HN Theater @HNTheaterMonth

Or, from 2007, The Richter Scales - "Here Comes Another Bubble": https://www.youtube.com/watch?v=I6IQ_FOCE6I

"build yourself a rocket ship / blast off on an ego trip" – lmao

⬐ BolexNOLA

This was a trip haha

Here Comes Another Bubble: https://youtube.com/watch?v=I6IQ_FOCE6I

Here Comes Another Bubble: https://youtube.com/watch?v=I6IQ_FOCE6I

Longer. This Richter Scales "Here comes another bubble" video was 2007. https://www.youtube.com/watch?v=I6IQ_FOCE6I&ab_channel=TheRi...

Obviously 2008 did see something of a drop in general so I guess they were right for the near term. But they were specifically ragging on companies that you'd have done very well with over the next decade+ even if you had bought in 2007.

⬐ subsubzero

Well we had a bubble burst in 2000(tech cratered), Valuations were tied to clicks/growth and not making money(sound familiar?).

Then 2008, everything dropped due to housing being pumped to the moon, a couple of banks went bust and tech along with everything else dropped.

There hasn't been much since, but the pressure is building for the next big one(pardon my richter scale/earthquake analogy).

When the next crash comes it will be scary as the tools the fed has are limited, they can't lower the interest rates any farther(they are at 0 now). They can print money but that would lead to worse inflation, or hyper-inflation as they say. The US has really dodged that bullet but it could happen, I wonder how people will react when a loaf of bread shoots to $25 a loaf, then 3 months later $100. It happened in advanced democracies(Argentina, Germany) and it could happen here.

It's that time again :-)

https://www.youtube.com/watch?v=I6IQ_FOCE6I

The article is from oct 2007(*fixed), around the same time of the video: "Here comes another bubble"

https://m.youtube.com/watch?v=I6IQ_FOCE6I

⬐ tosh

*2007

⬐ molmalo

Lol, yes 2007, fixed, thanks!

⬐ username90

I wouldn't say that 2007 was a bubble though, at least not in the tech world. Social media wasn't properly realized at the time so for example Facebook being valued at 15 billion or Linkedin at 1 billion made sense. There could have been ten similar sized competitors to both of them and the valuation would still have made sense since one of them would win.

⬐ maxlamb

That's what makes reading this piece 12 years later so interesting - there was definitely fear of a bubble in 2007 (probably partly due to the trauma of the 2000 dotcom bust) even though in retrospect there definitely wasn't. It's funny how it described Facebook's $15 billion valuation as a sign there might be a bubble, when FB now is valued at $525 billion.

https://www.youtube.com/watch?v=I6IQ_FOCE6I ;-(

"Here Comes Another Bubble" uses the same tune:

https://www.youtube.com/watch?v=I6IQ_FOCE6I

This song came out in 2007.

sing along: https://www.youtube.com/watch?v=I6IQ_FOCE6I

This comment is probably to be downvoted as off topic, but in case anyone missed this gem.

Here Comes Another Bubble: https://youtu.be/I6IQ_FOCE6I

  make yourself a million bucks
  partly skill, mostly luck
  now you can afford a down payment
  on a small house

https://www.youtube.com/watch?v=I6IQ_FOCE6I

> Started with 15% but got diluted to 1% after several rounds of funding including down rounds.

haha WOW oh my god, and the software engineers getting a fraction of a fraction of a percent and being "reassured" that its a generous offer!

https://www.youtube.com/watch?v=I6IQ_FOCE6I

⬐ hn_throwaway_99

While I don't disagree with your comment much (if the technical cofounder was diluted down to 1%, guessing pretty much all employees received well under $100k), it's weird that you linked to that "tech bubble" video from 2007. If anything, Peter Thiel was exactly right, and he understood that winner-take-all tech leaders would become insanely valuable. That video is arguing 2007 Facebook was a bubble at a $15 billion valuation. It's worth $470 billion today.

