I dropped out of college in 1998 to work in tech. The common knowledge at the time was that you got a job at a startup, and then in four years you retired, because they would IPO while you worked there and you'd coast your last two years while you vested in millions in stock options.
That obviously didn't happen for me, or most anyone else that started working in 1998.
But today doesn't feel like that. I don't see college kids being encouraged to drop out and make a fortune in tech. In fact what I do see are people being encouraged to graduate at the top of their class so they can get jobs at highly profitable FAANG companies.
It does feel a little frothy, especially with all of the non-profitable tech companies that are doing IPOs this year and next, but it feels more reserved this time.
Also, it feels like the VCs are the one taking the majority of the damage this time, not retail investors.
"I don't see college kids being encouraged to drop out and make a fortune in tech. In fact what I do see are people being encouraged to graduate at the top of their class so they can get jobs at highly profitable FAANG companies."
Except for those encouraged to skip college entirely...
> ...what I do see are people being encouraged to graduate at the top of their class so they can get jobs at highly profitable FAANG companies.
This has been true for India for a long time but the trend has been reversing since 2014 with the explosion of VC and in particular Angel investments that followed the Indian unicorn boom. Surprised that Europe is on a different trajectory.
> Also, it feels like the VCs are the one taking the majority of the damage this time, not retail investors.
Are majority investors who would have usually invested in the public markets now channeling capital to growth stage funds or are they calling bluff when these unicorns do float IPOs? If the former, not really sure if it's bad or good and for whom, but kind of makes for a very different proposition to the dot-com bubble of 2000s.
For instance, just today, paytm which long lost its market leader position in B2C/ P2P payments in India to Walmart's PhonePe, GooglePay, and WhatsApp, announced $1 billion in Series G funding that takes the total to $4.3 billion raised so far [0] with $500 million in losses just this past year. I really fail to understand the economics behind growth stage fund at all if it is clear that public markets aren't going to bail these investors out if the companies aren't making profits to justify valuation. Google India has openly complained abt the current P2P/B2C payments market as a loss leader with no path forward on generating revenue.
Either that, or like patio11 says, the amt of capital flowing through the markets is astounding [1]; and so I wonder if I am missing some key insights to be able to grasp the economics of it all, as an outsider?
Maybe people aren’t expecting riches, but I will say that all of my peers (late 20’s) looking for a career change are looking at coding boot camps as a way of achieving stability. Not that there’s anything wrong with that, but there’s no free lunch in the long term.
> I don't see college kids being encouraged to drop out and make a fortune in tech. In fact what I do see are people being encouraged to graduate at the top of their class so they can get jobs at highly profitable FAANG companies.
I've only worked at one FAANG company, but they actively encourage every good intern to drop out and start working full time.
This feels like the japanification of the whole western world plus China.
I don't even follow the valuations of the stock markets, I've been told they are high, but for tech I'm sure they are nowhere near those of 1998, so I don't think that tech will burst the bubble of everything.
I am however sure the party cannot go on for much longer, the negative interest rates and permanent increase of balance sheets of the FED and other central banks will either cause a stockmarket prolongued downturn, or fuck the whole financial system so profoundly that in 20 years time we won't be able to recognise it, nor be able to call our economies market-based or capitalistic.
> I don't see college kids being encouraged to drop out and make a fortune in tech.
I consider this a common theme of this very site and its owner: Y Combinator. They encourage people to drop out of school for their companies, and celebrate their stories of success. At least investors are pushing this narrative.
Better yet, just put away a little every month and get on with life:
> Logically, it seems like Buy the Dip can’t lose. If you know when you are at a bottom, you can always buy at the cheapest price relative to the all-time highs in that period. However, if you actually run this strategy you will see that Buy the Dip underperforms DCA over 70% of the time. This is true despite the fact that you know exactly when the market will hit a bottom. Even God couldn’t beat dollar-cost averaging.
Meet Juergen, actually the world's worst market timer. He invested in the German Stock exchange in 1914. In 2014 he finally broke even.
