David Cummings is looking for ways to justify the prospects for growth in tech. That’s in response to comments that there’s a bubble in tech.
I’d say perspectives (or potential) and bubbles are not the same thing. So here’s my response (below):
I was looking for a good definition of a tech bubble myself. Here’s the best I found so far.
Traditionally, bubbles need to components: easy credit and an inflatable asset that can be used as security to get more credit. This describes well the bubble phenomenon: from the first bubble in France (the Mississippi Company) to the latest housing bubble that burst in 2008.
So what parts of tech are bubbly these days?
Here and there, you can see bubbly activity. For example, we might focus on the 170M dollar investment in Supercell on the strength of their #1 position in the appstore (best monetizing game, at rate of 2M/day).
How does Supercell spend the money? Let’s speculate a bit. They could invest them in direct marketing and paywalls. In 6 months, they could be raking in 5M a day and ask for 250M at a much, much higher valuation. The question (thanks, Zynga) is how sustainable these games are.
But is this a bubble?
First, it’s definitely not wide-spread. Second, product usage and revenues are a pretty good indicator that a company is doing something right. Although they can be viewed as an inflatable asset, you’d be hard-pressed an alternative measure of company progress and success.
So, no, there isn’t a bubble.
