7 ms·

A major difference between between this tech boom and the dot com boom of the 90s is the general public had a real shot at investing in serious growth potential

by prklmn 9y ago

A major difference between between this tech boom and the dot com boom of the 90s is the general public had a real shot at investing in serious growth potential during the dot com boom. Now most of the growth is experienced under private ownership, then the grossly overvalued company is pawned off for the public to invest in. VCs have figured out how to extract most of the exciting gains.

omarchowdhury 9y ago
It would seem that ICO may change that.
clarky07 9y ago
That's what everyone said about facebook, but it's up 4x since IPO, and 8x from the post IPO dip it had.
- taneq 9y ago
  The exception that proves the rule, eh?
- the_watcher 9y ago
  Compare that to the first 5 years of Amazon post-IPO.
  - clarky07 9y ago
    it went from $2 to $16 (split adjusted). The real difference is that it was much much smaller at IPO, meaning it's pretty much impossible for FB to continue generating outsized returns whereas Amazon actually did much better from 5-10 or 10-15 than FB possibly could.
  - GuiA 9y ago
    Saving everyone a Google search: AMZN opened at (split adjusted) $1.49. 5 years later it was at $19.47. Over that span, it maxed at $106.69 (Dec 1999).
sgustard 9y ago
"Investing" in those days was "speculating." Hundreds of dubious companies made it to IPO that would never make it that far today, and most of those lost all their public investors' money. https://mattermark.com/technology-company-ipos-then-now/ https://mattermark.com/technology-company-ipos-then-now/
- suprfnk 9y ago
  Replace 'companies' with 'cryptocurrency', and you have your exciting market today! Hundreds of dubious cryptocurrencies of which a few might make it far.
- sah2ed 9y ago
  John Bogle's investment philosophy [0], which I agree with, boils down the difference between investing and speculating to the time horizon: "The main difference between investment and speculation lies in the time horizon." So in a way, I think you and the parent are both right -- you are talking about different sides of the same thing. [0] https://en.wikipedia.org/wiki/John_C._Bogle#Investment_philosophy https://en.wikipedia.org/wiki/John_C._Bogle#Investment_philo...
  - hellworld 9y ago
    Another one of Bogle's self serving comments. He's a legend but rarely unbiased. The key difference is the speculator buys it purely in the hope of flipping it. The investor considers the fundamentals of the investment. Time horizon is irrelevant. You can have special sits which you are in and out of in a month or so; but it's definitely an investment.
    - toomuchtodo 9y ago
      We are all hoping to flip our investments in the equities market; no one is holding forever. Unless you intend to die and pass your ownership interest to heirs.
      - concede_pluto 9y ago
baron816 9y ago
Whether that wealth is going to the top 1% or to the top .01% doesn't matter so much as far as the welfare of the general public is concerned. I think you could argue that the products that these tech companies are bringing to market are what is really benefiting the general public, much more than any investment returns ever could. And if the current model of investing is most efficient--in terms of generating new products and delivering them to market--then it is better for the public.
- j7ake 9y ago
  What is the public benefit of snapchat ?
  - cft 9y ago
    Of Facebook?
  - vecter 9y ago
    Seriously? People use it as a form of communication. It makes people feel closer to their friends. That has enormous value.
    - jakubp 9y ago
      So this is interesting. You may feel closer to people you haven't seen for a while when they are always "with" you on Snapchat -- I have certainly experienced that with people I don't talk to often or people who live on another continent. But then again, I can't shake the feeling that this is more about fun than really being close. I remember having close friends in high school and at the university. We spent many hours a day together for several years. Can't fake that, and I doubt anything like that will be born through Snapchat or similar tools. You sound quite certain that it has value. However, some claim that "communication" through technology can also alienate people. Some say it's a bit more shallow, that it doesn't have the same feel as actually talking to someone or even touching them for a second or two (really important for bonding). Value is not always clear. Forgive me a drastic comparison, but factory farming strikes me as similar: it brought cheap, tasty meat to a great number of people, but the jury is still out on whether it's good.
nikcub 9y ago
unintended consequence of SOX and over regulation of the public markets.
hkmurakami 9y ago
If you invested in all the IPOs from the .com era, would that actually beat the NASDAQ returns over the last 5 years from 2012-2017? Do we really need retail investors to invest in micro cap level companies? Look at the horror stories of people losing their retirement savings on GTAT. There were a lot of busts from that era and the average person isn't going to be able pick them well.
- xiaoma 9y ago
  Yes, we need retail investors to be able to invest in micro cap level companies. Nobody independent is going to do well competing against institutional investors who have, better access, faster trades and teams of quants. The only way to win is to play a game they can't play. Micro caps are a good example since institutional investors can't invest in them easily (even buying the whole company doesn't move the needle much for them). The other place where independents have an edge is long time horizons. They don't have anyone to report to or any need to sacrifice the long term in order to make quarterly numbers. As for the average person picking well, I encourage you to look at the Motley Fool community. There you'll find literally millions of hobbyist investors, some who have been chatting together since the mid 90s and many, many people doing well. Even looking at the medium-active CAPS player (basically their over/under prediction board where anyone can make bull or bear cases on any stock), it's better than what you'd get giving your money to Wealthfront or some other manager. Blocking retail investors from micro caps would just be one more way insulating the rich from competition with the conscientious. As bad as Sarbox has been, that would be an entirely new way to make the US system less equitable for the masses.
  - chii 9y ago
    > micro cap pardon my ignorance, but what is a 'micro cap'?
    - ant6n 9y ago
      A company that's worth millions (instead of hundreds of millions or billions)
  - 9y ago
austenallred 9y ago
The riskiness of the dotcom boom of the 90s crashed so hard it spent the entire stock market into a downward spiral. Maybe it makes sense to have those kinds of risks taken largely in private markets for accredited investors only.
prostoalex 9y ago
It's the anomaly of QE, which diverted so much of the institutional private capital from essentially zero-yielding debt markets into private equities markets.
- qeternity 9y ago
  This wasn't an anomaly, it was the entire rationale for QE: force capital into risk assets. EDIT: my username is not a coincidence here...
k-mcgrady 9y ago
That's the way it should be. Around half the world isn't online so these companies can still, at the very least, double in value over the long term. The 'easy' money is gone, sure, but it's probably good that we don't have hundreds of high valued-loss making companies on the public markets.
anovikov 9y ago
If you want to replicate 90s experience of the dot-com boom, buy into ICOs now. And the end result will most probably be... well also same to 90s.
- wslh 9y ago
  ICOs will evolve with more realistic offerings. The DAO disaster only happened one year ago and the community recovered very fast. The main point is the difficulty to access good deals early on and that is what is happening with new IPOs.
  - lambdadmitry 9y ago
    "The community" didn't "recover" because it wasn't broken in the first place. Sure ETH:USD declined, but then went up because everyone and their dog buy or mine cryptocurrencies in hope of getting rich fast (extensive media coverage helps). It's not a sign of a sound economic system, it's a sign of a bubble.
    - wslh 9y ago
      Not saying it is not a bubble. Amazon was part of the dot com era bubble and look at what they are now. When you lower the barrier of entry you have all kind of community members, including the few good ones who don't want to follow a more classical funding approach. In the worst case, all this is an interesting experiment.
- thecupisblue 9y ago
  Exactly. The "startup boom" that's going on now is staying strong because tech is available to most people and people are becoming more and more accustomed to using services offered by startups. Cryptos are now in the same position tech was in 90's/early2K's - not available or unknown to most people but promoted as "easy money by easy investments". Dozens of useless companies banking in on people chasing cheap money.

