“In the Studio,” CRV’s George Zachary Discusses Bubbles on the Eve of Facebook’s IPO

Editor’s Note: TechCrunch columnist Semil Shah currently works at Votizen and is based in Palo Alto. You can follow him on Twitter @semil

“In the Studio” hosts a Silicon Valley technology veteran this week, someone who has been around tech since 1977, in venture since 1995, an early investor in Twitter, Yammer, and Millennial Media, a former executive in the gaming console industry, and while in college, took an interest in economics where his thesis advisor just happened to be Nobel Laureate Franco Modigliani.

It’s become fashionable for certain breeds of celebrity tech pundits to sound the alarm bell for their audiences about the impending bubble we are in, or have been in, or will be in. It all reminds me of one of Gordon Gecko’s lines in Wall Street II, “like a rooster taking credit for the dawn.” Economic bubbles come and go, they are natural cycles that humans have lived through for centuries. A more interesting question to ask is: What phase are we in relative to the current economic cycle? This is exactly what George Zachary of Charles River Ventures dissects in this fascinating conversation.

With the Facebook IPO tomorrow, Zachary carefully walks us through a previous Valley bubble, explaining its formation, its growth, and the factors that led it to burst. We let the camera roll a bit longer on this one because it turned out Zachary has studied the history of economic bubbles and shared deeper insights into current market dynamics that have implications for the early-stage technology community. In this video, he almosts delivers a point-by-point lecture on the similarities and differences between the atmosphere around Netscape’s IPO versus the period we are in today. Zachary also spends time discussing what the rest of 2012 could look like for venture capital firms and early-stage founders who go into this market to raise funds. I’d recommend this video for any investor or entrepreneur investing in the consumer web and mobile spaces, a chance to hear a thoughtful opinion from someone who has a unique point of view on the current climate.

Here are some great quotes from Zachary from this discussion:

“The tensions that get created basically are socioeconomic in nature, where people feel like they’re missing out, and that fuels the end of the bubble. We’re not quite there, but we’re getting there…”

“We’re nearing the end of this bearish period, and we’re starting to see a bubble emerge…”

“The end of all bubbles are always marked by people borrowing money (debt) to buy equity.”

“There’s enough fear in the market to tells me that we’re not at a bubble yet. When there’s no fear, that’s when we’re near the end of the bubble.”

“Why is [Instagram] worth a billion dollars? Well, the question is it’s worth 1% of Facebook, which is different than it being worth a billion dollars.”