Mark Cuban has created an uproar by suggesting that we are in the middle of a Tech bubble, much bigger than one seen in 2000, and it may all end badly soon. Mr Cuban, who made his billions on the back of the bubbles, is someone to be listened to - and he is surely sounding apocalyptic. It is therefore worth looking at his argument closely and putting it in context.
The apocalyptic part of this warning is based on common sense. He is pointing out that todays billion dollar valuations are driven primarily by private capital, private equity and all that, as opposed to the IPO-led bubble that we had last time around. And, indeed, in a privately funded bubble, if and when it bursts, there will be no exits for too many people. In this setting, it will not be about doing a fire sale, it will be about just closing doors and going home.
This part of his argument makes sense. If the bubble pops, there is a real possibility of a quicker and nastier fall-out than what we saw in 2000. However, the central question is whether there is indeed a bubble. While Steve Case and others contested this almost immediately, it may still be worth reflecting upon.
If a bubble has to be defined in terms of symptoms - uneducated investors, outsized valuations not backed by fundamentals and fever pitch in the media - they are all present. Indeed, private valuations, backed by willing banks and loose money, are more prone to excesses than public markets. Privately funded bubbles can last longer, because everyones incentives may be aligned, but unexpected external events, say a slowdown in China and end of easy money, can start a stampede.
However, over and above just the symptoms, there is another fundamental weakness of the current tech investment philosophy. The defining characteristic of tech investment this time around is the philosophy of Software eating the World, in Marc Andresens now-classic words. More appropriately, this is about technology breaking into areas dominated by the most powerful institution ever invented - the State! The new wave of investments are going into tech companies working in Education, Transportation, Energy and Healthcare, with its primary value proposition centred around circumventing and disrupting the State as it exists today.
This is the key assumption that the success or failure of the technology investments hinge on this. If the current regulatory environment continues to exist, the tech bubble will surely burst. The business models of the sharing economy is plainly illegal, and global universities and transportation companies are operating within grey areas. This may indeed seem logical sitting in some parts of California, New York or London, but from other vantage point, it does seem the state is pushing back. Indeed, if a History of regulations was written, one would notice that the State always pushes back after a period of relative deregulation (not least because businesses keep pushing the boundaries and ultimately overdo it). This may indeed be one such moment, where the uncertainties and dangers of the globalised world - think Putin, ISIS, Cowboy bankers and all that - are generating consensus about strong interventionist states and fortified boundaries, not deregulation, flexibility and openness. The history-blind investors are betting on a globalisation apocalypse, though they continue to watch regulatory overreach in United States, their own backyard, and only blame Obama personally for the same.
Given that this, flawed, assumption underpins huge valuation, high and growing, there could indeed be the making of a bubble. The problem indeed is the rather insular structure of the investment community, which, given the concentration of wealth and private nature of investments, the herd mentality, which makes a bubble, is so easy to spot. With all this, Mr Cuban should be listened to, not dismissed out of hand being one of those bubble profiteers who may be merely advancing his own cause.
Popular posts from this blog
A friend has recently forwarded me a quote from Lord Macaulay's speech in the British Parliament on 2nd February 1835. I reproduce the quote below: "I have traveled across the length and breadth of India and I have not seen one person who is a beggar, who is a thief. Such wealth I have seen in this country, such high moral values, people of such calibre, that I do not think we would ever conquer this country, unless we break the very backbone of this nation, which is her spiritual and cultural heritage, and, therefore, I propose that we replace her old and ancient education system, her culture, for if the Indians think that all that is foreign and English is good and greater than their own, they will lose their self-esteem, their native self-culture and they will become what we want them, a truly dominated nation." The email requested me to forward me to every indian I know. I was tempted, but there were two oddities about this quote. First, the language, which
Introduction : The Business of Gift Giving Business gift giving has always been common and contentious at the same time. Business gifts are usually seen as an ‘advertising, sales promotion and marketing communication medium’ (Cooper et al , 1991). Arunthanes et al (1994) points out that such gifting is practised usually for three reasons: (a) in appreciation for past client relationships, placing a new order, referrals to other clients, etc.; (b) in the hopes of creating a positive, first impression which might help to establish an initial business relationship; and (c) giving may be perceived as a quid Pro quo (i.e. returning a favour or expecting a favour in return for something). The practitioners of gift-giving generally argue that doing business is often an aggregation of personal interactions and relationships, and gift-giving should be seen as a natural way of maintaining and enhancing these relationships. ‘Business gifts, especially one given in the course of the festive s
Buzzwords have disadvantages. Right now, experiential learning is one, and that means we put the label on everything and it stops to mean anything. Also, this means reasonable conversation about experiential learning becomes difficult - at times such as this, either you preach experiential learning or you are traditional, antiquarian and hopelessly out of touch. But, overlooking the limitations of experiential learning can cause big problems. Experiential Learning does many things - putting practice at the heart of learning is an important paradigm shift - but not everything, and it is important to be aware what it does not do. Usually, we equate the terms Project-based Learning (the method) with Experiential Learning (the idea) and Learning from Experience (the ideal), treating them as one and the same and using the terms interchangeably. Any talk about distinctive meaning of these terms is usually seen as pedantic, but really represent very different ideas about education.
