Of course it’s a bubble! Let’s not waste any time on that one.

The fact of a bubble doesn’t mean that all the stuff people in tech are building today is worthless, nor will it all vanish when (not “if”) the bubble deflates.

It does mean that a certain set of reality distortions infects our conversations and our coverage of the industry. If you are old enough to have lived through one or more previous turns of this wheel, you will recognize them. If they’re not familiar to you, herewith, a primer: three lies you will most commonly hear during a tech bubble.

(1) Valuation is reality

When one company buys another and pays cash, it makes sense to say that the purchased company is “worth” what the buyer paid. But that’s not how most tech-industry transactions work. Mostly, we’re dealing in all stock trades, maybe with a little cash sweetener.

Stock prices are volatile, marginal and retrospective: they represent what the most recent buyer and seller agreed to pay. They offer no guarantee that the next buyer and seller will pay the same thing. The myth of valuation is the idea that you can take this momentary-snapshot stock price and apply it to the entire company — as if the whole market will freeze and let you do so.

Even more important: Stock is speculative — literally. When I buy your company with stock in my company, I’m not handing you money I earned; I’m giving you a piece of the future of my company (the assumption that someday there will be a flow of profits). There’s nothing wrong with that, but it’s not remotely the same as giving you cash you can walk away with.

When one company buys another with stock, the entire transaction is performed with hopes and dreams. This aspect of the market is like capitalism’s version of quantum uncertainty: No one actually knows what the acquired company is “worth” until the sell-or-hold choices that people will make play out over time. Some people might get rich; some might get screwed.

Too often, our headlines and stories and discussions of deals closed and fortunes made ignore all this. Maintaining the blur is in the interests of the deal-makers and the fortune-winners. Which is why it persists, and spreads every time the markets go bananas. Then young journalists who have never seen a tech bubble before sally forth, wide-eyed, to gape at the astronomical valuations of itty-bitty startups, without an asterisk in sight.

This distorted understanding of valuation takes slightly different forms depending on the status of the companies involved.

With a publicly traded company, it’s easy to determine a valuation: Just multiply price per share times the total number of outstanding shares, right? But the more shares anyone tries to sell at any one time, the less likely it is that he will be able to get the same price. The more shares you shovel into the market, most of the time, the further the price will drop. (Similarly, if you decide you want to buy a company by buying a majority of its stock, you’ll probably drive the price up.) So stock valuations are elusive moving targets.

For private companies, though, it’s even worse. Basically, the founders/owners and potential investors sit down and agree on any price they like. They look for rationales anywhere and everywhere, from comparable companies and transactions to history to media coverage and rumor to “the back of this envelope looks too empty, let’s make up some numbers to fill it.” If other investors are already in the game, they’re typically involved too; they’re happy if their original investment is now worth more, unhappy if their stake (the percentage ownership of the company their investment originally bought them) is in any way diluted.

There are all sorts of creative ways of cutting this pie. The main thing to know is, it’s entirely up to owners and investors how to approach placing a value on the company. All that private investment transactions (like Series A rounds) tell you is what these people think the company is worth — or what they want you to think it’s worth.

Also: it’s ridiculous to take a small transaction — like, “I just decided to buy 2 percent of this company for $20 million because I think they’re gonna be huge” — and extrapolate to the full valuation of the company: “He just bought 2 percent of us for $20 million, so we’re now a $1 billion company, yay!”

If you can keep persuading lots of people to keep paying $20 million for those 2 percent stakes, and you sell the whole company, then you’re a $1 billion company. Until then, you’re just a company that was able to persuade a person that it might be worth $1 billion someday. During a bubble, many such people are born every minute, but their money tends to disappear quickly, and they vanish from the landscape at the first sign of bust.

(Here’s a classic “X is worth Y” fib from the last bubble of the mid-2000s. Note that Digg was ultimately acquired, years later, for a small fraction of the price BusinessWeek floated in 2006.)

(2) “We will always put our users first”

Many startup founders are passionate about their dedication to their users, in what is really Silicon Valley’s modern twist on the age-old adage that “the customer always comes first.” One of the side-effects of a bubble is that small companies can defer the messy business of extracting cash profits from customers and devote their energy to pampering users. Hooray! That makes life good for everyone for a while.

The trouble arises when founders forget that there is a sharp and usually irreconcilable conflict between “putting the user first” and delivering profits to investors. The best companies find creative ways to delay this reckoning, but no one escapes it. It’s most pronounced in advertising-based industries, where the user isn’t the real paying customer. But even tech outfits that have paying users face painful dilemmas: Software vendors still put cranky licensing schemes on their products, or create awkward tie-ins to try to push new products and services, or block interoperability with competitors even when it would make users’ lives easier. Even hardware makers will pad their bottom lines by putting nasty expiration codes on ink cartridges or charging ridiculous prices for tiny adapters.

