Dot Com Bubble Quotes

The dot-com and housing bubbles can both be explained by artificial credit expansion, say such economists.

During the dot-com bubble, most people did not use a persuasive theory to gauge whether stock prices were too high, too low, or just right. Instead, as they watched stock prices go up, they invented explanations to rationalize what was happening. They talked about Moore’s Law, smart kids, and Alan Greenspan. Data without theory.

Buffett being penalized for underperforming versus managers riding the long side of the dot-com bubble is a perfect illustration of a common investor mistake—failing to realize that often the managers with the highest returns achieve those results because they’re taking the most risk, not because they have the greatest skill.

She was one of the original dot-com phenoms—made crazy money for two years, then took the Internet bubble bath in 2000.

Another example, this one from the 2000 crash of the dot-com bubble, concerns a self-described introvert based in Omaha, Nebraska, where he’s well known for shutting himself inside his office for hours at a time. Warren Buffett, the legendary

A half-century later, Mark Twain would say that the gold rush drastically changed the American character, ending the tradition of patient apprenticeships, the gradual mastery of self, talent, and money. Gold created the get-rich-quick mentality that has been with us ever since, most recently during the dot-com bubble of the late 1990s.

Another example, this one from the 2000 crash of the dot-com bubble, concerns a self-described introvert based in Omaha, Nebraska, where he’s well known for shutting himself inside his office for hours at a time. Warren Buffett, the legendary investor and one of the wealthiest men in the world, has used exactly the attributes we’ve explored in this chapter—

Groups have powerful self-reinforcing mechanisms at work. These can lead to group polarization—a tendency for members of the group to end up in a more extreme position than they started in because they have heard the views repeated frequently. At the extreme limit of group behavior is groupthink. This occurs when a group makes faulty decisions because group pressures lead to a deterioration of “mental efficiency, reality testing, and moral judgment.” The original work was conducted with reference to the Vietnam War and the Bay of Pigs fiasco. However, it rears its head again and again, whether it is in connection with the Challenger space shuttle disaster or the CIA intelligence failure over the WMD of Saddam Hussein. Groupthink tends to have eight symptoms: 1 . An illusion of invulnerability. This creates excessive optimism that encourages taking extreme risks. [...] 2. Collective rationalization. Members of the group discount warnings and do not reconsider their assumptions. [...] 3. Belief in inherent morality. Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions. 4. Stereotyped views of out-groups. Negative views of “enemy” make effective responses to conflict seem unnecessary. Remember how those who wouldn't go along with the dot-com bubble were dismissed as simply not getting it. 5. Direct pressure on dissenters. Members are under pressure not to express arguments against any of the group’s views. 6. Self-censorship. Doubts and deviations from the perceived group consensus are not expressed. 7. Illusion of unanimity. The majority view and judgments are assumed to be unanimous. 8. "Mind guards" are appointed. Members protect the group and the leader from information that is problematic or contradictory to the group's cohesiveness, view, and/or decisions. This is confirmatory bias writ large.

One example of a high-tech company that submits to a Graham type of analysis is Amazon.com. Though it does business exclusively on the Web, Amazon is essentially a retailer, and it may be evaluated in the same way as Wal-Mart, Sears, and so forth. The question, as always, is, does the business provide an adequate margin of safety at a given market price. For much of Amazon’s short life, the stock was wildly overpriced. But when the dot-com bubble burst, its securities collapsed. Buffett himself bought Amazon’s deeply discounted bonds after the crash, when there was much fearful talk that Amazon was headed for bankruptcy. The bonds subsequently rose to par, and Buffett made a killing.

The entrepreneurs who stuck with Silicon Valley learned four big lessons from the dot-com crash that still guide business thinking today: 1. Make incremental advances Grand visions inflated the bubble, so they should not be indulged. Anyone who claims to be able to do something great is suspect, and anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward. 2. Stay lean and flexible All companies must be “lean,” which is code for “unplanned.” You should not know what your business will do; planning is arrogant and inflexible. Instead you should try things out, “iterate,” and treat entrepreneurship as agnostic experimentation. 3. Improve on the competition Don’t try to create a new market prematurely. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors. 4. Focus on product, not sales If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth.

