25 ms·

The tech bubble that never burst

244 points by skywal_l 5y ago

manholio 5y ago
There is no "tech" bubble. Some technologies are transformative and we have only begun to understand their implications. Other are ridiculous scams. The investors that are able to separate the chaff will always do well on the long run.
rbranson 5y ago
It feels like a lot of money, but I'd point out that even venture's blockbuster 2021 year, where it raised ~$128B in funding, is still far less money than Apple's ~$202B and Google's ~$169B cash on hand. Those are single companies.
- sbinthree 5y ago
  The heterodox truth is that startups are undervalued for their value potential. When single (venture backed) companies all have more cash than the entire ecosystem on their balance sheet, it becomes clear that the market is undervalued.
  - Msw242 5y ago
    Additionally, they are less capital intensive than ever, so founders have more options for funding than ever That pushes up prices
- rapsey 5y ago
  Apple and Google are giant money printing machines. How is this relevant?
  - mr90210 5y ago
    Not to mention that it is quite clear why both companies have loads of cash.
  - redisman 5y ago
    It proves that the valuations are somewhat rational.
muchtest 5y ago
Yet
- birracerveza 5y ago
  Everything eventually dies. The problem is you might die first.
  - xitrium 5y ago
    I like "The market can stay irrational longer than you can stay solvent." -Keynes
- azinman2 5y ago
  There were many car companies in the early 20th century. Most didn’t make it. Yet cars are an integral piece of our lives globally, so the market size only grew larger. Software is no different, except it’s infinitely flexible.
  - colinmhayes 5y ago
    There are some big differences between software and car companies though. Car companies required gigantic, continuing capital to manufacture their cars. Software has zero marginal cost. It seems that the difference in capital requirements once a company is up and running would allow the software industry to have more competitors.
    - azinman2 5y ago
      You’re assuming switching costs are the same, available labor is universal and endless, business dealings are the same, etc. It seems the most successful “competitors” are never head on for anyone entrenched, but rather come at similar problems from a different angel. Even companies who are up and running often want capital to take things to the next stage. None of that means burst of a bubble.
- FollowingTheDao 5y ago
ethbr0 5y ago
It's hard for a bubble to burst when it's cheap to borrow money.
- lotsofpulp 5y ago
  Or maybe it is related to tech companies earning record profits year after year and obviating entire other businesses year after year. There is still much upside to be had, especially on the recurring revenue front.
  - ethbr0 5y ago
    You're right. Uber obviated the need to pay for transportation. WeWork obviated the need to lease office space. The world will never be the same.
    - cupofpython 5y ago
      >WeWork obviated the need to lease office space Zoom has reduced leasing costs for many companies tbh
  - mupuff1234 5y ago
    I don't think people are talking about the profitable companies, but about the endless list of companies who are valued at billions and have yet to turn a profit.
  - time_to_smile 5y ago
    Someone on twitter once posed the question "what percent of the profits from profitable tech companies come from revenue from non-profitable ones?" I've found in looking at problems in general it helps to try to take a systems perspective. If you only look one step back everything makes sense and is fine, but when you start looking at the larger flows of everything is when you start to think that maybe the accounting doesn't all work out.
- solveit 5y ago
  Eight of the ten largest companies on the NYSE are tech companies (the others are Saudi Aramco and Berkshire Hathaway). Of those eight, only Tesla needs access to cheap capital. Edit: Tesla and Saudi Aramco (duh) aren't actually on the NYSE... Something something HN before coffee something Edit 2: Neither is Alphabet or Micros... you know what, just read publicly traded companies instead of NYSE.
ProAm 5y ago
I mean there were some blow ups. WeWork, Theranos, etc... But the era of cheap/free money is just starting to end, so I think the bubble is still ahead of us.
- gabereiser 5y ago
  Wasn’t aware it was ending, just thought it came with more criteria (web3).
  - blantonl 5y ago
    Don't forget more influencers and of course, crypto.
    - cinntaile 5y ago
      He didn't forget. Crypto is a fundamental part of web3. I'm not convinced this is where cheap money will go, it's too small to absorb all that capital.
      - chaxor 5y ago
        I'm not sure I understand this. Isn't web3 mostly just the use of decentralized systems? You don't need crypto for that. If your answer is incentive, I'm not so sure you need that either. For example, if you want to store something on the web, why not rely on a automated torrent protocol deamon in the browser that caches and seeds any datasets that you download? That solves a problem without crypto.
        cinntaile 5y ago
        Web3 is just a marketing term for decentralized systems/applications using a blockchain.
        antoniuschan99 5y ago
        I think they use crypto for monetization, whereas current or “web 2” mostly uses ads as the solution to monetization for a lot of web stuff. Eg. Sia File Transfer is a Technology for (Decentralized) File Sharing, while Sia Coin is the monetization side. Same as Helium Network, which is a LoRa Router whereas you get paid in Helium Tokens
arberx 5y ago
If your company isn't profitable or relies on refinancing your debt, the next decade is going to be brutal.
manuelabeledo 5y ago
We aren't in the early 2000s anymore. Tech companies won't be seen as a "fad" any time soon. As long as VCs keep making money out of diversifying risk, the "bubble" will never burst.
- toto444 5y ago
  Do you mean that 'this time is different' ?
  - metamet 5y ago
    Yes, but unironically. Societal and cultural understandings of what "tech" is has shifted dramatically in the last 20 years. Home computers were still pretty niche, constant connectivity via pocket size computers was a work of science fiction, and we didn't have an omnipresent internet retailer that could bring you nearly anything in a few hours/a couple days. The possibilities of the internet and tech companies were still in their formulative stage with regards to the general population. It's now so engrained in our daily lives that it's taken for granted. I suspect the bubbles that will actually burst are going to be incredible niche. Even then, things like NFTs may survive due to a cultural imagination that allows ideas to live on longer than maybe they should.
  - hahaxdxd123 5y ago
    I mean, every time is different in the sorts of companies/sector of the economy that fails. The large tech companies actually do have solid fundamentals. The dynamics of the business cycle remains the same though and some more speculative companies will fail (taking a look at the 6-month performance of Asana, Palantir, Zoom, etc makes me quite happy as a shorter).
  - deleted 5y ago
    [deleted]
  - ak_111 5y ago
    I remember two partners from Andreessen Horowitz gave a presentation to a group of investors and journalists around 2015, where they had a slide with literally the title "This time is different". I thought to myself this will not end well, major crash around the corner. I am annoyed that they were right.
kerblang 5y ago
I feel like the tech bubble is really just an outgrowth of an economic boom; big money rolls in, and needs a place to go. Everyone is happy to invest in dog shit as long as they can buy dog shit at $190/kilo and sell at 10 bucks more. They have to put the money somewhere. Tech companies are just a somewhere, but dog shit would be perfectly adequate, and arguably less overhead... I just realized NFT's have even less overhead than dog shit.
- contravariant 5y ago
  Of course trading in something which has no value other than being sold is just a pyramid game in disguise. In particular dog-shit has more intrinsic value than NFTs.
