We’ll detail the topic of the Bitcoin bubble in a later post, but I had to mention this recent Wired piece revealing the latest alleged Satoshi Nakamoto to be a 44-year-old Australian named Craig Steven Wright:

There’s also a PDF authored by Kleiman, who died in April of 2013, in which he agrees to take control of a trust fund, codenamed the “Tulip Trust,” containing 1.1 million bitcoins.
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That million-coin trove—The Tulip Trust—is the same size as a mysterious bitcoin fortune that’s long been visible on bitcoin’s blockchain and widely attributed to Satoshi Nakamoto. No one but Nakamoto is known to have assembled such a massive hoard of the cryptocurrency, and only Nakamoto could have generated so many bitcoins so early in its evolution, when a bitcoin could be “mined” with relatively small amounts of processing power. Only one such bitcoin megapile exists, and the closely-watched coins haven’t moved in bitcoin’s entire history.
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Wright’s blogging and leaked emails describe a man so committed to an unproven cryptocurrency idea that he mortgaged three properties and invested more than $1 million in computers, power, and connectivity—even going so far as to lay fiberoptic cables to his remote rural home in eastern Australia to mine the first bitcoins. His company, Tulip Trading, built two supercomputers that have officially ranked among the top 500 in the world, both seemingly related to his cryptocurrency projects. (Wright seems to enjoy tulip references, a likely taunt at those who have compared bitcoin to the Netherlands’ 17th century “tulip bubble.”)

If this guy really is the creator of Bitcoin… Wow. That is rich.

Of course, there’s a big difference between bitcoins and tulips. After the tulip bubble burst, at least the people holding tulip bulbs had something with some tangible use.

The post Purported Bitcoin Creator Loves Tulips appeared first on Tulips Tulips Tulips.

…the company has yet to make any significant money, choosing hyper growth over profits.

“It’s obviously a little scary, big valuation no monetization,” admitted OfferUp investor Josh Breinlinger, managing director at Jackson Square Ventures. “It’s easy to throw up the bubble flag.”

But Breinlinger says that OfferUp is different.

Forget fundamentals. This time is different!

“We’re not built on any other platform,” he said. “We own all of the usage, we own billions and billions of dollars of transactions. We can monetize that.”

Display advertising, featured listings or in-app payments could help turn those free users into profits, he says.

“I think we’re only a couple years away from OfferUp being one of probably the four or five largest commerce brands in the U.S.,” Breinlinger added. “They’ll be in the company of Amazon and eBay and Craigslist and Apple. That’s kind of it.”

Even given a chance to hedge such a bold prediction, Breinlinger said he’s backed a lot of marketplaces and he’s pretty confident that’s where OfferUp is headed.

I’m getting some serious ’90s dot-com bubble déjà vu here. So much “can,” “could,” and “I think” driving absurd amounts of money into companies that have yet to prove any ability to, you know, actually make money.

The post OfferUp, Up, and Away! appeared first on Tulips Tulips Tulips.

Overvalued in Silicon Valley, but Don’t Say ‘Tech Bubble’

SAN FRANCISCO — It is a wild time in Silicon Valley. Two-year-old companies are valued in the billions, ramshackle homes are worth millions and hubris has reached the point where otherwise sane businesspeople muse about seceding from the United States.

But the tech industry’s venture capitalists — the financiers who bet on companies when they are little more than an idea — are going out of their way to avoid the one word that could describe what is happening around them.

Bubble.

Could it be? Another dot-com bubble?

A bubble, in the economic sense, is basically a period of excessive speculation in something, whether it is tulips, tech companies or houses. And it is a loaded, even fearful, term in the tech industry, because it reminds people of the 1990s dot-com bubble, when companies with little revenue and zero profits sold billions in stock to a naïve public.
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Today, people see shades of 2000 in the eye-popping valuations assigned to private companies like Uber, the on-demand cab company, which is raising $1.5 billion at terms that deem the company worth $50 billion, and Slack, the corporate messaging service that is about a year old and valued at $2.8 billion in its latest funding round.

