This Industry Is Still Completely Ridiculous(techcrunch.com)
techcrunch.com
This Industry Is Still Completely Ridiculous
http://techcrunch.com/2015/01/24/this-industry-is-still-completely-ridiculous/
6 comments
When I started reading this article I found myself a bit annoyed. The author was complaining and pointing out the fact that some tech companies do some crazy/inane stuff, while ignoring all of the positive things that comes out of tech. Plus, even the crazy/inane stuff can end up having positive impact or side effects!
At the end of the article, however, I was pleased to find that the author came to the same conclusion. Yes, tech can be weird, and it seems especially so to those outside of tech, but I strongly believe that in the long run all of this experimentation will be a good thing.
At the end of the article, however, I was pleased to find that the author came to the same conclusion. Yes, tech can be weird, and it seems especially so to those outside of tech, but I strongly believe that in the long run all of this experimentation will be a good thing.
I remember hearing similar ridiculous things before the last software bubble burst. Huge valuations, investments in websites that do nothing, the success of gimmicky zany stuff like "sell 1 million single pixel ads!".
The author seems to take at face value that the ridiculousness is somehow grounded on something. When valuations for things like an app that does nothing except send 'Yo' compares favorably with a company like SpaceX, I have to wonder whether, really, we're in another bubble and in for another burst.
The author seems to take at face value that the ridiculousness is somehow grounded on something. When valuations for things like an app that does nothing except send 'Yo' compares favorably with a company like SpaceX, I have to wonder whether, really, we're in another bubble and in for another burst.
I keep thinking that, too. But this time, most of the silly stuff is profitable. In the first dot-com boom, companies went public long before they were profitable. (I had a program to track that, Downside's Deathwatch: http://www.downside.com/deathwatch.html). There are lots of failures, but they fail small, with YCombinator-sized funding. We're not seeing failures the size of Webvan or Excite@Home this time around.
The first dot-com collapse was spectacular. Empty streets in San Jose and San Francisco. Huge, empty office complexes. Excite@Home built a huge headquarters facility at the end of Seaport Drive in Redwood City, bigger than Facebook or Oracle. It was vacant for years. About 40% of the twentysomethings in SF left town. The excess furniture ended up at Consolidated Office Outfitters in San Jose, which had a warehouse covering an entire city block full of partitions, desks, and chairs. The computers went to Weird Stuff Warehouse in Sunnyvale, where you can get all the parts for a previous-generation data center cheaply.
That doesn't seem to be happening this time. Most of the startups can cover their operating costs. Many are overvalued, though, because their future growth may not be that large.
The first dot-com collapse was spectacular. Empty streets in San Jose and San Francisco. Huge, empty office complexes. Excite@Home built a huge headquarters facility at the end of Seaport Drive in Redwood City, bigger than Facebook or Oracle. It was vacant for years. About 40% of the twentysomethings in SF left town. The excess furniture ended up at Consolidated Office Outfitters in San Jose, which had a warehouse covering an entire city block full of partitions, desks, and chairs. The computers went to Weird Stuff Warehouse in Sunnyvale, where you can get all the parts for a previous-generation data center cheaply.
That doesn't seem to be happening this time. Most of the startups can cover their operating costs. Many are overvalued, though, because their future growth may not be that large.
Hmm. The silly and zany stuff was profitable then as well. Sure, not all of it (but nor is all of it today). The profit "on the silly stuff" then came mostly from speculative investment, buyouts and advertisers - not from direct consumer sales. I'm not sure how different that is from today. I'm not on the latest numbers; maybe you're better informed. Is the revenue being generated by today's startups more often and in larger quantities from direct consumer sales?
I found what you said about IPOs interesting. Why is it that you think going public (before or after being profitable) is an indicator of a bubble? It seems to me to be a minor detail.
