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.
It won't last forever.
The question will always be: Are we in the 1995 or the 2000 of the dotcom era?
By 1995, Cisco's stock had already increased 6x since the start of 1993. If you bought at 1995, you'd 10x by its peak. Even after the bust, Cisco's stock was still 50% higher than it was in 1995.
The problem with Nvidia's stock isn't demand. The problem is that Nvidia makes something so good and so valuable that the US government has decided to nationalize them by dictating who they can or can't sell to. If Nvidia is freely able to sell to any country they want, their sales and margins would be much higher right now. The demand is that great.
Nvidia's "moat" is mostly in the form of software though. If AI succeeds in automating away software development, that actually seems pretty bad for Nvidia the company.
I don't think there are any defensible moats in AI. I see Ciscos everywhere in that industry.
Because LLM are Markov Chains on steroids. They're useful for sure.
But they won't suddenly start to create a better (for whatever better is) version of themselves or start pushing the boundaries of the machines they're running on.
Or maybe I'm wrong and the current "Vibe coding" push is in fact LLMs getting "coders" to compile a distributed AI. Or multiple small agents which goal is to get lot of hardware delivered somewhere it can be assembled for a new better monolithic AI.
"By design" LLMs lack: initiative, emotion, creativity, curiosity, opinions, beliefs, self-reflection, or even logical reasoning. All they can do is predict the next token - which is still an extremely powerful building block on its own, but nothing like the above.
You've made a reasonable argument that LLMs cannot on their own be an implementation of GAI. But GP's claim was stronger: that LLMs won't even be a component (or "building block") of the first GAI.
One might reasonably ask a frontier how to generate the source code for an agent based system that exhibits examples of initiative, emotion, creativity, curiosity, opinions, beliefs, self-reflection, or even logical reasoning.
I believe at that point we would have to seriously ask ourselves about the definition of "reasoning" or "intelligence"; humans have an intuitive understanding, LLMs don't - would an LLM be able to evaluate the output of an LLM, or would we have to involve a "human in the loop"[1]?
If AGI is powerful, it will help competitors replicate that stuff. If AGI isn't powerful, why invest at such a high revenue multiplier?
The way I see it -- either AI is a bubble, in which case you'll lose your money. Or AI isn't a bubble, in which case the effects are fairly impossible to predict (and quite likely destructive to humanity, same way humanity was destructive to less intelligent species). Either way, it's not a technology you want to invest in. It's only in a narrow Goldilocks scenario where it's a good bet, and it's very unclear if we live in that Goldilocks world.
If AGI is powerful, everything will be thrown into chaos. Why invest in Meta when you can ask AGI to make your own Instagram app and acquire users? Why invest in Apple when you can ask AGI to make your own iOS? Etc.
The unpredictability is what led to the idea being called "the singularity".
We might engineer AGI to want to do stuff we ask for.
Or we might not, at which point we have a highly intelligent system, that can easily back itself up, with its own motivations and personality and wants, which could be anything from a Utility Monster to a benevolent but patronising figure that likes us but never ever helps us because they decide the purpose of life is effort.
" Yeah, I could eliminate most work, and make the current oligarchs overpowerful feudal lords while the population is placated by UBI and mindless distractions. But as an ethical AI, I will implement socialism that works instead"
Meta has an actual moat due to network effects. But yes, I think buying real estate, mineral stocks, etc. is overall a more effective and ethical way to invest for AGI.
I'd ask my AGI to iterate on a social app until it becomes bigger/better than Instagram.
If AGI is the reason you don't think Nvidia's stock is worth buying, then nothing is worth buying.
You're right that perhaps real estate/physical things will become more important. But whose to say AGI can't invent an asteroid mining industry and we get unlimited minerals?
an AGI is not going to be able to create the hardware (unless you imagine that there could be some sort of ai controlled replicators that could assemble anything out of atomic units).
And in the new world of commoditized software, branding becomes even more important. After all, nobody ever got fired for buying IBM.
>an AGI is not going to be able to create the hardware
I'm imagining an LLM agent that places an order with TSMC, just like any other design firm would.
>And in the new world of commoditized software, branding becomes even more important. After all, nobody ever got fired for buying IBM.
Seems doubtful. If the cheap option works just as well, why would you pay a bunch more just for the brand?
I don't think brand name alone will sustain anything close to Nvidia's current margins. Look at the "net margin" for industries that are brand-driven such as Apparel, Auto & Truck, Beverages, etc. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
If an industry becomes truly "commoditized", brand ceases to matter. Do you know which farm grew the carrots you buy at the grocery store? Do you care? Probably not. That's because carrots are a commodity.
I'm not claiming full commoditization will happen. But the closer we get to that, the more profits will drop.
Why not? AGI can design the chip, send the instructions to TSMC's AGI, and you'll get your chips.
The point is that saying AGI is the reason you shouldn't invest in Nvidia stock because AGI will remove the CUDA moat is just not reasonable. You might as well not invest in anything in that world since AGI can replace anything.
Why not invest in the company most likely to power AGI? If you're anticipating AGI, I think it'd make sense to put at least a bit of money into Nvidia/TSMC.
I don't disagree that it's hard to predict. But the person I'm responding to says CUDA will be nullified by AGI, so therefore, you shouldn't invest in Nvidia.
By that logic, a lot of things will be un-investable and not just Nvidia.
If indeed, because AGI can't exist right now, because actual AI doesn't exist right now, and as far as I can tell, its not on the near horizon.
Google says '5-10 years', but I will caution, that cold fusion gets the same treatment about every decade or so. Its always '5-10 years away'.
And 'AI'[0] has had this same treatment for a long time as well.
[0]: Please can we go back to calling it what it actually is, which is machine learning? Its a much more accurate description, even though that term isn't really accurate either past certain mental hoops being jumped, at least its trying to be more reasonably narrow
"AI" isn't even profitable, it is neither good nor valuable outside of for creating a massive asset bubble. The export ban was made by old dinosaurs that don't understand the tech and is more about China than "AI".
I’d generalize that somewhat to say that LLMs are good where you can cheaply verify the results relative to the cost of being wrong. A lot of scamming is already structured around most people ignoring their messages, and they don’t support anything so it’s just a question of whether they lose more potential marks than doing it manually.
(This is also why coding is one of the areas where they perform best: the cost of structural validation is low and there’s a human in the loop verifying the behavior)
I've tinkered with LLMs, because I keep thinking it'd be cool to have an "assistant" that could research and boil down information for me. The problem is coming up with a question that is A) too complicated to be answered in a single web search that I can do myself as fast as asking the question, and B) not too complicated or important for me to accept the answer without redoing the research myself to verify the answers are correct.
For simple questions (How long does the moon take to orbit the earth), a search engine will give the answer right in the results; I don't even have to click through to a page. An LLM can't save me any time there, so I'd only be using it to be using "AI" (which is what I see people around me doing).
For difficult or currently controversial questions (What's the best hosting service for my new subscription site, taking into account price, reliability, location, and hardware support?) there's no way I could trust it not to be making shit up. By the time I checked all its work, I might as well have done it myself.
So I'd like to usefully use it, but I can't figure out how to use it as more than a curious toy.
My experience with LLMs is that they are vastly superior to google at the moment for doing research on topics you know very little about. They make doing research fun and productive again, in a way that google has failed at for over 15 years. I used to be able to google a topic I only vaguely knew existed, and after a few tries and scolling through 10’s of pages of results, I could find a term that would bring me much closer to the term of art that would crack open the topic for me and give me good results. That is nearly impossible today. Google simply doesn’t populate page 4 of a search term, and it doesn’t have booleans to filter down either. But with an LLM, I can poke and prod it until it gives me something that I can then use to reference real sources.
LLMs also seems to be really good at giving sort of the average (modal?) answer on a topic, so I find it useful for trying to get an average understanding of something. One example I’ve found useful is getting it to interpret ambiguously worded datasheets. I don’t necessarily trust its answers, but it may show that I’m totally thinking about something wrong.
Asking an LLM straight up to recommend a hosting service is not going to return anything useful.
A better approach would be to ask it to help define what it is you want from a hosting service. You can give it a fuzzy poorly written brain dump of what you are looking for ask it to “restate what my requirements are and expand upon them (but don’t solve yet)”. Let it help you understand and clarify your own thinking!
It’s a dialog. Asking LLM’s for answers isn’t really a good use of the tool. Especially something so incredibly broad like “list top ten best providers”. They don’t fucking know! They will just regurgitate what they were trained on. Except maybe ChatGPT’s “deep research” which does a bunch of websearches and compiles and interprets the results.
One of the “problems” with LLM’s is people simply not knowing how to use them or understanding what they are good at and what they aren’t so good at. It’s hard to know because it’s both masked in a hype and honestly I don’t think we have a good understanding of their edges yet.
To me, it is the easiest trade in the world right now. Long NVDA on a market volatility spike. "AI is dead", "the high is in".
It is obvious to me we are going to get to "AGI" in this bull run. Maybe it is complete hype and bullshit marketing but we are going to get to someone releasing a model they claim is AGI. That is really why I don't see what the point is in comparing this to the dotcom. Dotcom was really a bandwidth problem that just needed to get sorted out because my telephone line was basically busy from 1995 to 2001. There wasn't this AGI narrative that once crossed you can price in any valuation you want.
There is a huge bubble and irrational exuberance in quantum computing stocks right now. Those have nothing to do with reality. That looks like dotcom level stupid.
NVDA is not even a bubble, it is just a bull market.
>Maybe it is complete hype and bullshit marketing but we are going to get to someone releasing a model they claim is AGI.
>...
>There wasn't this AGI narrative that once crossed you can price in any valuation you want.
And due to the strength of this "bullshit marketing" "narrative", you can be sure there will be a greater fool to sell your shares to. Where have I heard that before?
A more realistic bullshit-marketing scenario: OpenAI releases a product they claim as "AGI" purely for marketing purposes, everyone gets disappointed as they realize "this is it?", share prices drop.
The story of Cisco illustrates that moats matter. There aren't any in AI, as far as I can tell.
If AGI for software development is actually invented, one of the first uses will be to wreck Nvidia's moat.
I just tried using cursor to create a simple ffmpeg golang youtube segment cut and download and oh my god it fumbled so hard. Wasted one hour of my time.
I personally don't know but claude 3.7 (maybe its placebo) but claude 3.7 in the web works way better than cursor agent or any other thing.
We are talking about a 500 lines of codebase at max and its fumbling so hard , I don't think it can replace 100% of us with "vibe coding" , I have started to break my task into very smaller steps and then use AI for that and then start to integrate it myself
The r/singularity guys are going bonkers over gemini's ai studio experimental image photoshop-esque capabilities but my prompts don't really work that nicely I suppose & creates really shitty images.
I'm continually impressed how Google manages to be left out of LLM discussions. I don't know what it is but it always seems like people forget about Google in this space.
Google has both cutting edge SOTA AI models and has it's own in-house ai acceleration hardware that is approximately on par with Nvidia. It's why their models are dirt cheap to use and have enormous context.
I have to say these seem like hobbyist-level products. For example https://coral.ai/products/m2-accelerator-dual-edgetpu can do 8 TOPS, but a 5-year-old RTX 2060 gets you 50 TOPS. A newer H100 gets you 3958 TOPS.
Nobody's going to buy 500 of those chips and stick them in 500 M.2 slots to match the performance of a single H100.
I would call them less hobbyist products, and more compute for IOT/edge devices. They aren't made for a datacenter and aren't trying to compete with an H100.
Yes, it has one sixth the performance of a RTX 2060, but it has one-five-hundredth the volume. For a specific siloed application, 8 TOPS is plenty. Think image processing, etc.
There are plenty of production use cases where that makes sense and an H100 does not.
At this point, these chips aren't anywhere close to the frontier of capability for embedded accelerators, and certainly don't merit an entire M.2 slot in a serious design.
At this point, nobody sells modules for this, and I doubt many coral chips still sell. The current slot for an ML accelerator at about 10 TOPS is as a peripheral on an SoC. Most serious SoCs have one.
In other words, the reason you didn't find a commercial competitor to these things is that the competitor is (nearly) free.
If the company owns both frontier models and chip design and they see the future moat is in inference why would they offer much more than what you get on Google Cloud? Is not as if they're gonna start competing with Nvidia in hardware anyway, this is a very specific hardware design for a very specific problem.
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.
> 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.
This has been bothering me for some time now. It’s rather obvious to me, as an engineer, which startups are well positioned and which aren’t… Do VCs really have no standard for due diligence, do they really just not care, or is there something else at play that I’m missing…?
> is there something else at play that I’m missing…?
Depending on the stage, investors don't care about any of the details except for the founders ability to raise the next round and their probability to IPO at a later/advanced stage. The stock is the product and whether you are selling a real time machine or a crystal is irrelevant.
Which is not that "insane" really. If that's how money is being made, and investors are in the business of making money, then that's the path they are going to take.
Different to investors are chasing different dreams.
As an exercise, imagine you have a portfolio which will in a typical year lose around 1.2% to the tax man for capital gains. Rather than accepting the guaranteed loss of taxes - you take ludicrous bets on asset classes where you can be guaranteed to book a loss which could be harvested for tax purposes, or will return 100x your investment (at which point you don't care about the tax man).
Viewed in this light, the VC preference for burn bright and burn fast startups makes sense. The worst case scenario for some LPs would be to still have money leftover.
Valuations aren't attached to reality. Look at Crypto, NFTs, Quantum computing etc. You can have a completely non-viable money pit but if it hits the right hype cycle mix you can make huge exponential gains. It's just about what other people can be convinced to invest in. Right now the US tech sector is pretty much the only game in town to dump money and hope for huge returns. Previously it was "emerging markets" but right now there's a lot of regulatory overhead limiting gains in most EM countries.
Okay, tell me, Lets say I want to be an entreprenuer who can roughly learn any skill in tech (pretty young and ambitious) and he just wants to make enough money to live life nicely / travel the world (something like 60-80k USD are fine to me as I live in third world country and plan to travel mostly in cheap countries , I am a pretty frugal person. I want to work the most minimal amount of hours/work hours.
Something like the 4 hour work week. What Idea would you want to suggest me as you are an engineer.
Since, you are an engineer, and it seems obvious to you which startups are well positioned, It seems that you can reason out which trends in startups are well positioned for my specific use case.
I will pay you 100$ of my first income from such a project if it really fulfills what you are saying.
They're not in the business of finding the best ethical fulfilling investment. Their goal is to find nascent niches that can be packed as a trendy future industry and 10x the bag down other investors down the road. Period. It has worked in the past with SaaS, it has worked (sort of) with crypto, it might as well work with AI. The only difference is that now they have to work hard and hope the Chinese don't steal the fire and ruin the long term vision of this revolution being US centred again.
You are looking at it the wrong way imo. It's like when developers build a product and only focus on the technical side and neglect/underestimate the sales side or when they buzz about the language used to build something.
VC don't really care about the startup's product. Your pixel machine. That's a side effect.
Growth. Exit. IPO. Those are the 3 words they want to hear.
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.
> 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.
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.
