Sam Altman's Bubble Talk Bet Is 1 Year Old

> I think this underscores how long 5 years is in internet time.

You're absolutely right.

The 10 biggest tech stories of 2011 http://edition.cnn.com/2011/12/26/tech/web/tech-news-2011/in...

Previous discussion from longer than 1 year ago: https://news.ycombinator.com/item?id=9271679

My comment(s) then:

Ironically a basic statistics class indicates that cherry picking companies that deliver 2x, 3x and ... whatever the fuck that third pick is ... as a guaranteed return over 5 years is indicative of the overenthusiastic hype that historically surrounds bubble valuations.

#3 is a die roll. #2 is the killer. And I might take the bet on just #1.

I admire Sam's balls but the externalities here are immense. The greatest financial mind of our time built Berkshire Hathaway to $350B over 50 years. GE is worth $250B. Microsoft $340B.

To believe Sam's motley list of companies can either hold onto valuations approaching those "real" companies for five more years, let alone actually generate viable earnings and go public (even at goofy P/E multiples) in line with what GE, Microsoft, or Buffett's candy, ketchup and mac'n'cheese subsidiaries alone make seems ... optimistic at best.

If he loses, might I suggest the book title? "Oops! Brands Aren't Businesses!" by Samuel H. Altman.

I was curious, so I looked up what the press has reported on each company's most recent valuation (and therefore, these numbers could be off, because they don't factor in reported write downs / markups from individual investors [i.e. Fidelity], financing rounds not reported by the press, huge gains/downturns in revenue over the last year, etc.)

1.) The top 6 companies mentioned are now valued at $146.5b.

2.) The 9 midstage YC companies mentioned in the article are valued at $15.43b.

Another comment in this thread claims to have done the same analysis and come to the opposite conclusion. But neither of you shared your math. Could you show the analysis that led to your conclusion, so we can compare it to the other one?

Regarding #1, this means that all six will need to double their value, or some of them will need to grow by more than 100% to compensate for those which don't. Five years is a long time, but 100% is also a lot of growth. There aren't too many tech companies which I can think of who could provide adequate comps, but if we use GOOG as a generic "tech company":

- from 2012-present they went from $350 - ~$725

- from 2005-2012 they went from ~$125 - $350, if you skip a short lull at the end of 2008 when everything was down

One doubling on a 7 year scale, then next one on a ~4 year scale, using the today as the arbitrary starting point and measuring back.

If we ask the question a different way, which of these six companies have 100% growth ahead of them, i.e. their valuation is huge, and either their current market penetration is low or there are large enough new markets available to them. To me, Uber and SpaceX are the only obvious ones on that list. Palantir and Airbnb are less obviously well-positioned, but I would push them both to yes if I were personally to take this bet. Dropbox and Pinterest seem to be clearly in the other side, and if they maintain their current values, then each of the other companies will need to split $25B in growth four ways in order for this bet to hold.

Distributing that evenly:

- Palantir was last valued at $20B, so this is a 100%+ growth target over 4 years.

- As of 2015, Airbnb was valued at $25B so it's a similar situation for them.

- As of the beginning of this year, Uber was valued around $50B, so they would need to grow by 50%+

- SpaceX is valued somewhere around $12-15B, so this would be a ~200% growth for them!

Yet, we all know that unicorn gains are not distributed evenly. Even among the unicorns this is true, so a more likely scenario is that one or two of these companies will experience outsized growth while the others will experience impressive, but "modest", increases.

It's a fun, but probably pointless, exercise to try and pick which of these will be the unicorns among unicorns. (But I'd say Uber and SpaceX still)

Just to contextualize all this -- it was 2009, 7 years ago, when the DJI was last at half its value today. It was also 2009 when the S&P 500 was half today's value. We're talking about companies doubling on 4-5 year scales, 33-50% faster than the rest of the market.