Over the last 100 years, the US has had a great run and stock market returns have reflected that. By only looking at American returns you're cherry-picking the best results so your model is flawed.
This assumes that the world will continue on a “growth at all cost” model. Despite growing social inequality, and climate change, which seem to be at odds with a greed is good ethos that expands corporate profits at the cost of the environment and social stability.
This isn’t even mentioning the current market manipulation that central banks are engaging in around the globe to artificially inflate the value of stocks. What happens when we can no longer prop up equities? The consequences may be far worst as we’ve been effectively kicking the can down the road. Eventually the tab arrives and the people left with it will be those who hardly benefited from this historic run-up.
Also “past performance does not indicate future performance”
Only if you are dollar cost averaging over long periods of time. People use market timing as a strawman.
IMO, you invest strategically. Build cash positions over time as you ride the business cycle. Don't get greedy -- pigs get slaughtered, if you're investing in high-flying times, you should take profits and have some cash. I was just getting started in the 90s, and rode stocks like Amazon and Red Hat up to stratospheric heights. But when like 90% of Amazon's value vaporized, I had cashed out enough of my position that I was able to hold on and invest in other areas.
The same strategy served me well in 2008. I was able to get onboard high-quality investments at ridiculously cheap prices, which would not have happened if I was 100% invested.
The cost of this type of strategy is that you lose compounding. From my POV, I value having access to liquidity and the abilty to take advantage of market opportunities.
I was only in high school in 1998, but at least old enough to be aware of things like the stock market. It doesn't feel anything like the Internet 1.0 bubble. For one thing, the companies today have actual revenues and profits. People are not blindly throwing money at every .com IPO that comes out.
I'm trying really hard to think of a recent IPO of a profitable company. Companies in 1998 had "actual revenues and profits", Pets.com was just not one of them. I worked at Microsoft during that time, and they were making money hand-over-fist. Pretty sure Oracle was raking it in. Hell, even Sun wasn't looking bad. Same deal today: MSFT is still making it by the semi-load, Apple is still making me money (and a dividend, which you weren't getting in 1998). I could go on.
But you're not wrong, there is a difference: crap like Uber doesn't shoot to the moon on opening day. Or, as you put it, people aren't throwing money at them, hence Uber (et. al) still sitting under IPO price. That's what I think might save us from a repeat of early 2000s. Hair stylists aren't giving me stock advice these days, either.
I feel this general unease about an impending depression is what keeps it from happening.
Every one remember 2008 and 2000. Beating the drum about a depression being around the corner, makes people takes preemptive decisions that stop such disasters from happening.
The seed of skepticism has been sown, and while I hope it doesn't grow, I am glad it has planted itself among people with power to swing economies.
Certainly todays IPO's are more mature companies. However, "profits" are still no where to be found. Examples include Uber, Lyft, Peloton, Pinterest, GrubHub ... I could go on.
> For one thing, the companies today have actual revenues and profits.
The new wave "tech" companies, like Netflix and Tesla, haven't had a yearly profit yet.
And those are the best examples of "modern tech" (anyone who IPO'd after 2007). If we get into MoviePass, Uber, Lyft, Pelton, WeWork, etc. etc., we're into the "lose $4 Billion PER QUARTER" group.
Tesla "only loses $1 Billion/year" (roughly), making it a far more "profitable" company than these other ones.
I absolutely think we're in a bubble: driven by cheap debt. The problem is that I can't call when it will pop. Without knowing how or why things will pop, its completely useless to speculate. Stocks remain the best investment moving forward: with global bonds entering negative interest rates, and US Debt at record low-interest.
So even if I think there's a bubble, I'm pumping stocks because I don't have any better idea of what to invest into.
I’m getting this sinking feeling that it’s not the tech companies that are inflated as much as sectors like retail, manufacturing, and perhaps shipping because of the trade war going on.
I think what we are really seeing is a private equity bubble propping up fundamentally unprofitable companies, and its deflating because so much time passes between VC turbocharging of Uber for hamsters and IPO that it is becoming very difficult indeed to locate the greater fool.
