Bubbles are Useful

I was in LA for my friend Josh’s wedding tonight. Tomorrow I am in the Valley for a few days.

I may start wearing a suit again after the positive feedback from this tux photo:

Seeing that I am headed to the valley, it’s a good time to catch up on ‘bubbles’. The ‘bubble’ word has been thrown a round a lot again lately.

Social Capital had a good series on bubbles recently. I love this definition:

In a bubble…

Fear of losing capital becomes superseded by a different kind of fear: FOMO. Bubbles give everybody involved a credible reason to believe that follow-on financing will continue be available, and at more and more attractive rates to boot. Which means, if you’re an investor, hey, we’ve gotta get started now! Hurry, before the price goes up! And if you’re an entrepreneur, Hey, we’ve gotta get started now, before the competition does! That’s what we need to break the coordination failure. Under bubble conditions, we willingly and enthusiastically embark on speculative projects that have no line of sight to positive free cash flow and must continue raising more and more money. But sometimes, that’s what it takes to fund these types of big, risky projects. The 19th century railroad barons, early 20th century electric utilities, and end of the 20th century telecom providers that lived to tell the tale will back you up on that.

Here is the first piece ‘An Introduction to Bubbles

This piece is ‘Why Bubbles are (Sometimes) Useful‘.

Have a great week.

Also published on Medium.