Is this a rational analysis, or just whistling in the dark?

The answer to that will only be clear in retrospect.

On the one hand...

Last year around 20% of American business-school graduates went to work for a technology firm, the highest percentage since 2000. As in gold rushes past, the influx generates grumbling from old-timers and newcomers alike. In every coffee shop from downtown San Francisco to Palo Alto you hear complaints about eye-watering property prices and unbearable traffic.

On the other hand...

This is very matter of fact.

High valuations obviously come with a risk for investors. As tech firms move into new markets they can face a lot of regulatory uncertainty. Uber, for example, is sparring with regulators across much of the world and risks being forced to recategorise some of its drivers as employees instead of freelancers, which would damage its lean business model. Homejoy, a housecleaning service backed by venture capitalists, has announced it will shut down at the end of July because of lawsuits over whether its workers should be categorised as employees or contractors.

Less obviously, the valuations can damage the unicorns themselves. When a young entrepreneur desperate to join the “three comma” club accepts an overvaluation he runs the risk of a subsequent “down round”—a lower valuation when looking for future funding or going public. That is a reputation killer in a place where reputation has come to matter a lot. In 1999 the mainstream media were just beginning to home in on Silicon Valley; now the press covers it assiduously. “Today the cast of entrepreneurs is acting like Hollywood stars,” says Randy Komisar of Kleiner, Perkins, Caufield & Byers, a venture-capital firm. “There is a lot of strutting and vogueing for the cameras.”

Some unicorns have grown so big that they are sitting in a “valuation trap”, too expensive to be sold to a corporate buyer like Facebook, Google or Apple and unable to successfully float on public markets for what they are claimed to be worth. The high valuations across the board also make it harder for the unicorns to thin their ranks, or to ease the competitive pressures that are forcing them to spend so freely, by turning to eat each other. At least one mooted merger between unicorns in the same sort of business has fallen through because of the rate at which their values rose during the negotiations.

Another problem brought on by the enthusiastic investment in young companies is bidding up talent. Competition for skilled workers “is more intense than I have ever seen it,” says Jim Breyer, a prominent venture capitalist. The average software engineer in San Francisco now earns $150,000, according to Glassdoor, a database for employer reviews and job listings. In HBO’s comedy series “Silicon Valley”, the fictional startup Pied Piper finds itself so desperate for a good engineer that it is willing to make an offer to one who claims to be a cyborg, only to be turned down because he has so many other employers to choose from. It is the sort of exaggeration with a nub of truth that makes the show as popular among San Francisco techies as “Sex and the City” was among women in New York.

A particular bone of contention when it comes to hiring is common stock, which startups give to new hires. The value of common stock is assessed by outside firms, but the appeal of a low value, which maximises the upside for employees, leads some companies to try to make sure the assessment comes out that way. Public companies cannot play such games. Many employees have become wise to this and understand the arbitrage of going to work for a startup instead of a public firm. “Wall Street used to be the only place where there was profit without value,” says the boss of a public technology company. “Now there is the potential of this happening in Silicon Valley.”

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A lot of the unicorns have strong underlying businesses and could pull in their horns if the market turned against them. Indeed, some firms are raising money so they have extra cash on hand just in case. “I’ve asked the board, what’s the best way to store fat for the winter,” says Mr Butterfield of Slack, the software company. “The best answer is cash. You can’t really store up goodwill.” According to Mr Butterfield, his firm has “hundreds of millions of dollars in the bank” and is close to breaking even. Many other unicorns have money that could help cushion them. Palantir, which does data analysis, had $1 billion in cash at the end of last year.

Booms and busts are part of the history of Silicon Valley, and California more generally. But the Valley’s influence over the future of consumers and capitalism is here to stay. It has become a nexus of dealmaking and fortune-seeking, a realm of creativity and wild ideas, and it will remain so. But the geeks and dreamers who populate the Valley will need to be able to navigate both smooth and rough waters. Some will try to go too high and wipe out into the bay. Others will be diverted by wild winds. But many will make it safely back to shore—only to head back out again for the thrill, the challenge and the future.