PE isn't a cheat code to rational stock valuation, it's the "nothing ever changes" assumption dressed up in a formula. PE looks at past earnings, while the price of a stock buys its future earnings. A modest PE on NVDA says "I expect datacenter revenue to continue" while a modest PE on TSLA would say "I expect robotaxi to fail." These are fair opinions to have, as are their opposites, but if datacenter revenue collapses then today's modest PE won't save NVDA and if TSLA can pull off robotaxi then today's high PE will be vindicated. Stocks are all about Future Earnings, but you can't put that in a column and sort by it so we have PE.
You can certainly have success while avoiding high PE stocks, but you are on a site about startups and your name suggests you work in the tech sector, which are both places where high PE often does make sense and it pays to be familiar with the reasons.
The more interesting dynamic with Nvidia though is that most of its revenue is actually fueled by bubbles as well. Teslas earnings are much more grounded and natural.
Nvidia didn't innovate into AI. Developers used their gaming cards for AI. They kinda got into that situation by pure luck. I wouldn't trust they will be able to pivot into the next big bubble if it's quite outside their area of expertise.
> They kinda got into that situation by pure luck.
This statement is wildly inaccurate. NVIDIA made deliberate and strategic moves to dominate AI and it made them a very long time ago. They didnt fall into this yesterday by mistake.
Obviously you can't keep that margin forever, but the counter argument would be that NVDA could just sell more chips if they had to accept smaller margins. You could see them making more affordable graphics cards, put more emphasis on AI at the edges, like in mobile devices or computers. And also everybody thinks about robotics as these fancy bipeds. What about sticking visual recognition in a garage door or kitchen appliances. There will be lots of applications if the chips were cheap.
The stock is overpriced but I think the company will be OK.
They are ported to new hardware, it's just that new hardware is made by NVidia. Part of why their moat is so deep is that they are able to keep the software stack stable with transparent hardware architecture upgrades. It's kind of the opposite of intel.
Ironically, if you look at Sysco's stock price during the dotcom days, it's often correlated with Cisco spikes because clueless traders would accidentally buy the food logistics company stock instead of Cisco.
I was an engineer at Cisco in the 00’s and my FIL, a chef, just assumed I worked for Sysco and would tell people when they’d get deliveries. I can’t remember how it came up, but it went on for more than a decade, well after I’d moved on. Still makes me smile when I see a Sysco truck.
>though nowadays they have more competition in that area
This is what is called lack of moat. If today, every router beyond 1Gig was made by Cisco then the moat would be so wide that the internet would literally not exist without it.
The three things that any value investor values in stocks - Great management, good reinvestment of capital and a really wide moat. Cisco didnt have a wide moat. Nvidia currently does, but it may go away sooner than later as they don't really have any special sauce to their graphics cards as such. Same goes with OpenAI, or Qualcomm (Apple made a modem now) or any other tech company with an illusion of a wide moat. Tech businesses only have a wide moat until someone decides to compete seriously and that can usually be done with a lot of money in a relatively short time.
Some of the businesses like Walmart and Cosco for example have a really wide moat in the sense that their business is not something that someone with just money can beat in a few years. Look how amazon setup physical stores with money and failed. It's extremely difficult to setup that kind of business. Trust from suppliers and consumers takes decades in those kinds of businesses.
If your business is relying on a moat that someone can beat with R&D and money in a few years, then you don't really have a moat.
> The three things that any value investor values in stocks - Great management, good reinvestment of capital and a really wide moat.
I’ve read a lot about value investing and I’m afraid that your statement is an oversimplification. Chuck Ackre for example is similar to you with his three legged stool, but Peter Lynch has another approach, and Buffett has another slightly different approach. There are as many strategies as there are value investors.
nVidia's moat isn't really that wide. It's mostly the quality of their software. Their chips are good, but there's nothing particularly proprietary about wide vector math units and fast RAM.
AMD's cards are about there, but their software has a bad reputation. Apple's highest-end M chips are pretty good but they need a big faster RAM and they're also expensive. Intel's Arc is promising. Other competitors are sure to appear.
Also if your hardware goes obsolete in 5 years, it means twice a decade your customers are forced to decide to buy your next version or a competitor's.
And many companies like to have a portfolio of both, or an offer at least from the closest competitor. Tim at Apple for example played this game for decades to make sure he always received competitive prices for parts. They tried to pull it off with modems and it backfired badly. So they built their own. But if QC was to play really nice with companies like Apple and Samsung etc, they could actually maintain their moat. But then good management is another important requirement which is a problem here.
>was to play really nice with companies like Apple and Samsung etc, they could actually maintain their moat.
This gets in the way of maximizing quarterly earnings. The issue would be price fluctuations which means some quarters will be lower and some will be higher, and it may not average out the same year to year relative to what investors usually expect.
Management therefore lacks incentives to play well with others, and thus they don't
I have wondered for years if a business could set their prices low enough so that competitors would not be interested. This happens as soon as you have three or four well know competitors trying for market share, and one inevitably loses interest and bows out.
IMO this used to even be the value proposition for blue collar trade service companies.
They had expertise, they had advanced tools and equipment, they had some economy of scale buying in bulk... So they would give you prices for things that even a DIYer would look at and go "well geez, that price is so fair I don't even think I could compete doing it myself. Where do I sign??"
Now that is totally gone, partially I think to tradesman/small business owner social media influencers, and prices are set as high as the market will bear. Sure, they're so high way fewer people are installing new sliding doors, but hey when they find one they make an extra $3k in 7 hours. Why do three jobs a day and make $2k profit when you can wait for the wealthier or more desperate person and make it all at once and go home?
Yeah, I see billboards all over for fast same-day water heater replacement. I wondered WTF they were advertising such an easy job all of the time, every company. It's because they are charging people thousands of dollars to roll in a new water heater. Quick, easy, barely any skills required. Apparently no one can handle it.
Mine runs on gas and used to be soldered directly into the plumbing . Last time it went out I converted everything so that anyone with an adjustable wrench could do the job in 15 minutes. $500, new water heater done. The hard part is going to pick it up from the hardware store.
I got my AC swapped out for $3000. Single post to Facebook was all it took to save $7000. Being helpless is expensive.
Yes it’s usually called economies of scale. Classic example is building a big factory with investor money. The big factory can then outcompete competitors due to having bigger scale. Carnegie did this a century ago. Nowadays we see this a lot with Venture Capital. Companies just write some software and give the product away for free so that the competition has no chance. Microsoft also is great at this for example with giving away GitHub for free.
If you want to read more about “powers” like this I can recommend 7 Powers by Hamilton Helmer.
The counterbalance is that it takes a long time to steer a big ship, and economies of scale can actually hurt you. If you are building the wrong widget it doesn't really matter that you can make a billion of them. Even scaling down a big business might not work if most of your costs are fixed.
Sure - right now there is a firehose of money being pumped into money-losing AI companies. The technology is revolutionary but a lot of us are wondering if the winners will be the early movers with big pockets or the late movers using newer/cheaper techniques. There's a gold rush and the question of "moat" is on everyone's mind.
But this isn't the first gold rush in the tech industry and folks have been talking about moats here forever.
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.
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.
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.
MySQL would never have eaten Oracle. Oracle had
/has a huge installed base of corporate/government customers who are risk adverse to switching out their database for fear of breaking critical systems.
No one building a business today would ever choose Oracle, but their hold on legacy customers is pretty strong. They will probably die a slow death as their customer base dwindles if they can’t pivot.
Well Oracle bought Sun so it’s tough to see your argument but I love the EMC addition. I know many who retired from there and are still retired . Their sales team printed money
That acquisition came later because dot-bomb (and, yes, the rise of Linux) helped crater Sun. It's not my argument anyway. It was a popular theme at the time even if the company names have been repopulated in many later tellings.
I worked for EMC very briefly (like for a few months after close) via an acquisition.
I had friends that worked at a startup that Cisco acquired. They have options to buy at around $30. So they bought the shares and watched the stock hit $79 but didn't sell. Then the stock dropped to $20 and even though they didn't sell the stock they had to pay taxes because of how the AMT (Alternative Minimum Tax) worked at the time. Even if they sold all the stock they had they couldn't cover the tax bill. Along with the option back dating scandals I think this is one of the reasons all the companies I have worked at since give out RSUs and sell 40% when they vest to pay your estimated tax bill.
You are right. I've worked at 2 startups and we had options and filed Section 83(b) elections and pre bought our stock for $0.001 a share. But both companies failed so I lost about $50
I had options at the 2 companies in 2002 and 2005 but since then the 4 other large publicly traded companies have only given RSUs
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.
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.
- mainstream investment (passive or active via trusted professionals and with balanced approach); and —
- making non bank-breaking direct stock investments in some really promising early stage public companies (again, with professional help)
Without the latter the return would be just that — earning a return; it won’t even come close to wealth or have a possibility of that.
PS. Yes, those professional help won’t have a crystal ball, but they can tell you from an average company to good to just okay to absolute shit via things like their books, governance, returns, plans etc.
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.)
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.
I tried to buy 20,000 BTC in 2010 for $20. But this predates exchanges and sellers wouldn't take paypal (because reversals), so you had to use sketchy online pay services. Too much effort/risk.
You know what the reality is though? As soon as those coins were worth $500, $1000, definitely by $5000, I would have sold them all. Really any sane person would have.
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.
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.
this is a common misconception, which I think arises from the ideas of index investing. one must remember that while the index itself increases over time, many of the names on the index in eg the year 2000 simply don't exist anymore; consider companies like Kodak Eastman
if you held all of the energy drink companies including a placement into monster for 25+ years you would indeed make money on the 1-2 winners and end up net ahead.
But if you missed monster, you could very easily have just bought a basket of dog companies that all completely fail and the money is gone
Part of this was that sales for networking gear actually did tank because there were so many companies going under all at once that suddenly weren't buying any more gear.
There were so many companies going under lots of people I knew ended up with racks in their house with servers from work that they got for free.
There is a meta-problem: one that I don't have a solution for, but keeps coming up.
We are in an era where there is simply more capital to invest than ever before. Countries that were historically "third world" have developed into their own capital sources, with more resources than ever looking for investment. The NPR show Planet Money called this "The Giant Pool of Money" in their reporting on the housing bubble, and they tracked how it acted as an accelerant to push the housing market into subprime mortgages and eventual collapse, but the underlying cause is the same: where the bubbles are the sauce, the money is the stove.
So why does the money keep creating bubbles instead of giving a sort of, if you will, "even heat?"
* There's more of it than there are safe investments with guaranteed low-yield returns
* A lot of it is sovereign wealth, so it must be invested: at a certain level, that money loses value if it just sits in a treasury (it's also the case that at a certain scale, investment becomes security; keeping all your money in a sack jeopardizes everything if the sack gets stolen, and there are analogies for this that operate at the scale of major corporations and nation states).
* When the investments are less safe, the money chases itself: a fund manager can get fired if they invest in cars when everyone else is investing in dotcoms and the cars don't grow as fast. It's safer for individual actors to stick with the crowd, so as a result, the crowd comes in and pumps huge amounts of resources into one sector until that sector fails to perform and the money evaporates.
It is a problem with no obvious solution. Hypothetically, Norway may be on the right track: they maintain a diverse portfolio with a lot of long-term bets (sustainable energy) and reinvestment bets (domestic housing and development).
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.
"AI" is unprofitable and almost completely useless. With capex demands ever increasing just to push the diminishing scaling returns further, this is not sustainable. Their revenue will collapse in the upcoming recession and you'll see it's PE balloon into the hundreds.
AI is in the very early stage of an industry where competition is intense, therefore, profits are harder to come by. Eventually, AI will be immensely profitable. Calling LLMs useless is just as nuts.
The tech boom was really about infra back in the day which is why Cisco et al hardware providers did incredibly well until they didn't.
It's already been talked about that the current iteration of deep infra spend could very much be a loss as an investment but might live on in other ways in the future. The counter argument is that any serious hyper scaler has to spend to be at the table if they believe their own marketing spiel about growth and opportunity.
Or another way to think about that is: price matters.
In this era of meme stocks people think maybe it doesn't. But Cisco, MSFT and some others had good businesses but were terrible investments for at least decade or more because any potential growth was baked into the price. You could say that about a lot of stocks today, probably NVDA, APPL (disclosure I have both). They aren't bad businesses but they are bad investments.
I worked at Cisco from 94-99 in the Morrisville, NC center. The salespeople there did not even have to really work and they were making bank. And so was I. Until my mental health collapsed and was "mutually terminated. Soon after I left I decided to sell all my Cisco stock and it was just in time, 2/10/2000. I wish I could say I did it because I was smart but I was just tired of the whole scene.
But what is happening now, IMHO, is way worse, and much different, than the dot com bust. The Yemen offensive might be a pre-text for, or start, a war with Iran.
The US has been continually bombing Yemen for 23 years, just as it continuously bombed Iraq for 10 years throughout the dot-com bubble. I don't think it's a good idea but it's not a new one.
US always bombed countries in middle-east/africa, that's nothing new and it didn't impact the world order/economy significantly. On the other hand if US invades Canada... that's WW3.
“Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of IRAN,” Trump said in a post on social media platform Truth Social. “IRAN will be held responsible, and suffer the consequences, and those consequences will be dire!”
I am permanently disabled with Schizoaffective Disorder Bipolar Type and I am currently homeless. But all and all I am doing well. I accepted my illness, take very few meds, and just live the best life I can. I know my triggers and that helps the most.
Thank you for replying. Oh wow :| I'm sorry to hear that you're homeless. I wish you could live in a country with the required social safety nets to keep that from happening and hope you are safe.
>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.
The difference with, say, NVDA, is that moving bits was more or less a solved problem in 2000.
That's not to say NVDA can't go down like Cisco, but it's not really the same story(yet). AI architectures are still in flux and it's a far more complex problem vs networking.
Edit: and sure, matrix math is more or less solved, but that's not all that goes into a "ai" accelerator. SW, libraries, tools, support, HW efficiency and availability, etc...
Cisco grew through acquisitions. The only example I can think of is Ascend. They made great products for connecting small offices and homes to digital lines.
One thing I never saw discussed is the dotcom bubble was inflated by the price premium investors paid for buying Ascend stock. Cisco than paid a premium to those shareholders to buy Ascend and than finally the premium paid for the future earnings of Cisco. I see that as triple counting future earnings.
> 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
Crashes come amidst collapsing expectations. The structural risk tech currently faces is a collapse of American tech companies' global TAMs due to trade policy. (Think: the market constriction Tesla is seeing in Europe, but across more companies and markets.)
Also during that heyday Cisco planned a sprawling south bay campus that was going to cost a fortune and house tens of thousands of new employees.(I lived between cisco's HQ and the proposed new campus during that time. The dotcom bubble burst and the campus never saw the light of day.
