1) What makes you think there is room at AppGoogBook for those unemployed startup engineers? If the bubble bursts, it'll be because of a reality-check in the growth potential for consumer technology and advertising. AppGoogBook are chasing a lot of those same areas.
2) A lot of service industries in the bay area are being propped up by the software industry. All those new restaurants popping up in SF--how much of their revenues comes from VCs and software engineers whose salaries are paid by VCs?
3) Real estate values and rents in the bay area will plummet of there is a readjustment in the technology sector.
2. I do not think that Apple, Google, and Facebook are significantly competing against many of these startups. Facebook maybe to an extent, by not Apple and Google. None of them are major phone manufacturers or search engines. The only reason a bubble bursting is a problem is for companies without revenue relying solely on VC money to run. Apple is not in fact relying on VC money to run. Apple alone can afford to employ every startup worked in SF (not that they would, but they could)
>3) Real estate values and rents in the bay area will plummet of there is a readjustment in the technology sector.
I can't imagine that as being anything but good news long term. certainly sad for those owners now though, i agree. Yet, still not everyone in america.
The irresponsible valuations and investing will hurt everyone.
I feel like I made reasonable assumptions as to why those things wouldn't happen. If you think that's not the case, at least provide an argument as to why they would, as opposed to stating it as fact.
Recessions are never isolated. The entire point of a bubble is that investment capital chases gains. In the 90s it was tech. In the 2000s it was housing. Now we're back to tech again.
When the bubble pops, all those invested in the space are hurt. That means hedge funds, pension funds, etc, and the effects will absolutely ripple through the economy. I doubt it'll be anything like 2008 (which was greatly exacerbated by derivatives trading and so forth), but it will be felt well beyond the valley.
are there really a lot of pension funds investing in 0-revenue startups in SV? That seems like a place I really don't want my pension.
EDIT: [1] I lost a lot of money on my house that I bought in 2008 and sold in 2014. It sucked. I can't imagine my next house losing money because snapchat goes out of business....
But that's not what we're talking about. We're talking about a bubble bursting. That's a lot of value going out of the economy, and a lot of people losing money. That makes investors in general pull their money back. It creates an economy wide recession.
Most people seem to agree the bubble (if it exists) is in privately held venture backed startup companies. Does the popping of that bubble have significant ramifications across the economy as a whole?
1. Last time they were all public companies, including the big ones like intel,msft, being wildly overvalued. Everyone lost money, not just VC's
2. It will certainly be harder to do a startup, but I suspect all these engineers won't be unemployed. They will go and work for AppGoogBook. AppGoogBook will welcome them with open arms.
To recap, at least I think/hope, VC's and founders are the only one's losing money compared to everyone who might be invested in S&P 500 (read everyone) and there shouldn't be any kind of major unemployment causing extra problems
Is this a reasonable view?