Wolf Richter: Is the IPO Bubble About to Burst? Banana Republic Trots Out ‘Startup Guy’ Look

Lambert here: Well, he got the Banana Republic part right, anyhow…. Readers, if I were any good at the market, that’s what I’d be doing. Caveats aside, I had the same feeling when I saw the Amazon results. Amazon hasn’t ever made money, as opposed to pushing money around in a big circle, like me, so what spooked the herd? Readers, do you have your own favorite signs of a market top?

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

Bubbles are easy to discern, despite the Fed’s rhetoric that bubbles cannot be discerned. What’s hard is pinpointing the moment they top out. But that’s precisely what everyone wants to know: make tons of easy money as the bubble is inflating, then cash out at the top before it implodes.

But there is no scientific measure to time this right. Bubbles are consensual hallucinations that go on for a lot longer than anyone, afterwards, thought possible. And they implode when investors suddenly come out of it.

So lacking reliable scientific indicators of when to get out, everyone has their own list of ersatz indicators. It may be when an Uber driver gives you must-buy stock tips. Or it may be when a 22-year old in a retail job is flipping homes sight-unseen in his or her spare time. I overheard someone discussing such a deal via cellphone at an airport in early 2005 and knew we were getting very, very close to the top of the housing bubble. But the top would still be a year away.

Turns out, those indicators almost always get the most crucial element wrong: timing.

The IPO Bubble

Nevertheless, I now have a new indicator for my official the-top-is-in list, and this one concerns the startup and IPO bubble: Banana Republic’s “Startup Guy” look. You just can’t make this up!

The poor chap was at the bottom (!) of a promotional email Banana Republic sent to its email subscribers. On top were the Corporate Guy in a Banana-Republic suit, suede shoes, and no socks and the Creative Guy who’s trying to look like Steve Jobs minus the cool and the jeans.

Turns out the Startup Guy is wearing a “tailored Slim-Fit Soft-Wash Gingham Shirt,” a “Fulton Skinny-Fit pant,” no socks, and suede shoes. It could be, theoretically speaking, that there is a startup guy running around dressed this way; startup guys wear just about anything imaginable – except suit and tie, though I’ve seen it happen too: a guy who never wears a suit and who you didn’t even think owned a suit suddenly shows up in a suit. Maybe his mother-in-law is in town, or maybe he is trying to sell something to IBM.

People who work at startups, particularly the founders, the real startup guys and girls – for the moment, let’s not even imagine what Banana Republic’s Startup Girl look would entail – have other things to worry about than what Banana Republic tells them to wear.

If they were conformists looking to do whatever everyone else is doing, they most likely wouldn’t have started their outfits with their own blood, sweat, and tears. They’re mostly nonconformists with their own ideas about how to run a business, how to design a better mousetrap, how to market something more effectively, for better or worse.


That the whole startup exuberance – the media circus about soaring IPOs, the insanely valued buyouts by corporate America of tiny outfits with nearly no sales, the resulting “instant” billionaires – has been turned into a line of clothing called Startup Guy by multinational corporation Gap whose number crunchers think there is enough exuberance out there to sell this Startup Guy look to millions of non-startup guys – that’s the market they’re after, not the smallish number of real startup guys – that whole syndrome is my new indicator of a startup-bubble top.

But even that elegant indicator probably gets the most important element wrong: timing.

And exuberance it is. In the startup epicenter San Francisco, home prices hit a slick $1,000,000, while soaring office rents blow up enterprises with real business models. It’s crazy. It’s powered by hot money from around the world. Then comes the moment when the hot money evaporates.

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This entry was posted in Doomsday scenarios, Free markets and their discontents, Guest Post, Market inefficiencies on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Clive

    I have, for my sins, not been able to shake off the idea of US real estate as an investment asset class. I’ve got prior convictions alas on this line of thinking, and am still metaphorically kicking myself for missing out on The Great Reflation of the past couple of years or so. In my weaker moments, you can find my indulging my guilty pleasure — flicking through the realtor sites, especially those who advertise new builds in well known retirement areas.

    And I have always wondered what it would be like to retire to Palm Springs. So that’s where I was checking out the market.

    What had me running for cover ? The developer of these fine sounding “desert homes” including a Chinese language version of their marketing material. It made me wonder if we might well be at peak capital flight into the US single family real estate (cough) “safe haven”…

  2. MikeNY

    WTF, have socks gone the way of the corset and the cod-piece??