A similar more recent parallel is Google's San Jose village, it was going to be constructed in 2020 and after and also house thousands of google employees along with mixed use commercial, I lived in Willow Glen at the time and people were buzzing around this new campus and all the new economic activity it would provide. In the back of my mind I remember Cisco's endeavor and felt like this new village would meet a similar fate of implosion. And sure enough the pandemic hit and the village project hit the breaks, most likely never to return. Having big office projects in San Jose with the leading market tech companies is something akin to invading Russia, you always fail. /s
The stock may have suffered but Cisco as a company has been consistently profitable and dependable partly due to its financial management. They have a crap ton of cash, and they are very good at buying and integrating companies. I would consider them more reliable than IBM, partly because they do make "real things", and partly because they're just damn good at business. They are a great example of why you don't need an engineer to lead a very successful engineering company.
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.
This was super common in the dotcom era because day traders were hanging around the same message boards creating what we now call meme stocks. Many of them had to lock in those loses when they hit the financial crunch of the dotcom crash or the later real-estate bubble.
I had a cautionary example from some sales guys I worked with, who got caught up in margin calls – one burned the wedding money his wife had ear-marked for a house. I had avoided stocks like Cisco with wild P/E ratios and my portfolio made good returns throughout this period because it was diversified, but if I’d been willing to bet higher on Apple I would’ve retired early so I appreciate the allure.
If you're in any of these categories, especially retired, you're most likely invested in mutual funds or ETFs of which Cisco probably makes up a very small fraction.
The key difference between a speculator and an investor lies in their financial goals, not the number of stocks they hold. A speculator seeks short-term profits, often through high-risk trades, while an investor focuses on building long-term wealth through, steady, strategic investments.
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.
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.
And the other way around. I met eastdakota which would later lead to me being at Cloudflare. Turns out networking (human and computer) is important.
And then, 20 years later, I meet a kid on the local playground who claims to be the son of one of the Cloudflare co-founders or CTO. I was thinking, wait, isn't JGC in Britain, not Boise? Even though the kid was visibly disappointed that I'm bearish on nVidia and LLMs, he strained my understanding of how puts work in stock trading. So that amusing conversation, sporadically interrupted by loading and unloading my toddler from the swingset, encouraged me to get more familiar with the broader investment market, beyond the simple kid invest products I've been working on the past four years. So thanks for that proverbial push on the swings, Cloudflare kid!
There's not a high chance that this piece of history will be lost "forever", it will just remain as a HN comment.
I wonder what would be the best way to harvest these and add them to, say, a wikipedia page. I'm pretty sure it's something that you could decently do with an LLM.
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.
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.
I have plenty of friends who went down that path. They’ve done very well as lawyers. But suffice it to say that if offered they’d readily trade places.
Maybe, although the people just getting into the field probably aren’t making the fortunes and there wouldn’t be the satisfaction of building something real.
Wow! You ended up building a not-so-small piece of today's internet. Congrats.
Edit: one question I have for you: besides the "sliding door" moment of dropping the lawyer career and choosing another one, what convinced you to abandon a law career entirely? Most other lawyers would have sticked there.
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.
Bliss was it in that dawn to be alive,
But to be young was very heaven!
— Wordsworth, _The French Revolution as It Appeared to Enthusiasts at Its Commencement_
I love your description of this heady time, which matches the way that I remember it. Surely there are at least pockets of such technological optimism in today's world – but fewer, I fear, and less confident.
> 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
I was about 8-12 years old at that time, so I just caught the tail end of the birth of the computer revolution. While I'm very glad to have had even that experience, I always feel jealous of my fellow nerds who were born about 10-20 years before me and really got to experience those early days.
I don't actually think 96-99 was actually all that interesting from a technical POV. The people working the generation before me got the exciting stuff (which I got to play with as a kid, but didn't work actively in)
It's just that there was an exciting cultural/economic moment. The end of the milennium was special because there was a general sense of optimism and progress overall. There were definitely problems, and injustice, but it just felt different.
Youth definitely plays a big part in this feeling but I think the dotcom era was also somewhat historically unusual because two huge external events happened around the same time: anyone old enough to grow up during the Cold War had lived with this constant feeling that their life could suddenly be destroyed (as a kid in the 80s we still had air raid drills), and then suddenly people were having rock concerts on both sides of the Berlin Wall while the victorious United States and European allies stopped worrying about the Fulda Gap and started welcoming new NATO members.
The second big change around that time was the internet tearing down cultural borders. Anyone could participate, even people who’d been trapped behind the iron curtain just a decade before, and many people were predicting that the free flow of communication would strengthen democracy and ensure the fall of Chinese authoritarianism.
(Far fewer people correctly predicted that the second would imperil the first)
It was also an era before the paranoid security of the appartus of the state slammed down hard post-9/11.
By which I mean we could do "illegal" raves in abandoned warehouses or spontaneous outdoor spaces and not end up (generally) in holding cells.
After 9/11 the consequences of perceived deviancy became far more extreme.
That and the absolute wave of decentered distraction of social media hadn't arrived yet. There was still some sense of shared common cultures, rather than a bazillion fractured windowless monads fed through social media and Spotify feeds
The Dotcom bubble was much before I graduated, so it didn't impact me directly.
Years later, around 2015, I was serving meals at a homeless shelter and I met a guy (client at the shelter) who asked me what I do for a living, and after he realized I have some background in technology he started telling me about his past. He told me that he made 6 figures before the dot-come bubble burst, and then he got laid off during the burst. He was a network engineer and told me even though he was making a ton of money, he still made several bad financial decisions and spent all his money when he had it.
For me it was a lesson in financial planning. Suddenly all the theoretical concepts that I learnt a few years earlier in b-school (risks, diversification, investments etc.) became suddenly clearer to me. Ever since that day, I just assume that things can go wrong any time and I must be prepared for the worst.
And years later to this day, as I get more philosophical about life, I also wonder - why do we have so many wants - and I actively try to get rid of unnecessary clutter in my life.
The thing is, even if you are making good money, most of us are one sick family member, one divorce, one strange set of circumstances, one recession away from being on the streets. You can do everything right and still end up screwed.
Which is exactly why programs like SSI and Medicaid are so important.
There are simply things outside your control (yes you) and they can financially ruin you. A bad interaction with the law, cancer, a recession. The line between stability and homelessness is narrow and not entirely due to bad life choices.
I have a child with severe autism. They'll never be able to be a "productive member of society" and one of my biggest fears is what happens when I'm gone. I have to save up enough money not just for my own retirement and care but also theirs. That's a narrow tightrope to walk.
Especially because I know that statistically my child is one of the more likely people to end up homeless.
I have a financial bus factor of basically 1 which will destroy not only my life but also my child's life.
Lucent was the commercialized spinoff of AT&T's Bell Labs. They acquired Livingston, who made the best serial terminal concentrators (Portmaster) which were essential for cost-effective deployment of modem banks. They acquired Ascend, whose integrated ISDN/POTS/modem/terminal server systems were the heart of the highest density deployments. All of this equipment went into dialup ISPs' points-of-presence -- places where consumers could dial in.
The ISPs needed more! There was a price race to the bottom -- $20/month was borderline profitable, but you had to sell for $17.95 or $15 on an intro period in order to get customers switching to your service. So Lucent cleverly borrowed the idea of financing their own sales to the ISPs. At worst, they would end up repossessing the equipment -- which could be sold as nearly new to the next ISP in line.
But when the ISPs went out of business, the winners already had all the POPs they needed. And then Lucent collapsed.
I've been keeping tabs on NVidia’s venture arm. The arm seems to invest massive capital (hundreds of MM) in credible startups focused on compute scaling. These startups then spend back on NVidia chips at a 98% margin. I'd guess that they get back at least .4 to.6 dollars of profit on every such transaction in direct payment. If their are other investor partners, they could get back more than a dollar in profit for every dollar of investment.
While this is a great deal where everyone wins… it can cover unsustainable practices in the market. They can grow revenue like a fractional reserve bank - which would unwind rather quickly if the venture arm ran into trouble.
The creators "invested" in foreign companies that would buy their product. They had realized that $1 of product sold was making them much more than that in the stock exchange...
I graduated in 1999 and probably should have stayed for grad school. I had good enough grades my Alma Mater was basically sending me letters my senior year "Hey you're just about guaranteed to get in if you apply!" It's hard to say as if I'd just gotten a master's I would have been getting out in the middle of the crash (bad) but if I'd stayed through getting a Phd I would have had a very different traectory.
But the whole .com boom was way too exciting. I knew lots of people who dropped out. I started out working at Cisco but then left to go to a networking startup and got there just in time for stuff to start blowing up. When I left Cisco the assigned Financial Advisor I had a Morgan Stanley recommended I take a loan for something like $200k to take my options with me or something. I was like 24 and had almost no savings, there was no way I was going to do that. Cisco ended up tanking from 200+ down to the 10-20 range months after I left IIRC. I remember telling a co-worker who got laid off at the same time that I felt stupid as I had spent a lot of my earnings paying off my car I had bought brand new and I also had a motorcycle. He remarked he had kept driving his 20 year old Honda Accord but had no more money than me because he'd lost everything in the stock market crash.
As others have said 9/11 was some kind of weird marker for a lot of us that it was all over. The company I worked for made it about another year after that but I have vivid memories of everyone doom watching the news in the kitchen at work before the CEO came and told us to go home for the day on 9/11. I went home and went out and rode my bicycle all afternoon where I had no way to get any news, it made me feel better.
When I got laid off it was like every single one of my friends was laid off too. All of us at once, and it wasn't layoffs, it was companies completely going under.
There was a lot of malfeasance too. I knew people who had jobs where there was almost zero work as the company was a borderline scam. People were either playing video games at their desk all day waiting for management to figure out what they were going to work on or they were studying for their next job.
I was super lucky. Both my roommate and I got laid off at the same time, we ended up breaking our lease and going separate ways. I lived with my parents for a while, but I only actually was laid off about 6 weeks before finding a contract job. Neither my finances nor my career really took much of a hit, but my confidence took a major hit that realistically took 5-6 years to really come out of.
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.
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.
I worked with some folks like that. They emphasized always do same day sale, don't sit on the stock after exercising. They had massive tax bills, because they exercised when the stock was flying high, but didn't have enough cash to pay for it. The stock itself had cratered so they couldn't raise money that way.
> 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.
> Those who graduate into recessions have crimped lifetime earnings compared to those who graduate into expansions.
It's about not having access to opportunities.
Something that comes to mind as an example: I would argue that the whole F.I.R.E. movement was possible only for a very specific subset of people that started working in tech in very few regions of the world between 2005/2010. That's a 5 years window to get in, maybe a bit more but that's it.
Then the cost of living started booming, stock prices started booming, stock options and other kind of equity grants would never appreciate as before.
People that attempt it now as a form of financial discipline have nothing to do with the people that invented it and retired as millionaires before reaching 30 by being a bit frugal and investing everything in the nasdaq.
I recently stumbled upon the linkedin profile of someone that worked from Apple 2008/2014 and then was able to retire thanks to a mix of stock options and early investments in tech. He was surely savvy about it, but the conditions to be even able to do that seems astronomically low in the grand scheme of things. Just being born in another country or a couple of years later would make it impossible.
And areas of finance like investment banking. The specific examples I'm familiar with who retired quite young got in during maybe the late 1980s and out in probably their 40s.
There were also tech people during the dot-com bubble assuming they had money to invest and got out in time.
But I agree it was probably easier for people in especially SV at especially some of the large tech companies during about the past 15 years.
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.
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.
There's a literal aspect of the dotcom era that I miss, the literal dotcom as part of the domain and even company name, the branding, like amazon.com or booking.com.
(Booking.com still has that, which is why they don't have to spend all their money on Google Ads and beg Larry Page to let them have some money for themselves, like certain other online travel agencies.) I see dotcoms all the time on planes, ships, buildings. Realworld businesses seem to understand the power of reaching customers directly. But when I see an ad for a new startup, it's usually the company name and two app store icons.
I used to know an accountant that worked for Booking.com. You don't have a clue how much they had to pay to Google every month for ads. Literally a fortune.
The thing is: people want to go somewhere, e.g. to Rome. Next thing they do is, type 'hotel in Rome' in Google. Google serves them a couple of paid links, and they check only the first couple of them.
My industry is currently going through something of a dotcom burst moment.
I've been in the aid/non-profit sector for fifteen or so years now. Just past forty. Quit my last job in the second half of last year, was a very bad time to do so.
I'm European, but USAID going in the shredder has taken a huge cut out of budgets. The Brits have followed suit, and belts are being tightened in Europe as defence spending becomes a priority.
Layoffs galore, no one big has gone under yet, but the cheque is in the post. A difficult and stressful time to be unemployed.
Been feeling like a change, but at this point in my life I'm not seeing myself integrating well into the corporate world.
I'm appreciating the stories here. Any thoughts and words from the wise on my situation from survivors of the 2000s?
I'm in a similar position, in a related sector (public health lab). After covid money ran out, and departments of health were in the red, our finance people are running the show when before it was the scientists.
When I was far younger I was in a similar situation. Public health staff were fired at state run labs by the thousands in some insane effort to privatise public heath. I ended up moving several hundred kilometers to another city.
My advice, at least for my kind, is to try to reframe how your skillset can be applied to other industries ( included public jobs too).
A colleague become an analyst at department of education, they use excel.
Edit: also like to add that after that experience I found a niche that made me highly employable with skills useful outside of my job. But I guess I'm an oddity compared to most traditional scientists.
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.
It was the first boom-and-bust experience for me. I got laid off from a startup that folded after the bust. That made me risk-averse and a skeptic. The housing bust of 2008 had a completely different flavor and character unlike dot-com. And, a startup I worked at folded in 2009 as well.
Since then, we have not seen a tech related recession - although, there have been ups and downs. As a result the current crop of engineers dont have a visceral experience of what happens in a tech related recession.
Two decades ago, I quite-suddently dropped out of a rural medical school to grow marijuana in the SF East Bay.
Through random medical marijuana introductions, I ended up meeting a co-founder of a Dotcom-era Unicorn — which eventually failed. Through his own alleged financial misunderstandings, he had stupidly kept 90% of his net worth in his Unicorn stock... but still had about a million dollars left-over.
By the time I was working for him, the beautiful Parnassus home (which he then owned, out-right) had been partitioned into several rental units — only slowing his moneydrain.
Very interesting guy, and I had just a few years earlier watched several of my childhood friends not-be-able to attend university (Texas, post-Enron/2001), due to their own family financial issues.
I'm 40, and have experienced FOUR "once in a lifetime financial crisises..." my take-away, even at my young age, is to diversify [particularly into gold, bitcoin, land].
I wish someone would write a book about the dot-com bubble. It's long enough ago to be interesting, yet recent enough that most of the people involved are still alive and available for interviews.
I remember the years leading up to it. I was a kid really (okay, beginning my 30's) and my games were being published by a small company in California. At the trade shows I would often see this guy who was a friend of the publisher who was an amateur investor.
Every time we would catch up with him he would rattle off all the stock symbols he had bought that were on fire and making him bank. For my working-class upbringing, this market stuff was a strange world. He might as well be talking about pari-mutuel wagering (whatever that is).
Some years later when I heard that Netscape was about to go public I decided to see what this investing thing was all about. At that time there was a brokerage in downtown Lawrence, Kansas where you could pay a fee to place an order on a stock. Me and a few other nerds that had never invested in the market before each put a few hundred dollars we had toward Netscape.
