Speaker 1: Get in text with technology with tech Stuff from how
Speaker 1: stuff Works dot com. Hey there, and welcome to tech Stuff.
Speaker 1: I am your host, Jonathan Strickland. I'm a senior writer
Speaker 1: with how stuff works dot com and on tech Stuff.
Speaker 1: We like to cover all things tech, whether we love them,
Speaker 1: hate them, or otherwise indifferent to them, as long as
Speaker 1: the stories themselves are interesting. And I think that the
Speaker 1: story we're gonna cover today or begin to cover today
Speaker 1: spoiler alert, this is a part one of a multipart episode.
Speaker 1: I think this is a particularly interesting story. It's got
Speaker 1: a lot of morals to it, write a lot of
Speaker 1: lessons to take home. And today we're gonna talk about
Speaker 1: the dot com bubble and what happened to some of
Speaker 1: the folks and companies that we're affected by that bubble bursting.
Speaker 1: And it's actually a really fascinating series of stories. And
Speaker 1: as I said this as part one of the discussion,
Speaker 1: it turns out there are more companies that are really
Speaker 1: important or were really important, that we should cover, including
Speaker 1: a couple that weathered the dot com disaster and stuck
Speaker 1: around and are flourishing even now. Cough Amazon, cough cough.
Speaker 1: But before we jump into a where are they now discussion,
Speaker 1: I should backtrack and talk about what the dot com
Speaker 1: bubble was. Some of you may even be young enough
Speaker 1: where you weren't around during the dot com bubble days,
Speaker 1: or maybe you were very young when it happened. I
Speaker 1: was actually entering into my professional career at the time
Speaker 1: of the dot com bubble bursting, and it was a
Speaker 1: rough time. I did not work directly in the dot
Speaker 1: com sector. I worked in a company that had a
Speaker 1: lot of clients that were dot com clients. There were
Speaker 1: there were companies that were using the company I worked for.
Speaker 1: I worked for a consulting firm back in those days,
Speaker 1: the dark dark days, pre health stuff works, and a
Speaker 1: lot of our clients were dot com companies. When the
Speaker 1: bubble burst, most of those companies ended up going away
Speaker 1: or otherwise having severe restrictions put in place, and that
Speaker 1: affected the company I worked for. So this was a
Speaker 1: big thing. It wasn't just that certain companies went under
Speaker 1: and people lost their jobs. There was a ripple effect
Speaker 1: that was felt throughout commerce in general for quite some time. Now,
Speaker 1: let's address this concept of what an economic bubble is
Speaker 1: in general, so that we can just understand what we're
Speaker 1: talking about. Business Insider offers this helpful definition. And economic
Speaker 1: bubble exists whenever the price of an asset that may
Speaker 1: be freely exchanged in a well established market first sores
Speaker 1: then plummets over a sustained period of time at rates
Speaker 1: that are decoupled from the rate of growth of the
Speaker 1: income that might reasonably be expected to be realized from
Speaker 1: owning or holding the asset. Thanks Business Insider, that clears
Speaker 1: things right up. Let's break that down because it's actually
Speaker 1: a pretty simple concept when you when you really look
Speaker 1: at it. But for some reason, some entities find it
Speaker 1: necessary to obviuse skate things with language rather than just
Speaker 1: say things in simple terms. And an economic bubble occurs
Speaker 1: when people are essentially paying more for something, then what
Speaker 1: that's something is ultimately worth. And keep in mind what
Speaker 1: something is worth is based upon our perception of its value. Right.
Speaker 1: There's nothing intrinsic about any one thing versus any other
Speaker 1: thing that makes it automatically worth more or less. It's
Speaker 1: how we perceive it. Uh. Some things are necessities, right,
Speaker 1: like food and water. Those clearly have a value in
Speaker 1: the sense that they keep us alive. And depending upon
Speaker 1: how hungry or thirsty you are, it may be of
Speaker 1: much greater value to you at that time. If you
Speaker 1: are absolutely stuffed with the last visit to the all
Speaker 1: you can eat buffet over at the Golden Corral, you're
Speaker 1: probably not really ready to pay a whole bunch of
Speaker 1: money for a steak. But if you haven't eaten for
Speaker 1: a couple of days, that might be worth everything to you.