Aside from the movies, examples of positive-Black Swan businesses are: some segments of publishing, scientific research, and venture capital. In these businesses, you lose small to make big. You have little to lose per book and, for completely unexpected reasons, any given book might take off. The downside is small and easily controlled. The problem with publishers, of course, is that they regularly pay up for books, thus making their upside rather limited and their downside monstrous. (If you pay $10 million for a book, your Black Swan is it not being a bestseller.) Likewise, while technology can carry a great payoff, paying for the hyped-up story, as people did with the dot-com bubble, can make any upside limited and any downside huge. It is the venture capitalist who invested in a speculative company and sold his stake to unimaginative investors who is the beneficiary of the Black Swan, not the "me, too" investors.

The entrepreneurs who stuck with Silicon Valley learned four big lessons from the dot-com crash that still guide business thinking today: 1. Make incremental advances Grand visions inflated the bubble, so they should not be indulged. Anyone who claims to be able to do something great is suspect, and anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward. 2. Stay lean and flexible All companies must be “lean,” which is code for “unplanned.” You should not know what your business will do; planning is arrogant and inflexible. Instead you should try things out, “iterate,” and treat entrepreneurship as agnostic experimentation. 3. Improve on the competition Don’t try to create a new market prematurely. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors. 4. Focus on product, not sales If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth. These lessons have become dogma in the startup world; those who would ignore them are presumed to invite the justified doom visited upon technology in the great crash of 2000. And yet the opposite principles are probably more correct: 1. It is better to risk boldness than triviality. 2. A bad plan is better than no plan. 3. Competitive markets destroy profits. 4. Sales matters just as much as product.

In response to current events, people often reach for historical analogies, and this occasion was no exception. The trick is to choose the right analogy. In August 2007, the analogies that came to mind—both inside and outside the Fed—were October 1987, when the Dow Jones industrial average had plummeted nearly 23 percent in a single day, and August 1998, when the Dow had fallen 11.5 percent over three days after Russia defaulted on its foreign debts. With help from the Fed, markets had rebounded each time with little evident damage to the economy. Not everyone viewed these interventions as successful, though. In fact, some viewed the Fed’s actions in the fall of 1998—three quarter-point reductions in the federal funds rate—as an overreaction that helped fuel the growing dot-com bubble. Others derided what they perceived to be a tendency of the Fed to respond too strongly to price declines in stocks and other financial assets, which they dubbed the “Greenspan put.” (A put is an options contract that protects the buyer against loss if the price of a stock or other security declines.) Newspaper opinion columns in August 2007 were rife with speculation that Helicopter Ben would provide a similar put soon. In arguing against Fed intervention, many commentators asserted that investors had grown complacent and needed to be taught a lesson. The cure to the current mess, this line of thinking went, was a repricing of risk, meaning a painful reduction in asset prices—from stocks to bonds to mortgage-linked securities. “Credit panics are never pretty, but their virtue is that they restore some fear and humility to the marketplace,” the Wall Street Journal had editorialized, in arguing for no rate cut at the August 7 FOMC meeting.

Global finance made so much hay, not through efficient markets but by riding up and down three interlinked giant global asset bubbles using huge amounts of leverage. The first bubble began in US equities in 1987 and ran, with a dip in the dot-com era, until 2007. It was the longest equity bull market in history, and it spread out from the United States to boost stock markets all over the world. The smart cash that was being made in those equity markets looked around for a hedge and found real estate, which began its own global bubble phase in 1997 and ran until the crisis hit in 2006. The final bubble occurred in commodities, which rose sharply in 2005 and 2006, long before anyone had heard the words “quantitative easing,” and which burst quickly since these were comparatively tiny markets, too small to sustain such volumes of liquidity all hunting either safety or yield. The popping of these interlinked bubbles combined with losses in the subprime sector of the mortgage derivatives market to trigger the current crisis.