⬐ gammateam

the video is linked for the "pay developers a fraction of a fraction of a pie" line in the catchy song

extremely relevant and the 2007, in italics for emphasis, is irrelevant ... or is it timeless

Peter Thiel? yeah I'm going to go with "'Missed the Point', for $10,000"

meanwhile: https://www.youtube.com/watch?v=I6IQ_FOCE6I

⬐ ak39

LOL. Thank you very much for this!

It takes satire to make us see how far we have come thinking the way we do.

Well done.

In 2007 there was viral video suggesting that Facebook is overvalued at $15bln comparing to Ford: https://m.youtube.com/watch?v=I6IQ_FOCE6I

Lets see how the story will unfold.

⬐ jkot

Facebook had 50 million users at October 2007 [1], that is $300 per user.

https://finance.yahoo.com/news/number-active-users-facebook-...

⬐ akhilcacharya

*2007.

That video is fantastic.

⬐ mysterypie

> Lets see how the story will unfold

You left it unstated that Facebook is now worth $283bln more than Ford. So, yes, the video looks silly for crying wolf back in 2007.

But I'm at a loss to draw the correct conclusion from this. Is it rational that Facebook is now worth 6x as much as Ford?

⬐ eggie

> But I'm at a loss to draw the correct conclusion from this. Is it rational that Facebook is now worth 6x as much as Ford?

I worry that I see it as over-hyped because of my discomfort in the future it proposes. Its valuation represents the market's belief in what I feel is a very dark future.

⬐ mwfunk

One of the many weird things about the stock market is that it doesn't really reflect how investors feel about a given company, so much as it reflects how investors are predicting how other investors will feel about a company in the coming years.

So, a slightly more optimistic way of looking at it is that investors think that other investors think that there's a dark future ahead, but may not believe so themselves. It's quite possible that no one really believes in that particular dystopian future, but everyone thinks that everyone else does.

⬐ 03pxkexce5

I'm a lot more optistic about a world where everyone is socializing on the internet than one where everyone is burning carbon.

⬐ coldtea

>where everyone is socializing on the internet

Or, as we used to called it in my day, not actually socializing.

⬐ 03pxkexce5

So kids these days are exchanging enough words but not touching enough bodies?

⬐ coldtea

According to me, yes. And mostly not doing enough stuff together and eye to eye -- which makes those words easier and less meaningful when they are not accompanied by actual effort, money, being there, etc.

Digital is a nice way to keep touch or contact new people, but bad replacement for physical socializing. Of course it's also easier and needs far less commitment, courage and empathy, and you can't beat that for people...

⬐ michaelt

My level of optimism depends on whether I think FB can make enough profit to sustain their current valuation based on their current advertising alone, or whether they'll need to broaden their horizons in terms of monetising the data they hold.

It's fairly easy to imagine monetisation strategies that could be pretty negative in the long term.

⬐ 03pxkexce5

If I try to imagine the worst things Facebook could do, I don't get scared, because they don't seem that lucrative.

Blackmail me based on private conversations?

Resell my photo uploads to shutterstock?

Charge the intelligence agencies $1k per user for a backdoor to my encrypted FB chat messages?

⬐ emp_zealoth

They can make users miserable by messing too much with them or trying to squeeze more money out of them

⬐ eggie

They could influence elections, shift social policy to help certain people, and generally engineer the social world in their own image. It will be very hard to tell if this is happening.

They could become the whole internet. In many places they already are. This is a very sad future for someone who sees the internet as a tool of human liberation and direct connection.

I don't care so much about them selling our information. It's worthless even to me. These other things are much more subtle and valuable.

⬐ arcticfox

And unfortunately the valuation means there are a lot of powerful people invested in making that a reality.

⬐ heurist

Facebook uniquely knows the social network, communications, whereabouts and psychological makeup of ~1 billion individuals across the world. They've demonstrated the power to manipulate their users' emotions. Ford manufactures motor vehicles in a highly competitive industry. Comparing early Ford to current facebook might be a better comparison as they were both heralds of new disruptive technologies.