  - cwkoss 5y ago
    Similarly, a non-zero portion of facebook or google or amazon's current market cap is worth less than dog-shit. Hard to say how big that proportion is.
    - weatherlite 5y ago
      You are saying stocks have no value? That is on you to make the case because humanity disagrees...
      - cwkoss 5y ago
        I'm saying a double digit chunk of these companies' expenses and IP production is yielding no economic value: either through lack of product market fit or getting cancelled before they launch. These companies are dripping with untrimmed fat and lack of focus on serving customers via building dumb projects that never get used.
  - nightski 5y ago
    Pretty much any collectible could be called a pyramid scheme. It doesn't really matter in the long run. Humans like these things because they attach value to them as irrational as it might be. No one is melting down their Rolex for base metals. Lol. Yet they can be an extremely sound investment.
streetcat1 5y ago
Two points: 1. Tech moved from a sector to an whole economy. 2. The substitution for tech (e.g. labor) become very scares and expensive (either because of de globalization, baby boomer retirement, low birth rates). Hence, the value of tech increases. I.e. The only way to fight inflation is to use more tech.
- FollowingTheDao 5y ago
  > Tech moved from a sector to an whole economy. "Tech" is not the problem. It the the shady financing of the Tech sector that is the problem.
- politician 5y ago
  > Hence, the value of tech increases. Another example: The labor shortages in construction are acute and reveals a surge in social mobility among those who were/are employed in that sector. I expect investments in tech companies that claim to address the labor and supply shortages in construction to increase.
georgeecollins 5y ago
Because of the war in Ukraine people in the US aren't hearing as much about what is going on with Chinese real estate these days. TLDR: There is enough vacant housing in China to house Spain. Prices are going to drop, probably. People have been saying there was a bubble in Chinese real estate for ten or twenty years and all that time prices have been going up in ways that are probably at least sustainable based on a growing economy. I think the biggest movements of overvaluation are like Chinese real estate where people over pay, but the underlying value is still going up so you can keep justifying overpaying for years. Probably GE was like that for a long time. Now I think Tesla has been over valued for a long time (maybe not-- just take it as an example) but it's hard to argue it is over valued because at the same time the price appreciates the value of the underlying thing is also growing.
- gigaflop 5y ago
  Haven't some new-construction apartment buildings in China been left mostly empty, while others start crumbling before they're finished? As for Tesla, the market can stay irrational longer than one can stay solvent. If not for EM's cultlike fanbase, I doubt it would be this overvalued.
  - vardump 5y ago
    There's also anti-EM cult. I guess it balances it, shrug?
    - gigaflop 5y ago
      I feel like anti-cults are never as strong as the cult itself, and will rarely ever be. A cult is a portion of society following something or someone, and I feel like it encompasses people from suggestible fans to fanatics. An anticult can't contain people who have no interest, as those who lack interest will be on the sidelines not caring. I also think that there's a larger 'negative opinion threshold' that needs to be crossed for someone to migrate to the anticult, since anticult membership requires opposition and participation. In essence, cults can be passive, while anticults are active, and whenever you ask for activity, membership plummets, simply because the bar has gone above knee-height.
deleted 5y ago
[deleted]
ulzeraj 5y ago
I bet they are really proud of that scrolling graph effect and it is quite cool but it makes that part a bit confusing to read.
paywallasinbeer 5y ago
https://archive.ph/cbC9v https://archive.ph/cbC9v
- autarch 5y ago
  This isn't very helpful, as most of the article isn't readable without the JS that the NYT serves. Also, it seems like this article _isn't_ behind their paywall.
  - loeg 5y ago
    It's paywalled for me, for example.
    - autarch 5y ago
      Ah, the mysterious ways of the New York Times. For some reason I didn't get paywalled. But regardless, it's not readable on archive.ph, unfortunately.
      - neogodless 5y ago
        Yes this is an odd one. This thread led me to view the original, and I was not paywalled, and all was good. But then I shared it with friends because it wasn't paywalled... and they were paywalled.
scrlk 5y ago
"We are all at a wonderful ball where the champagne sparkles in every glass and soft laughter falls upon the summer air. We know, by the rules, that at some moment, the Black Horseman will come shattering through the great terrace doors, wreaking vengeance and scattering the survivors. Those who leave early are saved, but the ball is so splendid no one wants to leave while there is still time, so that everyone keeps asking, ‘What time is it? What time is it?’ But none of the clocks have any hands."
- marliechiller 5y ago
  very poetic, where is this from?
  - scrlk 5y ago
    Supermoney by George Goodman - he wrote under the pseudonym "Adam Smith". p.s. You might enjoy watching "Margin Call", if you haven't seen it before. This clip is particularly relevant: https://www.youtube.com/watch?v=LtFyP0qy9XU https://www.youtube.com/watch?v=LtFyP0qy9XU
ramesh31 5y ago
In the last 10 years, software ate the world. I can pull up the Fortune 500 and find an open job listing for myself at every single company on that list. Software is everything, and everything is software.
- cupofpython 5y ago
  Receptionists / customer service could say the same thing. Software engineers are going to be just as replaceable soon enough. In a lot of places, they already are. I think eventually they will be paid about equivalent to a construction worker (currently $40k). Maybe less since they dont have to be onsite or in good physical shape.
  - sfblah 5y ago
    On average that may be true. But actually good software engineers will always command a massive premium.
  - ramesh31 5y ago
    >I think eventually they will be paid about equivalent to a construction worker (currently $40k). Maybe less since they dont have to be onsite or in good physical shape. I used to think that. But the reality is that the vast majority of humanity is simply incapable of performing even basic programming tasks. It's so far outside of our normal day to day experience, that wrapping your head around the level of abstraction required even to understand a hash map is a massive undertaking for an average person. It's nothing at all like handing someone a hammer and showing them how to drive a nail. Being a dev is currently in the top 5 professions for earning potential and quality of life. Why isn't everyone doing it? Simply because they can't. Programming is really really hard, and it requires a certain combination of personality, drive, and intelligence that is far from common and can't really be taught to those that wouldn't otherwise figure it out on their own.
Kalanos 5y ago
Tons of tech stocks and valuations, especially the unprofitable ones, are down 50-66%. It definitely burst. Supply shortages, inflation, and the war provided a sanity check. On the other hand, 2021 was the biggest venture year ever. Everyone made a ton of money in the stock market, and needed to do something with it. The returns on ventures mean that its now a real investment channel that is here to stay.
- trgn 5y ago
  Absolutely, where is this narrative about the bubble not bursting, and cheap money this, and market irrationality that coming from? It totally did burst. Growth stock got killed early this year across the board. The market has punished Covid hype investments (e.g. Peloton, Zoom) very hard as well.
  - deleted 5y ago
    [deleted]
no_wizard 5y ago
Real question is: is now the time to leave startups for the Fortune 500s? Especially the big ones (Shopify, Apple, Meta, Microsoft, Google, Netflix)