But the ultimate bubble delusion is the founder’s pipe-dream that she can sell her company yet still retain control and keep “putting the user first” forever. In the public-company version of this phenomenon, the founder tells the world that nothing will change after the IPO, the company’s mission is just as lofty as ever, its dedication to the user just as fanatical. This certainty lasts as long as the stock price holds up. Legally and practically, however, the company now exists to “deliver value to shareholders,” not to deliver value to users. Any time those goals conflict — and they will — the people in the room arguing the shareholders’ cause will always hold the trump card.

In the private company version, the founder of some just-acquired startup proudly tells the world that, even though he has just sold his company off at a gazillion- dollar valuation, nothing will change, users will benefit, move right along. Listen, for instance, to WhatsApp founder Jan Koum, an advocate of privacy and online-advertising skeptic, as he “sets the record straight” after Facebook acquired his company:

If partnering with Facebook meant that we had to change our values, we wouldn’t have done it. Instead, we are forming a partnership that would allow us to continue operating independently and autonomously. Our fundamental values and beliefs will not change. Our principles will not change. Everything that has made WhatsApp the leader in personal messaging will still be in place. Speculation to the contrary isn’t just baseless and unfounded, it’s irresponsible. It has the effect of scaring people into thinking we’re suddenly collecting all kinds of new data. That’s just not true, and it’s important to us that you know that.

Koum sounds like a fine guy, and I imagine he totally believes these words. But he’s deluding himself and his users by making promises in perpetuity that he can no longer keep. It’s not his company any more. He can say “partnership” as often as he likes; he has still sold his company. Facebook today may honor Koum’s privacy pledges, but who can say what Facebook tomorrow will decide?

This isn’t conspiracy thinking; it’s capitalism 101. Yet it’s remarkable how deeply a bubble-intoxicated industry can fool itself into believing it has transcended such inconvenient facts.

(3) This time, it’s different

If you’re 25 today then you were a college freshman when the global economy collapsed in 2007-8. If you went into tech, you’ve never lived through a full-on bust. Maybe it’s understandable for you to look at today’s welter of IPOs and acquisitions and stock millionaires and think that it’s just the natural order of things.

If you’re much older than that, though, no excuses! You know, as you should, that bubbles aren’t forever. Markets that go up go down, too. (Eventually, they go back up again.) Volatile as the tech economy is, it is also predictably cyclical.

Most recently, our bubbles have coincided with periods — like the late ’90s and the present — when the Federal Reserve kept interest rates low, flooding the markets with cash looking for a return. (Today, also, growing inequality has fattened the “play money” pockets of the very investors who are most likely to take risky bets.)

These bubbles end when there’s a sudden outbreak of sanity and sobriety, or when geopolitical trouble casts a pall on market exuberance. (Both of these happened in quick succession in 2000-2001 to end the original dotcom bubble.) Or a bubble can pop when the gears of the financial system itself jam up, as happened in 2007-8 to squelch the incipient Web 2.0 bubble. My guess is that today’s bubble will pop the moment interest rates begin to head north again — a reckoning that keeps failing to materialize, but must someday arrive.

It might be this year or next, it might be in three years or five, but sooner or later, this bubble will end too. Never mind what you read about the real differences between this bubble and that one in the ’90s. Big tech companies have revenue today! There are billions of users! Investors are smarter! All true. But none of these factors will stop today’s bubble from someday popping. Just watch.

If you look at my life, I’ve never gotten it right the first time. It always takes me twice.
  — Steve Jobs, in a 1992 Washington Post interview

I first wrote about Steve Jobs as a digital auteur in January 1999, in a profile for Salon that tried, in the near-term aftermath of Jobs’ return from exile to Apple, to sum up his career thus far:

The most useful way to understand what Jobs does best is to think of him as a personal-computer auteur. In the language of film criticism, an auteur is the person — usually a director — who wields the authority and imagination to place a personal stamp on the collective product that we call a movie. The computer industry used to be full of auteurs — entrepreneurs who put their names on a whole generation of mostly forgotten machines like the Morrow, the Osborne, the Kaypro. But today’s PCs are largely a colorless, look-alike bunch; it’s no coincidence that their ancestors were known as “clones” — knockoffs of IBM’s original PC. In such a market, Steve Jobs may well be the last of the personal-computer auteurs. He’s the only person left in the industry with the clout, the chutzpah and the recklessness to build a computer that has unique personality and quirks.

