Maybe we're in a bubble but it doesn't matter(justinkan.com) |
Maybe we're in a bubble but it doesn't matter(justinkan.com) |
"Anyone who tells you that you shouldn’t be in tech, or that the current market situation will create an oversupply of people in tech, is doing you a massive disservice."
Who is saying this? I don't think anyone is trying to dissuade people from getting high tech skills.
I believe that the bubble consists of the massive amount of startups that do not actually provide a valuable service. Do we really need another social network or sharing site or "X for Y"? No, we don't, but it seems like 90% of the startups getting funded by incubators are just rehashes of that.
I believe that point is explained very well here: http://scripting.com/stories/2012/04/19/itsDefinitelyABubble...
The key points are here:
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2. We're bundling young people into things called startups, and selling them to investors for ever-increasing amounts of money.
3. In an effort to bring more suckers in, they just passed a law that makes it legal to pimp these startups to people who don't know anything. You will be able to take their investment by swiping a credit card. Probably using a $4 billion valuation Square dongle for an iPhone.
4. They have started incubators in every major city on the planet. Unfortunately it hasn't been stylish to learn how to program for a number of years, so there aren't that many programmers available to hire. And it takes years to get really good at this stuff.
5. Even if they could find enough programmers, there aren't that many businesses to start to satisfy the demand for investment vehicles. A lot like the situation with mortgages in the last bubble. So the VCs and angels and no doubt some very shady folks are putting together deals with people who can't program with no actual idea for the business. Don't look to Y-Combinator, they're the quality act here. But there are incubators in every city from Santiago to Beirut.
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The most important sentence there is "A lot like the situation with mortgages in the last bubble. So the VCs and angels and no doubt some very shady folks are putting together deals with people who can't program with no actual idea for the business."
And that is the bubble. Startups being founded with people who can't program with no actual idea for the business. Just like the last mortgage bubble.
And to be fair to Justin, I think twitch.tv is great. It is novel, has a clear path to monetization, and provides a service that people actually want. We need more venues for professional gaming and twitch.tv is a great step in that direction.
Now if you lay out all of the facts in front of the mark, and he/she dismisses them as pessimism or a conspiracy - I'd say society's responsibility should end there. But I think that the less credulous people in a society should institute enough oversight over situations that could be potential scams so that the more credulous can have the best picture of the situation that a neutral party could provide.
Statistically, a large amount of people will always be too dumb to make that decision for themselves, so we should try to ply them with all of the supplementary smarts that it's pragmatically possible to muster:)
'Premonitions of a bubble on the verge of popping do not ruffle those who are bullish on real estate. In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely. "South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past."'
It seems like a lot of the same kinds of thinking in Justin's article, "we might be in a bubble, but for you it doesn’t matter. The reality of the world is that software, specifically Internet enabled software, is becoming a part of every business. Marc Andreessen said “software is eating the world,” and by that he meant that as time goes on, every industry is becoming a software industry...You want to be in the tech game, because in time it will be the only game in town."
"You want to be in the tech game, because in time it will be the only game in town."
Well, no...because tech won't be big enough to employ more than a relatively small percentage of the population. And it won't matter that companies want to pay tech workers to help automate people out of jobs. Because once everyone is unemployed, no amount of tech will keep a company in business if nobody is making enough to buy its products.
Without a doubt, things are going to change. Just like they always have. Some industries will gain, and some will lost. Some people will find their skills in high demand, and some will find their skills obsolete. We won't, however, end up in world where you either work in tech or you're unemployed.
To the grandfather's point, I might be naive but when we automate away large numbers of people's jobs of course we will have to figure out some sort of wealth redistribution to give those people spending power (we do this right now in social welfare). However, my bet is that if you are one of the people doing the automating you'll be a lot better off than one of the people on welfare, because we've never in the history of humankind had perfect wealth redistribution.
Few skillsets grant you more of an ability to be self-reliant than the ability to understand and write software -- even if there's no job description written for what you do, or no company who will hire you. In almost any field of entrepreneurship, if you have tech savvy which your competitors don't, you have an inherent advantage against them and an ability to crack open the market.
Are you a DJ or party promoter who understands SEO/SEM and social media? You've got a leg up. Are you the only person in your area who understands both fashion apparel supply chains and software? You could be providing immense value.
The original point, stated differently:
Understanding software and the modern web -- even short of being able to write it -- can still give someone a sizeable advantage in many fields.
This reminds me of a really helpful salesperson at the Apple store that was really excited/proud to tell me that you can now walk in and purchase an item without ever talking to a salesperson...
off to the Naperville Apple store
»The truth is that the technology sector as a whole over any length of time is a positive-sum game
Actually, no - a bubble means people aren't investing on fundamentals but on momentum; the expected value of the investment is negative. If we were in a bubble (as in bubbles past) we wouldn't be in a positive sum game. Saying that it would be a net positive game over "any period of time" is economically and empirically ridiculous.
I happen to believe that we are not in a bubble. But if we were it would matter - it would mean that when the bubble pops opportunities in the field would decrease in frequency and magnitude. Since career scars early on have more persistent effects than displacements later in life it follows that an aspiring tech star cannot ignore the market realities of what they're going into.
We are mortal, we can't just ride the secular trend. The local time scale matters, too.
I've been wondering - when all the old media inevitably die off, where are these aggregators going to find their content?
