7 ms·

For those of you too young to remember, there were numerous articles written about the bubble bursting before it finally did in 2000-01. It wasn't a surprise th

by hvs 11y ago

For those of you too young to remember, there were numerous articles written about the bubble bursting before it finally did in 2000-01. It wasn't a surprise that it did, just that no one knew precisely when it would. My point is that arguing that people have said this bubble was about to burst and that it hasn't yet isn't an argument that it won't.

austenallred 11y ago
A good strategy as an analyst is to predict a downturn coming. You can be wrong for six or seven years, and then if/when there is a downturn you say, "I told you so!"
- xienze 11y ago
  The thing is though, there are just as many people saying "it's different this time". The person predicting a downturn will inevitably be right. The other person... not so much :).
  - learc83 11y ago
    There will inevitably be a downturn. When people say "it's different this time" they don't mean that there can never be a downturn, they mean that when it happens can't be predicted by looking at past events. And they mean that when it happens it will be different--perhaps not as bad. There is a huge difference between this time and last time. The internet is much more mature for one. People depend on web apps now in a way that's not going to change just because the market swings. Another thing that's different is that people spend more time on software distractions when the economy tanks, not less, so a global downturn is likely to drive consumer spending away from the real world into the virtual.
    - zzalpha 11y ago
      There is a huge difference between this time and last time. Is it, though? Instead of overvalued companies based on the theory of "put it on the internet", we have overvalued companies based on the theory of "put it on the internet and get a billion users". Companies that, by and large, struggle to break even without telling a compelling story for how they'll monetize (let alone achieve or retain) that huge projected subscriber base. For those that have a semi-believable revenue model (e.g., Uber), they make their money as rentiers, trying to scrape money off the top by matchmaking between actual service providers and customers... and in a lot of cases, they do so while violating labour laws vis a vis contractors (and in a lot of cases, regulations in the industry they're attempting to disrupt). I know the Pollyanna's around here want to insist that this time is different. That these companies have fundamentals now! Except, I don't see it. It looks like the same billion dollar gimmicks to me, just a decade and a half further down the road.
      - austenallred 11y ago
        > Companies that, by and large, struggle to break even without telling a compelling story for how they'll monetize (let alone achieve or retain) that huge projected subscriber base. The companies we're talking about in this discussion, late-stage (Series D and on) startups, already have a large and quickly growing user base. And, yes, most of them have real revenue. There are, of course, some that don't. Take Snapchat for example. Is it really that difficult to see how Snapchat will monetize? Everyone worried about whether or not Facebook would ever be able to monetize, but it brought in $4 Billion in revenue last quarter. Last quarter! Twitter isn't growing as quickly as some would like (only 4 million new users per quarter) and has its own share of problems, but it's still on track to bring in ~$2 Billion in revenue this year. It lowered revenue projections for the last quarter of 2015... to $650-710 million. You mention Uber: Uber's gross revenue is expected to hit a run rate of about $10 billion by the end of next year. Even with Uber only taking 20% (=$2B of that), that's $2 billion in revenue. And they're still growing 300% year over year. That is a holy shit number. So, yes, there is objectively a big difference between this time and last time. Could those companies be overvalued? Certainly. Do they need to start bringing in more profit? Yes, but even the most bearish investors admit that takes a lot of time. There may even be a downturn in the market, but it is not going to be 2000 all over again, when every tech company with the exception of a couple vanishes overnight into thin air.
