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Retirely in The things you own end up owning you,

SF tech culture is focused on solving one problem: What is my mother no longer doing for me?

This, perhaps, is the greatest similarity to what took place during the dot-com bubble, when a generation of companies were created to do more or less the same things. Webvan, the grocery-delivery business, raised $375 million at its I.P.O., in 1999-and reached a market value of as much as $7.9 billion- before eventually going bust.

Webvan. Oh, that was one of my favorite clients (not) – they were spending money like it was raining from the sky – those warehouses were crammed full of high-tech, and they almost made it – well, if they had had another 25 billion or so.

IMHO, their failure was trying to go national before they figured out how to do it regionally and before they got a good standard design on paper – they wanted to buy warehouses already being built and then slam in their facilities – it’s the wrong way to do that. Plus, they had not achieved profitability even in the SF Bay Area.

Oh, and I was not only selling them services, I was buying food from them as well, and their products were great – even the produce was excellent, but they did not carry any store brands so their overall prices were higher – but the convenience of a 30 minute delivery window and delivery to your door was pretty awesome.

Eventually, placing orders would have been faster than going to store but the initial software release was pretty logy. There was a lot of “how not to do it” that lots of people will not have learned from Webvan.

“It’s different this time”

It always is.

You can basically spot a bubble when the fundamentals go out of the window. Mature companies have a P/E of around 15-20. If your P/E is more like 65 or 300, that should be because you’ve still got a hell of a lot of growth potential. But those are the P/Es of Facebook and Amazon respectively. Is Facebook honestly going to grow 4 times in the near future? Well, it’s customer base literally can’t. Is Amazon going to grow by 20 times what it is in the fairly near future? Of course not.

Someone crunched the number’s on Uber and reckoned that based on the current valuation, Uber would have to grab more than half of the world’s taxi market in 5 years to justify it. Not to turn investors into very rich winners in a big gamble, but just to have a good result.

The only way investing in these works is by greater fool investing. That you think you can guess when the bubble will burst and get out and dump your shares on someone else before it happens. But someone is going to lose.

In the past, they’ve suggested, people were just trying to get filthy rich. Now they are trying to “make the world a better place.”

This is the part that cracks me up.  Every generation thinks they have it figured out.  They think they won’t make the mistakes of the previous generation.  They think that their motives are noble while the previous generation were just money-grubbing whores.

My generation used the “New Economy” line.  The “Old Economy” was no more.  The laws of supply and demand had been conquered.  Sure, you could make a billion dollars on paper by creating a company that used Legos to demonstrate object-oriented programming, but it was the passion that drove everyone.

Then one day the Old Economy showed up and massacred the New Economy, grabbed whatever gibblets seemed useful going forward and sold the rest as pig feed.

Counterpoint- these companies don’t always operate under traditional market rules. Facebook is a good example- you say that it’s overvalued because their customer base literally can’t grow any more. I’m not sure where you get that idea, but it’s wrong. It’s very easy for these tech companies to do two things- grow and monetize themselves in the developing world, and create new value out of established users.

1) Facebook’s market penetration is about 50% in most parts of the world- less in Asia, more in South America.

2) Facebook’s market is people who have access to the internet. The number above doesn’t mean that half of the world uses Facebook, it means that half of the people who use the internet use Facebook.

3) There’s a lot of room for growth because their market (internet users) is still growing, and growing quite rapidly in some underdeveloped parts of the world.

4) There’s a lot of room for growth in the existing markets that they have, because only about 70% of internet users are using social media.

5) There’s a lot of room for growth by engaging users already within their own userbase, because most of Facebook’s users are only occasional users.

6) About 1.7 billion people are signed up for Facebook compared to a world population of 7.2 Billion.

The two biggest distinctions between Bubble 1.0 and 2.0 as I see it:

1) Companies exited earlier, and at lower valuations the first time around: the investing public had a chance, albeit a small one, to make money on the IPO, or on the ramp-up of hype, or by shorting it on the way back after the pop. This time around, companies IPO extremely late, if ever, and all the money stays within the VC community. (Benefit: retail investor is shielded from most of the implosion. Downside: employees and investors alike get none of the upside.)

2) The point you cite: Last time around, people were making tools, or making tools to make tools. Routers, databases, servers, switches, chips, you name it. This time around, the only “product” being made is gobs of big data in the hope that some sort of marketing angle can be gleaned from it.

Microsoft used to be in the business of putting Windows on every PC, the better with which to sell MS Office licenses. Now it’s in the business of collecting telemetry and usage metricsfrom every PC, regardless of whether the user buysrents to Office 365. They adopted the model from Google: the Android OS doesn’t exist to sell phones. It exists to provide a data harvesting platform for Google. Google, Inc. is in the business of selling clicks and ad impressions. Adobe used to sell you a license for Photoshop that was good forever. Now it’s

, and the CEO acts like a broken record (back in the day, damaged vinyl used to loop) when asked a simple question about why it’s cheaper for an Australian to get on a plane, fly to North America, purchase an old version from North America, and fly back home again, than it was to buy a license domestically.

To step back and look at things a little more broadly; the first wave of tech companies were in the business of making things interoperable. Use a Cisco router to make that VAX talk to the Hulking Giant IBM 360 in the basement. Business shifted towards email – SMTP over TCP/IP or UUCP – over cubiclemail products like Lotus Notes, because there was a benefit to be had in connecting the world, not replicate the interoffice memo. On the consumer side, we may have bemoaned the Eternal September, but we loved the fact that we worked in an industry that defined itself by a trend of moving people away from proprietary platforms like CompuServe and AOL, and towards open platforms like email and IRC and USENET and the nascent WWW.

The current wave is distinguished from its prececessors in that it takes the opposite approach: the construction of monetizable walled gardens. How do you monetize something where anybody can write an end-user application that might take share from yours? Well, you don’t — you make sure nobody can code to it. And if anybody tries, you lock down the API and kick ‘em out, like LinkedIn, or Twitter, or Facebook have done in recent months. Email and IRC? Nope, you can have Facebook messaging, or Google Buzz, er, Plus er, Hangouts.

The trend of this wave is to return the desktop into a glorified dumb terminal by wrapping everything in a thick layer of SaaS: Software assimilated as a Service. When the subscription runs out, when the VC funding runs out, or when we just don’t feel like providing the Service anymore, your data goes away. You wouldn’t want your data to go away, would you? Got a great idea? Pay us and we might let you develop it against our platform. If it ain’t a walled garden, ain’t nobody interested in building it, let alone funding it, and that’s the most depressing thing about what this industry has become.