When the Dotcom Bubble Burst

  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.

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.

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

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.

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?

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.

I guess it's time to start a company called mVidia.

I guess just because a lot trades were initiated over phone?

> 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.

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.

Funny how usage of the the word moat simply exploded here on HN a few weeks ago.

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.

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.

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

APPL? Relevant to the discussion above on similar names.

Thats because you're getting in late. Startups still issue options - ISOs and NSOs to early employees, with different tax treatment.

Picking stocks retroactively is easy.

Monster didn't come until 2002.

For every Monster, Red Bull or Rockstar there were probably two dozen energy drink brands that failed.

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 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.

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.

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)

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.

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.

Stories like that make me wonder why domestic terrorism isn't more popular.

> 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.

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.

Which is a weird change. I remember when it was common to check the first few pages of results.