        zzalpha 11y ago
        Everyone worried about whether or not Facebook would ever be able to monetize, but it brought in $4 Billion in revenue last quarter. Last quarter! So let's do a little math. From this: http://www.forbes.com/sites/kathleenchaykowski/2015/04/22/facebook-earnings-mobile/ http://www.forbes.com/sites/kathleenchaykowski/2015/04/22/fa... We see 1.44 billion monthly active users. That translates to about $12 a year per user. Think about that. Now think about the potential growth curve. And you're telling me I should be impressed? Now, if they can find a way to continue to push that per-user revenue number up, great, let's see how that goes. But their numbers today only show great promise. Meanwhile, using Facebook as your benchmark is incredibly disingenuous. Of all the internet companies today, they have the largest subscriber base, the greatest retention, and the greatest daily active engagement. Snapchat doesn't come close. Twitter isn't growing as quickly as some would like (only 4 million new users per quarter) and has its own share of problems, but it's still on track to bring in ~$2 Billion in revenue this year. Twitter can't break even. They report 320MM monthly active users which means they're pulling in about $7 per user per year in revenues, less than Facebook, and with a growth curve that's even more alarming. Again, you're not seeing the forest for the trees, here. Uber's gross revenue is expected to hit a run rate of about $10 billion by the end of next year. And, mark my words, in 5 years they will be shut down by regulators and class action lawsuits as folks realize they're making $10B a year on the backs of illegal contract workers.
bryanlarsen 11y ago
And some of those articles were from 1998. It can take a long time for a bubble to burst. I remember hearing about the housing bubble in 2001. It even made the front cover of the Economist in 2005. As Keanes said "The market can stay irrational for longer than you can stay solvent".
- marcosdumay 11y ago
  As a rule, bubbles only burst after everybody gives up on claiming they will.
  - vegabook 11y ago
    Because that's when even the bears have been stopped into longs.
    - marcosdumay 11y ago
      And it's when the press has already moved full power into bringing more people to the market, and when people with doubts (and thus some spare money) have already invested, and people that didn't invest are feeling foolish, so they won't convince other people. And, probably, more reasons. That's one contrary indicator that seems to be very reliable.
- yummyfajitas 11y ago
  The housing bubble was a special case. It was more or less impossible to short until fairly late in the game (i.e. approximately the time when Burry actually did) - the market for CDS was not very liquid until synthetic CDOs came into the picture.
  - nissimk 11y ago
    I'm pretty sure that it's also quite difficult to go short on non publicly traded equity.
    - 11y ago
spyspy 11y ago
The problem with this type of reasoning is that there are always analysts predicting a bear market. Articles arguing as such come out every day. So it's easy to find an article from the late 90s that said a crash is coming and feel vindicated that that person was right among so many fools. Perhaps that analyst was brilliant and his argument was flawlessly researched, but anyone can build a bubble story over rising P/E ratios. I can predict a bubble burst right now and I'll be correct at some point in the future. Saying "we're in a bubble" is pointless without an accurate prediction of the turning point.
- bcantrill 11y ago
