In making any business decision you are also looking at the downside vs. the upside.
On "Let's Make a Deal" [1] there was always "door number two" or three and you had to decide if you were going to take the chance or not. Now it's one thing to pass up some "Furniture from Broyhill" and another thing to pass up a billion dollars or any large sum.
Now most of us don't know what "door number two" was so it's hard to say. So of course people are going to comment on how they view the situation from what they do know.
You can't say anything about the current investors. Only the future will tell if it's a wise investment.
strictly speaking: or fools that got lucky
Profit now, that's another thing.
So, yes, there actually are things that "no true scotchman" would do (else there's no reason to invoke a group named "scotchmen" at all).
In the case of OP, valuation is simply what the market will pay to own the stock of a company. Sometimes it coincides with what any individual will pay, sometimes not. There is no sort of magical intrinsic value to a company. All we are really doing is arguing over the definition of valuation.
The very definition of "valuation" points to the underlying "true" part -- valuation means an attempt to guess at the value of something.
It might not be possible to have a perfect guess (because nobody has all the data or knows all the future events that might affect it), but it's very possible to know a valuation if BS and critisize it.
Would you buy a Denny's dinner in rural Nebraska for 1 billion dollars?
Errm, how does the fact that FB is "now over $100b" prove that he was "completely wrong"?
How about: he was right that such valuations are crazy when FB was at $6.5b, and he is even more right now, as $100b is even more crazy.
It's not like FB somehow PROVED it deserved to be valuated as $6.5 at that time -- it just bubbled up even more in the stock market since.
If his premise was that such stock valuations are BS, then that's even more ammunition to his argument.
You are completely missing the point of the article, too. It is referring to the bubble of air which valuations are based on.
A little less meta: I think your point is valid but I think the OA's satire was an illustration of a valid criticism of a kind of valuation model that's driven more by herd mentality, and where anything giveth ephemerally can also be taketh away ephemerally if the pendulum swings back to fundamentals-driven before the bubbled company in question can build up real profits to start justifying its currently frothy 'maybe someday' valuation. Facebook, like Google, has been an exceptional case in several ways, it could be argued. But exceptions don't invalidate the wisdom of a general rule of thumb.
It's as if there are two ways of valuing companies, two competing schools, and their methodologies are opposed, arguably in outright conflict -- they can't both be true. One is the valuation on so-called fundamentals, the other is the bet that this will one day become one of those extreme outliers whose ROI is such a high multiple that it makes up for the losses on other failed bets. They're both valid models, like Newton or Einstein, that produce correct (enough) results, but in different situations and at different scales. The trick is to know when to use one model to make your decision, or the other. To carry this forward, 37Signals/JF/DHH clearly prefer/bias to the Newton method, in this analogy, and YC & SV VC the Einstein. Or to change the analogy, the former models are based on arithmetic, the latter on statistics. They both can work well but each in a different context with different endgame goals.
(And thanks for the reply. I'm a fan of your work.)