The Jobs-as-auteur meme has reemerged recently in the aftermath of his retirement as Apple CEO. John Gruber gave a smart talk at MacWorld a while back, introducing the auteur theory as a way of thinking about industrial design, and then Randall Stross contrasted Apple’s auteurial approach with Google’s data-driven philosophy for the New York Times.

(Here is where I must acknowledge that the version of the auteur theory presented in all these analyses, including mine, omits a lot. The theory originally emerged as a way for the artists of the French New Wave, led by Francois Truffaut, to square their enthusiasm for American pop-culture icons like Alfred Hitchcock with their devotion to cinema as an expressive form of art. In other words, it was how French intellectuals justified their love for stuff they were supposed to be rejecting as mass-market crap. So the parallels to the world of Apple are limited. We’re really talking about “the auteur theory as commonly understood and oversimplified.” But I digress.)

Auteurial design can lead you to take creative risks and make stunning breakthroughs. It can also lead to self-indulgent train wrecks that squander reputations and cash. Jobs has certainly had his share of both these extremes. They both follow from the same trait: the auteur’s certainty that he’s right and willingness (as Gruber notes) to act on that certainty.

Hubris or inspiration? Either way, this kind of auteur disdains market research. “It isn’t the consumers’ job to know what they want,” Jobs likes to say. Hah hah. Right. Only that, the democratic heart of our culture tells us with every beat, is precisely the consumer’s job. To embrace Jobs’ quip as a serious insight is to say that markets themselves don’t and can’t work — that democracy is impossible and capitalism one colossal fraud. (And while that’s an intriguing argument in its own right, I don’t think it’s what Jobs meant.)

I have to assume what Jobs really means here is that, while most of us know what we want when we’re operating on known territory, there are corners that we can’t always see around — particularly in a tumultuous industry like computing. Jobs has cultivated that round-the-corner periscopic vantage for his entire career. He’s really good at it. And so sometimes he knows what we want before we do.

I find nothing but delight in this. I take considerable pleasure in the Apple products I use. Still, it must be said: “I know best” is a lousy way to run a business (or a family, or a government). It broadcasts arrogance and courts disaster. It plugs into the same cult-of-the-lone-hero-artist mindset that Apple’s ad campaigns have celebrated. It reeks of Randian ressentiment and adolescent contempt for the little people.

Jobs’ approach, in Jobs’ hands, overcame this creepiness by sheer dint of taste and smarts. There isn’t anyone else in Apple’s industry or any other who is remotely likely to be able to pull it off. If what Jobs’ successors and competitors take away from all this is that “we know best” can be an acceptable business strategy, they will be in big trouble.

But there’s a different and more useful lesson to draw from the Jobs saga.

The salient fact about the arc of Jobs’ career is that his second bite at Apple was far more satisfying than his first. Jobs’ is a story that resoundingly contradicts Fitzgerald’s dictum about the absence of second acts in American life. In a notoriously youth-oriented industry, he founded a company as a kid, got kicked out, and returned in his 40s to lead it to previously unimaginable success. So the really interesting question about Jobs is not “How does he do it?” but rather, “How did he do it differently the second time around?”

By most accounts, Jobs is no less “brutal and unforgiving” a manager today than he was as a young man. His does not seem to be a story of age mellowing youth. But somehow, Jobs II has succeeded in a way Jobs I never did at building Apple into a stable institution.

I’m not privy to Apple-insider scuttlebutt and all I really have are some hunches as to why this might be. My best guess is that Jobs figured out how to share responsibility and authority effectively with an inner circle of key managers. Adam Lashinsky’s recent study of Apple’s management described a group of “top 100” employees whom Jobs invites to an annual think-a-thon retreat. Jobs famously retained “final cut” authority on every single product. But he seems to have made enough room for his key lieutenants that they feel, and behave, like a team. Somehow, on some level, they must feel that Apple’s success is not only Jobs’ but theirs, too.

Can this team extend Jobs’ winning streak with jaw-droppingly exciting new products long after Jobs himself is no longer calling the shots? And can an executive team that always seemed like a model of harmony avoid the power struggles that often follow a strong leader’s departure? For now, Jobs’ role as Apple chairman is going to delay these reckonings. But we’re going to find out, sooner or later. (And I hope Jobs’ health allows it to be way later!)

If Apple post-Jobs can perform on the same level as Apple-led-by-Jobs, then we will have to revise the Steve Jobs story yet again. Because it will no longer make sense to argue over whether his greatest achievement was the Apple II or the original Mac or Pixar or the iPod or the iPhone or the iPad. It will be clear that his most important legacy is not a product but an institution: Apple itself.