In a letter to investors this week, top Wall Street hedge fund manager David Einhorn warned “we are witnessing our second tech bubble in 15 years.” Market watchers point to soaring venture capital investments and the recent billion-dollar sales of tech companies Oculus and WhatsApp, which some observers say were overvalued. We’ll talk about the possibility of a bubble, and what it could mean for investors, tech workers and the Bay Area economy.

Are We in Another Tech Bubble? 25 April,2014forum

Jeffrey Pfeffer, professor of organizational behavior at the Graduate School of Business at Stanford University and author of "Power: Why Some People Have It -- and Others Don't"
Chris O'Brien, technology reporter for The Los Angeles Times
Jon Haveman, principal with Marin Economic Consulting, LLC
Barry Ritholtz, chairman and chief investment officer, Ritholtz Wealth Management

  • thucy

    “Are we in another tech bubble?”

    Wait – this is debatable?

    I didn’t realize that it was possible, in the age of the $10 bil AirBNB valuation, and whatsapp at $19 billion, and something called KandyKrush actually HAVING a valuation, I mean, I just didn’t realize that it was possible to suggest, or even to argue, that we are NOT in a massive, stupid, about-to-implode tech bubble.

    • The makers of Candy Crush made $1.8 billion in 2013.


      It seems to me that those who insist that we’re in a tech bubble are, like you, completely ignorant about what’s actually going on in the tech sector right now.

      • thucy

        Hmmm… should we also assume, along your lines of reasoning, that both Professor Pfeffer and David Einhorn are also “completely ignorant about what’s actually going on in the tech sector right now”?
        I think both gentlemen have made lucid and reasonable arguments supporting the notion that this is a bubble – if not in tech, then per Robert Thomas’ comment, in tech-RELATED fluff.

        • Nice deflection to try to get people to ignore the fact that you were totally wrong and utterly clueless about the current value of Candy Crush.

  • Guest

    We’ve had a huge accumulation of wealth in a few companies. With lots of cash, these big companies have been making very large numbers of acquisitions, literally buying 10-20 small companies per year. Think Apple, Cisco, etc. What we are seeing is mainly not a tech bubble but rather something like a land grab, the land in question being software and hardware patents. This consolidation of property and power into a few large corporations has shut out the rest of the market. Investors, in their desperation to gamble before everything is bought up, have fixated on remaining high-risk options like Kandy Krush.

    Apple: http://techcrunch.com/2014/04/23/apple-acquired-24-companies-in-the-last-18-months/
    Cisco: http://en.wikipedia.org/wiki/List_of_acquisitions_by_Cisco_Systems

    • Robert Thomas

      Inexplicably, Frank yet again produces a remarkably lucid comment.

  • thucy

    Is it fair to disclose that KQED, which receives significant funding from Google, which is itself highly invested in the tech bubble and its continued buoyancy, may not be in a position to feature guests and hosts who can call this market for what it is?
    Perhaps that is why the topic is “Are we in another tech bubble?” rather than, “When does this thing blow up in our faces?”

    • Guest

      KPFA would be a better place for this discussion.

      Actually Pando Daily had a good investigative piece about Google’s connection with Blackwater and other military companies. Maybe Pando has a podcast?

  • William – SF

    Bubble smubble … what socially redeeming value are these companies offering? (Narcissism isn’t one, in case that isn’t obvious.)

    Isn’t finance just chasing the most available target to pump before they dump?

    • What socially redeeming value are TV or film companies offering? Are we in a “film bubble” just because Michael Bay can make hundreds of millions of dollars making terrible, soulless films?

      • thucy

        Can you address Bill’s point, which is:

        “Isn’t finance just chasing the most available target to pump before they dump?”

        Which brings us back to the definition of a spec bubble, per the FT’s Edward Chancellor.

        • I don’t think so, no. Now that the influence of advertising in print and even traditional video media is waning finance seems to be chasing the new advertising platform.

