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There is NO Bubble…There is Entrepreneur Envy!

First off, there is no bubble today. Once and for all for every ‘journalist’ that calls me or any future question I get on the subject. Nyet, Nada, Nope.

We had ONE bubble in my lifetime and it was a ‘credit bubble’. We are still in it, seeing the effects of the unwinding and have a long way to go. I wrote heavily about the real-estate credit bubble from 2006-2008 as I was ground zero in Phoenix in the hottest ‘highest priced’ office that was filling up with the shmendrick brokers. Here is the defining post of my time in the building from March 2007 :

I have great office space in Phoenix. My good friend Blair grants it to me as long as I wear socks. I don’t. I WON’T!

Blair is a lender. A good one.

We share the 10th floor with Cushman Wakefield a big Commercial Broker. After a Starbucks, I have my jaunt to our shared bathroom on the floor. It has been getting more crowded. I have suggested a schedule of sorts. Not well taken.

Maybe it’s that I am prone to walk into their huge staff meetings with a pad and paper and fake like an employee. It’s the Costanza in me.

Back to the point…The bathroom indicator is flashing RED.

The bathroom is overflowing with agents. Throughout the last three years as people talked of a bubble I never got that feel. The Cushman people are pro’s and they never seemed too giddy.

Now that I am sharing the toilets with 50 new young guns, I am changing my tune.

There will be some good prices on leases in the next few years. Keep you powder dry, the leases short and your personal guarantees in your pocket. If you have to lease something now, squeeze (no pun intended) together and don’t overextend.

The internet of 1999 was a mania. What we are seeing today in web/tech is a phenomenon. People can’t value social graphs. It’s too new. Thousands of companies are starting because the opportunity to lay a claim in this phenomenon is possible.

People should be thrilled about one thing…’LIFE HAS GONE ON’. It’s different for sure and there is much pain for those stuck in their underwater homes. If you are reading the papers or watching TV you are missing the truth. Prices are moving up and too the right in everything but your home.

There are many retail stocks up 20 times on the backs of ‘tapped’ consumers. There are many oil and gas stocks up the same. Biotech and medical stocks are rocking. Software is booming. Apple and IBM are exploding with cash and growth. The media latches on to Steve Jobs not distributing the cash and thank god he laughs in their faces. Why should he trust the public with that cash. The public has proven to be imbeciles.

Most importantly for the upside of the market, no one owns stocks. There are millions of traders flipping stock with institutions in high growth names, but there are no rational conversations about the growth opportunities.

All the while, entrepreneurs are chasing dreams with little bits of angel and venture money. Companies with massive opportunity and now loads of cash are going public and dominating their verticals or mindshare. That’s not a bubble.

We the entrepreneurs believe at some level that we have the next Facebook, Linked In, Google, Pandora and our passion, fear, hunger and envy drives us. First hand let me tell you how humbling it is to have a board meeting with the investors in Zynga and WordPress – to name a couple- and explain our growth.

We are the early stages of a cycle and we need as much enthusiasm as we can get. There will be oodles of time for bubble talk in 2015.

Heads down please.

  • http://www.pointsandfigures.com pointsnfigures

    No bubble I agree.  Hyde Park Angels is seeing more deal flow in the “social graph” space. So, yeah, there is a proliferation of companies trying to cash in on the social facets of the internet.  With the valuation of LinkedIN, Facebook, Twitter and others, can you blame them???  

    These aren’t pension funds tossing money into the market.  It’s smart accredited investors taking a calculated risk.  There is no systemic risk to society if a bunch of rich individuals put there money into losing enterprises.  

    • http://www.howardlindzon.com howardlindzon

      indeed. It’s why I have been writing and reading less the last few months.
      The only interesting thing right now is Google Plus and running my own
      business in the face of the awful predictions I am hearing .

  • http://www.ipatient.com Dan Munro

    As always – a fun read – but don’t recall the Cushman office.  That must have been before your solo digs at 40th/Camelback?  Could have sworn you wore socks too ;-)  

    • http://www.howardlindzon.com howardlindzon

      the cushman office was at the esplinade and took over our whole floor…now completely gone…Blair of course is right there still banging away.

  • http://www.davidblerner.com davidblerner

    bravo Howard- appreciate you weighing in on this… now I can email this link to other bubble-babbling friends who never listen to my opinion anyway! -dave

  • The Fly

    Great post

    • http://pulse.yahoo.com/_EBKB3Z4PZJQXVLURAWL7MGAHCE Redwood Mtn

      This is the 1st non-abusive post by Fly that I read! Indeed!

  • http://www.ivanhoff.com ivanhoff

    Talking bubbles on the front pages of mainstream media is the best thing that can happen to an industry. It is the ultimate indicator that there is more room left to grow. It provides free press and it is a step forward towards its turning into a separate asset class, which is among the most important catalysts for further price growth. 

    Worry when everyone gets excited and bubble talk is moved to unnoticeable small columns at the back pages. I define bubble as unsustainable growth and valuation. Pointing to a bubble has nothing to do with the proper timing of its end.

