New US Tech Bubble Dominated By Social Media Companies Facebook "makes" nothing, yet it is more valuable than Boeing or American Express

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By Paolo von Schirach

November 25, 2013

WASHINGTON – The NYT correctly points out that we are witnessing something like another US tech stocks bubble. First Facebook and now Twitter have reached incredible valuations. Snapchat, a company that makes no money, rejected a bid to be bought for $ 3 billion, hoping to get a better deal down the line.

Absurd valuations

Aside from social media, Tesla Motors, the maker of  sophisticated but super expensive electric cars, is now more valuable than Chrysler. Except that Tesla makes only 22,000 cars a year.

All in all these valuations are preposterous. The NYT piece wonders whether investors are once again betting on something that will turn out to be a bubble. The experts consulted indicate that, even if this is a bubble that will inevitably burst, this time around (unlike the dot.com disaster of 2001) there will be only limited ripple effects. Therefore the damage will be confined to those stocks, as opposed to creating a sector wide tech earthquake.

Where is true innovation?

Be that as it may, my concern is somewhat different. It seems that our American tech leadership is now confined to social media companies. I have nothing against them; but if this is all we’ve got, we are in really bad shape.

I would like to see investors snapping stocks of state of the art, cheap “toilet to tap”, water purification systems that could be easily introduced all over the world. I would like to see really inexpensive, easy installation solar panels for the production of photovoltaic electricity. Such a technology would bring off the grid electricity to hundreds of millions, and it would unleash enormous economic growth in Africa and Asia.

Internet-based universities and more

And I am waiting for the launching of brand new internet based universities that will effectively compete with “brick and mortar” colleges, this way democratizing quality education. And what about “vertical urban farming” companies that will make it easy and cheap to cultivate anything in vertical structures located right next to consumers? This new technology would save water and energy, and it would eliminate the use of pesticides, while allowing reforestation all over the world.

And how about cheap HIV and malaria vaccines that anybody could buy at any drugstore? And wouldn’t you like Boeing or Airbus to come up with a new generation of finally cost-effective supersonic jetliners?   

Facebook makes nothing

But this is not happening. We do not see disruptive and effective new technologies being listed and funded. The really valuable tech companies like Facebook “make” nothing, and quite frankly add very little of value to our lives and our culture. Nevertheless, the absurdity is that Facebook is now number 33 ( $ 113.88 billion) in the list of the 50 most valuable US corporations, while “traditional” companies like Boeing and American Express are respectively number 35 (102.18) and number 41 ($ 90.05).

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