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Sam Altman's Bubble Talk Bet Is 1 Year Old
- vasilipupkin 10y agoSo far, I don't think he's right on all 3
- khuknows 10y agoI think it's too early to tell. There only needs to be one winner in each bet for them all to win & it still seems possible to me. Hard to tell until a couple of years from now though.
- raldi 10y agoThis would be a much more useful comment if you explained why.
- vasilipupkin 10y agoIf you take the one year out results, and using those growth rates project out to end of bet period, he would not be right on all 3. But it's only been one year and tech doesn't grow linearly. That's why I said so far.
- raldi 10y agoAnother comment in this thread claims to have done the same analysis and come to the opposite conclusion. But neither of you shared your math. Could you show the analysis that led to your conclusion, so we can compare it to the other one?
- vasilipupkin 10y agohttp://www.wsj.com/articles/t-rowe-price-marks-down-most-of-its-tech-startups-1460759094 http://www.wsj.com/articles/t-rowe-price-marks-down-most-of-...
- projectramo 10y agoHere are his three bets reproduced for comments: 1) The top 6 US companies at http://fortune.com/2015/01/22/the-age-of-unicorns/ http://fortune.com/2015/01/22/the-age-of-unicorns/ (Uber, Palantir, Airbnb, Dropbox, Pinterest, and SpaceX) are currently worth just over $100B. I am leaving out Snapchat because I couldn’t get verification of its valuation. Proposition 1: On January 1st, 2020, these companies will be worth at least $200B in aggregate. Seems he is on track for that one. 2) Stripe, Zenefits, Instacart, Mixpanel, Teespring, Optimizely, Coinbase, Docker, and Weebly are a selection of mid-stage YC companies currently worth less than $9B in aggregate. Proposition 2: On January 1st, 2020, they will be worth at least $27B in aggregate. Hmm... not as confident but I would not bet against it. 3) Proposition 3: The current YC Winter 2015 batch—currently worth something that rounds down to $0—will be worth at least $3B on Jan 1st, 2020. http://techcrunch.com/2015/03/23/here-are-the-companies-that-presented-at-y-combinator-demo-day-day-1/ http://techcrunch.com/2015/03/23/here-are-the-companies-that... http://techcrunch.com/2015/03/24/y-combinator-demos/ http://techcrunch.com/2015/03/24/y-combinator-demos/ Might be on track as well, though I am even less confident. If I were a betting man, I would say he is more right than wrong, and on track for all three. I think this underscores how long 5 years is in internet time.
- trsohmers 10y agoCruise (YC W14) was recently acquired by GM for $1B, so if he picked one earlier class the $3B bet would be attainable in my mind. Not to slight any W15 companies, I just haven't seen much.
- JonFish85 10y agoI'm really curious whether that $1B is truly $1B, or if that's the sticker price based on some crazy metrics they have to hit, and the actual value of the deal is in the $150-$250m range (not that that's anything to sneeze at either), plus unlikely incentives.
- btown 10y agoFor readers unfamiliar with this type of term: https://en.wikipedia.org/wiki/Earnout https://en.wikipedia.org/wiki/Earnout
- blowski 10y agoDid anyone take the bet? --- EDIT: OK, found out that "Boston-based venture capitalist Michael de la Maza" took him up on it. http://money.cnn.com/2015/03/30/technology/sam-altman-tech-startup-bubble-bet/index.html http://money.cnn.com/2015/03/30/technology/sam-altman-tech-s...
- stale2002 10y agoLame. It was just someone who wanted to work with Sam. Not someone who actually believed we are in a bubble, and was "Putting his money where his mouth was"
- neom 10y agoHe'll likely be right on all 3 but only because 1 company in each will disproportionately skew. His bet is overly broad. Palantir and SpaceX are very promising companies, it's hard to say if their true value will be realized by 2020. Stripe alone is worth $10-15B if you ask me. Where he might stumble is the 3rd, however finding $3B of worth in what must be 30+ companies shouldn't be hard, depends how badly the global economy slows in the next 4 years. I'm not sure this really does much to disprove the insular and bubbly nature of technology investment, however.
- jaz46 10y agoWinter 15 batch was 100+ companies.
- spencefu 10y agoThe skew is the point though. Startup valuations are supposed to work such that a small number of successes make up for a large number of failures. The press loves to harp on the individual cases, but all that matters for valuation is expected portfolio performance.
- neom 10y agoHedging is a thing in investing, yes. I do agree the press reports when businesses are perceived to not be doing well. I don't know I agree they usually point heavily to that being a venture thing. I'm still not sure much of this is the indicator of a bubble, that's all (it's a pretty boring bet?).
- rco8786 10y ago> 1 company in each will disproportionately skew. He's a VC, that's what he's betting on.
- tacos 10y agoPrevious discussion from longer than 1 year ago: https://news.ycombinator.com/item?id=9271679 https://news.ycombinator.com/item?id=9271679 My comment(s) then: Ironically a basic statistics class indicates that cherry picking companies that deliver 2x, 3x and ... whatever the fuck that third pick is ... as a guaranteed return over 5 years is indicative of the overenthusiastic hype that historically surrounds bubble valuations. #3 is a die roll. #2 is the killer. And I might take the bet on just #1. I admire Sam's balls but the externalities here are immense. The greatest financial mind of our time built Berkshire Hathaway to $350B over 50 years. GE is worth $250B. Microsoft $340B. To believe Sam's motley list of companies can either hold onto valuations approaching those "real" companies for five more years, let alone actually generate viable earnings and go public (even at goofy P/E multiples) in line with what GE, Microsoft, or Buffett's candy, ketchup and mac'n'cheese subsidiaries alone make seems ... optimistic at best. If he loses, might I suggest the book title? "Oops! Brands Aren't Businesses!" by Samuel H. Altman.
