I'm finally coming around to thinking that it is starting. About three years ago people were screaming bubble because YC companies were getting $4m or $5m valuations and I wrote the following:
"The truth is this: Bubbles don't exist without my aunt's mutual fund getting involved or my next door neighbor getting told to mortgage his house to invest by his financial advisor. Web 1.0 was all about IPOing on the nasdaq and fleecing the public with business models that disregarded profit. This time around things are different. At every stage of the process you see startups with business models. Guestlist, Github, FreshBooks, heck even Groupon, are making nontrivial money relative to the valuations and expected future growth."
And the money is starting to come in from my Aunts pension fund (Facebook buying instagram because they knew they were going to have her money within a couple months). Just barely starting, so we've got probably 2 to 4 years before the pop actually happens. But what are we supposed to do while it is happening? We can warn people for a while, but it won't change anything. Get money while you can, build a warchest like paypal did and get ready for the winter of 2015 to 2018.
Or you can just concentrate on building a sustainable business, and worry about more urgent things that will affect your business, rather than the macro-trends.
But "macro-trends" always affect your business even if you are building a sustainable one. Even if you have no investors, if your clients are suffering, you are suffering. If your clients' clients are suffering, you are suffering. If your clients' clients' clients are suffering, you are suffering.
You're right, but a truly valuable and sustainable business/technology will be one that clients consider worth paying for even when they are suffering.
There aren't necessarily a lot of modern tech companies that would survive this test though.
Agree or not, that's what DHH is saying here. It's harder for sustainable businesses to hire talent, when talent is getting paid more at places with enormous valuations.
This of course falls down if the large valuation and the large pay are justified by things like large revenues, or value to those with large revenues.
Sometimes I just wonder: what "talent" are you guys talking about?
It's almost as if there exist a group of fresh-grads who just completed their CS degree but can magically write a better compression engine or a revolutionary protocol that is better than TCP.
You don't get it. It's more expensive to hire any programmers when the average rate that a programmer gets is inflated by an influx of cash. It's independent of experience. You could substitute talent with "skilled labor" and everything else would stand.
Or do they? If you look at the big industries of the past, they came with real time constraints. In agriculture, for instance, if the work wasn't completed in time, the food would spoil. While skilled farmhands are more valued, in the absence of them, anyone off the street will be given the job simply because it has to be done one way or another.
What are the consequences to not building on your technology by a certain date? Maybe your competition will beat you to the punch. Maybe the costs that could be saved by implementing the software will continue to be expensed. Beyond that, not a whole lot.
This leads us to a situation where just having anyone on the job is not viable. It is prudent, in many, cases for a business to simply wait until someone who is "top talent" is freed up to do the work. Simply knowing how to program isn't going to be enough.
Put simply, people who can and do build stuff. Notice the emphasis on do. There are lots of smart people out there. Some percentage work at large companies in a relatively stress free job doing lots of things with maybe some building. Some other percentage get by just by being smart.
When talking about talent what all these companies want are the person who is smart, experienced, and can execute. That person who can build something from nothing. That person who actually works.
If you can get 2-3-4-5 of these kinds of people together on the same project amazing things can happen. It's very hard to hire these people because they are usually off building something...for their own startup.
I agree with the "next door neighbor" allegory. There's only a "bubble" when we can identify a bag holder. That almost inevitably winds up being the plebs, whether it be the general population or via government bailout (still the people). I'm not sure if anyone has yet identified who would be the bagholders in this "bubble", because a bunch of rich guys at Andreesen or Sequoia sure aren't it.
You need a vehicle for the commoner to piss away their money. I don't see that yet. Maybe in a couple years, when your local community KickStarter has you pulling money from your 401K to invest in corporate backed internet startups will they have a way to start to attract Joe the Plumber's wealth.
And with that, a "bubble" comes with it the psychological idea that it's RISK FREE money. That you can borrow money now, sell later and cash out the gains as your investment surely grows. Add to that the real actual feeling that you'd be stupid not to do it (because everywhere you look people are making money off this). That's when we've got a bubble.
When someone can point out a large, wide, gullible, set of people with no access to real fundamental information willing to give up their money through a simple mechanism (stock markets, housing, etc..) then folks, we've got a bubble.
The Euro faces, if not demise, then a near-certain restructuring that will ripple through global financial markets. China is also showing blemishes on its shiny economy, which was entirely foreseeable given their rather suspicious pegging at an 8% growth in GDP year on year. It won't collapse, but it will definitely cool considerably as even the politburo can't continue to justify building cities with no one in them just to pad GDP.
"The truth is this: Bubbles don't exist without my aunt's mutual fund getting involved or my next door neighbor getting told to mortgage his house to invest by his financial advisor. Web 1.0 was all about IPOing on the nasdaq and fleecing the public with business models that disregarded profit. This time around things are different. At every stage of the process you see startups with business models. Guestlist, Github, FreshBooks, heck even Groupon, are making nontrivial money relative to the valuations and expected future growth."
And the money is starting to come in from my Aunts pension fund (Facebook buying instagram because they knew they were going to have her money within a couple months). Just barely starting, so we've got probably 2 to 4 years before the pop actually happens. But what are we supposed to do while it is happening? We can warn people for a while, but it won't change anything. Get money while you can, build a warchest like paypal did and get ready for the winter of 2015 to 2018.