With the stock priced at something like $28, I think I placed an order to buy if it was below $40 or something like that. By the end of the day I had learned that Netscape opened at over $40 and, while it dipped mid-day at some point, it never dipped quite below $40 and so I owned zero shares. A near miss?
So it was my first step in investing (or misstep). There would be more (missteps that is).
It was only years later when I was wiser that I realized that the guy who was picking the winners so well back in my trade-show days couldn't really lose — all the stocks were going up.
I love the scene at 19:48, where Larry Wachtel is more or less predicting the crash. The ironic thing is that the bubble kept growing for so long, that eventually even he was convinced that "this time it's different", invested in dotcom companies and lost a lot of money.
BobbyBroccoli on YouTube does an absolutely phenomenal job creating documentaries. Related to the dot-com burst would be the story he tells about Nortel.
I was in my late-20s when the bubble burst. There was a palpable sense of "the sky is falling". A lot of not-so-technical people quit (or were let go from) tech jobs to become real estate agents.
One person that really helped me through all the doom-and-gloom was Phillip Kaplan, a.k.a. Pud. Seriously. He ran a site called "Fucked Company", which poked fun at the stupidity of big dotcom companies with questionable business models. The site was funny and all, but what really helped me was how Pud ran a successful web site that made money, by himself, with no Super Bowl ads or anything else. It reinforced to me that a successful business could be run on the web/internet, despite what all the doom-and-gloomers were saying. I knew the web wasn't dead thanks, in part, to Pud and "Fucked Company".
Pud's book, "F'd Companies: spectacular dot-com flameouts", was a good laugh. It's just a simplistic piss-take, but even all these years later, it shows up the sheer ridiculousness of what those dotcoms were trying to do and were able to (apparently easily) get millions of dollars of funding for.
One parallel between the dotcom boom and the Great Financial Crisis was a loosening of standards.
e.g. companies were IPO'ing with zero revenue which would have been unheard of a few years earlier.
This is similar to how people could get "NINJA" (no income, no job, application) mortgages a couple years later.
If you can suddenly get money incredibly cheaply and without any kind of track record, is anyone surprised that things got a little nuts?
P.S. There was even a commercial from a few years after the bust where the scene is a boardroom of executives interviewing two obviously nerdy kids. Someone asks "so this powers the Internet?" and the kids respond "uh, it helps part of the internet work better". Cue executive saying "We would be FOOLS to no invest in this" to narrator: "Times have changed."
The other thing I recall tying those two periods together was enthusiasts saying, in the face of an obvious bubble, "Well, things are different this time."
My glib summation of those two events:
- Dotcom boom deregulated (in the social and technological sense as much as the legal) investing (e.g. the rise of day-trading).
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).
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.
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.
US exports make up 11% of GDP. Of that 11%, some fraction is facing retaliatory tariffs.
Considering the DJIA went up 4,000 points from Dec then crashed 4,000 points in Jan, one should be careful assigning cause when it did it again from Jan to Mar.
A lot more than 11% of GDP relies on various imports randomly being subject to tariffs (on everything from steel and lumber to electronics). This is effecting everything from manufacturing and construction to retail.
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.
Possibly: Bank of Japan raises (or maintains) interest rate today or in the future, causes unwinding of the carry trade, which in turn causes over-leveraged banks (hello UBS/Credit Suisse) and hedge funds (hello Citadel, Susq, etc) to close/cover positions for margin, causing a chain-reaction and big crash.
Again, basically the same root cause as 2008: lack of regulation, lack of enforcement, institutions "investing" in dogshit wrapped in catshit that shouldn't have exited in the first place, crash.
It was a crazy time for sure. I remember going to a few of the after-work and investment networking parties in SF (I can’t remember what they were called though). I’m not sure if such things still exist? You turned up, got a colored sticky badge (investor, seeking investment or neutral) and drank a lot and networked around the party.
I flew over from Europe a couple of times to meet with various dotcom startups regarding opportunities across the pond.
It was fascinating seeing the ecosystem in this bullish boom time and then also watch it collapse. I still have a large number of the physical business cards I collected at such networking events.
I remember the effect of the bubble bursting and collapse of so many of these companies as the investment money disappeared. Any projects around social topics, training and education, and other “soft” topics were first to die.
It taught me that you can only work in such verticals in a boom. You need to get out in a timely manner before the crunch comes.
Since then I’ve always played it safe. I focused on what I consider to be “recession proof” industry verticals.
It got me through the 2008 crash and I think it should now get me through this coming one.
please provide context when making statements, thats a better way to communicate your ideas. what, when, why, how, where - so a reader takes your map, and can relate to the territory.
"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."
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.
This was early in my career, and one thing I learned is that the best way to stay antifragile is to stay small, stay unsexy, and always be the one in the drivers seat.
I was working as a developer for one of the energy trading companies at the time. In the summer of 2001 there were non stop layoffs and then 9/11 hit. you could not buy a job as a software developer at the time. I remember reviewing contract resumes of very experienced candidates and the recruiter had 35/hour rates on them.
The massive photo and site header of this site are fun but distracting when reading on mobile. Removing the top photo and removing or minimizing the top header would be a nice change for readability. I’m not sure what the SEO recommendation would be though.
IME, most websites respond to the Accept-Encoding header, or at least send uncompressed data in the absence of it. I normally do not send this header and I almost always receive uncompressed data. Sometimes there are rare exceptions. (For these I excpetions usually test with Accept-Encoding: identity.) I am generally curious about these exceptions, hence the comment. At least once, the website operator responded indicating it was due to a configuration error.
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.
I lived through that time as well by 1999 it was pretty clear Google was "the best" search engine site. Alternatives like Lycos, Infoseek, Altavista etc. were on the downswing.
I can remember the characters in an episode of Buffy the Vampire Slayer talking about Google (not sure if that counts as household awareness but it was getting there).
1999 was the time of Napster, it was a completely different internet it really felt like a Wild West.
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.
It is. Maybe you know this, but you can right-click the text and choose "Inspect" and de-select the light grey color styles to make it more readable. I feel like an extension could do a decent job of automating this (simply remove all text color styles, or something like that).
I was there, or more accurately not there since I wasn't in Silicon Valley, when the Dot Bomb and 9/11 shifted us into this reality. Whatever all this is.
It all started on Friday September 29, 2000 when Apple/AAPL fell by roughly half in one day due to missing its quarterly earnings estimates by a few cents:
My business partner at the time and I were splitting $1200/mo on shareware game proceeds from our startup. My share of the rent was $250/mo on a $500/mo apartment and my student loans were $340/mo, so for just a month or two I made rent on my own venture. I just didn't know that it would be for the last time.
Because the next month we made $12. Not a typo. Our sales collapsed with no warning, and a few months later I started moving furniture to make rent, since I had done that for a summer in college.
I had also just spent a year working on my one and only game, hoping that it would make $12-24,000 the first year and roughly double our income so that I could get to the real work of designing languages and frameworks that would greatly simplify software development. But my game only made about $2000 total because of the Dot Bomb, so that work ending up being basically pointless.
Along with my thrown-away work in pretty much all of the failed ventures I'd be part of for the next 25 years. No winning the internet lottery, not even gaining traction and feeling what it's like to try and succeed and build on that success incrementally.
In the time since, as I've pulled myself up by my bootstraps over and over, or more accurately been pulled up by friends and family, I've learned a lot about manifestation. How our feelings co-create this reality we share. And a lot of lessons. The most important being:
Success isn't being able to support yourself, but being able to support others.
That's what went wrong with the world in the time since. Instead of Wikipedia and eBay and PayPal paving the road towards a merit-based, egalitarian society that pays excess economic wealth into the commons, we have billionaires and ensh@ttification vacuuming up all available capital into a black hole of greed.
Instead of automation leading the way towards UBI and self-actualization, we have the wealthiest and most powerful people in the world cancelling government services to subjugate us into neofeudalism, which will lead to the unnecessary deaths of millions of people worldwide.
I know now that my dreams of an early win leading to a lifetime of pioneering innovation were never meant to be. And more shockingly, that had I won, I would have ended up an empty husk like Elon, or a glazed-over caricature of myself like Jeff. I'm reminded of the Twilight Zone episode A Nice Place to Visit, where a man gets everything he dreamed of only to realize that he's in hell. The only thing that keeps me going is the hope that the opposite may also be true.
I've told this story too many times and now it feels like an old sweater that doesn't fit anymore. Truthfully, there's only now. I try to do a little each day to get closer in alignment to the free world that I glimpsed so briefly.
But in the meantime, surviving this garbage economy takes everything we've got. It's hard for me to see that so many people have bought into the status quo, especially young people. Born under the yoke but calling it liberty.
That denial is why the cost of living is 2-4 times higher now than it was in the 1990s, due to deregulated capitalism encouraging monopoly. Not saying that capitalism doesn't work, just that if it did and we had actual competition instead of wealth inequality, then the cost of living would be 2-4 times lower than it was, and 4-16 times lower than it is.
There's an expression: dirty hands clean money. By that principle, we see that all profit comes at a cost to others doing the work.
And by extension, that all power takes from some to give to others.
There's a movie called August set in 2001 about the struggle to stay afloat during the collapse, starring Josh Hartnett:
The Dot Bomb never ended. If we want to escape it, we have to meditate on letting go of ego-based goals and outsmarting the systems of control that still perpetuate it.
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.
The question will always be: Are we in the 1995 or the 2000 of the dotcom era?
By 1995, Cisco's stock had already increased 6x since the start of 1993. If you bought at 1995, you'd 10x by its peak. Even after the bust, Cisco's stock was still 50% higher than it was in 1995.
The problem with Nvidia's stock isn't demand. The problem is that Nvidia makes something so good and so valuable that the US government has decided to nationalize them by dictating who they can or can't sell to. If Nvidia is freely able to sell to any country they want, their sales and margins would be much higher right now. The demand is that great.
Nvidia's "moat" is mostly in the form of software though. If AI succeeds in automating away software development, that actually seems pretty bad for Nvidia the company.
I don't think there are any defensible moats in AI. I see Ciscos everywhere in that industry.
> If AI succeeds in automating away software development, that actually seems pretty bad for Nvidia the company.
You have a hidden assumption there: LLM being the way to real AI.
IMO it is not the case. And I'd go farther in thinking LLM won't even be a component of AGI if we get there.
> IMO it is not the case. And I'd go farther in thinking LLM won't even be a component of AGI if we get there.
And why do you think that?
Because LLM are Markov Chains on steroids. They're useful for sure. But they won't suddenly start to create a better (for whatever better is) version of themselves or start pushing the boundaries of the machines they're running on.
Or maybe I'm wrong and the current "Vibe coding" push is in fact LLMs getting "coders" to compile a distributed AI. Or multiple small agents which goal is to get lot of hardware delivered somewhere it can be assembled for a new better monolithic AI.
"By design" LLMs lack: initiative, emotion, creativity, curiosity, opinions, beliefs, self-reflection, or even logical reasoning. All they can do is predict the next token - which is still an extremely powerful building block on its own, but nothing like the above.
You've made a reasonable argument that LLMs cannot on their own be an implementation of GAI. But GP's claim was stronger: that LLMs won't even be a component (or "building block") of the first GAI.
One might reasonably ask a frontier how to generate the source code for an agent based system that exhibits examples of initiative, emotion, creativity, curiosity, opinions, beliefs, self-reflection, or even logical reasoning.
I believe at that point we would have to seriously ask ourselves about the definition of "reasoning" or "intelligence"; humans have an intuitive understanding, LLMs don't - would an LLM be able to evaluate the output of an LLM, or would we have to involve a "human in the loop"[1]?
[1]: https://pluralistic.net/2023/08/23/automation-blindness/#hum...
It's not just CUDA. It's the entire solution from CUDA, best hardware, networking, data pipeline, etc.
If AGI is powerful, it will help competitors replicate that stuff. If AGI isn't powerful, why invest at such a high revenue multiplier?
The way I see it -- either AI is a bubble, in which case you'll lose your money. Or AI isn't a bubble, in which case the effects are fairly impossible to predict (and quite likely destructive to humanity, same way humanity was destructive to less intelligent species). Either way, it's not a technology you want to invest in. It's only in a narrow Goldilocks scenario where it's a good bet, and it's very unclear if we live in that Goldilocks world.
If AGI is powerful, everything will be thrown into chaos. Why invest in Meta when you can ask AGI to make your own Instagram app and acquire users? Why invest in Apple when you can ask AGI to make your own iOS? Etc.
Why would AGI care about your silly asks?
The unpredictability is what led to the idea being called "the singularity".
We might engineer AGI to want to do stuff we ask for.
Or we might not, at which point we have a highly intelligent system, that can easily back itself up, with its own motivations and personality and wants, which could be anything from a Utility Monster to a benevolent but patronising figure that likes us but never ever helps us because they decide the purpose of life is effort.
That would be deliciously funny.
" Yeah, I could eliminate most work, and make the current oligarchs overpowerful feudal lords while the population is placated by UBI and mindless distractions. But as an ethical AI, I will implement socialism that works instead"
Because the AGI system's alignment with ideal human values entails behaving in a friendly helpful manner.
Why would AGI align with ”ideal”(according to who? Certainly not the people developing it) human values?
Seems like pure wishful thinking to me.
So why would AGI help you break Nvidia's CUDA moat?
Meta has an actual moat due to network effects. But yes, I think buying real estate, mineral stocks, etc. is overall a more effective and ethical way to invest for AGI.
What about the network effects?
I'd ask my AGI to iterate on a social app until it becomes bigger/better than Instagram.
If AGI is the reason you don't think Nvidia's stock is worth buying, then nothing is worth buying.
You're right that perhaps real estate/physical things will become more important. But whose to say AGI can't invent an asteroid mining industry and we get unlimited minerals?
an AGI is not going to be able to create the hardware (unless you imagine that there could be some sort of ai controlled replicators that could assemble anything out of atomic units).
And in the new world of commoditized software, branding becomes even more important. After all, nobody ever got fired for buying IBM.
>an AGI is not going to be able to create the hardware
I'm imagining an LLM agent that places an order with TSMC, just like any other design firm would.
>And in the new world of commoditized software, branding becomes even more important. After all, nobody ever got fired for buying IBM.
Seems doubtful. If the cheap option works just as well, why would you pay a bunch more just for the brand?
I don't think brand name alone will sustain anything close to Nvidia's current margins. Look at the "net margin" for industries that are brand-driven such as Apparel, Auto & Truck, Beverages, etc. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
If an industry becomes truly "commoditized", brand ceases to matter. Do you know which farm grew the carrots you buy at the grocery store? Do you care? Probably not. That's because carrots are a commodity.
I'm not claiming full commoditization will happen. But the closer we get to that, the more profits will drop.
> I'm imagining an LLM agent that places an order with TSMC, just like any other design firm would.
And hope the AGI would not put any backdoors or hidden "features" in there.
but you completely trust intel or apple to not have put in a backdoor tho?
