A bubble is forming in observations by technology investors and entrepreneurs that bursting bubbles create opportunities for tech investors and entrepreneurs. The latest
variation on the theme is from Paul Graham, founder of incubator
Y Combinator. Similar exhortations
here,
here and
here.
With all due respect, no duh. Not that such thinking is false--it's manifestly true, and there's something to be said for urging calm as the ship is slipping beneath the waves. It's that such reminders belabor the obvious and fail to peer deeper into how technology and financial capital interact.
Since speculative bubbles began, tech and money have been mixing in highly flammable cocktails of risk and reward. Pick a bubble, any bubble: canals in 1797, railways in 1847, dot-coms in 2000. These spasms clear the way for the next surge. New technologies and the financial opportunities they create eventually send us hurtling us toward crisis. And (hooray!) rebirth.
So what happens when, as in the current moment, funding declines, investment returns fall and valuations swoon? This: Profits harvested from once-fertile technologies gravitate toward water wheels, light bulbs, combustion engines, vacuum tubes, semiconductors, optical switches, clean technology or whatever comes next, driving the next phase of innovation. The Internet era blossomed from the preceding boom in chips, PCs and software, which defined the commercial context of their time and in turn drove financial innovation. That shaped the environment for other innovative technologies then giving rise to the next revolution.
To which you may say, no duh. Quite so. Pep talks like
Graham's serve their purpose--like Scarlett, we all want to believe tomorrow is another day. And it never hurts to extend a hand in helping us get there. But perhaps the time is also ripe to ask other questions. For one, where are we, exactly, on the bubble's slippery face--the top, bottom or somewhere between the two--and how can knowing this help entrepreneurs and investors calibrate their timing to seize on those opportunities that, as history shows, are just awaiting a breath of air?
-- Alain Sherter
See Oct. 17 post from PaulGraham.comFor more see
Don Dodge,
Feld Thoughts,
Mark Evans and
Furrier
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