Did Lloyd Blankfein just call the top of the tech bubble?

Say what you will about Lloyd Blankfein, the CEO of Goldman Sachs, but for all his failings he’s probably quite intelligent. Here’s what he said in response to a question on the upcoming Facebook IPO from Eric Schatzker of Bloomberg TV. (Hat tip to Barry Ritholtz at The Big Picture):

If we ever added an S to the end of BRIC to make it BRICS, you might have to throw Silicon Valley in there.

Goldman, as you might know, is the firm that invented the BRIC acronym. Sorry, South Africa. Looks like the geeks beat you to it.

But did Lloyd just call the top of a new tech bubble? The main question that seems to be on the lips of everyone in the tech scene (and a good many people outside of it) is, “Are we or aren’t we in a tech bubble?” Arguments tend to break down as follows:

• No, we’re not in a tech bubble.
  Paul Graham is the founder of YCombinator, the so-called Harvard of startup incubators. With such a personal and financial stake in the industry, you wouldn’t expect him to acknowledge a bubble. Here’s how he explained his position during an interview with Bloomberg West last month:

In every market prices rise and fall, like a sine wave. Prices are kind of high now. They’ll probably go down in the future, right? But high prices is not a bubble. A bubble is like a mania, right? I mean, people are thinking, “I gotta get in or I’ll get left behind”, right? And I don’t feel that people are thinking that now [...] I mean, I was there for the first bubble and that was a mania!

• Yes, we are in a tech bubble.
  Dave Winer is a software developer and long-timer blogger. The following are verbatim excerpts from his recent post:

• We’re believing there’s value because we want to believe.
• We’re bundling young people into things called startups, and selling them to investors for ever-increasing amounts of money.
• In an effort to bring more suckers in, they just passed a law that makes it legal to pimp these startups to people who don’t know anything.
• It just doesn’t matter if the businesses are any good, not to satisfy the bubble. As long as more suckers are coming in.

• We may be in a new tech bubble but who cares.
  Justin Kan, who has founded a few startups of his own, has this to say:

The truth is that the technology sector as a whole over any length of time is a positive-sum game even if the economy doesn’t grow at all, because it is taking business away from other industries (i.e. those other industries will experience negative gains adjusted for population growth; that is, they are shrinking in relation to everything else). A retraction of investment interest in this will slow but not stop the disruption.

But maybe the best, final word on this topic comes from an informal poll on Hacker News, which is a sort of Reddit for tech geeks.

As you can see the majority, about 72%, think that things are looking pretty bubblelicious.

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Tags: Dave Winer, Facebook, Goldman Sachs, Hacker News, Lloyd Blankfein, Paul Graham, Reddit, Silicon Valley, tech bubble, YComibnator

Category: Tech