Speaker 1: So the point being that while they were talking in absolutes,
Speaker 1: really you should remember these are gradients. So people start
Speaker 1: paying more for something than what the perceived value of
Speaker 1: that thing actually is. Eventually, this imbalance reaches a tipping point,
Speaker 1: and you might say people wisen up, or maybe they
Speaker 1: get cold feet. They realize that they're probably not going
Speaker 1: to get a return on any investment they put into
Speaker 1: that company. The point is everyone starts to pull away
Speaker 1: from that thing that they had been pouring money into,
Speaker 1: and then the vacuum created causes the market to destabilize
Speaker 1: and ultimately collapse in on itself, at least in the
Speaker 1: case of a bubble collapse. And there's been a lot
Speaker 1: of economic bubbles over the years, generally speaking. The dot
Speaker 1: com bubble began in the spring of nineteen ninety seven
Speaker 1: and collapsed initially around two thousand, two thousand one. That's
Speaker 1: when we started seeing the first major trouble spots arise,
Speaker 1: and then you would see the aftershocks of that continue
Speaker 1: further into the future of that time. Our past time
Speaker 1: is linear, and so it kind of shook out by
Speaker 1: two thousand three. So seven to two thousand three is
Speaker 1: generally the period of the dot com bubble, with a
Speaker 1: lot of the company's going out of business around two
Speaker 1: thousand two thousand one. So what caused this bubble and
Speaker 1: its collapse. Well, I've done a few episodes about the
Speaker 1: dot com bubble, so I'm just going to give you
Speaker 1: a summarized version of what happened this episode. In the
Speaker 1: f c C in the United States lifted restrictions that
Speaker 1: had up to that point outlawed commercial use of the Internet,
Speaker 1: so now people could actually use the Internet for commercial
Speaker 1: purposes starting in ninety one. One year earlier, back in
Speaker 1: Tim Burners Lee had built the first web server and
Speaker 1: web client. He was working with CERN, that's the institution
Speaker 1: that runs the large Hadron Collider, so he had built
Speaker 1: the first one of those back in So in ninety one,
Speaker 1: the web is brand spanking new, almost no one has
Speaker 1: heard of it. Really, it's in research facilities and universities.
Speaker 1: I remember the first time I saw the Worldwide Web,
Speaker 1: first time I ever saw a web client was when
Speaker 1: I was going to a college in North Georgia, probably
Speaker 1: three so that's a few years after the invention of
Speaker 1: the web client and the web server, and I remember
Speaker 1: thinking when I looked at it, this is never gonna
Speaker 1: take off. It was way too slow. Even with our
Speaker 1: our our colleges computer connections, web pages just took forever
Speaker 1: to load, and they were really boring to look at.
Speaker 1: I thought, why bother with that? Just use tell net.
Speaker 1: So I probably would be one of these pulled back
Speaker 1: in the dot com days who made some misguided decisions,
Speaker 1: because I certainly didn't see the Web becoming nearly as
Speaker 1: popular as it did, nor would I have guessed that
Speaker 1: the Web would one day serve at least in part
Speaker 1: as the reason why I had a job. And now
Speaker 1: I am totally there. Anyway, The point was, it was
Speaker 1: early days, but everyone was really excited about it. The
Speaker 1: potential for the Internet was enormous, and everyone kind of
Speaker 1: recognized it. Eventually started hearing people talk about something called
Speaker 1: the Information super Highway referring to the Internet, and it
Speaker 1: was just starting to take hold. Even by the mainstream
Speaker 1: public was still largely unaware of the Internet and what
Speaker 1: it was all about. There were a lot of folks
Speaker 1: who thought that the Internet and the Web were the
Speaker 1: same thing. You could argue that there's still a lot
Speaker 1: of people who think the Internet and the Web are
Speaker 1: the same thing. They're not. The Web is just one
Speaker 1: facet of the Internet. It's kind of like a layer
Speaker 1: on top of the foundation that is the Internet, with
Speaker 1: other layers like email and FTP servers and that sort
Speaker 1: of thing also existing on this foundation. Remember, the Internet
Speaker 1: itself is a network of networks. It's the interconnectivity of
Speaker 1: all these different machines and the protocols that allow them
Speaker 1: to communicate with each other. That's what the Internet is now.
