4 ms·

>Kinda like the dotcom bubble. It's interesting to me that people bring up 'The Dot Com Bubble' as an example of empty hype, when in fact, investing in the Int

by RC_ITR 3y ago

>Kinda like the dotcom bubble. It's interesting to me that people bring up 'The Dot Com Bubble' as an example of empty hype, when in fact, investing in the Internet even at the peak (deploying capital proportional to 1999 market caps) has one of the best IRR's in the history of time (Amazon, eBay/PayPal, eTrade, etc.). I don't think hype will die down so much as winners will be chosen and the long tail will stop buying GPUs (in the same way Pets.com and Webvan stopped building warehouses).

staticman2 3y ago
">It's interesting to me that people bring up 'The Dot Com Bubble' as an example of empty hype, when in fact, investing in the Internet even at the peak (deploying capital proportional to 1999 market caps) has one of the best IRR's in the history of time (Amazon, eBay/PayPal, eTrade, etc.)." Do you have a source for this claim? Like, you or someone else has a market cap dataset of 1999 web companies and their market cap, including such 1999 darlings as stanlee.net, pets.com, etc. And you or someone else calculated the perormance of a .com portfolio circa 1999 if held for some time period past 1999? That sounds like a dubious claim, especially because there isn't a clear line between a .com company and a non .com company. I recall related tech companies were also part of the .com hype cycle.
- RC_ITR 3y ago
  I do! Let's put it this way - at the end of 1999, the top 10 companies were Yahoo! ($110bn)| Amazon ($27bn) | Yahoo! Japan ($25bn) | eBay ($17bn) | Infosapce/Blucora ($10bn) | Lycos ($8bn) | Priceline ($7bn) | eTrade ($7bn) | Monster.com ($6bn) | CNET ($4bn) Pets.com made a lot of noise in the media, but peaked at a $400mn valuation. Yahoo! exited in 2015 for $5bn plus about $40bn of Alibaba stock (bad but not awful) Amazon is the real driver as it went from $27bn to $1,500bn today, a 56x return and a 20% IRR (it's nice when your #2 position does that). Yahoo! Japan went from $25bn to $32bn. eBay was $17bn, combined eBay and PYPL are $100bn. Priceline was $7bn and is now $113bn. eTrade was bought by Morgan Stanley for $13bn in 2020. Lycos was acquired by a Spanish telecom in 2000 for $13bn. The rest of the Top 10 were basically zeroes, but going down the list you also get Expedia ($1bn to $15bn). And keep in mind this is buying at basically the peak. The key is you actually had to listen to the wisdom of the market and not try to play in the penny stocks, which still largely holds true today.
  - staticman2 3y ago
    Okay, but if Nvidia is an "AI" company, then Cisco (352 bn) , Lucent (252 bn), Intel (271 bn), and Microsoft (583bn) and maybe even Nokia (197bn) were arguably 1999 "web" companies. An investment in hardware companies making telecommunications equipment was also considered an investment in the internet, as I remember it. But maybe your dataset includes that as well.
    - RC_ITR 3y ago
      No, Coca-Cola also reached a peak in 1998 that it didn't surpass until 2014, and calling that the "Internet Bubble" is definitely wrong. I'm just saying that the 'Dotcom Bubble' is wildly misremembered. It was a broad market bubble with media coverage of the Internet. EDIT: To add to the point. The companies you cite are 'picks and shovels' companies (don't even get me started there - what's the biggest pick and shovel company? the phrase should be 'jeans, coffee and banks'). There was certainly a 'picks and shovels' bubble that Nvidia may very well repeat, but the Internet was/has always been a good investment.
      - staticman2 3y ago
        Actual living, non hypothetical investors were not buying the 382 publicly traded "web" companies at market cap rates in 1999 then patiently waiting 20+ years. (I doubt retail investors could have even executed this strategy.) If your investment strategy can't even be executed by retail investors I wouldn't call it a "good" investment.
        RC_ITR 3y ago
        Why? I agree many didn't but in what way was there any impediment for people to do this? We both know eTrade existed back then... It's like saying "who would buy Apple in 2005 and hold to today?" The answer is "only a handful of now billionaires," but that doesn't mean it's an invalid strategy (again, it's one of the greatest strategies in the history of time). If you're making the separate point that investing in Coca-Cola, Corning, or Intel in 2000 was a bad idea that many people did do, then I agree with you, but again that was a broad market bubble that sent people looking for explanations.

