7 ms·
Bubble talk (2015)
- Ecco 7y agoSo... Did he win? I’m especially curious about part 3 :)
- Matticus_Rex 7y agoPart 1 didn't quite make it. Eyeballing it I think it's around $150B, which I think still substantially backs his point, but it loses him the bet. Part 2 was an easy win from Stripe alone. I scanned the YC '15 Winter list and I don't think I recognize any of them. Someone could track it better via Crunchbase, but I rather doubt that he bet correctly there either. EDIT: Oh, GitLab.
- user402 7y agoPart 3: Gitlab alone is almost $3B
- Matticus_Rex 7y agoAh, cool. Missed them somehow.
- dweekly 7y agoAlso Atomwise is in that group.
- cm2012 7y agoI just googled the company values, and it looks like he came up a bit short for number 1 but got close, easily beat number 2 with Stripe alone.
- everybodyknows 7y ago2015, March.
- everybodyknows 7y agoOriginal title lacked a date -- and comment pointing out the omission gets downvoted. Such downvotes are destructive to the quality of information on HN. @dang?
- iamsb 7y agoI dont think he won the first bet did he? Airbnb, Palantir, Dropbox, Uber, Spacex, and Pinterest together are less than 200 bn and falling. All still pretty good companies (not you Uber), doing interesting things though. bet 2 - I have not done the calculation, but just stripe puts it way beyond the 27 bn figgure. bet 3 - plenty of good companies in that batch. Razorpay was valued at half a billion dollars in last round. Overall seems like he was right. https://www.ycdb.co/batch/w15 https://www.ycdb.co/batch/w15
- iamsb 7y agobet 3 - gitlab was in that batch and is alone worth 2.7 bn, so yeah total batch valuation is well north of 3bn.
- virgilp 7y agoUber: 50.73 bln Spacex: 33.3 bln? Airbnb: 35 bln? Palantir: 26 bln ? Pinterest: 10.4Bln Dropbox: 7.44 Bln They are far from $200bln, so he certainly lost the first one. Might have won the other 3 though.
- JohnJamesRambo 7y agoTo me, the outcome is just another example of the power of diversification and that we really don’t know anything about which stocks or companies are best. Stripe alone made Bet 2 worth it.
- stereolambda 7y agoI'm inclined to read it as early opportunities having the highest average growth potential. Big companies are more likely to be already around their actual ceiling.
- jbverschoor 7y ago20% off. I’d say that’s a pretty decent guess in 5 years.
- username90 7y ago
- fyp 7y agoPeople were projecting that he will lose last year: https://news.ycombinator.com/item?id=18792890 https://news.ycombinator.com/item?id=18792890
- NhanH 7y agoNo macro collapse, and the first proposition didn't work out: Uber: 50B, Palantir < 40B, Airbnb < 40B, Dropbox < 10B, Pinterest ~10B, SpaceX < 40B. So total 160-180B market cap. Close, but not quite.
- cm2012 7y agoBiggest difference was that the public market valued a bunch of these companies waaay less than VCs did.
- iamsb 7y agoSo it was a bubble then?
- cm2012 7y agoNot sure if it's the right nomenclature, since bubbles are supposed to be pop. Instead they just grew in value slower than they were.
- Waterluvian 7y agoThe muffins didn't rise properly.
- huffmsa 7y agoPerhaps, but dealt with via smaller adjustments rather than catastrophic collapse. The underlying principles of the companies is sound, just priced a bit too high. The market fixed it (as it is supposed to do)
- MichaelApproved 7y ago“Fixed” is too definitive of a word, isn’t it? Who knows if the market is correct right now. Repriced, adjusted, revaluation. Those seem more appropriate for the timeframe. More time is needed to tell if it was fixed or not.
- chrisked 7y agoBet 1 should be less than 200bn. Bet 2+3 was spot on and easily won.
- blantonl 7y agoThe market can stay irrational longer than you can stay solvent.
- H8crilA 7y agoYeah, a better bet would be about those companies actually delivering profits and "growing into their vaulations", as people politely put it. None of those companies have earned a single dollar for shareholders. Not a single dollar.
- AznHisoka 7y agoDidn’t early stage investors in Uber and Pinterest made money when they IPO’d?
- H8crilA 7y agoI said "companies delivering profits", not "people making money trading the stock". I'm sure speculation can be profitable on such volatile securities, after all volatility is everything for traders. But there's nothing here (so far) for a fundamentals based long term investor to write home about. Zero.
