I've called the kneejerk "bubble" reactions "boring" [1] and I stand by that. That doesn't mean I disagree (or agree for that matter). It just means that banal perjoratives with nothing to back them up are boring.

To call this a bubble, one must first describe what one means by a bubble. A bubble in my mind is a period of rapid growth in valuations followed by a massive devaluation on such a scale that it hinders investment and innovation.

The subprime collapse was a bubble. Many people were left underwater on their mortgages. Building in many places stopped for years. This has a knock-on effect on jobs, related industries and so on. That's a bubble.

The dotcom collapse was also a bubble. But there are several differences this time around:

1. Startup costs now, for most Internet startups, are essentially zero. 10+ years ago you had to spend $5-10M to do anything (once you paid for Sun servers, Oracle licenses and so on);

2. Lax listing requirements, particularly on the NASDAQ, helped perpetuate fraud;

3. There was no experience to draw on (from living memory at least). Now we hopefully know a little better;

4. Sarbanes-Oxley, clusterfuck that it is, has at least kept the number of Internet companies IPOing relatively low. This has some negative consequences too but it means that retail investors and mutual funds have largely been excluded from the startup scene, which honestly is a Good Thing [tm]; and

5. Now, as opposed to then, there are real businesses operating in the tech space who are generating profits on a scale not seen in probably a century or more. Apple, for example, is worth >$500B market cap now and by some estimates that's still cheap given their profits.

10+ years ago investment dried up, capital dried up and legitimate businesses couldn't start or continue to operate, which had a domino effect.

What happens if next month Facebook goes from $100B valuation to $10B? Honestly, not a lot. Late stage investors will lose their shirts. That's fine. VC is a high-risk business. Individuals who participate in the IPO will lose a lot of money. That's not ideal but so be it.

But the important thing to ask is: what will happen to the system as a whole? Startups will still start. When you can build a mobile app and business for $50k the capital markets are basically irrelevant to you. Apple, Google, Microsoft and others will remain. Life will go on.

The low cost of startups is itself a barrier to institutional investment (by pension funds and the like) because the amounts are too small. Again, that's a Good Thing [tm].

What's really happening here is a lot of money is changing hands between VCs and endowment funds and honestly in relative terms it's not that much money.

Speaking to some examples (recent and otherwise):

- Instagram: I think this purchase was overvalued but, if anything, it demonstrates just what a high-risk investment Facebook is if a company can go from nothing to being an existential threat in 2 years. I honestly believe Facebook was taking them out of the market with this buy;

- Pinterest: through affiliate and advertising revenue I see potential for this company to be a huge business with massive ability to drive traffic to commerce sites. Make no mistake, this is a real business. It's not without risk but the potential is huge;

- Youtube: I bring this one up because it went, in 18 months, from being nothing to being bought by Google for >$1.5B (IIRC). Some said now it was overpaying. Honestly, in hindsight I think that price may well have been a massive bargain.

Just because you don't see potential doesn't mean there isn't any. Just because something ends up failing doesn't mean the risk wasn't worth taking.

The reason the kneejerk bubble accusations annoy me is that they come from the sort of people who seem so averse to risk that they neve take any. That is, until the very peak of the bubble (when they finally convince themselves this can go on forever).

Please, I beg of you, if you're going to jump and down and yell "bubble" at least add something to the conversation or back it up with something. A >$1B valuation on a funding round doesn't actually mean anything.

Disclaimer: I work for Google.

EDIT: I forgot to address a couple of points.

Firstly, I too find it depressing what a lot of us are working on [2] [3]. The fact that SpaceX can revolutionize launch costs for less money than was spent on Instagram is sobering and depressing.

Secondly, it is incredibly hard to hire good engineers. I don't see this as evidence of a bubble. I see this as evidence that:

a) (good) engineering is hard;

b) when other costs (bandwidth, servers, software) go to zero, demand for manpower will go up because businesses that once weren't possible or viable will become so; and

c) in a world where anyone can be a founder, it makes no sense to stick to 90s era equity arrangements. To be honest, being an early employee is a lottery ticket and, generally speaking, a shitty deal. Last cofounder = 25-50%. First employee = 1-2%. If good talent is better off working on their own startup you shouldn't be surprised that they do.

[1]: http://news.ycombinator.com/item?id=3985393

[2]: http://news.ycombinator.com/item?id=3876897

[3]: http://www.youtube.com/watch?v=vKmQW_Nkfk8