by RC_ITR 3y ago

staticman2 3y ago

">It's interesting to me that people bring up 'The Dot Com Bubble' as an example of empty hype, when in fact, investing in the Internet even at the peak (deploying capital proportional to 1999 market caps) has one of the best IRR's in the history of time (Amazon, eBay/PayPal, eTrade, etc.)." Do you have a source for this claim? Like, you or someone else has a market cap dataset of 1999 web companies and their market cap, including such 1999 darlings as stanlee.net, pets.com, etc. And you or someone else calculated the perormance of a .com portfolio circa 1999 if held for some time period past 1999? That sounds like a dubious claim, especially because there isn't a clear line between a .com company and a non .com company. I recall related tech companies were also part of the .com hype cycle.

RC_ITR 3y ago
I do! Let's put it this way - at the end of 1999, the top 10 companies were Yahoo! ($110bn)| Amazon ($27bn) | Yahoo! Japan ($25bn) | eBay ($17bn) | Infosapce/Blucora ($10bn) | Lycos ($8bn) | Priceline ($7bn) | eTrade ($7bn) | Monster.com ($6bn) | CNET ($4bn) Pets.com made a lot of noise in the media, but peaked at a $400mn valuation. Yahoo! exited in 2015 for $5bn plus about $40bn of Alibaba stock (bad but not awful) Amazon is the real driver as it went from $27bn to $1,500bn today, a 56x return and a 20% IRR (it's nice when your #2 position does that). Yahoo! Japan went from $25bn to $32bn. eBay was $17bn, combined eBay and PYPL are $100bn. Priceline was $7bn and is now $113bn. eTrade was bought by Morgan Stanley for $13bn in 2020. Lycos was acquired by a Spanish telecom in 2000 for $13bn. The rest of the Top 10 were basically zeroes, but going down the list you also get Expedia ($1bn to $15bn). And keep in mind this is buying at basically the peak. The key is you actually had to listen to the wisdom of the market and not try to play in the penny stocks, which still largely holds true today.
- staticman2 3y ago
  Okay, but if Nvidia is an "AI" company, then Cisco (352 bn) , Lucent (252 bn), Intel (271 bn), and Microsoft (583bn) and maybe even Nokia (197bn) were arguably 1999 "web" companies. An investment in hardware companies making telecommunications equipment was also considered an investment in the internet, as I remember it. But maybe your dataset includes that as well.
  - RC_ITR 3y ago
    No, Coca-Cola also reached a peak in 1998 that it didn't surpass until 2014, and calling that the "Internet Bubble" is definitely wrong. I'm just saying that the 'Dotcom Bubble' is wildly misremembered. It was a broad market bubble with media coverage of the Internet. EDIT: To add to the point. The companies you cite are 'picks and shovels' companies (don't even get me started there - what's the biggest pick and shovel company? the phrase should be 'jeans, coffee and banks'). There was certainly a 'picks and shovels' bubble that Nvidia may very well repeat, but the Internet was/has always been a good investment.
    - staticman2 3y ago
      Actual living, non hypothetical investors were not buying the 382 publicly traded "web" companies at market cap rates in 1999 then patiently waiting 20+ years. (I doubt retail investors could have even executed this strategy.) If your investment strategy can't even be executed by retail investors I wouldn't call it a "good" investment.
      - RC_ITR 3y ago
        Why? I agree many didn't but in what way was there any impediment for people to do this? We both know eTrade existed back then... It's like saying "who would buy Apple in 2005 and hold to today?" The answer is "only a handful of now billionaires," but that doesn't mean it's an invalid strategy (again, it's one of the greatest strategies in the history of time). If you're making the separate point that investing in Coca-Cola, Corning, or Intel in 2000 was a bad idea that many people did do, then I agree with you, but again that was a broad market bubble that sent people looking for explanations.