⬐ GCA10

On Facebook v. Ford, in terms of how shareholder value gets built and sustained, yes, the market is being as rational as it ever gets. Consider the following five dimensions:

CREATING THE PRODUCT: Facebook's engineers provide the framework, but each day's content is created free of charge by 1.5 billion active users. That's great for profit margins! At Ford, cars don't get built unless the company buys steel, glass, tires, etc. and pays workers to put it all together. That really squeezes margins.

GENERATING DEMAND: Facebook's users share content and invite their friends to join, at no cost. Media companies beg to play in Facebook's ecosystem. By contrast, Ford needs to spend billions on advertising to get people excited about cars.

OBLIGATIONS TO CUSTOMERS: Facebook has a modest-sized fraud and security team that keeps everything tidy. They do heroic work, but there aren't 50,000 of them. At Ford, the requirements for inspections, safety tests, recalls, legal settlements when vehicles go bad, etc. are vastly larger.

OBSOLESCENCE: Ford has $58 billion invested in plant and equipment. Every day, those factories get a little closer to being obsolete. Ford must constantly either raise cash or reinvest profits to keep its factories competitive. That means less free cash for shareholders. By contrast, Facebook has just $8 billion invested in server farms, beautiful headquarters, etc. Its asset-maintenance burden is vastly less -- and should stay that way forever.

MAKING MONEY: Ford's net income zigzags all over the place, jolted by lots of market/economic issues. Net income was down last year; historically it's ranged from $11 billion to sizable losses. Facebook's net income totaled $3.7 billion last year and is climbing at a very snappy rate. 35% a year? Doubling? Still hard to tell, but it keeps going up.

Put all those factors together, and Facebook is a growth stock with a pretty straightforward path to making its business hum. Ford is a cyclical stock that may have already posted its peak profits. Ford may be a bedrock part of the U.S. economy, but that doesn't always get you a lot of love in the stock market, for reasons above. Yeah, Ford has $150 billion in revenue a year and Facebook had just $18 billion. But markets value companies on their growth prospects. I've got no trouble believing that Facebook's overall opportunity to make money is 6x better than Ford's.

⬐ james-watson

Great analysis but you left out one major point: Facebook is a monopoly in it's market segment, whereas Ford is one of many fierce competitors.

As such, Facebook takes all the profit from social media advertising, and can set its own prices and dictate terms to its customers. Ford can afford to do no such thing.

If Ford were the only auto maker in the world, it would be a far more lucrative investment.

⬐ lvs

Snore. It's just advertising. If internet advertising is overvalued, then SV company valuations are dramatically too high.

⬐ vecter

Google is "just advertising". What's your point?

⬐ lvs

I made my point. If internet advertising is an overvalued sector of the economy -- which it most certainly is -- then all your favorite companies need new business models. What more do you want to hear?

⬐ 03pxkexce5

And if cars are overvalued, then Ford needs a new business model. Kind of a tautology there.

⬐ coldtea

The insight the parent offered though is pointing out the tautology in the former case. Because while everyone knows Ford == cars, lots of people see SV/Google and miss that most of it is in the selling ads business and much less in selling tech.

⬐ lvs

There is no tautology and no conflict. Both would be true statements of their conditional claims were true. The trouble is that internet advertising is far more likely to be overvalued than cars are. I think everyone in the thread knows this and is just being a bit difficult for some rhetorical purpose.

⬐ 03pxkexce5

Perhaps I am wrong about this, but it was my impression that increases in internet advertising revenue were mainly based on increased volume, not higher prices. I don't see any reason volume should drop when more and more consumers are using the internet and spending more time on it.

⬐ lvs

Consumers don't buy advertising. Companies do. Consumers don't want advertising at all, and they don't really understand that all their tech products/services are subsidized by ad revenue. Would they pay recurring fees for those products/services without an ad subsidy? Some would, but most won't. So if and when companies (that actually produce something) decide that their investment is better spent outside of search and social media, and if consumers don't then fund those products directly, it will be like an earthquake in SF. This is exactly what happened to newspapers, by the way.