Metaverse Hype? Not sure. From the ashes of the dot-com bubble, the global e-commerce market has risen, worth five trillion dollars (as of 2021).

There are at least three ways in which bubbles can be useful. First, the bubble may facilitate innovation and encourage more people to become entrepreneurs, which ultimately feeds into future economic growth.9 Second, the new technology developed by bubble companies may help stimulate future innovations, and bubble companies may themselves use the technology developed during the bubble to move into a different industry. Third, bubbles may provide capital for technological projects that would not be financed to the same extent in a fully efficient financial market. Many historical bubbles have been associated with transformative technologies, such as railways, bicycles, automobiles, fibre optics and the Internet. William Janeway, who was a highly successful venture capitalist during the Dot-Com Bubble, argues that several economically beneficial technologies would not have been developed without the assistance of bubbles.10

Do yourself a favor and run down the list of businesses started during depressions or economic crises. Fortune magazine (ninety days after the market crash of 1929) FedEx (oil crisis of 1973) UPS (Panic of 1907) Walt Disney Company (After eleven months of smooth operation, the twelfth was the market crash of 1929.) Hewlett-Packard (Great Depression, 1935) Charles Schwab (market crash of 1974–75) Standard Oil (Rockefeller bought out his partners in what became Standard Oil and took over in February 1865, the final year of the Civil War.) Coors (Depression of 1873) Costco (recession in the late 1970s) Revlon (Great Depression, 1932) General Motors (Panic of 1907) Procter & Gamble (Panic of 1837) United Airlines (1929) Microsoft (recession in 1973–75) LinkedIn (2002, post–dot-com bubble) For the most part, these businesses had little awareness they were in some historically significant depression. Why? Because the founders were too busy existing in the present—actually dealing with the situation at hand.

At the end of 1999 I was the editor of Time, and we made a somewhat offbeat decision to make Bezos our Person of the Year, even though he wasn’t a famous world leader or statesman. I had the theory that the people who affect our lives the most are often the people in business and technology who, at least early in their careers, aren’t often found on the front pages. For example, we had made Andy Grove of Intel the Person of the Year at the end of 1997 because I felt the explosion of the microchip was changing our society more than any prime minister or president or treasury secretary. But as the publication date of our Bezos issue neared in December 1999, the air was starting to go out of the dot.com bubble. I was worried—correctly—that internet stocks, such as Amazon, would start to collapse. So I asked the CEO of Time Inc., the very wise Don Logan, whether I was making a mistake by choosing Bezos and would look silly in years to come if the internet economy deflated. No, Don told me. “Stick with your choice. Jeff Bezos is not in the internet business. He’s in the customer-service business. He will be around for decades to come, well after people have forgotten all the dot.coms that are going to go bust.

back when the internet first exploded onto the scene, we faced the dot-com bubble, where excitement outstripped reality and a lot of businesses failed. And it wasn’t just small businesses. Nokia was once invincible, dominating the mobile phone market in the 90s. It looked unassailable, as did Blackberry, as did Kodak. Now, they’re museum pieces. “Then we had the social media bubble. For the first time, the world was united on one global platform. Facebook had more users than the ten largest countries in the world combined. And then disinformation set in, and the bubble of confidence burst, followed by a pandemic where lies took lives. “Then we had the AI bubble. AI was the future. AI would replace all our menial jobs and usher in utopia. Only it didn’t. It left the menial jobs untouched and stripped out the talent from where it was needed most. And then, like Ouroboros, the snake began eating its own tail.

