

It's definitely a bubble - prajjwal
http://scripting.com/stories/2012/04/19/itsDefinitelyABubble.html

======
skrebbel
Imho, the OP is entirely looking over the fact that many successful exits
happen because a few BigCo's who _are_ making _real_ money on _real_ products
(ads for your local hairdresser) are so desparate for good software people
that they'll do talent acquisitions.

If that wasn't happening, i'd call it a bubble. But the BigCo's _are_ making
money. Real money, not ponzi investment hype nonsense. As long as these
companies stay profitable, there's no bubble.

I think.

But hey, I'm just a programmer, no economist. Of whom there's _not_ a
shortage, by the way.

~~~
burgerbrain
If the idea is that BigCo's who desperately need programmers are throwing cash
at people in an attempt to get them, then what the OP is describing as a
bubble is just a _massively_ inefficient fad recruiting technique.

There is absolutely no reason why so many non-programmers should be getting so
rich helping programmers find jobs at BigCo's. Strictly speaking the economy
might demand this sort of money with this recruitment technique so
economically it might be sound, but it seems to me there is a good deal of
room here for disruption....

~~~
robwgibbons
This isn't a problem with hiring. For crying out loud, the founders of these
companies aren't looking for jobs, they're founding companies. Larger
companies are drooling over their customers, their products, and their people.
There is a big difference.

~~~
burgerbrain
Facebook was drooling over Instagram customers? I find this somewhat hard to
swallow.

------
tgrass
Talk of overvaluation when based on anecdotal isolated evidence is unbecoming
of HN. Please, if this is serious conversation, someone compile a valid
statistical sample of indicators.

------
joedev
The money quote: "In an effort to bring more suckers in, they just passed a
law that makes it legal to pimp these startups to people who don't know
anything. You will be able to take their investment by swiping a credit card.
Probably using a $4 billion valuation Square dongle for an iPhone. ... It just
doesn't matter if the businesses are any good, not to satisfy the bubble. As
long as more suckers are coming in."

~~~
kylebrown
The new law:
[http://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups...](http://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups_Act)

------
brudgers
Dumb money is now chasing smart money in the startup industry.

Determining if that constitutes a bubble is left as an exercise for the
reader.

------
stuckk
It seems that every author that writes about being in a bubble thinks that
they are the only ones that can see it. ignoring the fact that everyday an
article hits front page of HN talking about being in a bubble and no one can
see it.

So when everybody is saying that nobody is seeing the signs of a bubble does
that mean that we are in a bubble?

~~~
brudgers
> _"So when everybody is saying that nobody is seeing the signs of a bubble
> does that mean that we are in a bubble?"_

No it's when your barber is investing in a startup.

And that's what the new law is designed to do.

The reason this is important is because the way one makes money from startups
is not by investing in one.

It's by investing in 100.

And your barber doesn't have that kind of cash.

~~~
eru
Just give him an index fund. Or let him flip coins or roll dice.

------
Paul_S
Here's an idea. If you think it's a bubble then get on it as fast as you can
as there's clearly money to be made and cash in as soon as possible or
whenever it is you think the bubble is going to burst.

Sorry. I guess I've read too many articles recently about it being a bubble. I
even agree, just not care very much.

------
aristidb
I have no opinion whether this is a bubble or not. Just one thing:

This is not a Ponzi Scheme.

Get your definition of Ponzi Schemes right, please. Ponzi Schemes are a
specific type of fraud, not to be generalised to everything that relies on
superficially similar principles.

~~~
fr0sty
A ponzi is where you use the money from new investors to pay off earlier
investors.

Early investors in startups cash out during later funding rounds or
acquisitions.

QED.

~~~
aristidb
"You" vs. "other people". In bubbles, the investors just trade the shares
among each other.

In a Ponzi scheme, there is a central party that refunds investors on demand,
and does so with money from new investors.

A Ponzi scheme is always a fraud, frothy valuations in a bubble might indicate
market manipulation, but not _necessarily_ fraud.

------
AznHisoka
Not sure whether I agree, but he could've done a better job explaining what
"rebooting the Internet dev process" means... it seemed so cryptic.