29athrowaway 5y ago
Imagine you sell bananas but each time you sell a banana bunch, the banana bunch is duplicated. Also imagine that because of that, you don't need to grow multiple bananas, you only to grow one and copy it many times. That is why software makes so much money.
- pphysch 5y ago
  Not in practice. In practice, everytime you want to take a bite of the banana, you need to log into a web portal and verify you have an active, fully-paid license for the banana service. Draconian IP law and the arbitrary fees they enforce are why software makes so much money.
nostrademons 5y ago
People are very bad at predicting true change in the fundamentals of how they live their lives and then dealing with the implications of that. We've been lulled into the myth of a steady-state economy by the post-WW2 Pax Americana. If that's your model, any rapid change is a "bubble" that's going to pop and return us to our original steady state, and real lasting change is consistently undervalued. Here's a pop quiz with a counterintuitive answer: if Bitcoin succeeds at replacing the dollar as both the world reserve currency and the currency of choice for everyday transactions, what's its fair market value? Most optimists would divide total dollar supply ($21T) by total Bitcoin supply ($21M) and come out with $1M. But the true answer is infinite: if this scenario actually comes to pass, the dollar's value will trend to zero and the question will become meaningless, as you won't be able to trade your dollars for Bitcoin at any price. So it is with tech: software is actively replacing many core industries, which sends their value to zero and the owners of their software replacements to effectively infinity. I suspect similar dynamics are at play with prices in general and particularly asset & housing prices. Everybody's calling a bubble and thinking they'll buy stuff later when prices come down. That can happen in localized instances (like lumber last summer), but oftentimes those bubble bursts reverse themselves and end up driving higher. Lumber went up by 250% again in the second half of last year, just as tech company stocks have reached heights that were unimaginable in the dot-com boom. The overall price level in the economy isn't going down.
- crate_barre 5y ago
  In a sense, most of the so called bubbles occurring right now are due to a lack of tech and innovation. The issue isn’t that Home prices are inflated, the issue is our most innovative solution for home ownership is credit hand outs. The Finance sector is not innovative enough to solve this. We’d need to think about building denser cities and pragmatic modern housing. Affordable housing doesn’t have to mean “middle or low income in certain area”. These are old industries of finance and old progressive ideas that simply are not disruptive enough. We’re starving for innovation.
  - BlargMcLarg 5y ago
    >the issue is our most innovative solution for home ownership is credit hand outs I'm fairly certain we have more innovative solutions, but the risks just aren't lucrative for the far majority of investors. It's a lack of (relatively frictionless) experimentation more than anything. The majority of solutions I imagine directly contrast typical western individualism, too.
lkrubner 5y ago
The Florida Land Boom of the 1920s was a bubble: https://en.wikipedia.org/wiki/Florida_land_boom_of_the_1920s https://en.wikipedia.org/wiki/Florida_land_boom_of_the_1920s But after 1935, Florida took off and grew like crazy. Even if you bought at the peak of the bubble, by the 1940s you had still gained some value. The USA stock market went through one of histories greatest bubbles from 1927 to 1929. Afterwards, it took the stock market 24 years to recover. But by the mid 1950s, the stock market was rising to new heights. The DotCom boom was clearly a bubble in 1999, but eventually many of the ideas became far more valuable than the heights of 2000. If the bubbles form because investors are looking too far forward into the future, eventually the future does arrive, and then you see a period of sustained growth. That is exactly what happened in Florida, with the bubble in the 1920s, and sustained growth beginning 15 years later, at the end of the 1930s, and lasting for several decades. My point is, if you wait long enough, the economy will often grow beyond even stupidly famous disasters. To be sure, you can probably find better investments. Buying into the stock market in 1929 and then waiting 24 years to get back to that level is not great for growing your wealth. But given time, many assets do grow beyond even the bubbles.
- yumraj 5y ago
  I think you make a good general point and I will agree, but it needs to be said that not every bubble will recover, for example the tulip bubble, beanie babies and so on. Crypto, NFT .. who knows, only time will tell who was right.
  - 88840-8855 5y ago
    Don't forget the Japanese stock market that could never recover from the bu bubble in the 80s.
    - gruez 5y ago
      Technically it did recover. The price hasn't but if you factor in dividends (ie. total return), you'd be up 32.228% between 1989 and 2021.
dreamcompiler 5y ago
My god that website is an awful mess of forced scrolling and dancing monkeys. Even reader mode can't make it pleasant enough to read.
- Supermancho 5y ago
  The graph isn't even relatively accurate for the values. 2b is left of 4b but 3b is right of 4b. WTF
kibwen 5y ago
Markets have become disconnected from reality. Maybe that's not entirely a bad thing. But it's the death blow to the ideas that markets can be a foundational organizing principle of society for the sake of allocating scarce resources. The market will remain irrational longer than society can remain solvent. That's not to say that there isn't a role for markets, but it's apparent that they need ongoing heavy-handed intervention to keep their incentives aligned.
wussboy 5y ago
Two of my favorite phrases are: 1. Nothing can go on forever. 2. Things can go on a lot longer than you think.
- maerF0x0 5y ago
  >The Market Can Remain Irrational Longer Than You Can Remain Solvent https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/
alfl 5y ago
Re: several comments here saying "web3 is a scam". That's what people used to think[0] about Web 2.0 as well. [0]: https://www.wired.com/2005/10/web-2-0-cracks-start-to-show/ https://www.wired.com/2005/10/web-2-0-cracks-start-to-show/
- pphysch 5y ago
  Web3 can be defined in many different ways, but the majority of cryptocurrency/NFT cycles are spent on scheming how to make a quick buck.
- mjr00 5y ago
  Not really sure how that article is relevant to "web3 is a scam". The Web 2.0 cracks it refers to are spammers, low-quality user generated content, and misinformation... which are real problems that not only existed back then, but are amplified even further today.
outside1234 5y ago
There are periods of overvaluations but overall we are in a secular increase in the demand for internet based services and software driven businesses.
raldi 5y ago
Conventional wisdom has things exactly backwards; going back to the rise of the Information Age (say, 1980), the long-term trend is growth. The bubbles are the brief, unsustainable periods when valuations are temporarily down. Yes, they’re bound to happen every now and then. But sure as anything, they pop and we return to normal (i.e., growth).
paulpauper 5y ago
Goes to show how useless these forecasts of 'bubble', 'crisis', 'froth', etc. are. Home prices in the Bay Area still going nuts despite endless predictions from 2013-2020 of bubble. If prices are rising 20%/year then all you need are 3 years of gains to come out ahead even if the bubble bursts. Each year that passes in which prices rise and the bubble does not burst means you're one year closer to crossing the point at which even if the bubble does burst you will not lose money. It's easy to lose perspective that in-between crashes there are gains. So the accumulated gains matter more than the endpoints. https://greyenlightenment.com/2022/02/28/the-ignoring-the-middle-fallacy-the-importance-of-accumulated-earnings-returns/ https://greyenlightenment.com/2022/02/28/the-ignoring-the-mi... Waiting for the bubble to burst, whether it's stocks or homes, often means missing out as prices keep going up year after year. Even if the market does crash, you will never get a chance to buy back at the price your originally wanted to buy at. If you didn't buy a home in 2013-2017 because of bubble fears, even if the market does crash, you will not be able to buy at those prices again. To quote the Superbowl FTX ad, you did miss out.
