Silicon Valley Snake Oil: It's Passed Its 'Sell By Date'

Authored by Mark St.Cyr,

“It’s different this time!” One of the greatest examples of Silicon Valley “snake oil” ever devised, embraced, and consumed en masse.

The problem with “snake oil?” It’s never different. And today’s newest and improved version has passed its expiration date – and is beginning to turn rancid.

Remember when “unicorns” were the thing? I know, they still are in a sense. But they are far from the once mythical enablers of turning $Millions into $Billions via IPO’s. As a matter of fact, that process has become so tainted, the only way to keep attention focused that a company may still be worth what investors declare? Is to keep it under the cloak-of-darkness, also known as “private.”

One has to marvel at how rapidly ineffectual the “It’s different this time” elixir argument is becoming with every passing day.

Why? Ask yourself this: Why is it, not only have the most highly valued unicorns yet gone public, but also, at the same time, the stock “market” is at never before seen in human history highs?

Yet, that isn’t even the main issue, there’s another even more telling one. And it is this: There’s not even been a set date or road show scheduled, (except vague innuendo) when basically this same condition has applied for months, if not years!

What, market conditions at “all time highs” aren’t suitable? No money to be made in “tech?”

Well, there is money to be made in tech, but only if your sticker symbol has the right marking such as the coveted “bulls-eye” of the central banks. (Hint: FAANG)

If you’ve any misgivings about that. Just pull up a chart of any “disruptor” IPO darling of choice from 2015 onward. If you were one of the so-called “lucky ones” to get in on opening day? I’ll garner you no longer need, or look, at any of those charts. And, you have my condolences. (Hint: try TWLO, SNAP, or APRN for clues.)

The issue for Silicon Valley today is this: It’s going to get worse, much worse. And the only ones not getting it is the entire tech complex.

Sorry, but, once again, hint: It’s over. As in dot-com mania over.

The only thing left to happen is the inevitable crash. But make no mistake – it’s a matter of when, not if. And “when” is soon. Soon as in months, maybe a few earnings cycles, not years. For the seismic, tectonic shift, once known as Fed. largesse that has enabled all of it, has now not only been halted, but reversed, as in money from the Fed. will be withdrawn, and destroyed.

That’s what “balance sheet normalization” truly means. And the first to feel “the burn” as they say will be what was once the hottest, of hot sectors. i.e., Tech, especially, no earnings to sub-par earnings tech. Hello unicorns, and ads-for-eyeballs disruptor models aka known as social-media.

This all begins in earnest this coming October, just a week or so from now. And with it everything changes, especially, any and all past assumptions of “It’s different this time” accolades or defenses from traditional business metrics. i.e., making a net profit.

The reason? It’s going to be precisely that: different, this time.

Let’s use today’s deca-corns (yes, that’s an actual term because “uni” is just so blasé) for a little context shall we?

I posited back in April that Uber™ was in far greater trouble than anyone (especially the mainstream business/financial media) not only dared say, but rather, was able to intellectually extrapolate. I also contended, that this had major implications for “The Valley” at large.

Not only has that premise further crystalized. It’s crumbling even faster by the day. To wit:

Market Watch™: “Uber stripped of right to operate in London in latest blow to ride-sharing app”

Can you say: “Uh Oh?”

So let’s see: From a claimed $68Billion, to an assumed $40’ish (or less) on rumored buy outs, and now London says “…not fit and proper to hold” a license in the city. You know, a city that’s basically a mecca for taxi cabs and service.

What’s the valuation assumptions from here? Half of $40? Or, even less? Why? Easy…because who’s next? New York? Chicago? It’s an open question, just like its valuation. For nothing is yet truly settled.

Oh, but wait, there’s AirBnB™ that’ll save the apocalypse from venturing any further I’m told. Well, in my opinion, that’s a maybe, to a flat out no. “Why,” you ask? Again, fair question, and it is this:

Just like Uber – the longer it remains private – the more time is allotted for any, and all lawsuits either resting, or being drawn, to ferment ever further.

Uber has its driver issues and such. AirBnB has its own regulatory hurdles to still fight. And those fights just may get hit with an accelerant if the latest proposals being bandied about for increasing its presence draw it closer into the spotlight. Case in point:

A new start-up called Loftium™ has been launched to help prospective home buyers with up to $50K for a down-payment, but there’s a catch: You have to list a bedroom for three years on AirBnB and share the revenue.

Sounds great right? Here’s how I view it…

Much like Uber, this will have (and encourage) lawsuits, and more because of this one factor: Much like the “independent contractor” issue has yet to be fully resolved for Uber (let alone all the other suits.) AirBnB rentals in many cases break the social contract of not only knowing who is your neighbor, or tenant. But also: what business is allowed to openly operate within a residential neighborhood.

Say what you want about, “Renting out a room in my house is no different that letting a friend or family member stay the same period.” I’ll respond with, “Au contraire mon ami, it sure is.”

It is also very different in the eyes of both business law, as well as zoning. And this latest example of “disruption” is going to bring all of that, and more, to the forefront for AirBnB, in my estimation.