------
ekanes
Honest question: Who cares if it's a bubble? If you aren't going to act on the
opinion/information, it might not be worthy of your time, attention and focus.
"Watch out! Bubble!" conversations generally just raise our anxiety without
being actionable.

------
tdicola
While I agree there's a bubble and that the recent JOBS act has the potential
to turn things into a frenzy (see Taibbi:
[http://www.rollingstone.com/politics/blogs/taibblog/why-
obam...](http://www.rollingstone.com/politics/blogs/taibblog/why-obamas-jobs-
act-couldnt-suck-worse-20120409) ), I'm not sure I agree it's near the scale
of the mortgage derivative bubble. The mortgage mess involved _trillions_ of
dollars across the entire global economy, and set back the entire middle class
when it popped (along with destroying and pushing to the brink of destruction
some of the biggest financial institutions in the world).

------
wmil
It's not really a bubble. It's more of a gold rush. A new way to get rich has
opened up, and it's not clear who will succeed and who will fail. So people
rush in and stake claims.

The other factor is that there has been a huge loss of faith in Wall Street.
The SEC and ratings agencies don't seem to be able to do their job in the face
of increasingly complex financial products being brought to market.

I think that a lot of investors prefer losing their money on a crazy idea that
failed to losing money to fraud.

------
jgmmo
"We don't have a mechanism to, as a society, say let's not go all the way with
this bubble"

Yes we do. You can short stocks. It's like placing a bet that the stock will
go down in the future.

If this is a bubble, and you know that eventually certain companies behaving
this way are gonna tank -- then you can bet right now that way and earn a big
payout if that's the case.

Put your money where your mouth is.

~~~
fr0sty
> If this is a bubble, and you know that eventually certain companies behaving
> this way are gonna tank -- then you can bet right now that way and earn a
> big payout if that's the case.

"Markets can remain irrational a lot longer than you and I can remain
solvent." -- John Maynard Keynes

That is: if you short a stock (leaving aside that you cannot short non-public
stock) and it continues to go up you will need to continue adding money to
your account to cover your accumulating losses. If it goes up high enough and
you don't have enough collateral your position is closed and you are broke.

It is not enough just to identify a bubble you also have to call the top with
a reasonably degree of accuracy.

~~~
Estragon
I knew a guy who shorted yahoo at $8 in the late 90s.

------
bradleyland
That's not how I'd identify a bubble. Then again, I'm not an economist.

If you look at past bubbles, there's a pretty obvious pattern. A financial
boondoggle is used to build a giant mass of capital. The financial boondoggle
collapses, but those who profited (massively) from the boondoggle pay only a
nominal fine to maintain the appearance of punishment. The capital that was
built up in the last boondoggle is used to get the ball rolling on the next
one.

If you want to know about how bubbles form, I think you're better off learning
about confidence scams than you are economics. As with many things, the
difference between a businessman and a con man isn't black & white. We're
talking shades of grey here. If I were tasked with finding the next bubble,
I'd trace the people responsible, rather than looking broadly at the market in
an attempt to identify swells of capital without much perceived value.

~~~
molsongolden
The subprime lending bubble to build up a giant mass of capital, the financial
crisis collapse, the banks and funds who pimped the MBS paid a nominal fine to
maintain the appearance of punishment, that capital is now flowing to VC
funds?

------
tgrass
A bubble is the overvaluation of an asset class, or merely...inflation.
"Inflation is always and everywhere a monetary phenomenon."

And another way: The value of any asset as evinced by its price is merely the
willingness and ability of someone to pay for it.

If you accept the EMH, then you understand we are incapable of seeing the big
picture. Something can be valuable to your neighbor without being valuable to
you. At the same time, if you do not know when to sell an asset, or know whom
to sell it to, then you are a fool to buy it just because the price has risen
for the last three weeks.

Economics is not accounting. It does not prescribe value.

~~~
skylan_q
"A bubble is the overvaluation of an asset class, or merely...inflation."

Merely inflation? It's much more than that. It's dis-coordination within an
economy.

~~~
ryanaAM
A bubble is the overvaluation of something. Overvaluation can only occur if
there is surplus value in the market that's not needed in other places.
Surplus value means there's more money in circulation than the market needs -
That's inflation.

