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Interesting conversation between Dave McClure and DHH about Facebook
- vitolds 16y agoThe nice thing about markets is that people can put their money where their mouth is. I wonder if DHH, assuming he had an opportunity, would short facebook at $50 billion valuation. Investment banks have talented people working for them, and they have excellent knowledge on how different assets are priced, they may be wrong but it's very hard to tell exactly when they are wrong. I guess betting against them would be rational if DHH had some unique insight as to why $50B is too much. However a claim about the bubble 2.0 or frothy markets is not something unique -- I'm sure they have already priced this public sentiment into the deal.
- danenania 16y agoWell, his whole point is that Goldman isn't value investing, but hoping to profit as a market maker. Goldman may believe the stock is basically worthless but still think they can make big profits on the deal. As for "people can put their money where their mouth is" and shorting: "Markets can remain irrational longer than you can remain solvent." -Keynes
- edge17 16y agoshorting means you have to also be able to stomach the upside pain. Maybe it'll end low, but you have to have enough capital to float against margin calls while it climbs. I know people that got eaten alive for shorting yahoo back around 2000 - they were certain it was overvalued and rode short positions from $40 till over $100. Then their wives made them liquidate the positions; if they'd held out a little longer they would have won... shorting isn't all about being right - you also have to have enough capital. The above quote is very apt. Even if I didn't believe in FB's valuation, I wouldn't short it because I doubt I have the financial fortitude to take the pain.
- jayzee 16y agoWait till they bring the economy down again and the smart talented people at GS ask for a bailout. Besides how would you short shares in a privately held company?
- msy 16y agoBy trading securities that derive from a private vehicle that owns shares.
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- Charuru 16y agoThe colors are incorrect on the bottom. Green and blue should be reversed.
- armandososa 16y agoI can't comment on the conversation itself because I don't understand (the subject) well enough. But I found the tool very interesting. This is the kind of thing that twitter should have natively. I don't know if the bettween guys posted this, but if they did, then I say it's a brilliant promotion. [edited for typos]
- revorad 16y agoI've been searching for a tool like this. Bettween is just perfect.
- joshu 16y agoi agree. a while ago i proposed to twitter that urls of the form: twitter.com/username,username,username/startid-endid to display a series...
- revorad 16y agoI wish someone would whisper Paul Buchheit's advice into Twitter's ears: "it's better to make a few people really happy than to make a lot of people semi-happy." Instead of trying to be as big as possible, if they just worked on improving the website, it would be a lot more useful.
- jacobbijani 16y agoBeing as big as possible seemed to work out, though.
- revorad 16y agoI'm not sure what you mean by that. What I mean is that, at least now, they could focus on improving their product for the existing userbase.
- rhizome 16y agoThat bettween page doesn't degrade gracefully at all.
- ethangunderson 16y agoIt's also missing a bunch of the conversation, making it rather worthless.
- ekanes 16y agoI was thinking, "wow, great job!" until I had to click "more" "more" "more" "more, dammit!" just to read a twitter conversation.
- revorad 16y agoDo you know of a better tool like this? I've been searching but this is the best I could find.
- samlevine 16y agoForums, message boards, IRC, etc. ;)
- revorad 16y agohaha i meant a tool for following a twitter conversation between two people.
- rhizome 16y agoThe weird thing is that it shouldn't be hard to create a thread out of an arbitrary number of @tags. I have to think it already exists somewhere.
- rhizome 16y agoThe weird thing is that it shouldn't be hard to create an eminently readable thread out of an arbitrary number of @tags. I have to think it already exists somewhere.
- duairc 16y agoI can't understand why dhh keeps saying capitalism is so great. Is it because he has loads of money?
- xal 16y agoIs it not the greatest idea we have ever come up with? Sure there are tons of issues with it but it also converted the planet from tribal warfare to incredible prosperity over the last hundreds of years.
- Andys 16y agoWhere "the planet" is only a subset of the planet.
- mishmash 16y agoMy guess would be that "the planet" would have preferred the tribal warfare way of life... just a hunch.
- code_duck 16y agoIt was the dominant economic system in place while that happened. I don't think we can say that technological advances were the result of capitalism, necessarily, or that they would not have happened under some other social structure.
- nhangen 16y agoWhy isn't it great?
- steveklabnik 16y agoSnarky answer: It's only great for those at the top. I should prefix this by saying There are two kinds of languages: the ones people complain about, and the ones that nobody uses. This applies equally to governments. The merits of different economic and governmental systems is a little offtopic here, but I'd suggest browsing some wikipedia pages for some alternate opinions: * http://en.wikipedia.org/wiki/Marxism#Criticism_of_capitalism http://en.wikipedia.org/wiki/Marxism#Criticism_of_capitalism * http://en.wikipedia.org/wiki/Anarchist_communism#Economic_theory http://en.wikipedia.org/wiki/Anarchist_communism#Economic_th... * http://en.wikipedia.org/wiki/Socialism#Economics http://en.wikipedia.org/wiki/Socialism#Economics Etc. This won't really answer your question, but it should start to formulate a few questions in your mind, and by pursuing them, at least lead you to why others criticize capitalism, even if you disagree with them.
- joshu 16y agoi don't think dhh actually understands what a marketmaker does.