  You're misunderstanding the essential point of @hvs's comment: it's not that some people predicted the bust (though that was certainly true), it's that the articles that indicated a bust was coming helped instill a collective sense the boom couldn't last forever. This is very important because it preconditions everyone for the bust -- and when the bust comes, it accelerates stunningly quickly. Having lived through two of these (the dot-com bust and the housing bust) that is my overwhelming conclusion: that the boom goes on much longer than you could think possible, but once it turns into bust, it turns with a vengeance that you cannot imagine. And I'm not alone in this conclusion; Marc Andreessen (famously) phrased this as startups that will "vaporize"[1] -- because we are the generation that saw it first hand. Until then (and as was said to me at the height of the dot-com bubble by someone who was then three times my age[2]): enjoy the party -- but dance close to the door! [1] https://twitter.com/pmarca/status/515216965183754242 https://twitter.com/pmarca/status/515216965183754242 [2] https://twitter.com/bcantrill/status/572952707788505088 https://twitter.com/bcantrill/status/572952707788505088
  - ChuckMcM 11y ago
    This is exactly right, bubbles are a sort of "mass hysteria" where everyone in the herd is trying to get the most for themselves. Generally to be successful you need otherwise rational people to put aside reason and to invest in the belief that things are going up. And they do, and you get these things. And when that belief is dispelled, they go elsewhere. What isn't well spelled out is how people step out of the bubble without losing their shirts. And that is something that is going to make this one interesting. A privately held company is illiquid. So you can't really get out, you just have to sit there and watch your value deflate. But as Sam pointed out, a lot of these investments are more like debt than equity, they have their liquidation preferences built in, to the really interesting thing will be to see if someone comes up with a creative way to switch all the people and IP from one company to a different company without triggering a "sale". Let's imagine that DropBox creates a wholly owned subsidiary "DroppedBox" and of course gives it a non-exclusive right to use all of DropBox's IP in perpetuity for no fee (its a subsidiary right?) and then people start transferring into that new organization to work on projects there. And then after nearly everyone is working there, it has its own equipment, staff, etc. DropBox divests itself of its subsidiary and leases back access to the servers and services to support its legacy clients. And then DropBox goes chapter 7, but DroppedBox lives on with all the customers and technology and people of the original and none of the onerous liquidation clauses that made it impossible for them to so public or move freely in the financial markets. When the bubble has started deflating rapidly, that is the kind of behavior you can expect. Smart people skirting the edge of prudence to avoid being the ones who take the loss.
zaidf 11y ago
Sure, but I bet you there weren't any articles in 1993 about a bubble that ultimately burst in 2000. The insanity with the current argument for a bubble is that we have people who have been screaming "bubble!" since 2006, starting with the myspace and youtube acquisitions. At some point predicting that there is a bubble loses meaning if the prediction doesn't have a time constraint(ultimately, all companies and people die.)
- deleted 11y ago
  [deleted]
mseebach 11y ago
It's also not an argument that it will. I'm not saying it won't, but I find flaw with the argument that because it happened before, it will necessarily happen again, in a substantially similar way. Generals are always preparing to fight the last war. Something will probably happen, but I don't think it's reasonable to expect that looking at 2000 will teach us much about that something. Silicon Valley is a substantially different place today from what it was during the dot-com years. While not all (few, if any) unicorns are financially healthy in any traditional sense, they all have plausible business plans, ie. ones that involves booking actual revenue from delivering actual services to actual customers for actual money. The dot-com victims almost comically did not. The investors in the valley today are sophisticated and institutional, all weathered through the dot-com bust, not mom-and-pops -- much less sensitive to small bumps and panics, again a very different environment from 2000.
lbrandy 11y ago