The reality is that for most investors the vague notion that they might be missing a great opportunity far outweights any well documented evidence that they are walking into a sinkhole.
Many investors from the dotcom bubble simply left the market and new ones took their places. If there's money to be made some people will always be there, it doesn't gets more complex than that.
So basically you shouldn't stay out of tech right now just like you shouldn't stay out of tech in 1998. You should've done that in 2001 when everything started to collapse. Funny that Justin mentions Amazon because that company took a nosedive back then.
Question is, how long we have until the next 2001?
When that happens many people, including "negationists" and wantrepreneurs will GTFO from tech as fast as they can rip the copper wire from their office walls.
Where are the people who are designing actual tangible items?
Why is so much of this stuff only fluff and entertainment?
Despite that, I don't know of anyone who I went to school with that could write a single line of code today. Of them, I do have one friend who is also in the software business, but his skills lie in other area of production. He admits he cannot program.
For your vision to come true, programming will have to become much more fundamental, to the point that something else will have to be cut. Which other subject should get the axe?
My child will be bilingual. English and 10010101001.
HARDWARE + SOFTWARE.
think nest, tesla (yes, it's a huge software play), and the like.
# Factor 1
The first is the fact that the people who have disposable income already own more tangible items than the ultra wealthy of our cave dwelling ancestors did. In terms of value.
# Factor 2
Since people already own most of the tangible things needed to live a comfortable life, consumer focused companies need methods to find the specific consumers that are currently interested in buying tangible things, or who can be convinced to be interested. They then need to profile these people and then present them with messages engineered to elicit feelings of hope for fulfillment (I say hope, because often the fulfillment does not come). This is describing classic consumer research and classic advertising. This is currently a costly process*.
U.S. ad spending grew 6.5% in 2010 to $131.1 billion, according to new data from Kantar Media.
# The Result
A huge market has been created. A very real market. As an aggregate our private information and attention (market research & advertising) is quite valuable. Not to say this market is so vast it eclipses all others. Facebook is valued at over 100 Billion according to some. Selling tangible goods like oil or Apple products seem to still be larger than this market. So a few individual markets are larger than social networking market?
We live in a world where the ability to line people up, study then and then use psychological tactics to hook into their desires and wants, on an aggregate, is worth more than the products on an individual case are worth.
# An Analogy
If this is hard to wrap your brain around, think of this analogy. Imagine a world where the automobile, plane, boat etc were never invented and no roads exist. However a few Rail Road companies exist. The FB RR, the Twitter RR, Instagraam RR and the Pinterest RR company. The FB RR just bought Instagram RR. Companies like Coca-Cola sell tangible products (sugar water) And before the 4 mentioned Rail Roads existed Coca-Cola did quite well selling its sugar water. It has become a billion dollar business. By way of Pony Express (Television, magazines, research groups) many people have chosen to buy Coca-Cola. However, from its point of view it could sell more and hiring men to carry large sums of sugar water long distances on horseback is expensive. And worse now that Rail Roads are popping up in small towns competing companies such as Pepsi, Jones soda, etc are delivering their sugar water for cheaper.
The truth is if no Rail Road existed and no Pony express, you or I would be fine. We would drink water, we would tend our farm and trade carrots for apples. Which we would use to make apple juice. Evolutionary speaking we don't need Coca-Cola. And the heads of Coca-Cola know this. If they don't start paying the FB, Twitter, Instagram and Pinterest RR to ship their sugar water to local towns people will stop buying Coca-Cola. A billion dollar business is at the mercy of these 4 Rail Roads. But it’s not just Coca-Cola. There are millions of businesses in the same boat.
So yes, social networks provide intangible goods to you and I, however, to consumer focused companies they are essential for Sugar Water Co to be a billion dollar company in today's economy.
The result is a gold rush, and though you may feel morally against this gold rush, you can’t deny it’s not real money, real value being created. A better mouse trap has been built. It creates wealth. In this case this mouse trap tracks you, analyzes you and convinces you to spend your money on Sugar Water. This is a tanigable, valuable and desirable good to many rich people.
1. "Storing food for the winter". R&D to prepare us for challenges we'll face in the future. Ex: alternative energy research. This sort of thing is extremely difficult to fund in a capitalist society. We need more of it.
2. Waste. Accounting and lawyering and sales and such.
3. Entertainment. Everything from movies to luxury goods.
If given a choice between 2 and 3, I'd pick 3 any day. I'd like for there to be more of 1, but I guess that makes me a socialist :).
I don't see any functional difference between a Farmville cow and a ceramic cow that sits on a mantlepiece. They have exactly the same practical use, but one cost way more energy to produce than the other. My argument for how Farmville will save us from global warming is a post for another time.
tl;dr: Value is what the market says it is, not what you say it is.
See also: http://www.slate.com/blogs/moneybox/2011/12/12/let_them_eat_...
I do think your general principle for appropriate government action is too strong and leads to some questionable results, but that ends up getting too involved in abstract political principles for this particular thread.
I'm sure the standard brokers will provide guidance like this for a price, but you could establish norms as to what information is most important for every single new company to get out there, or take standards set by the government and make that information accessible.
I'm not saying they're not necessary. But if the economy were a mechanical system, law and accounting would be the friction between the belts and the wheels that produces waste heat.
Here's another view: Accounting is the instrumentation that lets you make sure the machine (the business) stays calibrated, and that the inputs match up to the outputs.