Chris “Long Tail” Anderson plucks a few economic petals and muses — Bubble. Not a bubble. Bubble. Not a bubble. — whether the current Valley fondness for all tech things fun and frothy is a bubble. He plumps down on the side of it not being one, citing cheaper raw materials (one of my VEF presentation points), open source software, and the continuing pace of technology adoption.
I don’t disagree entirely, but I think Chris is a little more sanguine than the situation deserves. For example, while less venture capital is going out, when it costs one-tenth as much money to create tech companies you need much less venture capital to do mischief. Similarly, if you invest that venture money narrowly, both geographically and sectorally, then it takes even less money to really screw things up.
Finally, while a reduced obsession with IPOs is good, a market built around acquisition exits (which Chris approvingly cites) comes with its own costs. Not least among those costs is that there are a hell of a lot more potential buyers for the average IPO (all of us market participants) than there are for Web 2.0 companies built to flip (Google-Yahoo-Microsoft).