by prklmn 9y ago

omarchowdhury 9y ago

It would seem that ICO may change that.

clarky07 9y ago

That's what everyone said about facebook, but it's up 4x since IPO, and 8x from the post IPO dip it had.

taneq 9y ago
The exception that proves the rule, eh?
the_watcher 9y ago
Compare that to the first 5 years of Amazon post-IPO.
- clarky07 9y ago
  it went from $2 to $16 (split adjusted). The real difference is that it was much much smaller at IPO, meaning it's pretty much impossible for FB to continue generating outsized returns whereas Amazon actually did much better from 5-10 or 10-15 than FB possibly could.
- GuiA 9y ago
  Saving everyone a Google search: AMZN opened at (split adjusted) $1.49. 5 years later it was at $19.47. Over that span, it maxed at $106.69 (Dec 1999).

sgustard 9y ago

"Investing" in those days was "speculating." Hundreds of dubious companies made it to IPO that would never make it that far today, and most of those lost all their public investors' money. https://mattermark.com/technology-company-ipos-then-now/ https://mattermark.com/technology-company-ipos-then-now/

suprfnk 9y ago
Replace 'companies' with 'cryptocurrency', and you have your exciting market today! Hundreds of dubious cryptocurrencies of which a few might make it far.
sah2ed 9y ago
John Bogle's investment philosophy [0], which I agree with, boils down the difference between investing and speculating to the time horizon: "The main difference between investment and speculation lies in the time horizon." So in a way, I think you and the parent are both right -- you are talking about different sides of the same thing. [0] https://en.wikipedia.org/wiki/John_C._Bogle#Investment_philosophy https://en.wikipedia.org/wiki/John_C._Bogle#Investment_philo...
- hellworld 9y ago
  Another one of Bogle's self serving comments. He's a legend but rarely unbiased. The key difference is the speculator buys it purely in the hope of flipping it. The investor considers the fundamentals of the investment. Time horizon is irrelevant. You can have special sits which you are in and out of in a month or so; but it's definitely an investment.
  - toomuchtodo 9y ago
    We are all hoping to flip our investments in the equities market; no one is holding forever. Unless you intend to die and pass your ownership interest to heirs.
    - concede_pluto 9y ago

baron816 9y ago

Whether that wealth is going to the top 1% or to the top .01% doesn't matter so much as far as the welfare of the general public is concerned. I think you could argue that the products that these tech companies are bringing to market are what is really benefiting the general public, much more than any investment returns ever could. And if the current model of investing is most efficient--in terms of generating new products and delivering them to market--then it is better for the public.