> arguing that people have said this bubble was about to burst and that it hasn't yet isn't an argument that it won't. The reverse isn't an argument, either. There's essentially zero information content in a claim that "the bubble" will burst sometime between now and the heat death of the universe.
creamyhorror 11y ago
"Unicorns Dropping Like Flies: First Dropbox; Then Square; Now Fidelity Cuts Snapchat Valuation By 25%" - Zero Hedge https://news.ycombinator.com/item?id=10546947 https://news.ycombinator.com/item?id=10546947 * Dropbox was warned by its investment bankers that it would be unable to go public at a valuation anywhere near close to what its last private round (which had most recently risen to $10 billion from $4 billion a year ago) valued it at. * Square, last private valuation of $6bn, $3.9bn at IPO * Snapchat, written down 25% by Fidelity ($31 -> $23) * Combined "valuation" of all US unicorns is $486 billion. Their combined profit? $0. The cresting wave of immense private valuations is crashing onto the rocky shore of public markets. Funding is going to shrivel.
- deleted 11y ago
  [deleted]
- austenallred 11y ago
  There's a difference between a correction in the market (or more specifically a correction with regard to a few companies) and a bursting of a bubble. Tech investment volume today is much, much smaller than it was in the 2000s, despite the fact that the number of people on the Internet has grown by two orders of magnitude. Actually the funding per person online has remained almost on a flat line from 2002 to today. There's some frothiness in the late-stage market still, and but those are the companies that are being corrected. That's largely happening because none of them are IPOing, and with interest rates being practically 0 investors have to put their money somewhere. So they build some losses into a late-stage portfolio theory instead of distributing it in the S&P 500. Some of those companies will end up with lower valuations, but that's always happened, and that's built into the IPO model. In other words, even if several late-stage "unicorns" completely failed (and some undoubtedly will), that doesn't mean that the entirety of tech will be viewed as worthless. The only way it is worthless is if the companies won't eventually generate profits. Last time that was largely the case because the unit economics were bad. This time we see real revenue coming through and the unit economics are there for most companies. I remember all of HN being positive that Instagram selling for $1B to Facebook was the height of the bubble. But now Instagram is returning >$500m in revenue to Facebook per year. Turns out it was a very, very savvy purchase. All of the current tech "unicorns" combined are worth 2/3 of Microsoft. You can make the argument that owning all of Twitter, Amazon, Square, Snapchat, Dropbox, Uber, Zenefits, etc. would be worse than owning 2/3 of Microsoft, but I could definitely see the other side of that argument, as well.
jegutman 11y ago
Strongly, strongly, strongly disagree with this description. This is a completely unfalsifiable definition of a bubble. On December 5, 1996 Alan Greenspan first uttered the phrase "irrational exuberance". Some people amazingly credit him with "calling the bubble" for this statement. The Nasdaq 100 closed at 835.80 that day, the lowest price the Nasdaq 100 has closed once the bubble "crashed" was at 804.64 on October 7, 2002. This is the problem with "bubble watchers". Yes, it's possible for prices to get too high and for companies to trade at too high of valuations (or so it seems) and late 1990s had plenty of that. However, many people are constantly calling bubbles, people were calling the S&P 500 a bubble in this current rally back at 1200 and 1300. Could it go back down? Certainly, but that doesn't make the people calling it a bubble at 1200 correct if it drops from 2100 to 1800. One of my favorite jokes about the subject: Bubble watchers have correctly predicted 9 of the last 2 bubbles. Btw, for those interested in a sane economist talking about bubbles I highly highly recommend Scott Sumner. Here's a good old post of his on the subject: http://www.themoneyillusion.com/?p=8063 http://www.themoneyillusion.com/?p=8063