- ffggvv 5y ago
  post 2008 crash you had a good 10 years to buy at the prices you supposedly missed out on.
- jboggan 5y ago
  Quoting a Superbowl ad, let alone an FTX Superbowl ad, as an example of wisdom is the surest sign to me that we are indeed in a monstrous bubble.
- dsp 5y ago
  Your comment reminds me of “What If You Only Invested at Market Peaks?” https://awealthofcommonsense.com/2020/12/what-if-you-only-invested-at-market-peaks/ https://awealthofcommonsense.com/2020/12/what-if-you-only-in...
wazoox 5y ago
There is a great Jewish joke about markets: Shlomo was returning from Antwerp, when he met Moishe: "Look at this bag of diamonds I've bought there! only 1000 florins, it's easily worth double that!" "Wow, that's a hell of a bargain, how much do you want for it? 2000?" "deal!". Shlomo went home. He told his wife Sarah about his daily business. "So Moishe bought this bag for double the price without bargaining? He must know it's worth much more than that, you moron! Buy it back tomorrow!" The next day, Shlomo met Moishe : "listen, I'll take back the bag of diamonds. 3000 florins?" "deal!" That night, Moishe told the story to his wife Debrah. "Imbecile! can't you see you've been gamed? You're now 1000 florins poorer than yesterday, and what do you have?" The next day, Moishe met Shlomo: "listen, I've think about it, I want to buy back the diamonds. 4000?" "deal!" So this little back and forth game goes on for a week, when someday, Shlomo said to Moishe: "Listen, I'd like to buy the diamonds back after all..." "Too late, I've sold the bag yesterday to a merchant from Hamburg!" "What? You've sold a stranger a bag of diamonds that was making us 1000 florins A DAY?"
- usrn 5y ago
  Good old GDP.
- ChuckNorris89 5y ago
  Replace the diamonds with housing and it's spot on in the West.
  - sumedh 5y ago
    But housing can be a source of income unlike diamonds.
    - imtringued 5y ago
      You are correct but sometimes home prices are rising faster than rents it is absurd.
- dvt 5y ago
  NFTs in a nutshell.
lamontcg 5y ago
okay, now do The Housing Bubble That Never Burst.
photochemsyn 5y ago
As far as I know, every major human civilization across the span of history has been a bubble that eventually collapsed to a much reduced state. Egyptians, Romans, Sumerians, Mayans. . . Now we've gone and created a truly massive population bubble, with the aid of technologies like antibiotics and industrial fertilizer production. A crash of some sort appears inevitable.
skippyboxedhero 5y ago
Inflation is near 10%. Fed funds rate is 0.5%. The govt is handing stacks of cash to people. M2 growth peaked last year at 25%. I wonder why the bubble never burst...a real puzzler, probably a question that scientists will never work out (btw, this sarcasm is real, you have people at the Fed who think like this, this is why inequality has skyrocketed...even relative to 2010, when inequality was already high, we are up multiples...no-one has really examined this thoroughly, the Fed lacks the ability to think proactively, it is always reactive/backwards-looking). Something that perpetually puzzles people who don't work in finance (and even then, most people in finance never get it)...because something will happen eventually, it does not mean it will happen today. There is this pervasive mindset: if the value of X is Y, then it should be Y today...or else, why would anyone buy it at Y+10. In finance, the day of reckoning can be postponed for a very long time. Borrow more, make the interest payments, hope something changes. You see this with companies: they don't go bust until someone asks for their money back. And people do not have expectations that separable from today's prices (thankfully, economists are now integrating this into their understanding of inflation)...if something is trading at X, people think that is the same thing as it's value rather than a function of supply and demand in the short-term. To make this conclusion more explicit: the value of a company it's future cash flows, you can say your company is worth $1bn, $10bn, $100bn...but at some point that money has to convert into cash, that is what value is. (The gap between now and "then" is how you make money investing. It is very easy to tell what is going to happen eventually, you can make money because most investors are unable to psychologically bridge that gap, they need today and now. Unf, policymakers have exactly the same mindset...someone else's problem, tomorrow, tomorrow, never today).
neonate 5y ago
https://archive.ph/wTIdR https://archive.ph/wTIdR
subsubzero 5y ago
Good timeline, the one commonality though during the NYtimes chart is that money was cheap(low interest rates). At the start of their timeline - 2011, fed interest rates were 0 and stayed that way until 2015, they then creeped up slightly hitting a peak in 2019(2.5). Rates then went back to 0 due to the pandemic[1]. In addition trillions of dollars were created out of thin air and that contributed alot to funding during the pandemic. What kept rates artifically low was inflation was also low, now that inflation is skyrocketing the fed has signaled that rates are also going to jump. This is really bad for growth companies and you can see for yourself by looking at stock prices on a 6 month timeline(from today) and see the huge drop in valuations($sq, $roku, $afrm, $pypl ...) I expect these valuations to tumble by the summer even further as rates increase. history of fed interest rates - https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135 https://www.thebalance.com/fed-funds-rate-history-highs-lows...
aaroninsf 5y ago
Salient to a lot of argument ITT about real wealth, inflation, and the US economy: no analysis of the contemporary bubble is possible without explicit treatment of the mind-boggling capture of wealth by the richest quintile and in particular the richest < 5%, which began in 1971 and has only accelerated. If you are not yet familiar with the hard numbers on this, I beg you to look it up. It is life-changing to realize that the true decline in wealth accumulation, leisure, security, social mobility, etc., since ~1970-71, (described elsewhere in the thread here as "real GDP decline" etc.), is ENTIRELY a product of wealth-capture by the very rich. Actual total wealth in this country is at least triple what it was in 1971 by any meaningful metric. But the wealth held by all but the top 10-20% has DECLINED in that time. Because ALL the gains have been captured by the wealth; and most of that by the VERY VERY VERY wealthy. The social disruption, material breakdown, comprehensive anxiety cum tribalism, etc., could ALL have been avoided. Now consider that wealth capture has resulted in political capture and media consolidation and oligopoly. Why are the consequences of this wealth accumulation never discussed, or made into policy centerpieces, except for a few lone voices who are written off as radical or eccentric? This has changed from general-order horror to active-threat horror in the last 10 years because the capture of wealth cum power is now driving us away from solutions to urgent problems: • political tribalism cum brewing civil war • accelerating worst-case climate change These are major forces for social disruption. Confronting them is impossible without addressing the consolidation of wealth and power by the uber-rich.
_hypx 5y ago
"Stock prices have reached what looks like a permanently high plateau." - Irving Fisher https://www.federalreservehistory.org/essays/stock-market-crash-of-1929 https://www.federalreservehistory.org/essays/stock-market-cr... Be careful proclaiming that a bubble can't burst. They have been known to last both a long time and crash harder than what anyone expected.

