a bubble to me!

------
rosalinekarr
> “The valuation of $1 billion – not as insane as the [$15 billion] valuation
> placed by Microsoft on Facebook – was jaw dropping.”

lol

------
beatpanda
If we're not in a bubble, we have very serious structural economic and social
problems created by the tech industry that we need to solve. The (supposedly
sustainable) rising tide is mostly drowning people, and if no reprieve in the
form of a crash is coming, we need another solution.

------
H0n3sty
Most real estate agents, mortgage brokers, and building contractors couldn't
see the real estate bubble either. It's hard to see a bubble when you're
inside of it.

The tech bubble may very well outlast the US dollar bubble.

------
Xyik
Valuations have been questionable but that alone does not mean we are in a
bubble. I'd rather we looked at the amount of funding that has been raised and
the amount loss to gauge whether we're in a bubble.

------
doppp
Sam HAS to play down the fact that we are in a tech bubble. He is, after all,
a venture capitalist, so do note the conflict of interest here.

My friend referred me to this Bill Gurley article [1]. My metric for whether
there is another bubble is not so sophisticated. I feel that there is a bubble
when celebrities (like sports personalities) begin investing in questionable
startups [2][3]. Harkens back to the '99 bubble.

Edit: Before you bring up Ashton Kutcher, a single data point does not a trend
make. But yes, we've been in a bubble long before he began investing actually.

[1]: [http://abovethecrowd.com/2014/01/24/on-
bubbles/](http://abovethecrowd.com/2014/01/24/on-bubbles/)

[2]: [http://www.vanityfair.com/news/2016/04/kobe-bryant-
silicon-v...](http://www.vanityfair.com/news/2016/04/kobe-bryant-silicon-
valley-tech-bro)

[3]: [https://e27.co/boxing-champion-manny-pacquiao-throws-his-
hat...](https://e27.co/boxing-champion-manny-pacquiao-throws-his-hat-into-the-
startup-ring-invests-in-singapores-gtoken-20160606/)

~~~
api
VCs have interests both ways. They can benefit in new investments if
valuations are lower.

~~~
MagnumOpus
Only if they are late-stage investors. SamA specialises in being early, as do
most of the other valley venturati. If you are a first-round investor, there
is only downside in the bubble bursting.

------
anysz
Come on Sam, these clickbait fools aren't worthy of such attention.

------
seanmcdirmid
There might not be a bubble in tech, but China is absolutely scaring me right
now. If those Chinese bubbles pop, it might shake investor confidence in other
sectors as well (e.g. tech).

------
sndean
As someone who's completely ignorant about this sort of thing, and about
whether it's a bubble:

If it is indeed a bubble, is there anything positive that will result from it
bursting?

~~~
gozur88
I think there's a case to be made that bubbles result in malinvestment, that
is, you end up building capability to produce goods and services for which
there isn't enough demand to support that capability. It's inefficient.

When a bubble bursts we collectively look around and think "What is it that we
really need?"

~~~
sndean
> you end up building capability to produce goods and services for which there
> isn't enough demand to support that capability. It's inefficient.

Ohh, makes sense. Thanks for putting that in a clear way. So, while it's
painful, you could say bubbles bursting is healthy...

Whenever I try to say that around friends I come off as malevolent. I'll use
your words next time.

~~~
damptowel
Note that overleveraged companies tend to outcompete more conservative ones in
the short term, they just have more weight to throw. And if enough of them go
down at the same time, the resulting slump won't do decent investors any good
either.

------
anexprogrammer
It feels just like 1998, but for the fact there's enough folk memory of the
dot com bust to put IPOs on ice.

I guess they don't want to risk duplicating lastminute.com

Only question is when it pops.

------
tomahunt
A Google Trends search for "bubble" might also suggest we are not in a bubble.
[I find a peak around 2009]

------
ajsbae
As a college student, I wonder what implications this will have on the future
job market.

------
allworknoplay
What the hell is Sam talking about? Quoting people from 2007-2008 saying we
were in a bubble then as if nothing was wrong at the time? 2008/2009 was only
partly insane because of tech, but it was an INSANE time: VCs were too scared
to ask their LPs for cash because they knew the capital calls would fall
short. Dealflow utterly halted for 6 months, and took another year after that
to get back to something that felt productive. We were absolutely in a bubble
then.

Using bubble-quotes from that era as evidence that we're not in a bubble now
is absolutely preposterous.

~~~
tommynicholas
"Deal flow halted for 6 months" \- Sequoia invested in Airbnb, Dropbox, and
Green Dot within 6 months of RIP Good Times. Pretty nice deal flow.

------
vadym909
You just jinxed us man. Taunting Lady Luck like that? Now we're really
screwed!

------
jayzalowitz
Thats just like... your opinion man...

------
jmanooch
Everyone who says we are in a bubble should come up with a systematically
better way to allocate capital.

Otherwise: shut up and fuck off.

Because for all the hullaballoo about poor allocation in X or Y [Combinator]
or Z company being correct, the broader premise, that the market is working
out good things to do with money, is clearly somewhat proven by Silicon
Valley's last decade of spend: cheap, connected, actually smart smartphones;
electric cars becoming affordable; affordable re-useable rockets. All of which
are vastly humanly benign, as well as good ways to make money (not all of
which do, but some do, i.e. phones).

So, pony up, or fuck the fuck off.

~~~
effingwewt
It's already been done, you're just too vehemently guarding your non-point to
admit it. IPO. If these ridiculously over-valued companies ever went public,
as stated MANY times in this discussion, they would get REALISTIC VALUATIONS,
and come crashing back to earth quick, fast, and in a hurry. Companies are
actively SCARED to IPO now, as it almost always means lower valuations once
they have to prove feasibility, rather than convince rich people dumber than
they to pony up the money. So how about come up with a cogent argument or
GTFO?

-Also, good things with money? One words. THERANOS.