    • http://www.howardlindzon.com howardlindzon

      probably a great reverse indicator indeed.  I remember the picture of a house with a piggybank on it on businessweek at the TOP

  • http://mrunexpectedly.wordpress.com Mr. Unexpectedly

    Comparing a credit bubble and a tech bubble makes no sense to me, as the future valuations are based on wildly different metrics. I don’t at all disparage what you do (on this blog, on stocktwits, or on twitter), but the pervasive notion that a downward-disappearing middle class and a rich/poor gap worthy of a banana republic will simply ride a wave of Engrossing Innovation into a bright new tomorrow (which same wave, by the way, provides few new [domestic] jobs but plenty of stuff to buy and/or use for free while you can’t pay for food or energy in the general “up and to the right” market recovery) is as bubblicious as a Carleton Sheets infomercial circa 2005.

    • http://www.howardlindzon.com howardlindzon

      You are entitled to your opinion. We innovate and the rest of the world
      copies and chases. Lots of margin in being first

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  • @johndayani

    Well said. Let’s change the world today & save the pessimism for 2015! #in

  • http://www.harlemghost.blogspot.com/ HarlemGhost

    solutions in search of a problem …  Facebook will not exist in 10 years …

    • http://www.howardlindzon.com howardlindzon

      This post was not about fcebook which is the one problem stock

  • http://www.linkedin.com/in/scottjhoward ScottjHoward

    Please let this be the definitive post on this topic. Lets put this to bed and get to the business of building great companies. You know companies with hockey stick revenue growth and awesome profit performance. Speculation is a problem for the accountants on Wall St, not entrepreneurs out here creating value. 

  • http://twitter.com/RickBullotta Rick Bullotta

    Probably no macro bubble, but certainly plenty of “bubblets” in and around SoMoLo.  One can’t look at debacles like Color and not think that isn’t a heightened element of lunacy in some sectors…and the investor community is every bit as complicit as some of the clone/feature/??? startups who bring with them an overwhelming reminder of the “emperor’s new clothes” phenomenon in the tech investing world. 

    I think you accurate account for the majority of entrepreneurs and investors who have the passion, drive, and belief in their calling.  But I do think that the lure of a quick flip and easy money has increased the percentage of scumbags and shysters, and those bad apples can spoil at least the perception of the whole bunch.   

    • http://www.howardlindzon.com howardlindzon

      yes rick…I cant argue that

  • Kevin

    just compute earnings per share and you’ll see that you’re wrong. there most definitely is a bubble.  companies are being overvalued by 10-100X in terms of opportunity cost of capital.  it’s irrational to predict 100x growth for groupon and facebook, etc.  look at startups like color and airbnb. or pandora.  they’re being irrationally overvalued in terms of profit per capitalized dollar. calling a bubble a bubble and celebrating entrepreneurship are not exclusive.  for some reason you’re offended as an entrepreneur that people are questioning the values companies are being ascribed.  google makes tons of money, pandora does not.  the “bubble” simply refers to the monetary value being ascribed to pandora, as if it were making money like google.  it’s not mean spirited or driven by envy, it’s simply a sober assessment of valuations.

    • http://www.howardlindzon.com howardlindzon

      We agree to disagree.

  • http://sco.tt Scott Yates

    “Up and _too_ the right”?!?!?!?

    That’s just too much “too” for me too take too times!

  • http://michaelkdawson.com/ TrendRida

    The Talking Heads missed the internet & credit implosions.  Now the safe route is to say that everything going up is a bubble. Just good old fashion CYA….

  • Jason

    I fundamentally disagree. BS start-ups are being funded on stratospheric valuations daily, simply because of the envy of VC and investor types who are leaping over their desks to fund anything with a pulse that they otherwise would never look at. To make it worse, businesses with SOLID EBITDA are being passed over daily for the next social media type property coming out of the valley. The crash is coming and it’s sooner than 2015.

    • http://www.howardlindzon.com howardlindzon

      ok. we hear you. we just disagree. i dont bet on crashes and best sellers
      before they happen.

  • Tony

    I read a similarly-inspired post a few weeks ago.

    A quote from “We’re Bullish on Human Beings” reads:
    http://www.wealthvault.net/high-jinks/investing-in-people/

    “Because regardless of political incompetence, and ill-advised moves on Capitol Hill — or across any other major world economy — the business cycle doesn’t stop. We humans, as long as we’re around, WANT and NEED new and improved ‘stuff.’

    “And somebody — a business — has to make it….”

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  • AXD42

    No one ever sees a bubble while they’re in it.  From the Tulip Bubble of the 1600s to the Housing Bubble of the 2000s, those who had a stake in perpetuating it always say the same thing.  “This one is different”.  It never is.  It always ends the same way.

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  • Michael Libert

    Looking at the IPO market as a sign of appetite for risk, we can still see some headroom from the bubble days of ’00.  Exits have a way to climb before people should run for the sidelines.  Sure, funding is increasing, but we are still in the middle of a growth phase where commercialization is starting to occur for many new companies.  Real growth, driven by revenue and profit $, will truly start to accrue over the next three year cycle.  Will valuations come back into check?  Possibly.  Will fundamentals also start to perform?  For sure!  I’m optimistic. 

  • http://breakoutperformance.blogspot.com ericjackson

    Good comments on the inability to value the social graph. You see McNamee’s comments on that in his LA talk last month?

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