Today’s correction isn’t much like the dot-com bubble • Hacker News Board

Re: Today’s correction isn’t much like the dot-com bubble

#61

Post by sfilipov » Sun, Oct 20, 2019, 4:43 PM UTC

jeremydeanlakey wrote: post #48

One perspective that I gained much later than I should have: Suppose you have a small software company, Reinvest Software with big margins and lots of opportunities to expand. You can take home that profit and pay taxes. Or you can invest in growth. That investment in growth is an investment in intangible assets with insanely good tax treatment. But it looks bad on the financial statements. Suppose an investor, Smart…

What are good examples of Reinvest Software? My guess would be Amazon, but what others?

Re: Today’s correction isn’t much like the dot-com bubble

#62

Post by SpicyLemonZest » Sun, Oct 20, 2019, 4:55 PM UTC

hurrdurr2 wrote: post #55

easytiger wrote: post #12

Earlier quoted context omitted.

To be more specific it's a real estate company, that started out with a low asset ownership position. Then it got into the asset game leveraging their revenue, but mostly leveraging some meaningless sociological/technological gibberish to skewer an investor. I think this speaks to the state of the kind of people making decisions about things they don't even try to understand.

This is what amazes me; that there are so many supposedly intelligent individuals throwing money at shitty ideas. Google investing in Juicero comes to mind. It's like any semblance of due diligence is just an afterthought.

I think calling Juicero a shitty idea is too strong. It didn't end up working, and probably it was knowable in advance that it wouldn't, but the difference between early-stage Juicero and early-stage Keurig is smaller than most people gave it credit for. There's a strong and robust market (at least in the SF Bay Area) for weird expensive juices.

Re: Today’s correction isn’t much like the dot-com bubble

#63

Post by ghaff » Sun, Oct 20, 2019, 4:57 PM UTC

chubot wrote: post #45

lotsofpulp wrote: post #25

Earlier quoted context omitted.

Why hotel businesses? There are many different hotel brands to choose from, pricing is transparent, photos/reviews are available on many websites, customer service at the chains take care of complaints pretty well, and there has been a ton of new hotel room supply added.

I started staying in AirBNB's around 2013 because I could get a kitchen, e.g. for a week-long stay. I like drinking water and not eating out 2-3 times a day, every day, for a week! I was staying by myself, but I've heard from traveling families that hotels are a big hassle for them because they lack a kitchen. Imagine feeding a couple kids while staying for a week. That cost will really add up if you're eating out 3…

"Extended stay" places have at least limited kitchens. I often stay at them for the typically more comfortable sitting area but having a fridge can be useful too. I mostly don't use the kitchen though.

AirBnB did make renting vacation homes and the like more convenient. Even if hotels aren't really broken, the vacation rental services were very fragmented and mostly not great.

A lot depends on what you're looking for. On vacation, I do sometimes like something with a bit more "character." TBH though, most of the time I just want reliable with a 24 hour desk, the ability to leave luggage before I can check in or after I check out, etc.

Re: Today’s correction isn’t much like the dot-com bubble

#64

Post by janoc » Sun, Oct 20, 2019, 5:00 PM UTC

That article seems to harp on the fact that it is "not-com bubble", basically that the companies are getting punished because they are not "pure tech/software companies". Quite a way to miss the point, IMO.

As if delivering pure software was a sign that the company is worth investing in. Just look at all the cryptocurrency/blockchain startups from about two years ago. Most of them literally didn't have anything else but a whitepaper and some hacked up "coin" - a derivative of the open source Ethereum code. And 99.9% of them has gone bust already, disappearing with all the investor's money.

This is about investors finally wising up that a start-up with no path to profitability is not a viable business, regardless of the explosive growth fueled by cheap VC dollars and undercutting the competition ("disrupting the market") by ignoring existing laws (Uber, ...).

At least not for public investors - it is still immensely profitable for the founders and early investors of those "unicorns".

However, their goal is not to make a profitable company but to grow fast, attract a lot of VC money and then recoup the investment in an inflated IPO when the entire Potemkin village gets sold off to a lot of naive suckers who end up footing the bill once the house of cards finally collapses.

This is what needs to called out, not some BS talk about "not-com" bubbles.

