To me the most sobering cautionary tale from the dotcom bubble is the story of Cisco. Cisco manufactured, in a very real sense, the physical infrastructure of the internet: the routers, switches, modems, etc. that directed the IP packets to their destinations. (To a significant extent they still do, though nowadays they have more competition in that area.)

Savvy investors piled in to the stock, reasoning that, while internet startups might come and go, the internet itself was surely here to stay. It was popular to observe that, in the California gold rush of the mid-1800s, the purveyors of mining equipment made it rich more reliably than the prospectors for gold.

Anyway the Cisco stock price peaked in March 2000, and to this day it still has not reached that level again. The savvy investors were of course correct in their belief that the internet would continue to be important, and that Cisco would continue to be an important manufacturer of internet networking equipment. But they lost money anyway, because once the euphoria had worn off the market consensus was that the stock just wasn’t worth as much as the price it had been selling for at the height of the mania.

Any parallels to hot contemporary stocks are left as an exercise for the reader — and I do not mean to suggest that history must always repeat exactly.

Obviously you don't mean NVIDIA, because 80% margins on matrix multiplication will last foreverrrrr.

And I can't name several customers with very deep pockets working on their own chips to squeeze/compete with NVDA.

I think you're not naming entire nation states, given the way the Chinese are splashing money around there it looks like there is about to be a flood of chipmaking capacity hitting the market and a lot of that will end up competing in matrix multiplying.

Although I hear VCs are working on an algorithm where they burn money directly and the smoke patterns represent the solution to the multiplication. That might keep the margins high.

Those Chinese companies will have to fight our western champions, TSMC in a green trenchcoat, TSMC in a red trenchcoat, TSMC in a blue trenchcoat, TSMC in a purple trenchcoat, and TSMC in a yellow trenchcoat.

Is this after the same Spidermen TSMCs got down from all sitting on top of each other?

Microsoft, Meta and Oracle already spend billions on supposedly completely inferior(according to the Nvidia cultists) AMD chips. Nvidia is the biggest bubble in human history.

> And I can't name several customers with very deep pockets working on their own chips to squeeze/compete with NVDA.

Google, Amazon, and Microsoft all have custom ASIC and TPU projects in their pipeline, and what holds true today might not hold true in 5 years.

A major reason Nvidia was able to do so well was because of technical outreach by donating their GPUs to programs all over the US, building a strong albeit self serving OSS relationship, the CUDA ecosystem, and the acquisition of Infiniband.

Much of these advantages can be nullified by competitive margins and pricing for hyperscalers designed and owned hardware.

Cisco was hit by this same situation as server vendors like Dell began integrating their own in-house networking functionality within their servers, and Dell itself was outcompeted by cloud vendors.

Agreed, the only thing I'd add would be AMD's self-sabotage. Pretending to have compute capability (see also "right around the corner") for over a decade when it was actually so broken as to be sub-viable was an enormous own-goal that they doubled down on when they exited desperation mode without rehydrating the teams and tripled down on with the RDNA/CDNA split.

By rights they should have been fast followers, but they stacked the critical mistakes so high that frankly I think NVIDIA's subsidized GPGPU classes are the smaller part of this story. If the people struggling to get OpenCL to work had been able to get it to work (on other than NVIDIA GPUs lol) the situation would look very different today.

You see different versions of the four horsemen of the internet but the one I remember (and I can find lots of references to on the internet) is: Cisco, Sun, EMC, and Oracle. And, indeed, Oracle is the only one continuing to perform whether you like them or not and whether startups use them at this point.

With respect to Cisco specifically (and Intel) there was also a huge optical networking bubble.

Linux ate Sun, I ran a sun lab, had a few sun workstations at home, but really preferred my linux/BSD boxes. BSD/Linux ate into Cisco. You could buy multiport ethernet cards, throw it into a linux PC and have your own router/firewall that offered more features than Cisco. MySQL would have eaten into Oracle, but their stupid MyISAM got in the way.

While Oracle definitely benefited from the dot-com era, my impression was that, unlike the other three, its core business has always been banks and other large enterprise companies.

That core didn’t suffer much during the dot-com crash so Oracle was in a good position to do things like vacuum up the pieces of Sun.

Don't disagree. That was the common metaphor? But Oracle was less embedded in the internet ecosystem even if Sum was enterprise too to a large degree--though was trying to be more startup/internety given their roots.

