When the Dotcom Bubble Burst

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.

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.

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

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

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

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

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.

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.

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!

The upcoming AI crash is gonna be seriously big

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

Sounds like a lot of startups.

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).

and there was no more traffic on the 101