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Did people expect the dotcom bubble? I was just 15 but one of my current day co-workers was active at the time and he lost a lot of money in shares that he tho

Did people expect the dotcom bubble? I was just 15 but one of my current day co-workers was active at the time and he lost a lot of money in shares that he thought would keep their value. Shares he had received from employers. But with cryptocurrencies people can't stop talking about how it will burst. Maybe that will change things in a somewhat psychological way.

rthomas6 9y ago
It will burst when everyone who could possibly be convinced to buy has bought. When the optimism is so contagious you start to doubt if it will ever really pop, that maybe this time it's different. In the dotcom bubble, people were buying shares at prices such that justifying those prices would require companies to make more money than any company had made before. But people, including experts, said this time it's different because the internet will change everything, and those companies really will make more money than any company has before. Even though no actual hard data justified that optimism.
- charlesdm 9y ago
  I highly doubt we're close to that point, to be honest. This is a global bubble. Billions of people around the world. Most of the money invested will flow in a few top coins -- not 200 different equities. The dot-com bubble was US centric, and the market went up to $6.7tn before imploding to $1.7tn. If, in the mania of the 2000s, things could head towards $6.7tn, I don't believe that this bubble will be smaller in the age of loose monetary policy. Money is essentially free today. A few weeks ago, Saudi Arabia paid $450m for a painting. If that isn't a sign of how money has lost its value, I don't know what is. Would I bet everything I own on crypto? No, of course not. Can you still get a 10x return on money you invest today? I wouldn't be surprised. Even knowing there will be a major correction at some point, it's probably a mistake not to own at least some.
  - rthomas6 9y ago
    Yeah, I own some ETH and EOS (not very much), because those are the ones I most believe have long-term intrinsic value for the world.
    - stuxnet79 9y ago
      Can you summarize what the differences are between ETH and EOS?
      - rthomas6 9y ago
        Sure. They're both Turing-complete blockchains which can run decentralized apps/smart contracts, and of course be used for transactions directly. Ethereum (ETH): Created in 2015, currently successfully running. Right now ETH uses a proof of work consensus algorithm with plans to move to a proof of stake algorithm over time. Its smart contracts can be coded in two purpose-built languages, and work is being done on cross-compilers to facilitate writing in more. ETH can currently handle ~20 tx/sec, but the community is very active in working toward vast improvements in this regard via very technical solutions (sharding, plasma), but they're not quite there yet. Ethereum is truly decentralized and runs tens of thousands of validating nodes. EOS: Planned creation date is in June 2018. Its smart contracts will use WASM (allowing the use of many general purpose computer languages), support parallel computation, and have some sort of ability to change deployed contracts to allow for debugging and updates. It will handle 100,000+ tx/sec out of the box, and transactions will have 0 fees. Instead of fees, percentage of holdings determines allowable transaction bandwidth (If you have 1% of EOS, you get 1% of EOS transaction throughput). However, instead of tens of thousands of validating nodes, EOS will have 21, with all coin holders having the ability to vote for who these validators are. EOS will trust the consensus of these validators for transaction security. This is how EOS achieves such high transaction volume and zero fees. IMO, this is the main weakness of EOS.
        stuxnet79 9y ago
        Thanks for the breakdown. Very helpful. I'm somewhat disappointed with EOS's offering compared to ETH, as I'd always (wrongly) assumed they were providing a lot of innovations in an effort to reduce ETH market share in the whole 'dApp platform' space.
ckastner 9y ago
> Did people expect the dotcom bubble? Greenspan called it "Irrational Exuberance" in 1996 [1], although I personally don't remember it being that bad then. By 1999, the word "bubble" was all over the media. [1] https://en.wikipedia.org/wiki/Irrational_exuberance https://en.wikipedia.org/wiki/Irrational_exuberance
- lokedhs 9y ago
  Back at the end of the dotcom bubble, I was working at some expo, messing with some servers behind a small stage that the vendor had set up. At the stage was the former finance minister of Sweden speaking about "the new economy" which is what the bubble was called in Sweden before it burst. I specifically remember hearing him address the question (it might have been rhetorical or from the audience) as to how this was sustainable given that most of companies involved didn't actually earn any profits. Most of the overvalued companies involved during the bubble was consultancy companies making web pages for other companies. I still remember being somewhat stunned by the answer he gave. He explained that that was not an issue since the new economy worked differently compared to the old one. At that point I shook my head, focused my attention back on the servers and came to the conclusion that the bubble would burst sooner than later.
  - dev360 9y ago
    Bredbands-Jesus!
JPKab 9y ago
People who didn't understand the internet invested in the .com bubble. Compared to crypto/blockchain, the internet is a relatively straightforward thing to understand. My suspicion is that, because a much higher percentage of the population isn't going to be able to make sense of blockchain, it will be easier for the finance industry and startups to trick idiots into investing, and they will have a deeper pool of idiots to draw from. Just like the .com bubble, there is real value in blockchain. You just can't judge that from the investments.
- spookthesunset 9y ago
  > there is real value in blockchain People say this, but I maintain it isn't true. The only thing the blockchain is good for is when you cannot have any kind of central trusted authority. "Central authority" typically meaning government institutions like regulations and the legal system. Once you remove a central trusted authority, transaction costs get very expensive very fast. If you can't trust anybody but yourself it means you bear the cost of validating every single part of a transaction. You see this in the blockchain--it is massively more expensive to process a transaction than using a simple database. You see this in "smart contracts" because without a legal system to fallback on, you have to code every single edge case no matter how remote or you'll get fucked (which is actually impossible anyway, and is one of the reasons why the entire idea of "smart contracts" is a bunch of baloney...). My point is, for 99.9% of every day things we have no need for any kind of distributed trustless ledger. The transaction costs for them outweigh the alternative of simply trusting people and using our legal system when something goes bad. The only real use case for trustless distributed ledgers are for stuff that cannot use the legal system--eg organized crime, crypto-ransomware software, illegal drug trade, etc. For everything else, a database is all you need. By the way, I'm not even going to go into the fact that "The Blockchain" only functions with mining, and the only way to incentivize mining is to bolt a "currency" on top like Bitcoin or ETH and then find a market to sell all the "coins" the miners generate. Take away that, and who the hell pays for the mining? If your answer is "the banks would" or "the parties would"... well, if they are gonna do that why the hell wouldn't they just pay for a traditional database instead? After all, that kind of cooperation sounds pretty centralized anyway and a large Postgres instance is a lot cheaper than thousands and thousands of miners....
blincoln 9y ago
A lot of people realized that the dotcom bubble was a bubble well before it burst. The biggest sign was investors pouring money into startups that were sort of inherently incapable of generating the level of profit that would allow them to continue operating, e.g. Kozmo.com.
- spookthesunset 9y ago
  > Kozmo.com Hey don't diss Kozmo. I remember being a punk teenager and ordering a single 20oz bottle of soda and having it delivered by some dude in a car an hour later. Clearly, it wasn't a bubble :-)
  - cdolan 9y ago
    Wait they had UBER eats/post mates way back then?
IshKebab 9y ago
Yes. Everyone knew it was all crazy. I think theres a perception that nobody knows about bubbles until it is too late. The truth is that people know, but they gamble that they'll be able to get their money out before it bursts. Look at Bitcoin. Clearly a bubble. But... do you pull out, or do you roll the dice and see if it goes to $30k?
notyourday 9y ago
> Did people expect the dotcom bubble? Yes, people who worked in dot com expected it. Those who did not thought they were smarter than us. Going to coffee shops was surreal - there were people who were telling us what our companies were doing.

