Bill Gurley won’t come right out and say we’re in another tech bubble because, as he said in his Above the Crowd blog, “It’s a dangerous question to ponder – especially out loud and especially here at ground zero. Silicon Valley thrives on optimism, and anyone waving the bubble flag is auditioning for the title of nonbeliever or party pooper.”

Still, for a guy who won’t speak the words out loud, the well-respected VC from one of Silicon Valley’s top venture firms, Benchmark Capital, sure has been writing and talking about bubbles a lot lately. It’s sort of hard to miss.

In a blog post called “On Bubbles …,” Gurley quotes Warren Buffett’s famous line, “Be fearful when others are greedy and greedy when others are fearful,” then adds, “Using this traditionally contrarian investment mindset, one would certainly tread with trepidation in today’s market … there is most certainly an absence of fear.”

He goes on to explain that tech’s well-known boom and bust cycles are a result of lots of people slowly taking on more and more risk over time, much like the proverbial frog in a pot of gradually heated water. The critter is fine until the water starts to boil. By then, it’s too late.

In other words, bubbles are formed when everyone starts to behave like frogs in a hot tub.

At a recent Silicon Valley event, Gurley provided a perfect example of these short-lived Jacuzzi dwelling amphibians: cloud computing firms. 

He explained that, when cloud-based software provider Workday went public in 2012, it immediately traded at ridiculously high multiples, even though the company was burning enormous amounts of cash on marketing and sales. That triggered a spending spree at every Software-as-a-Service company in the valley.    

“The number of people employed in Silicon Valley in money-losing companies is at an all time high now. The last time it was that high was in 1999,” Gurley said, referring to the dot-com bubble. “If we hit any kind of speed bump you won’t be able to get those companies into a position where they can be sustainable without very catastrophic events.”

“No one is sacrificing growth for profitability right now. The markets are rewarding companies for that,” he said.

He’s right. In addition to Workday, NetSuite, Salesforce.com, and other cloud computing companies are boasting huge valuations while spending more than half their revenue on sales and marketing and running perpetually in the red.

And just this week, cloud storage startup Box announced plans to go public. Yet another IPO for Wall Street to salivate over, even though the company lost a whopping $168 million last year on $171 million in sales and marketing expenses.  

Having said all that, now here’s the rub.

Truth is, Gurley is no Chicken Little crying, “The Cloud is falling! The Cloud is falling!” For one thing, the Cloud was just an example. He might just as well have been talking about social media companies like Facebook and Twitter or messaging apps like WhatsApp and Snapchat.

More importantly, Gurley was actually an early investor in Snapchat. Likewise, Benchmark backed Twitter, not to mention a long list of notable companies that include Dropbox, GrubHub, Instagram, OpenTable, Red Hat, Uber, Zillow, Yelp, and back in the first bubble, eBay and Juniper Networks.

In fact, Benchmark has had quite a run in recent years. Its portfolio companies have had 25 successful exits, including 10 IPOs and 15 acquisitions for a total market value of $55 billion.

Given all this activity, you might wonder why Gurley and company are seemingly long in what appears to be a growing tech bubble with unfathomably sky-high valuations. Why aren’t they running for the hills in fear for their lives or at least their return on their investment?  

The answer to this apparent conundrum can also be found in Gurley’s “bubble” article, where he explains that Fed Chairman Alan Greenspan first uttered the phrase “irrational exuberance” in 1996. The market peak was still years away. And venture capital firms that pulled back too soon missed the best three years of returns in history.

“All of which makes predicting market tops a delicately tricky business,” he wrote. Insightful, indeed.   

Finally, you might be interested in knowing that, in the real world, a frog will actually jump out of the water before it gets too hot. So the real question is, how many investors are as smart as a frog? Are you?

It’s Official: We Are in a Tech Bubble

Steve Tobak is a management consultant, former senior executive, columnist and author of the upcoming book, “Real Leaders Don’t Follow." Tobak runs Silicon Valley-based Invisor Consulting where he advises executives and business leaders on strategic matters. Contact Tobak. Follow him on FacebookTwitter or LinkedIn