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As someone who recently accepted a job in silicon valley, I've started to become concerned that there is a bubble. I feel there are many parallels between 1999

As someone who recently accepted a job in silicon valley, I've started to become concerned that there is a bubble. I feel there are many parallels between 1999 and today. I would love to be convinced otherwise because I am concerned with job security, but I can't escape the feeling that the "music" will soon stop. At the very least I'd like to hear people's opinions on whether there is a bubble or not

highace 13y ago
If it looks like a bubble and acts like a bubble...
Edmond 13y ago
It is unlikely that those who stand to profit from a bubble would acknowledge it....up until the housing market came crashing down there was a continuous stream of people on CNBC talking up the market....the same happened in the first dot com bubble, you can expect the same now. The new excuse is that even if there is a bubble it will be contained. It does seem an entire bubble economy has been created in SV where bogus companies provide bogus products and services for other bogus companies. Maybe in this case any collapse would be contained, but I guess we'll have to wait and see. As the expression goes: Anything that can't go on will stop.
- ritchiea 13y ago
  Isn't the crazy thing that it can go on? There's enough money at the top of the economy that the rich can keep investing in startups as an asset class and not really feel the losses even though they seem huge to those of us who get by on a salary from a job. The real question is: will the investments keep coming? My guess is it continues. Hedge funds as a whole also perform below market but see continued investment because of the promise that they will have tremendous returns when a firm succeeds. Startups get money from the same sort of investors. People who are only investing a portion of their portfolio, chasing big returns and mostly unconcerned about losing some money along the way.
  - waterlesscloud 13y ago
    So it's a new paradigm and it's different this time?
    - ritchiea 13y ago
      I don't think I said anything like that. All I said is there is a culture that embraces the sort of risky investment that VCs make & that hedge funds are comparable investments. Let's take a reasonable definition of a bubble: when the price of an asset has risen much higher than what is justified by the market. By that definition I don't think we're in a bubble, I believe investors are logical and they know they are taking risks chasing a large return. I also believe investors will continue to chase big returns from tech companies and that there is precedent for this behavior in other types of investments.
LandoCalrissian 13y ago
So the biggest difference to me is that the 1999 bubble was completely built on the backs of everyday investors. It was a rush to IPO and easy money, and eventually the market got wise and the whole thing fell apart. The new paradigm is far more interesting, since it's almost all the investment comes from VC and Angel Investors. I think these entities can leverage risk far better, since they may lose a few million here and there, but when they hit a whale they really hit big. I think there might be 'micro bubbles' within the industry that may implode under their own weight (F2P mobile games companies come to mind), but I think that's largely separating the wheat from the chaff. I know some will disagree with me on this analysis, but I don't really subscribe to the sky is falling theory. The tech industry is now big business, that's not going to change.
- ajiang 13y ago
  Regardless of my opinion on whether or not we're in a bubble, the argument of "it's different this time because..." is used in the build up of every bubble we've ever experienced. Stock bubble? Economic stability and the wonderful controls the Fed has on monetary policy. No more economic cycles. First tech bubble? The internet is a wonderful thing we haven't had before - new opportunities, etc. Everything is different until it isn't.
- GFK_of_xmaspast 13y ago
  Right now there's so much money sloshing around here because (a) there's nowhere else for it to go and (b) everybody's doing it. What happens when there is somewhere else for it to go?
GFK_of_xmaspast 13y ago
Of course it's a bubble. Stack that paper now.

highace 13y ago

If it looks like a bubble and acts like a bubble...

Edmond 13y ago

It is unlikely that those who stand to profit from a bubble would acknowledge it....up until the housing market came crashing down there was a continuous stream of people on CNBC talking up the market....the same happened in the first dot com bubble, you can expect the same now. The new excuse is that even if there is a bubble it will be contained. It does seem an entire bubble economy has been created in SV where bogus companies provide bogus products and services for other bogus companies. Maybe in this case any collapse would be contained, but I guess we'll have to wait and see. As the expression goes: Anything that can't go on will stop.

ritchiea 13y ago
Isn't the crazy thing that it can go on? There's enough money at the top of the economy that the rich can keep investing in startups as an asset class and not really feel the losses even though they seem huge to those of us who get by on a salary from a job. The real question is: will the investments keep coming? My guess is it continues. Hedge funds as a whole also perform below market but see continued investment because of the promise that they will have tremendous returns when a firm succeeds. Startups get money from the same sort of investors. People who are only investing a portion of their portfolio, chasing big returns and mostly unconcerned about losing some money along the way.
- waterlesscloud 13y ago
  So it's a new paradigm and it's different this time?
  - ritchiea 13y ago
    I don't think I said anything like that. All I said is there is a culture that embraces the sort of risky investment that VCs make & that hedge funds are comparable investments. Let's take a reasonable definition of a bubble: when the price of an asset has risen much higher than what is justified by the market. By that definition I don't think we're in a bubble, I believe investors are logical and they know they are taking risks chasing a large return. I also believe investors will continue to chase big returns from tech companies and that there is precedent for this behavior in other types of investments.

LandoCalrissian 13y ago

So the biggest difference to me is that the 1999 bubble was completely built on the backs of everyday investors. It was a rush to IPO and easy money, and eventually the market got wise and the whole thing fell apart. The new paradigm is far more interesting, since it's almost all the investment comes from VC and Angel Investors. I think these entities can leverage risk far better, since they may lose a few million here and there, but when they hit a whale they really hit big. I think there might be 'micro bubbles' within the industry that may implode under their own weight (F2P mobile games companies come to mind), but I think that's largely separating the wheat from the chaff. I know some will disagree with me on this analysis, but I don't really subscribe to the sky is falling theory. The tech industry is now big business, that's not going to change.

ajiang 13y ago
Regardless of my opinion on whether or not we're in a bubble, the argument of "it's different this time because..." is used in the build up of every bubble we've ever experienced. Stock bubble? Economic stability and the wonderful controls the Fed has on monetary policy. No more economic cycles. First tech bubble? The internet is a wonderful thing we haven't had before - new opportunities, etc. Everything is different until it isn't.
GFK_of_xmaspast 13y ago
Right now there's so much money sloshing around here because (a) there's nowhere else for it to go and (b) everybody's doing it. What happens when there is somewhere else for it to go?

GFK_of_xmaspast 13y ago

Of course it's a bubble. Stack that paper now.