You point out that we've been hearing VCs belly ache about the high prices they've been paying for many years, but I don't see how it follows that the market is irrational, but even if it is, in that case it'd make it easier to remain solvent. Which directly contradicts your second thought.
"The market can stay irrational longer than you can stay solvent" is a common saying in the financial world: it means that even if you're right that assets are overvalued, there's no guarantee that they'll come back down to earth in any reasonable length of time, and so betting against the market can often be a losing gamble even when you're right.
In some senses the market is never "irrational", because a security is worth exactly what someone will pay for it, and so by definition it always has the right price. In other senses, the market is always "irrational", because its price is determined by the emotions of its participants and not any sort of rational analysis. (The whole reason markets are efficient is that they average out the misjudgments of many members, such that those who miss the mark too much drop out and cease to become participants.)
I think Owen's point is that the sky is always falling. Bubble psychology and boom/bust cycles is a natural part of the operation of markets.