⬐ 03pxkexce5

Internet advertising spending replaced newspaper advertising. What is going to replace internet advertising? VR? Those ads will probably still be sold by FB and Google.

To me, Google and FB's PE ratios are sensible, taking into account current profits, continuing growth in the short and medium term, and uncertainty in the long run.

⬐ nl

Why do you think internet advertising is overvalued?

It is only this year that internet advertising is projected to match TV advertising spend. TV advertising has been around ~50 years, and before that we have another ~100 years of print advertising to learn from.

From those historic precedents we can see that advertising is a huge, huge market. It is true that something could surpass internet advertising as the best way to spend that money, but I don't see any viable candidates (I'm including mobile & VR ads in "internet").

AdBlockers - of course - accelerate the trend of the money in the "internet" category going to players like FB where they control the delivery mechanism (ie, deliver ads in a mobile app, where an ad blocker can't reach it on most platforms).

⬐ cm2187

Plus advertising aren't exactly the most stable form of revenues in a downturn. Some investors will be in for a harsh awaking at the next bear market.

⬐ adventured

That very much depends on the context of the ad business in question. What stage it's at in terms of expansion and so on. Google zoomed right through the great recession, growing its advertising business while most businesses were struggling. As far as Google's business was concerned, the great recession hardly happened at all.

⬐ GCA10

Anything's possible, but the "It's just X" argument can be invoked so universally that I'm not sure it adds to the conversation.

ExxonMobil is just oil. WalMart is just department stores. Visa is just credit cards. All those companies have top-20 valuations. It's possible to come up with a doomsday scenario for any industry ... but by and large, once they get really big, they tend to persist in some form.

⬐ dredmorbius

That's a good list, though I'd add a few caveats / contras to it.

Your "Creating the Product" and "Generating Demand" elements synergise off one another. Facebook has considerable network effects, and those network effects stimulate content, but break the chain, or boil-off customers (see "The Evaporative Cooling Effect"), and the feedback's strongly negative all the way down. MySpace imploded quite rapidly. Google's G+ had some traction initially, but worked exceptionally hard to drive off its strongest fans. Those who are slower to learn (/me raises hand) are only now being convinced of our error.

But "Obsolescence" is the big one. Ford's plant degrades from the inside, and the rate of amortisation of manufacturing equipment is fairly well known. Innovation in automobiles peaked in the 1920s, though it's arguable that there were additional spurts in the 1970s (largely around economy), 1990s (quality and electronic controls), and now a possible shift to hybrid or electric vehicles, though those remain tiny portions of the entire market (highly visible, but still tiny by either unit count or, slightly less so due to much higher per-unit costs, currency marketshare).

Ford, along with other US automakers was blindsided when a very modest amount of market innovation, toward more efficient vehicles, hit in the 1970s. That was an exogenous obsolesence function.

Facebook and other technologies face this all the damned time. As I've slowly realised, the cost of provisioning technology hardware falls by an order of magnitude per decade. The rate is much slower for software, but there's far more capable, far more modular software rising up all the time. You can actually see this progression going back to the dawn of electronic computing, with IBM owning the market in the 1950s and 1960s, then a cascade of first minicomputers (DEC, Wang, Sun), then micros (PCs), then laptops, now handhelds, coming along at roughly 10-year intervals.

Software's taken a while to catch up.

Facebook had roughly 1/10 the hardware cost profile of Google (though growth of the Web may have increased that). Scaling out a startup now is largely a solved problem. Revenue model is harder -- but you need far less revenue.

The other problem Facebook (and any other tech player) faces is that their own codebase becomes liability. For every table-based desktop site (say, Hacker News), that existing site layout (and perhaps much the technology underpinning it) actively impedes movement to mobile or tablet devices. I've had long arguments with designers of sites who insist on pixel- and point-based font sizing, rather than em and rem, and then screw up with low-contrast sites to boot.

