> Calling both the housing market and internet startups a bubble is not doing anyone a disservice.
Well it is. It is hurting the egos of many people here as many are involved in startups. Accepting the fact that it might be a bubble would mean somehow joining the ranks of the hated housing market speculators and bankers.
I am not saying whether it is a bubble or not. But if you see a large rationalization effort into making this "not a bubble" that might be a plausable explanation.
I don't think anyone attributes the bubble, or lack thereof, to the people working hard to make their visions happen. Rather, the "bubble" aspect usually involves purely speculative investing frenzy from financial sources: be it VCs, angels, or banks.
In the case of Internet Bubble 1.0, you had such a huge buildup (and stage set for a huge burst) because you had three forces working in tandem and reinforcing each other:
1) Big banks underwriting IPOs on questionable businesses with unproven models and no revenue expectations.
2) VCs and/or angels rushing to fund pretty much any idea, no matter how sketchy, because of the above.
3) An influx of would-be founders (especially nontechnical founders) and speculators basically gold-rushing out to the Bay Area to try to get something off the ground -- often driven primarily, if not solely, by a lottery ticket mentality, and not by love of their product or business model.
Whether we're currently in a bubble largely depends on your belief in the solidity, or lack thereof, of the companies being funded. Amount of funding, frequency of funding, etc., are only aspects of a bubble -- but they are not sufficient to describe a bubble. It's only a bubble if the investment has reached a point of irrationality, and the only way to determine irrationality is to examine the companies themselves against the investment they've received.
The underlying asset in a bubble is usually inherently valuable until the bubble itself starts driving creation of assets that wouldn't have otherwise exists. The housing bubble drove the prive of homes up enormeously, but the houses were very useful to their owners and had real value. Then speculators came and made a lot of houses that were above and beyond what normally would be required, but because of the bubble made sense. I think most of the "WEB 2.x IS A BUBBLE!" crowd are seeing people jumping in to invest at dumb valuations and startups being created for no reason other than to chase the money, and that is what they are fearful of. That could inflate the arena and make it worse for genuine startups.
Bubbles are, by definition, predicated on the perception of some measure of value that is not really there. This could include creation of unreal assets or fictional derivative values on real assets, as happened in housing. But it doesn't have to. You can easily have a bubble that involves nothing more than overvaluation of tangible assets. Commodities bubbles, for instance.
That's not a disservice. It's a reality check -- EDIT dispelling the even more half witted belief that "I can make money because he did", regardless of the quality of your idea or it's commercial viability.
> Well it is. It is hurting the egos of many people here as many are involved in startups. Accepting the fact that it might be a bubble would mean somehow joining the ranks of the hated housing market speculators and bankers.
Well it is. It is hurting the egos of many people here as many are involved in startups. Accepting the fact that it might be a bubble would mean somehow joining the ranks of the hated housing market speculators and bankers.
I am not saying whether it is a bubble or not. But if you see a large rationalization effort into making this "not a bubble" that might be a plausable explanation.