I have no idea how this bet will come out but I was not pursuaded by Sam's argument because he did not address the root cause of the bubble. Put another way, he's sitting on the surface of a bubble and pointing out that there's not a bubble rising from that surface.

He's saying that there's innovation and the innovation makes these companies more valuable-- on that we can all agree. Whether VC investments are correctly valuing companies or not at various stages, I don't even think that's an issue, so I will take his general assertion that they reasonably are. To the extent that people think that the nature of a the "bubble" is unrealistic valuations, I think it's silly to say there's a bubble. That's not the bubble. The actual bubble causes these high valuations but has nothing to do with VC judgement -- who are all acting based on the pricing information they're getting from the market-- so that they are being irrational is due to the irrational pricing info they are getting, not due to having lost their senses. The irrational pricing info is that the cost of money is way too cheap.

The bubble is not a startup funding bubble, it's a dollar bubble.

The main argument for us being in a bubble is not that we're in a bubble of VC expectations for companies-- though that is a side argument that VCs expect google and Facebook to buy everything whatever the quality.

The main argument is that since 2001 and especially since 2008 the money spigot has been opened wide. Helicopter Ben is in full effect. The 2008 bubble was a direct consequence of that spigot being open, combined with interest rates being held below the cost of money and the Clinton era "not loaning money to people who can't repay is racist" agenda and changes to the CRA that forced banks to make bad loans. Everything else that happened in 2002-2007 was secondary effects.

When 2008 happened the spigots were opened even wider, the interest rates forced lower ,and now, instead of having an open market for T-bills the federal reserve itself is buying them. Totally distorting the market.

The short description of what that means is that money is really cheap-- really cheap for the institutional types that have a lot of it already, and especially really cheap for anyone who can go to the federal reserve window. EG Banks. T he banks have all this money and have to put it somewhere that earns a return over the borrowing cost (carry)... which from the Fed is even cheaper than the money you lend them in your savings and checking accounts.

The way the money spigot works is it filter thru tiers of the economy. Banks lend as much as they can which produces economic growth (though not without cost, hence the whole misrepresenting this system as Keynesian-- keynes recognized the cost and danger of this, but everyone who claims to be "keynesian" since then and advocates this system seems to ignore the cost and danger.).... and a lot of it hits the stock market and then even more risky ventures.

All this money in the VC pockets chasing startups is originating at the federal reserve as they shove money into the economy.

Sam talks about "interest rates rising". Well, interest rates would have risen, but the fed is providing unlimited demand for T-bills so that's distorting a market signal. The FOMC is providing unlimited money to paper short gold, so that's distorting another market signal.

I don't know how it will break-- just as I wasn't sure how the housing crisis would break in 2008, even though I knew there was a bubble (and at that time, by the way, everyone said there wasn't a bubble. They also said there wasn't a bubble in 1999. How old was Sam in 1999? I honestly don't know but I'm guessing he was not 18.)

And all of this is on top of a hundred years (since the founding of the federal reserve) of exporting the effects of US dollar inflation onto other economies-- most of which were weaker than us but now are reaching parity and don't need the dollar to back their currencies so much anymore.

The bubble is not a startup funding bubble, it's a dollar bubble.

I'm certain we are in one. I have no idea if it will bust in the next 5 years. But when it does, it will be worse than 2008, 1999 and the 1930s combined.