244 points by skywal_l 5y ago

There is no "tech" bubble. Some technologies are transformative and we have only begun to understand their implications. Other are ridiculous scams. The investors that are able to separate the chaff will always do well on the long run.

rbranson 5y ago

It feels like a lot of money, but I'd point out that even venture's blockbuster 2021 year, where it raised ~$128B in funding, is still far less money than Apple's ~$202B and Google's ~$169B cash on hand. Those are single companies.

sbinthree 5y ago
The heterodox truth is that startups are undervalued for their value potential. When single (venture backed) companies all have more cash than the entire ecosystem on their balance sheet, it becomes clear that the market is undervalued.
- Msw242 5y ago
  Additionally, they are less capital intensive than ever, so founders have more options for funding than ever That pushes up prices
rapsey 5y ago
Apple and Google are giant money printing machines. How is this relevant?
- mr90210 5y ago
  Not to mention that it is quite clear why both companies have loads of cash.
- redisman 5y ago
  It proves that the valuations are somewhat rational.

muchtest 5y ago

Yet

birracerveza 5y ago
Everything eventually dies. The problem is you might die first.
- xitrium 5y ago
  I like "The market can stay irrational longer than you can stay solvent." -Keynes
azinman2 5y ago
There were many car companies in the early 20th century. Most didn’t make it. Yet cars are an integral piece of our lives globally, so the market size only grew larger. Software is no different, except it’s infinitely flexible.
- colinmhayes 5y ago
  There are some big differences between software and car companies though. Car companies required gigantic, continuing capital to manufacture their cars. Software has zero marginal cost. It seems that the difference in capital requirements once a company is up and running would allow the software industry to have more competitors.
  - azinman2 5y ago
    You’re assuming switching costs are the same, available labor is universal and endless, business dealings are the same, etc. It seems the most successful “competitors” are never head on for anyone entrenched, but rather come at similar problems from a different angel. Even companies who are up and running often want capital to take things to the next stage. None of that means burst of a bubble.
FollowingTheDao 5y ago

ethbr0 5y ago

It's hard for a bubble to burst when it's cheap to borrow money.

lotsofpulp 5y ago
Or maybe it is related to tech companies earning record profits year after year and obviating entire other businesses year after year. There is still much upside to be had, especially on the recurring revenue front.
- ethbr0 5y ago
  You're right. Uber obviated the need to pay for transportation. WeWork obviated the need to lease office space. The world will never be the same.
  - cupofpython 5y ago
    >WeWork obviated the need to lease office space Zoom has reduced leasing costs for many companies tbh
- mupuff1234 5y ago
  I don't think people are talking about the profitable companies, but about the endless list of companies who are valued at billions and have yet to turn a profit.
- time_to_smile 5y ago
  Someone on twitter once posed the question "what percent of the profits from profitable tech companies come from revenue from non-profitable ones?" I've found in looking at problems in general it helps to try to take a systems perspective. If you only look one step back everything makes sense and is fine, but when you start looking at the larger flows of everything is when you start to think that maybe the accounting doesn't all work out.
solveit 5y ago
Eight of the ten largest companies on the NYSE are tech companies (the others are Saudi Aramco and Berkshire Hathaway). Of those eight, only Tesla needs access to cheap capital. Edit: Tesla and Saudi Aramco (duh) aren't actually on the NYSE... Something something HN before coffee something Edit 2: Neither is Alphabet or Micros... you know what, just read publicly traded companies instead of NYSE.

ProAm 5y ago

I mean there were some blow ups. WeWork, Theranos, etc... But the era of cheap/free money is just starting to end, so I think the bubble is still ahead of us.

gabereiser 5y ago
Wasn’t aware it was ending, just thought it came with more criteria (web3).
- blantonl 5y ago
  Don't forget more influencers and of course, crypto.
  - cinntaile 5y ago
    He didn't forget. Crypto is a fundamental part of web3. I'm not convinced this is where cheap money will go, it's too small to absorb all that capital.
    - chaxor 5y ago
      I'm not sure I understand this. Isn't web3 mostly just the use of decentralized systems? You don't need crypto for that. If your answer is incentive, I'm not so sure you need that either. For example, if you want to store something on the web, why not rely on a automated torrent protocol deamon in the browser that caches and seeds any datasets that you download? That solves a problem without crypto.
      - cinntaile 5y ago
        Web3 is just a marketing term for decentralized systems/applications using a blockchain.
      - antoniuschan99 5y ago
        I think they use crypto for monetization, whereas current or “web 2” mostly uses ads as the solution to monetization for a lot of web stuff. Eg. Sia File Transfer is a Technology for (Decentralized) File Sharing, while Sia Coin is the monetization side. Same as Helium Network, which is a LoRa Router whereas you get paid in Helium Tokens

arberx 5y ago

If your company isn't profitable or relies on refinancing your debt, the next decade is going to be brutal.

manuelabeledo 5y ago

We aren't in the early 2000s anymore. Tech companies won't be seen as a "fad" any time soon. As long as VCs keep making money out of diversifying risk, the "bubble" will never burst.

toto444 5y ago
Do you mean that 'this time is different' ?
- metamet 5y ago
  Yes, but unironically. Societal and cultural understandings of what "tech" is has shifted dramatically in the last 20 years. Home computers were still pretty niche, constant connectivity via pocket size computers was a work of science fiction, and we didn't have an omnipresent internet retailer that could bring you nearly anything in a few hours/a couple days. The possibilities of the internet and tech companies were still in their formulative stage with regards to the general population. It's now so engrained in our daily lives that it's taken for granted. I suspect the bubbles that will actually burst are going to be incredible niche. Even then, things like NFTs may survive due to a cultural imagination that allows ideas to live on longer than maybe they should.
- hahaxdxd123 5y ago
  I mean, every time is different in the sorts of companies/sector of the economy that fails. The large tech companies actually do have solid fundamentals. The dynamics of the business cycle remains the same though and some more speculative companies will fail (taking a look at the 6-month performance of Asana, Palantir, Zoom, etc makes me quite happy as a shorter).
- deleted 5y ago
  [deleted]
- ak_111 5y ago
  I remember two partners from Andreessen Horowitz gave a presentation to a group of investors and journalists around 2015, where they had a slide with literally the title "This time is different". I thought to myself this will not end well, major crash around the corner. I am annoyed that they were right.

kerblang 5y ago

I feel like the tech bubble is really just an outgrowth of an economic boom; big money rolls in, and needs a place to go. Everyone is happy to invest in dog shit as long as they can buy dog shit at $190/kilo and sell at 10 bucks more. They have to put the money somewhere. Tech companies are just a somewhere, but dog shit would be perfectly adequate, and arguably less overhead... I just realized NFT's have even less overhead than dog shit.

