When the superbubble bursts
Good morning! This Monday, what do you do when the superbubble inevitably pops? Better get your mop ready. I’m Owen Thomas, and I write parody song lyrics to relieve the stress of coming up with Source Code ideas.
It’s not a tech bubble. It’s tech foam.
Are we in a bubble? Are we in a superbubble? And what happens when it bursts?
Bubble goo, probably. Or at least that’s how we thought about bubbles in the dotcom era: They end in a big, sticky mess that takes forever to clean up. But things have gotten a lot more complicated since then. A singular bubble that pops all at once isn’t the right mental model anymore.
Cash inflates bubbles. And the global pool of money just keeps swelling.
- By 2020, gross savings in the U.S. and China combined had grown to more than $10 trillion, according to World Bank data. The pandemic only spiked the savings rate higher as households cautiously guarded cash. And those are just savings, not investments; the global stock and bond markets were worth nearly $230 trillion that year, according to SIFMA.
- Some of those savings flooded into Big Tech: Even with recent market pullbacks, Apple and Microsoft are worth more than $2 trillion, and Alphabet and Amazon are also in the $1 trillion-plus club.
- Then there’s crypto; The five most valuable coins are collectively worth roughly $1.1x trillion according to CoinMarketCap, and that’s after the #BitcoinCrash over the last few days that saw bitcoin, ether and other cryptocurrencies drop 20% or more.
So what do we call what we have now? Economist Jeremy Grantham says it’s a “superbubble,” which he defined as “simultaneous bubbles across all major asset classes” in a report his investment firm, GMO, issued Thursday.
- Investors could lose $35 trillion if valuations retreated to historic norms, Grantham calculated.
- You’ve heard from Protocol’s Biz Carson about the startup bubble. Axios’ Dan Primack thinks we’ve seen the peak in private-market valuations: “We know we're on the other side of the valuation hill because when we turn around, we're looking up.” And GV’s M.G. Siegler expects us to hit a “Great Deflate.”
- SPACs and IPOs have had a rough year, and some work-from-home stocks like Zoom and Peloton have seen their prices slashed as hopes grow that the pandemic will ease.
- But Ark’s Cathie Wood thinks the bubble is in the overall stock market, not tech stocks per se.
Another way to look at these multiple bubbles forming, inflating and popping is just the reality of late, very late, Apple’s-new-Focus-mode-blocked-your-alarm-notification capitalism. Call it tech foam. And you’re swimming in it.
- Markets reallocate capital as investors react to new information. The pace of change is accelerating. There’s more new than ever, and more money chasing the new new.
- Inflation is a looming threat. But inflation erodes the value of static savings. That only increases the desire for higher returns. But all that money has to go somewhere, so if one sector pops, another is waiting to soak up that cash. And if need be, creative types will invent entirely new kinds of assets (that NFT in your Twitter avatar is ever so fetch).
- Don’t forget: In tech, capital markets and labor markets are more tightly tied than ever. Oh, so your employees’ options are underwater? When golden handcuffs get tarnished, valuable workers reallocate their human capital by signing out of Slack and mailing their laptop back.
By all means, panic. Panic is fun! The future is rarely invented by the understressed. Even if there is a superbubble, there’s more money on the sidelines. A16z is reportedly raising another $4.5 billion to invest in crypto. One founder’s bubble pop is another entrepreneur’s treasure, freeing up cash and people to chase a different dream. And the goo on your Allbirds? Just wipe it off. No one’s going to notice when we’re all racing forward.
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A MESSAGE FROM APPIAN
Businesses need applications faster than ever before, and they need them to solve increasingly complex, sophisticated problems. This means IT teams need a more efficient way to quickly deliver powerful software and a better way to partner with their business counterparts. That’s where low-code comes in.
People are talking
Brian Chesky said his working vacation on Airbnb will set an example for others:
- “If I can do my job from a house in Atlanta, that means a lot of people could travel all over the world and live, not just travel.”
Elon Musk thinks the ability to update Twitter profiles with an NFT “is annoying”:
- “Twitter is spending engineering resources on this bs while crypto scammers are throwing a spambot block party in every thread!?”
Accenture’s Janani Thiyagarajan said about half of her team was out sick with omicron at one point:
- “It was kind of hard for us to juggle everything. There were a lot of people [out sick] at once.”
Coming this week
It’s going to be a busy earnings week. Companies including Apple, Microsoft and Tesla are expected to report quarterly updates.
The GamesBeat and Facebook Gaming Summit starts tomorrow. The event is all about the metaverse and future of gaming.
Amplify 2022 starts on Wednesday. The creator-focused event will feature YouTubers and content strategists.
The Women in Cloud Summit is Wednesday. The four-day conference includes discussions on topics ranging from VC funding to leadership.
In other news
The on-screen Peloton heart attack is a thing now, apparently. After the whole Mr. Big fiasco, something similar happened on "Billions" last night. Peloton can't buy a break right now.
An antitrust bill heading to the Senate floor is more risky than it seems. On its face, the bill would stop large platforms from prioritizing their own products, but experts say parts of the legislation could make it harder to stop hate speech.
Here's a must-watch NFT critique. Everyone was talking this weekend about "The Problem With NFTs," a new video from Folding Ideas. It's more than two hours long, but it's worth it.
IBM sold its Watson Health assets. After years of promising Watson's ability to make huge leaps in AI-powered health care and mostly failing to live up to those promises, IBM is offloading the project to Francisco Partners.
A division within Activision Blizzard has unionized. Developers at Raven Software, who have been on strike for several weeks, are asking that Blizzard management voluntarily recognize their union.
An anti-vaccine mandate protest last weekend was organized on Facebook. Thousands of people joined a Facebook group to talk about plans for the rally and their feelings about vaccines. Meta didn’t take down the group’s page, but removed some individual posts.
U.S. athletes were told to use burner phones during the Olympics, according to The Wall Street Journal. Great Britain, Canada and the Netherlands told their athletes the same, citing cybersecurity concerns.
Big Tech CEOs are raking it in. Tim Cook, Satya Nadella and others are making more money than ever these days, and tens to hundreds of thousands more than their own employees.
Can AR and VR save theater?
When there’s a spike in COVID-19 cases, the entertainment industry tends to take a hit. But with the help of AR and VR, theater might not need to hit the brakes quite so fast.
Performing venues have been toying with the technology to bring shows to people’s homes. For example, one British venue managed to transform “All Kinds of Limbo” into a musical people can watch via AR on a phone, VR on a headset, or by using a computer. Yet another reason to get rid of those jeans and stock up on more sweatpants.
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