After trying to figure out if he was actually going to back up his argument anywhere - at some point I realized he was essentially saying that Uber is not different than Pets.com and stopped caring about the article.
Money Is Pouring into Tech Like It’s 1999, and That's Not Good
51–60 of 64 posts
Re: Money Is Pouring into Tech Like It’s 1999, and That's Not Good
#52Earlier quoted context omitted.
Sure it is. VCs aren't the money guys, they just invest the funds of the money guys. Not investing really isn't an option for them.
VC's are paid to invest intelligently and get a return. But they have a conflict of interest because unless they invest, they don't get paid.
That's for the carry. If the market crashes and their investments fail, their carry income will be zero anyway.
VC's do get paid even if they don't invest via their management fee. It's certainly enough for them to live comfortably on while investing the fund over a ten year cycle.
But, to your point, there's another dynamic here: if they don't invest (and thus have no carry), they will be less likely to be able to raise future funds.
Just saying that it's not as simple as saying there's a conflict of interest. VC's do have a fiduciary duty to their investors and their income is tied, at least in part, to their ability to make money. Even if they lose all of the money, there is no direct cost except for possibly a quite substantial lost of reputation.
The risk to entrepreneurs is not symmetrical. No guaranteed salary is available to entrepreneurs. Even if a portfolio company fails, VC's still receive a management fee.
This system works surprisingly well, except when VC's are stupid or screw entrepreneurs. It's actually pretty amazing that it works at all, since really the middlemen hold most of the power as the distributors, but not originators, of the capital.
Re: Money Is Pouring into Tech Like It’s 1999, and That's Not Good
#53It's easy to chalk this up to herd behavior but what's scarier is the real possibility that solid investment choices don't really exist in America anymore.
Re: Money Is Pouring into Tech Like It’s 1999, and That's Not Good
#54Although the economy suffered a hit, does anyone remember what the job market was like for programmers after the boom? If this article is right (which I'm not convinced of), even to a smaller extent -- how do you think that will impact the current job market?
Re: Money Is Pouring into Tech Like It’s 1999, and That's Not Good
#55Earlier quoted context omitted.
I'll paraphrase a comment I wrote on reddit about this yesterday. Alibaba has a PE ratio one tenth of amazon - and is already a profitable company. This is the exact opposite of what a bubble is. This is not at all like the kind of IPOs leading to the 2000 crash.
I didn't comment on Alibaba's financials. I simply responded to the statement that "there's not a lot of splashy IPOs happening," which I found somewhat amusing in light of the fact that the arguably "splashiest" IPO just took place. That said, Alibaba's profitability and PE ratio compared to Amazon is meaningless in the context of a bubble discussion. A bubble does not merely consist of unprofitable companies becomi…
If Amazon's stock price fell by 25%, and Alibaba's did the same, as an Alibaba shareholder would you take comfort in the fact that Alibaba still has a PE ratio one tenth Amazon's? Of course not.
Actually, yes, I would take comfort in that fact. It would mean that Alibaba was far more likely to recover its value.
Re: Money Is Pouring into Tech Like It’s 1999, and That's Not Good
#56An interesting twist in the current incarnation is this story is how big "private" money is taking risks on the tech sector. Overall, I don't really find this story convincing for a few of reasons, though I suppose there is plenty of room for disagreement. (1)T he first boom actually did get a lot right. The PC-internet revolutions was intense and did create a lot of new value. The mistake was treating it like a land…
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…
"This time the money is largely coming from private equity and there's not a lot of splashy IPOs happening."
There's a lot of public wealth caught up in the stock market in general right now. Technology is especially overvalued (e.g. Amazon at $150Bn, Yelp and Pandora at $5Bn, etc.) despite having more earnings than bubble v1.0. But even if you believe that the downside of a tech crash is limited, you're forgetting that technology is unlikely to crash without dragging down the entire market -- the same forces that are propping up tech are propping up everything else.
Moreover, people keep talking about hedge funds as if they're completely dissociated from the larger market. But a lot of pension, retirement and other "conservative" wealth has been flooding into these funds seeking a return over the last few years. Grandma's retirement not isolated from the health of the tech industry; it's just harder for journalists to see the risk this time, because it doesn't look like last time.
Remember: This Time It's Different! (tm)
Re: Money Is Pouring into Tech Like It’s 1999, and That's Not Good
#57Earlier quoted context omitted.
>> "The current "tech bubble" is just one of multiple bubbles being driven by an even larger bubble in public equities..." This is interesting. Could you elaborate on some of the other sub-bubbles? Not being facetious, am really curious.
I know nothing about finance but the Federal Reserve has provided new money at almost no interest to banks for a fairly long period of time from ~2008 onwards (this was called quantitative easing). This essentially forced the EU and countries like Switzerland to do the same, if they did not want their currency to get too strong. It is not a stretch of imagination that this fueled much of the current stock market boom…
Yeah, the fed loans money to banks at, essentially, zero interest, and the banks then use it to invest in the stock market, or some such. They make money, because the market isat all-time highs. They pay back the fed, and keep their profits.
All the major firms do this. It's nuts, but our government literally lends free money to investors on Wall Street so they can make millions of dollars on trades.
Of course, this all comes tumbling down when the markets are in bad shape. And, unlike most people in this thread, I fully expect any and all bubbles to burst due to some outside influence: Ebola, 9/11, war, etc. Something big happens to scare the markets, and the big party here in the Valley is over. Who know when that will happen, but it feels like the next year or so will be the time frame, if my gut is any indication.
Burn that capital while you can, folks!
Re: Money Is Pouring into Tech Like It’s 1999, and That's Not Good
#58Earlier quoted context omitted.
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…
>> "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." Definitely. The hiring market in our industry is _on fire_ right now, we are treated well, paid fairly, etc. When the hard times come, it might be a little less cushy to be an engineer/data scient…
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Re: Money Is Pouring into Tech Like It’s 1999, and That's Not Good
#59Earlier quoted context omitted.
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…
>> "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." Definitely. The hiring market in our industry is _on fire_ right now, we are treated well, paid fairly, etc. When the hard times come, it might be a little less cushy to be an engineer/data scient…
It's not cushy (to be an engineer). IT in it's current form is demanding (I like the "intense 24/7 activity" phrase). We are paid well for a reason and ofc it MAY feel cushy when you are on top of things. But this requires more than 8 hours a day, 5 days a week and some non-IT hobbies. I am even arguing on the side of "people just applying stuff" and ofc. the ones creating IT for them to use: No time to trim the beard (was prioritized down).
Re: Money Is Pouring into Tech Like It’s 1999, and That's Not Good
#60Earlier quoted context omitted.
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…
>> "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." Definitely. The hiring market in our industry is _on fire_ right now, we are treated well, paid fairly, etc. When the hard times come, it might be a little less cushy to be an engineer/data scient…
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