contravariant 5y ago
Of course trading in something which has no value other than being sold is just a pyramid game in disguise. In particular dog-shit has more intrinsic value than NFTs.
- cwkoss 5y ago
  Similarly, a non-zero portion of facebook or google or amazon's current market cap is worth less than dog-shit. Hard to say how big that proportion is.
  - weatherlite 5y ago
    You are saying stocks have no value? That is on you to make the case because humanity disagrees...
    - cwkoss 5y ago
      I'm saying a double digit chunk of these companies' expenses and IP production is yielding no economic value: either through lack of product market fit or getting cancelled before they launch. These companies are dripping with untrimmed fat and lack of focus on serving customers via building dumb projects that never get used.
- nightski 5y ago
  Pretty much any collectible could be called a pyramid scheme. It doesn't really matter in the long run. Humans like these things because they attach value to them as irrational as it might be. No one is melting down their Rolex for base metals. Lol. Yet they can be an extremely sound investment.

streetcat1 5y ago

Two points: 1. Tech moved from a sector to an whole economy. 2. The substitution for tech (e.g. labor) become very scares and expensive (either because of de globalization, baby boomer retirement, low birth rates). Hence, the value of tech increases. I.e. The only way to fight inflation is to use more tech.

FollowingTheDao 5y ago
> Tech moved from a sector to an whole economy. "Tech" is not the problem. It the the shady financing of the Tech sector that is the problem.
politician 5y ago
> Hence, the value of tech increases. Another example: The labor shortages in construction are acute and reveals a surge in social mobility among those who were/are employed in that sector. I expect investments in tech companies that claim to address the labor and supply shortages in construction to increase.

georgeecollins 5y ago

Because of the war in Ukraine people in the US aren't hearing as much about what is going on with Chinese real estate these days. TLDR: There is enough vacant housing in China to house Spain. Prices are going to drop, probably. People have been saying there was a bubble in Chinese real estate for ten or twenty years and all that time prices have been going up in ways that are probably at least sustainable based on a growing economy. I think the biggest movements of overvaluation are like Chinese real estate where people over pay, but the underlying value is still going up so you can keep justifying overpaying for years. Probably GE was like that for a long time. Now I think Tesla has been over valued for a long time (maybe not-- just take it as an example) but it's hard to argue it is over valued because at the same time the price appreciates the value of the underlying thing is also growing.

gigaflop 5y ago
Haven't some new-construction apartment buildings in China been left mostly empty, while others start crumbling before they're finished? As for Tesla, the market can stay irrational longer than one can stay solvent. If not for EM's cultlike fanbase, I doubt it would be this overvalued.
- vardump 5y ago
  There's also anti-EM cult. I guess it balances it, shrug?
  - gigaflop 5y ago
    I feel like anti-cults are never as strong as the cult itself, and will rarely ever be. A cult is a portion of society following something or someone, and I feel like it encompasses people from suggestible fans to fanatics. An anticult can't contain people who have no interest, as those who lack interest will be on the sidelines not caring. I also think that there's a larger 'negative opinion threshold' that needs to be crossed for someone to migrate to the anticult, since anticult membership requires opposition and participation. In essence, cults can be passive, while anticults are active, and whenever you ask for activity, membership plummets, simply because the bar has gone above knee-height.

deleted 5y ago

[deleted]

ulzeraj 5y ago

I bet they are really proud of that scrolling graph effect and it is quite cool but it makes that part a bit confusing to read.

paywallasinbeer 5y ago

https://archive.ph/cbC9v https://archive.ph/cbC9v

autarch 5y ago
This isn't very helpful, as most of the article isn't readable without the JS that the NYT serves. Also, it seems like this article _isn't_ behind their paywall.
- loeg 5y ago
  It's paywalled for me, for example.
  - autarch 5y ago
    Ah, the mysterious ways of the New York Times. For some reason I didn't get paywalled. But regardless, it's not readable on archive.ph, unfortunately.
    - neogodless 5y ago
      Yes this is an odd one. This thread led me to view the original, and I was not paywalled, and all was good. But then I shared it with friends because it wasn't paywalled... and they were paywalled.

scrlk 5y ago

"We are all at a wonderful ball where the champagne sparkles in every glass and soft laughter falls upon the summer air. We know, by the rules, that at some moment, the Black Horseman will come shattering through the great terrace doors, wreaking vengeance and scattering the survivors. Those who leave early are saved, but the ball is so splendid no one wants to leave while there is still time, so that everyone keeps asking, ‘What time is it? What time is it?’ But none of the clocks have any hands."

marliechiller 5y ago
very poetic, where is this from?
- scrlk 5y ago
  Supermoney by George Goodman - he wrote under the pseudonym "Adam Smith". p.s. You might enjoy watching "Margin Call", if you haven't seen it before. This clip is particularly relevant: https://www.youtube.com/watch?v=LtFyP0qy9XU https://www.youtube.com/watch?v=LtFyP0qy9XU

ramesh31 5y ago

In the last 10 years, software ate the world. I can pull up the Fortune 500 and find an open job listing for myself at every single company on that list. Software is everything, and everything is software.

cupofpython 5y ago
Receptionists / customer service could say the same thing. Software engineers are going to be just as replaceable soon enough. In a lot of places, they already are. I think eventually they will be paid about equivalent to a construction worker (currently $40k). Maybe less since they dont have to be onsite or in good physical shape.
- sfblah 5y ago
  On average that may be true. But actually good software engineers will always command a massive premium.
- ramesh31 5y ago
  >I think eventually they will be paid about equivalent to a construction worker (currently $40k). Maybe less since they dont have to be onsite or in good physical shape. I used to think that. But the reality is that the vast majority of humanity is simply incapable of performing even basic programming tasks. It's so far outside of our normal day to day experience, that wrapping your head around the level of abstraction required even to understand a hash map is a massive undertaking for an average person. It's nothing at all like handing someone a hammer and showing them how to drive a nail. Being a dev is currently in the top 5 professions for earning potential and quality of life. Why isn't everyone doing it? Simply because they can't. Programming is really really hard, and it requires a certain combination of personality, drive, and intelligence that is far from common and can't really be taught to those that wouldn't otherwise figure it out on their own.