    My indicator for the top of the market is when mom and pop finally can’t resist anymore and go all-in, having decided that they will be priced out FOREVAH if they don’t move now.

    Somebody has to hold the bag.

    1. Skeptic

      “Somebody has to hold the bag.”

      Throw out all those economic texts, charts, theorems, etc., Mike, seasoned by NY, has summarized it all. Ricardo, Smith, all those perfesseurs, analysts, quants eat your hearts out.

    2. craazyman

      That’ll probably be me. The Doomers & Gloomers that we’d read right here at NC for years have basically ruined my life. I thought I’d get rich quick from all their erudition by going short! Europe was gonna crater and burn and so was the US housing market. The financial system would be revealed as insolvent. And stocks would crash. Instead everything went up 60% or 100%. The only thing naked here is my portfolio. The last chance is to leverage up a long position to catch the bull market while we still can, before it goes up another 1000% and you’re left someplace back in the past alone wondering where life went without you.

    3. craazyman

      actually if somebody clicks the link to the Banana REpublic website, some of those looks look pretty good! Startup guy is ridiculous, of course. Nobody starting up a global tech giant would look that relaxed. Especially if they were a straight guy. Straight guys can’t dress themselves to save their lives. I know that whatever clothes I put on, I look ridiculous. Once I got dressed for work at a corporate casual office my girlfriend at the time gave me a long stare and said “You look like a clown.” That hurt. But frankly she was right.

      If you’re a straight guy you’d probably look at least 100 times bettr if you just dressed like they do in the ads. But the problem would be, all the women would think you’re gay. If you can work that to your advantage, it might help break the ice by lulling them into a false sense of security. hahaha. Before the hammer falls. no pun intended.

      Of course, if you’re really a straight guy, you’d probably still f88ck it up somehow and end up looking even more ridiculous than you already do. When you’re a straight guy and a bonehead (that may be redudant) It’s hard to get anything right. You just need to get lucky no matter what situation youre in.

      1. Yves Smith

        Actually, Tom Ford (of course gay) has the dirty secret, and it costs money, but from an investment perspective, it is probably worth it.

        He has everything tailored to fit, even cheap T-shirts.

        It’s amazing how something that looked like it doesn’t work can look 1000 times better with getting it fitted. I only did that with some serious business clothes that looked like purchasing mistakes back in the day when I was a corporate person and needed to look put together. A surprisingly high percentage of the time, having the tailor have a go at it salvaged what would otherwise have been a wardrobe total loss.

        The other trick is following the French woman playbook. They spend a lot of money on one or two outfits and wear them a ton. And guys can get away with wearing uniforms MUCH more readily than men. So consider less and better.

        1. craazyman

          if some dude show up to take you out on a date and he looks like Startup Guy or Creative Guy (god forbid) — I bet you’d be like “WTF”?

          Its one thing to hang out and gossip with Fashion Queens, but when a situation requires a real man with a hammer the attire becomes a distant secondary consideration. It’s OK for the man to look presentable, but beyond that it’s fashion foo-foo woo-woo that simply discredits his manliness and arouses suspicion about his orientation and fitness for the tasks at hand.

          1. Lambert Strether Post author

            Elmore Leonard, Gold Coast:

            First thing though, Roland spent his back pay. He bought himself four new summer suits the man told him were designed in Paris, France, and specially cut for them by this tailor in Taiwan, Republic of China. He bought himself new three-hundred-fifty-dollar hand-tooled, high-heeled boots. He bought an Ox Bow wheat-colored straw hat with a high crown and a big scoop brim that, with the cowboy boots, put him up around six-six. He bought a cream-colored Cadillac Coupe d’Ville, cash. And put two months’ rent down on an eight hundred dollar apartment in Miami Shores.

            Look good and you feel good.


        1. RUKidding

          Yeah, who knew socks were OUT? I thought going sock-less was only for trustafarians in places like Miami or Palm Springs.

      2. MtnLife

        Craazy, I grew up with multiple family members owning clothing stores so fashion was beat into me. Add a strict Catholic upbringing (I’ve mostly recovered) and old school gentleman manners and you have a recipe for a total perception of gayness. Probably didn’t help that I had a lot of gay friends too. I didn’t find out until my 20’s you have to look like crap and be an asshole to appear straight.