The difference between Cisco and Nvidia is that Cisco's P/E ratio exploded out of proportion to their business while Nividia's revenue and profit are increasing exponentially. But people will probably tank NVDA -95% anyway because "bubble popped".

There is certainly a boom for Nvidia right now. To justify their PE though Nvidia has to keep increasing their already massive revenue to completely ridiculous and unsustainable levels. The bubble here is the amount that big tech is spending on unprofitable "AI" simply to keep their stock prices from collapsing.

but a great bet as the bubble was bursting was not mining equipment for the prospectors, but instead energy drinks for the coders. Specifically $1000 invested in Monster Beverage Corporation (MNST) would be worth $1,187,849 today.

same $1000 invest peak dot com on March 10, 2000 Apple (AAPL): Value today : $266,862. Nvidia (NVDA): Value today : $882,065. Amazon (AMZN): Value today : $256,482.

Picking stocks retroactively is easy.

Personally I find it really fun. Helps keep chasing money in perspective.

Could have, should have, would have.

Company I was working for didn't go public until the end of March that year. No horror stories from me, was a fun time to be working, lots of great memories.

Investing in a market index today is even easier. Instead of doing historical research on thousands of stocks, you just compare the expense ratios of a handful of index funds and pick the lowest one.

I don't disagree but even modest bets in specific companies have done pretty well over the past couple decades or so. Yes, they're gambles but small-ish bets for bigger payoffs than NASDAQ. (Though that's been pretty good overall and probably safer in aggregate.)

It’s hard to know few decades ago which companies to put substantial money in. It’s hard to know which companies will perform in the next few decades. And if you are wrong in your bets, there goes a few decades of your life and you can’t rewind the clock to try again.

But then you get stuck owning Tesla and Exxon

Yeah. AAPL could have been a huge win for anyone. I actually did pretty well but nothing like the step level function that investing a bit earlier or bigger could have been. And there was also a bit of a drop when a lot of people could have doubled down but got out. But there's a lot of luck involved. (And I've since diversified most of it to money managers and taken the tax benefits.)

Apple wasn't doing so great in 2000. Its "PC" market share was ~2%. Jobs had just come back a few years earlier and MS made a large investment, but neither the iPod nor OS X had come out yet, so it was quite a turnaround story.

In the earlyish 2000s, Apple started to look interesting as a consumer electronics company even if it wasn't clear they were committed to it. And the whole mobile trend wasn't obvious to a lot of us at that point.

I talked to them as an analyst in that era and they were still spending attention on enterprisey products like Xserve.

And even the initial iPhone in 2007 wasn't clearly a game-changer. It was the 3GS that really made a lot of people take notice.

In the case of APPL it is fun to think about what the money I spent on a computer that year like a Power Mac G4 could have been worth today if I had invested in the stock instead.

I remember local developer group chats about BTC / ETH in early 2010s. We met weekly next to local restaurant bar. I like to calculate what if I had skipped a meal or a drink one night and instead bought BTC or ETH with the that money what it would be worth today.

Bets I haven't made. Bets I have made.

Some AAPL bets were pretty good ones. BTC seems more like a real gamble. Though obviously back in self-mining days even if it seems not much different from SETI at Home. And your hard disk would probably have crashed at some point. Or you would probably have been ripped off.

Best way to be miserable.

I don’t know any investor who puts 100% of their money into a single stock, nor any who lack recurring cash flow to buy more of what they already own. While their 2000 purchase may not have realized any gains, they’re likely ahead thanks to dollar cost averaging and dividend payouts.

> I don’t know any investor who puts 100% of their money into a single stock

You clearly don't follow very many "meme stock" communities.

>once the euphoria had worn off the market consensus was that the stock just wasn’t worth as much as the price it had been selling for at the height of the mania.

I've seen too much in the past 4 years to think that euphoria is anything but a convenient and incomplete explanation for things like, "Cisco's price hit its high 25 years ago and never since." More is happening, driven by the fact that there's more ways to make money on the movement of a stock than it going up significantly in price over time.

You can pick better examples. I would go with JDSU.

Had the dotcom bubble not burst I’d likely be an attorney. I’d accepted an offer at a law firm in San Francisco to work in their Securities practice, largely taking companies public or doing M&A.

In March of 2000, the firm called and said: “Good news bad news. Good news: you still have a job [unlike a lot of my law school classmates]. Bad news: we don’t need any more Securities lawyers, but we have lots of room in our Bankruptcy practice.”

