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I was there during the dot com bubble bursting. Psychology factored into it, but it wasn't the primary reason the bubble bursted. The main two reasons were: 1.
by 3pt14159 4y ago
I was there during the dot com bubble bursting. Psychology factored into it, but it wasn't the primary reason the bubble bursted. The main two reasons were:
1. Hype around new technologies is sometimes warranted. Electrification, for example. It wasn't clear how long it would take for these weird new internet companies to really start turning a buck, but after a few years spreadsheet parameters were updated and the whole financial industry saw the writing on the wall for most web companies.
2. Many profitable and completely unfunded web companies primarily received their funding from other web companies that were. This set off a cascading reaction of bankruptcies and massive layoffs. Advertisers, publishers, tool makers, and many others were in this second category of legit business that lost the vast majority of their customers.
One of the downsides of an inflating currency is that there is a general feeling of "well I have to invest my money somewhere!" that is hard to overcome and leads to bubbles until the sky starts falling, so I agree with you that psychology is a factor; but the fundamentals still dominate in the medium to long term.
- UncleOxidant 4y agoThe current environment has a similar feeling to the early part of the dot com bubble-burst. In that early part of the burst we had the feeling that it could get bad, but we also were sort of deluding ourselves into thinking that it wouldn't be that bad. ...also HN today kind of looking like fuckedcompany[1] back in those days. [1] https://en.wikipedia.org/wiki/Fucked_Company https://en.wikipedia.org/wiki/Fucked_Company
- deleted 4y ago[deleted]
- 3pt14159 4y agoI agree that there are similarities, but many of the web businesses these days are legit with happy customers. The challenge seems to be more widespread across the economy and there are a few not-so-black-swan-anymore looking things on the horizon (e.g., a Sino war) that could dramatically change the picture for the whole industry. My take away is that we may have a mild recession, but the likelihood of a massive recession is a lot higher than it has been in decades.
- foobarian 4y agoI have a hard time imagining the analog of Nortel or Lucent today. They simply vanished.
- UncleOxidant 4y agoIt's not hard to imagine Lyft and/or Uber vanishing. Paraphrasing Buffet: The easy-money tide is going out and we're going to find out who's been swimming naked.
- umeshunni 4y agoWework, various lending and fin-tech companies (e.g. Better), Crypto companies.
- 3pt14159 4y agoThen imagine this: War over Taiwan. One way or another all the fabs get incinerated. Which companies go bankrupt now?
- ethbr0 4y agoExactly. One of the central features of the dot-com bubble were that stupid (as in never-gonna-work / Silicon Valley-the-series) companies were getting massive amounts of funding. Then, it was because {value} = {idea} + {Internet}. Except nobody knew how much value the {Internet} part added, because the Internet wasn't done solidifying in terms of capability (e.g. "AJAX? What's that?") or connectivity (PocketPC!). Now, the Internet is a pretty well-known quantity. So while Uber and Lyft and Masayoshi Son's portfolio might be massively overvaluing things, the fundamental nature is well understood. Some stupid companies will die, but there are lots of companies making actual money doing actually useful things. And the primary casualties of the dot-com bust are all so consolidated that the tools-impact will likely be lesser too. Amazon/MS/Google aren't going to go bankrupt over softer cloud demand.