Speaker 1: You may have even seen some news clips from the
Speaker 1: mid nineties of various news anchors and television show hosts
Speaker 1: trying to suss out what the heck all this Internet
Speaker 1: terminology actually meant. There's a great clip a Bryant Gumbel
Speaker 1: who is trying to figure out the structure of an
Speaker 1: email address, and he's talking about the AT symbol. You know,
Speaker 1: the A inside the circle, and he's like, is that
Speaker 1: an AT? I heard it was an AT, but that
Speaker 1: can't be right, right, And so it's kind of charming
Speaker 1: really to see a time when the Internet had been
Speaker 1: around for a few years, people in the know had
Speaker 1: been using it, but it was just now starting to
Speaker 1: get into mainstream consciousness. Uh. It was a really exciting
Speaker 1: time and technology and a lot of companies were looking
Speaker 1: at the Internet as the next possible way to reach
Speaker 1: customers or to convert people into customers, and because the
Speaker 1: FCC had lifted those commercial restrictions on the Internet, companies
Speaker 1: had the opportunity to create a presence there and define
Speaker 1: their online brands. In an interview that same year that
Speaker 1: Bryant Gumble was trying to figure out what the ADS
Speaker 1: symbol was, Eric Schmidt, who would later on make a
Speaker 1: really big name for himself over at Google, proclaimed that
Speaker 1: by the year two thousand, every major company would have
Speaker 1: a presence on the Web in some way, and he
Speaker 1: was right on the money right there. Everyone needed to
Speaker 1: get on the web, even if they didn't understand exactly
Speaker 1: what they were going to do. Once they had a
Speaker 1: web presence, they knew that they needed to be there
Speaker 1: because people were going to go there. And while in
Speaker 1: the early days no one was really sure how the
Speaker 1: web might serve as a way to generate revenue apart
Speaker 1: from Internet service providers who were making money by charging
Speaker 1: people for Internet access, everyone was sure that the web
Speaker 1: was the pathway to fame and fortune or if you
Speaker 1: prefer if you're an Indiana Jones fan, origin and Glory kid,
Speaker 1: fortune and glory. Many people were becoming Web citizens, meaning
Speaker 1: that you had a lot of people subscribing to services
Speaker 1: that would allow them to access the Internet. Good Old
Speaker 1: American Online would be one of those, America Online giving
Speaker 1: me free CDs to act as coasters since six uh.
Speaker 1: But a lot of people were starting to subscribe to
Speaker 1: Internet service plans and start to serve the web. So
Speaker 1: there was definitely an audience there for companies, and the
Speaker 1: potential for customers was also there. So there was this
Speaker 1: unprecedented method of reaching out to people who would become
Speaker 1: your customers. That gave companies a chance to have a
Speaker 1: more personal connection with their customers instead of just blasting
Speaker 1: out ads everywhere. And this became something of a land grab,
Speaker 1: and in the midst of all this chaos, a new
Speaker 1: entity emerged, and these were companies that didn't just flock
Speaker 1: to the Web in order to extend an already existing
Speaker 1: brand like Coca Cola or Nike or something like that.
Speaker 1: These were companies that could not have existed before the web.
Speaker 1: These were the web based or web integrated companies that
Speaker 1: depended heavily upon the Web for their respective business models.
Speaker 1: These were the dot coms. Now, not every dot com
Speaker 1: was a web based company, I suppose. I mean, the
Speaker 1: dot com bubble affected more than just Internet related companies.