Being a Bankruptcy lawyer didn’t sound like fun. A law professor’s brother was starting a B2B startup. He offered me a job. The startup was a colossal failure, but I was hooked on the idea of a group of people starting something from nothing.

Next ~8 years were painful with lots of ideas that went no where, but it all worked out. So, in the end, always remember that but for the dotcom bubble bursting, I’d be keeping track of my time in six minute increments.

Always remember that without the dotcom bubble, eastdakota would be counting in 6 minute increments :P

Sincerely, can you say more about the 8 years of pain? I’m curious how you navigated that, especially with/without relationships, family obligations, “runway” restrictions, etc

Edit: looking at the profile, eastdakota is CEO and cofounder of CloudFlare. There are probably interviews and Wikipedia pages that address my questions.

Those 8 years were painful. To make money, I worked as a bartender, an LSAT test prep instructor, as an adjunct law professor at a law school that was so bad it doesn’t exist anymore. I remember 4am at the bar in Chicago where I worked, cleaning up some patron’s puke off the floor, and thinking: I need to figure something else out.

All the time I was trying to find an idea for a startup. I still had the lawyer bit flipped on so lots of things I tried had a legal/regulatory bent. That was definitely a blind spot that held me back for a while.

The fun YC-related story on the founding of Cloudflare is that, before YC, Paul Graham used to host a conference called the “MIT Anti-Spam Conference.” He invited me the second year of the conference (2003, I think) to give a talk on how to write effective anti-spam laws. The very technical crowd was polite to the lawyer. I met a ton of interesting people, many of whom played outsized roles in machine learning over the next few years, including John Graham-Cumming, now Cloudflare’s CTO. Paul invited me back the following year saying I should do something similar.

I was pretty sure the audience wouldn’t tolerate the lawyer giving another talk about regulation, so I went to a young engineer on the team of the (bad) startup I was working on and suggested we build a system to track how spammers scrape your email addresses. He agreed to build the backend if I built the front end (which I largely stole from the hot startup of the time: LinkedIn). That turned into Project Honey Pot, which I gave a talk on at Paul’s conference. Project Honey Pot gave the initial seed of an idea that turned into Cloudflare. And the young engineer was Lee Holloway who cofounded Cloudflare with me and Michelle Zatlyn.

Lesson to me has always been even in times where you don’t feel like you’re making forward progress in your life and career, find ways to stay involved with interesting people and projects and chances are they’ll pay dividends in ways you don’t expect later in life.

I clearly remember walking back to Paul’s house in Cambridge after the 2004 conference where I’d presented Project Honey Pot. I believe he and Jessica had relatively recently started dating. They were talking about startups and how people didn’t understand how they worked. Paul suggested they should teach a class at MIT. And that, of course, is what later turned into YC.

There were other dramatic events that evening in Cambridge that I think sharpened all our minds and made us appreciate there’s no time like the present, but I’ll leave that story for another day.

Damn, what a turn of opportunities from just saying yes and showing up (and obviously a ton of hardwork and sacrifices). Thanks for sharing!

I can't resist ...

> There were other dramatic events that evening in Cambridge that I think sharpened all our minds and made us appreciate there’s no time like the present, but I’ll leave that story for another day.

> ... appreciate there’s no time like the present ...

The present is now! Some of us are dying to hear the story.

I’ve told it elsewhere. Some Googling around may turn it up.

I love how humble his origin story was, and how he didn't need to drop in where he is/who he is as part of it.

Amazing who you /meet/ here.

Definitely. I think this is true of the internet in general, we have an amazing ability to communicate with almost anyone, even busy experts in niche fields, if we just make/ask something that interests them. I don't think I appreciate that enough.

This was a wild time to begin a career, and I was just dropping out of college, having been the class of '99 but delayed a semester already due to bad work/life balance. I was self-teaching in web and systems programming and generally doing things on the internet, had a good grasp of things technically, but had no grounding in finance, business, stock options, or any of it. Everywhere around me seemed like opportunity, and Linux seemed somehow related. I even was supposed to have stock options in VA Linux[1] due to my paid work there, but that didn't pan out in the end. I didn't yet know how the internet would change everything, but it felt like it was definitely happening, and somehow that meant everyone involved would get rich. The media story didn't help. I wouldn't change any of it, though. I did it for the love of learning and still do.

