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Tech bubbles are bursting all over the place

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251–260 of 774 posts

Re: Tech bubbles are bursting all over the place

#251

This has been a long time coming. Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present value of the company + future earnings. And of course there was some amount of speculation around future earnings, but for the most part companies at least tried to be profitable. But if you look at the share price of like, Tesla - it's completely insane. There…

> __completely__ insane.

It isn't completely insane.

First off, it isn't irrational to allocate an excessive amount of capital to sustainability. The meme that this level of provision is short-sighted is myopic to the extreme, because obviously over the long term it is failure to be sustainable, not being sustainable, which is myopic. Perhaps it is overvalued, but calling it completely insane goes a bit too far.

Second, you are obviously right that the present value of their assets doesn't justify their current price, but it is hubris to try and claim that their is no future in which their revenues can justify their increased valuation. Think ahead to the future while skipping the steps to get there and we are obviously incredibly likely to exist in a world in which AI and automated labor is commonplace, in which energy is provided through renewable means, and in which transport from point to point is handled by electric vehicles. It is not __completely insane__ to think Tesla might play a large role in this future. It is quite reasonable to expect they would. Their present course has them explicitly targeting playing a very large role in that sort of future. They have been making progress and inroads in playing that role. They are on track to play that role and can play it if they execute successfully. Whether they do, that is another question, but whether the potential exists? It certainly seems to exist.

A lot of times people point at automakers when they try to justify calling Tesla overvalued. The idea that Tesla wouldn't be larger than that industry is silly. That industry spent billions on building out manufacturing capabilities. They took on debt in order to create products which the market doesn't believe will be viable in the future. The projected value of those companies has to account for that and obviously they aren't going to be valued as highly as they might be if they weren't burdened with those liabilities. Perhaps you don't know this, but a few years back legacy automakers were struggling with dealers who would intentionally sabotage the ability to sell electric vehicles by giving test drives in vehicles which were intentionally left without charge. Perhaps you don't know this, but dealers have laws in place to protect them from car companies which force legacy car companies to use them despite the way the perverse incentives could spell the death of the ICE auto industry. There are real structural reasons to value these companies as being less able than Tesla to flourish. Thinking this is the case isn't completely insane.

Re: Tech bubbles are bursting all over the place

#252
This market is so wild. The big techs are making so much money yet the market is in turmoil if you simply remove the big four (Apple, Google, Microsoft and Amazon). There are some great “value” if you look hard enough. People are quick to draw parallel to dotcom, but this one is quite different in so many ways.

Re: Tech bubbles are bursting all over the place

#253

And all it took was the Federal Reserve raising the federal funds rate by less than 100 bps after a decade and a half of rock bottom rates. I have nothing more to add. I'm going to go outside and breathe some fresh air.

More is expected, though:

> More rate rises are expected. The Economist Intelligence Unit expects the Fed to raise rates seven times in 2022, reaching 2.9% in early 2023.

(The Guardian)

Re: Tech bubbles are bursting all over the place

#254
post #21

People said this was the "best time ever to get funding" for a startup. I disagree. In my view, it was the best time ever if you played a particular game and had the right connections. I pitched an idea to a VC, which I had a prototype for, looking for $100k. He liked it but wouldn't fund because I didn't have a solid business plan. Fair enough, I need to find a business partner. But then he told me something about h…

> Also, I haven't seen a single "promising" startup actually be profitable, except those ones made without major funding.

The whole point of VC is cash to be unprofitable. Grow faster by overspending today.

Re: Tech bubbles are bursting all over the place

#255

Earlier quoted context omitted.

Tesla made more money last quarter than Ford, GM and Toyota. Toyota made 10x the number of cars as Tesla. Tesla is growing vehicle production 50% YoY, while growing profit even faster (having barely hit economies of scale yet). Tesla has a backlog of orders approaching a year in many regions. Everyone else is losing money on their EVs and can't make them in volume production, can't find the batteries for them, becaus…

I'm not sure where you are getting those numbers from. Ford had $37b in revenue Q4. Tesla had $16b. Tesla is an impressive company that's managed to finally be profitable. But currently their market cap is higher than all other auto manufacturers combined. > Everyone else is losing money on their EVs and can't make them in volume production, can't find the batteries for them, you do the math. That's the thing, this s…

> I'm not sure where you are getting those numbers from. Ford had $37b in revenue Q4. Tesla had $16b.