Speaker 1: Some possibly fell more into the general technology category, but
Speaker 1: many of the famous ones either depended solely or heavily
Speaker 1: on the Internet as part of their business. And in
Speaker 1: April nineteen seven, business was booming. Startup companies were receiving
Speaker 1: enormous amounts of investment capital. They were going to initial
Speaker 1: public offerings super early, so they were turning into from
Speaker 1: privately held companies into publicly traded companies at an enormous rate.
Speaker 1: I mean, we were seeing I p o s every
Speaker 1: few weeks, it seemed like, from these various startup companies,
Speaker 1: and people were eager to purchase shares in them and
Speaker 1: to join in this gold rush that was the early
Speaker 1: days of the commercial web. Uh so dot com companies
Speaker 1: represented this idea of of opportunity and potential, and no
Speaker 1: one was really sure where it was going to go,
Speaker 1: but everyone was pretty sure it was gonna get really awesome.
Speaker 1: If you back the right company, you would strike a
Speaker 1: vein of gold and you would be set for life.
Speaker 1: Companies that were a little more than a name and
Speaker 1: a cool sounding idea, we're getting millions of dollars and
Speaker 1: investments long before they could prove that they had any
Speaker 1: sort of working business plan or strategy. And so these
Speaker 1: new startups began to sell lots of stock, and those
Speaker 1: stock prices were skyrocketing. Many startups rewarded employees with stocks,
Speaker 1: paying them in shares of the company. Typically you'd be
Speaker 1: promised a salary that would be pretty good, but the
Speaker 1: stock options had the potential to turn you into a millionaire.
Speaker 1: Several companies had employees who, at least on paper, had
Speaker 1: become millionaires because of these stock options. Uh Normally, you
Speaker 1: can't sell your stock options right away, so you have
Speaker 1: to wait for them before you can. You have to
Speaker 1: wait a certain amount of time before you can exercise
Speaker 1: them and then sell them, which meant that on paper. Sure,
Speaker 1: you're a millionaire, but you can't actually access any of
Speaker 1: that money or spend it in any meaningful way. If
Speaker 1: you started spending, you would essentially be going into debt
Speaker 1: and you would have to wait for your stocks to
Speaker 1: mature or you're really you're for you to be able
Speaker 1: to exercise your options is really what you would need
Speaker 1: to be able to do, and then sell that off
Speaker 1: in order to actually get access to that money. Meanwhile,
Speaker 1: you had companies creating ridiculous head hunting tactics in order
Speaker 1: to gain the right talent, and folks would jump from
Speaker 1: job to job. They get lured away from one company
Speaker 1: to another with a promise of more cash or better
Speaker 1: benefits and more stock. And this was really a crazy
Speaker 1: time to be working in any sort of tech industry.
Speaker 1: There was no such thing as loyalty on either side,
Speaker 1: because you had companies that were overinflated and then going
Speaker 1: under in the course of just a couple of years,
Speaker 1: and you had employees who would desktop from one company
Speaker 1: to another at the slightest indication that they would be
Speaker 1: able to get a favorable deal. So it really destabilized
Speaker 1: the workforce, and I think we're still feeling effects of
Speaker 1: that more than a decade later. The stock inflation in
Speaker 1: particular was ultimately unsustainable back in before the bubble began
Speaker 1: to inflate. The Nasdaq Stock Exchange, which is home to
Speaker 1: many tech company stocks, it typically has younger industry companies.
Speaker 1: The the old companies are on the Dow Stock Exchange,
Speaker 1: but the really the young, scrappy ones tend to be
Speaker 1: on NASDAC, including most of the tech companies. Uh. Well,
Speaker 1: the Nasdaq index was at one thousand points, but hang on,
Speaker 1: what the heck are NAZDAC points and what did those
Speaker 1: points even mean? Well, to get at this number, you
Speaker 1: have to follow a few steps, and to understand this,
Speaker 1: I'm going to use a hypothetical example. So let's say
Speaker 1: I have a company and I've launched my new company.