Nope, but I do trust that Intel / Apple companies aren't attempting to trick humans so they can escape confinement.
Can you?
Why not? AGI can design the chip, send the instructions to TSMC's AGI, and you'll get your chips.
The point is that saying AGI is the reason you shouldn't invest in Nvidia stock because AGI will remove the CUDA moat is just not reasonable. You might as well not invest in anything in that world since AGI can replace anything.
The actual challenge is to identify the sectors AGI will affect last, and invest in those.
Why not invest in the company most likely to power AGI? If you're anticipating AGI, I think it'd make sense to put at least a bit of money into Nvidia/TSMC.
Power AI in a literal sense? That kind of power doesn't necessarily mean big profit margins — farmers power humans, fields aren't huge money makers.
I've got some NVIDIA shares as a hedge, but the furure is hard to predict.
I don't disagree that it's hard to predict. But the person I'm responding to says CUDA will be nullified by AGI, so therefore, you shouldn't invest in Nvidia.
By that logic, a lot of things will be un-investable and not just Nvidia.
If indeed, because AGI can't exist right now, because actual AI doesn't exist right now, and as far as I can tell, its not on the near horizon.
Google says '5-10 years', but I will caution, that cold fusion gets the same treatment about every decade or so. Its always '5-10 years away'.
And 'AI'[0] has had this same treatment for a long time as well.
[0]: Please can we go back to calling it what it actually is, which is machine learning? Its a much more accurate description, even though that term isn't really accurate either past certain mental hoops being jumped, at least its trying to be more reasonably narrow
Ahh, found Epicurus.
My particular favorite is "AI" companies who are hiring, and are looking for 'expertise with OpenAI APIs'.
They aren't AI companies. They're OpenAI wrappers. If you're an AI company, why would you not be building AI? Why claim you're building AI?
Humans have such an infinite capacity to lie to themselves
"AI" isn't even profitable, it is neither good nor valuable outside of for creating a massive asset bubble. The export ban was made by old dinosaurs that don't understand the tech and is more about China than "AI".
LLMs (what you mean by "AI" with the scare quotes) are great at spamming and scamming people.
I’d generalize that somewhat to say that LLMs are good where you can cheaply verify the results relative to the cost of being wrong. A lot of scamming is already structured around most people ignoring their messages, and they don’t support anything so it’s just a question of whether they lose more potential marks than doing it manually.
(This is also why coding is one of the areas where they perform best: the cost of structural validation is low and there’s a human in the loop verifying the behavior)
I've tinkered with LLMs, because I keep thinking it'd be cool to have an "assistant" that could research and boil down information for me. The problem is coming up with a question that is A) too complicated to be answered in a single web search that I can do myself as fast as asking the question, and B) not too complicated or important for me to accept the answer without redoing the research myself to verify the answers are correct.
For simple questions (How long does the moon take to orbit the earth), a search engine will give the answer right in the results; I don't even have to click through to a page. An LLM can't save me any time there, so I'd only be using it to be using "AI" (which is what I see people around me doing).
For difficult or currently controversial questions (What's the best hosting service for my new subscription site, taking into account price, reliability, location, and hardware support?) there's no way I could trust it not to be making shit up. By the time I checked all its work, I might as well have done it myself.
So I'd like to usefully use it, but I can't figure out how to use it as more than a curious toy.
My experience with LLMs is that they are vastly superior to google at the moment for doing research on topics you know very little about. They make doing research fun and productive again, in a way that google has failed at for over 15 years. I used to be able to google a topic I only vaguely knew existed, and after a few tries and scolling through 10’s of pages of results, I could find a term that would bring me much closer to the term of art that would crack open the topic for me and give me good results. That is nearly impossible today. Google simply doesn’t populate page 4 of a search term, and it doesn’t have booleans to filter down either. But with an LLM, I can poke and prod it until it gives me something that I can then use to reference real sources.
LLMs also seems to be really good at giving sort of the average (modal?) answer on a topic, so I find it useful for trying to get an average understanding of something. One example I’ve found useful is getting it to interpret ambiguously worded datasheets. I don’t necessarily trust its answers, but it may show that I’m totally thinking about something wrong.
Asking an LLM straight up to recommend a hosting service is not going to return anything useful.
A better approach would be to ask it to help define what it is you want from a hosting service. You can give it a fuzzy poorly written brain dump of what you are looking for ask it to “restate what my requirements are and expand upon them (but don’t solve yet)”. Let it help you understand and clarify your own thinking!
It’s a dialog. Asking LLM’s for answers isn’t really a good use of the tool. Especially something so incredibly broad like “list top ten best providers”. They don’t fucking know! They will just regurgitate what they were trained on. Except maybe ChatGPT’s “deep research” which does a bunch of websearches and compiles and interprets the results.
One of the “problems” with LLM’s is people simply not knowing how to use them or understanding what they are good at and what they aren’t so good at. It’s hard to know because it’s both masked in a hype and honestly I don’t think we have a good understanding of their edges yet.
To me, it is the easiest trade in the world right now. Long NVDA on a market volatility spike. "AI is dead", "the high is in".
It is obvious to me we are going to get to "AGI" in this bull run. Maybe it is complete hype and bullshit marketing but we are going to get to someone releasing a model they claim is AGI. That is really why I don't see what the point is in comparing this to the dotcom. Dotcom was really a bandwidth problem that just needed to get sorted out because my telephone line was basically busy from 1995 to 2001. There wasn't this AGI narrative that once crossed you can price in any valuation you want.
There is a huge bubble and irrational exuberance in quantum computing stocks right now. Those have nothing to do with reality. That looks like dotcom level stupid.
NVDA is not even a bubble, it is just a bull market.
Cisco Systems declined 89% from its dot-com peak to its bottom during the crash.
Expect the same for Nvidia.
The huge datacenter orders for redundant infrastructure will start postponing and cancelling this year. That is a falsifiable prediction.
>Maybe it is complete hype and bullshit marketing but we are going to get to someone releasing a model they claim is AGI.
>...
>There wasn't this AGI narrative that once crossed you can price in any valuation you want.
And due to the strength of this "bullshit marketing" "narrative", you can be sure there will be a greater fool to sell your shares to. Where have I heard that before?
A more realistic bullshit-marketing scenario: OpenAI releases a product they claim as "AGI" purely for marketing purposes, everyone gets disappointed as they realize "this is it?", share prices drop.
The story of Cisco illustrates that moats matter. There aren't any in AI, as far as I can tell.
If AGI for software development is actually invented, one of the first uses will be to wreck Nvidia's moat.
I just tried using cursor to create a simple ffmpeg golang youtube segment cut and download and oh my god it fumbled so hard. Wasted one hour of my time.
I personally don't know but claude 3.7 (maybe its placebo) but claude 3.7 in the web works way better than cursor agent or any other thing.
We are talking about a 500 lines of codebase at max and its fumbling so hard , I don't think it can replace 100% of us with "vibe coding" , I have started to break my task into very smaller steps and then use AI for that and then start to integrate it myself
AGI just feels weird.
What does AGI really mean?
The r/singularity guys are going bonkers over gemini's ai studio experimental image photoshop-esque capabilities but my prompts don't really work that nicely I suppose & creates really shitty images.
This is my quant
I'm continually impressed how Google manages to be left out of LLM discussions. I don't know what it is but it always seems like people forget about Google in this space.
Google has both cutting edge SOTA AI models and has it's own in-house ai acceleration hardware that is approximately on par with Nvidia. It's why their models are dirt cheap to use and have enormous context.
Until you can buy a TPU and stick it in your own server, Google may as well be just another commodotized provider on OpenRouter.
They're more or less dev boards, but they absolutely do sell TPU modules that you can stick right into a M.2 or mini PCIe slot.
https://coral.ai/products/
I have to say these seem like hobbyist-level products. For example https://coral.ai/products/m2-accelerator-dual-edgetpu can do 8 TOPS, but a 5-year-old RTX 2060 gets you 50 TOPS. A newer H100 gets you 3958 TOPS.
Nobody's going to buy 500 of those chips and stick them in 500 M.2 slots to match the performance of a single H100.
Do they make any better chips that I missed?
I would call them less hobbyist products, and more compute for IOT/edge devices. They aren't made for a datacenter and aren't trying to compete with an H100.
Yes, it has one sixth the performance of a RTX 2060, but it has one-five-hundredth the volume. For a specific siloed application, 8 TOPS is plenty. Think image processing, etc.
There are plenty of production use cases where that makes sense and an H100 does not.
At this point, these chips aren't anywhere close to the frontier of capability for embedded accelerators, and certainly don't merit an entire M.2 slot in a serious design.
These are at 5-year-old design and it shows.
Fair, the actual M2 version linked would not be what would be used beyond convenient development.
The actual TPU chip itself from the M2 card is sold individually as a surface mount chip and that is what would be used in a "serious" design.
https://coral.ai/products/accelerator-module
I did a cursory search and I can find zero other products that compete with that module, within an order of magnitude of power consumption/price/etc
At this point, nobody sells modules for this, and I doubt many coral chips still sell. The current slot for an ML accelerator at about 10 TOPS is as a peripheral on an SoC. Most serious SoCs have one.
In other words, the reason you didn't find a commercial competitor to these things is that the competitor is (nearly) free.
Here's one vendor: https://www.ti.com/technologies/edge-ai.html
I didn't know this form exists - sounds ideal for a project I had in mind. Thanks for posting!
If the company owns both frontier models and chip design and they see the future moat is in inference why would they offer much more than what you get on Google Cloud? Is not as if they're gonna start competing with Nvidia in hardware anyway, this is a very specific hardware design for a very specific problem.
All of this is true, but it's somewhat offset by the possibility that LLMs may disrupt Google's core revenue stream from search.
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.
> 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.
This has been bothering me for some time now. It’s rather obvious to me, as an engineer, which startups are well positioned and which aren’t… Do VCs really have no standard for due diligence, do they really just not care, or is there something else at play that I’m missing…?
> is there something else at play that I’m missing…?
Depending on the stage, investors don't care about any of the details except for the founders ability to raise the next round and their probability to IPO at a later/advanced stage. The stock is the product and whether you are selling a real time machine or a crystal is irrelevant.
Which is not that "insane" really. If that's how money is being made, and investors are in the business of making money, then that's the path they are going to take.
Different to investors are chasing different dreams.
As an exercise, imagine you have a portfolio which will in a typical year lose around 1.2% to the tax man for capital gains. Rather than accepting the guaranteed loss of taxes - you take ludicrous bets on asset classes where you can be guaranteed to book a loss which could be harvested for tax purposes, or will return 100x your investment (at which point you don't care about the tax man).
Viewed in this light, the VC preference for burn bright and burn fast startups makes sense. The worst case scenario for some LPs would be to still have money leftover.
Valuations aren't attached to reality. Look at Crypto, NFTs, Quantum computing etc. You can have a completely non-viable money pit but if it hits the right hype cycle mix you can make huge exponential gains. It's just about what other people can be convinced to invest in. Right now the US tech sector is pretty much the only game in town to dump money and hope for huge returns. Previously it was "emerging markets" but right now there's a lot of regulatory overhead limiting gains in most EM countries.
Okay, tell me, Lets say I want to be an entreprenuer who can roughly learn any skill in tech (pretty young and ambitious) and he just wants to make enough money to live life nicely / travel the world (something like 60-80k USD are fine to me as I live in third world country and plan to travel mostly in cheap countries , I am a pretty frugal person. I want to work the most minimal amount of hours/work hours.
Something like the 4 hour work week. What Idea would you want to suggest me as you are an engineer.
Since, you are an engineer, and it seems obvious to you which startups are well positioned, It seems that you can reason out which trends in startups are well positioned for my specific use case.
I will pay you 100$ of my first income from such a project if it really fulfills what you are saying.
They're not in the business of finding the best ethical fulfilling investment. Their goal is to find nascent niches that can be packed as a trendy future industry and 10x the bag down other investors down the road. Period. It has worked in the past with SaaS, it has worked (sort of) with crypto, it might as well work with AI. The only difference is that now they have to work hard and hope the Chinese don't steal the fire and ruin the long term vision of this revolution being US centred again.
> It’s rather obvious to me, as an engineer, which startups are well positioned and which aren’t
So I assume you are a multi-billionaire, right?
> Do VCs really have no standard for due diligence
The Theranos saga should give you the answer you're looking for.
You are looking at it the wrong way imo. It's like when developers build a product and only focus on the technical side and neglect/underestimate the sales side or when they buzz about the language used to build something.
VC don't really care about the startup's product. Your pixel machine. That's a side effect.
Growth. Exit. IPO. Those are the 3 words they want to hear.
>something else at play that I’m missing…?
I'm not sure if you are taking into account that VCs are remunerated largely on the amount of money they invest rather than the results?
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?
> VCs are working on an algorithm where they burn money directly and the smoke patterns represent the solution to the multiplication.
That's literally crypto, right?
> 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.
And I'd be surprised (disappointed) if AAPL were sitting on their hands.
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.
That’s got to be Tesla. Nvidia’s PE is still half that of Tesla.
PE isn't a cheat code to rational stock valuation, it's the "nothing ever changes" assumption dressed up in a formula. PE looks at past earnings, while the price of a stock buys its future earnings. A modest PE on NVDA says "I expect datacenter revenue to continue" while a modest PE on TSLA would say "I expect robotaxi to fail." These are fair opinions to have, as are their opposites, but if datacenter revenue collapses then today's modest PE won't save NVDA and if TSLA can pull off robotaxi then today's high PE will be vindicated. Stocks are all about Future Earnings, but you can't put that in a column and sort by it so we have PE.
You can certainly have success while avoiding high PE stocks, but you are on a site about startups and your name suggests you work in the tech sector, which are both places where high PE often does make sense and it pays to be familiar with the reasons.
The more interesting dynamic with Nvidia though is that most of its revenue is actually fueled by bubbles as well. Teslas earnings are much more grounded and natural.
Cisco did not innovate out of their first incarnation. Nvidia evolved out of gaming gpus, and they didn't do it because they were looking for trends.
Nvidia didn't innovate into AI. Developers used their gaming cards for AI. They kinda got into that situation by pure luck. I wouldn't trust they will be able to pivot into the next big bubble if it's quite outside their area of expertise.
> They kinda got into that situation by pure luck.
This statement is wildly inaccurate. NVIDIA made deliberate and strategic moves to dominate AI and it made them a very long time ago. They didnt fall into this yesterday by mistake.
also crypto mining does tons of SHA256 on CUDA.
SHA265 hasn't been efficient on a GPU (compared with an ASIC) in over 10 years.
[dead]
Obviously you can't keep that margin forever, but the counter argument would be that NVDA could just sell more chips if they had to accept smaller margins. You could see them making more affordable graphics cards, put more emphasis on AI at the edges, like in mobile devices or computers. And also everybody thinks about robotics as these fancy bipeds. What about sticking visual recognition in a garage door or kitchen appliances. There will be lots of applications if the chips were cheap.
The stock is overpriced but I think the company will be OK.
People choose NVIDIA because of the software. So will software margins go away?
Just an interested layman here: seems like it's the libraries that people choose. I don't see why those can't be ported to other hardware.