j7ake 9y ago
What is the public benefit of snapchat ?
- cft 9y ago
  Of Facebook?
- vecter 9y ago
  Seriously? People use it as a form of communication. It makes people feel closer to their friends. That has enormous value.
  - jakubp 9y ago
    So this is interesting. You may feel closer to people you haven't seen for a while when they are always "with" you on Snapchat -- I have certainly experienced that with people I don't talk to often or people who live on another continent. But then again, I can't shake the feeling that this is more about fun than really being close. I remember having close friends in high school and at the university. We spent many hours a day together for several years. Can't fake that, and I doubt anything like that will be born through Snapchat or similar tools. You sound quite certain that it has value. However, some claim that "communication" through technology can also alienate people. Some say it's a bit more shallow, that it doesn't have the same feel as actually talking to someone or even touching them for a second or two (really important for bonding). Value is not always clear. Forgive me a drastic comparison, but factory farming strikes me as similar: it brought cheap, tasty meat to a great number of people, but the jury is still out on whether it's good.

nikcub 9y ago

unintended consequence of SOX and over regulation of the public markets.

hkmurakami 9y ago

If you invested in all the IPOs from the .com era, would that actually beat the NASDAQ returns over the last 5 years from 2012-2017? Do we really need retail investors to invest in micro cap level companies? Look at the horror stories of people losing their retirement savings on GTAT. There were a lot of busts from that era and the average person isn't going to be able pick them well.

xiaoma 9y ago
Yes, we need retail investors to be able to invest in micro cap level companies. Nobody independent is going to do well competing against institutional investors who have, better access, faster trades and teams of quants. The only way to win is to play a game they can't play. Micro caps are a good example since institutional investors can't invest in them easily (even buying the whole company doesn't move the needle much for them). The other place where independents have an edge is long time horizons. They don't have anyone to report to or any need to sacrifice the long term in order to make quarterly numbers. As for the average person picking well, I encourage you to look at the Motley Fool community. There you'll find literally millions of hobbyist investors, some who have been chatting together since the mid 90s and many, many people doing well. Even looking at the medium-active CAPS player (basically their over/under prediction board where anyone can make bull or bear cases on any stock), it's better than what you'd get giving your money to Wealthfront or some other manager. Blocking retail investors from micro caps would just be one more way insulating the rich from competition with the conscientious. As bad as Sarbox has been, that would be an entirely new way to make the US system less equitable for the masses.
- chii 9y ago
  > micro cap pardon my ignorance, but what is a 'micro cap'?
  - ant6n 9y ago
    A company that's worth millions (instead of hundreds of millions or billions)
- 9y ago

austenallred 9y ago

The riskiness of the dotcom boom of the 90s crashed so hard it spent the entire stock market into a downward spiral. Maybe it makes sense to have those kinds of risks taken largely in private markets for accredited investors only.

prostoalex 9y ago

It's the anomaly of QE, which diverted so much of the institutional private capital from essentially zero-yielding debt markets into private equities markets.

qeternity 9y ago
This wasn't an anomaly, it was the entire rationale for QE: force capital into risk assets. EDIT: my username is not a coincidence here...

k-mcgrady 9y ago

That's the way it should be. Around half the world isn't online so these companies can still, at the very least, double in value over the long term. The 'easy' money is gone, sure, but it's probably good that we don't have hundreds of high valued-loss making companies on the public markets.

anovikov 9y ago

If you want to replicate 90s experience of the dot-com boom, buy into ICOs now. And the end result will most probably be... well also same to 90s.

wslh 9y ago
ICOs will evolve with more realistic offerings. The DAO disaster only happened one year ago and the community recovered very fast. The main point is the difficulty to access good deals early on and that is what is happening with new IPOs.
- lambdadmitry 9y ago
  "The community" didn't "recover" because it wasn't broken in the first place. Sure ETH:USD declined, but then went up because everyone and their dog buy or mine cryptocurrencies in hope of getting rich fast (extensive media coverage helps). It's not a sign of a sound economic system, it's a sign of a bubble.
  - wslh 9y ago
    Not saying it is not a bubble. Amazon was part of the dot com era bubble and look at what they are now. When you lower the barrier of entry you have all kind of community members, including the few good ones who don't want to follow a more classical funding approach. In the worst case, all this is an interesting experiment.
thecupisblue 9y ago
Exactly. The "startup boom" that's going on now is staying strong because tech is available to most people and people are becoming more and more accustomed to using services offered by startups. Cryptos are now in the same position tech was in 90's/early2K's - not available or unknown to most people but promoted as "easy money by easy investments". Dozens of useless companies banking in on people chasing cheap money.