Into the bubble 2.0: Proceed with caution

Henry Blodget (who was at the heart of the last dotcom bubble) advises we all proceed with caution in a Guardian article today:

"So why can't we all
load the boat with net stocks, make back the money we lost five years
ago, and retire rich? Why can't today's industry executives dismiss the
90s boom as a silly kindergarten recess and be confident that it is
"different this time"?

sadly, even the most powerful trends rarely proceed forever up and to
the right. These days, it's easy to make money in internet-land, and
when it's easy to make money, trouble usually lies ahead. What,
exactly, this trouble might be - and when it might come - is hard to
say. If it were obvious, the market would already have discounted it.
Some possibilities certainly leap to mind: a global recession hammering
advertising spending (which is usually among the first line items to
get cut); click-fraud or a loss of exuberance hobbling search; Google's
dependence on a single high-growth revenue stream, leaving it exposed
to a stumble; Yahoo's continental drift toward its its new boss's roots
in the movie business resulting in a more capital-intensive and slower
growing business model; a loss of focus at eBay stemming from a
high-risk bet on Skype. Any of these risks - and dozens more - could
temporarily kneecap the stocks and leave investors wondering how they
could have been so moronic to fall for the internet story again.

in this second go-round, we might enjoy another five to 10 years of
extraordinary, smooth growth, making the believers rich and leaving the
cautious feeling like (poor) worry warts. One of the errors that people
made in the 90s - one of the errors that I made -was to assume the
trouble would be visible on the horizon before it wreaked commercial

Unfortunately, it wasn't then, and it probably won't be this time."

Comments (6)
  1. Great article, thanks for the link.

    With Google doing so well it’s easy to fall into a false sense of security wrt IT stocks.

  2. Angels and VC’s can proceed with caution, but not me. I’m going to continue my "bubble-headed exuberance" and "giddiness" as I try to come to grips with the Web 2.0 meme.

    Web 2.0 may border on hubris and folly at times, but it is necessary if we hope to push forward and help the meme evolve into something useful (and profitable).

    Blodget’s article, and a recent post on Joel on Software < >, scoffs at the excitement surrounding Web 2.0 and the social software movement in general. They seem to compare it to the irrational exuberance of the late 90’s.

    Irrational exuberance was a problem in the financial markets. It was never a problem in the marketplace of ideas.

    VC’s will loose money. If Wall Street comes unglued again, mom and dad will loose money. But that’s their problem. I’m not going to carry their baggage as I try to get my hands around the Big Idea (what ever that is).

    The question I keep coming back to is the value of failure. Wall Street hopes to avoid failure. Those of us in the trenches cannot!

    Failure is great. It should be energetically pursued. We should embrace it and wear it like a badge of honor. And we should remember it. Others can cry over lost paper wealth, but I’m going to work an idea until I, or someone else, gets it right.

    These are great times for anyone interested in ideas. Wall Street be damned, I’m focusing on progress toward the Big Idea.

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