(HN's own fonts are barely readable for me on a 10" tablet, and no, mobile extensions don't help.)

Further, "Making Money" for Facebook has been exceptionally reliant on both easy-money Federal Reserve policies, and lending and banking regulations favouring Silicon Valley style investments. A tremendous amount of advertising is itself financial services, electronics, and other startups (I'm basing this off of Google's advertisers which I'm familiar with from other sources, but suspect FB's profile is similar). That ads money could well dry up damned quickly.

Tech companies have the problem that as the money dries up so does their tech workforce. Look at the salaries reported to have been offered to Yahoo's top tech talent (if you can't offer appreciating stock, you've got to bleed money). Lose programmer interest, and again there's a downward cascade of talent and capabilities, and some of the negative feedbacks start dominating.

⬐ nazka

It's more than just Facebook the product. Facebook the company made a lot of good acquisitions like Instagram.

⬐ duncanawoods

Shouldn't this analysis include the level of risk unique to a social network i.e. a usenet/myspace/digg/frendster crash?

Businesses that rely on and grow from network effects, die from them too at an even faster rate. A scandal or rival product could take FB to zero. Some would say that history tells us it is FB's inevitable outcome. I know some believe that it can't happen and the FB is "the last social network" but that sounds a little bit like bubble participants claiming "this time its different".

⬐ heurist

They'll switch to business intelligence in that case (like Foursquare). They've got enough data to last them lifetimes.

⬐ jsemrau

Interesting that you mentioned Foursquare. I considered them a has been for such a long time and only recently realized that they are still around being the geolocation API provider for a bunch of products. Successful pivot, I think.

⬐ WorldMaker

My assumption was that it was never really a pivot. It seemed that the geolocation API was always their primary strategy. I thought that was why it continues to be odd that so much of Foursquare's usage and network loss seems attributable to their own consumer confusing actions to split out the social network part into a new brand (Swarm) instead of the other way around.

⬐ cheez

They'll keep buying out competitors. It's the smart move.

⬐ jasonjei

If anything, Ford is facing many viable competitors than FB with respect to traditional and EV cars.

The warning signs of FB rising were apparent for years, but the News Corp managed MySpace did nothing to curb its rise.

⬐ sosuke

Today's homepage and the recent news got me thinking of this old video. Everything is on fire but everything is still going well. Not just well the market and stable businesses are much better now than 2007.

This was a good article to read.

Less seriously, back in hn, re: "we're going to change the world!"

https://www.youtube.com/watch?v=I6IQ_FOCE6I

⬐ chetanahuja

It's old, but I never came across it before. Truly funny.

Relevant: http://www.youtube.com/watch?v=I6IQ_FOCE6I, http://www.youtube.com/watch?v=hh3U7C0xLW4, http://www.youtube.com/watch?v=exmwSxv7XJI

More seriously I wonder why random signals that appear to be noise but if noticed are actually quite pertinent to predicting trends have such a great effect on people.

Example follows:

Kennedy later claimed he knew the rampant stock speculation of the late 1920s would lead to a crash. It is said that he knew it was time to get out of the market when he received stock tips from a shoe-shine boy

Source: http://en.wikipedia.org/wiki/Joseph_P._Kennedy,_Sr.

For example if my mom came to me with an investment decision my response would be a big fat no - might even go out and look at it for a short. If my hairdresser recommended a stock to me - I'd feel immediately like selling. These are by definition low signal events that should be classified as pure noise - but they seem to be a rather useful thought model.

So party like it's 1997 - get in and get out.

Here's the video you were referencing, circa late 2007: http://www.youtube.com/watch?v=I6IQ_FOCE6I

I find it interesting that this was made in 2007, before Lehman and before the great recession: http://www.youtube.com/watch?v=I6IQ_FOCE6I

Can there be a bubble bubble? Instead of irrational exuberance you have irrational cynicism?

