If History is any Guide, You’ve Got Two Years

Looking at those charts, it looks like he could have claimed the same thing 2, 4, and 6 years ago and would have been wrong each time.

Things never fell back to the 1994 level. In fact, it looks like they didn't fall too far below where they're at now.

I was a lot more worried about a tech bubble -before- I saw those charts.

This post is interesting because it illuminates a formula that I hadn't been aware of.

1 - pick something HN already agrees with and then add some graphs.

2 - explain that the graphs are indicative of the concept that HN agrees with. Regression analysis is not required, and if it were, fudging the numbers would be perfectly acceptable.

3 - add an overly dramatic title, and post to HN!

I really miss the downvote button, but since it doesn't exist anymore I'll complain instead.

History does not repeat itself. Concepts from history do, and lessons can indeed be learned. But looking at graphs "in general" and pointing at where they look similar is wrong at best, and a fantastic way to lose tons of money at worst.

History is maybe not a great a measure in this case. In the late 90's/early 2000's the entire US economy was in a major boom, not just the tech industry. Then in 2000 the economy came crashing down, as economies tend to do about every 8-10 years. The bottom falling out of the tech sector was a fairly significant contributor to the downturn, and then 9/11 happened shortly there after further hampering the recovery process. The US federal reserve worked to stimulate the economy by keeping interest rates. The economy started to flourish again in the mid-2000s. But then those low interest rates greatly contributed to the next crash when the housing bubble burst in 2008 (8 years after the last major economic downturn!).

As the graphs in this article show the tech industry has recovered at a fairly constant rate since 2000. There was a drop in funding in 2008, corresponding to the drop in the rest of the US economy. The tech industry managed to bounce back from the that incredibly quickly, resulting in what everyone is now saying is a bubble.

However, looking at the entire situation, not just the tech industry, we're in wildly different economic times now than we were in 2000. The US economy as a whole is still fairly depressed, while the tech sector is sort of an anomaly that's doing extremely well.

It's certainly a possibility that this is a tech bubble that'll burst and drop the tech industry back in line with the rest of the economy. However, to look at history as a guide once more, it's much more likely that the rest of the economy will continue to recover and enter boom cycle (which shockingly also happens roughly once every 8-10 years) and catch up to the tech industry. At which point a lot more than just tech companies and investors will have a lot of money to spend. Until, of course, something else triggers the next major economic down turn sometime between 2016 and 2020.

I used to work for a couple of guys who are running their own scientific computing startup and are still in business after more than ten years. They've been very good at finding people who can benefit pretty quickly from their work and who pay them to develop it further. I haven't been in contact with them in a while, but as of a year ago, they've been working on the same core technology for ten years and developing it further every year. There's no need for speculative funding, because they create R&D plans that result in commercially useful, albeit prototype-quality, products.

They're very special in that they have a lasting technical edge, or you could say they've gotten lucky. I think major companies that could compete with them think the technology they're using is so hard to work with that it's a permanently boutique business, but they have always had a cautious eye towards scaling the business, and I don't see any reason why they can't accomplish it someday.

Google cache version: http://webcache.googleusercontent.com/search?q=cache:sx1uHnu...

(edit: seems the site is back now)

(edit2: maybe not)

The basic premise here seems to be along the lines of "The environment looks a bit like it did a couple of years before the bubble burst" and then a leap-of-faith "...therefore you've got 2 years"

I don't find the argument as laid out particularly convincing, though it's nice to have data to look at.

But if you bootstrap and find customers willing to pay for your product you've got a lot longer than that.

For me, the graph seems to follow almost perfectly the hype cycle you get with every new innovation (the main deviation being the dip around 2009, courtesy of the Great Recession). My belief is that web-based apps are entering the "plateau of productivity" phase, and we won't see a second internet bubble.

There might be a second internet bubble if certain internet-related innovations seem sufficiently novel to start new hype cycles. Maybe a social bubble (not too likely, but could happen in the next 2 years) or a mobile/tablet bubble (a bit more likely, but will take 4 or 5 years to burst).

Of course in the decades to come we'll see 3d printing bubbles, nanotechnology bubbles, commercial space flight bubbles, and more. People always get overexcited about new technology - the more potential the technology has, the more over-excitement.

The only people who need to think like this are scam startups.

If you have good fundamentals (traction, revenue, defensibility, market strategy) there is always money available for you.

The only people who need to worry about catching the bubble are those who are trying to get funding without doing the work of building a business.

The other perspective is that a good number of very successful companies were founded in a recession / downturn:

http://www.kauffman.org/newsroom/the-economic-future-just-ha...

http://blogs.hbr.org/silverman/2008/08/why-downturns-breed-b...

http://www.resourcenation.com/blog/famous-companies-that-wer...

There are a lot of lists like this.

When thinking about bubbles, I like to turn the question around and ask myself: Is it possible to grow for many years without any bubbles?

I would say no. And that is why while I suspect what we're in is no where near as big as the .COM bubble was, the road ahead is also not smooth. But then gain, ups and downs are also nothing new or worth worrying much about.

The very early stages of .com 2.0 produced some of my favorite startups. And the most optimistic part of me is curious about what great things will rise form the ashes of this/next bubble.

History doesn't repeat, but it rhymes. Although every cycle is different, there will always be people who call a top too early, and others who predict further expansion on the eve of a crash.

There are similarities to 1998: enough of a boom that's unlike safe historical value-anchors to make the skeptical scared, but also enough novelty to suggest continuing upside as the opportunities are explored.

The recent memory of the dot-com boom, and the general malaise in the rest of economy, changes the expression quite a bit. Are we hiding the exuberance that would otherwise signal excess, and thus don't realize how late in the cycle it already is? Or are we proceeding at a measured pace, keeping perceptions closer to sustainable valuations, meaning we're still early in a now longer, slower cycle? I wish I knew for certain.

That is a handwavy graph if I've ever seen one.

Those opening sentences are a grammatical nightmare. I like the piece, but that's a harsh opening... might want to fix that.

As always past performance is not an indicator of future performance.