/ Economics

The FT on the ‘Tech Bubble’

The Financial Times writes[1]:

... In a week marking the 15th anniversary of the dotcom bubble peak, there are plenty of reasons to argue that this tech boom is not like the last. But that alone is not a good reason to sit back and enjoy the ride. While bubbles never recur in exactly the same way, some of the same forces are usually at work. In Silicon Valley, history is not repeating itself, but it is starting to rhyme.

The case for “this time it’s different” is easy to summarise. The share of economic activity conducted on digital platforms has grown enormously in a decade and a half. To take just two comparisons: the online audience numbers about 3bn, compared with little more than 400m in 2000. And spending on online advertising has grown from $8bn to $50bn in the US over the same period.

Interesting summary of the prevailing opinions about the supposed 'tech bubble' in Silicon Valley/the general technology sector (at least the consumer portion of the tech sector).

I personally don't think the tech industry (in America) is in a bubble[2]. However, I do have to admit that there are certain companies that are significantly overvalued startups/private tech companies that simply do not deserve their current valuation. Other companies, on their other hand, do deserve their high valuations/acquisition prices due to the potential of their technology, or due to the amount of people that use it on a daily basis.

  1. Richard Waters, ' Dotcom history is not yet repeating itself, but it is starting to rhyme' (Financial Times, 12 March 2015) <https://www.ft.com/content/655d167c-c89c-11e4-8617-00144feab7de> ↩︎

  2. Even if the (consumer) tech industry in the USA is in a bubble, the risk of it leading to an outright financial crisis (on the scale of the 2008 Global Financial Crisis) is highly unlikely. Such contagion is unlikely (on such a scale) due to the fact that the ordinary investor (along with the international banking system) being disconnected from the tech private market, and not wholly or significantly dependent on the tech industry itself for its daily workings. ↩︎