My oh my, turn on the blogosphere this morning and what do I find? A serious brouhaha brewing and boiling because Dvorak went and wrote the tiresome, “Bubble 2.0″ (”we’re in one and it’ll end badly”). Go read all of the techmeme links if you want the full skinny — including folks like Fred Wilson correctly pointing out that you can’t be near the popping of a bubble if everyone’s walking around talking about it.
Now, with my prior caveats firmly in place, I wanted to offer up some contextual thoughts because, as mentioned in the title of this post, I’m a sucker:
1. Long live the echo chamber!
I have yet to see one piece that mentions “bubble 2.0″ in a larger economic context. Scoble’s talking about how John’s got the wrong bubble. Marshall’s slappin’ John down. Lots of folks are piling on. And not one comment has been made about the housing market, sub-prime (and prime) loan problems, 75 dollar oil, a fed that claims to be still leaning toward tightening, private equity bubbles — nothing! Apparently, lesson #1 of “Bubble 2.0″ is that the entire twitter-facebook-youtube-google driven mess lives in complete isolation.
2. So, how about some context?
Ahem. By any objective measure, the economy has been doing quite well the past few years. In that time, a bubble did form — in the housing market. And that bubble is now bursting. Bad. Notice, though, that *that* bubble doesn’t seem to be dragging down the entire economy. In fact, it is probably serving as a nice drag on what would be normal inflationary trends. Further, that drag may lead to the Fed *easing* rates sooner than would be their normal inclination.
Lesson: for the past several years, the economy was growing. The economy has actually been slowing, and in a context larger than silicon valley, is on the verge of touching zero growth (especially in places like Florida). This is all healthy — and will ultimately provide the foundation for when “bubble 2.0″ does occur. That is to say that as the economy picks up steam again (2008), it will serve as a real booster to the already fine technology industry.
(I’ve left oil, etc out of the above point for simplicity’s sake.)
3. Bubble? How do we know?
Economies are cyclical. Industries (no matter how innovative) live within economies. “Bubbles” are natural parts of cyclical economic movements. Are we in a bubble? Good question. Most economists will tell you that we’re most certainly in the strongest global economic growth cycle in the last 40 or 50 years. That larger mega-trend, when combined with the about-to-recover U.S. economy, provides the larger economic backdrop for the whole “web 2.0″ movement.
The last “bubble” occurred around public equity markets, as they provided the liquidity and transparency needed to really drive a mass bubble. I remember knowing it was bad when *everyone* I met was becoming a stock broker and/or day trader. People were quitting their jobs to “live off of trading.” That was the backdrop for the last bubble.
Will we see something similar this time around? I’d bet so. And I’d also bet that we’ll be hearing the “this time its different” refrain again.
Will this bubble be bigger than the last one (as Dvorak alleges)? Well, if the global economic expansion (and the big wave of baby boomer retirement spending) is any indication — yes.
4. Are we close to busting
Let me go out on a limb here (that’s sarcasm), not even *close*. Judging by the cycles, the articles, the worry, I’d guess that we won’t see an actual “bubble” pop until some time that’s 24-48 months from now. And, as Phil as said many times, you can’t plan more than three years out (for anything). In other words, we’re not there; we’re two years from needing to worry about it; everyone go back to work.
5. What is important
Really good innovative ideas *occur* during bubbles and come to material reality in the aftermath of the bubble (the bust). That’s why the whole “defrag” topic is a 10 year cycle. We’re at the very beginning of really cool ideas, and we won’t see the fruition of it all for another 8-10 *years*. What’s important in a bubble? Finding the rare nuggets of real innovation and nurturing them through the tough times.