From what I can tell (there is no universally accepted definition of a bubble) all that is needed for a bubble is for speculation (trade-value) to outgrow revenue (use-value) at the same time speculation appears to increase the demand for, lack of supply of, or actual underlying value of a business/commodity/whathaveyou. Upon entering a feedback loop of increased speculative investment because of rapidly inflating possible returns (which do pay out up until the bubble bursts) and increased returns because of rapid inflation in the amount of venture capital, the numbers get bigger on their own without a need for change in underlying value. That is until investors withdraw, causing capital and valuations to plummet, and more investors to withdraw, ad nauseum.
The important thing here is that the source of investment (venture/speculative) capital need not come from any particular source, be it public option or nay. It's possible in principle to have a bubble based on Venture Capital and private money, but its also true in practice that these VC firms are often traded publicly themselves and promise returns based on their investments.
The second paragraph and last sentence are fascinating, but isn't the hypothesis here that the bubble hasn't burst yet?
I found what you said about IPOs interesting. Why is it that you think going public (before or after being profitable) is an indicator of a bubble? It seems to me to be a minor detail.
From what I can tell (there is no universally accepted definition of a bubble) all that is needed for a bubble is for speculation (trade-value) to outgrow revenue (use-value) at the same time speculation appears to increase the demand for, lack of supply of, or actual underlying value of a business/commodity/whathaveyou. Upon entering a feedback loop of increased speculative investment because of rapidly inflating possible returns (which do pay out up until the bubble bursts) and increased returns because of rapid inflation in the amount of venture capital, the numbers get bigger on their own without a need for change in underlying value. That is until investors withdraw, causing capital and valuations to plummet, and more investors to withdraw, ad nauseum.
The important thing here is that the source of investment (venture/speculative) capital need not come from any particular source, be it public option or nay. It's possible in principle to have a bubble based on Venture Capital and private money, but its also true in practice that these VC firms are often traded publicly themselves and promise returns based on their investments.
The second paragraph and last sentence are fascinating, but isn't the hypothesis here that the bubble hasn't burst yet?
Wow that sounds fascinating. I'd like to read more about the first dot-com collapse (I was ~10yo at the time!). Any good resources besides wikipedia to get me started? :)
So what you're saying is that we actually seem to have learned from our mistakes?
Pot. kettle. black - 'Tech Crunch' (stupid name) is the poster child for boosting sketchy tech that has more to do with financial shell games to pump and dump products and services than advancing tech for the good of mankind.
This was a good, funny article but there are thousands going bust or running their credit cards to the max trying to create new firms which is the darker side of all this...
The Valley tech funding circus is beyond bizarre...
This was a good, funny article but there are thousands going bust or running their credit cards to the max trying to create new firms which is the darker side of all this...
The Valley tech funding circus is beyond bizarre...
You should never bite the hand that feeds you, but sometimes it's okay to gnaw on it a little, just to see what it tastes like.
I think it's always good to distinguish between an article and the publication that's hosting it.
Oh yeah? Well he got to fly the Bitcoint jet, so there :-)
Not that I'm jealous, or anything...
Not that I'm jealous, or anything...
Interesting times and all that.
I have to wonder at what industries centuries ago were viewed in the same way.
On a side not, that page/article/site is a work of art in* demonstrating painful mobile design.
On a side not, that page/article/site is a work of art in* demonstrating painful mobile design.
A lot of the consumer stuff people buy is pretty silly or of minute importance, and i'm sure it was also considered silly in the past. And yet, it forms a pretty large industry.
When the author ran off the names of those NSA projects (horsewrap, iceblock, micefur...) for some reason the REM song "it's the end of the world as we know it" popped into my head.
I think there was a period of time when the military used a random word generator for operations. Whether or not this is a figment of my imagination, I think it would not be a bad idea for the NSA or any organization with a constant churn of operations that need names.
I wonder if the random word generator is cryptographically secure, or if there is a backdoor into it.
operation horsecrap??? double take there.
Long before software people drew lines in the sand that formed pictures only visible from airplanes which did not exist. Stuff is weird, get used to it.