The history of irregular media operations is complex and fractured; generalizations are difficult. Yet it is possible to isolate three large and overlapping historical phases: First, throughout the nineteenth century, irregular forces saw the state's telecommunications facilities as a target that could be physically attacked to weaken the armies and the authority of states and empires. Second, for most of the twentieth century after the world wars, irregulars slowly but successfully began using the mass media as a weapon. Telecommunications, and more specifically the press, were used to attack the moral support and cohesion of opposing political entities. Then, in the early part of the twenty-first century, a third phases began: irregular movements started using commoditized information technologies as an extended operating platform. The form and trajectory of the overarching information revolution, from the Industrial Revolution until today, historically benefited the nation-state and increased the power of regular armies. But this trend was reversed in the year 2000 when the New Economy's Dot-com bubble burst, an event that changed the face of the Web. What came thereafter, a second generation Internet, or "Web 2.0," does not favor the state, large firms, and big armies any more; instead the new Web, in an abstract but highly relevant way, resembles - and inadvertently mimics - the principles of subversion and irregular war. The unintended consequence for armed conflicts is that non-state insurgents benefit far more from the new media than do governments and counterinsurgents, a trend that is set to continue in the future.

The price volatility within each trading day in the U.S. stock market between 2010 and 2013 was nearly 40 percent higher than the volatility between 2004 and 2006, for instance. There were days in 2011 in which volatility was higher than in the most volatile days of the dot-com bubble.

A sobering denouement had to come...exponential growth is a potent delusion-maker, and in 1999, 10 years after the Nikkei’s peak, I was thinking about the Japanese experience as we were waiting to claim our rental car at San Francisco airport. Silicon Valley was years into its first dotcom bubble, and even with advance reservations people had to wait for the just-returned cars to get serviced and released again into the halting traffic on the clogged Bayshore freeway. Mindful of the Japanese experience, I was thinking that every year after 1995 might be the last spell of what Alan Greenspan famously called irrational exuberance, but it was not in 1996 or 1997 or 1998. And even more so than a decade earlier, there were many economists ready to assure American investors that this spell of exponential growth was really different, that the old rules do not apply in the New Economy where endless rapid growth will readily continue.

I felt I was New Age before it became hip (and now passé), and disliked the name given to this 'recent' wave of spiritual interest in the 1980s because the word 'new' was in it: this word automatically implies that the phase will soon pass into something either “established” or stale, or will be chronicled as an ephemeral fad or phase to be found on some old bookshelf one day. Again, passé. For instance, the New Thought movement faded with the smoke of the Great War, the war to end all wars – which later was reclassified as WWI. Indeed, just a few years into the new 21st century, New Age was becoming old. Smooth jazz seemed to replace the name in music, and holistic and integral were the latest catch words describing the eclectic philosophy of the past decades. Astrologers were laughing: they knew the planetary alignments that predicted this network of integrated thought; it was the same inspiration behind the world wide web. Uranus (technological innovations, groups) and Neptune (images, imagination) reunited in the mid 1990s in the practical sign of Capricorn; we all became more connected with the next jump in electronics, technology and vision, right on cue. The world wide wave (www) was here. That wave came in, peaked in the 1990s, everyone was refreshed and expanded (some got drenched), and the promoters were now looking for new packaging. By the end of the 1990s, the Dot.com bubble burst. It was time for the next phase.

learned four big lessons from the dot-com crash that still guide business thinking today: 1. Make incremental advances Grand visions inflated the bubble, so they should not be indulged. Anyone who claims to be able to do something great is suspect, and anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward. 2. Stay lean and flexible All companies must be “lean,” which is code for “unplanned.” You should not know what your business will do; planning is arrogant and inflexible. Instead you should try things out, “iterate,” and treat entrepreneurship as agnostic experimentation. 3. Improve on the competition Don’t try to create a new market prematurely. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors. 4. Focus on product, not sales If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth.

A new dot.com bubble for AI? I doubt it. Companies do not invest in AI because it's hot, but because it is efficient

The entrepreneurs who stuck with Silicon Valley learned four big lessons from the dot-com crash that still guide business thinking today: 1. Make incremental advances Grand visions inflated the bubble, so they should not be indulged. Anyone who claims to be able to do something great is suspect, and anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward. 2. Stay lean and flexible All companies must be “lean,” which is code for “unplanned.” You should not know what your business will do; planning is arrogant and inflexible. Instead you should try things out, “iterate,” and treat entrepreneurship as agnostic experimentation. 3. Improve on the competition Don’t try to create a new market prematurely. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors. 4. Focus on product, not sales If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth.