View From a Height

One of the topics we didn’t get around to on the air was the topic of today’s bubbles.  Eric Janszen’s article for Harper’s mentions what he thought at the time were a couple of possibilities, China and Alternative Energy/Infrastructure:

There is one industry that fits the bill: alternative energy, the development of more energy-efficient products, along with viable alternatives to oil, including wind, solar, and geothermal power, along with the use of nuclear energy to produce sustainable oil substitutes, such as liquefied hydrogen from water. Indeed, the next bubble is already being branded.

Since then, Janszen has backed off on that suggestion, believing that there hasn’t been enough self-generated investment to justify the term, “bubble.”  However, some VCs in the industry, also with Internet experience, beg to differ:

“There will be many decades of bubbles ahead,” he said. “There are people out there trying to outlaw them, particularly the sore losers. But they are accelerators to technology innovation.”

He argued that the history of technology is marked by bubbles of overinvestment, from the PC to the Internet, voice over IP, and others.

The same is happening in global warming. Concerns over global warming have spurred billions of dollars in investment from venture capitalists and government research to create low-polluting alternatives to fossil fuels.

“There is definitely a global warming bubble and one of the ways I know that is because the name Al Gore (is present),” Metcalfe joked. “Al Gore inflated the Internet bubble and now he’s inflating the global warming bubble.”

This was also about two years ago, but Metcalfe repeated the Gore joke at a recent VC conference in Boston, so it’s clear his thinking hasn’t changed on this issue.

The idea of bubbles as accelerators to technology and innovation is probably true, especially if they’re limited to equity bubbles.  (Debt bubbles are much more dangerous to the economy.)  Of course, remember that VCs, especially those who get in and out early, are usually among bubble winners, so there’s the issue of perspective in Metcalfe’s bubble boosterism.