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41,000,006 reasons why I think we're in a bubble

jacquesmattheij.com

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Re: 41,000,006 reasons why I think we're in a bubble

#191

Post by klenwell »

klenwell wrote: post #159
grellas wrote: post #134

I guess it is a matter of terminology but I have to disagree on this one. A bubble is all-pervasive and extreme. It represents a systematic investment mania where everything becomes surreal. People sell vast tracts of land for a prized tulip. Junk companies with nothing to offer but a vague concept about revolutionizing how this or that will be done owing to some new phenomenon such as the internet make serial stock…

This is a great point. To condense what you said a bit: the dot-com bubble followed the democratization of stock trading (which itself got a technological assist from the internet). Lots of people, myself included, who never bought a stock start using online trading accounts. The housing bubble followed the democratization of home buying. Lots of people who never had bought a house before (or a second or third house)…

Going to offer an answer to my own question: where's the next bubble?

My boring answer has always been: commodities. Yeah, ordinary people can buy and sell precious metals now. But wouldn't it be more convenient if you could just directly buy a nicely packaged product online (with no service premium) that represents whatever arbitrary commodity or commodity future (or whatever it is you trade) you desire? I'm sure this would do wonders for oil prices. All those gold trading services that advertise on cable seem to be a niche example of the phenomenon.

However, I just came across something which may offer a more interesting answer: bitcoin, or more generally, currency. I going by what I was just reading here:

http://www.reddit.com/r/programming/comments/g7zlw/google_en...

I don't fully understand what bitcoin is. But I'm sure that will only be part of its charm if it ever goes mainstream. At any rate, just an idea.

Re: 41,000,006 reasons why I think we're in a bubble

#192

Post by atrevisan »

Typically those kinds of things would happen once every year or so, twitter (I still don't fully grok their business model), facebook and so on.

Don't understand Twitter's business model? Promoted tweets have the ability to become AdWords for social. Millions of pieces of content are shared everyday giving insight into user's pleasures, dislikes, and lifestyle. This user data, when analyzed, has immense value for companies interested in purchasing. That information is worth a ton.

Bubble or no bubble, I sure grok their business model.

Re: 41,000,006 reasons why I think we're in a bubble

#193

Post by ChuckMcM »

ErrantX wrote: post #153
edw519 wrote: post #30

I don't know about the rest of the world, but we sure are in a bubble here at Hacker News. There seems to be a real disconnect between what people want to build/invest in and what people in the real world actually need and want to pay for. Just as sample of what I've witnessed in the past few years: Ask HN: How do you like my file sharing app? Ask HN: How do you like my social app for niche ? Ask HN: How do you like…

There is also a huge (multi-Billion dollar) "industry" for corporate level software that is under serviced in many areas (i.e. the software is churned out by large development houses and is below par). Yet very few startups seem to target these areas. We took a product into a badly serviced industry and were wildly profitable within about a year on minimal funding. I always worry that there is a growing amount of spe…

"Yet very few startups seem to target these areas."

Perhaps you're seeing an artifact. Generally the startups you hear about on HN and elsewhere are trying to generate 'buzz' and 'raise awareness' to get to 'closing a funding round.'

As you yourself demonstrate when one starts a company to solve a problem for which there are already customers in pain (and thus willing to buy the product), they can generally, if they execute well, get started and get profitable early on and then grow organically by expanding out from their customer base to adjacent markets. All without any big funding round or 'buzz gathering.'

Solving known problems well, gets you a steady paycheck, its not 'sexy' and its not usually 'disruptive' and it is very very rarely even brought up in places like this.

Because the problems are known it also means are are usually several players trying to get to the same dollars and margins are limited right from the start as people compete to be the chosen solution out of a variety of solutions.

Disruptive changes on the other hand, take a market with a reasonable capital flow and shift it all to a single player. Depending on how long that shift lasts, the return on investment for that player is 10, 100, even 1000 times higher.

The other problem here is that if you are a VC fund you can't leave the money you've raised in T-bills forever, you really really do need to invest it. So there is pressure to put it out there and get it working for you, and if its been getting 2 - 3% in T-bills and your clients were expecting 20 - 30% then the longer its been sitting the bigger a pop you want to spend it on. A very strange but measurable forcing function.

