Name: Finally, an answer: Are we in a tech bubble?
Uploaded: 2015-07-10
Duration: 5 min 20 s
Description: In a round of 'Fact or Fiction,' Fortune staffers Erin Griffith, Robert Hackett, and Daniel Roberts debate one of the most frequently asked questions in the technology industry.

Lots of smart people seem to think we are in the middle of a tech bubble. But lots of smart people say we're not. So I've asked some Fortune tech team here to has it out. Joining me are writers Erin Griffith, Robert Hackett, and Daniel Roberts. Hey guys. So we're going to start off with a lightning round. First I just want you to answer yes, no, are we in a tech bubble. Erin? No. Yes. Yes. Bubbly bubble. Bubbly bubble. Alright. So here's what we're gonna do. I'm gonna read you a statement, one of three. And you're gonna hold up these cards. Pull them out. And you're gonna hold up and say fact or fiction for each one of these. Ready? These companies are not changing the world, therefore it's a tech bubble. Fact or fiction? Okay, Robert, why fact? [ LAUGH ] [ LAUGH ] Well, right now you've got a bunch of companies doing very similar things. There's this trend going on where people call the Uber of X. So you have like the Uber of. Garbage collection. Or the Uber of house painting. And these things are not very different from one another. It seems like there's a lot of froth going on. Okay. Yeah. Okay. Well, you two disagree. Tell me a little bit about that. Just because there's a bunch of frivolous startups out there that are doing maybe very silly things, like Uber for cats or whatever, doesn't mean that there's also. Not- That sounds great. [ LAUGH ] See? Exactly. This doesn't mean that there's also not a lot of really cool, disruptive, innovative things, or maybe even uncool, but disruptive and innovative. And they are coming into industries like HR or maybe even garbage collection that has never had technology touch it before. So there's a huge opportunity here. Dan? I don't think it's a bubble because there are some companies that aren't changing the world, although many of them are frivolous and ridiculous and inane. I think it's a bubble because of how quickly they're able to raise funding, and then how quickly their valuation skyrockets. And a lot of these companies have ballooned valuations that really they don't deserve. Interesting. Alright. You raised a good point. And that's actually going to bring me to my second statement. Ready? Here we go. Some of these companies make real money, therefore not a tech bubble. Fact or fiction? Fact. Fiction. Fiction. Okay, Erin. I'm going to start with you. Why? I mean, this is the difference between now and 2001, when the tech bubble, or 2000, when the tech bubble burst. Those companies were going public at massive billion- dollar valuations and they weren't making a dime. They were fueled entirely on venture capital. Right now the companies that are the so- called unicorns, worth billions of dollars, they're private. They're not going public. But they're making real money. A lot of them actually have revenue. They're not profitable, so that's Gonna raise some challenges, but they do have actual revenue. Yeah. That reminds me of Uber. Right? Making tons of money but not necessarily turning a profit. Wasting tons of money, too. But the idea is that they're gonna invest a lot into it now, so that they can kind of lay the ground work and build a giant business. And then, when somebody else tries to enter that business, like say, Lift, they've already outspent them. They already have a stronghold in every market they go to. So, basically, you know, they're spending money now to make a ton later. Right. Gentlemen, you disagree. Explain. Some of them are making money and some of them aren't. A lot of these companies are getting big valuations when, really, they haven't proven any model beyond, hey, it's a fun place to post a sticky from a wedding you like, or, oh, I can send my friend a photo and then it vanishes. And the amount of interests that you're seeing from VCs, makes me think that there's just too much money flying around. We call it a bubble because we think, it's going to burst. It can't last. Erin you had something to say here. Well the thing about, okay you're looking at frivolous social media apps, but people said that about Facebook, when Facebook was valued at $ 15 billion. Now it's worth $ 215 billion. And they have a massive, growing advertising business. They're pretty much dominating the mobile advertising market. So I think it's easy to just miss things when they're small, but you have to kinda look at the long term picture. And granted, not all of these are gonna succeed, a lot of the stuff that's getting funded is really stupid, but that doesn't mean that the ones that do succeed will not be home runs. Alright let's move on to the next one, and Robert I'll come to you in a second. Venture capital is a fraction of the economy. We're talking about all this, we're getting all heated about this discussion, but, look, does any of this matter? Nothing matters, fact or fiction. I'm always gonna agree with nothing matters. Fact of fiction, alright Robert, I'm gonna start with you. It does matter. I mean, so even though VC's account for a smaller portion of the economy And they are accounting for this risk in their models when they're giving money to these startups. You have all these startups with all these employees and everything, and they're going to feel the brunt of this when a correction happens. They're not going to be able to sustain themselves anymore. The romantic view is that a V. C. 's job is to see the future. So all this matters because, as Erin said, I don't believe many of these small guys that I'm criticizing are going to be the next Facebook. But if one or two are, then that really matters. I mean look how important Facebook is, look how important Twitter now is. So it matters for our future and how we use tech in ten years down the road. That's true and even these companies that have mass evaluations, the money that they're raising isn't even from VC's, which again is a teeny- tiny little portion of the investment community. But even these late stage funds. Uber's raising billions of dollars at a time. This is coming from pension fund investors, mutual fund investors. That's still so, so tiny in the grand scheme of things. That even if it all collapses, it's really not going to be anything remotely like in 2000 or even in 2008 with the housing crisis. That's a good point. Well thank you so much for being here, I really appreciate it. I'll just say for my own purposes, I don't think it's a bubble, but we'll go from there. [ MUSIC ]

In a round of "Fact or Fiction," Fortune staffers Erin Griffith, Robert Hackett, and Daniel Roberts debate one of the most frequently asked questions in the technology industry.