Tesla makes a 27.4% gross margin on that revenue though, while Ford has a gross margin of 4.8%.

> Tesla is an impressive company that's managed to finally be profitable.

Although technically true, this is a little misleading as it implies that Tesla is barely profitable - in reality they have moved from 'finally becoming profitable' to now being the most profitable automaker (in terms of total profit).

Re: Tech bubbles are bursting all over the place

#256

This has been a long time coming. Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present value of the company + future earnings. And of course there was some amount of speculation around future earnings, but for the most part companies at least tried to be profitable. But if you look at the share price of like, Tesla - it's completely insane. There…

Over a long enough time frame the stock market and even the whole economy behaves like a pyramid scheme as it is dependent on new generations to be more people than the previous one.

This isn't really true for the same reason that GDP per capita isn't a constant number.

Re: Tech bubbles are bursting all over the place

#257
post #7
post #2

I work for non-tech generating 100million+ in revenue. Cushy job, fully remote, good pay and full autonomy with flexible hours working as an IC. I recently talked to a startup, similar pay, culture would be a better fit since it was mostly techies and I'm a nerd by nature.....but things just got awkward as soon as I asked about their revenue....they were bleeding money and I was told they were being acquired by a big…

Across every investment class there has been a trend of buyers needing to become more financially irresponsible in order to participate in the market. Need to buy a house? bid 20% more than asking, if you don't - someone else will.. in cash. Need to build a ride-hailing app? prepare to pay people to ride indefinitely. Need to own a growth stock? prepare to pay upwards of 100x multiple on revenue. All around, there ha…

I don't think it's housing. It's just that the market had a boom during the bored pandemic times and now that that is over (except in china) the market is readjusting. The market is highly leveraged by psychology over the short term, but in the end even the most exuberant people have to face reality and tighten their belt. Housing will flat line or decrease now as well, since people realize the cost of mortgages is too damn high. Also with lumber and other prices falling that will help new home builds. If Russia ever stops the attempted genocide of Ukraine then markets will probably soar as gas prices come back down instead of increasing.

Re: Tech bubbles are bursting all over the place

#258

Earlier quoted context omitted.

Thanks, I wish people could speak clearly.

RIF is an industry standard term with a long history. The problem isn’t others speaking unclearly. It’s assuming others are in the wrong rather than being happy to learn something new.

This issue is that the audience of HN isn't limited to industry veterans.

Re: Tech bubbles are bursting all over the place

#259
post #2

I work for non-tech generating 100million+ in revenue. Cushy job, fully remote, good pay and full autonomy with flexible hours working as an IC. I recently talked to a startup, similar pay, culture would be a better fit since it was mostly techies and I'm a nerd by nature.....but things just got awkward as soon as I asked about their revenue....they were bleeding money and I was told they were being acquired by a big…

Is there any growing startup that's not bleeding money? Isn't what the seed and Series A and maybe B funding is about? After series A funding I'd expect some revenue stream, but not enough to pay expenses, after B series, they should have a plan to profitability and some proven customers that show that they can actually get that revenue, and after C I'd expect them to be executing to that plan. If bleeding money scar…

There are. It happens when you hit high level of product market fit with a lean team and don’t go on a massive hiring spree after but keep growing the team at a measured pace.

I think Github, Notion, Retool, Slack, probably Figma, hit revenues quite quickly as they launched and became profitable or at least close to breakeven.

Re: Tech bubbles are bursting all over the place

#260
post #171

Earlier quoted context omitted.

The money can find a productive outlet, it’s just that for the last 5 years or so, speculative investments (that weren’t productive) had a much higher rate of return. Which is too bad as the productive investments like building a solar power plant really benefitted from the low interest rates that drove the non-productive speculative bubble. non-productive Speculative investments tend to get punished at the end of th…

> non-productive Speculative investments tend to get punished at the end of the cycle by losing all value, thus punishing those invested in it and restoring order. To be precise, the investors who are left holding at the end of the cycle get punished. The early investors who got out make out like robbers. This system incentivizes pump-and-dump.

Always has been.
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