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I don't think this is a bubble, but expected inflation, due to COVID19. I am guessing we will see cash devalue roughly 2x in the next five years. As a result,

I don't think this is a bubble, but expected inflation, due to COVID19. I am guessing we will see cash devalue roughly 2x in the next five years. As a result, there's a scramble where to put money safely. If the alternative -- cash -- loses half of its value once COVID19 financial measures start unwinding, all of a sudden, investments just need a 50% ROI to be profitable. If I dump a million dollars into a startup, and it sells for the equivalent of $500k in five years ($1M after inflation), I've come out neutral.

icedchai 6y ago
How's that? I think you'd need it to sell for at least 2 mil to come out neutral. We're ignoring the reality of your shares getting diluted in future rounds.
- woofie11 6y ago
  Blargh. I wrote that badly, didn't I? Let me rephrase that more clearly: Let's say I expect 100% inflation over the next 5 years. I can buy an investment which will lose 50% of its real value over that time. I come out neutral compared to holding cash. In dollars: I buy today at a nominal value of $1 million, and sell at $1 million. Same as cash. In value: I buy today at a real value of $1 million. I sell at a real value of $500k in 2020 dollars. I can buy into investments whose real value is falling, and still come out ahead in inflationary times. Value-losing startups suddenly become okay investments since they lose less value than dollars. Both due to COVID19 and government debt generally, I think we're heading for high inflation.... People are looking for assets to put money into. Real values can go going down, while nominal (dollar) values can be going up. https://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics) https://en.wikipedia.org/wiki/Real_versus_nominal_value_(eco... Selling at $2 million would mean I didn't lose value, but I'm not sure people are finding alternative investments which won't lose value; it's why people are grabbing bitcoin, and stocks are hot.
  - icedchai 6y ago
    Yep, makes sense, thanks for the explanation!

icedchai 6y ago

How's that? I think you'd need it to sell for at least 2 mil to come out neutral. We're ignoring the reality of your shares getting diluted in future rounds.

woofie11 6y ago
Blargh. I wrote that badly, didn't I? Let me rephrase that more clearly: Let's say I expect 100% inflation over the next 5 years. I can buy an investment which will lose 50% of its real value over that time. I come out neutral compared to holding cash. In dollars: I buy today at a nominal value of $1 million, and sell at $1 million. Same as cash. In value: I buy today at a real value of $1 million. I sell at a real value of $500k in 2020 dollars. I can buy into investments whose real value is falling, and still come out ahead in inflationary times. Value-losing startups suddenly become okay investments since they lose less value than dollars. Both due to COVID19 and government debt generally, I think we're heading for high inflation.... People are looking for assets to put money into. Real values can go going down, while nominal (dollar) values can be going up. https://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics) https://en.wikipedia.org/wiki/Real_versus_nominal_value_(eco... Selling at $2 million would mean I didn't lose value, but I'm not sure people are finding alternative investments which won't lose value; it's why people are grabbing bitcoin, and stocks are hot.
- icedchai 6y ago
  Yep, makes sense, thanks for the explanation!