Facebook, Instagram, Ben Bernanke: Thank You for the New Tech Bubble
Apr 19, 2012
When an 18 month-old photo-sharing company consisting of about a dozen guys and no real revenues is purchased for $1 billion dollars, do we need any clearer reminder of how batshit crazy things are?
Those who continue to inflate the tech bubble will be quick to remind us all of how they’ve learned from the past. That , who by August of 2011 had uploaded .. They do have a point. Silicon Valley (and Alley) have matured. Startups these days are focused, driven, and efficient, creating products that people actually use. In a period of less than a year after its launch, Instagram was used by
In regular terms, quantitative easing is a fancy way of saying “print motherfucker, print,” essentially flooding the markets with cash that’s cheap to borrow. And with rates as low as they are, those in the money need somewhere to park their green. Many have looked to the equities market, which is why we’re seeing the likes of Apple flirt with a market cap of $1 trillion. But there are only so many mature tech companies worth betting on. Others of course, have turned to tech startups, perhaps inspired by the unbridled enthusiasm of the likes of Yuri Miller’s Digital Sky Technologies with their now choice-looking investments in Facebook, Zynga, and Groupon. That Aaron Sorkin movie probably didn’t help.
In some ways, it’s capitalism at its finest: the efficient reallocation of capital into more efficient and relevant assets. That more money is flowing into technology is not necessarily a bad thing — if we were able to look at things objectively. The problem with bubbles is that the ups and downs create an emotionally-charged frenzy that prevents us from thinking clearly, the result being unrealistic expectations.
Some (like Obama) have long hailed tech as a savior of the faltering economy (he even started at the Dept. of Energy). Meanwhile, computers may very well be , despite what Apple’s PR guys might have you believe. The endgame then is filled with disappointment, anger and backlash.
For now, when you put it into perspective, Facebook’s giant purchase of Instagram doesn’t look too bad after all. It’s more coherent babble in the mad house. As Saft writes, “Facebook is making rational decisions within a context which is fundamentally irrational. Facebook has been awarded a valuation of its own shares and business which is likely hugely in excess of their actual promise. That valuation is predicated, in large part, on their dominant position within social media. They are being paid because they have the best network.”
For Facebook, which launches its , the deal just makes sense. They have cash so it doesn’t matter and no longer need they worry about Instagram. In a way, it signals the true end of the disruptive phase of this bubble. Those in ascension — the Facebooks, Apples, and Twitters — are consolidating power much like Microsoft and later Google did before them. So for those watching, this time may be different, but that doesn’t mean a bubble isn’t . No fancy hipstamatic filter will be able to pretty that up.
- Facebook, Instagram, Ben Bernanke: Thank You For the New Tech Bubble (news.slashdot.org)
- Another Tech Bubble? Maybe Not (npr.org)
- Joe Weisenthal on John Hussman on Ben Bernanke (delong.typepad.com)
- Does $1 Billion Instagram Purchase Prove Social Media Bubble? (bigthink.com)
- How Did Ben Bernanke Muscle Fed Prez Fisher? (economicpolicyjournal.com)
- Bernanke defends Fed response to financial crisis (headlineclicker.com)
- Russell Sage-Century Foundation “Rethinking Finance” Conference: Ben Bernanke (delong.typepad.com)
- Bernanke Q&A: Still Need To Watch Shadow Banking Problems (forexlive.com)
- Finance Friday (Rewind): Fed Chairman Bernanke delivers Part One of a four-part series (vaned.typepad.com)
- Bernanke defends Fed response to financial crisis (seattlepi.com)