Speaker 1: We'll call it um Oh Ben would like this. I'm
Speaker 1: gonna call it Baby Jay's Lemonade stand and it gets
Speaker 1: listed on the Nasdaq Stock Exchange. So the number of
Speaker 1: shares I issue and the price that those shares trade
Speaker 1: at decide my company's market capitalization, which is the market
Speaker 1: value of my company. So for this example, let's say
Speaker 1: Baby Jay's Lemonade standards trading at ten dollars a share,
Speaker 1: and I have a hundred thousand shares available on the market.
Speaker 1: So we take those hundred thousand, we multiply that by ten,
Speaker 1: and that gives me one million dollars. That should mean
Speaker 1: that Baby Jay's lemonade stand has a market capitalization of
Speaker 1: a million bucks. Well, that's how much my company is
Speaker 1: worth according to the market. But what about the NASDAC points. Well,
Speaker 1: those points represent a market capitalization weighted approach, meaning the
Speaker 1: points give you a quick glimpse of the value of
Speaker 1: the stocks traded inside the index. Now, I'm talking about
Speaker 1: a collective value here, not an individual company, and the
Speaker 1: bigger companies have a stronger influence on the overall point
Speaker 1: value than the smaller companies because the bigger companies typically
Speaker 1: have way more shares on the market. So it has
Speaker 1: a relationship between the value of the shares and the
Speaker 1: number of shares that are out there in total across
Speaker 1: all of NASDAC. So if a few big companies are
Speaker 1: doing really well and a bunch of smaller companies are
Speaker 1: doing really not so well, the NASDAC point system may
Speaker 1: still indicate a healthy growth because those larger companies are
Speaker 1: making a bigger impact on the points than the smaller ones. Anyway,
Speaker 1: back in April nineteen nine five, like I said, the
Speaker 1: NAZADAC points were at about thousand. Five years later in
Speaker 1: two thousand, in March the index was closer to five thousand,
Speaker 1: so it had grown incredibly over the course of those
Speaker 1: five years. Keep in mind, when the Nazdac launched, it
Speaker 1: had one hundred points. That's how much they determined we're
Speaker 1: in there in nineteen seventy one when the NAZDAC launched
Speaker 1: one hundred points. So from nineteen seventy one to nineteen
Speaker 1: ninety five it went from one hundred points up to
Speaker 1: a thousand points. From ninety five to two thousand it
Speaker 1: went to five thousand points. That's an incredible amount of growth.
Speaker 1: The actual combined value of all those stocks back in
Speaker 1: March two thousand, before the bubble began to deflate, was
Speaker 1: six point seven one trillion dollars. Wow, that's a lot
Speaker 1: of cheddar By April sixth two thousand, so March two
Speaker 1: thousand six point seven one trillion. April the next month
Speaker 1: it had dropped to five point seven eight trillions, So,
Speaker 1: in other words, in one month, the market had lost
Speaker 1: nearly one trillion dollars, or if you prefer a real
Speaker 1: world scenario. During the two thousand Super Bowl, there were
Speaker 1: seventeen dot com companies that had ads that played during
Speaker 1: that Super Bowl, and collectively those ads cost about forty
Speaker 1: four million dollars. During the two thousand one Super Bowl,
Speaker 1: one year later, only three dot com companies had ads
Speaker 1: played during the Super Bowl. Most of the other companies
Speaker 1: that had advertised during the previous year didn't even exist anymore.
Speaker 1: That's how brutal this bubble bursting was. So what happened, Well,
Speaker 1: the big thing that happened was that people lost confidence
Speaker 1: in the tech sector in general and the dot com
Speaker 1: sector in particular. A bit of a panic began in
Speaker 1: March two thousand when Dell and Cisco, which are two
Speaker 1: large tech companies that had predated the dot com era
Speaker 1: and we're large enough to weather those issues. They had
Speaker 1: been growing more organically over time than the dot com
Speaker 1: startups had, so del and Cisco would get big, but
Speaker 1: they got big at a slower pace. These startups would
Speaker 1: suddenly just inflate to huge size out of nowhere. Well,
Speaker 1: del and Cisco both gave a little bit of a scare.
