7 ms·

I was only in high school in 1998, but at least old enough to be aware of things like the stock market. It doesn't feel anything like the Internet 1.0 bubble. F

by imgabe 7y ago

I was only in high school in 1998, but at least old enough to be aware of things like the stock market. It doesn't feel anything like the Internet 1.0 bubble. For one thing, the companies today have actual revenues and profits. People are not blindly throwing money at every .com IPO that comes out.

fengb 7y ago
WeWork would like a chat.
- dank79430 7y ago
  Blue Apron needs the dial in info
- eli_gottlieb 7y ago
  Also Uber. And Lyft.
  - deleted 7y ago
    [deleted]
  - jerf 7y ago
    Ok. To get to 1999 levels, now name several dozen more. The angle where something like this could happen would be the advertising bubble, if there is one, collapsing. Then there are many companies who are currently quite solvent and profitable that suddenly wouldn't be.
    - gniv 7y ago
      > Ok. To get to 1999 levels, now name several dozen more. SQ, SHOP, TWLO, WDAY, NOW, OKTA, TEAM, MRVL, SPOT, SPLK, PANW, DOCU, TSLA, ROKU, DXCM. These are all $10+ billion market cap and negative earnings. There are tons more in the 5-10 billion range.
      - jerf 7y ago
        I suspect a number of those are the types of companies that if they had to turn a profit, could do so by cutting back investment and taking profits, in addition to reasonable amounts of corporate restructuring and investment. Many of them are at least plausibly in that category. Some of them are not (TSLA for instance is not in a position where they can coast right now). 1999 was full of companies where even if they had captured 100% of the relevant market at the time, would still not be turning a profit or be viable businesses. They were fundamentally built on the presumption that 2015-levels of internet penetration and hardware capabilities in the first world would be obtained in 2001 or so. It wasn't just a matter of "they were investing what could have been profits into further growth", it was a lot more like "they were taking VC money and setting it on fire and calling that a business model". It is not the same today. (Modulo my caveat about advertiser money above.) It may be bad. But 1999 was insane. I can easily see a correction, even one we'd consider large. But I would bet the "correction" doesn't undo more than two years of stock market growth when it happens, and it may not even manage to cause a recession, or if it does, a very minimal one.
        gniv 7y ago
        Sure, I buy all that. But the article compares to 1998, which was not as crazy. We may yet get into a 1999 situation.
  - kypro 7y ago
    Both have significant revenues and are arguably still in their growth stage. I don't like either stocks, but even these names aren't comparable to what was happening during the dotcom bubble.
- sealthedeal 7y ago
  WeWork is a prime example of why this is nothing like 1998. The street did not allow a hyper-inflated company to go public, they spoke, got the CEO fired, blocked the IPO, and are more or less dictating that they become "profitable" before any news of the having an IPO comes out...
mikestew 7y ago
I'm trying really hard to think of a recent IPO of a profitable company. Companies in 1998 had "actual revenues and profits", Pets.com was just not one of them. I worked at Microsoft during that time, and they were making money hand-over-fist. Pretty sure Oracle was raking it in. Hell, even Sun wasn't looking bad. Same deal today: MSFT is still making it by the semi-load, Apple is still making me money (and a dividend, which you weren't getting in 1998). I could go on. But you're not wrong, there is a difference: crap like Uber doesn't shoot to the moon on opening day. Or, as you put it, people aren't throwing money at them, hence Uber (et. al) still sitting under IPO price. That's what I think might save us from a repeat of early 2000s. Hair stylists aren't giving me stock advice these days, either.
- toomuchtodo 7y ago
  > I'm trying really hard to think of a recent IPO of a profitable company. Zoom and Pager Duty. To your point, everything else has been meh.
  - icedchai 7y ago
    PagerDuty lost over $12 million last quarter. And if you bought the stock in June, you'd have lost more than half your money.
    - deleted 7y ago
      [deleted]
  - sealthedeal 7y ago
    I think you are caught up in the fact that a company MUST be profitable to IPO. That is simply not true. Just because these companies are not profitable does not mean they are not stable self sufficient businesses. Amazon pioneered the idea that you do not need to be profitable, in fact you can lose money every single day, month, year, for the sake of growth. We do not know if these "companies have the ability to turn profitable if they want to, but my bet is they probably can. Not to rant, but this is prime example why people like Bezos and Buffet want to get away from the quarterly reporting, it just doesn't do a good job of letting companies lose money in the sake of growth it is WAY to focused on profit over growth.
pastor_elm 7y ago
Netflix, Roku, Uber, Spotify, etc all make profits?
- TenJack 7y ago
  Netflix and Uber make revenue but are not profitable. Not sure about Roku and Spotify
  - Ididntdothis 7y ago
    Netflix actually is profitable.
    - jletienne 7y ago
      not at the cash flow level
      - badloginagain 7y ago
        Because their strategy is massive investment into original content to maintain market positioning now that the market is splintering into IP-driven streaming services. Investors signal they approve of this strategy by continuing to invest in Netflix, despite not getting juicy dividends. Netflix could massive reduce spend on OC and payout dividends, but that would be ultimately damaging to the long-term success of the company.
        Ididntdothis 7y ago
