Unfortunately, if the price somebody was willing to pay is the only concept of valuation we have, the stock market would never crash. The problem is that there is a concept of overvaluation. Otherwise we wouldn't have bubbles. When future expected earnings don't match up with the stock's sky-high valuation reality tends to catch up eventually.

Instagram does not produce more value for more people than the New York Times, our newspaper of record. It is an app that nearly everyone reading Hacker News could write in less than a month, and scale just as easily. Facebook could have added photo filters to its photo sharing site in less than a week and suck up a good portion of Instagram's audience. I'm still at a loss to explain why this was a good idea - but I guess we'll see if it bites Facebook in the ass.

This purchase, and the fact that people having a tiny idea are given multi-million dollar seed rounds regularly, are why I think we're in another bubble.