Why is everything a Tech company? How does anyone justify WeWork as a tech company? I heard about some tools WeWork engineering built and thought, why didnt they just buy off the shelf products and invest in more office space or acquire the competition?
Slack is a true tech company, Uber/Lyft and AirBnB are app tech companies but not WeWork. Peloton is not a tech company. Zoom, Crowdstrike, and Pager Duty are tech companies.
> How does anyone justify WeWork as a tech company?
Straight from the horse's mouth (We Co's S-1 Filing, pg.2):
"Technology is at the foundation of our global platform. Our purpose-built technology and operational expertise has allowed us to scale our core WeWork space-as-a-service offering quickly, while improving the quality of our solutions and decreasing the cost to find, build, fill and run our spaces. We have approximately 1,000 engineers, product designers and machine learning scientists that are dedicated to building, integrating and automating the complex systems we use to operate our business. As a result, we are able to deliver a premium experience to our members at a lower price relative to traditional alternatives."
"Tech" is a proxy for low marginal production cost per customer, i.e. moon potential. If you want to get risk-tolerant investors excited, first convince them you're Tech. The rest of the investors will jump on board when it looks like you're winning.
Ok, Tycho, Enron, WorldCom, Global Crossing, tell me again how the supposed dot com crash was all about Pets.com and dozens of internet companies that would go on to become some of the largest corporations in history?
Interest rates are at just 2%, versus in the late '90s, in 2006, and the late 80s , when the were at 5-6% or higher. It may be at least 5 years before rate bump against the upper-end of the cycle, around 5%, and then another 3 years for the market to finally crest.
Nah, but for those who were too young to remember 98 the crypto bubble in 2017 had a very similar feel. The stock market is 2019 may be overvalued but it’s nothing like that.
> The obvious similarities are that, now as then, a U.S. president faces the threat of impeachment against the backdrop of a strong economy and surging stock market. Even “Friends” is still popular today, just as it was then.
What? I guess "Friends" mention was intended as a joke here, but it surely does not look funny considering previous sentence.
They can write such articles every year:
- stocks are surging and there are wildfires in California, just like 20 years ago
- market is down today and Schwarzenegger is making new Terminator, just like 30 years ago
[+] [-] jedberg|6 years ago|reply
That obviously didn't happen for me, or most anyone else that started working in 1998.
But today doesn't feel like that. I don't see college kids being encouraged to drop out and make a fortune in tech. In fact what I do see are people being encouraged to graduate at the top of their class so they can get jobs at highly profitable FAANG companies.
It does feel a little frothy, especially with all of the non-profitable tech companies that are doing IPOs this year and next, but it feels more reserved this time.
Also, it feels like the VCs are the one taking the majority of the damage this time, not retail investors.
[+] [-] mcguire|6 years ago|reply
Except for those encouraged to skip college entirely...
[+] [-] ignoramous|6 years ago|reply
This has been true for India for a long time but the trend has been reversing since 2014 with the explosion of VC and in particular Angel investments that followed the Indian unicorn boom. Surprised that Europe is on a different trajectory.
> Also, it feels like the VCs are the one taking the majority of the damage this time, not retail investors.
Are majority investors who would have usually invested in the public markets now channeling capital to growth stage funds or are they calling bluff when these unicorns do float IPOs? If the former, not really sure if it's bad or good and for whom, but kind of makes for a very different proposition to the dot-com bubble of 2000s.
For instance, just today, paytm which long lost its market leader position in B2C/ P2P payments in India to Walmart's PhonePe, GooglePay, and WhatsApp, announced $1 billion in Series G funding that takes the total to $4.3 billion raised so far [0] with $500 million in losses just this past year. I really fail to understand the economics behind growth stage fund at all if it is clear that public markets aren't going to bail these investors out if the companies aren't making profits to justify valuation. Google India has openly complained abt the current P2P/B2C payments market as a loss leader with no path forward on generating revenue.
Either that, or like patio11 says, the amt of capital flowing through the markets is astounding [1]; and so I wonder if I am missing some key insights to be able to grasp the economics of it all, as an outsider?
