Is it really a tech bubble, or is it something else?

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Adam Lashinsky, in a piece for Fortune last week, wrote at length about the question that has crossed the minds of everyone north of San Jose: are we in a bubble? He takes a nostalgic trip down memory lane, talking about the dot-com bubble and how we are starting to see similar behaviors again.

Like Adam, I too was around in the Valley during the crazy days, so a lot he said resonated, but I still am not smart enough to say that we are in a bubble. These days it is hard to tell. In 2000 it was fairly easy to tell.

We live in crazy times — that is true — and things have gotten crazier, but it still doesn’t feel like the turn of the century. Last week, another former colleague from Red Herring brought up the topic and wondered how different things are now versus the 1999-2000 madness. And then he answered the question himself: 1999 had a gold rush mentality, a sense of broader mania. This time around you see more of a gross entitlement; and that’s what is different about the Bay Area.

Bay Area/San Francisco

The difference is the scale and scope of everything happening around here. Back then people would show up, hoping that they could merely participate in this tech-internet thing. Now, many (if not most) show up expecting millions even if their companies fail. Just sit in a cafe — any cafe in San Francisco — and you hear stuff that makes you want to poke your eyes out.

Founders, instead of trying to forge relationships, are getting into a pattern of expecting funding without much effort. After all, if it doesn’t work out, no harm done and there is an acqui-hire around the corner. There is an expectation that even if they don’t build an interesting product, they deserve a nice exit for trying anyway: which is troubling as far as I am concerned.

Today, the babble is sourced from blogs; news blogs, expert blogs, investor blogs and founder blogs. Yes, I have overheard a conversation that combined wisdom from Jesus and Ben Horowitz. Back then it was my then employer Red Herring and The Industry Standard that acted as source of buzzwords. Those magazines existed because the mainstream media at that time didn’t much care about the internet and the broader technology industry; for them it was a niche.

Today, the mainstream (which includes Fortune and its competitor, Forbes) is once again back chasing the story. The reason why there is a boom in technology media today is because it is THE story. Technology is now part of the social fabric; it is what is causing dislocation. It is the cause of fear amongst all of us. The digitization of our society is a challenge that is both legislative and philosophical. And that is why we are seeing a greater demand for those who cover this industry.

In 1990s, we had a generally upbeat economic environment around the country and there was a sense of naive optimism around the internet. Then came the gold rush and later the malfeasance. Right now we have a country that is facing an unending economic uncertainty, especially for a large swathe of people. As a result, the Bay Area stands out and finds itself living under a microscope. There is no naive optimism; just gross entitlement and that is what’s wrong.

Our industry has boom and bust cycles that are much faster that any other industry and at the same time have unsaid but distinct barriers to entry. The internet-speed cycles lead to many more startups and more people becoming millionaires faster and at a much younger age than any other industry — even the older version of the internet industry. We also forget that the same speed which thrills, also kills. The recent retrenchment of technology stocks is a good reminder that the craziness doesn’t get to mania levels anymore.

IPO stock performance 2014

Source: Deutsche Bank Research

The 1999 bubble was driven by stock markets where insane valuations for crap stocks led to insane decisions by equally insane (and clueless) venture investors. This time around, the stock markets, after overpaying for initial public offerings from much of 2013 and 2014, have come to their senses and decided that bad businesses aren’t to be rewarded. A Deutsche Bank report pointed out that 86 percent of IPOs have broken issue and 91 percent are trading below their first day close. Clearly, the market has skimmed out the froth and continues to re-price stocks including Twitter, which has trended down in recent days.

The bad behaviors, like everything, get magnified too much by social media. I mean, last week in Italy people were asking me about Google buses, protests and what is wrong with the tech industry. I don’t know what is wrong except that the social norms and behaviors of players are different. The world looks at the gratuitous amount of profits made by a company like Google, and juxtaposes it against the lack of hope for a majority of the planet.

People dislike Uber, not because some founder is going to become a billionaire; the discontent comes from the visible disparity between those who have it and those who don’t. Google buses get rocks and eggs thrown at them mostly because they are a reminder of digital feudalism. As an industry, we are very fortunate; and that is why it is important to remember why we need to have compassion and understanding about the fears of the rest of the world. We need to remember that our actions now intersect and influence those who are not of our industry. Trying to be in their shoes isn’t a bad place to start.

I have been around in San Francisco for over 12 years and I have come to reluctantly call it home. The garishness of modern times is unsettling but it doesn’t mean we are fully in the grip of mania/madness just yet. And if being the old-ish guy in the valley has taught me anything, it is that booms turn into busts, cycles end and greed gets it comeuppance. And we start all over again.

The way I deal with it? Avoid the spectacle of technology and instead focus on technology and science solving real problems. For me, it is always about the possibilities.

Featured image courtesy Aksenova Natalya via Shutterstock

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