- MichaelApproved 7y ago> None of those companies have earned a single dollar for shareholders. Is that what shareholders are asking for, right now? Don’t they want fast growth more than they want profits?
- H8crilA 7y agoI suppose, yes, and this is a little scary - the world being in such a state that you can wait 10 years for a company to make profits and it is still considered OK. Cheapening money. But also how much longer can we wait? Google, Apple, Microsoft and Facebook were all turning profit before the IPO! Find the old S-1s if you don't believe me. And back in those days IPOs happened much much earlier.
- maehwasu 7y agoRegardless of the fact that he missed by a bit, this type of writing is way more valuable than the standard NYT/Bloomberg "OMG IS IT A BUBBLE???" articles?
- MichaelApproved 7y agoI would say so. The writer is giving analysis with money and reputation on the line using specific metrics. It gives us something to measure and review. It also adds/removes credibility when we read another article with his analysis.
- austhrow743 7y agoWonder who took the other side and where they chose for him to donate to. Edited due to ambiguity.
- cpach 7y agoAccording to a previous HN thread, Michael de la Maza took the other side. https://news.ycombinator.com/item?id=18792890 https://news.ycombinator.com/item?id=18792890
- 317070 7y agoWell, the other side won. So the other side will not need to donate. Albeit that it was close.
- austhrow743 7y agoSorry for my poor wording. "He" was referring to Sam.
- mattmaroon 7y agoHis bet was a parlay so it lost, but not by a lot. Had he been able to include Snapchat it probably would have done worse. I think what we’ve seen in the last five years is that there’s some bubble-like irrationally exuberance but overall it’s far from 2000 all over again. Companies have high valuations but this time also often have financials and growth prospects to go with them.
- mdlm 7y agoMatt, When will portfolio 1 reach $200B? Michael
- mattmaroon 7y agoI certainly don’t know.
- glofish 7y agoDatapoint for reference: if you invested in an SP500 fund during the same time you would have roughly doubled (around 180%) your money (an annualized return of 11%).
- nabla9 7y agoThat's the proper comparison. Investing into startups and unicorns should provide significant yield over diversified and less risky investment. Getting the same result from taking more risk is not a good investment. from the end of March 30, 2015 +56% SP500 Price index +70% SP500 Total return index +83% Nasdaq price index Uber, Palantir, Airbnb, Dropbox, Pinterest, and SpaceX doubling their valuations would give only +3.2% annualized return over Nasdaq. I don't see the risk/reward ratio of a good investment if the price just doubles in that period. (FAANG is another good comparison).
- iamsb 7y agoHow is investing in companies which are already 100 bn in valuations more risky than SP500? I am sure all investors who put money in these companies when they were risky, made very good returns, far more than SP500.
- nabla9 7y agoIt's not the size but the way they operate: * plan is to forego profits to gain market share, negative earnings * free cash flow is negative * lots of debt. Dropbox -40%, Uber -28%, Pinterest -23% since the IPO.
- glofish 7y agoAre you saying that all one needs to do is put money into the risky companies that will succeed and avoid the risky ones that won't?
- zozbot234 7y agoThere was definitely a trade collapse that might have impacted valuations somewhat.
- MichaelApproved 7y agoI would argue that Trump is the worst president in history but can we please leave names like “Cheeto-in-chief” on reddit?
- zozbot234 7y agoI'm sorry if you took offense at any part of my comment, and I've tried to streamline it a little bit. But I think that some things should not be left unsaid - Trump has been called "the worst president in history" for all sorts of reasons, many and perhaps most of which are just about partisan bias rather than substance. Focusing on some of the actual policies he's taken credit for, and their real-world effects is probably more helpful.
- aetherson 7y agoI don't think that the trade war had disproportionate effects on Altman's prop 1 companies.
- zozbot234 7y agoAltman's bet was about absolute values, not proportions. The trade collapse impacts those as much as anything else.
- aetherson 7y agoThe prop 1 companies underperformed Altman's expectations in a way that the market as a whole, and the prop 2 and prop 3 companies, did not. Explaining that via recourse to a trade war is difficult.