by hvs 11y ago

austenallred 11y ago

A good strategy as an analyst is to predict a downturn coming. You can be wrong for six or seven years, and then if/when there is a downturn you say, "I told you so!"

xienze 11y ago
The thing is though, there are just as many people saying "it's different this time". The person predicting a downturn will inevitably be right. The other person... not so much :).
- learc83 11y ago
  There will inevitably be a downturn. When people say "it's different this time" they don't mean that there can never be a downturn, they mean that when it happens can't be predicted by looking at past events. And they mean that when it happens it will be different--perhaps not as bad. There is a huge difference between this time and last time. The internet is much more mature for one. People depend on web apps now in a way that's not going to change just because the market swings. Another thing that's different is that people spend more time on software distractions when the economy tanks, not less, so a global downturn is likely to drive consumer spending away from the real world into the virtual.
  - zzalpha 11y ago
    There is a huge difference between this time and last time. Is it, though? Instead of overvalued companies based on the theory of "put it on the internet", we have overvalued companies based on the theory of "put it on the internet and get a billion users". Companies that, by and large, struggle to break even without telling a compelling story for how they'll monetize (let alone achieve or retain) that huge projected subscriber base. For those that have a semi-believable revenue model (e.g., Uber), they make their money as rentiers, trying to scrape money off the top by matchmaking between actual service providers and customers... and in a lot of cases, they do so while violating labour laws vis a vis contractors (and in a lot of cases, regulations in the industry they're attempting to disrupt). I know the Pollyanna's around here want to insist that this time is different. That these companies have fundamentals now! Except, I don't see it. It looks like the same billion dollar gimmicks to me, just a decade and a half further down the road.
    - austenallred 11y ago
      > Companies that, by and large, struggle to break even without telling a compelling story for how they'll monetize (let alone achieve or retain) that huge projected subscriber base. The companies we're talking about in this discussion, late-stage (Series D and on) startups, already have a large and quickly growing user base. And, yes, most of them have real revenue. There are, of course, some that don't. Take Snapchat for example. Is it really that difficult to see how Snapchat will monetize? Everyone worried about whether or not Facebook would ever be able to monetize, but it brought in $4 Billion in revenue last quarter. Last quarter! Twitter isn't growing as quickly as some would like (only 4 million new users per quarter) and has its own share of problems, but it's still on track to bring in ~$2 Billion in revenue this year. It lowered revenue projections for the last quarter of 2015... to $650-710 million. You mention Uber: Uber's gross revenue is expected to hit a run rate of about $10 billion by the end of next year. Even with Uber only taking 20% (=$2B of that), that's $2 billion in revenue. And they're still growing 300% year over year. That is a holy shit number. So, yes, there is objectively a big difference between this time and last time. Could those companies be overvalued? Certainly. Do they need to start bringing in more profit? Yes, but even the most bearish investors admit that takes a lot of time. There may even be a downturn in the market, but it is not going to be 2000 all over again, when every tech company with the exception of a couple vanishes overnight into thin air.
      - zzalpha 11y ago
        Everyone worried about whether or not Facebook would ever be able to monetize, but it brought in $4 Billion in revenue last quarter. Last quarter! So let's do a little math. From this: http://www.forbes.com/sites/kathleenchaykowski/2015/04/22/facebook-earnings-mobile/ http://www.forbes.com/sites/kathleenchaykowski/2015/04/22/fa... We see 1.44 billion monthly active users. That translates to about $12 a year per user. Think about that. Now think about the potential growth curve. And you're telling me I should be impressed? Now, if they can find a way to continue to push that per-user revenue number up, great, let's see how that goes. But their numbers today only show great promise. Meanwhile, using Facebook as your benchmark is incredibly disingenuous. Of all the internet companies today, they have the largest subscriber base, the greatest retention, and the greatest daily active engagement. Snapchat doesn't come close. Twitter isn't growing as quickly as some would like (only 4 million new users per quarter) and has its own share of problems, but it's still on track to bring in ~$2 Billion in revenue this year. Twitter can't break even. They report 320MM monthly active users which means they're pulling in about $7 per user per year in revenues, less than Facebook, and with a growth curve that's even more alarming. Again, you're not seeing the forest for the trees, here. Uber's gross revenue is expected to hit a run rate of about $10 billion by the end of next year. And, mark my words, in 5 years they will be shut down by regulators and class action lawsuits as folks realize they're making $10B a year on the backs of illegal contract workers.

bryanlarsen 11y ago

And some of those articles were from 1998. It can take a long time for a bubble to burst. I remember hearing about the housing bubble in 2001. It even made the front cover of the Economist in 2005. As Keanes said "The market can stay irrational for longer than you can stay solvent".

marcosdumay 11y ago
As a rule, bubbles only burst after everybody gives up on claiming they will.
- vegabook 11y ago
  Because that's when even the bears have been stopped into longs.
  - marcosdumay 11y ago
    And it's when the press has already moved full power into bringing more people to the market, and when people with doubts (and thus some spare money) have already invested, and people that didn't invest are feeling foolish, so they won't convince other people. And, probably, more reasons. That's one contrary indicator that seems to be very reliable.
yummyfajitas 11y ago
The housing bubble was a special case. It was more or less impossible to short until fairly late in the game (i.e. approximately the time when Burry actually did) - the market for CDS was not very liquid until synthetic CDOs came into the picture.
- nissimk 11y ago
  I'm pretty sure that it's also quite difficult to go short on non publicly traded equity.
  - 11y ago

spyspy 11y ago

The problem with this type of reasoning is that there are always analysts predicting a bear market. Articles arguing as such come out every day. So it's easy to find an article from the late 90s that said a crash is coming and feel vindicated that that person was right among so many fools. Perhaps that analyst was brilliant and his argument was flawlessly researched, but anyone can build a bubble story over rising P/E ratios. I can predict a bubble burst right now and I'll be correct at some point in the future. Saying "we're in a bubble" is pointless without an accurate prediction of the turning point.