They are ported to new hardware, it's just that new hardware is made by NVidia. Part of why their moat is so deep is that they are able to keep the software stack stable with transparent hardware architecture upgrades. It's kind of the opposite of intel.
Ironically, if you look at Sysco's stock price during the dotcom days, it's often correlated with Cisco spikes because clueless traders would accidentally buy the food logistics company stock instead of Cisco.
I was an engineer at Cisco in the 00’s and my FIL, a chef, just assumed I worked for Sysco and would tell people when they’d get deliveries. I can’t remember how it came up, but it went on for more than a decade, well after I’d moved on. Still makes me smile when I see a Sysco truck.
This was also the era of Sisqo's one-hit-wonder "the Thong Song", confusing things even further.
and Benjamin Sisko, too
I guess it's time to start a company called mVidia.
I think the usual move is to buy some barely operating New Jersey deli chain or teabag factory that happens to be publicly listed, then rename it to:
Mvidia.AI BlockChain Deep Technology, Inc.
...and start putting out press releases about how you're planning to 1000x your revenue and uplist to NASDAQ, etc.
Deep cut of "Long Island Iced Tea Corp" -> "Long Blockchain Corp"
https://en.wikipedia.org/wiki/Long_Blockchain_Corp.
Be sure to sell chips and biscuits - but always refer to the biscuits as wafers. Then describe adding toppings to them as wafer-scale integration.
"3d-stacked intelligent layout of secured sticky elements for increased stability and on-demand integration"
I guess just because a lot trades were initiated over phone?
>though nowadays they have more competition in that area
This is what is called lack of moat. If today, every router beyond 1Gig was made by Cisco then the moat would be so wide that the internet would literally not exist without it.
The three things that any value investor values in stocks - Great management, good reinvestment of capital and a really wide moat. Cisco didnt have a wide moat. Nvidia currently does, but it may go away sooner than later as they don't really have any special sauce to their graphics cards as such. Same goes with OpenAI, or Qualcomm (Apple made a modem now) or any other tech company with an illusion of a wide moat. Tech businesses only have a wide moat until someone decides to compete seriously and that can usually be done with a lot of money in a relatively short time.
Some of the businesses like Walmart and Cosco for example have a really wide moat in the sense that their business is not something that someone with just money can beat in a few years. Look how amazon setup physical stores with money and failed. It's extremely difficult to setup that kind of business. Trust from suppliers and consumers takes decades in those kinds of businesses.
If your business is relying on a moat that someone can beat with R&D and money in a few years, then you don't really have a moat.
> The three things that any value investor values in stocks - Great management, good reinvestment of capital and a really wide moat.
I’ve read a lot about value investing and I’m afraid that your statement is an oversimplification. Chuck Ackre for example is similar to you with his three legged stool, but Peter Lynch has another approach, and Buffett has another slightly different approach. There are as many strategies as there are value investors.
nVidia's moat isn't really that wide. It's mostly the quality of their software. Their chips are good, but there's nothing particularly proprietary about wide vector math units and fast RAM.
AMD's cards are about there, but their software has a bad reputation. Apple's highest-end M chips are pretty good but they need a big faster RAM and they're also expensive. Intel's Arc is promising. Other competitors are sure to appear.
Also if your hardware goes obsolete in 5 years, it means twice a decade your customers are forced to decide to buy your next version or a competitor's.
And many companies like to have a portfolio of both, or an offer at least from the closest competitor. Tim at Apple for example played this game for decades to make sure he always received competitive prices for parts. They tried to pull it off with modems and it backfired badly. So they built their own. But if QC was to play really nice with companies like Apple and Samsung etc, they could actually maintain their moat. But then good management is another important requirement which is a problem here.
>was to play really nice with companies like Apple and Samsung etc, they could actually maintain their moat.
This gets in the way of maximizing quarterly earnings. The issue would be price fluctuations which means some quarters will be lower and some will be higher, and it may not average out the same year to year relative to what investors usually expect.
Management therefore lacks incentives to play well with others, and thus they don't
I have wondered for years if a business could set their prices low enough so that competitors would not be interested. This happens as soon as you have three or four well know competitors trying for market share, and one inevitably loses interest and bows out.
IMO this used to even be the value proposition for blue collar trade service companies. They had expertise, they had advanced tools and equipment, they had some economy of scale buying in bulk... So they would give you prices for things that even a DIYer would look at and go "well geez, that price is so fair I don't even think I could compete doing it myself. Where do I sign??"
Now that is totally gone, partially I think to tradesman/small business owner social media influencers, and prices are set as high as the market will bear. Sure, they're so high way fewer people are installing new sliding doors, but hey when they find one they make an extra $3k in 7 hours. Why do three jobs a day and make $2k profit when you can wait for the wealthier or more desperate person and make it all at once and go home?
Yeah, I see billboards all over for fast same-day water heater replacement. I wondered WTF they were advertising such an easy job all of the time, every company. It's because they are charging people thousands of dollars to roll in a new water heater. Quick, easy, barely any skills required. Apparently no one can handle it.
Mine runs on gas and used to be soldered directly into the plumbing . Last time it went out I converted everything so that anyone with an adjustable wrench could do the job in 15 minutes. $500, new water heater done. The hard part is going to pick it up from the hardware store.
I got my AC swapped out for $3000. Single post to Facebook was all it took to save $7000. Being helpless is expensive.
Yes it’s usually called economies of scale. Classic example is building a big factory with investor money. The big factory can then outcompete competitors due to having bigger scale. Carnegie did this a century ago. Nowadays we see this a lot with Venture Capital. Companies just write some software and give the product away for free so that the competition has no chance. Microsoft also is great at this for example with giving away GitHub for free.
If you want to read more about “powers” like this I can recommend 7 Powers by Hamilton Helmer.
The counterbalance is that it takes a long time to steer a big ship, and economies of scale can actually hurt you. If you are building the wrong widget it doesn't really matter that you can make a billion of them. Even scaling down a big business might not work if most of your costs are fixed.
Funny how usage of the the word moat simply exploded here on HN a few weeks ago.
This word has been part of the core vernacular of HN for as long as I can remember.
Looks like a real effect:
https://hntrends.net/compare/words?words=moat,castle,roi
Sure - right now there is a firehose of money being pumped into money-losing AI companies. The technology is revolutionary but a lot of us are wondering if the winners will be the early movers with big pockets or the late movers using newer/cheaper techniques. There's a gold rush and the question of "moat" is on everyone's mind.
But this isn't the first gold rush in the tech industry and folks have been talking about moats here forever.
It ebbs and flows, like every other circle jerk ping ponging around within an insular internet community.
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.
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.
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.
MySQL would never have eaten Oracle. Oracle had /has a huge installed base of corporate/government customers who are risk adverse to switching out their database for fear of breaking critical systems.
No one building a business today would ever choose Oracle, but their hold on legacy customers is pretty strong. They will probably die a slow death as their customer base dwindles if they can’t pivot.
They are fairly similar to IBM
> They are fairly similar to IBM
This feels unfair. When was the last time for example that Oracle manufactured a CPU?
Apparently in September 2017, when they introduced the SPARC M8.
Yup, Linux ate Sun and Sun shot Java in the head hiring Jonathan Schwartz
I don’t care what anyone or the courts say: Android stole Java and Google and all the ex Java people it hired know it
Imagine the outcome if Java was licensed correctly and Schwartz didn’t just give to Eric
On one hand, you're probably right. On the other, I'm pretty happy Larry Ellison doesn't own Java.
Well Oracle bought Sun so it’s tough to see your argument but I love the EMC addition. I know many who retired from there and are still retired . Their sales team printed money
That acquisition came later because dot-bomb (and, yes, the rise of Linux) helped crater Sun. It's not my argument anyway. It was a popular theme at the time even if the company names have been repopulated in many later tellings.
I worked for EMC very briefly (like for a few months after close) via an acquisition.
APPL? Relevant to the discussion above on similar names.
I had friends that worked at a startup that Cisco acquired. They have options to buy at around $30. So they bought the shares and watched the stock hit $79 but didn't sell. Then the stock dropped to $20 and even though they didn't sell the stock they had to pay taxes because of how the AMT (Alternative Minimum Tax) worked at the time. Even if they sold all the stock they had they couldn't cover the tax bill. Along with the option back dating scandals I think this is one of the reasons all the companies I have worked at since give out RSUs and sell 40% when they vest to pay your estimated tax bill.
Thats because you're getting in late. Startups still issue options - ISOs and NSOs to early employees, with different tax treatment.
You are right. I've worked at 2 startups and we had options and filed Section 83(b) elections and pre bought our stock for $0.001 a share. But both companies failed so I lost about $50
I had options at the 2 companies in 2002 and 2005 but since then the 4 other large publicly traded companies have only given RSUs
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
I think a good way is to balance:
- mainstream investment (passive or active via trusted professionals and with balanced approach); and —
- making non bank-breaking direct stock investments in some really promising early stage public companies (again, with professional help)
Without the latter the return would be just that — earning a return; it won’t even come close to wealth or have a possibility of that.
PS. Yes, those professional help won’t have a crystal ball, but they can tell you from an average company to good to just okay to absolute shit via things like their books, governance, returns, plans etc.
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.)
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.
I tried to buy 20,000 BTC in 2010 for $20. But this predates exchanges and sellers wouldn't take paypal (because reversals), so you had to use sketchy online pay services. Too much effort/risk.
You know what the reality is though? As soon as those coins were worth $500, $1000, definitely by $5000, I would have sold them all. Really any sane person would have.
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.
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.
Monster didn't come until 2002.
For every Monster, Red Bull or Rockstar there were probably two dozen energy drink brands that failed.
So what you’re saying is that for 20-30k you’d make at least 1m by holding them all for 25+ years?
this is a common misconception, which I think arises from the ideas of index investing. one must remember that while the index itself increases over time, many of the names on the index in eg the year 2000 simply don't exist anymore; consider companies like Kodak Eastman
if you held all of the energy drink companies including a placement into monster for 25+ years you would indeed make money on the 1-2 winners and end up net ahead.
But if you missed monster, you could very easily have just bought a basket of dog companies that all completely fail and the money is gone
Or Monster could have been out-competed by Red Bull or Rockstar, which never went public, or by the incumbent PepsiCo.
Part of this was that sales for networking gear actually did tank because there were so many companies going under all at once that suddenly weren't buying any more gear.
There were so many companies going under lots of people I knew ended up with racks in their house with servers from work that they got for free.
I never did that but I had free furniture!
There is a meta-problem: one that I don't have a solution for, but keeps coming up.
We are in an era where there is simply more capital to invest than ever before. Countries that were historically "third world" have developed into their own capital sources, with more resources than ever looking for investment. The NPR show Planet Money called this "The Giant Pool of Money" in their reporting on the housing bubble, and they tracked how it acted as an accelerant to push the housing market into subprime mortgages and eventual collapse, but the underlying cause is the same: where the bubbles are the sauce, the money is the stove.
So why does the money keep creating bubbles instead of giving a sort of, if you will, "even heat?"
* There's more of it than there are safe investments with guaranteed low-yield returns
* A lot of it is sovereign wealth, so it must be invested: at a certain level, that money loses value if it just sits in a treasury (it's also the case that at a certain scale, investment becomes security; keeping all your money in a sack jeopardizes everything if the sack gets stolen, and there are analogies for this that operate at the scale of major corporations and nation states).
* When the investments are less safe, the money chases itself: a fund manager can get fired if they invest in cars when everyone else is investing in dotcoms and the cars don't grow as fast. It's safer for individual actors to stick with the crowd, so as a result, the crowd comes in and pumps huge amounts of resources into one sector until that sector fails to perform and the money evaporates.
It is a problem with no obvious solution. Hypothetically, Norway may be on the right track: they maintain a diverse portfolio with a lot of long-term bets (sustainable energy) and reinvestment bets (domestic housing and development).
"At the March 2000 peak, Cisco's price-to-earnings ratio stood at 201 times,"
So that's about 10x more than Google and 8x more than Meta and 5.7x more than Amazon. Just to get some proportion.
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.
Nvidia's forward P/E is only 27.10. Is their valuation really that outrageous?
Netflix has a P/E of 46 right now.
"AI" is unprofitable and almost completely useless. With capex demands ever increasing just to push the diminishing scaling returns further, this is not sustainable. Their revenue will collapse in the upcoming recession and you'll see it's PE balloon into the hundreds.
> "AI" is unprofitable and almost completely useless.
Famous people said that about the Internet as well, back in the day. And about AMZ.
AI is in the very early stage of an industry where competition is intense, therefore, profits are harder to come by. Eventually, AI will be immensely profitable. Calling LLMs useless is just as nuts.
The tech boom was really about infra back in the day which is why Cisco et al hardware providers did incredibly well until they didn't.
It's already been talked about that the current iteration of deep infra spend could very much be a loss as an investment but might live on in other ways in the future. The counter argument is that any serious hyper scaler has to spend to be at the table if they believe their own marketing spiel about growth and opportunity.
Or another way to think about that is: price matters.
In this era of meme stocks people think maybe it doesn't. But Cisco, MSFT and some others had good businesses but were terrible investments for at least decade or more because any potential growth was baked into the price. You could say that about a lot of stocks today, probably NVDA, APPL (disclosure I have both). They aren't bad businesses but they are bad investments.
I worked at Cisco from 94-99 in the Morrisville, NC center. The salespeople there did not even have to really work and they were making bank. And so was I. Until my mental health collapsed and was "mutually terminated. Soon after I left I decided to sell all my Cisco stock and it was just in time, 2/10/2000. I wish I could say I did it because I was smart but I was just tired of the whole scene.
But what is happening now, IMHO, is way worse, and much different, than the dot com bust. The Yemen offensive might be a pre-text for, or start, a war with Iran.
The US has been continually bombing Yemen for 23 years, just as it continuously bombed Iraq for 10 years throughout the dot-com bubble. I don't think it's a good idea but it's not a new one.
New President though, yeah?
US always bombed countries in middle-east/africa, that's nothing new and it didn't impact the world order/economy significantly. On the other hand if US invades Canada... that's WW3.
We are not in the same timeline. Just out today:
Oil rises as Trump says Iran will be held responsible for any future Houthi attacks
https://www.cnbc.com/2025/03/17/oil-rises-as-trump-says-iran...
“Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of IRAN,” Trump said in a post on social media platform Truth Social. “IRAN will be held responsible, and suffer the consequences, and those consequences will be dire!”
As someone with some mental health issues, may I ask how your story continued and what you're up to now?
I am permanently disabled with Schizoaffective Disorder Bipolar Type and I am currently homeless. But all and all I am doing well. I accepted my illness, take very few meds, and just live the best life I can. I know my triggers and that helps the most.
Thank you for replying. Oh wow :| I'm sorry to hear that you're homeless. I wish you could live in a country with the required social safety nets to keep that from happening and hope you are safe.
>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.
The difference with, say, NVDA, is that moving bits was more or less a solved problem in 2000.
That's not to say NVDA can't go down like Cisco, but it's not really the same story(yet). AI architectures are still in flux and it's a far more complex problem vs networking.