Build yourself a rocket ship,

Blast off on an ego trip.

Can this really be the end?

Back to work you go again.

http://www.youtube.com/watch?v=I6IQ_FOCE6I

http://www.youtube.com/watch?v=I6IQ_FOCE6I

http://www.youtube.com/watch?v=I6IQ_FOCE6I

Always appropriate. On a side note, really hard to know whether this is a bubble or not. I don't want to take either side, but you cannot refute that a billion dollars for a startup that did not gain any significant revenue seems like a lot of money.

I'm auditing the class as well and I like it quite a lot. Make sure to not get TLDR discouraged and at least scroll all the way down for the (very amusing) video that was played in class. Direct link:

http://www.youtube.com/watch?v=I6IQ_FOCE6I&feature=playe... from 2007 but still semi-relevant :)

http://www.youtube.com/watch?v=I6IQ_FOCE6I

"First you need a buzzword,

Then a second and a third,

Pick at least two industries you'll revolutionize.

Find yourself an engineer,

Feed him pizza, buy him beer,

Give him just a fraction of a fraction of the pie.

Need a good domain name,

Must be cheap, can't be lame,

Something cool like Flickr, Meebo, WikiYou, Mahalo, Bebo,

'Telephone' without the 't',

'Digg' but with a triple 'g',

Make your elevator pitch,

Code it up and flip the switch!"

--The Richter Scales, "Here Comes Another Bubble"

http://www.youtube.com/watch?v=I6IQ_FOCE6I

I just listened to the Richter Scales' "Here Comes Another Bubble" last week. I would repost it as a thread, but I'm not sure how well it'll fare, so here it is on all its glory.

http://www.youtube.com/watch?v=I6IQ_FOCE6I

When was the song released? December of 2007.

Relevant video - http://www.youtube.com/watch?v=I6IQ_FOCE6I

http://www.youtube.com/watch?v=I6IQ_FOCE6I

Just a couple years too early...

⬐ kls

Do you get that eerie feeling that a bunch of that quantitative easing is ending up in the valley?

This reminds me of http://www.youtube.com/watch?v=I6IQ_FOCE6I

Thiel says:

"Back in 2008, we heard talk of another tech bubble, because people thought Facebook was overvalued at $500 million. Flash forward to today, and it’s clearly worth a lot more than that."

Did this happen? Who in 2008 was talking about Facebook at $500 million, and complaining it was overvalued? People around that time were talking about Facebook at $15 billion being overvalued (e.g. http://www.wired.com/techbiz/startups/news/2007/10/facebook_..., http://www.youtube.com/watch?v=I6IQ_FOCE6I).

⬐ dstein

Maybe angel/vc investing is in a bubble, but the tech sector is definitely not. When you view the graph of the NASDAQ between 1990 and 2000, compared to 2000 and 2010 it is pretty clear to see. The NASDAQ could double within the next year and still be right in line with historical growth rates.

⬐ olalonde

Please people, when you submit something 2+ years old, indicate it in the title. (2007 in this case)

⬐ c1sc0

My view on this is that the first internet wave came too early. In the late 90s, society was not ready for the changes the internet were bringing (disintermediation, killing of distribution channels, ...). The tech was oversold by eager business people to an audience that was not asking for it & oftentimes did not understand it. Now at least people 'get' the internet. Sometimes I feel we're only now fulfilling the promises we made ten years ago.

⬐ JarekS

For some time I have a feeling that we have 1996/1997 again - this video is from 2007...

⬐ tomjen3

No, wallstreet died before this could end up in a real bubble.

But there is always next time.

⬐ iamelgringo

I don't think there's a bubble at all. The original tech bubble happened because companies IPO'd really early, and Joe Average Investor took equity out of his home or took cash advances on his credit cards and invested it in high tech stocks. This inflated the value of those stocks, causing more Joe Average Investors to pour money into high tech stocks. Lather, Rinse, Repeat until mid-2000 when that cycle collapsed.

