3 ms·
The distinction made at the end of the article between a "valuation bubble" and a "risk bubble" seems entirely false to me. "much of the media has adopted Gurl
by discodave 12y ago
The distinction made at the end of the article between a "valuation bubble" and a "risk bubble" seems entirely false to me.
"much of the media has adopted Gurley as the apostle of the “here we go it’s 1999 all over again” mantra, but that was a valuation bubble. Companies simply weren’t worth what they were priced at. Gurley is arguing that the private market with its limited information and oversight is producing something very different: investors putting too much money in companies without enough information or enough potential upside to justify the risk."
To me "investors putting too much money in companies without enough information or enough potential upside to justify the risk" == valuation bubble.
- rqebmm 12y agoAgreed. At the end of the day investors are doing the following formula: (Projected Revenue * %Risk of Ruin) = Valuation If you overestimate the projected revenues, or underestimate the risk , you're still arriving at the wrong valuation, and if investors are doing this systematically, we get a bubble.
- adamlett 12y agoAs a poker player, I recognize that you can be ruined both by making plays with a negative expected value (= valuation) or by making plays with positive expected value but which you are not adequately bankrolled for (= risk). Doyle Brunson wrote in his tome Super System from the seventies that he would gladly bet his entire net worth on a 51% chance of success. Even though this is technically a bet with an expected positive outcome, its clearly very risky. Modern gamblers recognize this and pay attention borh to the expected value and the variance.