Speaker 1: Two investors they decided to UH to authorize selling a
Speaker 1: huge amount of stock and end up being this kind
Speaker 1: of domino effect, right, so they placed large cell orders
Speaker 1: on their stocks. It's spooked some investors. People began to
Speaker 1: sell off their tech stocks in general. And when you've
Speaker 1: got a lot of people trying to sell a stock
Speaker 1: and not a lot of people trying to buy stock,
Speaker 1: prices began to drop. Demand had diminished. You suddenly had
Speaker 1: people trying to dump their stock as opposed to buying
Speaker 1: up more. And if no one wants to buy it,
Speaker 1: then your price goes down. If I'm selling lemonade at
Speaker 1: at Baby Jay's lemonade stand, but I'm selling it at
Speaker 1: five bucks of glass and no one's buying a glass,
Speaker 1: chances are I need to start lowering that price. And
Speaker 1: it might not be until I get all the way
Speaker 1: down to a quarter of glass before anyone even bites
Speaker 1: or SIPs. I guess it's lemonade, so you wouldn't bite
Speaker 1: it anyway. These startup companies, many of which have been
Speaker 1: burning through crazy amounts of investment money, had failed to
Speaker 1: show any signs of actually creating a viable business. Some
Speaker 1: companies were struggling to turn a profit, and others weren't
Speaker 1: doing much of anything as far as the average investor
Speaker 1: could see. A lot of them were spending all that
Speaker 1: investment money on lavish, trendy office spaces or crazy amenities,
Speaker 1: partly in an effort to attract talent from other companies,
Speaker 1: and partly just as an act of extravagance. It was
Speaker 1: a house of cards, and once people began to question
Speaker 1: it and wonder if they were ever going to a
Speaker 1: return of their investment, the whole thing began to topple.
Speaker 1: For many of those companies, the stocks they issued weren't
Speaker 1: worth the paper they were printed on. Employees who were
Speaker 1: promised a future filled with wealth watched as their compensation
Speaker 1: shriveled up and all those shares in the company became worthless.
Speaker 1: And many of the leaders of those companies were held
Speaker 1: up to scrutiny and some of them to ridicule. But
Speaker 1: I want to make this clear. I think most of
Speaker 1: those folks were genuinely trying to make a viable company.
Speaker 1: There are a few m M, let's call them jackasses
Speaker 1: in the group who were boasting about having lear jets
Speaker 1: and other crazy amenities, and perhaps some of the things
Speaker 1: that happened to them were well, let's just say they
Speaker 1: are probably people who were experiencing a sense of shot
Speaker 1: in freuda as it was unfolding. Uh. And in some
Speaker 1: cases they were just trying their best, but they didn't
Speaker 1: have a business plan that was very solid, or they's
Speaker 1: got too much money too quickly, and that paradoxically led
Speaker 1: them down to their eventual collapse. Now we're gonna talk
Speaker 1: about some specific companies and what happened to them in
Speaker 1: our next section, but first let's take a quick break
Speaker 1: and thank our sponsor. Alright, so that was the super
Speaker 1: fast version of the dot com bubble bursting. Now let's
Speaker 1: talk about some of the companies and founders that were
Speaker 1: involved in this mess. One of those companies was Broadcast
Speaker 1: dot Com. So the history of this company goes back
Speaker 1: aways before there was a web actually, So back in
Speaker 1: there was a guy named Cameron Christopher Jabe. It seems
Speaker 1: goes by Chris Jabe these days, and I may even
Speaker 1: be mispronouncing that it's j A E. B. If we're
Speaker 1: doing it as old English, it would be jab. Anyway,
Speaker 1: he felt he could really solve a problem that sports
Speaker 1: fans run into, and that problem is that if you're traveling,
Speaker 1: you might not have any way to tune into a
Speaker 1: station and listen to your home team whoopop on. I
Speaker 1: don't know. Let's say it's the New York Yankees, because
Speaker 1: they deserve it. It's my fantasy, let me live it.