rthomas6 9y ago

It will burst when everyone who could possibly be convinced to buy has bought. When the optimism is so contagious you start to doubt if it will ever really pop, that maybe this time it's different. In the dotcom bubble, people were buying shares at prices such that justifying those prices would require companies to make more money than any company had made before. But people, including experts, said this time it's different because the internet will change everything, and those companies really will make more money than any company has before. Even though no actual hard data justified that optimism.

charlesdm 9y ago
I highly doubt we're close to that point, to be honest. This is a global bubble. Billions of people around the world. Most of the money invested will flow in a few top coins -- not 200 different equities. The dot-com bubble was US centric, and the market went up to $6.7tn before imploding to $1.7tn. If, in the mania of the 2000s, things could head towards $6.7tn, I don't believe that this bubble will be smaller in the age of loose monetary policy. Money is essentially free today. A few weeks ago, Saudi Arabia paid $450m for a painting. If that isn't a sign of how money has lost its value, I don't know what is. Would I bet everything I own on crypto? No, of course not. Can you still get a 10x return on money you invest today? I wouldn't be surprised. Even knowing there will be a major correction at some point, it's probably a mistake not to own at least some.
- rthomas6 9y ago
  Yeah, I own some ETH and EOS (not very much), because those are the ones I most believe have long-term intrinsic value for the world.
  - stuxnet79 9y ago
    Can you summarize what the differences are between ETH and EOS?
    - rthomas6 9y ago
      Sure. They're both Turing-complete blockchains which can run decentralized apps/smart contracts, and of course be used for transactions directly. Ethereum (ETH): Created in 2015, currently successfully running. Right now ETH uses a proof of work consensus algorithm with plans to move to a proof of stake algorithm over time. Its smart contracts can be coded in two purpose-built languages, and work is being done on cross-compilers to facilitate writing in more. ETH can currently handle ~20 tx/sec, but the community is very active in working toward vast improvements in this regard via very technical solutions (sharding, plasma), but they're not quite there yet. Ethereum is truly decentralized and runs tens of thousands of validating nodes. EOS: Planned creation date is in June 2018. Its smart contracts will use WASM (allowing the use of many general purpose computer languages), support parallel computation, and have some sort of ability to change deployed contracts to allow for debugging and updates. It will handle 100,000+ tx/sec out of the box, and transactions will have 0 fees. Instead of fees, percentage of holdings determines allowable transaction bandwidth (If you have 1% of EOS, you get 1% of EOS transaction throughput). However, instead of tens of thousands of validating nodes, EOS will have 21, with all coin holders having the ability to vote for who these validators are. EOS will trust the consensus of these validators for transaction security. This is how EOS achieves such high transaction volume and zero fees. IMO, this is the main weakness of EOS.
      - stuxnet79 9y ago
        Thanks for the breakdown. Very helpful. I'm somewhat disappointed with EOS's offering compared to ETH, as I'd always (wrongly) assumed they were providing a lot of innovations in an effort to reduce ETH market share in the whole 'dApp platform' space.