bcantrill 11y ago
You're misunderstanding the essential point of @hvs's comment: it's not that some people predicted the bust (though that was certainly true), it's that the articles that indicated a bust was coming helped instill a collective sense the boom couldn't last forever. This is very important because it preconditions everyone for the bust -- and when the bust comes, it accelerates stunningly quickly. Having lived through two of these (the dot-com bust and the housing bust) that is my overwhelming conclusion: that the boom goes on much longer than you could think possible, but once it turns into bust, it turns with a vengeance that you cannot imagine. And I'm not alone in this conclusion; Marc Andreessen (famously) phrased this as startups that will "vaporize"[1] -- because we are the generation that saw it first hand. Until then (and as was said to me at the height of the dot-com bubble by someone who was then three times my age[2]): enjoy the party -- but dance close to the door! [1] https://twitter.com/pmarca/status/515216965183754242 https://twitter.com/pmarca/status/515216965183754242 [2] https://twitter.com/bcantrill/status/572952707788505088 https://twitter.com/bcantrill/status/572952707788505088
- ChuckMcM 11y ago
  This is exactly right, bubbles are a sort of "mass hysteria" where everyone in the herd is trying to get the most for themselves. Generally to be successful you need otherwise rational people to put aside reason and to invest in the belief that things are going up. And they do, and you get these things. And when that belief is dispelled, they go elsewhere. What isn't well spelled out is how people step out of the bubble without losing their shirts. And that is something that is going to make this one interesting. A privately held company is illiquid. So you can't really get out, you just have to sit there and watch your value deflate. But as Sam pointed out, a lot of these investments are more like debt than equity, they have their liquidation preferences built in, to the really interesting thing will be to see if someone comes up with a creative way to switch all the people and IP from one company to a different company without triggering a "sale". Let's imagine that DropBox creates a wholly owned subsidiary "DroppedBox" and of course gives it a non-exclusive right to use all of DropBox's IP in perpetuity for no fee (its a subsidiary right?) and then people start transferring into that new organization to work on projects there. And then after nearly everyone is working there, it has its own equipment, staff, etc. DropBox divests itself of its subsidiary and leases back access to the servers and services to support its legacy clients. And then DropBox goes chapter 7, but DroppedBox lives on with all the customers and technology and people of the original and none of the onerous liquidation clauses that made it impossible for them to so public or move freely in the financial markets. When the bubble has started deflating rapidly, that is the kind of behavior you can expect. Smart people skirting the edge of prudence to avoid being the ones who take the loss.

zaidf 11y ago

Sure, but I bet you there weren't any articles in 1993 about a bubble that ultimately burst in 2000. The insanity with the current argument for a bubble is that we have people who have been screaming "bubble!" since 2006, starting with the myspace and youtube acquisitions. At some point predicting that there is a bubble loses meaning if the prediction doesn't have a time constraint(ultimately, all companies and people die.)

deleted 11y ago
[deleted]

mseebach 11y ago

It's also not an argument that it will. I'm not saying it won't, but I find flaw with the argument that because it happened before, it will necessarily happen again, in a substantially similar way. Generals are always preparing to fight the last war. Something will probably happen, but I don't think it's reasonable to expect that looking at 2000 will teach us much about that something. Silicon Valley is a substantially different place today from what it was during the dot-com years. While not all (few, if any) unicorns are financially healthy in any traditional sense, they all have plausible business plans, ie. ones that involves booking actual revenue from delivering actual services to actual customers for actual money. The dot-com victims almost comically did not. The investors in the valley today are sophisticated and institutional, all weathered through the dot-com bust, not mom-and-pops -- much less sensitive to small bumps and panics, again a very different environment from 2000.

