FORTUNE — In a highly entertaining debate on Bloomberg Television Thursday afternoon, Vivek Wadwah squared off with Paul Kedrosky over the tech bubble. The argument ultimately came down to whether the bubble should inflate in the public markets rather than within the portfolios of private investors whose jobs entail accepting high risk.
Kedrosky, a blogger and tech investor, conceded there is a bubble among a small handful of privately held startups and that there are a number of overvalued companies, including some newly public ones. Wadhwah, a tech entrepreneur-cum-pundit and academic, said the “ridiculous valuations” of companies like LinkedIn (LNKD) and Pandora (P), as well as private companies trading on secondary markets, amount to a bubble that’s going to burst soon. Kedrosky put the pop about five years in the future, and noted that at least for now, overvaluation is a problem for “a very small list of companies,” mostly in the social-media business.
Http://www.youtube.com/watch?v=DMRM1RwvTmA
More precisely, Kedrosky doesn’t even think this is a problem. “The essence of technology markets,” he said, “is that you have to have these enthusiasms.” As in all bubble debates, he harkened back to the dot-com bubble of the late ’90s. Outfits like Spotify, Netflix (NFLX) and Google’s (GOOG) YouTube exist, he said, “because we overbuilt the telecom network in response to a prior bubble.”
Yes, responded Wadwah. But also, “people lost their life savings.” People such as “Grandma.” He mentioned “Grandma” about half a dozen times. “Let the VCs lose their shirts,” he said, “but why do we raid grandma’s piggy bank?”
To which Kedrosky retorted: “If Grandma’s buying Facebook shares [when that company goes public], she deserves the bad things that happen to her.”
But Kedrosky’s argument assumes that Grandma’s investment occurs in a vacuum, and that only people who directly own overvalued stocks are hurt when public markets tumble. As we’ve repeatedly seen, this is not the case.
Nonetheless, Kedrosky held fast to his theatrical worldview. “The essence of growth capitalism – of technology, of entrepreneurship – is animal spirit, is this belief in the impossible.”
The only question is whether the impossible beliefs of animal spirits should be financed by public investors.