Speaker 1: Jeb's initial approach was to ask various sports teams if
Speaker 1: he could get permission to broadcast the events of games
Speaker 1: to an audience, and he found an early investor in
Speaker 1: Mark Cuban. Now by this time we were talking about
Speaker 1: the nineteen nineties, and Mark Cuban had apparently been thinking
Speaker 1: about a similar idea for a while, and Cuban effectively
Speaker 1: took control of the company in return for his investment.
Speaker 1: Uh he brought on a guy named Todd Wagner who
Speaker 1: had attended Indiana University as did Mark Cuban, and Wagner
Speaker 1: held a law degree and was a c p A.
Speaker 1: And in they formed a company called audio Net. Three
Speaker 1: years later they would rebrand it as broadcast dot com.
Speaker 1: The core of the business remained this idea of streaming
Speaker 1: games over the Internet, or really not streaming a game
Speaker 1: so much as streaming the commentary about a game over
Speaker 1: the internet. In the company went public and stock prices skyrocketed.
Speaker 1: In Yahoo acquired Broadcast dot Com in a stock purchase
Speaker 1: deal that was valued at five point seven billion dollars.
Speaker 1: These days, it's often cited as one of the worst
Speaker 1: acquisitions of all time now around at that that point,
Speaker 1: in fact, we did a tech Stuff episode where we
Speaker 1: talked about this. Around then, there were about a half
Speaker 1: million users on broadcast dot com and they, you know who,
Speaker 1: spent five point seven billion dollars in stock, So it
Speaker 1: essentially worked out to being ten thousand dollars per user
Speaker 1: of broadcast dot Com. So yeah, who could have done
Speaker 1: the same thing by just going to everyone who had
Speaker 1: a Broadcast dot com active account and cutting them a
Speaker 1: check for ten grand and they would have spend the
Speaker 1: same amount of money ten dollars. I guess if I
Speaker 1: were a user of broadcast dot Com, I would have
Speaker 1: felt really flattered that I was valued so highly well.
Speaker 1: Cubans sold off his Yahoo shares, or most of them,
Speaker 1: and he secured himself as a billionaire. Todd Wagner also
Speaker 1: became a billionaire, but he would stay on with Yahoo
Speaker 1: until the year two thousand and he turned down an
Speaker 1: opportunity to become the chief operating officer of Yahoo. Jab,
Speaker 1: the founder of the feast, received a relatively paltry fifty
Speaker 1: million dollars. So even though it was his idea, and
Speaker 1: he often is overlooked in discussions about broadcast dot com.
Speaker 1: If you talk about broadcast dot com, you talk about founders,
Speaker 1: it's almost always Mark Cuban and Todd Wagner. They almost
Speaker 1: never mentioned Jab, who had actually come up with the
Speaker 1: idea in the first place. As for the company, even
Speaker 1: with y'all whose considerable wealth and size behind it, it
Speaker 1: never really turned into anything profitable, and so in two
Speaker 1: thousand two, Yeahoo effectively shut it all down. Mark Cuban
Speaker 1: is still an investor. He's also the owner of the
Speaker 1: Dallas Mavericks, so he's been doing all right. You might
Speaker 1: have seen him on Shark Tank. He also tends to
Speaker 1: speak out on matters of political significance. Todd Wagner has
Speaker 1: become known as an entertainment investor. He has interests in
Speaker 1: several television and movie ventures, and he's also the head
Speaker 1: of a large charitable foundation. So that's pretty cool. And
Speaker 1: asked for the guy who came up with the idea
Speaker 1: of Chris Well, he became the owner of a company
Speaker 1: called common Ground Kawaii for nine years, and according to
Speaker 1: his LinkedIn profile, that was a sustainable resource center established
Speaker 1: to make it easier to gain access to education, products
Speaker 1: and services that enhance the environment, build community, and support
Speaker 1: the local economy. It's pretty cool thinking about making a change,
Speaker 1: using his money to help make a positive influence on
Speaker 1: his community. And in twenty sixteen, he founded a new company,
Speaker 1: all the b Well Media Company, and he said, I
Speaker 1: envision a uniquely organic, secure health and information service that
Speaker 1: allows people to create improved relationships between themselves, their community,
Speaker 1: and the environment. And he's living in Kawaii, Hawaii, which
Speaker 1: is pretty awesome. I've been to Kawai and I love it,
Speaker 1: So if he ever wants me out there to talk
Speaker 1: about his company, I am willing to make that trip.
