# Are we in another tech bubble? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [July 2, 2017, 5:04pm UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367 "2017-07-02T17:04:51Z")\ **Posts on this page:** 9\ **Page:** 2
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [July 4, 2017, 3:25am UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367/21 "2017-07-04T03:25:26Z")
> [@ThisIsTheEnd](#): > > …What do you have is some rather crowded trades in a handful of names, the FAANGs, etc. And so their valuations are higher than normal which is affecting some indexes that are highly weighted by them - which then drags up the price of other stocks via ETFs… Apple, MS, Amazon, FB & Google make up 12% of the S&P, so they do have a heavy influence on the index. But there is no sense in which this “drags up the price of other stocks via ETFs”. Virtually all index ETFs track capitalization-weighted indices. An ETF therefore represents a constant number of underlying shares, so there is no rebalancing of share positions required as constituent stocks change in value. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [July 4, 2017, 3:52am UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367/22 "2017-07-04T03:52:18Z")
How is Uber even considered part of the tech economy? They’re a service company. Their product is driving people around. ---
**Author:** ![Isamu](https://avatars.discourse-cdn.com/v4/letter/i/7c8e57/32.png) [@Isamu](https://boards.straightdope.com/u/Isamu)\ **Post date:** [July 4, 2017, 4:26am UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367/23 "2017-07-04T04:26:25Z")
> [@Little\_Nemo](#): > > How is Uber even considered part of the tech economy? They’re a service company. Their product is driving people around. Not even that. Don’t they just connect potential drivers to potential passengers? ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [July 4, 2017, 4:42am UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367/24 "2017-07-04T04:42:15Z")
> [@Isamu](#): > > Not even that. Don’t they just connect potential drivers to potential passengers? Yes, but the rides are what’s being sold. My point was they use technology - cars, telephones, computers - but they’re not selling technology. If Uber is a tech company then so is Domino’s Pizza. ---
**Author:** ![The\_Lurker\_Above](https://avatars.discourse-cdn.com/v4/letter/t/dc4da7/32.png) [@The\_Lurker\_Above](https://boards.straightdope.com/u/The_Lurker_Above)\ **Post date:** [July 4, 2017, 2:17pm UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367/25 "2017-07-04T14:17:24Z")
> [@iamthewalrus\_3](#): > > Yeah, but they’re spending _hundreds of millions_ on underpricing the market to get word of mouth advertising. Not just underpricing, but oversupplying. They want calling an Uber to be really fast and convenient so they need lots of idle Uber cars all over the place. To keep these idle drivers happy and on the network Uber throws lots of ‘extra’ money (ie cash they got from VCs) at them in the form of sign-up/X-rides in a week/referral bonuses. In a world where Uber has to be profitable, and pay drivers entirely out of fares, prices for riders have to rise and there will be fewer drivers on the road. That makes getting one slower and less convenient. If Uber had a plan to be profitable as a stand-alone business, rather than pull some big salaries from VC funding and pray for a bigger sucker to buy em out, they had to be hoping that they could jump-start a city’s market with these driver incentives then (almost entirely) phase them out and still have a thriving business. (I assume that there’d always be some kind of ‘bonus’ program as a gameified way of managing the available fleet, but funded out of Uber’s cut). Is there a city out there without lots of driver incentives? I haven’t seen any drivers complaining about them being completely removed in any markets. I have a sneaking suspicion that there are a relative handful of cities where something similar to Uber’s current business model could be self-sustaining. I’d love to have access to their data; there’s got to be a lot of very interesting analysis one could do. ---
**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\ **Post date:** [July 4, 2017, 4:17pm UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367/26 "2017-07-04T16:17:24Z")
Uber’s goal with the oversupply of drivers was to hit a critical point where the number of users matched up with the oversupply. First you get a ton of drivers so that people automatically think of Uber in getting a ride so the driver pool is being sufficiently used. An absolutely great plan if the number of users rises fast enough. A slow rise or, worse, a stall in ridership and they are in trouble. The optimists are still fighting but they are going to fail once the VCs start to back off. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [July 4, 2017, 4:25pm UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367/27 "2017-07-04T16:25:16Z")
The weird thing about Uber is that their interests and those of the drivers don’t align; Uber would prefer that there be an oversupply of drivers, so one is close by whenever someone wants a ride. The drivers would prefer that there be fewer drivers, so each makes more money. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [July 4, 2017, 5:14pm UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367/28 "2017-07-04T17:14:25Z")
> [@Dewey\_Finn](#): > > The weird thing about Uber is that their interests and those of the drivers don’t align; Uber would prefer that there be an oversupply of drivers, so one is close by whenever someone wants a ride. The drivers would prefer that there be fewer drivers, so each makes more money. I’m not sure that’s quite true. At any instant, an active driver would prefer that the demand for rides exceeds supply. But in the long run, that’s self-correcting, because too few drivers and long wait times, customers won’t use the service at all. It seems to me that a driver with enlightened self-interest probably wants to be associated with the dominant market player, because with a large number of drivers _and_ a large number of customers the whole thing becomes more stable, with short and consistent wait times for both driver and customer. ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [December 6, 2020, 3:46pm UTC](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367/29 "2020-12-06T15:46:53Z")
> [@Textual\_Innuendo](#): > > Although not shortable, Slack is another - it is just mind-blowing to me that it had 2/3 the valuation of Whole Foods when Amazon had it’s acquisition hat on and was considering Slack or Whole Foods. This seems like a good time to revisit this thread given the recent acquisition of Slack by Salesforce for $27.7B. Shorting Slack at a $9B valuation would have been a disastrous move. Common consensus is that this represented the lower end of expectations, with Microsoft Teams so aggressively eating into Slack’s market share not being something predicted in 2017, if that had not happened, Slack would probably still be an independent company at multiple times this valuation. Meanwhile, checking in on some other commonly mentioned companies in this thread: Uber - Private valued in 2017 at $48B, now publically valued at $97B Apple - $630B → $2080B Google - $640B → $1240B MS - $520B → $1620B FB - $430B → $800B Amazon - $490B → $1600B Bitcoin - $2500 → $19,000 Dropbox - $10B private valuation → $8.4B public valuation Pinterest - $12B private valuation → $42B public valuation Snapchat - $26B → $72B Of these, only Dropbox dropped in absolute terms. Over the same time period, the S&P500 gained ~50% so every single other tech stock mentioned in this thread outperformed the S&P, many by a significant margin. Interestingly, nobody in the thread mentioned Tesla which went from a $60B → $600B market cap, easily taking the top place for biggest gainer on the list. Of course, many people are going to claim that we’re still in the same tech bubble that we were in in 2017 and just you wait for it all to pop but we’ve been waiting since 2003ish for this bubble to pop and even the most dire predictions of a popped 2020 bubble would still exceed the returns from a 2017 “safe investment” at this point. [Previous page](https://boards.straightdope.com/t/are-we-in-another-tech-bubble/790367.md?page=1)