[0] https://techcrunch.com/2019/11/24/paytm-1-billion/
[1] https://news.ycombinator.com/item?id=19210703
[+] [-] pgwhalen|6 years ago|reply
[+] [-] puglr|6 years ago|reply
I've only worked at one FAANG company, but they actively encourage every good intern to drop out and start working full time.
[+] [-] raducu|6 years ago|reply
I don't even follow the valuations of the stock markets, I've been told they are high, but for tech I'm sure they are nowhere near those of 1998, so I don't think that tech will burst the bubble of everything.
I am however sure the party cannot go on for much longer, the negative interest rates and permanent increase of balance sheets of the FED and other central banks will either cause a stockmarket prolongued downturn, or fuck the whole financial system so profoundly that in 20 years time we won't be able to recognise it, nor be able to call our economies market-based or capitalistic.
[+] [-] OnlineGladiator|6 years ago|reply
I consider this a common theme of this very site and its owner: Y Combinator. They encourage people to drop out of school for their companies, and celebrate their stories of success. At least investors are pushing this narrative.
[+] [-] throw0101a|6 years ago|reply
> Meet Bob.
> Bob is the world’s worst market timer.
> What follows is Bob’s tale of terrible timing of his stock purchases.
* https://awealthofcommonsense.com/2014/02/worlds-worst-market...
Better yet, just put away a little every month and get on with life:
> Logically, it seems like Buy the Dip can’t lose. If you know when you are at a bottom, you can always buy at the cheapest price relative to the all-time highs in that period. However, if you actually run this strategy you will see that Buy the Dip underperforms DCA over 70% of the time. This is true despite the fact that you know exactly when the market will hit a bottom. Even God couldn’t beat dollar-cost averaging.
* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
[+] [-] bryanlarsen|6 years ago|reply
Over the last 100 years, the US has had a great run and stock market returns have reflected that. By only looking at American returns you're cherry-picking the best results so your model is flawed.
[+] [-] andreilys|6 years ago|reply
This isn’t even mentioning the current market manipulation that central banks are engaging in around the globe to artificially inflate the value of stocks. What happens when we can no longer prop up equities? The consequences may be far worst as we’ve been effectively kicking the can down the road. Eventually the tab arrives and the people left with it will be those who hardly benefited from this historic run-up.
Also “past performance does not indicate future performance”
[+] [-] jefftk|6 years ago|reply
[+] [-] theturtletalks|6 years ago|reply
[+] [-] justinzollars|6 years ago|reply
[+] [-] Spooky23|6 years ago|reply
IMO, you invest strategically. Build cash positions over time as you ride the business cycle. Don't get greedy -- pigs get slaughtered, if you're investing in high-flying times, you should take profits and have some cash. I was just getting started in the 90s, and rode stocks like Amazon and Red Hat up to stratospheric heights. But when like 90% of Amazon's value vaporized, I had cashed out enough of my position that I was able to hold on and invest in other areas.
The same strategy served me well in 2008. I was able to get onboard high-quality investments at ridiculously cheap prices, which would not have happened if I was 100% invested.
The cost of this type of strategy is that you lose compounding. From my POV, I value having access to liquidity and the abilty to take advantage of market opportunities.
[+] [-] imgabe|6 years ago|reply
[+] [-] mikestew|6 years ago|reply
But you're not wrong, there is a difference: crap like Uber doesn't shoot to the moon on opening day. Or, as you put it, people aren't throwing money at them, hence Uber (et. al) still sitting under IPO price. That's what I think might save us from a repeat of early 2000s. Hair stylists aren't giving me stock advice these days, either.
[+] [-] screye|6 years ago|reply
Every one remember 2008 and 2000. Beating the drum about a depression being around the corner, makes people takes preemptive decisions that stop such disasters from happening.
The seed of skepticism has been sown, and while I hope it doesn't grow, I am glad it has planted itself among people with power to swing economies.