ckastner 9y ago

> Did people expect the dotcom bubble? Greenspan called it "Irrational Exuberance" in 1996 [1], although I personally don't remember it being that bad then. By 1999, the word "bubble" was all over the media. [1] https://en.wikipedia.org/wiki/Irrational_exuberance https://en.wikipedia.org/wiki/Irrational_exuberance

lokedhs 9y ago
Back at the end of the dotcom bubble, I was working at some expo, messing with some servers behind a small stage that the vendor had set up. At the stage was the former finance minister of Sweden speaking about "the new economy" which is what the bubble was called in Sweden before it burst. I specifically remember hearing him address the question (it might have been rhetorical or from the audience) as to how this was sustainable given that most of companies involved didn't actually earn any profits. Most of the overvalued companies involved during the bubble was consultancy companies making web pages for other companies. I still remember being somewhat stunned by the answer he gave. He explained that that was not an issue since the new economy worked differently compared to the old one. At that point I shook my head, focused my attention back on the servers and came to the conclusion that the bubble would burst sooner than later.
- dev360 9y ago
  Bredbands-Jesus!

JPKab 9y ago

People who didn't understand the internet invested in the .com bubble. Compared to crypto/blockchain, the internet is a relatively straightforward thing to understand. My suspicion is that, because a much higher percentage of the population isn't going to be able to make sense of blockchain, it will be easier for the finance industry and startups to trick idiots into investing, and they will have a deeper pool of idiots to draw from. Just like the .com bubble, there is real value in blockchain. You just can't judge that from the investments.

spookthesunset 9y ago
> there is real value in blockchain People say this, but I maintain it isn't true. The only thing the blockchain is good for is when you cannot have any kind of central trusted authority. "Central authority" typically meaning government institutions like regulations and the legal system. Once you remove a central trusted authority, transaction costs get very expensive very fast. If you can't trust anybody but yourself it means you bear the cost of validating every single part of a transaction. You see this in the blockchain--it is massively more expensive to process a transaction than using a simple database. You see this in "smart contracts" because without a legal system to fallback on, you have to code every single edge case no matter how remote or you'll get fucked (which is actually impossible anyway, and is one of the reasons why the entire idea of "smart contracts" is a bunch of baloney...). My point is, for 99.9% of every day things we have no need for any kind of distributed trustless ledger. The transaction costs for them outweigh the alternative of simply trusting people and using our legal system when something goes bad. The only real use case for trustless distributed ledgers are for stuff that cannot use the legal system--eg organized crime, crypto-ransomware software, illegal drug trade, etc. For everything else, a database is all you need. By the way, I'm not even going to go into the fact that "The Blockchain" only functions with mining, and the only way to incentivize mining is to bolt a "currency" on top like Bitcoin or ETH and then find a market to sell all the "coins" the miners generate. Take away that, and who the hell pays for the mining? If your answer is "the banks would" or "the parties would"... well, if they are gonna do that why the hell wouldn't they just pay for a traditional database instead? After all, that kind of cooperation sounds pretty centralized anyway and a large Postgres instance is a lot cheaper than thousands and thousands of miners....

blincoln 9y ago

A lot of people realized that the dotcom bubble was a bubble well before it burst. The biggest sign was investors pouring money into startups that were sort of inherently incapable of generating the level of profit that would allow them to continue operating, e.g. Kozmo.com.

spookthesunset 9y ago
> Kozmo.com Hey don't diss Kozmo. I remember being a punk teenager and ordering a single 20oz bottle of soda and having it delivered by some dude in a car an hour later. Clearly, it wasn't a bubble :-)
- cdolan 9y ago
  Wait they had UBER eats/post mates way back then?

IshKebab 9y ago

Yes. Everyone knew it was all crazy. I think theres a perception that nobody knows about bubbles until it is too late. The truth is that people know, but they gamble that they'll be able to get their money out before it bursts. Look at Bitcoin. Clearly a bubble. But... do you pull out, or do you roll the dice and see if it goes to $30k?

notyourday 9y ago

> Did people expect the dotcom bubble? Yes, people who worked in dot com expected it. Those who did not thought they were smarter than us. Going to coffee shops was surreal - there were people who were telling us what our companies were doing.