Thursday, August 18, 2011

Sean's speculation: tech bubble starting to leak

A little while back I'd commented about the tech bubble. I speculated that, once the market falls about 15%, we'd start to see a drop in investing, since tech startups are basically highly leveraged investments:
Here's how it will happen: once our stock market dips again, say 15% (and it's bound to happen eventually, even if it goes up before), Google and other established companies will pare back their acquisitions -- even if it's largely an emotional move. It won't be terrible for them, since they have clear business models and low burn rates. VCs will realize -- from market data, industry hearsay, and experience -- that it's not worth investing as freely in high-risk startups. After all, their hundreds of $100B tech startups no longer have buyers. This won't be the end of VC capital, but it will be enough for a number of tech startups to log off. Of course, many VCs will be hurt by this, which will have second-order market effects as some go bankrupt, and the stock market will drop further, as value is lost overnight. And that's how the bubble will burst.
So my hunch is that this will start to happen pretty soon. First person to bet me $1 can take the other side of the bet (specifically I'm betting that, within 3 months, there will be news article(s) in widely established national or international newspapers that mention (a) the precarious drop in tech startup funding and (b) fresh rounds of layoffs at these startups). This bet is conditioned on the market staying at 15% below its crest for that period.

Thursday, August 04, 2011

The Wall Street Journal and Editorial Quality

A while back Rupert Murdoch said he would make the Wall Street Journal a more general-audience publication. It's been going on for some time.

Recently they published an article titled, "Who Gets Drunk and Why" ? To be sure, it's one of the most popular (it's the most-read on But it's also not such a good article. First, the article isn't really business/econ/finance related. That's okay if they're trying to make the Journal a wider-audience publication. But, in contrast to interesting general-audience articles about drinking by the New York Times, the Journal article doesn't describe new research, and its interview with an expert gives us bland, non-newsworthy information:
Drinkers who think they can tell when they've had enough are very often wrong. "Alcohol can affect your reflexes even if you feel fine," says Samir Zakhari, director of the division of metabolism and health effects at the National Institute of Alcohol Abuse and Alcoholism.
The Journal article is a rehash of stuff we learned in middle school health-ed classes, peppered with a few anecdotal interviews. The only interesting bit in the article was this:

Women's menstrual cycles are yet another factor: Alcohol metabolism increases about 10% right after ovulation.

The Times article, in contrast, actually tells us something that may be interesting:

Dr. Nora Volkow, director of the National Institute on Drug Abuse, has shown in several brain-imaging studies that people addicted to such drugs as cocaine, heroin and alcohol have fewer dopamine receptors in the brain’s reward pathways than nonaddicts. Dopamine is a neurotransmitter critical to the experience of pleasure and desire, and sends a signal to the brain: Pay attention, this is important.

When Dr. Volkow compared the responses of addicts and normal controls with an infusion of a stimulant, she discovered that controls with high numbers of D2 receptors, a subtype of dopamine receptors, found it aversive, while addicts with low receptor levels found it pleasurable.

This finding and others like it suggest that drug addicts may have blunted reward systems in the brain, and that for them everyday pleasures don’t come close to the powerful reward of drugs. There is some intriguing evidence that there is an increase in D2 receptors in addicts who abstain from drugs, though we don’t yet know if they fully normalize with time.

So what is my point? Mainly that the WSJ is indeed moving toward a general audience, but its editorial standards aren't up to snuff. Or else they are now trying to pander to an audience who didn't learn basic things in middle school.