Ask HN: If you knew this was a bubble, what would you do differently? | Hacker News Reader

Ask HN: If you knew this was a bubble, what would you do differently?

11 pointsanonym98 comments

When I saw that the valuation of Zynga might be between 7 and 9 billion dollars, I honestly began to get worried. I think that for people in the startup field, it might be hard to think of that as an unrealistic number, because everyone -wants- their new business to be so valuable. Maybe someone has experiences to share from the last time the tech stocks crashed, whether there were warning signs?

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7-9B for Zynga isn't that unreasonable. The valuation for Phillip Morris is 107B, and they sell rolled-up tobacco. Starbucks is 25B, selling coffee. Simple things that are highly addictive basically give you a license to print money, and are valued accordingly by stockholders.

The warning signs for the first dot-com bust were when businesses whose only competitive advantage was that they lost money on any sale got funded. Things like Value America, or Pets.com, or AllAdvantage.com. When you strip away the "here, we'll give you money to use our product so we can gain market share", there was essentially no reason to use those over existing alternatives. Giving away money is not a sustainable business model, hence bubble.

By that standard, the only major e-property I'd be worried about today is Bing...

I'd be really interested why you highlighted Bing. Its services, especially the maps, seem to have potential.

I highlighted it because of Bing Cashback, which is exactly the sort of money-losing stunt that dot-com businesses pulled at the height of the boom to gain market share.

Microsoft, at least, has the cash that they can afford to blow a few hundred million for nothing, and the smarts to discontinue the program when it's obvious it doesn't work.

In a bubble I'd be even more wary about working with other companies (I'm pretty wary as it is).

I rely on a lot of other companies to run my business. I have a web host, e-mail providers (for personal and bulk), multiple analytics providers, a cloud backup service, an open source content management system—and that's just naming a few types of businesses that I rely on.

In a bubble, it's more likely that any of these companies could disappear (but it could still easily happen in a non-bubble). I'd be even more diligent about having my data backed up and an alternative plan for if one of these companies goes out of business.

Another risk is that a company that you rely on will become too successful. Etacts is a perfect example. I loved their product and used it a lot. Now it's gone because Salesforce bought them.

I'd also be more aggressive about getting paid for advertising. Right now, I'm pretty relaxed about invoicing companies after I run a sponsorship campaign. I want to ensure that they're happy first. If I was really worried, I'd make them pay up front.

There are some things that I probably couldn't overcome. Google disappearing would be one. I'd lose 80% of my traffic, my e-mail, my analytics, and a bunch more.

You should always be wary of whom you work with. There are a lot of sexy startups for startups right now. They offer some great services, but what will you do when they disappear, kill the product you rely on, or get rolled into a bigger company? It will happen, bubble or not.

My question would be (assuming you answer yours): Why are you acting in a way that you wouldn't if you did know it was a bubble?

Doing something stupid has little to with the macro-economy. What you should be doing is conducting yourself in a non-idiotic manner all of the time, as protection from things like bubbles; then you don't need to worry about a thing.

Worried about what? That you don't have any Zygna options?

The saying "In a hurricane even turkeys fly" comes to mind.

  KONAMI CORPORATION = $2.70B
  NINTENDO CO LTD = $41.21B
  ACTIVISION BLIZZARD = $13.21B
  TAKE-TWO INTERACTIVE = $1.37B
  ELECTRONIC ARTS = $6.15B

If this were 1998, you would dump all your money into these stocks in the anticipation that the bubble would continue to expand for several years, and spill over into related areas. You get your money in, call up your Goldman Sachs buddies, and flip them to Mutual Funds after they're overvalued. Rinse and repeat until the bubble blows.

1. Continue what I'm doing

2. ??????

3. Profit?

Bubble or no bubble. Doesn't change a thing. I'm going to keep focusing on what I do best.

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