- tptacek 16y agoI bet you're wrong, based on what little I know of his social circle in Chicago. But (sincere question): what's the thing he said that tripped your alarm?
- joshu 16y agoA marketmaker is someone who stands ready to both buy and sell at some published price. They're aggregating a deal which they are then reselling. That's more like a broker-dealer, I guess. Taking principal risk in what might eventually IPO is more of an underwriter. Actual marketmakers tend to try to go home with no risk on the books, because they have no interest in exposing themselves to gap risk. I think lots of people have casual understandings of what financial terms mean and then just sort of guess the rest of it (much like people think SecondMarket is the secondary market; it's not.)
- tptacek 16y agoAll I'll say in direct response to this is that Chicago is not a trading backwater, especially at the small-scale entrepreneurial level. I'd put money on him passing the Joshua Schacter Trading 101 exam. (Seriously, it sounds like a fun bet.)
- baguasquirrel 16y agoNo, I'm pretty sure he does. The details of the deal are complicated. Most of the money that Goldman is going to invest for Facebook is not coming from Goldman itself, though Goldman will invest almost half a billion of its own money.
- joshu 16y agoWhat does a marketmaker do?
- endlessvoid94 16y agoI can never tell if DHH is trolling or not.
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- DrJosiah 16y agoMy first thought was that DHH was being reasonable and rational in his skepticism. Then my thoughts about fees, etc., were mirrored and confirmed http://www.businessinsider.com/facebook-now-it-all-makes-sense-2011-1 http://www.businessinsider.com/facebook-now-it-all-makes-sen... . It smells like a money grab for GS, and even at $2B in revenue for 2010, still seems at least a little over-valued.
- swombat 16y agoThis mostly demonstrates that Twitter is a very poor medium for complicated conversations. I'm sure the conversation would have gone very differently if they had used, say, IRC. Twitter seems to make it astonishingly easy to have a dialogue of deaf people, where each side fails to hear what the other side is saying. Throw in the fact that both sides are, to some extent, posturing to their audiences, and you have a recipe for a non-conversation.
- Confusion 16y agoI find it a typical conversation between someone healthily skeptical of capitalism and someone unwilling to really consider its downsides. Twitter, irc or posturing have nothing to do with it. I fully understand what DHH is trying to make clear to McClure, while the latter is channeling the naive view that has become American gospel, where downsides are continuously swept aside with a 'meh, worksforme'.
- davemc500hats 16y agoI totally get downside, but it's somewhat limited if FB is making $500m on $2b in 2010, and 100%+ growth in ann revenue, along with likely biz model improvements & increase in per-user economics. reasonable floor is prob $20-30B, whereas upside could be $100-250b if growth & profits hold up. downside at .5x vs upside at 2-5x seems like a reasonable bet to me. DHH seems to ignore most of these metrics, except for saying that 100 P/E ratio is high. however that doesn't really acknowledge growth or biz model changes that will bring down P/E ratio over next few years. to say it's high is perhaps reasonable. but to ignore that they are dominant, that multiple market participants have set a value (not just GS), and finally to call Rushkoff's recent article about Facebook "fading" a "thoughtful"... all of these strike me as more biased than not. of course my opinions are biased as well -- I've worked with Facebook running their incubator program in 2009, and I used to work for Founders Fund, one of their early investors. anyway I thought it was fun back & forth, given the limitations of the medium.
- jrockway 16y agoI wish there was a "reply to multiple comments" button, because there are about eight where the reply should be, "well yeah, it's a Twitter conversation". People are expecting PhD-level discourse over people tapping out messages on their phone while they're using the bathroom. This apparently leads to disappointment. :)
- stretchwithme 16y agoThe bubbles they lament are caused by the Federal Reserve's subsidy of debt. All that extra liquidity does not flow evenly through the economy; it flows faster into those areas that have been rising, buoying the returns of earlier investors and creating an even steeper price increases. And this will continue until everyone that could possibly buy in finds they find no one to sell to. Granted such a pattern is inevitable to some degree, but all this hot money, which we all pay for indirectly through inflation, blows them all out of proportion.
- stretchwithme 16y agojeez, my grammar sucks sometimes
- drusenko 16y agoModerate inflation is actually a good thing. Without inflation, there is no reason to invest your money -- the incentive is to hoard wealth, like in the Middle Ages.
- CEZEALAH 16y agoIsn't the term "value" derived from how much a particular item is worth to someone else? Having said that, I cannot understand why people say that "Goldman may know the shares are worthless but are hoping to profit from the deal". If people are willing to pay for it, it has value. As far as Facebook's valuation, the old model of figuring out a company's worth by is revenue is not applicable. Why is a company worth $50b if it produces $2b in revenue? There is no guarantee that it will make even $1 the next year. Whereas, just because a company produces $1 in revenue does not make it worthless because whose to say it wont produce $2bln next year.
- Qz 16y agoIf you didn't know who these people were, which would you guess was the programmer and which would you guess was the investor?
- davemc500hats 16y agoaltho I'm primarily an investor now, I was also a programmer from around 1980 thru 1995. that said, I'm sure DHH can/could code rings around my sorry ass. still, that has limited bearing on our respective positions.