Over the summer, a friend of mine and I were talking and we came to the subject of Groupon. He was joking how we’re so smart yet we can’t come up with a simple idea like Groupon to land ourselves a $30 billion evaluation.  At the time I was reading a lot about the inner workings of Groupon. And I was convinced there was some serious shady business going on there. I tried to explain why I believed Groupon was a ponzi scheme. But I just came off as a conspiracy theorist. Yet my friend, distracted by the beach and the scenery,  said he’d be interested to hear more about Groupon and why I thought it was a scam. On July 13th I wrote him an email this is that email:

The Groupon article was worth mentioning when you brought up to the subject. Although Groupon isn’t a ponzi scheme by definition I don’t believe it is sustainable. Using the existing money they have generated from previous Groupon sales they reinvest into expanding to other locations and cities. They hire more salesman then they need. They currently have 8000 employees and over 50% are salesman. Companies that use a sales first business model tend to fail or run in to sustainability problems. I think think Groupon will eventually need to restructure. But most importantly, why I think it is a scam is because they have all of these employees which they need to pay salary and commission to, and instead Groupon chooses to reinvest any money they make into rapid aggressive expansion. And then they turn around and raise money by rushing to an IPO. They give investors a chance to privately invest at their ridiculously overpriced $30billion valuation. And they use that money to pay their employees and themselves. They will crash and people will speak of a tech bubble again. But this time around there will be only a few companies that will suffer from this ‘tech bubble’. These days real innovation and lean companies start with something sustainable and by creating traction.

The following articles are about a bubble I strongly believe in, the education bubble. Peter Thiel is a tech genius in my opinion and he talks about the topic. His track record speaks for itself. The best part of all this is hes putting his money where his mouth is by creating the 20 under 20 program and encouraging kids to drop out of school. It just launched last month and no real business have come out of it yet but it shows much promise to launch some of the most innovative and useful creations to the real world.

Techcrunch Peter Theil Education Bubble Article

Economist Higher Education Bubble Article

The articles don’t mention this but a huge problem I see that Peter Thiel is indirectly solving is that the most qualified and smartest young tech stars of our generation look to get rich quick. Most of them want to graduate and go work for Facebook, Twitter, Foursquare, or Instagram. These are all great companies but they are all methods of entertaining ourselves as human beings. It’s not progressing our race for optimal survival. And that’s what makes me think the world is doomed. Cause these kids want to go work for them or create a stupid $0.99 photo app that turns pictures into different colors to make millions because that is the easy way out. No one encourages them to pursue the creative and innovative ideas they have which is what Peter Theil is helping promote.