[1] https://www.wired.com/1999/12/va-linux-sets-ipo-record/

I agree with all that. Dot-bomb was a nuclear winter like nothing tech has seen since--certainly including today. I was lucky enough to almost immediately land something through someone I knew and, if it didn't pay a lot of money, it was a decent (and mostly enjoyable) living for a number of years. But a lot of people I knew basically dropped out of tech and some probably never again had solid jobs.

And, yes, it also crashed any tech-heavy investments that took years to recover to their peak levels assuming they recovered at all. A stock I owned through options at one former employer were a source of tax write-offs for years. Probably led me to be a bit too conservative with such things. Eventually they got acquired through various complicated transactions and I did "OK" after something like 15 years.

> Probably led me to be a bit too conservative with such things

Those who graduate into recessions have crimped lifetime earnings compared to those who graduate into expansions. I wonder to what extent it's lost income, and to what extent it's a more risk-averse attitude.

I don't know. For me, it was mostly don't double down on my own company stock or maybe even (at the time) more aggressive funds generally. It's not like I retreated into Treasuries. But I still did OK from the more aggressive investments because (maybe luckily?) they did pretty well.

I didn't really graduate into a recession but I felt I learnt some lessons in dot-bomb (when I was probably almost 40) which was a decent way into my professional career. It was a period from the 80s when new grads in tech weren't earning anything like the incomes that at least some Silicon Valley copanies were paying if that was there thing.

You’re lucky to even have done OK. Not only did a lot of people get wiped to zero, but some people ended up in huge debt to the govt.

I know multiple people who went through:

- Exercise an option and “realize a gain”. Have to pay taxes for that year on the realized gains.

- stock crashes to zero or near zero before they had a chance to sell (either because of blackout periods or not being public yet)

- tax burden from year N-1 is still due for hundreds of thousands. Capital loss offset only helps for returns in the following years

Sell to cover if you can

I don't remember the details. I had bought a (modest) vehicle with exercised gains (and maybe employee stock purchase). Don't remember the residual tax impacts being a big factor in general--may have been timing of some sort. But a $100 stock went to about $4. Went back up a bit and then only became somewhat OK through various subsequent acquisitions and spin-offs. But, yeah, a lot of people got clobbered when they took profits and then held onto the stock--and other scenarios like you say.

When I left not long before dot-bomb, I'm glad I didn't go for all the stock options they were offering me but I had already made the decision to leave. The company I went to cratered but, as I wrote, someone I knew picked me up.

But, yeah, making it through dot-bomb was incredibly lucky. The situation in tech broadly may not be great today but it's not like 2001.

Also the story of midcap saas going public around 2020.

Application service providers. Was just not the right time.

I was somewhat early in my career when this happened. I was working at a small telecommunications company when the crash hit. Just about everyone got laid off, though with decent severance. Managed to make that last until I got another tech job almost three months to the day after my previous employer went belly up.

It was a strange, scary time. Not just companies pretty much vanishing overnight but also a lot of people losing their jobs. Not all of them were as lucky as I (and a few others I knew/worked with) was; they couldn't find anything in the industry for a long while. Some abandoned tech. Others stuck it out.

Never want to go through anything like that again!

That one hit me hard. I had just quit my job from a prestigious company the previous year to pursue my dream with two friends of building an internet related company and just a few months after we launched the market tanked. And it tanked so hard that we practically went out of business a year later. The problem was that the web back then was so fragile as a business case that once the bubble burst a lot of companies lost interest in investing in it.

The upcoming AI crash is gonna be seriously big

"The aftermath of the dotcom bubble didn’t just turn dotcoms into acquisition targets. Established tech companies became acquisition targets themselves. In some cases, they even sought out acquisition as a matter of survival."

Sounds like a lot of startups.

The years 1996 to 1999/2000 feel to me like I could go back and live them 20 times over, each time different, and still feel like I would look back with longing at all the things I missed out on and wish I could go back and relive/redo/take-a-different path.

I haven't had a feeling anything like that since about any time. I know it's probably in large part because of my age at the time (early 20s) but there was also just so much going on and the feeling was so intense, and youth culture was so on fire, so much energy. And in our tech industry, where I was just starting to find my foothold... there was this feeling in technology like if you just found the right combination of tools and ideas you could really be at the forefront of something new.

Dropped out of my BA in philosophy to join the fray and write code. Weekends full of raves, neat parties and music, meeting all sorts of people, and feeling like tech was part of something progressive and world changing in a positive and utopian way rather than ... this place where we are now.

