Are We Just Waiting for Another Tech Bubble?

Thursday, April 24, 2014

Logo of WhatsApp, the popular messaging service bought by Facebook for USD $19 billion, seen on a smartphone February 20, 2014 in New York. (STAN HONDA/AFP/Getty Images)

Last February, Facebook shelled out $19 billion for mobile messaging platform WhatsApp, instantly creating 55 new Palo Alto millionaires at the small, start-up company. 

The HBO series "Silicon Valley" has found comedy gold in the Northern California economy, satirizing what has become a recurring story in the area: The tiny app that made it big. But that narrative has left some in Silicon Valley and on Wall Street scratching their heads, worrying that the tech economy has re-entered the boom-and-bust era of the late 1990s.

Over the last few days, two prominent hedge fund managers, David Einhorn of Greenlight Capital and Jeff Ubben of ValueAct, have raised concerns about the future of Silicon Valley. 

"We've got to fix tech," Ubben told a group of investors this week, while Einhorn warned that "cool kid companies" may have created another tech bubble.

Josh Lerner is a professor at Harvard Business School and an expert in venture capital and the tech economy. The author of "The Venture Capital Cycle" and "The Money of Innovation," Lerner explains that, while he sees some similarities between the '90s tech boom and today, he believes the tech economy is still in a safe zone. 

Guests:

Josh Lerner

Hosted by:

Todd Zwillich

Produced by:

Jillian Weinberger

Editors:

T.J. Raphael

Comments [4]

Mark

Wow, the technology world has passed you by, sir. I bet you're one of those dudes who still thinks "software" sounds funny. That is fine, amusing even, just don't cry age discrimination when no one wants to hire you again.

Apr. 27 2014 12:16 AM
Robert Thomas from Santa Clara

The events of 1999 and 2000 were no "burst technology bubble". They were the result of stupid expectations of foolish investors in the unsupportable (or non-existent) business plans of a lot of retail sales and marketing ventures that happened to rely on internet connections between consumers and purveyors. Graduates of Schools of Communications, recently having arrived to scoop up web-site-design fool's gold, abandoned their "live-work" lofts in the trendy garrets of the Mission District of San Francisco (a backwater bedroom community forty miles away) as quickly as they had occupied them.

As a working engineer employed in Santa Clara Valley since the late 1970s and a resident here since the 1950s, I've seen real pops and clicks and bubbles in the technology industry of our region; the 2000 thing didn't rate.

The 2000 events were "shiny objects" for know-nothing journalists (I say, KNOW. NOTHING. Remember "Y2k"?) who only have aspect into our industry by way of public relation officers, marketing executives, advertising directors, salesmen and writers of fiction.

Facebook, Twitter, Yahoo and similar operations aren't technology companies. Even Google only dabbles in technological research (though "dabbling" for such a substantial firm isn't an insignificant thing); it's a sales and marketing company. Apple makes real product and has had much success as, essentially, an appliance manufacturer - it has produced little in the way of real technological advance.

If Google, Apple, Facebook, Yahoo and Twitter all disappeared tomorrow, Santa Clara Valley would suffer a blip in tax revenue but it would otherwise see little impact on the fabric of our industry.

Apr. 24 2014 04:04 PM
John A

And is string theory just rearranging the deck chairs 'till the next great physics breakthrough is realized?

Apr. 24 2014 03:47 PM
ML from Miami FL

Hmmm, a mobile program called "What Sapp?" Fitting. There are lots of saps that will be separated from their money with this repackaging of the messaging paradigm. If I had a boomer-friendly frontman working with me I could become super successful in this world of high-tech snake oils and hollow IPOs. I could buy my own Cloud City!

Apr. 24 2014 09:50 AM

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