Kalanos 5y ago

Tons of tech stocks and valuations, especially the unprofitable ones, are down 50-66%. It definitely burst. Supply shortages, inflation, and the war provided a sanity check. On the other hand, 2021 was the biggest venture year ever. Everyone made a ton of money in the stock market, and needed to do something with it. The returns on ventures mean that its now a real investment channel that is here to stay.

trgn 5y ago
Absolutely, where is this narrative about the bubble not bursting, and cheap money this, and market irrationality that coming from? It totally did burst. Growth stock got killed early this year across the board. The market has punished Covid hype investments (e.g. Peloton, Zoom) very hard as well.
- deleted 5y ago
  [deleted]

no_wizard 5y ago

Real question is: is now the time to leave startups for the Fortune 500s? Especially the big ones (Shopify, Apple, Meta, Microsoft, Google, Netflix)

29athrowaway 5y ago

Imagine you sell bananas but each time you sell a banana bunch, the banana bunch is duplicated. Also imagine that because of that, you don't need to grow multiple bananas, you only to grow one and copy it many times. That is why software makes so much money.

pphysch 5y ago
Not in practice. In practice, everytime you want to take a bite of the banana, you need to log into a web portal and verify you have an active, fully-paid license for the banana service. Draconian IP law and the arbitrary fees they enforce are why software makes so much money.

nostrademons 5y ago

People are very bad at predicting true change in the fundamentals of how they live their lives and then dealing with the implications of that. We've been lulled into the myth of a steady-state economy by the post-WW2 Pax Americana. If that's your model, any rapid change is a "bubble" that's going to pop and return us to our original steady state, and real lasting change is consistently undervalued. Here's a pop quiz with a counterintuitive answer: if Bitcoin succeeds at replacing the dollar as both the world reserve currency and the currency of choice for everyday transactions, what's its fair market value? Most optimists would divide total dollar supply ($21T) by total Bitcoin supply ($21M) and come out with $1M. But the true answer is infinite: if this scenario actually comes to pass, the dollar's value will trend to zero and the question will become meaningless, as you won't be able to trade your dollars for Bitcoin at any price. So it is with tech: software is actively replacing many core industries, which sends their value to zero and the owners of their software replacements to effectively infinity. I suspect similar dynamics are at play with prices in general and particularly asset & housing prices. Everybody's calling a bubble and thinking they'll buy stuff later when prices come down. That can happen in localized instances (like lumber last summer), but oftentimes those bubble bursts reverse themselves and end up driving higher. Lumber went up by 250% again in the second half of last year, just as tech company stocks have reached heights that were unimaginable in the dot-com boom. The overall price level in the economy isn't going down.

crate_barre 5y ago
In a sense, most of the so called bubbles occurring right now are due to a lack of tech and innovation. The issue isn’t that Home prices are inflated, the issue is our most innovative solution for home ownership is credit hand outs. The Finance sector is not innovative enough to solve this. We’d need to think about building denser cities and pragmatic modern housing. Affordable housing doesn’t have to mean “middle or low income in certain area”. These are old industries of finance and old progressive ideas that simply are not disruptive enough. We’re starving for innovation.
- BlargMcLarg 5y ago
  >the issue is our most innovative solution for home ownership is credit hand outs I'm fairly certain we have more innovative solutions, but the risks just aren't lucrative for the far majority of investors. It's a lack of (relatively frictionless) experimentation more than anything. The majority of solutions I imagine directly contrast typical western individualism, too.

lkrubner 5y ago

The Florida Land Boom of the 1920s was a bubble: https://en.wikipedia.org/wiki/Florida_land_boom_of_the_1920s https://en.wikipedia.org/wiki/Florida_land_boom_of_the_1920s But after 1935, Florida took off and grew like crazy. Even if you bought at the peak of the bubble, by the 1940s you had still gained some value. The USA stock market went through one of histories greatest bubbles from 1927 to 1929. Afterwards, it took the stock market 24 years to recover. But by the mid 1950s, the stock market was rising to new heights. The DotCom boom was clearly a bubble in 1999, but eventually many of the ideas became far more valuable than the heights of 2000. If the bubbles form because investors are looking too far forward into the future, eventually the future does arrive, and then you see a period of sustained growth. That is exactly what happened in Florida, with the bubble in the 1920s, and sustained growth beginning 15 years later, at the end of the 1930s, and lasting for several decades. My point is, if you wait long enough, the economy will often grow beyond even stupidly famous disasters. To be sure, you can probably find better investments. Buying into the stock market in 1929 and then waiting 24 years to get back to that level is not great for growing your wealth. But given time, many assets do grow beyond even the bubbles.

yumraj 5y ago
I think you make a good general point and I will agree, but it needs to be said that not every bubble will recover, for example the tulip bubble, beanie babies and so on. Crypto, NFT .. who knows, only time will tell who was right.
- 88840-8855 5y ago
  Don't forget the Japanese stock market that could never recover from the bu bubble in the 80s.
  - gruez 5y ago
    Technically it did recover. The price hasn't but if you factor in dividends (ie. total return), you'd be up 32.228% between 1989 and 2021.

dreamcompiler 5y ago

My god that website is an awful mess of forced scrolling and dancing monkeys. Even reader mode can't make it pleasant enough to read.

Supermancho 5y ago
The graph isn't even relatively accurate for the values. 2b is left of 4b but 3b is right of 4b. WTF

kibwen 5y ago

Markets have become disconnected from reality. Maybe that's not entirely a bad thing. But it's the death blow to the ideas that markets can be a foundational organizing principle of society for the sake of allocating scarce resources. The market will remain irrational longer than society can remain solvent. That's not to say that there isn't a role for markets, but it's apparent that they need ongoing heavy-handed intervention to keep their incentives aligned.

wussboy 5y ago

Two of my favorite phrases are: 1. Nothing can go on forever. 2. Things can go on a lot longer than you think.

maerF0x0 5y ago
>The Market Can Remain Irrational Longer Than You Can Remain Solvent https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/

alfl 5y ago

Re: several comments here saying "web3 is a scam". That's what people used to think[0] about Web 2.0 as well. [0]: https://www.wired.com/2005/10/web-2-0-cracks-start-to-show/ https://www.wired.com/2005/10/web-2-0-cracks-start-to-show/

pphysch 5y ago
Web3 can be defined in many different ways, but the majority of cryptocurrency/NFT cycles are spent on scheming how to make a quick buck.
mjr00 5y ago
Not really sure how that article is relevant to "web3 is a scam". The Web 2.0 cracks it refers to are spammers, low-quality user generated content, and misinformation... which are real problems that not only existed back then, but are amplified even further today.

outside1234 5y ago

There are periods of overvaluations but overall we are in a secular increase in the demand for internet based services and software driven businesses.

raldi 5y ago

Conventional wisdom has things exactly backwards; going back to the rise of the Information Age (say, 1980), the long-term trend is growth. The bubbles are the brief, unsustainable periods when valuations are temporarily down. Yes, they’re bound to happen every now and then. But sure as anything, they pop and we return to normal (i.e., growth).

paulpauper 5y ago

Goes to show how useless these forecasts of 'bubble', 'crisis', 'froth', etc. are. Home prices in the Bay Area still going nuts despite endless predictions from 2013-2020 of bubble. If prices are rising 20%/year then all you need are 3 years of gains to come out ahead even if the bubble bursts. Each year that passes in which prices rise and the bubble does not burst means you're one year closer to crossing the point at which even if the bubble does burst you will not lose money. It's easy to lose perspective that in-between crashes there are gains. So the accumulated gains matter more than the endpoints. https://greyenlightenment.com/2022/02/28/the-ignoring-the-middle-fallacy-the-importance-of-accumulated-earnings-returns/ https://greyenlightenment.com/2022/02/28/the-ignoring-the-mi... Waiting for the bubble to burst, whether it's stocks or homes, often means missing out as prices keep going up year after year. Even if the market does crash, you will never get a chance to buy back at the price your originally wanted to buy at. If you didn't buy a home in 2013-2017 because of bubble fears, even if the market does crash, you will not be able to buy at those prices again. To quote the Superbowl FTX ad, you did miss out.