The .com financial crash definitely exploded the euphoria. But more than anything 9/11 really was the thing that let the air out of the balloon for good.

Sept 12, 2001 I think was the beginning of this current era of paranoia and fear.

Nice timing, although the market crash that is just about starting right now is more due to lack of functional US market regulation (similar to 2008, but worse).

How so? Feels like the crash starting now is very squarely due to the chaotic anti-investment actions of the current administration.

No the crash was coming this administration just accelerated it. Trillions of $ of government debt and private debt is up for financing at 3-4 times the interest rate.

Maybe - i've been reading that sort of permabear "the economy is about to crash because of obvious reason X" for at least 15 years now. I listened for a time sadly - it cost me a lot of missed investment growth. Eventually they'll be right, but haven't been very predictive.

However, the deliberate economic self-destruction being unleashed by trump and friends feels like a very different flavor of cause.

I'm a big proponent of the bear case, but if you factor in dividends [0] pretty much any time in the last century has nominally been a good time to invest in the S&P 500 even if the first few years aren't optimal.

The bear case is generally "this will cause a crisis, then the government is going to print money, hand it out to asset owners & lump taxpayers and citizens with the real costs". There has been a reasonable expectation that shareholders will come through fine since the '08 crisis firmed up expectations about how the government will handle problems. I don't think there is an expectation any more that the S&P will go down in nominal terms. To argue that it will someone has to come up with a theory where the Fed doesn't get involved. There have been multiple major crisii and if anything US stock market performance is the inverse of how the economy is expected to perform. For example, COVID was a big winner for shareholders and asset owners despite obviously being an economic catastrophe.

[0] https://www.slickcharts.com/sp500/returns

Economists have predicted 9 out of the last 5 recessions, as the saying goes.

Usually even if this it the case you don't necessarily want to pull out of the market, but buy into the dip. Unless you seriously think the stock market is going to be wiped out for years, buying the dip means you have a large position when the market starts recovering.

Most non-institutional investors rarely just have cash lying around. My assets are tied up in the market. Same as it's dangerous to try to time the top of the market, it's dangerous to try to time the bottom. I tried in a modest way in 2008, and it took me a decade to recover on those stocks.

I was honestly shocked that both the Biden admin and corporations were able to hold this off in 2023-2024 given the huge debt loads held by everything.

Banks love to extend and pretend big loans because loans going belly up is also bad for them. Small fry like homeowners rarely get such grace.

I got my nice Herman Miller chair that I'm sitting on now, which was wheeled out into the parking lot by the facilities guy saying "take it all..."

This Ballard style stuff is the things I love.

and there was no more traffic on the 101

Didn't realize it hit Socal so hard.

COVID did that too. It was eerie.

I enjoyed it when the highway was empty. Me and my friends would go for drives and it was so fun.

I mean yeah the circumstance sucked sure but it wasn’t eerie for me.

My family and I thrived during the pandemic. We made a lot of money, we sold our house and Airbnb'ed around the US, including Hawaii. It was an amazing time for us.

>And it’s a misnomer to call it a boom. In a boom, someone’s actually making money

What does that say about the current AI boom (when you exclude shovel supplier NVIDIA)?

> Amazon and Google did emerge from the dotcom era and both outrank Microsoft on the Fortune 500 today

This is not true :)

In 2024:

Amazon was ranked #2 Google (Alphabet) was ranked #8 Microsoft was ranked #13

Amazon was founded in 1994. Google was founded in 1998.

What about the statement:

> Amazon and Google did emerge from the dotcom era and both outrank Microsoft on the Fortune 500 today

isn’t true?

What I'd say with Google is that I don't really think of Google as a .com era company because its massive success and hype wave came after the .com wave and crash had ended, and Google around 99/2000 wasn't a big hyped .com company...

In 99/2000 Google wasn't the massive success it was about 2 years later. And its IPO didn't happen until much later after the .com crash. It was known and popular among techies but wasn't the household name it became about 2002, 2003.

When I think of the .com crash (and I lived through it) I think of the companies that had IPOd or were about to, and took massive investment in 99. In 99 Google was still a small concern.

Amazon, yeah, I'd say Amazon is a late 90s company. Though they were just about books then.

Apologies for going off-topic but putting light grey text on a white background is one of the most baffling (and infuriating) design trends I've ever witnessed on the web.