
No, Mark Cuban, this tech bubble is not worse than 2000 - Permit
https://medium.com/@thisisjoshvarty/no-mark-cuban-this-tech-bubble-is-not-worse-than-2000-2e1cf42b8405
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DougHaber
I'm a little confused about the way the article is using numbers.

They say their generous worst case calculation of losses is $550 billion,
based off of the number of angel investors, throwing out a 1 million number
against each, and then valuing companies at $327 billion.

They then compare that to the losses in NASDAQ of 5 trillion. That is based on
the peak of 6.7 to the low of 1.6.

Why does the chart in the article only show a peak of about 5 trillion, which
would cut the losses from about 5 trillion to to about 3.4 trillion?

Isn't it wrong to compare the estimate of angel investors and valuations
against NASDAQ? Why not compare NASDAQ against NASDAQ? To use their style of
comparing against extremes, back in 2009 we hit a low of 1.29. In July we hit
a high of about 5.2. If those gains were erased, wouldn't we take a loss of
about 3.91 trillion, which is a little larger than their chart showed for the
dotcom crash?

Am I missing something, or is this article making a misleading comparison?

EDIT: Reading about the NASDAQ composite index on Wikipedia, it says that the
index was changed in 2014, and the composition is very different then it was
in 2000. So, even NASDAQ to NASDAQ may not work as a comparison, unless it can
be recalculated the same way, and even then, other factors such as inflation
should probably be factored in, since it was substantial. (The CPI shows $1
from 2000 is worth $1.39 in 2015 dollars.)

EDIT #2: After researching a bit, I think the difference between their chart
showing a loss of 3.91 and them saying 5 might be because the 5 trillion is in
terms of market cap. On August 18th we were at 9.15 billion, but I don't have
a good source for historical market cap data. From the look of things, I'm
guessing the losses off our recent peaks to the 2009 lows would be larger than
the dotcom losses, but I'd love to hear from anyone who better understands
these things.

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enahs-sf
I also am not very confident in the math from this post. $327B - all unicorn
companies $225B - all angel investment $???B - all A,B,C,D..n companies that
don't fit into the unicorn category.

I think the potential for losses is ostensibly much larger in the proposed
"worst" case scenario; That being said, I don't think it's a very plausible
outcome.

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jitix
Some important points:

1\. When/If the unicorns kick the bucket they will take a lot of other
companies with them.

2\. There are dozens of smaller startups for every unicorn. These smaller
numbers add up.

3\. A lot of auxiliary services are based around the startups - advertising,
infrastructure, etc. There will be a ripple effect if the bubble bursts.

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KaiserPro
I would suggest that you are missing the true meaning of "shitting the bed"

The entire of finance is linked. Those trading in the normal world of finance
typically trade in more than one market. (bitcoin isn't normal, well not until
recently, however the total daily trades are tiny)

If the entire angel market were to collapse as described it would cause a
"contagion" that would whirl around the world.

Take for example uber with its stupidly large valuation. Real banks have
invested real money into that company. Currently its horrendously over valued.
Its a taxi company with an app. The only reason they are successful is that
they have enough cash to under cut the world. They also have an obnoxiously
selfish culture that generates PR via controversy.

If their credit ability were to be hampered, they would not be able to expand.
This means they'd not be able to defy gravity and be forced to make a profit
on the existing markets they have. cue massive implosion, all taxi services
start to consolidate.

Once that happens it;ll start to affect other tech stocks and private
investment.

once one or two unicorns fail because their underlying buisness model fails,
it will lead to a total re-evaluation of credit for the entire tech industry.

This then filters into general stock. Add that to the wobbles from china,
brazil, low price of oil and commodities and you have a nice crash.

The key thing here is that everything is interconnected. Like a open office if
someone gets the plague, it spreads like wild fire.

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icebraining
I keep seeing the claim that Uber subsidizes the rides, but where is the
evidence of that? Every time I see actual numbers, I never see riders making
more than what customers pay; from what I can tell, Uber gets a decent
commission per ride.

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p_monk
Mark Cuban: "In the tech bubble it was Broadcast.com, AOL, Netscape, etc.
Today its, Uber, Twitter, Facebook, etc."

Broadcast.com wasn't Uber. It wasn't even a Groupon

~~~
chrismcb
Yahoo bought broadcast.com for about 6 billion. Groupon is worth about 2, so
is twitter and yahoo bought tumblr for 800 million. Aol had a market cap
around 200 billion.

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rdlecler1
First, I was in China in 2011, and that felt like a bubble. First, we are not
even close to that yet. Second the author doesn't really seem to understand
how valuations work. When $5-trillion of value was wiped out, it doesn't
really mean that $5-trillion was lost, that's just the aggregate change in
valuation. Facebook is a $250b company, but people didn't put $250b into it,
more like $25b. Similarly, If I go out and raise $100k at a $5M valuation, and
the company goes bankrupt, yes there has been a $5M loss of wealth, but only
$100k of real money was lost.

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xcyu
The presentation from a16z comes to mind which had much more specific numbers
comparing previous tech bubble to the current one. For example, the U.S. total
funding in tech as % of GDP was 10.8% in 1999 vs. 2.6% in 2014 (slide 14).
[http://a16z.com/2015/06/15/u-s-tech-funding-whats-going-
on/](http://a16z.com/2015/06/15/u-s-tech-funding-whats-going-on/)

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matheweis
While I believe the author is correct, I think that the view is somewhat
shortsighted. You cannot simply pull a half trillion dollars out of the
economy and not expect a ripple effect into other industries. A economic
multiplier of 10x brings you into the 5 trillion range, and oh, wait, there is
the dot-com boom again. Edit: To clarify, I don't think that a 10x multiplier
would be accurate - just trying to show the missing variables.

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droidist2
But "we're in a bubble" is seen as savvy while "we're not in a bubble" is seen
as naive. Always take the side of pessimism if you want to seem cool and
smart.

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blakejennings
Mark Cuban's writing is just terrible.