        That actually makes the business model questionable long term . Successful companies make profits while they are still able to invest in their future.
        majormajor 7y ago
        Netflix's competitors are willing to burn short term money to try to make inroads, so the market is already distorted here.
devonkim 7y ago
I’m getting this sinking feeling that it’s not the tech companies that are inflated as much as sectors like retail, manufacturing, and perhaps shipping because of the trade war going on.
benjohnson 7y ago
I agree 100% with you. But that doesn't give me comfort because from what I've seen before every crash people said to themselves: "this time it's different."
throwaway2048 7y ago
I think what we are really seeing is a private equity bubble propping up fundamentally unprofitable companies, and its deflating because so much time passes between VC turbocharging of Uber for hamsters and IPO that it is becoming very difficult indeed to locate the greater fool.
- dehrmann 7y ago
  > private equity bubble It's institutional investors (think pensions) chasing returns because of low interest rates. PE's played a role in a lot of things we're currently seeing. I wouldn't characterize its role in tech quite as propping up a bubble. Easy money means companies are trying a winner-take-all approach, loss-making longer, and delaying IPOs. Tech IPO performance has been mostly lackluster because of a lack of profits and private investors already captured gains from most of the growth. Outside tech, they've been buying up medical companies, raising out-of-network rates, leading to surprise medical bills. They're also under fire for leveraged buyouts, but turning around distressed assets is what PE's historically been good at, and for all the noise about leveraged buyouts and store closures, these were already sinking ships. PE didn't kill Toys R Us, Amazon did.
screye 7y ago
I feel this general unease about an impending depression is what keeps it from happening. Every one remember 2008 and 2000. Beating the drum about a depression being around the corner, makes people takes preemptive decisions that stop such disasters from happening. The seed of skepticism has been sown, and while I hope it doesn't grow, I am glad it has planted itself among people with power to swing economies.
- lotsofpulp 7y ago
  A stall in population growth (decline if we exclude immigration) must play into it also.
- perl4ever 7y ago
  "Irrational exuberance" was ~1995, if I recall correctly, so obviously skepticism at the highest levels doesn't prevent bubbles.
icedchai 7y ago
Certainly todays IPO's are more mature companies. However, "profits" are still no where to be found. Examples include Uber, Lyft, Peloton, Pinterest, GrubHub ... I could go on.
- sct202 7y ago
  Grubhub was profitable (Q3 2019, they made $1 million), but now that they have real competition from Uber Eats and Doordash their fortunes have soured. https://investors.grubhub.com/investors/press-releases/press-release-details/2019/Grubhub-Reports-Third-Quarter-2019-Results/default.aspx https://investors.grubhub.com/investors/press-releases/press...
  - icedchai 7y ago
    I stand corrected! Though you have to admit that $1 million in profit on $322 mil in revenue leaves something to be desired...
bvda 7y ago
> People are not blindly throwing money at every .com IPO that comes out. Now it's ICOs...
- ghaff 7y ago
  Was at any rate.
dragontamer 7y ago
> For one thing, the companies today have actual revenues and profits. The new wave "tech" companies, like Netflix and Tesla, haven't had a yearly profit yet. And those are the best examples of "modern tech" (anyone who IPO'd after 2007). If we get into MoviePass, Uber, Lyft, Pelton, WeWork, etc. etc., we're into the "lose $4 Billion PER QUARTER" group. Tesla "only loses $1 Billion/year" (roughly), making it a far more "profitable" company than these other ones. I absolutely think we're in a bubble: driven by cheap debt. The problem is that I can't call when it will pop. Without knowing how or why things will pop, its completely useless to speculate. Stocks remain the best investment moving forward: with global bonds entering negative interest rates, and US Debt at record low-interest. So even if I think there's a bubble, I'm pumping stocks because I don't have any better idea of what to invest into.
- vkou 7y ago
  Tesla's not a tech company, it's a car company. Tech companies make money because the cost of scaling a tech service to support more users is pennies on the dollar. Just spin up more servers - most of your expenses are fixed, regardless of whether you serve 2 users, or 2 million. This is why Wall Street fawns over them. Unless Tesla has built a Star Trek replicator, it's not a tech company. It's a car company, that must spend 95 cents on building a car, to secure 1 dollar of revenue from selling it.
  - dragontamer 7y ago
    All companies are branding themselves as tech companies, even if they're in established industries. * Moviepass is a tech company, even though they were only selling subscription movie tickets. * Peleton is a tech company, even though they sell exercise equipment. * Tesla is a tech company, even though they just sell cars. * Uber / Lyft are tech companies, even though they are just a middle-management service for... effectively Taxis. * WeWork is a tech company, even though its business model is straight up commercial real-estate subleasing. * Netflix is a tech company, even though it just spent a $Billion on studios, new TV shows, and other entertainment costs. ------ Everyone is a "tech" company. Because that's how you siphon off money from investors these days. Even Amazon seems to be turning into a glorified FedEx / Warehousing / logistics company. When everyone is a tech-company, no one is a tech company. Its the nature of the current bubble IMO.

