4 ms·

I don't think we're in a bubble. How can the author compare the IPO of Facebook, a company with a billion users and billion dollar in revenue, to those IPOs of

by motti_s 15y ago

I don't think we're in a bubble. How can the author compare the IPO of Facebook, a company with a billion users and billion dollar in revenue, to those IPOs of the late 90s of companies with no revenue and no viable plan to have any in the foreseeable future? In fact most IPOs since LinkedIn started the trend are of mature companies. That's not what happened in the bubble days. It's true that more companies are being created and seed valuations are going up. But the selection process still occurs at the series A stage and crappy companies usually still can't pass that hurdle. As for the JOBS act: if I'm not mistaken investment is capped at (the lowest of) $10K or 10% of the annual salary. I believe you even have to go through a course before you can invest though the JOBS act. Conversely, in the stock market you can invest as much as you want, without any training, and lose everything overnight. The fact is that economy fluctuates. Whenever there's an upswing people scream bubble. It's a result of the traumatic effect of previous bubbles. But the irony is that real bubbles sneak on you. Hardly anyone sees them coming. So keep screaming bubble, it makes me feel safe.

moocow01 15y ago
"But the irony is that real bubbles sneak on you. Hardly anyone sees them coming. So keep screaming bubble, it makes me feel safe." I think there is a bubble and I can accept the rest of your viewpoint, but this part is not true. Most people who have a well developed understanding of an industry and basic financial sense easily recognize bubbles and have always done so in the past. The people who it sneaks up on are those who listen to the media and listen to their friends who listen to the media. Bubbles typically start out of real economic growth. The problem is that they outgrow market indicators when you get too many lemmings playing the telephone game and ignoring fundamentals. From what I see around the bay area there seem to be a lot of indicators of this social dynamic playing out. There is lots of money chasing other money to nowhere but Ill agree its not as bad as it was in 2000.
- motti_s 15y ago
  "Most people who have a well developed understanding of an industry and basic financial sense easily recognize bubbles and have always done so in the past." I try to listen to what people I trust from the industry say about the existence of a bubble. Pretty much all of them say that there is none. For example Ben Horowitz (of Andreesen Horowitz) consistently argues that there is absolutely no bubble (and he was around for the real bubble occurred). See 5:10 - http://www.youtube.com/watch?v=9xzcJnqcTP4 http://www.youtube.com/watch?v=9xzcJnqcTP4 I think that often when markets become hot, people automatically think of a bubble, but that's not necessarily true. The internet has grown from 50 million users to over 2 billion and smartphones were non-existent in the 90s. So perhaps higher valuations for tech companies are justified due to higher potential. But you could be right, only time will tell.
  - spitfire 15y ago
    Ben Horowitz is an investor. You wouldn't think he has a vested interest in this, would you?
    - motti_s 15y ago
      The overheated market causes high valuation, which some argue, hurts investors. By saying bubble and discouraging unsophisticated investors from bidding, he probably stands to gain, not lose. Everyone has a vested interest in what they deal with (or they're amateurs, hence I don't need their opinion). That doesn't mean they never say the truth.
ebaysucks 15y ago
Bubbles are not about believing in the wrong trends, they are about believing the trend will materialize too fast. E.g. dot com boom: Basic premise was right, "software will eat the world", only the speed at which it would happen is overestimated. This is what makes growth investing so difficult: Quite easy to predict solar or electric cars will take off, very hard to predict which company in the cambrian explosion will win. Overall history has proven over and again that in aggregate, value investing beats growth investing for exactly this reason.
hcarvalhoalves 15y ago
I believe the critic is more about the fact Facebook buying a company with no business plan, let alone revenue, for $ 1b, and how that reflects on the industry.

by motti_s 15y ago

moocow01 15y ago

"But the irony is that real bubbles sneak on you. Hardly anyone sees them coming. So keep screaming bubble, it makes me feel safe." I think there is a bubble and I can accept the rest of your viewpoint, but this part is not true. Most people who have a well developed understanding of an industry and basic financial sense easily recognize bubbles and have always done so in the past. The people who it sneaks up on are those who listen to the media and listen to their friends who listen to the media. Bubbles typically start out of real economic growth. The problem is that they outgrow market indicators when you get too many lemmings playing the telephone game and ignoring fundamentals. From what I see around the bay area there seem to be a lot of indicators of this social dynamic playing out. There is lots of money chasing other money to nowhere but Ill agree its not as bad as it was in 2000.

motti_s 15y ago
"Most people who have a well developed understanding of an industry and basic financial sense easily recognize bubbles and have always done so in the past." I try to listen to what people I trust from the industry say about the existence of a bubble. Pretty much all of them say that there is none. For example Ben Horowitz (of Andreesen Horowitz) consistently argues that there is absolutely no bubble (and he was around for the real bubble occurred). See 5:10 - http://www.youtube.com/watch?v=9xzcJnqcTP4 http://www.youtube.com/watch?v=9xzcJnqcTP4 I think that often when markets become hot, people automatically think of a bubble, but that's not necessarily true. The internet has grown from 50 million users to over 2 billion and smartphones were non-existent in the 90s. So perhaps higher valuations for tech companies are justified due to higher potential. But you could be right, only time will tell.
- spitfire 15y ago
  Ben Horowitz is an investor. You wouldn't think he has a vested interest in this, would you?
  - motti_s 15y ago
    The overheated market causes high valuation, which some argue, hurts investors. By saying bubble and discouraging unsophisticated investors from bidding, he probably stands to gain, not lose. Everyone has a vested interest in what they deal with (or they're amateurs, hence I don't need their opinion). That doesn't mean they never say the truth.

ebaysucks 15y ago

Bubbles are not about believing in the wrong trends, they are about believing the trend will materialize too fast. E.g. dot com boom: Basic premise was right, "software will eat the world", only the speed at which it would happen is overestimated. This is what makes growth investing so difficult: Quite easy to predict solar or electric cars will take off, very hard to predict which company in the cambrian explosion will win. Overall history has proven over and again that in aggregate, value investing beats growth investing for exactly this reason.

hcarvalhoalves 15y ago

I believe the critic is more about the fact Facebook buying a company with no business plan, let alone revenue, for $ 1b, and how that reflects on the industry.