  • John

    The ongoing feverish investment in an infinite number of meaningless tech start-ups is a sign that there is too much cash in the economy. The creation of this tech bubble is only made possible by the excessive hoarding of wealth by a slim segment of society. Because the ultrarich just want to stash their money somewhere, they don’t care about broad-based economic growth or meaningful investment, which is why they’re willing to invest in totally useless crap made by know-nothing 21-year-olds, and don’t care about
    the effect their financing has on inequality, the health of municipalities, etc. So inequality (in our regressive tax system) will just begets more inequality
    (in the ruined cities the tech. industry leaves behind.)

  • thucy

    what a relief to hear Pfeffer as a guest. The other guest, Bubble-Denialist Ritholtz, might want to read The Financial Times’ Edward Chancellor’s classic “Devil Take the Hindmost: A History of Financial Speculation.” Under Chancellor’s definition, and by the definition of most sane people, this is a bubble.


  • Another Mike

    Carly Fiorina does not support the notion of Silicon Valley arrogance, because her personality was formed while climbing the ladder at an East Coast company before being picked to run HP — a job she was neither temperamentally suited for nor technically qualified to do. And HP was different from most Silicon Valley companies, because it was never based on a single great idea.

    Classify Fiorina as “East Coast arrogance.”

  • Another Mike

    One difference between today’s tech stocks and 2000’s tech stocks is that hardware is languishing. Only Apple stock is valued in the Facebook-Google range.

  • Jon-Edmond Abraham

    Honestly…the tech bubble is akin to a huge ugly zit here in San Francisco. When it pops it’ll be really ugly and messy. This thing is fueled by nothing more than pure greed! Speculators are all over the map on this issue continually fail to take into consideration the enormous cost to regular and long time residents here. My friends get thrown out of San Francisco altogether because there are scant protections against greedy landlords and wealthier renters who bid up the rents on just a few apartments. It always only takes a few and the rest of the landlords take the cue. Meanwhile San Francisco is filthier than ever from all the influx and the residents now on the streets.

  • Hadrien

    While the house market will be affected by the tech bubble but it might be good news for people and small/medium business that are being priced out of the house and talent market in the Bay Area currently, isn’t that a good thing?

  • Bill

    Maybe a Bubble for Big Data (http://www.ft.com/cms/s/2/21a6e7d8-b479-11e3-a09a-00144feabdc0.html#ixzz2zHBmjz3u), but maybe for Knowledge Based AI Systems it is a new dawn: http://swank.stanford.edu

  • Robert Thomas

    The companies that have been discussed, arguably with the exception of Google




    Companies like Facebook are “technology” companies like UPS is an automotive company.

    • thucy

      A. GREAT. POINT. (Seriously.)

    • Guest

      Facebook is a front company. Its real purpose is to collect information as part of the spying apparatus, and they do so using technology, not using salesmen. They appear to be selling software as a service, when actually they are like professional phishers.

      • Robert Thomas

        And… the cosmic balance of the universe is restored.

  • Jan Guffey

    OMG, the gentleman that just spoke about trying to buy a house in Hillsborough and having absentee owners as neighbors…his statement that Silicon Valley is protected is not about where I live in downtown San Jose. My human brothers and sisters are homeless, living by the creeks and under bridges here – they ARE affected by the economiy and the obscene income disparity in Silicon Valley

  • Robert Thomas

    After spending ten years at MIPS and Silicon Graphics, I was set to change jobs in 1999. I loved working at SGI, but for a long list of reasons, the party was over. Today, SGI B40 – B43 are called the “GooglePlex” and B20 is The Computer History Museum. C’est la vie.

    So I was actively exploring the Valley for alternatives in 1999 – 2000, looking for something different to do and for a new challenge.

    I was doing this, all through the period commonly thought of and referred to as the “bursting” of the “late ’90s tech bubble”. Oh no!

    But wait! I had all kinds of opportunities laid before me. I was a regular guy, with skills, but not any sort of famous person. During the exact same time when all of the newspapers (including prestigious Eastern Seaboard rags) were proclaiming catastrophe, I was taking sober calls from recruiters and talking to a short list of engineering directors. At the time, John Chambers was being criticized by many in the network machinery sector for having pumped orders among his customer base beyond the capacity of his customers to deploy; this was frustrating for a number of smaller networking companies and they were in distress. Else, there were plenty of opportunities available, and I snagged a very favorable one.