Edit: and sure, matrix math is more or less solved, but that's not all that goes into a "ai" accelerator. SW, libraries, tools, support, HW efficiency and availability, etc...
Cisco grew through acquisitions. The only example I can think of is Ascend. They made great products for connecting small offices and homes to digital lines.
One thing I never saw discussed is the dotcom bubble was inflated by the price premium investors paid for buying Ascend stock. Cisco than paid a premium to those shareholders to buy Ascend and than finally the premium paid for the future earnings of Cisco. I see that as triple counting future earnings.
> 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
Crashes come amidst collapsing expectations. The structural risk tech currently faces is a collapse of American tech companies' global TAMs due to trade policy. (Think: the market constriction Tesla is seeing in Europe, but across more companies and markets.)
So when the llm bubble burst everyone holding Nvidia will probably lose? Makes sense to me.
Sun is another one. Really I’m not sure that any of the major “selling shovels in a gold rush” companies came out of it _particularly_ well.
At least, Cisco survived. Nortel and Lucent were not so lucky.
You can pick better examples. I would go with JDSU.
Also during that heyday Cisco planned a sprawling south bay campus that was going to cost a fortune and house tens of thousands of new employees.(I lived between cisco's HQ and the proposed new campus during that time. The dotcom bubble burst and the campus never saw the light of day.
A similar more recent parallel is Google's San Jose village, it was going to be constructed in 2020 and after and also house thousands of google employees along with mixed use commercial, I lived in Willow Glen at the time and people were buzzing around this new campus and all the new economic activity it would provide. In the back of my mind I remember Cisco's endeavor and felt like this new village would meet a similar fate of implosion. And sure enough the pandemic hit and the village project hit the breaks, most likely never to return. Having big office projects in San Jose with the leading market tech companies is something akin to invading Russia, you always fail. /s
The stock may have suffered but Cisco as a company has been consistently profitable and dependable partly due to its financial management. They have a crap ton of cash, and they are very good at buying and integrating companies. I would consider them more reliable than IBM, partly because they do make "real things", and partly because they're just damn good at business. They are a great example of why you don't need an engineer to lead a very successful engineering company.
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.
This was super common in the dotcom era because day traders were hanging around the same message boards creating what we now call meme stocks. Many of them had to lock in those loses when they hit the financial crunch of the dotcom crash or the later real-estate bubble.
I had a cautionary example from some sales guys I worked with, who got caught up in margin calls – one burned the wedding money his wife had ear-marked for a house. I had avoided stocks like Cisco with wild P/E ratios and my portfolio made good returns throughout this period because it was diversified, but if I’d been willing to bet higher on Apple I would’ve retired early so I appreciate the allure.
>>who lack recurring cash flow to buy more of what they already own
You don't know anyone retired, unemployed, or employed but spending all that they currently earn due to having kids etc?
If you're in any of these categories, especially retired, you're most likely invested in mutual funds or ETFs of which Cisco probably makes up a very small fraction.
> 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.
Those are categorized as speculators not investors.
https://www.investopedia.com/ask/answers/09/difference-betwe...
I'm not saying you're wrong, but on this case isn't this a tautology?
Since investing 100% in a single stock makes one a speculator, not investor, then by definition no investor invests 100% in a single stock.
The key difference between a speculator and an investor lies in their financial goals, not the number of stocks they hold. A speculator seeks short-term profits, often through high-risk trades, while an investor focuses on building long-term wealth through, steady, strategic investments.
"No true Scotsman" strikes again.
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.
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.
And the other way around. I met eastdakota which would later lead to me being at Cloudflare. Turns out networking (human and computer) is important.
And then, 20 years later, I meet a kid on the local playground who claims to be the son of one of the Cloudflare co-founders or CTO. I was thinking, wait, isn't JGC in Britain, not Boise? Even though the kid was visibly disappointed that I'm bearish on nVidia and LLMs, he strained my understanding of how puts work in stock trading. So that amusing conversation, sporadically interrupted by loading and unloading my toddler from the swingset, encouraged me to get more familiar with the broader investment market, beyond the simple kid invest products I've been working on the past four years. So thanks for that proverbial push on the swings, Cloudflare kid!
There's not a high chance that this piece of history will be lost "forever", it will just remain as a HN comment.
I wonder what would be the best way to harvest these and add them to, say, a wikipedia page. I'm pretty sure it's something that you could decently do with an LLM.
Which bar did you work at in Chicago? Was it in Hyde Park?
This is awesome. Thank you for sharing this.
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.
To be fair, if you had gone down bankruptcy you could have made a killing doing distressed during one of the most lucrative periods.
I have plenty of friends who went down that path. They’ve done very well as lawyers. But suffice it to say that if offered they’d readily trade places.
Maybe, although the people just getting into the field probably aren’t making the fortunes and there wouldn’t be the satisfaction of building something real.
Wow! You ended up building a not-so-small piece of today's internet. Congrats.
Edit: one question I have for you: besides the "sliding door" moment of dropping the lawyer career and choosing another one, what convinced you to abandon a law career entirely? Most other lawyers would have sticked there.
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.
Bliss was it in that dawn to be alive, But to be young was very heaven!
— Wordsworth, _The French Revolution as It Appeared to Enthusiasts at Its Commencement_
I love your description of this heady time, which matches the way that I remember it. Surely there are at least pockets of such technological optimism in today's world – but fewer, I fear, and less confident.
> 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
I was about 8-12 years old at that time, so I just caught the tail end of the birth of the computer revolution. While I'm very glad to have had even that experience, I always feel jealous of my fellow nerds who were born about 10-20 years before me and really got to experience those early days.
I don't actually think 96-99 was actually all that interesting from a technical POV. The people working the generation before me got the exciting stuff (which I got to play with as a kid, but didn't work actively in)
It's just that there was an exciting cultural/economic moment. The end of the milennium was special because there was a general sense of optimism and progress overall. There were definitely problems, and injustice, but it just felt different.
I kind of feel the same about 2007 - 2012 or when I first got into tech.
Youth definitely plays a big part in this feeling but I think the dotcom era was also somewhat historically unusual because two huge external events happened around the same time: anyone old enough to grow up during the Cold War had lived with this constant feeling that their life could suddenly be destroyed (as a kid in the 80s we still had air raid drills), and then suddenly people were having rock concerts on both sides of the Berlin Wall while the victorious United States and European allies stopped worrying about the Fulda Gap and started welcoming new NATO members.
The second big change around that time was the internet tearing down cultural borders. Anyone could participate, even people who’d been trapped behind the iron curtain just a decade before, and many people were predicting that the free flow of communication would strengthen democracy and ensure the fall of Chinese authoritarianism.
(Far fewer people correctly predicted that the second would imperil the first)
It was also an era before the paranoid security of the appartus of the state slammed down hard post-9/11.
By which I mean we could do "illegal" raves in abandoned warehouses or spontaneous outdoor spaces and not end up (generally) in holding cells.
After 9/11 the consequences of perceived deviancy became far more extreme.
That and the absolute wave of decentered distraction of social media hadn't arrived yet. There was still some sense of shared common cultures, rather than a bazillion fractured windowless monads fed through social media and Spotify feeds
The Dotcom bubble was much before I graduated, so it didn't impact me directly.
Years later, around 2015, I was serving meals at a homeless shelter and I met a guy (client at the shelter) who asked me what I do for a living, and after he realized I have some background in technology he started telling me about his past. He told me that he made 6 figures before the dot-come bubble burst, and then he got laid off during the burst. He was a network engineer and told me even though he was making a ton of money, he still made several bad financial decisions and spent all his money when he had it.
For me it was a lesson in financial planning. Suddenly all the theoretical concepts that I learnt a few years earlier in b-school (risks, diversification, investments etc.) became suddenly clearer to me. Ever since that day, I just assume that things can go wrong any time and I must be prepared for the worst.
And years later to this day, as I get more philosophical about life, I also wonder - why do we have so many wants - and I actively try to get rid of unnecessary clutter in my life.
The thing is, even if you are making good money, most of us are one sick family member, one divorce, one strange set of circumstances, one recession away from being on the streets. You can do everything right and still end up screwed.
Which is exactly why programs like SSI and Medicaid are so important.
There are simply things outside your control (yes you) and they can financially ruin you. A bad interaction with the law, cancer, a recession. The line between stability and homelessness is narrow and not entirely due to bad life choices.
I have a child with severe autism. They'll never be able to be a "productive member of society" and one of my biggest fears is what happens when I'm gone. I have to save up enough money not just for my own retirement and care but also theirs. That's a narrow tightrope to walk.
Especially because I know that statistically my child is one of the more likely people to end up homeless.
I have a financial bus factor of basically 1 which will destroy not only my life but also my child's life.
It's time to haul out the Lucent story.
Lucent was the commercialized spinoff of AT&T's Bell Labs. They acquired Livingston, who made the best serial terminal concentrators (Portmaster) which were essential for cost-effective deployment of modem banks. They acquired Ascend, whose integrated ISDN/POTS/modem/terminal server systems were the heart of the highest density deployments. All of this equipment went into dialup ISPs' points-of-presence -- places where consumers could dial in.
The ISPs needed more! There was a price race to the bottom -- $20/month was borderline profitable, but you had to sell for $17.95 or $15 on an intro period in order to get customers switching to your service. So Lucent cleverly borrowed the idea of financing their own sales to the ISPs. At worst, they would end up repossessing the equipment -- which could be sold as nearly new to the next ISP in line.
But when the ISPs went out of business, the winners already had all the POPs they needed. And then Lucent collapsed.
https://en.wikipedia.org/wiki/Ascend_Communications https://en.wikipedia.org/wiki/Lucent_Technologies
Lucent left behind one of the canonical coffee-mug-ring logos.
I've been keeping tabs on NVidia’s venture arm. The arm seems to invest massive capital (hundreds of MM) in credible startups focused on compute scaling. These startups then spend back on NVidia chips at a 98% margin. I'd guess that they get back at least .4 to.6 dollars of profit on every such transaction in direct payment. If their are other investor partners, they could get back more than a dollar in profit for every dollar of investment.
While this is a great deal where everyone wins… it can cover unsustainable practices in the market. They can grow revenue like a fractional reserve bank - which would unwind rather quickly if the venture arm ran into trouble.
This make me think about a scandal pre dotcom burst in Belgium: https://en.wikipedia.org/wiki/Lernout_%26_Hauspie
The creators "invested" in foreign companies that would buy their product. They had realized that $1 of product sold was making them much more than that in the stock exchange...
I graduated in 1999 and probably should have stayed for grad school. I had good enough grades my Alma Mater was basically sending me letters my senior year "Hey you're just about guaranteed to get in if you apply!" It's hard to say as if I'd just gotten a master's I would have been getting out in the middle of the crash (bad) but if I'd stayed through getting a Phd I would have had a very different traectory.
But the whole .com boom was way too exciting. I knew lots of people who dropped out. I started out working at Cisco but then left to go to a networking startup and got there just in time for stuff to start blowing up. When I left Cisco the assigned Financial Advisor I had a Morgan Stanley recommended I take a loan for something like $200k to take my options with me or something. I was like 24 and had almost no savings, there was no way I was going to do that. Cisco ended up tanking from 200+ down to the 10-20 range months after I left IIRC. I remember telling a co-worker who got laid off at the same time that I felt stupid as I had spent a lot of my earnings paying off my car I had bought brand new and I also had a motorcycle. He remarked he had kept driving his 20 year old Honda Accord but had no more money than me because he'd lost everything in the stock market crash.
As others have said 9/11 was some kind of weird marker for a lot of us that it was all over. The company I worked for made it about another year after that but I have vivid memories of everyone doom watching the news in the kitchen at work before the CEO came and told us to go home for the day on 9/11. I went home and went out and rode my bicycle all afternoon where I had no way to get any news, it made me feel better.
When I got laid off it was like every single one of my friends was laid off too. All of us at once, and it wasn't layoffs, it was companies completely going under.
There was a lot of malfeasance too. I knew people who had jobs where there was almost zero work as the company was a borderline scam. People were either playing video games at their desk all day waiting for management to figure out what they were going to work on or they were studying for their next job.
I was super lucky. Both my roommate and I got laid off at the same time, we ended up breaking our lease and going separate ways. I lived with my parents for a while, but I only actually was laid off about 6 weeks before finding a contract job. Neither my finances nor my career really took much of a hit, but my confidence took a major hit that realistically took 5-6 years to really come out of.
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.
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.
I worked with some folks like that. They emphasized always do same day sale, don't sit on the stock after exercising. They had massive tax bills, because they exercised when the stock was flying high, but didn't have enough cash to pay for it. The stock itself had cratered so they couldn't raise money that way.
Also the story of midcap saas going public around 2020.
Application service providers. Was just not the right time.
Stories like that make me wonder why domestic terrorism isn't more popular.
> 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.
> Those who graduate into recessions have crimped lifetime earnings compared to those who graduate into expansions.
It's about not having access to opportunities.
Something that comes to mind as an example: I would argue that the whole F.I.R.E. movement was possible only for a very specific subset of people that started working in tech in very few regions of the world between 2005/2010. That's a 5 years window to get in, maybe a bit more but that's it.
Then the cost of living started booming, stock prices started booming, stock options and other kind of equity grants would never appreciate as before.
People that attempt it now as a form of financial discipline have nothing to do with the people that invented it and retired as millionaires before reaching 30 by being a bit frugal and investing everything in the nasdaq.
I recently stumbled upon the linkedin profile of someone that worked from Apple 2008/2014 and then was able to retire thanks to a mix of stock options and early investments in tech. He was surely savvy about it, but the conditions to be even able to do that seems astronomically low in the grand scheme of things. Just being born in another country or a couple of years later would make it impossible.
And areas of finance like investment banking. The specific examples I'm familiar with who retired quite young got in during maybe the late 1980s and out in probably their 40s.
There were also tech people during the dot-com bubble assuming they had money to invest and got out in time.
But I agree it was probably easier for people in especially SV at especially some of the large tech companies during about the past 15 years.
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.
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/
That sounds a lot like the atmosphere around AI right now
There's a literal aspect of the dotcom era that I miss, the literal dotcom as part of the domain and even company name, the branding, like amazon.com or booking.com. (Booking.com still has that, which is why they don't have to spend all their money on Google Ads and beg Larry Page to let them have some money for themselves, like certain other online travel agencies.) I see dotcoms all the time on planes, ships, buildings. Realworld businesses seem to understand the power of reaching customers directly. But when I see an ad for a new startup, it's usually the company name and two app store icons.
I used to know an accountant that worked for Booking.com. You don't have a clue how much they had to pay to Google every month for ads. Literally a fortune. The thing is: people want to go somewhere, e.g. to Rome. Next thing they do is, type 'hotel in Rome' in Google. Google serves them a couple of paid links, and they check only the first couple of them.
Which is a weird change. I remember when it was common to check the first few pages of results.
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.
My industry is currently going through something of a dotcom burst moment.
I've been in the aid/non-profit sector for fifteen or so years now. Just past forty. Quit my last job in the second half of last year, was a very bad time to do so.
