I’m
not going to answer, I’m not going to give you a yes or no I don’t think, I don’t think it’s fair. What does it matter, it implies that people get irrationally [xx]Well I think
there is one thing we can say, which is that real estate values will be going up. [xx]. let’s talk about it, let’s be honest. What are the consequences of this? Well, young people who need houses will go into areas of scarce housing resources and there will be competition for houses. And house will go up. So for them it’s not a bubble, it’s actually a house. Alright, and if you’re an existing house seller who gets to sell at a higher price, you love it. So I think that’s gonna be interesting. The other comment I would make having gone through a highly, highly publicized IPO is that you don’t really know the answer to these questions until there’s reasonable amount of circulation of shares, you have, you, you have a more stable shareholder base. You won’t have it until the initial significant lockups expire, which is typically 6 months. So you won’t really know the answers to these questions until 2012. Why isn’t it fair to just give a yes or no answer, I just didn’t understand that. I don’t think it’s, I don’t think it’s my job to call the market. It’s a mistake for me to say what the market should Okay, a lot of people would say you’re really well positioned just because of your experience. Well, but I’m not a brilliant investor. If I were a brilliant investor then maybe I’d have some status. I’m a computer scientist. Okay. Evaluation that would be in place for the company do you think they? But, do you understand that evaluations, it’s, it’s mathematically incorrect. You, you, the way evaluations work, is you take one percent of the shares which are trading in secondary markets. And then you’ll imply that if 99% of their shares were in circulation that would be the value, but it’s not, right. It’s just mathematically incorrect thinking that this is how our systems work. This bothered me at Google by the way. It’s not a new fact. So what’s, you won’t really know until there’s enough shares in trading to say what the total asset value is. The theory is that X Company is worth Y I, if you were to fully, fully you know, dissolve. Why the values? But it, but it’s not necessarily right. You’re taking a one percent and scaling it. I can assure you that all the shareholders of all these companies decided to sell on day one eventually the place would fall. You know, that’s why they have lockups and have restrictions for that reason. And plus all the rules went out. But I think it’s exciting. It’s exciting for them. I wish them very well. It was fun when we went through.Earlier this week, Google Executive Chairman Eric Schmidt gave an over 70 minute long talk to press at the Sun Valley conference here in Idaho. Towards the end of the talk, a reporter asked the former Google CEO whether he, like many in the media world, thinks we are presently in a tech bubble and what Google’s $1.67 billion 2004 IPO at a $23 billion valuation (Google’s current valuation is 171.43 billion) means in light of today’s IPO valuations.
“Oh we were underpriced,” Schmidt joked, before remarking that he didn’t actually know whether or not we are presently in a bubble.
“On the general question of bubble, in the first place you don’t know it’s a bubble until the bubble ends, by definition. The rule I set for myself 10 years ago was that if the press calls it a bubble then I’d pay attention, and let me report that the New York Times, the Wall Street Journal and the Economist have all written articles saying that it’s a bubble.
So you have a couple choices A) The revenue growth possibility on these platforms is so large that you could get the kind of revenue acceleration that justifies the valuations. B) You have a liquidity squeeze where you don’t have enough shares, and they’re artificially high.”
When a journalist pointed out that it sounded like Schmidt was “unconvinced either way,” he said that it’s difficult to know whether the valuations are fair until a significant amount of shares hit the market, usually when employee lockups expire, typically after six months, “You won’t really know the answers until 2012,” he said.
The only clear thing at the moment, Schmidt said, was that real estate values will go up. “Young people who need houses will go into areas of scarce housing resources and there will be competition for houses and housing prices will go up. So for them it’s not a bubble it’s actually a house.”
On what effect if any the seven years of market experience have had on his perspective on Google’s IPO, Schmidt said, “Google went public at a very different time, at what people thought was an unbelievably high valuation, and let me point out that we’ve never traded below our opening price.”
When pressed again by a reporter for a yes or no answer, Schmidt gave the following humble reply, ” I don’t think it’s my job to call the market. It’s a mistake for me to say what the market should think … I’m not a brilliant investor. If I were a brilliant investor then maybe I’d have some status. I’m a computer scientist.” … A computer scientist with a $7 billion net worth.