Re: Today’s correction isn’t much like the dot-com bubble

#65

Post by janoc » Sun, Oct 20, 2019, 5:04 PM UTC

mtts wrote: post #3

“ The problem with tech today isn’t so much that software failed to eat the world, but that the most celebrated unicorns weren’t actually software companies. They have struggled to achieve liftoff because their feet are stuck in the mud of the physical world” This sums it up nicely. Investors got deluded enough to think that if they threw enough money at a non-software company it would magically start making software…

Sorry but if someone thinks that throwing money at a software company with equally poor business fundamentals would work then they are completely deluded too.

Even software companies fail and don't make much profit to speak of. Just look at all that cryptocurrency/blockchain nonsense.

If your business is losing money and, worse, has no meaningful way to stop losing money, it makes no difference whether you are selling software, services or renting office space or running a taxi business. It will fail.

Re: Today’s correction isn’t much like the dot-com bubble

#66

Post by rubicon33 » Sun, Oct 20, 2019, 5:06 PM UTC

code4tee wrote: post #44

There’s another often unwritten element here around companies basing their valuation on false markets. For example, if I sell $2 for $1 that’s a false market. Of course I can grow like crazy and gobble up lots of customers. I could even “disrupt” existing players like those stodgy old companies (banks) that sell $2 for $2.15 (a loan). The VC subsidies for some of these companies are so high that they are basically se…

That's not an uncommon nor unheard of tactic in business. Fuel growth, and capture the market for your brand, by selling at a loss.

The trick is always the transition to profitability. Generally, this comes through layoffs and maybe price increases.

Re: Today’s correction isn’t much like the dot-com bubble

#67

Post by rubicon33 » Sun, Oct 20, 2019, 5:10 PM UTC

janoc wrote: post #65

mtts wrote: post #3

“ The problem with tech today isn’t so much that software failed to eat the world, but that the most celebrated unicorns weren’t actually software companies. They have struggled to achieve liftoff because their feet are stuck in the mud of the physical world” This sums it up nicely. Investors got deluded enough to think that if they threw enough money at a non-software company it would magically start making software…

Sorry but if someone thinks that throwing money at a software company with equally poor business fundamentals would work then they are completely deluded too. Even software companies fail and don't make much profit to speak of. Just look at all that cryptocurrency/blockchain nonsense. If your business is losing money and, worse, has no meaningful way to stop losing money, it makes no difference whether you are sellin…

Correct me if I'm wrong but... Instagram & Twitter were both unprofitable for a REALLY long time.

Instagram got bought by Facebook and eventually became an ad network.

Twitter eventually, after nearly a decade of not making a profit, made a profit.

Re: Today’s correction isn’t much like the dot-com bubble

#68

Post by empath75 » Sun, Oct 20, 2019, 5:12 PM UTC

muglug wrote: post #4

The obvious counter-example to this is Slack, a "pure-tech" company whose value has halved since IPO, and there's a similar story with Snapchat (though its value has recovered somewhat in the past year).

I don’t think there’s fundamentally anything wrong with slack though. Investors just don’t understand it, I don’t think. I’ve read so many articles about how Microsoft is going to crush it with teams and it’s so obvious to anyone who has had to work with both of them that they simply are not competitors — really the only thing close to it is Discord and it’s not going after the enterprise market.

Re: Today’s correction isn’t much like the dot-com bubble

#69

Post by AznHisoka » Sun, Oct 20, 2019, 5:16 PM UTC

semiotagonal wrote: post #57

cptskippy wrote: post #13

Earlier quoted context omitted.

I don't think Slack counts, Slack's IPO was just a cash out because they saw the writing on the wall.

Slack's stock price chart has a "down and to the right" appearance.

It was valued at $7 billion or so early last year. so at today’s price, it still went up over 50% since then. so one could argue it is still overvalued.

just because some greater fool declared it was worth $40 at some point doesn’t mean it’s now a bargain if it goes down to $20.

Re: Today’s correction isn’t much like the dot-com bubble

#70

Post by Scoundreller » Sun, Oct 20, 2019, 5:18 PM UTC

code4tee wrote: post #28

All that’s happening is that the market is calling BS on companies that lack sound business fundamentals. The days of valuing companies sky high that are deeply unprofitable but “it’s OK because we’re a tech company so it doesn’t matter” are over. This is ultimately a good thing for companies with real businesses that were for much of recent history valued far less than those that had no clear prospects of making a p…

It still works for taking over highly fragmented industries. And always will.