Worried about tech bubble? Ask you Uber driver

Uber is not only an awesome ride service, it’s might also be the grapevine of the tech industry.

If you live long enough, you’ll see a lot of crazy shit in your life. Starting with the crap that kids do, crazy teenage behavior, college dipshit maneuvers, and later the inevitable knucklehead business tactics. It’s all out there, and all you really have to do is keep your head down, your ears open, and the needle out of your arm. Chances are you’ll learn a lot.

So when it comes to predicting when this current Silicon Valley bubble is gonna pop, all you have to do is, 1) remember your history, and 2) ask your Uber driver.

A lot of younger entrepreneurs are asking me where this latest tech insanity is headed. While it’s tempting to give a lot of technical economic reasons why the economy is overheating, the real advice is much more cliché and a lot more boring. Watch the money.

First, let’s discuss crash history circa 2000. What happened back then was a quick shut-off of capital, and it went like this:

  • Venture capital fund raises money
  • VC puts said money in a bank and hits the streets looking for startup investment opportunities.
  • VC finds opportunities and invests in said opportunities.
  • VC gets press for investing in NEXT BIG THING, and the launch party is epic.
  • VC loves the buzz and heads back out to get the next hit. Another company found, investment followed by more press, followed by another party.
  • Rinse and repeat, until VC has a big portfolio listed on their website.

Good, right? But, let’s take it a little further:

One morning VC rolls out of expensive organic cotton sheets, looks at the Benz in the driveway, and checks their schedule. “I have 10 board meetings this week and — shit, I got a lotta companies in the portfolio. Some I way overpaid for.” (That last part definitely said only to self).” VC continues, “Before I start investing in more companies, I better work some of these and get some exits before the investors get nervous.”

Much to their dismay, a VC eventually realizes that the rush of new investments is always followed by the dull reality of having to do something with the portfolio. Plus, this is a good opportunity for VCs to blame their investment slowdown on a general softening of the entire market. The VC sheep effect kicks in, and general investing in new companies slows down considerably.

Venture capital is the lifeblood of startups, those fabulously unprofitable hatchlings. I mean, someone has to pay for the in-house juice bar, right? So when the above sequence kicks in, companies experience trouble getting financing, some start going out of business, and the entire pyramid scheme collapses except for a handful of really important companies. The final straw is when VCs see other VCs passing on seemingly good deals, and shopping their own companies with more gusto than usual.

And with that, you got yourself a bubble busting. The trick is to see it coming down and head for the exits.

One easy way to see a burst coming is to have an inside view (i.e., be a VC). Since VCs are the ones dropping the turd in the punchbowl, they sure as hell know when it’s gonna be carried to the buffet table. This is where I was in 2001. As a VC, I was able to go into protective mode and exit out my LPs in good shape. Maybe it was dumb luck, but the wider your ears the luckier you get.

This time around, however, I’m not a VC. So I use the next best source for market intelligence: Uber drivers.

Talking to Uber drivers is like talking to flight attendants. In the past 10 years, I learned a lot about the airline business by talking to flight attendants. Years ago, I could see trouble brewing at United and American while predicting Virgin America would have a bright future. Good businesses have happy employees. A Virgin attendant once told me, while delivering coffee to my seat, that it’s the best job she ever had. A United attendant around the same time groused, “We treat you like shit because they treat us like shit.” Not a recipe for success.

And so it goes with Uber. I’m usually bored to death in an Uber, so I talk to the drivers. Uber drivers are a moderately happy bunch and quite amenable to the gab. I ask them who’s been in their car lately, and their responses are very telling: a venture capitalist from famous name firm, or the head of investments for large brand-name tech company, or a PE investor, or maybe a hedge fund manager. I ask for what they talk about and I listen. Right now, I hear tell tale of a distinct slowdown in investments. The word from the Uber is the snake has a mouse in their belly and plans to digest for a while. That spells bubble-burst to me.

Now, if you think this is all very unscientific and uninformed, you’re so right. It’s unsubstantiated rumor, and anyone making a move based on this info should have their head examined.


If your livelihood depends on venture capital giving your startup a little runway, I would keep your ear very close to the ground. Follow the money by watching what the VCs are doing (and more importantly) not doing.

And talk to your Uber driver, you might learn something.