[mcmullen]

One of the later episodes of the a16z podcast featured Marc Andreessen and Benedict Evans. They were discussing technology valuations and made some good points. Though I disagreed with their "no bubble" consensus, they were right in mentioning the classic "Russian oil money" and "new players" argument. Previously, most tech investing was done by U.S. venture capitalists. (One of the reasons why non-U.S. start-ups find it hard to fund themselves.)

However with multi-billion dollar technology floats like Facebook taking place - many, many people are taking notice and bringing lots of money with them. This, obviously, increases demand which in-turn increases prices. That's all. If, or indeed when, the bubble pops and people realise that these businesses aren't worth the price paid, I suspect it won't lead to the type of crisis that occurred in 00/08 - just lots of rich people with less money.

[pyoung]

"just lots of rich people with less money."

My original take on the "bubble" was somewhat in line with this. However, the more I think about it, the more I am inclined to believe that this will "trickle down" in many ways. Fewer investments will lead to fewer jobs. In SV, this could lead to a cooling down (or worse) of the labor market. The established players (Google, Apple, Amazon, etc) will probably pull through alright, but the VC money will thin out. If I was a software engineer and I wanted to hedge my bets, I would probably try get a job at one of the bigger, more stable companies in the next year. If things do cool down, I imagine that programmer jobs and salaries will be the most noticeable side effect.

Of course I could be entirely wrong. It's possible that VC money makes up only a small fraction of the demand for software engineers. After all, almost every industry under the sun is shifting towards (or wants to shift towards) higher levels of automation and efficiency using computers and software.

[mcmullen]

You're absolutely right that "trickle down" occurs. Basic logic suggests that if lots of businesses have lots of funding, and that funding dries up, there will inevitably be job losses because they have to be funded from somewhere.

However, I wouldn't worry too much because technology is clearly the future and the need for technology professionals will continue to grow. These stupidly high valuations are for, I hope, decent businesses. By that virtue, they will get the funding they need - just not the scale that we have seen. Hence, I used "just lots of rich people will less money" because the people set to lose out are the huge investment vehicles who seem to be huddled around the Valley at present. The highly skilled engineers needn't worry because the likes of Mr. Wilson and Mr. Andreessen aren't going anywhere, and the average Joe Bloggs needn't worry because their pensions aren't at risk. The people who should worry are those who watched the Facebook float and said, "Shit, I need some of that action!"

As always, it's the stupid that lose out. Fortunately, the stupid ones aren't providing our mortgages or issuing our credit cards this time. (Namely, Royal Bank of Scotland, Bank of America, et al.)

But, hey - I'm just a 24 year old CS grad come IT consultant, what do I know?