Re: 41,000,006 reasons why I think we're in a bubble

#194

Post by shadowfox »

dtby wrote: post #135
haploid wrote: post #90

Earlier quoted context omitted.

I disagree. I think the reason you see those kind of posts is that those kind of applications are low-hanging fruit. The development of Yet Another File-Sharing App or Social Media Service can be accomplished by anyone with a "Learn Rails In 21 Days" book and a credit card. Companies that are also getting tons of funding right now are biotechnology and solar energy startups, but I have never seen anything along the l…

More to the point, people lack any domain experience. Don't get me wrong: it's cool to be an awesome hacker... but if you don't know about anything outside of hacking.. chances are some neck-beard somewhere has already solved all of the problems of which you are aware.

The other issue with domain knowledge, at least in my experience, is that it takes a significant effort to become sufficiently knowledgeable in a new domain to discover and solve the real problems faced by people working in that domain.

Re: 41,000,006 reasons why I think we're in a bubble

#195

Post by pkulak »

patio11 wrote: post #125
edw519 wrote: post #30

I don't know about the rest of the world, but we sure are in a bubble here at Hacker News. There seems to be a real disconnect between what people want to build/invest in and what people in the real world actually need and want to pay for. Just as sample of what I've witnessed in the past few years: Ask HN: How do you like my file sharing app? Ask HN: How do you like my social app for niche ? Ask HN: How do you like…

To add, approximately one half of people in the real world share a common demographic category with a sliver of HN users and a fraction of a sliver of what we create. Women have money. Go take it. Nobody else wants it in tech. (Well, aside from Groupon, Zynga, and a few other companies that missed the opportunity to make an iPhone app that you could wiggle to share photos.)

I've got a web app that's used by mostly women, but for some reason I'm not swimming in cash. But I wish it was true!

Re: 41,000,006 reasons why I think we're in a bubble

#196

Post by yummyfajitas »

anamax wrote: post #188
yummyfajitas wrote: post #176

Earlier quoted context omitted.

Inflation helps the proletariat, you know. Most of them are net debtors, so inflation makes it easier to pay off their debts.

> Inflation helps the proletariat, you know. Most of them are net debtors, so inflation makes it easier to pay off their debts. Not so fast. Lenders factor in expected inflation, so it's only unexpected inflation that benefits debtors. And, making payments isn't the only way to handle debt - bankruptcy works too. You don't get any more "pay later" pizzas, but you get to keep the ones that you already ate. However, in…

It's true that a higher inflation regime will not help debtors. But the net effect of an event like QE/QE2 is to help debtors.

Re: 41,000,006 reasons why I think we're in a bubble

#198

Post by futuremint »

yannickmahe wrote: post #73

What I don't get, economically speaking, is how we can both be in a bubble and in a barely recovering economy. In other words, how do these angels and VCs still have that much money to invest in such companies?

Most VC's are backed by enormous pension funds and/or other group retirement vehicles. This is how they can afford to bet large sums of money on multiple companies with an expected payoff of only 1 in 10 companies on long time frames.

The pension isn't using that money (right now anyway), so the VC is free to do with it what they want, and in the end the money comes back to the pension in multiples.

At least this is my understanding talking to an actual VC (not in a fund-raising situation, just casually).

Re: 41,000,006 reasons why I think we're in a bubble

#199

Post by ErrantX »

elai wrote: post #190
ErrantX wrote: post #153

Earlier quoted context omitted.

There is also a huge (multi-Billion dollar) "industry" for corporate level software that is under serviced in many areas (i.e. the software is churned out by large development houses and is below par). Yet very few startups seem to target these areas. We took a product into a badly serviced industry and were wildly profitable within about a year on minimal funding. I always worry that there is a growing amount of spe…

You guys are a security consulting firm from what I see. What products did you create for that?

That's just one (the main) side of things; the specific piece of software I mention is in another market.

Re: 41,000,006 reasons why I think we're in a bubble

#200

Post by crux_ »

I'm curious about a couple of things, but also ignorant... so here's hoping for a helpful reply:

- How much institutional money (pensions, sovereign wealth, etc) is ending up in VC?

(My intuition tells me that the tremendous pressure on these funds to generate returns, which was a huge part of the housing bubble, is in turn fueling this bubble too, although not nearly at the same scale.)

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