[+] [-] icedchai|6 years ago|reply
[+] [-] dragontamer|6 years ago|reply
The new wave "tech" companies, like Netflix and Tesla, haven't had a yearly profit yet.
And those are the best examples of "modern tech" (anyone who IPO'd after 2007). If we get into MoviePass, Uber, Lyft, Pelton, WeWork, etc. etc., we're into the "lose $4 Billion PER QUARTER" group.
Tesla "only loses $1 Billion/year" (roughly), making it a far more "profitable" company than these other ones.
I absolutely think we're in a bubble: driven by cheap debt. The problem is that I can't call when it will pop. Without knowing how or why things will pop, its completely useless to speculate. Stocks remain the best investment moving forward: with global bonds entering negative interest rates, and US Debt at record low-interest.
So even if I think there's a bubble, I'm pumping stocks because I don't have any better idea of what to invest into.
[+] [-] devonkim|6 years ago|reply
[+] [-] throwaway2048|6 years ago|reply
[+] [-] bvda|6 years ago|reply
Now it's ICOs...
[+] [-] benjohnson|6 years ago|reply
But that doesn't give me comfort because from what I've seen before every crash people said to themselves: "this time it's different."
[+] [-] pastor_elm|6 years ago|reply
[+] [-] fengb|6 years ago|reply
[+] [-] wil421|6 years ago|reply
Slack is a true tech company, Uber/Lyft and AirBnB are app tech companies but not WeWork. Peloton is not a tech company. Zoom, Crowdstrike, and Pager Duty are tech companies.
[+] [-] rollerboi|6 years ago|reply
Straight from the horse's mouth (We Co's S-1 Filing, pg.2):
"Technology is at the foundation of our global platform. Our purpose-built technology and operational expertise has allowed us to scale our core WeWork space-as-a-service offering quickly, while improving the quality of our solutions and decreasing the cost to find, build, fill and run our spaces. We have approximately 1,000 engineers, product designers and machine learning scientists that are dedicated to building, integrating and automating the complex systems we use to operate our business. As a result, we are able to deliver a premium experience to our members at a lower price relative to traditional alternatives."
[+] [-] firethief|6 years ago|reply
[+] [-] kfrzcode|6 years ago|reply
[+] [-] c11ad1406c5e6|6 years ago|reply
Two. Now that Bloomberg is running for president, I am suspect of any doom-and-gloom articles published by his media properties.
[+] [-] paulpauper|6 years ago|reply
[+] [-] Cub3|6 years ago|reply
CMD+SHIFT+R
[+] [-] googleisevil6|6 years ago|reply
After this if anyone still thinks that MSM is honest about Trump, they're either deluded or dishonest.
[+] [-] zcw100|6 years ago|reply
[+] [-] thathndude|6 years ago|reply
[+] [-] unknown|6 years ago|reply
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[+] [-] swlkr|6 years ago|reply
[+] [-] mcguire|6 years ago|reply
[+] [-] paulpauper|6 years ago|reply
Interest rates are at just 2%, versus in the late '90s, in 2006, and the late 80s , when the were at 5-6% or higher. It may be at least 5 years before rate bump against the upper-end of the cycle, around 5%, and then another 3 years for the market to finally crest.
[+] [-] throwaway1777|6 years ago|reply
[+] [-] asdff|6 years ago|reply
[+] [-] paulpauper|6 years ago|reply
[+] [-] thefujin|6 years ago|reply
What? I guess "Friends" mention was intended as a joke here, but it surely does not look funny considering previous sentence.
They can write such articles every year:
- stocks are surging and there are wildfires in California, just like 20 years ago
- market is down today and Schwarzenegger is making new Terminator, just like 30 years ago
[+] [-] TurkishPoptart|6 years ago|reply
[+] [-] draw_down|6 years ago|reply
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[+] [-] paulpauper|6 years ago|reply
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[+] [-] unknown|6 years ago|reply
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[+] [-] yuppiepuppie|6 years ago|reply
[+] [-] deweller|6 years ago|reply
[+] [-] ed312|6 years ago|reply