    What the world outside of the actual technology industry of the South Bay saw at that time was the rise of a lot of over-hyped sales and marketing companies with business plans (such as they were) depending on connecting consumers to purveyors using the internet as a medium. There was NO “technology” bubble. There was MUCH rending of garments over the occupation of a lot of “live-work” loft space in the Mission by School of Communications graduate “web designer” and “script monkey” carpetbaggers who helicoptered out as quickly as they had helicoptered in. HOOPLA! HOOPLA!

    There are upturns and downturns in our industry. The events of 1999 didn’t rate and the current spectacle of the inflation of a lot of billboard management companies like Facebook doesn’t rate, either.

    • Another Mike

      Just as the housing bubble spurred demand for lumber, flooring, drywall, etc., so did the dotcom bubble spur demand for servers, memory, networking equipment, etc. So the hardware companies were caught up in the dotcom bubble.

      • Robert Thomas

        To a degree there was something of a storm, as I say, among the lesser network machinery people but it was in fact only tangentially related to the “boom” and “bust” typified by the plight of on-line retailers that was in the press at the time.

        Friends of mine a Lucent, Juniper Networks and Cisco had noted the amount of excess networking hardware on their customers’ shelves at the end of 1998 and into 1999. Most agreed that Chambers was principally responsible; he had represented to the customer base that they would 1) require FAR more capacity over the next eight quarters than they had planned (partly in order to accommodate the on-line retail boom) and 2) they needed to order NOW, if they didn’t want to be caught with their pants down. The resulting bulge and subsequent slump in the core and edge router business did burn some smaller players. But the reasons for that “pump and slump” had little to do with the ridiculous “pets.com” stuff.

        In the computing machinery sector (Sun, SGI, Amdahl, Tandem, hp, IBM, CDC et.al) and among their compnent suppliers there was little effect

  • Robert Thomas

    You know, Mayor Bloomberg wanted to build “Silicon Sand Spit”, or something like that on Roosevelt Island. Maybe that’s going ahead with mayor De Blasio’s administration? I wish them well.

    Hewlett Packard was a powerful force for our region. What’s called Hewlett Packard now has very little to do with the company as it was in its heyday. That superb instrument manufacturer is now called Agilent; its superb component operation is now Avago Technologies.

    But at the beginning of 1956, when William Shockley leased “the quonset hut” at 391 South San Antonio in Mountain View (now a halal grocers with a rather forlorn palm tree in front), hp instruments were and would continue to be based on thermionic flux-valve technology. Varian Associates (1948) and Watkins-Johnson (1957) were world leaders in crucial microwave technology after WWII; Ampex of San Carlos (1944) used money provided by Bing Crosby to produce (copy) “appropriated” Nazi tape recording technology and to invent videotape. Lockheed, Westinghouse and IBM and our universities were instrumental in making the region an important basic research center.

    Shockley and his employees, including Noyce and Moore did something else. They brought the first transistor manufacturing operation to the Valley. Their colleague Jean Hoerni (another of the “traitorous eight”) at Shockley and at Fairchild invented the planar process:


    This single development, along with their silicon passivation technique (from a discovery made in 1955 by Carl Frosch at Bell Labs in Murray Hill) lead to an industry that completely displaced the germanium transistor technology favored in the established Eastern U.S. industrial complex. Intel reckons that sometime in 2015, there will be 1,200 quintillion transistors in service. These are not just ephemeral material states, they’re actual physical structures.


    Reasonable estimates have been made that the industry is responsible for 100s of trillions of dollars of todays global wealth.

    Snap your fingers, build some buildings, add a cafeteria with a rock-climbing wall and a row of foosball tables. Good luck to you.

  • Jon-Edmond Abraham

    Most of the comments from the techies (and their ilk) in support of the incredible mayhem which comes attendant to including them here are truly, well, sick and sickening. But as Jesus said, “…forgive them for they know not what they do”. It is in my opinion the real estate industry which is culpable in the main on the chaos and sorrow because they are the primary beneficiaries and drivers in this situation. They are the ones with the real excess of money and lawyers pitted against fairness and balance. But the City is also culpable as they share in the huge financial benefits from all the influx of these new “neighbors”.

    • I bet those grapes are soooo sour. Yup.

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