Hint: You think the hotel associations and such alone are going to just stand by and allow (as well as pay) all the taxes and restrictions for code enforcement while a neighborhood of homes around it gets to do it all without zoning, OSHA, mandated handicap access and egress, fire and safety requirements, and more?

Tack all of the above onto where now, there is a vocal, and concerted push (with incentives and more) by AirBnB to make “business traveler deals” available. If you believe the industry alone (let alone people in neighborhoods just sitting back as transients come too-and-fro into their neighborhood where their children are), I have some wonderful oceanfront property in Kentucky you can lease out, on the cheap. “Trust me.”

I used the unicorns above for examples because these are/were used as the touchstones against any, and all calls of criticism against the “It’s different this time” mantra. And now? (In my opinion) They are well past their sell by date, especially since now the Federal Reserve has indeed made it official and declared “”normalization” will begin in October.

And if you still believe in: “this time it’s different?” Here’s something to remind you, that it is – exactly that. To wit: “Spiking Silicon Valley Unemployment Dragging down California’s Economy”

Just as a reminder of how fast the whole “It’s different this time” meme can go awry. Here’s what I said back in October of 2015. to ridicule from many of the Valley’s aficionado set and business media cheerleaders.. To wit:

“However, you know what changes everything? When the meme of “Gonna stay here till I cash-in and then I’ll buy me a McMansion!” turns into the underlying realization that quite possibly – you’re going to end up living in a shipping container! Possibly forever if things don’t change.”

But it’s different this time. right? Or, maybe, it’s not. Better check that “bottle” for an expiration date. I think it may be well passed.


BlindMonkey Sun, 09/24/2017 - 21:36 Permalink

This is confusing.  There are tech companies, even Uber, that have great products they are creating.  Where do you draw the line between hype and value?

SixIsNinE desertboy Sun, 09/24/2017 - 23:53 Permalink

here's some scary silicon "innovation" -  the synthetic biology - nanotech(and by the way - from these links i also found out that the SOYLENT product (yes, MAN-made,not made of MAN:) - a new kind of manmade powder drink - caused some people to get sick - turns out FDA has not approved whatever the mystery ingredients are in SOYLENT) - we've been hearing once in a while of people who swim down in Gulf of Mexico who get a flesh eating bacteria - and die - well here is the reason -  i can't believe it's first I remember reading about CYNTHIA - the engineered bacteria released in Gulf of Mexico to eat up the Deepwater Horizon BP oil disaster (60 sq. miles oil slick) - but surprise!  it is mutating and likes to eat living things, people definitely.and pay attention to these links:  synthetic biology/nanotech unbridled : Cynthia: Flesh-Eating Synthetic Bacteria that has Gone Wild

In reply to by desertboy

spdrdr NoPension Sun, 09/24/2017 - 22:55 Permalink

I concur.  It is contexually the correct gramatical use of "passed".If the OP had written "I think it may be well past." this would be completely incorrect, as "past" is neither a noun  ("it was in the past"), an adjective ("This past quarter has been a motherfucker for us!"), an adverb ("Don't go past!), or a preposition ("Don't go past this line in the sand!").Using the term "I think it may be well passed." is correct, as "passed" is being used as a verb.  In fact, for all of those Grammar Nazis, it is using the verb as a PAST tense.However, if the sentence read: "I think it may be well passed its use-by date." then it changes to an adverb, and hence should be "past", not "passed".Now back to our usual programming... 

In reply to by NoPension

spdrdr bitplayer Sun, 09/24/2017 - 23:33 Permalink

OK, if you are talking about the lede "It's Passed Its 'Sell By Date", you need to look at the preposition "It's". This is an abbreviation of "It has" and even you might clearly see that the verb is "HAS".  Contextually, it becomes "It has passed..." as opposed to "It has past", which is clearly incorrect.Your move, motherfucker. 

In reply to by bitplayer

spdrdr spdrdr Mon, 09/25/2017 - 03:28 Permalink

Although, to be fair (being Fight Club and all), I do concede that some fag could pick up some Tofu at their local supermarket, and say "It's past its use-by date!", and be 50%/50% correct.  It is  PAST its use-by date, or it has PASSED its use-by date, depending upon the author's intent.  Both cannot be a positive true - i.e. one must be incorrect.The fag with the tofu is using "It's" as "It IS", and in THAT context, "past' is correct: "It's past its use-by date!"So - are we currently looking at "It's" as being "It HAS" or else "It IS"?I think in the context of the OP narrative, it is clearly intended to be "It HAS".Indeed, the OP provided the following:"And today’s newest and improved version has passed its expiration date – and is beginning to turn rancid."Clearly "passed" and not "past" is apposite.However, I do apologise for callng you a motherfucker.  It is Fight Club, but given the vagaries of correct grammar and contextualisation, I am willing to apologise. I will simply call you a Nitwit. 

