Pmarca: OK, you're right, it IS a bubble

http://blog.pmarca.com/2007/10/ok-youre-right-.html

by alex_c • 19 years ago

23 20 19 years ago

blog.pmarca.com

aston2• 19 years ago

This article is a mess. The strategy here seems to be "setup complete straw men for all of the arguments you don't like, then dispense with them not by making counter arguments but by showing the (straw man, distorted) arguments to be silly." Plus it's hard to read.

dbrush• 19 years ago

It seems to me that the strategy was to loosen some panties and inspire some laughter. I enjoyed the fruits of both efforts.

nanijoe• 19 years ago

An Alien has taken over Pmarca's blog , he's had some strange posts in the last few days.

alex_c• 19 years ago

So THAT explains that Bionic Woman post!

jsrfded• 19 years ago

Bite your tongue. Folks with far less to show are regularly promoted to sainthood here.

Marc climbed up from grad student to monster IPO, rode out huge corporate stuff at Netscape/AOL, left and started another company, raised huge money, built a huge business during the dot-com winter, and piloted the ship home through a dizzy chain of IPO/merger/acquisition. He is now blogging the best stuff about entrepreneuring you can read anywhere on the net right now.

You should listen to this guy...

cglee• 19 years ago

You have to also realize nowadays he's a VC and runs Ning. I believe, like Mark Cuban's blog, his first interest isn't to disseminate insights, but to server his business interests.

neilc• 19 years ago

Is Marc A. actually a VC? I think he's been an angel investor in a few startups, but that's not equivalent to being a VC.

paul• 19 years ago

The Colbert maneuver. Nicely done.

asmosoinio• 19 years ago

Gotta love this: "laid-getting wankers". :)

nurall• 19 years ago

pmarca on crack...

henning• 19 years ago

Eh.

Say all you want, no sustainable revenue means no business, sooner or later.

iamelgringo2• 19 years ago

I have to say that I agree with Marc.

The problem with the first bubble wasn't caused by non-profitable companies. It was caused by hubris over stock prices. The reason why so many people lost their shirts in the first bubble was because millions of Joe Averages took out cash advances or cashed out home equity to buy Internet stocks. There was a lot of hubris around the NASDAQ and average investors jumped in on the action en masse. I personally knew at least 4-5 people who had left their jobs to become day-traders.

I worked with a Med student who had maxed out 8-10 credit cards, bought high tech stocks with them, and then bought a collection of motorcycles with his stock earnings. When the bubble popped, he was left with a bunch of loans on expensive motorcycles, $100,000 in credit card debt and a great position on worthless Pets.com stock.

Sarb-Ox has really clamped down on the number of IPO's that are occuring now. So, even though there might be hubris around web apps right now, the average investor has no way of pumping money into those businesses, and that's a good thing.

What start-ups are creating are several products in tandem: The first is software that actually does stuff. The second is a community of users that develop and grow around that software product. The third is a small tight-knit group of people who have proven their capacity to produce.

Big Co is interested in all three of those things. And Big Co has proven repeatedly that they are willing to shell out a bunch of cash to aquire the software, the community or the people. Even if the startup isn't profitable, the software, community and people are still very valuable to companies that need those things.

What start-ups aren't creating this time around is IPO fever where the stock price gets ramped up while the founders and employees cash out. This is what's going to prevent the next big bubble from forming around web apps for quite a while this time around. The fundamentals are much better this time around.

david927• 19 years ago

And I have to say that I disagree.

The Web 1.0 bubble wasn't based on the way in which people found the money to buy these stocks or the hubris in the expectation that these stocks would always go up. It's just about fundamentals. When you buy a stock, you are buying how much the company earns today and adjust that for how much it could earn, say, ten years from now.

People bought Pets.com either with the naive expectation that it would earn billions in the future or with the expectation other people would think so. There was no evidence, just lots of hope and the eternal wish to get rich.

So you and Marc are telling me that Facebook is really worth $10 billion. You two are saying that that's a realistic expectation based on an objective evaluation and anyone who doesn't agree should be ridiculed. Ah... there's the hint. Ridicule is a cover for fear. Personally, I don't need to hide. I have the fundamentals -- and time -- on my side.

aston2• 19 years ago

I'm pretty torn between you two's viewpoints.

On one hand, it's clear to me that whether or not there's direct financial value to building a super popular site, there's definitely societal value to products that people like. I really, really want stuff like Facebook to be worth a ton of money, because they mean something to (a lot of) people. Plus, my personal instinct is to build social websites, so if I'm gonna be a millionaire, it's going to be along the lines of something web2.0.

On the other hand, it absolutely kills me that a tech company can get a valuation of 100x of their current revenue, mostly on the hope that somebody somewhere'll figure out a way to make real money on a product (and in the meantime people will make acquisitions believing that it's an inevitability). Posts like pmarca's make me feel like people believe in Facebook because if Facebook doesn't work, nothing will, and we really will be back to boring 2003 instead of exciting 2007.

Goladus• 19 years ago

I think iamelgringo's point is that it doesn't matter if Facebook is really worth $10 billion or not, because no one's actually paying that much; and the entities paying some percentage of those valuations are insulated from the effects of a crash.

The term "bubble" scares people because of events such as those that happened in 2000-2001. It's an imprecise term because of that. If you mean "inflated valuations" we might be in a bubble, if you mean "reckless speculation by average consumers" then we're probably not.

If Facebook turns out to be a dud before they ever have an IPO, who are the big losers? A few hundred employees, and some professional investors. Microsoft is still plenty profitable without Facebook, and VCs will bounce back or be replaced. It'll indirectly affect many others, but the typical portfolio of a typical working American will remain relatively stable.

Conversely, if 500,000 average consumers average $20,000 invested in Facebook and it suddenly goes bankrupt, that's a huge problem. It causes a massive disruption in their lives, and it will have a much more noticeable indirect effect on everyone else. (eg nobody can afford to buy Christmas presents this year)

sammyo• 19 years ago

Hmmm, most amusing, this community has a blind spot.

allenbrunson• 19 years ago

i don't think sarcasm is a good way to make any point, and i'm surprised to see the otherwise unflappable marca using such a tactic.

geebee• 19 years ago

I agree. I felt this was one of the weaker posts on a great blog.

The problem with sarcasm is that it allows the writer to frame the opposition in exaggerated, silly terms. For instance, the post derides people who claim VC's are "All stupid, and unnecessary to boot".

Nobody would half a brain would make that claim. Of course capital will still matter, in many cases. But there is still an interesting emerging argument that the cost of server space and programming tools have dropped to the point where bootstrapping has become a real option.

I'd love to see a writer as good and experienced as Marc give me his take on this new trend. Is it a good idea? A bad idea? When would you want to do one rather than the other? This is all lost in the sarcasm format.

But I agree with the other posters here who have pointed out that Marc is just having a little fun taking the piss out of the naysayers. Nothing really wrong with that. I enjoyed the post, but I hope he gets back to his more insightful style in his next post.

far33d• 19 years ago

Has there ever been an example of something incredibly popular that hasn't made money eventually? The best I can think of is napster, and their issues were legal.

Pmarca: OK, you're right, it IS a bubble

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