Tech industry titans are fond of reminding us just how different 2012 is than the irrationally exuberant days of the dot-come bubble and crash, and they're right. According to some data, today is even worse. Worse than 1999? Is that possible? Definitely maybe. There's no question that the heyday of the dot-com boom was frothy …
Very sensible article
You should talk to this guy:
He seems to disagree with you.
Re: Very sensible article
As Emerson would say, "A foolish consistency is the hobgoblin of little minds." :-)
No, actually, I agree with both articles (I should, since I wrote them both :-), but they accentuate different data known at different times. My earlier article focused on the companies still focused on *revenue,* but what I had overlooked earlier (because I didn't have enough data) was a focus on *profitability.* It's clear that companies are more interested in revenue than before...and that they're not nearly focused enough on marrying revenue with profitability.
An oversight in the first article? Probably. But those data simply weren't available to me then. Or, rather, I should say: "easily available." I could have gone out and dug up the information, but I didn't. That's my fault. But I appreciate you calling out the apparent (real?) discrepancy.
Re: Very sensible article
As you say, they don't talk about quite the same things so I shouldn't be too pedantic.
The key points I would make, though, are these:
Firstly, although the VCs who incubate and market these companies and the people who build them want us all to ignore the question of money because 'this is a disruptive new idea with enormous growth potential', their own keenness to monetise the investment demonstrates that people should be extremely wary. If money now really didn't matter then all of the people involved would be less desperate to IPO and make their millions asap.
Secondly, and more importantly, the problem with the 'web 2.0 allows us to disrupt the market and build a giant empire which will make us hugely profitable' business model is precisely that the internet makes building giant and giantly profitable monopolies which last for generations (IBM, Standard Oil etc.) much more difficult. Even before Facebook is reliably profitable there are a dozen good reasons why they might cease to be relevant in the near future and even Google face threats to their absurdly profitable search business because the monopolistic behaviour and vagueness in explaining their business model is more visible and so less acceptable than for a similarly positioned company pre-internet/
All of that means that even exorbitant growth doesn't justify a valuation which assumes the type of monopoly power Microsoft had in the 90s.
The venture capitalists who push these disruptive startups are glossing over the fact that it's the ease with which business models are disrupted which really makes the internet scary, because if they spelled that out then noone would buy shares in Facebook or Groupon at even a tenth their current valuation.
That's why this is a bubble.
Ubiquiti is a proper company (That it has nearly as much revenue as Facebook it surprising though).
The quality of their wifi kit for the price is really good.
Actually what a braindead scale to use on a graph. (Even using a graph is not as useful as just a tablet with a rough revenue count.)
The comparison is totally nonsense due to the scales.
I'm relieved to find I'm not the only one who thinks we learned nothing from what will shortly be referred to as the *first* dotcom boom and bust.
In the interests of IT...
...I'd just like to point out that one of the companies on that graph is practically called 'Spunk'
Now the question is not....
...if there is a new dot-com bubble of if it is larger, but how we can profit from it.
The first dot-com bubble gave us cheap fibre, essentially eradicating fees for long distance calls. What will be left over with when this bubble bursts?
Re: Now the question is not....
That's easy, we'll be left with thousands of self-obsessed individuals with nowhere to blather about their irrelevant yet over-publicised existence.
The bubble is dead. Long live the bubble.
A couple of observations:
"Definitely maybe. There's no question that the heyday of the dot-com boom was frothy in the extreme. A total of 18 companies between 1999 and 2000 reached the "billion-dollar club," attaining VC-set valuations of $1 billion or more. Today we have over 20 companies in this rarefied class, nearly all of which value has been established in 2011:"
And if we value 1999 dollars as if they were the greatly inflated 2011 dollars, do the results look different?
" we're in for a lot of financial carnage, most of which will be visited upon unsuspecting public investors"
After what the world went through at the end of 2008, there are no 'unsuspecting public investors'. Only traders and fools.
Inflation causes mal-investment, thus bubbles, then recession/depression.
The root cause of these high risk 'valuations' is too much fiat currency sloshing around, due to ZIRP, central bank fiat currency inflation (e.g. Q.E. and many aliases), and private bank fractional reserve (fraudulent) credit inflation; this always ends up with not enough good investments to put fiat currency in, thus high risk bubbles in bad investments. Inflation is now much worse than 2008, let alone the dot con bubble period!
Obviously any bad investments will eventually fail, and when enough fail the bubble bursts, so lots of fiat currency gets written off, thus deflation, so we get recession/depression; this is cynically called the business cycle; this is a cruel Ponzi scam which ratchets wealth transfers from the Poor and Middle classes to the Rich, each cycle!
This is basically what Austrian Economics predicts, because it is based what actually happens to economies, not some Ivory Tower Classical Economics wishful thinking or blatant Ponzi scams like Keynesian Economics.
Re: Inflation causes mal-investment, thus bubbles, then recession/depression.
TECH BIZ TODAY IS WORSE THAN DOT-COM BUBBLE DAYS
That and every other biz. The downward debt spiral is sending the large nation's economies over the edge of the slippery slope. You can say "Look, this sector is getting better.Or that business is." But until the world's GDP improves visibly, arguing that the economy is strengthening is fruitless.. Remember this depression, unlike '29, is a bottom up event. In other words, the rich and their lifestyles will be around till the end.. Until then, when we see them we'll think "Things are still okay. X just bought a new Caddy."
Governments can't improve their economies by printing more fiat or deceptive stories about unemployment, retail sales or profits. The amounts they quote are nothing but inflated dollars and don't mean what they purport to.
The Austrian theory makes me think about the gold standard and get a stitch in my side. Talking about Austrian Economics today, is like wanting to take the Mauretania after the Titanic cast off with you on it.
As I was saying
<"Wall Street Journal - 25 minutes ago (June 8)
By DANIEL MICHAELS
When Airbus and Boeing Co. announce orders at the Farnborough International Airshow this week, they will value the deals based on the planes' catalog prices—which no one pays.">
Which of Boeing's prices - catalog or discount - will end up in the Commerce Dept's totals when they're reported?