But of course it’s not a bubble. At least, not according to people whose continued good fortune and ability to rake in huge piles of money depend on it not being a bubble…

In a recent analysis, [Tomasz Tunguz, a partner at Redpoint Ventures], who was in high school when the dot-com bubble burst, found that investors were paying twice as much for stakes in private technology companies as they were for those that were publicly traded.

He called it “a runaway train of late-stage fund-raising.” He also called it “a really weird time” and “a really hard environment to maintain financial discipline.”
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“If the question is, Are these valuations divorced from fundamentals? I think they are,” [Jerry Neumann, founder of Neu Venture Capital in New York] said.

But that is not a bubble, he said. Rather, it is “an irrational pricing decision.”
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Sam Altman, president of Y Combinator, an incubator that invests in very young companies, has grown so tired of bubble talk that this month he countered it with a $100,000 “no bubble” bet.

The bet, which will be donated to charity, is based on several variables, including his prediction that the five most valuable unicorns, a list that includes Uber and Airbnb, the home rental service, will be worth more than $200 billion by 2020.

That is an impressive display of Olympic-level mental gymnastics just to avoid saying the word “bubble.” Here’s an excerpt from Sam Altman’s blog post in which he proposes the wager:

I’m tired of reading about investors and journalists claiming there’s a bubble in tech. I understand that it’s fun to do and easy press, but it’s boring reading. I also understand that it might scare newer investors away and bring down valuations, but there’s got to be a better way to win than that.
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Instead of just making statements, here is a bet looking 5 years out. To win, I have to be right on all three propositions.

1) The top 6 US companies at http://fortune.com/2015/01/22/the-age-of-unicorns/ (Uber, Palantir, Airbnb, Dropbox, Pinterest, and SpaceX) are currently worth just over $100B. I am leaving out Snapchat because I couldn’t get verification of its valuation. Proposition 1: On January 1st, 2020, these companies will be worth at least $200B in aggregate.

2) Stripe, Zenefits, Instacart, Mixpanel, Teespring, Optimizely, Coinbase, Docker, and Weebly are a selection of mid-stage YC companies currently worth less than $9B in aggregate. Proposition 2: On January 1st, 2020, they will be worth at least $27B in aggregate.

3) Proposition 3: The current YC Winter 2015 batch—currently worth something that rounds down to $0—will be worth at least $3B on Jan 1st, 2020.
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This bet is open to the first VC who would like to take it (though it is not clear to me anyone who wants to take the other side should be investing in startups.) The loser donates $100,000 to a charity of the winner’s choice.

I’d probably take that bet if I were a VC with $100k to burn.

Back to the New York Times:

And no matter how hard people try to avoid them, bubbles happen again and again, from the Dutch tulip bubble of 1636, to the 1929 stock bubble that resulted in the Great Depression, to the housing bubble that buckled Wall Street in 2008.

Even the smartest get caught up. Isaac Newton, whose laws of motion and gravity arguably make him the most important scientist ever, bought into the South Sea Bubble of 1720. It was a bad bet on a company granted a monopoly on trade with South America by the British government. He reportedly said: “I can calculate the motions of the heavenly bodies, but not the madness of people.”

Bubbles seem obvious after the crash, of course. The problem is they are almost impossible to see in the present.

But are they though? Are they, really?

The post Dot-Com Not-Bubble appeared first on Tulips Tulips Tulips.

As the Great Housing Bubble was rapidly inflating in 2005, I started a blog called Seattle Bubble in order to—as the name implies—explore the housing bubble’s specific effects on the Seattle-area real estate market.

In the ten years that I’ve been researching, analyzing, and writing about real estate, I’ve learned a lot about economics, and even more about economic bubbles. Thanks to human nature being what it is, the sad truth is that economic bubbles are everywhere. So, I decided to start this site focused more broadly on bubbles.

Within these pages I plan to discuss current bubbles, past bubbles, and future bubbles. Everything from real estate, to bitcoin, to Beanie Babies, to tulips.

It all comes back to tulips.

The post Tulip Mania appeared first on Tulips Tulips Tulips.