ffggvv 5y ago
post 2008 crash you had a good 10 years to buy at the prices you supposedly missed out on.
jboggan 5y ago
Quoting a Superbowl ad, let alone an FTX Superbowl ad, as an example of wisdom is the surest sign to me that we are indeed in a monstrous bubble.
dsp 5y ago
Your comment reminds me of “What If You Only Invested at Market Peaks?” https://awealthofcommonsense.com/2020/12/what-if-you-only-invested-at-market-peaks/ https://awealthofcommonsense.com/2020/12/what-if-you-only-in...

wazoox 5y ago

There is a great Jewish joke about markets: Shlomo was returning from Antwerp, when he met Moishe: "Look at this bag of diamonds I've bought there! only 1000 florins, it's easily worth double that!" "Wow, that's a hell of a bargain, how much do you want for it? 2000?" "deal!". Shlomo went home. He told his wife Sarah about his daily business. "So Moishe bought this bag for double the price without bargaining? He must know it's worth much more than that, you moron! Buy it back tomorrow!" The next day, Shlomo met Moishe : "listen, I'll take back the bag of diamonds. 3000 florins?" "deal!" That night, Moishe told the story to his wife Debrah. "Imbecile! can't you see you've been gamed? You're now 1000 florins poorer than yesterday, and what do you have?" The next day, Moishe met Shlomo: "listen, I've think about it, I want to buy back the diamonds. 4000?" "deal!" So this little back and forth game goes on for a week, when someday, Shlomo said to Moishe: "Listen, I'd like to buy the diamonds back after all..." "Too late, I've sold the bag yesterday to a merchant from Hamburg!" "What? You've sold a stranger a bag of diamonds that was making us 1000 florins A DAY?"

usrn 5y ago
Good old GDP.
ChuckNorris89 5y ago
Replace the diamonds with housing and it's spot on in the West.
- sumedh 5y ago
  But housing can be a source of income unlike diamonds.
  - imtringued 5y ago
    You are correct but sometimes home prices are rising faster than rents it is absurd.
dvt 5y ago
NFTs in a nutshell.

lamontcg 5y ago

okay, now do The Housing Bubble That Never Burst.

photochemsyn 5y ago

As far as I know, every major human civilization across the span of history has been a bubble that eventually collapsed to a much reduced state. Egyptians, Romans, Sumerians, Mayans. . . Now we've gone and created a truly massive population bubble, with the aid of technologies like antibiotics and industrial fertilizer production. A crash of some sort appears inevitable.

skippyboxedhero 5y ago

Inflation is near 10%. Fed funds rate is 0.5%. The govt is handing stacks of cash to people. M2 growth peaked last year at 25%. I wonder why the bubble never burst...a real puzzler, probably a question that scientists will never work out (btw, this sarcasm is real, you have people at the Fed who think like this, this is why inequality has skyrocketed...even relative to 2010, when inequality was already high, we are up multiples...no-one has really examined this thoroughly, the Fed lacks the ability to think proactively, it is always reactive/backwards-looking). Something that perpetually puzzles people who don't work in finance (and even then, most people in finance never get it)...because something will happen eventually, it does not mean it will happen today. There is this pervasive mindset: if the value of X is Y, then it should be Y today...or else, why would anyone buy it at Y+10. In finance, the day of reckoning can be postponed for a very long time. Borrow more, make the interest payments, hope something changes. You see this with companies: they don't go bust until someone asks for their money back. And people do not have expectations that separable from today's prices (thankfully, economists are now integrating this into their understanding of inflation)...if something is trading at X, people think that is the same thing as it's value rather than a function of supply and demand in the short-term. To make this conclusion more explicit: the value of a company it's future cash flows, you can say your company is worth $1bn, $10bn, $100bn...but at some point that money has to convert into cash, that is what value is. (The gap between now and "then" is how you make money investing. It is very easy to tell what is going to happen eventually, you can make money because most investors are unable to psychologically bridge that gap, they need today and now. Unf, policymakers have exactly the same mindset...someone else's problem, tomorrow, tomorrow, never today).

neonate 5y ago

https://archive.ph/wTIdR https://archive.ph/wTIdR

subsubzero 5y ago

Good timeline, the one commonality though during the NYtimes chart is that money was cheap(low interest rates). At the start of their timeline - 2011, fed interest rates were 0 and stayed that way until 2015, they then creeped up slightly hitting a peak in 2019(2.5). Rates then went back to 0 due to the pandemic[1]. In addition trillions of dollars were created out of thin air and that contributed alot to funding during the pandemic. What kept rates artifically low was inflation was also low, now that inflation is skyrocketing the fed has signaled that rates are also going to jump. This is really bad for growth companies and you can see for yourself by looking at stock prices on a 6 month timeline(from today) and see the huge drop in valuations($sq, $roku, $afrm, $pypl ...) I expect these valuations to tumble by the summer even further as rates increase. history of fed interest rates - https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135 https://www.thebalance.com/fed-funds-rate-history-highs-lows...

aaroninsf 5y ago

Salient to a lot of argument ITT about real wealth, inflation, and the US economy: no analysis of the contemporary bubble is possible without explicit treatment of the mind-boggling capture of wealth by the richest quintile and in particular the richest < 5%, which began in 1971 and has only accelerated. If you are not yet familiar with the hard numbers on this, I beg you to look it up. It is life-changing to realize that the true decline in wealth accumulation, leisure, security, social mobility, etc., since ~1970-71, (described elsewhere in the thread here as "real GDP decline" etc.), is ENTIRELY a product of wealth-capture by the very rich. Actual total wealth in this country is at least triple what it was in 1971 by any meaningful metric. But the wealth held by all but the top 10-20% has DECLINED in that time. Because ALL the gains have been captured by the wealth; and most of that by the VERY VERY VERY wealthy. The social disruption, material breakdown, comprehensive anxiety cum tribalism, etc., could ALL have been avoided. Now consider that wealth capture has resulted in political capture and media consolidation and oligopoly. Why are the consequences of this wealth accumulation never discussed, or made into policy centerpieces, except for a few lone voices who are written off as radical or eccentric? This has changed from general-order horror to active-threat horror in the last 10 years because the capture of wealth cum power is now driving us away from solutions to urgent problems: • political tribalism cum brewing civil war • accelerating worst-case climate change These are major forces for social disruption. Confronting them is impossible without addressing the consolidation of wealth and power by the uber-rich.

_hypx 5y ago

"Stock prices have reached what looks like a permanently high plateau." - Irving Fisher https://www.federalreservehistory.org/essays/stock-market-crash-of-1929 https://www.federalreservehistory.org/essays/stock-market-cr... Be careful proclaiming that a bubble can't burst. They have been known to last both a long time and crash harder than what anyone expected.