There are precious few IPO's right now. And, the people investing in startups right now are accredited investors i.e angels and VC's. There isn't money rushing in from Joe Average Investor in the US, because by law they can't invest in a non-publicly traded company.

Angels and VC's plan on a bunch of companies in their portfolio failing. They typically expect to lose money on %40-70 of their investments, break even on %30 of their investments and hopefully make a 2X to GoogleX return on their money on the %10-30 of the companies that "succeed".

There are around 250,000 millionaires in the San Francisco Bay Area and 600,000 millionaires in NYC.[1] That's a huge pool of people that can afford to write a check for $25-50k without really hurting if they lose that money. A lot of those people are also increasingly willing to write a check to a couple of entrepreneurs with a promising product and a bit of traction. Why? Because they would rather do that with some of their wealth rather than pay a professional money manager %3 of their investment a year to manage their money for them.

ref [1]: http://www.us.capgemini.com/news/current_news.asp?ID=840

http://www.youtube.com/watch?v=I6IQ_FOCE6I All this classic video is missing is Twitter, now the center stage.

some of that stuff can be found in the Richter Scales parody of the same Billy Joel song... www.youtube.com/watch?v=I6IQ_FOCE6I

The college humor vid reminded me of this.

⬐ nazgulnarsil

it's fun to watch the growing pains of a new form of communication. I bet there were similar bubbles at the dawn of television as the modern day super-stations formed.

⬐ babul

old but gold.

⬐ alyx

I managed to miss out on seeing this video 6 months ago. I think it's even more true now that 6 more months are out of the way.

Catchy and creative!

⬐ asmosoinio

Déjà vu, I guess this made is to the front page about 6 months ago or so?

Anyway, still a fun watch.

⬐ andresvi

This is hella old! Hacker News should start thinking how to avoid links like this in future (I mean the ones that have already been here once).

⬐ volida

just enjoy it ;)

⬐ daveambrose

Hells ya! :)

⬐ None

None

⬐ marvin

The Ford Motor Company vs. Facebook valuation point can be explained by the fact that Ford has a debt/equity ratio of more than 23 (debt to market cap of 11, 170 billion in total debt - http://finance.yahoo.com/q/ks?s=F) and is, like the rest of the US auto industry, in a downward spiral. This isn't a good company to use as comparison, because public perception of its economic muscle is much greater than what the stock market says. In relation to its revenue, Ford is in serious trouble.

Facebook is grossly overvalued by any traditional measure of company value (valuation/revenue in the region of 100), but on the other hand Facebook isn't priced by the open market. The only thing supporting the company's valuation is Microsoft's 250$ million investment, which was probably more politically motivated than motivated by economics. (At a valuation like this one, which other market players would be remotely interested in investing?)

At this point, what happens in Silicon Valley isn't a bubble. Investment is under control. Certain companies are overvalued, but the valuations aren't supported by any form of mass hysteria: if anyone is burned, the effects will be local.

And don't forget that even during the IT bubble at the turn of the millennium, many sound companies were created. There is bound to be a smaller or larger degree of dead weight dragged along by any new breaking of ground in technology. This isn't a new phenomenon by any measure.

⬐ timr

"Certain companies are overvalued, but the valuations aren't supported by any form of mass hysteria: if anyone is burned, the effects will be local."

Where do you think the money is coming from? There may not be an IPO market, but Joe VC is getting his capital from individual investors and organizations that are just as flighty and nervous as they were in 1999.

All it will take is one or two high-profile failures, and it'll be nuclear winter in the valley again. The mechanism may be different, but the results will be the same.

⬐ hugh

Sure, but Joe VC's venture funds usually have a ten-year lifetime, so year-to-year fluctuations in the skittishness of investors shouldn't be that big a problem. Your average VC is still working to invest a big pile of money he raised years ago, while trying to raise money he won't invest for years.