Money Is Pouring into Tech Like It’s 1999, and That's Not Good

I've discussed this at length with investors, entrepreneurs, and upper level management at large tech service agencies, and I'm not convinced that there is necessarily a bubble this time around. Accounting for the massive increase in bandwidth, CPU, GPU, smartphone ownership, software development practices, AI logic, and reliance on data compared to that of 1999, it's really a flawed model to draw 1:1 parallels in my opinion.

While there will be a shift at some point away from software/web entities and into manufacturing (to catch up meatspace to webspace), it will be these tech entities that will largely lead the charge, to enhance their own offerings. The example put forth in the article is as flawed as the logic it purports to criticize: "SAYING WE’RE NOT IN A BUBBLE BECAUSE IT’S NOT AS HIGH AS 1999 IS LIKE SAYING THAT KIM-JONG-UN IS NOT EVIL BECAUSE HE’S NOT HITLER."

Compared to 1999, the value drawn from these companies inside the "bubble" doesn't even remotely exist within the same qualitative and associative parameters.

That's what happens when you're an investment manager. You're paid to do something, anything. If you just sit on cash, your investors aren't going to keep paying your fees.

Even small start ups should continue to do ok -- the hardware overhead for early stage stuff now is so cheap it is nearly free. Models that require huge scale before the revenue comes in could be a problem.

I self-funded so my opinion is likely wrong, but it seems like a lot of the excess money is going to questionable things in addition to paid growth (no clue how much Uber, Lyft, and others are spending, Groupon certainly took the paid acquisition to the extreme buying up huge chunks of available online inventory.) Luxurious offices are nice but hardly necessary for a serious coder or designer.

Perhaps the most vulnerable are the start ups that already exist and are dependent on investor money to operate. In the event of a market pull back desperate companies should be easy pickings for the big boys to acquire talent and other interesting goodies.

Leverage -- that makes bubbles very dangerous and unpredictable. Investor leverage is one thing, companies' own leverage is quite another. Last I looked (a year ago), tech was the best of the best by this metric. For public companies in other sectors, its a wonder if they would be worth anything in another major credit crunch. The corporations we keep hearing about having massive cash stock piles have liabilities to match. A concern would be Facebook's or Apple's market cap dropping 50%+ . Go to 0? No.

I like that we have internet fundamentalists now.

I think point (4) is the key here. The original bubble happened on the public exchanges with public money. The "IPO" was the big deal that everyone wanted to get in on after Netscape, et al valuations went crazy. Institutional investors were investing people's retirement accounts into companies they didn't understand. When that finally fell over, the impact was felt across the economy because it involved everybody's money.

This time the money is largely coming from private equity and there's not a lot of splashy IPOs happening. The people who are investing aren't mom and pop planning for their retirement. If a big VC firm looses it's shirt it's not as likely to have the impact on "Main Street" as we saw the last time around.

I'd like to say that I don't care one whit if a bunch of rich people suddenly loose their money, but if history has anything to show, it's that they'll somehow figure out a way to make the rest of us feel the pain too.