I'm European, but USAID going in the shredder has taken a huge cut out of budgets. The Brits have followed suit, and belts are being tightened in Europe as defence spending becomes a priority.
Layoffs galore, no one big has gone under yet, but the cheque is in the post. A difficult and stressful time to be unemployed.
Been feeling like a change, but at this point in my life I'm not seeing myself integrating well into the corporate world.
I'm appreciating the stories here. Any thoughts and words from the wise on my situation from survivors of the 2000s?
I'm in a similar position, in a related sector (public health lab). After covid money ran out, and departments of health were in the red, our finance people are running the show when before it was the scientists.
When I was far younger I was in a similar situation. Public health staff were fired at state run labs by the thousands in some insane effort to privatise public heath. I ended up moving several hundred kilometers to another city.
My advice, at least for my kind, is to try to reframe how your skillset can be applied to other industries ( included public jobs too).
A colleague become an analyst at department of education, they use excel.
Edit: also like to add that after that experience I found a niche that made me highly employable with skills useful outside of my job. But I guess I'm an oddity compared to most traditional scientists.
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.
It was the first boom-and-bust experience for me. I got laid off from a startup that folded after the bust. That made me risk-averse and a skeptic. The housing bust of 2008 had a completely different flavor and character unlike dot-com. And, a startup I worked at folded in 2009 as well.
Since then, we have not seen a tech related recession - although, there have been ups and downs. As a result the current crop of engineers dont have a visceral experience of what happens in a tech related recession.
Two decades ago, I quite-suddently dropped out of a rural medical school to grow marijuana in the SF East Bay.
Through random medical marijuana introductions, I ended up meeting a co-founder of a Dotcom-era Unicorn — which eventually failed. Through his own alleged financial misunderstandings, he had stupidly kept 90% of his net worth in his Unicorn stock... but still had about a million dollars left-over.
By the time I was working for him, the beautiful Parnassus home (which he then owned, out-right) had been partitioned into several rental units — only slowing his moneydrain.
Very interesting guy, and I had just a few years earlier watched several of my childhood friends not-be-able to attend university (Texas, post-Enron/2001), due to their own family financial issues.
I'm 40, and have experienced FOUR "once in a lifetime financial crisises..." my take-away, even at my young age, is to diversify [particularly into gold, bitcoin, land].
I wish someone would write a book about the dot-com bubble. It's long enough ago to be interesting, yet recent enough that most of the people involved are still alive and available for interviews.
Or a film.
I remember the years leading up to it. I was a kid really (okay, beginning my 30's) and my games were being published by a small company in California. At the trade shows I would often see this guy who was a friend of the publisher who was an amateur investor.
Every time we would catch up with him he would rattle off all the stock symbols he had bought that were on fire and making him bank. For my working-class upbringing, this market stuff was a strange world. He might as well be talking about pari-mutuel wagering (whatever that is).
Some years later when I heard that Netscape was about to go public I decided to see what this investing thing was all about. At that time there was a brokerage in downtown Lawrence, Kansas where you could pay a fee to place an order on a stock. Me and a few other nerds that had never invested in the market before each put a few hundred dollars we had toward Netscape.
With the stock priced at something like $28, I think I placed an order to buy if it was below $40 or something like that. By the end of the day I had learned that Netscape opened at over $40 and, while it dipped mid-day at some point, it never dipped quite below $40 and so I owned zero shares. A near miss?
So it was my first step in investing (or misstep). There would be more (missteps that is).
It was only years later when I was wiser that I realized that the guy who was picking the winners so well back in my trade-show days couldn't really lose — all the stocks were going up.
There are some documentaries on Youtube, for example this one:
https://www.youtube.com/watch?v=FTvfshr4tMw
I love the scene at 19:48, where Larry Wachtel is more or less predicting the crash. The ironic thing is that the bubble kept growing for so long, that eventually even he was convinced that "this time it's different", invested in dotcom companies and lost a lot of money.
https://www.imdb.com/title/tt0256408/?ref_=ls_t_2
also https://en.wikipedia.org/wiki/Dot.Com_(album)
Also, August (2008)
https://en.m.wikipedia.org/wiki/August_(2008_film)
BobbyBroccoli on YouTube does an absolutely phenomenal job creating documentaries. Related to the dot-com burst would be the story he tells about Nortel.
- Part 1: https://youtu.be/I6xwMIUPHss?si=WXwM92NA8V6vdjYl
- Part 2: https://youtu.be/sDdC3-LT7pM?si=aiIDCjHJ0syeZZP4
I was in my late-20s when the bubble burst. There was a palpable sense of "the sky is falling". A lot of not-so-technical people quit (or were let go from) tech jobs to become real estate agents.
One person that really helped me through all the doom-and-gloom was Phillip Kaplan, a.k.a. Pud. Seriously. He ran a site called "Fucked Company", which poked fun at the stupidity of big dotcom companies with questionable business models. The site was funny and all, but what really helped me was how Pud ran a successful web site that made money, by himself, with no Super Bowl ads or anything else. It reinforced to me that a successful business could be run on the web/internet, despite what all the doom-and-gloomers were saying. I knew the web wasn't dead thanks, in part, to Pud and "Fucked Company".
Pud's book, "F'd Companies: spectacular dot-com flameouts", was a good laugh. It's just a simplistic piss-take, but even all these years later, it shows up the sheer ridiculousness of what those dotcoms were trying to do and were able to (apparently easily) get millions of dollars of funding for.
One parallel between the dotcom boom and the Great Financial Crisis was a loosening of standards.
e.g. companies were IPO'ing with zero revenue which would have been unheard of a few years earlier.
This is similar to how people could get "NINJA" (no income, no job, application) mortgages a couple years later.
If you can suddenly get money incredibly cheaply and without any kind of track record, is anyone surprised that things got a little nuts?
P.S. There was even a commercial from a few years after the bust where the scene is a boardroom of executives interviewing two obviously nerdy kids. Someone asks "so this powers the Internet?" and the kids respond "uh, it helps part of the internet work better". Cue executive saying "We would be FOOLS to no invest in this" to narrator: "Times have changed."
The other thing I recall tying those two periods together was enthusiasts saying, in the face of an obvious bubble, "Well, things are different this time."
My glib summation of those two events:
- Dotcom boom deregulated (in the social and technological sense as much as the legal) investing (e.g. the rise of day-trading).
- 2000s housing bubble (pre-GFC) deregulated home-buying (subprime adjustable-rate mortgages).
Perhaps our parting assessment of the ZIRP era will be it cut to the chase and deregulated gambling.
> Perhaps our parting assessment of the ZIRP era will be it cut to the chase and deregulated gambling.
I considered mentioning ZIRP as a "anyone could get money" and glad you made the point better than I could.
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.
> Trillions of $ of government debt and private debt is up for financing at 3-4 times the interest rate
This is a problem, but it's not the current problem. The pain isn't coming from defaults [1]. It's coming from our export industries.
[1] https://fred.stlouisfed.org/series/DRALACBN
US exports make up 11% of GDP. Of that 11%, some fraction is facing retaliatory tariffs.
Considering the DJIA went up 4,000 points from Dec then crashed 4,000 points in Jan, one should be careful assigning cause when it did it again from Jan to Mar.
A lot more than 11% of GDP relies on various imports randomly being subject to tariffs (on everything from steel and lumber to electronics). This is effecting everything from manufacturing and construction to retail.
DJIA is a garbage index that's weighted by share price instead of anything meaningful and only includes 30 companies.
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.
What crash so you foresee? We just had a correction but that’s typical and healthy.
How do you think it will unfold?
Possibly: Bank of Japan raises (or maintains) interest rate today or in the future, causes unwinding of the carry trade, which in turn causes over-leveraged banks (hello UBS/Credit Suisse) and hedge funds (hello Citadel, Susq, etc) to close/cover positions for margin, causing a chain-reaction and big crash.
Again, basically the same root cause as 2008: lack of regulation, lack of enforcement, institutions "investing" in dogshit wrapped in catshit that shouldn't have exited in the first place, crash.
Peak lunacy for me was when 3com owned most of Palm, but 3com was worth less than the value of their Palm shares.
It was a crazy time for sure. I remember going to a few of the after-work and investment networking parties in SF (I can’t remember what they were called though). I’m not sure if such things still exist? You turned up, got a colored sticky badge (investor, seeking investment or neutral) and drank a lot and networked around the party.
I flew over from Europe a couple of times to meet with various dotcom startups regarding opportunities across the pond.
It was fascinating seeing the ecosystem in this bullish boom time and then also watch it collapse. I still have a large number of the physical business cards I collected at such networking events.
I remember the effect of the bubble bursting and collapse of so many of these companies as the investment money disappeared. Any projects around social topics, training and education, and other “soft” topics were first to die.
It taught me that you can only work in such verticals in a boom. You need to get out in a timely manner before the crunch comes.
Since then I’ve always played it safe. I focused on what I consider to be “recession proof” industry verticals.
It got me through the 2008 crash and I think it should now get me through this coming one.
The upcoming AI crash is gonna be seriously big
But anything that survives the crash will be the next Google.
please provide context when making statements, thats a better way to communicate your ideas. what, when, why, how, where - so a reader takes your map, and can relate to the territory.
>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)?
For finance and economics researchers this was an amazing period to study. Here are a couple of papers I love:
"Rose.com by any other name" by Cooper, Dimitrov, and Rau: https://home.business.utah.edu/finmc/FinalJFversion2371-2388...
"Can the Market Add and Subtract? Mispricing in Tech Stock Carve-outs" by Lamont and Thaler: https://web.archive.org/web/20170813171441id_/http://faculty...
"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.
and there was no more traffic on the 101
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.
Didn't realize it hit Socal so hard.
This was early in my career, and one thing I learned is that the best way to stay antifragile is to stay small, stay unsexy, and always be the one in the drivers seat.
I was working as a developer for one of the energy trading companies at the time. In the summer of 2001 there were non stop layoffs and then 9/11 hit. you could not buy a job as a software developer at the time. I remember reviewing contract resumes of very experienced candidates and the recruiter had 35/hour rates on them.
The massive photo and site header of this site are fun but distracting when reading on mobile. Removing the top photo and removing or minimizing the top header would be a nice change for readability. I’m not sure what the SEO recommendation would be though.
I can pinpoint the burst (at least for me) to a very specific date. March 21st 2000. When Lycos Europe IPOed and closed the day below its issue price.
Like www.sec.gov, this website only sends compressed data, ignoring Accept-Encoding: identity as a means of disabling compression.
IME, most websites respond to the Accept-Encoding header, or at least send uncompressed data in the absence of it. I normally do not send this header and I almost always receive uncompressed data. Sometimes there are rare exceptions. (For these I excpetions usually test with Accept-Encoding: identity.) I am generally curious about these exceptions, hence the comment. At least once, the website operator responded indicating it was due to a configuration error.
I’m genuinely curious about your reasons to intentionally disable compression? Is there any scenario where gzip is too costly for your device?
> 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.
I lived through that time as well by 1999 it was pretty clear Google was "the best" search engine site. Alternatives like Lycos, Infoseek, Altavista etc. were on the downswing.
I can remember the characters in an episode of Buffy the Vampire Slayer talking about Google (not sure if that counts as household awareness but it was getting there).
1999 was the time of Napster, it was a completely different internet it really felt like a Wild West.
Fortune 500 is a ranking by revenue, not market capitalization, if that helps.
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.
It is. Maybe you know this, but you can right-click the text and choose "Inspect" and de-select the light grey color styles to make it more readable. I feel like an extension could do a decent job of automating this (simply remove all text color styles, or something like that).
Firefox has a "reader view" which works well for things like that.
Article on dotcom without mentioning webvan!
Lol those were the days...
I was there, or more accurately not there since I wasn't in Silicon Valley, when the Dot Bomb and 9/11 shifted us into this reality. Whatever all this is.
It all started on Friday September 29, 2000 when Apple/AAPL fell by roughly half in one day due to missing its quarterly earnings estimates by a few cents:
https://money.cnn.com/2000/09/29/markets/techwrap/
My business partner at the time and I were splitting $1200/mo on shareware game proceeds from our startup. My share of the rent was $250/mo on a $500/mo apartment and my student loans were $340/mo, so for just a month or two I made rent on my own venture. I just didn't know that it would be for the last time.
Because the next month we made $12. Not a typo. Our sales collapsed with no warning, and a few months later I started moving furniture to make rent, since I had done that for a summer in college.
I had also just spent a year working on my one and only game, hoping that it would make $12-24,000 the first year and roughly double our income so that I could get to the real work of designing languages and frameworks that would greatly simplify software development. But my game only made about $2000 total because of the Dot Bomb, so that work ending up being basically pointless.
Along with my thrown-away work in pretty much all of the failed ventures I'd be part of for the next 25 years. No winning the internet lottery, not even gaining traction and feeling what it's like to try and succeed and build on that success incrementally.
In the time since, as I've pulled myself up by my bootstraps over and over, or more accurately been pulled up by friends and family, I've learned a lot about manifestation. How our feelings co-create this reality we share. And a lot of lessons. The most important being:
Success isn't being able to support yourself, but being able to support others.
That's what went wrong with the world in the time since. Instead of Wikipedia and eBay and PayPal paving the road towards a merit-based, egalitarian society that pays excess economic wealth into the commons, we have billionaires and ensh@ttification vacuuming up all available capital into a black hole of greed.
Instead of automation leading the way towards UBI and self-actualization, we have the wealthiest and most powerful people in the world cancelling government services to subjugate us into neofeudalism, which will lead to the unnecessary deaths of millions of people worldwide.
I know now that my dreams of an early win leading to a lifetime of pioneering innovation were never meant to be. And more shockingly, that had I won, I would have ended up an empty husk like Elon, or a glazed-over caricature of myself like Jeff. I'm reminded of the Twilight Zone episode A Nice Place to Visit, where a man gets everything he dreamed of only to realize that he's in hell. The only thing that keeps me going is the hope that the opposite may also be true.
I've told this story too many times and now it feels like an old sweater that doesn't fit anymore. Truthfully, there's only now. I try to do a little each day to get closer in alignment to the free world that I glimpsed so briefly.
But in the meantime, surviving this garbage economy takes everything we've got. It's hard for me to see that so many people have bought into the status quo, especially young people. Born under the yoke but calling it liberty.
That denial is why the cost of living is 2-4 times higher now than it was in the 1990s, due to deregulated capitalism encouraging monopoly. Not saying that capitalism doesn't work, just that if it did and we had actual competition instead of wealth inequality, then the cost of living would be 2-4 times lower than it was, and 4-16 times lower than it is.
There's an expression: dirty hands clean money. By that principle, we see that all profit comes at a cost to others doing the work.
And by extension, that all power takes from some to give to others.
There's a movie called August set in 2001 about the struggle to stay afloat during the collapse, starring Josh Hartnett:
https://www.imdb.com/title/tt0470679/
The Dot Bomb never ended. If we want to escape it, we have to meditate on letting go of ego-based goals and outsmarting the systems of control that still perpetuate it.
[dead]