Uber and the Tech Bubble – Learn from History or “Financial Ruin”
Uber and the Tech Bubble – Learn from History or “Financial Ruin” from Gold Core
– Uber, Grand Canal Dock, Canals, the New Tech Bubble and the Financial Mania of Today
– “Both the canal and railway manias led to ridiculously overvalued companies, whose subsequent crash brought financial ruin to many”
– “Yet these technologies did change the world, eventually”
– Time to learn the lessons of history
Last week Uber, the taxi-sharing app, floated on the New York stock exchange. As a result the company is now worth just over $65 billion.
We are entering the 11th year of a bull market, and because success tends to breed a disregard for the possibility of failure, investors expressed “disappointment” at the shares’ performance in the first few days of trading.
Does this tell us where we might be in the global economic and financial cycle? Tech insiders are said to be “disappointed” at this valuation of more than $60 billion for a taxi firm with precious few assets, that has no immediate prospect of making a profit, and burns through $2 billion of shareholders’ money a year.
Think about this for a minute: a company that loses money, has no real prospect of profits, and spends shareholders’ money in an extraordinarily cavalier way has a higher value than thousands of solid companies that have been making more money for decades.
Maybe it is very 20th century of me, but surely profit is what shareholders should be concerned about? Is this the essence of financial mania?
Coincidentally, I was considering this mania for tech and so-called tech stocks as the Dart was delayed at Grand Canal Dock in Dublin one morning.
Grand Canal Dock is positioned at the mouth of the Grand Canal, the result of a mania for canals in the late 18th century, and the Dart is the descendent of the first railway built in Ireland, itself the result of a speculative mania for railways in the mid-19th century.
In both episodes great fortunes were made and lost in speculation on the shares of companies that didn’t make profits but augured riches betting on the new technologies of the times, burning through shareholders’ funds to get to the promised land.