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Even if he is right about his bets, it does not prove that there was no bubble. A lot of times when bubbles burst, many small competitors are whipped out of the
by washedup 12y ago
Even if he is right about his bets, it does not prove that there was no bubble. A lot of times when bubbles burst, many small competitors are whipped out of the market, while the ones that have been successful up to that point have a better chance of surviving. Not only survive, but once the dust settles they are the few left to soak up any new investments.
Boom/bust cycles can be thought of as a redistribution of bad investments, which often time results in the demise of fresh competitors or, at best, the assimilation of "failed" capital (human, tech, infrastructure) of those ventures into the companies which successfully navigate the transition at a very low cost.
The bubble that different parties speak about when talking about the tech world has to do not so much with the amount of money flowing into that sector as an aggregate, but the near-exponential growth in new companies and the unfathomable valuations of some of them which are hard to justify.
- jmcatani 12y ago>>> Of course, there could be a macro collapse in 2018 or 2019, which wouldn’t have time to recover by 2020. I think that’s the most likely way for me to lose. Macro collapse = Bubble Bursting. The performance of YC's personal portfolio is irrelevant to the idea of bubble bursting if there are other investors running a pump and dump on the industry at large.
- etruong42 12y agoI took "macro collapse" to mean some tumultuous event independent of existing market valuations, such as natural (or man-made) disasters, epidemics, war, etc. I've never heard the term myself, so I am speculating.
- baddox 12y agoWhat then would you propose as a decision procedure for whether we are in a bubble?
- washedup 12y agoBubble bursts are generally large-scale psychological phenomena. Nothing can be done to avoid them, and boom bust cycles will continue in small sectors, larger sectors, and the entire economy for the foreseeable future. As investors slowly start struggling to find valuable places to put their money, an idea that it isn't worth while begins to circulate through the investment world. The best advice is to always invest wisely. It makes no difference whether you are in a bubble or a contraction. Doing so will put you in a better position to succeed even when the bubble bursts.
- deleted 12y ago[deleted]
- AlfonsoP 12y agoYou say larger companies survive crashes, but their valuations still take huge hits. Look at the last dot-com crash: MSFT crashed from $59 to $21, AAPL crashed from $4.90 to $1.00, CSCO crashed from $79 to $14, and so on. 1 of these companies (AAPL) took 5 years to recover and double its market cap peak of 2000, while the 2 other companies never even recovered their market cap peak. So betting on Sam's metric in 1998-1999 would have been a very reliable indicator of whether or not a bubble would follow these years.