lbrandy 11y ago

> arguing that people have said this bubble was about to burst and that it hasn't yet isn't an argument that it won't. The reverse isn't an argument, either. There's essentially zero information content in a claim that "the bubble" will burst sometime between now and the heat death of the universe.

creamyhorror 11y ago

"Unicorns Dropping Like Flies: First Dropbox; Then Square; Now Fidelity Cuts Snapchat Valuation By 25%" - Zero Hedge https://news.ycombinator.com/item?id=10546947 https://news.ycombinator.com/item?id=10546947 * Dropbox was warned by its investment bankers that it would be unable to go public at a valuation anywhere near close to what its last private round (which had most recently risen to $10 billion from $4 billion a year ago) valued it at. * Square, last private valuation of $6bn, $3.9bn at IPO * Snapchat, written down 25% by Fidelity ($31 -> $23) * Combined "valuation" of all US unicorns is $486 billion. Their combined profit? $0. The cresting wave of immense private valuations is crashing onto the rocky shore of public markets. Funding is going to shrivel.

deleted 11y ago
[deleted]
austenallred 11y ago
There's a difference between a correction in the market (or more specifically a correction with regard to a few companies) and a bursting of a bubble. Tech investment volume today is much, much smaller than it was in the 2000s, despite the fact that the number of people on the Internet has grown by two orders of magnitude. Actually the funding per person online has remained almost on a flat line from 2002 to today. There's some frothiness in the late-stage market still, and but those are the companies that are being corrected. That's largely happening because none of them are IPOing, and with interest rates being practically 0 investors have to put their money somewhere. So they build some losses into a late-stage portfolio theory instead of distributing it in the S&P 500. Some of those companies will end up with lower valuations, but that's always happened, and that's built into the IPO model. In other words, even if several late-stage "unicorns" completely failed (and some undoubtedly will), that doesn't mean that the entirety of tech will be viewed as worthless. The only way it is worthless is if the companies won't eventually generate profits. Last time that was largely the case because the unit economics were bad. This time we see real revenue coming through and the unit economics are there for most companies. I remember all of HN being positive that Instagram selling for $1B to Facebook was the height of the bubble. But now Instagram is returning >$500m in revenue to Facebook per year. Turns out it was a very, very savvy purchase. All of the current tech "unicorns" combined are worth 2/3 of Microsoft. You can make the argument that owning all of Twitter, Amazon, Square, Snapchat, Dropbox, Uber, Zenefits, etc. would be worse than owning 2/3 of Microsoft, but I could definitely see the other side of that argument, as well.

jegutman 11y ago

Strongly, strongly, strongly disagree with this description. This is a completely unfalsifiable definition of a bubble. On December 5, 1996 Alan Greenspan first uttered the phrase "irrational exuberance". Some people amazingly credit him with "calling the bubble" for this statement. The Nasdaq 100 closed at 835.80 that day, the lowest price the Nasdaq 100 has closed once the bubble "crashed" was at 804.64 on October 7, 2002. This is the problem with "bubble watchers". Yes, it's possible for prices to get too high and for companies to trade at too high of valuations (or so it seems) and late 1990s had plenty of that. However, many people are constantly calling bubbles, people were calling the S&P 500 a bubble in this current rally back at 1200 and 1300. Could it go back down? Certainly, but that doesn't make the people calling it a bubble at 1200 correct if it drops from 2100 to 1800. One of my favorite jokes about the subject: Bubble watchers have correctly predicted 9 of the last 2 bubbles. Btw, for those interested in a sane economist talking about bubbles I highly highly recommend Scott Sumner. Here's a good old post of his on the subject: http://www.themoneyillusion.com/?p=8063 http://www.themoneyillusion.com/?p=8063