by imgabe 7y ago

fengb 7y ago

WeWork would like a chat.

dank79430 7y ago
Blue Apron needs the dial in info
eli_gottlieb 7y ago
Also Uber. And Lyft.
- deleted 7y ago
  [deleted]
- jerf 7y ago
  Ok. To get to 1999 levels, now name several dozen more. The angle where something like this could happen would be the advertising bubble, if there is one, collapsing. Then there are many companies who are currently quite solvent and profitable that suddenly wouldn't be.
  - gniv 7y ago
    > Ok. To get to 1999 levels, now name several dozen more. SQ, SHOP, TWLO, WDAY, NOW, OKTA, TEAM, MRVL, SPOT, SPLK, PANW, DOCU, TSLA, ROKU, DXCM. These are all $10+ billion market cap and negative earnings. There are tons more in the 5-10 billion range.
    - jerf 7y ago
      I suspect a number of those are the types of companies that if they had to turn a profit, could do so by cutting back investment and taking profits, in addition to reasonable amounts of corporate restructuring and investment. Many of them are at least plausibly in that category. Some of them are not (TSLA for instance is not in a position where they can coast right now). 1999 was full of companies where even if they had captured 100% of the relevant market at the time, would still not be turning a profit or be viable businesses. They were fundamentally built on the presumption that 2015-levels of internet penetration and hardware capabilities in the first world would be obtained in 2001 or so. It wasn't just a matter of "they were investing what could have been profits into further growth", it was a lot more like "they were taking VC money and setting it on fire and calling that a business model". It is not the same today. (Modulo my caveat about advertiser money above.) It may be bad. But 1999 was insane. I can easily see a correction, even one we'd consider large. But I would bet the "correction" doesn't undo more than two years of stock market growth when it happens, and it may not even manage to cause a recession, or if it does, a very minimal one.
      - gniv 7y ago
        Sure, I buy all that. But the article compares to 1998, which was not as crazy. We may yet get into a 1999 situation.
- kypro 7y ago
  Both have significant revenues and are arguably still in their growth stage. I don't like either stocks, but even these names aren't comparable to what was happening during the dotcom bubble.
sealthedeal 7y ago
WeWork is a prime example of why this is nothing like 1998. The street did not allow a hyper-inflated company to go public, they spoke, got the CEO fired, blocked the IPO, and are more or less dictating that they become "profitable" before any news of the having an IPO comes out...

