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The efficient allocation of capital


There's an interesting article in Sunday's San Francisco Chronicle about the apparent inflation of a social media bubble. Companies like Facebook, Twitter, LinkedIn, Groupon and Zynga are being valued at many, many times their respective revenues. Nothing could go wrong with this, right? Naw, the professionals are in charge.

Venture capitalist Ethan Kurzweil offers the following reassurance, "I wouldn't call it a bubble at all, I'd call it a renaissance." That's right, a renaissance, a rebirth. Why am I thinking of the moment in Alien when John Hurt's stomach bursts open?

Maybe because in his next breath Kurzweil lets slip the truth:

I will say that if we're in a bubble, it's likely at the early stages. Massive amounts of wealth will be created before it all comes tumbling down.

(I know it's presumptuous of me, but I'm pretty sure the underscored sentence above should read, "[m]assive amounts of money will be redistributed before it all comes tumbling down." I leave it to you to ponder how much and to whom.)

A guy like Kurzweil, with his Econ degree from Stanford and MBA from Harvard, is more a carnival barker and confidence man than an honest broker. The young man undoubtedly has a very bright future ahead. God help the rest of us.

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