      3. RUKidding

        There’s a pretty big Banana Republic near Union Sq in San Francisco that I visited recently. I found it interesting that the Mens Dept was much bigger than the Womens (usually the reverse is true), plus the gals had to go downstairs, while the guys got pride of place on the ground floor (another reversal). I confess that I thought a lot of the guys-wear looked rather gay-wear to me. I know SF is hot hot hot again with another tech bubble & all the start ups, etc, plus of course, the epicenter (in theory) of gay culture. So I wondered if all the start-up dudes in the Bay Area these days were gay or what?

        Appears that perhaps Banana Republic is attempting to appeal to that market anyway, but perhaps the Millenial males are in full Metrosexual mode, too.

    4. DJG

      Cod pieces are back big time. Look at flat-front pants (without the pleat). Most men’s pants, especially jeans, are now designed to pull up and out at the fly. Pleated pants give men a very sleek look–an illusion of greater height. Not so the current styles–it’s all about the protruding crotch, the low belly (to show off the fat, I guess), and the droopy butt. You haven’t been to Brooklyn enough, Mike.

      1. MikeNY

        I was all about to whip out the Metrocard until I got to the part about the belly fat and droopy butts… :-\

      2. ewmayer

        LOL @ codpieces being back in — time to pop in the Blackadder season 1 DVD and proceed to the episode where Edmund seeks to impress the ladies at a court gathering by sporting the “intimidator” of the codpieces in his collection, the infamous “Black Russian”:

        “The Black Adder” The Archbishop (1983)

        [You have to be a bit patient, this one starts a bit slowly, but gets funnier as its goes along.]

  3. Auntienene

    What’s up with the half-tucked-in shirts? I first noticed this in women’s clothing catalogs. Most of us would just look like absent-minded slobs if we adopted this.

    1. RUKidding

      Maybe it’s to endorse Millenials looking like absent-minded slobs & being able to get away with it? I see it sported about sometimes, but mostly in non-work settings.

  4. cnchal

    NC is a treasure trove, and from following a link the other day, I came across this gem.

    Ken Jones, July 22, 2014 23:02
    Price is what you pay and value is what you get”. If you think that’s true, Alan (and no one with a brain could disagree) – how can you write this nonsense?

    Shares are a long term instrument analogous to a variable coupon 50-60 year bond. Central Bank cash-splash in the short term makes no difference to the VALUE of a share today. But their operations (all this “whatever it takes” puff) have created the recent illusion that they have the power to refashion reality as they choose, in a long term sense. This is “new normal” nonsense. Buyers think they’re sagely buying VALUE. They’re just paying today’s price, and that price is currently based on belief in the permanent effect of an unsustainable external interference.

    Anyway – we can’t all be bulls. Like the “money entering the market” talk, this is rubbish. Like every dollar put in by one trader leaves with another, for every one of these bulls buying there’s a bear who’s happy to get out. When we hear from 65% of the commentariat, like now, and including you – “The only way is up!” that is a screaming sell signal. Optimism, like pessimism is very infectious, and sense goes out the window. As Buffet said – “A market with a concept between its teeth makes lemmings look like individualists”. Like in NYC the man said that all the traders he met were contrarians (impossible) we all know we’ll be the smart ones who’ll be fearful when others are greedy. Well – we can’t all be, and they’re certainly not todays buyers!

  5. Anarcissie

    I thought tucking your shirt in at all was passé. You wear a T shirt outside your pants, and, if it’s not too hot, an unbuttoned shirt over that. Jeans still seem to be mandatory.

    The thing about the socks I don’t get at all. Sweaty shoe leather or canvas on your feet is too horrible even for high-styling.

  6. brooklinite

    This is off topic, Since there is a brooklyn discussion going on I wanted to add, What is the deal with the asian and white combination, I recently moved to the area. I don’t have a problem with the style, What is it about asian women liking white men doesn’t matter old or young, and the other way. I am sorry if I sound like an idiot, I just don’t have any asian friends dating white men or either way. Can some one throw me some perspective please —

  7. Jeff N

    my indicator is when the promo items that companies send you in the mail get especially pricy.

    I received a real oven mitt the other day, for some offering that was “hot”. it’s actually nicer than the oven mitt I currently own.

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