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High valuations don't make a bubble. A bubble is when people invest believing there will be a "greater fool" down the road who will pay a higher price. Startu
by ekanes 11y ago
High valuations don't make a bubble. A bubble is when people invest believing there will be a "greater fool" down the road who will pay a higher price. Startups aren't going public at the same pace they did in the last bubble, where the public was the chump. Prices might be high but there's also more value being created now, and more rigor in evaluating startups.
- crpatino 11y agoI do not agree that the Greater Fool theory is a necessary condition for there being a bubble. That would be closer to a pyramid or a Ponzi scheme. Not 100% sure of what the difference is. Rather, the problem is when unsophisticated investors buy in because they don't want to miss out of the gravy train. It does not matter if the mantra of the day is "Computing/BigData/DaCloud is eating the world" or "Real state prices will keep going up in the foreseeable future" or whatever they said during the years of the Tulip mania; it is always magical thinking. In theory, everybody knows that VC are high-risk/high-rewards. In practice, once the dumb money starts flowing, it's only a matter of time before short term greed triumphs over common sense and sound business practices.