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Bubble? Maybe, Maybe Not. Froth? Oh Yeah

Posted by: Rob Hof on August 02, 2007

John Dvorak, who loves to get a ruckus going, contends we’re now in a bubble. I’m not convinced by his particular arguments, but I’ve seen signs of a bubble for awhile now. It still hasn’t popped, mostly because the pop that would make noise—IPOs that go bust and catch individual investors in the implosion—hasn’t happened. There just aren’t that many IPOs yet. And it’s also true that companies don’t cost much to create, so it’s not as if even the pros are in big danger of losing a lot of money (yet).

But that doesn’t mean there isn’t some kind of bubble, or at least excess. The fact that you can start a company on almost nothing means there are a whole lot more companies all trying to get our attention. It’s virtually guaranteed that even more will fail, even if they do so more quietly. The fact that so many people spout the dogma that “it’s different today” frankly worries me. Maybe they’re right. But they seem rather over-eager about trying to tell us to pay no attention to the undeniable froth.

Scoble has it right here: We’re in an attention bubble. Sooooo many services require our time and attention today—MySpace, Facebook, Twitter, Pownce, you name it. We can’t do all this stuff at once. A whole lot of contenders are going to lose.

The Valley’s cheerleaders say this kind of creative destruction is a positive thing. Maybe so, in the long-term scheme of things. But there’s a whole lot of waste involved, and it doesn’t all fall on professional investors. We’re talking about the lives of real people here, not just abstract economic entities. Employees who hold useless stock options in their fifth startup employer certainly get hurt, for one.

For all that, I’m on the fence here: Is this kind of thing a bug or a feature?

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Reader Comments

dave mcclure

August 2, 2007 01:39 PM

definitely feature, not bug.

attention bubble? feh... maybe. but that's a silicon valley thing. the rest of the world doesn't have that problem. they might have an attention *addiction*... to TV, to games, to Facebook/MySpace, but i guarantee you it's not that big a problem.

stock option risk? maybe, but hey that's a choice, not a rqmt. plus there's always the offset that a lot of employees (like me) get/got a free ride on the Intel / MSFT / Yahoo / Ebay / Google of their day... so stock options cut both ways, and MANY folks benefit more than lose there. you still get a salary, so the only big losers are people who are company founders & early employees in startups who take under-market salary. those folks could be serial losers -- damn, talking about myself again! -- but they take that risk with eyes wide open, and every once in awhile they'll hit a winner.

bubble? no way. froth? ok, a little. losers? c'mon... we're all geeks playing in the biggest bathtub (silicon valley0 with the best toys around. if a few VCs get banged up a little bit, that's part of the business.

on to the next mountain.

- dave mcclure

luca Filigheddu

August 3, 2007 02:43 PM

Are we sure that the explosion of the "bubble" is going to happen online ?

sarah lacy

August 7, 2007 09:00 AM

i'm one of those people always saying it's different that worries rob so much ;) but i think the point isn't: things are different so we are NOT in a bubble. it's just the factual observation that things are indeed very, very different from the late 1990s and 2000, so when people say "this is just like 1999" i think it's an ignorant statement. there's a difference between saying that and saying it might be a bubble or it's frothy. (i agree with the latter) rob is right to bring up the human impact from these things. but the simple case is the human impact this time around-- even if it all went away tomorrow- would be nothing compared to the stock market and job hit the valley and the US had in the early '00s.

and i argue feature, not bug. not to be callous-- my husband and i were hit very hard by the early 2000s. i just think if you consider one of the valley's greatest strengths is a culture of not being afraid to fail-- well, that doesn't come without some failures.

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