- gatsby 10y agoI was curious, so I looked up what the press has reported on each company's most recent valuation (and therefore, these numbers could be off, because they don't factor in reported write downs / markups from individual investors [i.e. Fidelity], financing rounds not reported by the press, huge gains/downturns in revenue over the last year, etc.) 1.) The top 6 companies mentioned are now valued at $146.5b. 2.) The 9 midstage YC companies mentioned in the article are valued at $15.43b.
- KKKKkkkk1 10y agoTLDR: Venture capitalist claims the tech sector is not in a bubble.
- david927 10y agoExactly. To be fair, it's pretty hard to remain objective in his spot. If he spent a year anywhere else in the world, doing something different, he would certainly have a different perspective. But that's fine. He should feel the way he feels about this. I was going to make a similar bet but in the other direction. My instincts say that 90% of the companies mentioned would be out of business by then and the remaining in the "still-going-but-not-relevant/MySpace" category. The coming Tech Winter will be devastating to the unicorns, precisely because so much is expected from them. But I don't want to be one of those people. A community is built by people supporting each other, up or down, Tuesday or Wednesday. Maybe Sam is right and maybe I am, but at the end of the day, let's innovate and let the future unfold how it will.
- kaonashi 10y ago"Bubble" is a bit of a loaded word. It implies both overvaluation and general instability; but these things aren't necessarily linked.
- pj_mukh 10y agoFlip side: Journalist writes article with 'bubble' in the title.
- spinlock 10y agoIt's not a claim. It's a bet with $100,000 backing it.
- sama 10y agoI feel better about this now than I did a year ago. Proposition 1 is up about 50% in the first year, and proposition 2 is up about 65%. The main point remains--we spend far too much time talking about whether or not startups are in a bubble. It's boring and it gets in the way. Sometimes it will be true and sometimes it won't, but the stories claiming a huge bubble for the last 10 years have been generally wrong. It was telling to me that, even with the fever pitch of VCs calling for the end of the world last year, only one investor (a TechStars mentor) would take this bet. The goal of this bet was to deflate the bubble conversation, and that seemed somewhat effective.
- ebbv 10y agoDo you think that perhaps there were crickets because the people with the money/position to be able to take the bet have good reason to share your bullish view because they also stand to benefit from you being right? So they have to not only be bearish but be really confident about being bearish to take your bet? I believe we are in a bubble but I'm not a millionaire I'm just a regular developer, so I don't have $100k to gamble. Maybe I should have offered to take your bet at $100 a year ago? :) To be honest, though, even though I believe we are in a bubble I don't feel that confident it will burst by 2020. There's too many factors at play that I can't accurately predict a timeline. I just think we're in a bubble because I look at valuations of companies like Uber and AirBnB and they seem inflated to me.
- eganist 10y ago> The goal of this bet was to deflate the bubble conversation, and that seemed somewhat effective. Is it the bet which deflated the bubble conversation, or a deflation (or speculation of such) of the bubble itself? I ask because if you take a look at layman-accessible headlines or even some of the conversations which take place here, there's still quite a lot about the "downturn" in the bay. That alone's likely enough to get people to stop talking "bubble" even if the only downturn was in the rate of acceleration of growth, not in actual growth itself. Still, I appreciate the bet for putting the focus on entrepreneurial efforts as a force of worldwide change rather than as a force of wealth creation.
- vasilipupkin 10y ago
- hindsightbias 10y agoProtip: Bubbles always last 18 months longer than you think they can.
- Pxtl 10y agoI figured the Canadian real-estate bubble would pop like 5 years ago. Not so much.
- vkou 10y agoWell... It popped in Fort McMurray. Edit: And that was way before this year's wildfire.
- mrtron 10y agoIf the 'bubble' pops now, prices will still be higher than they were 5 years ago. That makes your prediction extra bad. Unless you normalize by currency, in which case its just a fairly bad prediction.
- bunkydoo 10y agoI would not call tech industry a bubble by any means. However, since my work took me away from Silicon Valley - I have to say there are almost no startups that have really changed my life in any noticeable way. All I have watched happen is my new smartphones and laptops get thinner, and the apps on them switch to flat design language. Glass was neat, more novelty though. Cardboard was cool, also a novelty - plus I don't game so VR doesn't effect me (yet) and on top of that, neither of these were made by a startup - but a huge corporate entity. I thought back in 2010 I would be experiencing my entire tech life through Augmented reality by at least 2015. Needless to say, I am not. :(
- pj_mukh 10y ago"The gleeful anticipation of a correction by investors and pundits is not helping the world get better in any meaningful way." Probably the most important line of the post. Hate that someone invested $<X> M in an app that just sends "Yo" to other people? Great, don't use it, don't invest your money in it. Yelling on the sidelines about how crappy it all is, seems counter-productive. Writing self-fulfilling prophecies to get clicks seems even more egregious.
- vykvykvi 10y agoUh oh, it looks like someone has skin in the game and is worried. :'(
- pj_mukh 10y agoMore like broke-ass engineer annoyed at my fellow ilk on the peanut gallery. Though in a way, I don't want to return to the days the Blue-Chips ran the show, if that is what you want to call "skin in the game".
- Xyik 10y agoBetting on valuations of private companies is a bit silly.