~~~
skylan_q
Prices get bid up, but price inflation is different from inflation. Price
inflation is the increase in prices brought about through the auction
mechanism. But in our circumstances, we get economy-wide price increases
because of increases in the total stock of money.

Price inflation causes money to lose value, so we can't really say there is an
overvaluation simply because prices have increased. It could very well be the
case that valuation hasn't drastically changed at all, but newer, cheaper
money is flooding in which causes price inflation.

------
GlennS
It's an echo chamber talking about a bubble.

------
api
I do see some silliness, but I don't see the kind of money that flowed in the
late 90s. Or am I wrong?

~~~
burgerbrain
Facebook bought Instagram for as much money as it would take to put something
like 112 '69 Volkswagon Beetles into low earth orbit.

Now maybe that is an isolated incident, but I'm not so sure.

~~~
lysol
89615kg to LEO (kg converted from curb weight of 112 '69 Beetles[1]) would
actually cost 1,613,076,070 dollars[2].

[1]: <http://www.1800vw.bizhosting.com/1969.htm>

[2]:
[http://en.wikipedia.org/wiki/Criticism_of_the_Space_Shuttle_...](http://en.wikipedia.org/wiki/Criticism_of_the_Space_Shuttle_program)
Cost per kg from here

~~~
molsongolden
Not if you use a SpaceX Falcon 9.

edit: A quick search turned up a cost of less than $5,500/kg to LEO so it
would only cost $492,882,500!

~~~
IanDrake
Pricing everything in the number of times you could rocket to space seems like
"the next" Internet meme.

Great for SpaceX for achieving that, but it's really not a measuring stick for
value.

~~~
burgerbrain
Not a measuring stick for value, no. But certainly a measuring stick for
_"expensive as hell"_.

------
BHSPitMonkey
Those paragraph link URLs are positively absurd.

[http://scripting.com/stories/2012/04/19/itsDefinitelyABubble...](http://scripting.com/stories/2012/04/19/itsDefinitelyABubble.html#wereInABubbleNowAndLikeAllBubblesUnlessYoureThinkingAboutItTheRightWayYouDontSeeItThatsHowBubblesAreItWouldntBeABubbleIfItWereEasyToSee)

[http://scripting.com/stories/2012/04/19/itsDefinitelyABubble...](http://scripting.com/stories/2012/04/19/itsDefinitelyABubble.html#5EvenIfTheyCouldFindEnoughProgrammersThereArentThatManyBusinessesToStartToSatisfyTheDemandForInvestmentVehiclesALotLikeTheSituationWithMortgagesInTheLastBubbleSoTheVcsAndAngelsAndNoDoubtSomeVeryShadyFolksArePuttingTogetherDealsWithPeopleWhoCantProgramWithNoActualIdeaForTheBusinessDontLookToAHrefhttpwwwlaunchcoblogisthereaycombinatorvaluationbubbleornothtmlycombinatoraTheyreTheQualityActHereButThereAreIncubatorsInEveryCityFromSantiagoToBeirut)

[http://scripting.com/stories/2012/04/19/itsDefinitelyABubble...](http://scripting.com/stories/2012/04/19/itsDefinitelyABubble.html#imgSrchttpscriptingcomimages20120419trampcoffeecoupjpgWidth145Height136Border0StylefloatRightPaddingleft15pxPaddingbottom5pxPaddingtop10pxPaddingright15pxAltaPictureNamedTrampcoffeecoupjpgokaySoNowImGoingToSkpFromAllThatToTheNatureOfTheBubbleWereInNowIDontWantToArgueAboutItBecauseItCantReallyBeArguedItsUpToEachOfUsToComeToOurOwnConclusionsAndBetAccordinglyIfYoureRightYouMightDoBetterThanIfYouBetWrongEventuallyWereGoingToPopTheBubbleThatsBasedOnTheBeliefThatTheHumanSpeciesHasAFutureAtThatPointUnlessYourBetPutYouOnAnotherPlanetYoureJustAsFuckedAsEveryoneElseNoMatterHowMuchGoldYouHaveOrGunsWhetherMittRomneyIsPresidentOrBarackObama)

