When the dotcom bubble burst in 2000 many investors slapped their foreheads at their collective stupidity and shouted: what were we thinking? How was it that Pets.com, a profitless start-up more famous for its floppy-eared sock puppet mascot than any coherent business plan, could float on the Nasdaq before going bust within the year?
Some investors may be squirming again today as they watch the 29 per cent fall in the Nasdaq this year and survey the wreckage of special purpose acquisition companies, which enabled several profitless companies without coherent business plans to come to market. These Spacs were, in the words of one veteran investor, the “last degenerate spasm of an over-extended bull run.”
However, as the tech entrepreneur Paul Graham wrote in a brilliant essay in the aftermath of the first dotcom crash, stock market investors were right about the direction of travel even if they were wrong about the speed of the journey. “Despite all the nonsense we heard during the bubble about the ‘new economy’ there was a core of truth,” he wrote in “What The Bubble Got Right”.
Written in 2004, Graham’s list of 10 things the bubble got right still stands the test of time. The internet has indeed revolutionised business. Casually dressed, California-based, 26-year-old nerds with good ideas have often out-innovated 50-year-old suits with powerful connections. Technology doesn’t add, it multiplies, he wrote.
What have investors got right in the…
