Billionaire's Portfolio

April 3, 5:00 pm EST

We’ve talked about the prospects that Lyft and Uber, dumping shares on the public at a combined $140 billion plus valuation, may mark the end to the Silicon Valley boom cycle.

This uber-exuberant valuation reflects the regulatory and policy advantage Silicon Valley has enjoyed for the past decade (which is ending).  It shows the displacement of capital from Wall Street to Silicon Valley (as a result of those advantages).  And arguable, it shows the euphoric stage of a bull market for internet 2.0.

Bull markets are said to be born on pessimism, grown on skepticism, mature on opitimism and die on euphoria.  For the euphoria stage, as Paul Tudor Jones describes it, there’s typically no logic to it and irrationality reigns surpreme.  Given that markets have bought the notion that a hand full of apps would destroy enduring industries, millions of jobs, and life will be great (?) —  It’s fair to say that irrationality is (and has) reigned supreme.

With this in mind, we talked about the beginning of the end, last year, when the regulatory screws began to tighten on the untouchable tech giants (namely, Amazon, Facebook and Google).

As I said back on September 4th, when Amazon crossed the trillion-dollar valuation threshold, “at 161 times earnings, the market seems to be betting on the Amazon monopoly being left to corner all of the world’s industries. That’s a bad bet. Much like China undercut the compeition on price and cornered the world’s export market, Amazon has undercut the retail industry on price, and cornered the world’s retail business. That tipping point (on retail) has well passed. And as sales growth accelerates for Amazon, so does the speed at which competition is being destroyed. But Amazon is now moving aggressively into almost every industry. This company has to be/will be broken up.”

A day later, Facebook and Twitter executives visited Capitol Hill for a Congressional grilling.  Here’s an excerpt from my note that day:  “If you listened to Zuckerberg‘s Congressional testimony in April, and today’s grilling of Jack Dorsey (Twitter) and Sheryl Sandberg (Facebook), it’s clear that they have created monsters that they can’t manage. These tech giants have gotten too big, too powerful and too dangerous to the economy (and society).”

In short, they are too big to manage, and Zuckerberg said just that in his Op-Ed this week, calling for global regulation.  Remember, the irony is, regulation only widens the moats for these companies.  The higher the cost of compliance, the smaller the chances that there will ever be another Facebook developed in a dorm room.