[Lavery]

In a lot of ways, the current expression of the tech sector (certainly from a valuation standpoint) and the startup scene particularly feels like a consequence of the response to the financial crisis. Critics of the Fed spent years loudly worrying about how the various QE programs were going to drive up inflation. Of course, this didn't materialize, at least as measured in the usual basket of goods and services. What did happen was a broad and sustained inflation in financial assets / collapse in yields that drove everyone further out along the risk curve, with VC being the furthest point out.

The tie in to inflation is darkly amusing the because the classic precursor to inflation is wage growth. Broadly, there hasn't been any--except in the tech sector, which has seen a veritable explosion in pay from where it was a decade ago.

[pitaj]

Business Cycle Theory explains exactly this. When interest rates are too low, people go elsewhere for returns, resulting in malinvestment. What it doesn't do is predict when the crash will happen, or say how to spot which investments are bad.

[fzzzy]

I'd just like to point out that the tech pay explosion likely has a lot to do with this: https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...

[Lavery]

No question that played a role, but it's not like the settlement happened in 2011 and then salaries immediately corrected to the current levels and stayed. This has been a steady climb upwards.