mikestew 7y ago

I'm trying really hard to think of a recent IPO of a profitable company. Companies in 1998 had "actual revenues and profits", Pets.com was just not one of them. I worked at Microsoft during that time, and they were making money hand-over-fist. Pretty sure Oracle was raking it in. Hell, even Sun wasn't looking bad. Same deal today: MSFT is still making it by the semi-load, Apple is still making me money (and a dividend, which you weren't getting in 1998). I could go on. But you're not wrong, there is a difference: crap like Uber doesn't shoot to the moon on opening day. Or, as you put it, people aren't throwing money at them, hence Uber (et. al) still sitting under IPO price. That's what I think might save us from a repeat of early 2000s. Hair stylists aren't giving me stock advice these days, either.

toomuchtodo 7y ago
> I'm trying really hard to think of a recent IPO of a profitable company. Zoom and Pager Duty. To your point, everything else has been meh.
- icedchai 7y ago
  PagerDuty lost over $12 million last quarter. And if you bought the stock in June, you'd have lost more than half your money.
  - deleted 7y ago
    [deleted]
- sealthedeal 7y ago
  I think you are caught up in the fact that a company MUST be profitable to IPO. That is simply not true. Just because these companies are not profitable does not mean they are not stable self sufficient businesses. Amazon pioneered the idea that you do not need to be profitable, in fact you can lose money every single day, month, year, for the sake of growth. We do not know if these "companies have the ability to turn profitable if they want to, but my bet is they probably can. Not to rant, but this is prime example why people like Bezos and Buffet want to get away from the quarterly reporting, it just doesn't do a good job of letting companies lose money in the sake of growth it is WAY to focused on profit over growth.

pastor_elm 7y ago

Netflix, Roku, Uber, Spotify, etc all make profits?

TenJack 7y ago
Netflix and Uber make revenue but are not profitable. Not sure about Roku and Spotify
- Ididntdothis 7y ago
  Netflix actually is profitable.
  - jletienne 7y ago
    not at the cash flow level
    - badloginagain 7y ago
      Because their strategy is massive investment into original content to maintain market positioning now that the market is splintering into IP-driven streaming services. Investors signal they approve of this strategy by continuing to invest in Netflix, despite not getting juicy dividends. Netflix could massive reduce spend on OC and payout dividends, but that would be ultimately damaging to the long-term success of the company.
      - Ididntdothis 7y ago
        That actually makes the business model questionable long term . Successful companies make profits while they are still able to invest in their future.
        majormajor 7y ago
        Netflix's competitors are willing to burn short term money to try to make inroads, so the market is already distorted here.

devonkim 7y ago

I’m getting this sinking feeling that it’s not the tech companies that are inflated as much as sectors like retail, manufacturing, and perhaps shipping because of the trade war going on.

benjohnson 7y ago

I agree 100% with you. But that doesn't give me comfort because from what I've seen before every crash people said to themselves: "this time it's different."

throwaway2048 7y ago

I think what we are really seeing is a private equity bubble propping up fundamentally unprofitable companies, and its deflating because so much time passes between VC turbocharging of Uber for hamsters and IPO that it is becoming very difficult indeed to locate the greater fool.