There is no other city like Kolkata for me: It is Home. The only city where I don't have to find a reason to go to, or to love. It is one city hardwired into my identity, and despite being away for a decade, that refuses to go away. People stay away from their homeland for a variety of reasons. But, as I have come to feel, no one can be completely happy to be away. One may find fame or fortune, love and learning, in another land, but they always live an incomplete life. They bring home broken bits of their homeland into their awkward daily existence, a cushion somewhere, a broken conversation in mother tongue some other time, always rediscovering the land they left behind for that brief moment of wanting to be themselves. The cruelest punishment, therefore, for a man who lives abroad is when his love for his land is denied. It is indeed often denied, because the pursuit of work, knowledge or love seemed to have gotten priority over the attraction of the land. This is particularly
Today, Helen Goddard, 26, a highly popular music teacher of a City School for Girls, has been sentenced to 15 months in prison. Her crime was to carry out a year long lesbian affair with one of her pupils, who appeared in the court and admitted that the affair was consensual and it was she who pressured Helen into the affair. For Helen, a bright musician and a devout Chistian, this is an extraordinary lapse of judgement. Also, she was teaching in the £13,000 private girls only school in London. She was surely aware what the consequences of her action will be. The fact that she still could not stop herself tells us that lovers do not always act rationally, something we always knew. There is more in this affair than personal tragedies. For a start, this has all the dramatic elements: a bright, beautiful teacher more in Julia Roberts mould [as in Mona Lisa Smile], a stiff upper lip school [not unlike Wellesley] and a story like Notes On A Scandal with an added twist. Indeed, Helen
In most societies today, making profits are accepted as moral, if not especially praiseworthy. This was not as obvious as it appears today – people used to be embarrassed about making a profit not so long ago. Crazy as it seems today, it is worth thinking why it was so. Profits, as economists will put it, is the reward for risk-taking, for putting a business enterprise together in the pursuit of an objective. In this definition, remember, profits are not what it is commonly understood to be – the gross middle-line towards the bottom – but a figure net of entrepreneur’s earning [wages for his labour], dividends and interests on borrowed capital, and provisions for building and other physical assets [a sort of rent, offsetting what these assets could have earned if leased out]. This pure profit – surplus – accrues to a business as a reward to its organisation, for the act of entrepreneurship itself. Economists were divided on how this surplus comes about. The conventional wisdom was,
Introduction: Hastings in the history of Indian Education Whether or not one includes Warren Hastings in the history of Education in India is a matter of perspective. If writing the history of education means writing the history of schools, the impact of Hastings' administration would be quite limited. If anything, the rapid implosion of local rulers in Eastern, Southern and Northern India during Hastings' tenure had meant a bleak period for the indigenous education system, as patronage and funds would have dwindled away for many of them. The Company administration really concerned itself with the schooling of the natives only after 1813, as Nurullah and Naik rightly pointed out ( see my earlier post ) and one can legitimately start the story at this point. However, if history of Education in India is to encompass the transformation of Indian Scholarship, on which foundation the new, colonial, system of Education would be built, the story must start with Warren Hast
I wrote a note on Kolkata, the city I come from and would always belong to, in July 2010. Since then, the post attracted many visitors and comments, mostly critical, as most people, including those from Kolkata, couldn't see any future for the city. My current effort, some 18 months down the line, is also prompted by a recent article in The Economist, The City That Got Left Behind , which echo the pessimism somewhat. I, at least emotionally, disagree to all the pessimism: After all Kolkata is home and I live in the hope of an eventual return. Indeed, some change has happened since I wrote my earlier post: The geriatric Leftist government that ruled the state for more than 30 years was summarily dispatched, and was replaced by a lumpen-capitalist populist government. Kolkata looked without a future with the clueless leftists at the helm; it now looks without hope. However, apart from bad governance, there is no reason why Kolkata had to be poor and hopeless. It sits right
In our age, the only way to be politically correct is to be democratic. This is a post-70s affair - those days, still, some people had alternative ideologies in mind. Those alternate ideas are dead and gone, long discredited, and it seems that we have only one system which can make people happy, free and live longer. So, we have this huge export industry of democracy, and democracy's warriors, which the American security establishment has lately become. The democracy's businessmen, the bond traders, the media barons and the Hollywood types, are feted everywhere. The consensus is deafening and dumbing. It is indeed awkward to ask now - whether democracy is the right system for every society. It indeed should be. Collective wisdom is better than individual autocracy. In societies where democratic elections have been few and far between, the popular vote has demonstrated the extra-ordinary political savvy of the usually disinterested masses. Democracy has proved to be an excell
Introduction Erna Petri née Kürbs, a farmer’s daughter from Herressen in Thuringia, arrived in Ukraine with her three year old son to join her husband Horst in June 1942. Horst, an SS leader inspired by Nazi ideologue Dr Richard Walter Darré, settled in the plantation of Grzenda, just outside today’s Lviv, to become a German Gentleman-Farmer. Erna saw Horst beating and abusing the workers in the plantation within two days of arriving there, which was, as Horst explained, necessary for establishing authority. Erna joined in enthusiastically, settling into a combination of roles of ‘plantation mistress, prairie Madonna in apron-covered dress lording over slave labourers, infant-carrying, gun-wielding Hausfrau.’  However, there were clear rules in the plantation, and Erna was very much expected to play the woman’s role of being a Cake-and-Coffee hostess. When four Jews were caught in the estate while trying to escape from a transport to a death camp, Horst told Erna and her female
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.