- mdorazio 7y agoI'm actually surprised that he didn't win this bet since it wasn't really based on non-bubble metrics in the first place. A more interesting bet to me would have have involved profitability, P/E ratio, or some other long-term indicator that current high-rolling unicorns are actually sustainable businesses. I think WeWork has demonstrated pretty clearly that billions of dollars of VC money can prop up unsustainable companies for more than 5 years (i.e. the market can remain irrational longer than the term of this bet).
- MarkMc 7y agoAlthough Sam would have lost this bet, I respect that he had the courage to make a forecast with a specific number and a specific future date. Too many pundits make grand but imprecise predictions like "AI will become dominant in the next decade". The book 'Superforcasting' tackles this problem in detail: https://www.amazon.com/Superforecasting-Science-Prediction-Philip-Tetlock/dp/0804136718 https://www.amazon.com/Superforecasting-Science-Prediction-P...
- harryh 7y agoIf I recall correctly, the bet was accepted. EDIT: Ah, I found documentation: "Michael de la Maza, a Boston-based investor and TechStars mentor, has taken my recent bet on valuations." https://twitter.com/sama/status/582292425449730049 https://twitter.com/sama/status/582292425449730049
- mdlm 7y agoThanks for using Twitter to remind Mr. Altman of the bet.
- ksec 7y ago>Of course, there could be a macro collapse in 2018 or 2019, which wouldn’t have time to recover by 2020. Which hasn't happened... There was another thread about bubble and calling me out. Just to point out, If you bought S&P Index in 2015 you would now have roughly 200% return. But this is in the context of tech. We forget Apple, Microsoft, Google are not just doing fine, they are doing great. And not just in US, TSMC and Samsung representing SemiConductor industry are all doing great, thanks to those ridiculous profits from NAND and DRAM; Samsung is reinvesting everything into making DRAM NAND and Foundry more competitive. Which will hopefully fence off those State sponsored Chinese Competition. In terms of Startup, While Sam might have loss on first proposition ( I think he won the other 2 ), but they are operating just fine with similar valuation if not more, just not meeting the 200B target. Unlike other Startup that cashes in from IPO and then devalued into nothing. Will we see a correction? Very likely. Are we in a bubble? No, at least not yet. ( Unless you like to redefine any correction as bubble burst )
- OnlineGladiator 7y ago> Are we in a bubble? No, at least not yet. I agree with everything you said except for this. Not because I am definitively saying we are in a bubble, but just pointing out it's impossible to know if we are. Very few people saw the last financial collapse coming.
- lotsofpulp 7y agoThe last financial collapse had many companies claiming paper valuations of assets. Companies like AAPL/MS/GOOG/FB have significant net income with significant moats around their products that still have plenty of room to grow as they all move to subscription income.
- OnlineGladiator 7y agoIt's always easy to come up with justifications for why "this time it's different" and people will be doing that even after the stock prices are already declining. It's impossible to foresee an unknown unknown.
- grumpy8 7y agoSucks that Sam lost his bet because as far as I'm concerned he "won" his point (I.e. there was clearly not a bubble and all these 1,2,3 companies did amazing). Still, it's great that it's going to a charity
- aguyfromnb 7y agoSeems odd to me to deny bubble talk, then base "success" on market cap. Outsized market caps are associated with bubbles. There are a few companies in there for which survival is questionable.
- harryh 7y agoThe idea of the bet was that if there was a bubble in 2015 it would have deflated by now.
- throwGuardian 7y agoMany here are claiming he lost the bet on #1, but consider the details: Predicted Aggregate value: $200B Actual value: $145B (Math in [1]) His prediction is off by 25%. Technically a lost bet, but I'd say a prudent bet as a VC. As for #2, #3, he wins them outright. Overall, being 25% off the most optimistic prediction isn't too bad a loss. I'd say he won the argument convincingly. I will note that anyone above average intellect in his position (as an investor with gobbles of analytics, best in class prediction models and advisors, and access to thousands of high quality pitches to see down the pipeline) would likely predict as he did, so while he won, he wasn't clairvoyant, he was merely following the data. [1]: Math: Uber: $50B SpaceX: $35B. Airbnb: $35B Palantir: $25B Pinterest: $10B Dropbox: $7.5B
- probe 7y agoHe technically has until March of 2020. I still think there’s a chance that he pulls #1 off (SpaceX pulling off human flights in Q1 and re-raises, Airbnb going public as a profitable and defensible business, Uber and rationalization in ridesharing and delivery + continued execution)
- kick 7y ago...no? He said it himself, he has until January 1st of 2020. He lost the bet.