dehrmann 7y ago
> private equity bubble It's institutional investors (think pensions) chasing returns because of low interest rates. PE's played a role in a lot of things we're currently seeing. I wouldn't characterize its role in tech quite as propping up a bubble. Easy money means companies are trying a winner-take-all approach, loss-making longer, and delaying IPOs. Tech IPO performance has been mostly lackluster because of a lack of profits and private investors already captured gains from most of the growth. Outside tech, they've been buying up medical companies, raising out-of-network rates, leading to surprise medical bills. They're also under fire for leveraged buyouts, but turning around distressed assets is what PE's historically been good at, and for all the noise about leveraged buyouts and store closures, these were already sinking ships. PE didn't kill Toys R Us, Amazon did.

screye 7y ago

I feel this general unease about an impending depression is what keeps it from happening. Every one remember 2008 and 2000. Beating the drum about a depression being around the corner, makes people takes preemptive decisions that stop such disasters from happening. The seed of skepticism has been sown, and while I hope it doesn't grow, I am glad it has planted itself among people with power to swing economies.

lotsofpulp 7y ago
A stall in population growth (decline if we exclude immigration) must play into it also.
perl4ever 7y ago
"Irrational exuberance" was ~1995, if I recall correctly, so obviously skepticism at the highest levels doesn't prevent bubbles.

icedchai 7y ago

Certainly todays IPO's are more mature companies. However, "profits" are still no where to be found. Examples include Uber, Lyft, Peloton, Pinterest, GrubHub ... I could go on.

sct202 7y ago
Grubhub was profitable (Q3 2019, they made $1 million), but now that they have real competition from Uber Eats and Doordash their fortunes have soured. https://investors.grubhub.com/investors/press-releases/press-release-details/2019/Grubhub-Reports-Third-Quarter-2019-Results/default.aspx https://investors.grubhub.com/investors/press-releases/press...
- icedchai 7y ago
  I stand corrected! Though you have to admit that $1 million in profit on $322 mil in revenue leaves something to be desired...

bvda 7y ago

> People are not blindly throwing money at every .com IPO that comes out. Now it's ICOs...

ghaff 7y ago
Was at any rate.

dragontamer 7y ago

> For one thing, the companies today have actual revenues and profits. The new wave "tech" companies, like Netflix and Tesla, haven't had a yearly profit yet. And those are the best examples of "modern tech" (anyone who IPO'd after 2007). If we get into MoviePass, Uber, Lyft, Pelton, WeWork, etc. etc., we're into the "lose $4 Billion PER QUARTER" group. Tesla "only loses $1 Billion/year" (roughly), making it a far more "profitable" company than these other ones. I absolutely think we're in a bubble: driven by cheap debt. The problem is that I can't call when it will pop. Without knowing how or why things will pop, its completely useless to speculate. Stocks remain the best investment moving forward: with global bonds entering negative interest rates, and US Debt at record low-interest. So even if I think there's a bubble, I'm pumping stocks because I don't have any better idea of what to invest into.

vkou 7y ago
Tesla's not a tech company, it's a car company. Tech companies make money because the cost of scaling a tech service to support more users is pennies on the dollar. Just spin up more servers - most of your expenses are fixed, regardless of whether you serve 2 users, or 2 million. This is why Wall Street fawns over them. Unless Tesla has built a Star Trek replicator, it's not a tech company. It's a car company, that must spend 95 cents on building a car, to secure 1 dollar of revenue from selling it.
- dragontamer 7y ago
  All companies are branding themselves as tech companies, even if they're in established industries. * Moviepass is a tech company, even though they were only selling subscription movie tickets. * Peleton is a tech company, even though they sell exercise equipment. * Tesla is a tech company, even though they just sell cars. * Uber / Lyft are tech companies, even though they are just a middle-management service for... effectively Taxis. * WeWork is a tech company, even though its business model is straight up commercial real-estate subleasing. * Netflix is a tech company, even though it just spent a $Billion on studios, new TV shows, and other entertainment costs. ------ Everyone is a "tech" company. Because that's how you siphon off money from investors these days. Even Amazon seems to be turning into a glorified FedEx / Warehousing / logistics company. When everyone is a tech-company, no one is a tech company. Its the nature of the current bubble IMO.