In reply to by spdrdr

jin187 NoPension Sun, 09/24/2017 - 23:13 Permalink

I don't understand why licenses are needed at all. Do driver's licenses prevent wrecks? Do business licenses prevent illegal or immoral business practices? Do licensed cab companies do more background checks, or use safer, better cars than Uber? The answer to all of those is probably no.

Most government licenses are just a cash grab and stealth tax. You don't see it coming out of your check on payday, or your wallet at the register, so of course they aren't taxing anyone. That's literally the only reason the companies competing with AirBnB, and Uber are pissed. Government is screwing them, and those guys bypass it, so rather than fight back against the corrupt government, they call for government to punish everyone equally.

In reply to by NoPension

Bryan Sun, 09/24/2017 - 21:48 Permalink

"past"Kudos though for the correct uses of "it's" and "its".  I give Tyler a B+ for grammar.The title "It's passed its expiration date" is an incorrect pull quote of the correct grammar "has passed its expiration date."FYI - I'd be happy to spell check your titles for $10/title.  Then again, most people either don't care or wouldn't recognize proper grammar anyway.

NoPension Sun, 09/24/2017 - 21:44 Permalink

My neighbors, married and no children.......fixed the workshop into a nice apartment....and rented out the house to a family who more than covers the note.

They have a nice little gig...traveling to fairs and whatnot, in a class b motor home....selling an edible product for cash. $10,000 gross on a good weekend.

Bless them.

Anteater NoPension Sun, 09/24/2017 - 21:59 Permalink

Bless them, they must have one helluva booth.That's 1,000 sales, over maybe 12 good hoursin one weekend, is one sale every 90 seconds,and I'll bet they're not selling butter popcorn,so they have to check IDs and make changein that 90 seconds, prolly wear Depends, lol.We used to sell bud pipes from Oaxaca backbefore US tourists were big in Mexico, comeback up to El Norte and sell to the hippies,...but we never made no $10,000 weekend.That's why the Grateful Dead gave it all up.

In reply to by NoPension

tmosley Sun, 09/24/2017 - 21:59 Permalink

>x obsolete organisation of buggy whip manufacturers isn't going to allow a new service to continue operationShould have left that part out, tbh. Withdrawal of CB liquidity is enough.Though one wonders if the Fed's withdrawal of liquidity won't be countered by BoJ or BoE or whoever the fuck else.

Yen Cross Sun, 09/24/2017 - 23:58 Permalink

 All the VC capital is drying up.  Same shit happened in 2000. Gonna be much worse this time because of stagflation. The fed has already lost control, and is scared shitless.  That's why the yield curve is so flat. I would be selling bonds [2-5] on the short end, right about now. That weird move in 5's was probably the short end looking for temporary protection. Maybe primary dealers have a better grasp of how the fed plans to retire their paper? The shit has been twisted so many times I can't keep up. It might be time to see the reverse repo charts [like during QE] again.  Where's Bill Gross... crickets   All cycles come to an end.  The Greeks and Romans didn't have [HFT] microwave towers.

BallAndChained Sun, 09/24/2017 - 22:08 Permalink

> Silicon Valley Snake OilYou mean like Bitcon and cryptos?At least snake oil can keep your skin from drying out. With cryptos, rubbing thin air on your skin does nothing.

BallAndChained jin187 Mon, 09/25/2017 - 00:06 Permalink

You are one of those people who want to eat gold lol. Why are you so hungry?You can't eat thin air either.Why are you so dumb as to think people who have gold can't afford to have water or food?Water and food is common and cheap. Thin air is even cheaper.You are fooling yourself to think someone would walk into a desert holding only gold but not bring any water lol.Gold and water is not mutually exclusive. You are allowed to have both.

In reply to by jin187

BallAndChained atomic balm Mon, 09/25/2017 - 03:43 Permalink

Yeah like that is going to happen to everybody lolRob a train, have somebody put you into suspended animation for 100 years, go into the middle of the desert, deliberately crash your car, be so stupid as to not bring enough water, and be able to manufacture gold at no cost. Yeah very likely lolTry drinking Bitcon and cryptos in the middle of the desert. Most people have never even been to a desert and never will, so they all suddenly want to go to the middle of the desert.

In reply to by atomic balm

MuffDiver69 Sun, 09/24/2017 - 22:23 Permalink

Use any search engine and put in Silicon Valley and California economy etc . Tons of articles on the cliff California is teetering on. Moonbeam has mentioned it over the years, but on they go and yes, this entire charade is almost over. The biggest difference is many of the big boys sit on piles of cash, but that ain't helping the schmucks who will get pounded once again..

Chundered ever… Sun, 09/24/2017 - 22:47 Permalink

Are you saying that Zuck-the-Cuck is bailing out for $20bn while the last of the going is good.?The Cuck Indicator is looking accurate...a nice market crash...say 45% with Cuck-n-Co buying back in to take then FaceScam private.?

MD Sun, 09/24/2017 - 22:54 Permalink

Once the tech bubble pops, the real estate bubble in the tech hub cities will swiftly collapse. It's going to be quite the shit show.