Speaker 1: But moreover, I think it's really cool that he has
Speaker 1: taken his money and while he might have been essentially
Speaker 1: written out the history books in large part with this
Speaker 1: whole story, he really was trying to create a solution
Speaker 1: to a problem. And then after all of that, he's
Speaker 1: still working to better his community. I think that's admirable.
Speaker 1: Although Broadcast dot Com itself obviously didn't stick around, so
Speaker 1: they were both both Mark Cuban, actually all Mark Cuban
Speaker 1: and Christi Yap. We're both essentially out of the picture
Speaker 1: by the time Broadcast dot Com fizzled out, and recently
Speaker 1: Fortune reported that Cuban is interested in buying back the
Speaker 1: broadcast dot Com brand. This was from some articles that
Speaker 1: were written in mid August, and according to Barbed Darrow,
Speaker 1: who wrote a piece for Fortune, Cuban wants to use
Speaker 1: the domain as the home of a private chat app
Speaker 1: that leaves no trace on servers of messages between people.
Speaker 1: And if you were to use the app, if you
Speaker 1: ever wanted to keep a record of what was said,
Speaker 1: you could do screen grabs, but they would end up
Speaker 1: blurring out the names of the people who were involved
Speaker 1: in the conversation, so everyone would become anonymous in the
Speaker 1: screen grabs. During the actual conversation, you know who you're
Speaker 1: talking to, but the records would not leave a trail
Speaker 1: to follow. And you can imagine in this day and
Speaker 1: age why people would be interested in such a piece
Speaker 1: of technology. With some governments, including the United States, occasionally
Speaker 1: getting a little nosy about who is saying what and
Speaker 1: to whom, uh, it's an issue and if you are
Speaker 1: criticizing our current administration, they seem to take a big
Speaker 1: interest in that, which is somewhat worrisome when you live
Speaker 1: in a nation that is supposed to be valuing free speech.
Speaker 1: So this is kind of a way to train and
Speaker 1: ensure free speech by removing the ability for other parties
Speaker 1: to look into it in the first place. All right,
Speaker 1: we're gonna stick with the b companies here. We just
Speaker 1: talked about Broadcast dot com, but now we're going to
Speaker 1: talk about a different company called Boo dot com. B
Speaker 1: o O as in what a ghost says when it
Speaker 1: wants to scurre you. This was an e commerce company
Speaker 1: that was all about selling branded fashion apparel, mostly in
Speaker 1: the sports and active activewear categories. It was founded by
Speaker 1: Ernst mom Shton, Casa Leander, and Patrick Headland, three Swedish
Speaker 1: entrepreneurs who founded the company in nine And while I
Speaker 1: had problems with Jab's name or Jabe, I definitely butchered
Speaker 1: all three of their names, so my apologies to them.
Speaker 1: Malmstein and Leander had previously founded an online book store
Speaker 1: called Bocus dot com b O k u s and
Speaker 1: then they were able to sell that for Bouckoo's of cash.
Speaker 1: They became millionaires, and Boo dot Com was their follow up.
Speaker 1: They decided they wanted to try a new approach and
Speaker 1: create a new company. They launched the site in nineteen.
Speaker 1: Within a year it would collapse. So it goes up
Speaker 1: in ninety nine and comes down in two thousand, having
Speaker 1: burned through more than a hundred thirty million dollars in
Speaker 1: investment money in the process. So that's more than ten
Speaker 1: million dollars a month. So what went wrong? Well, part
Speaker 1: of it was just plain old hubris. The founders wanted
Speaker 1: to create an instant Amazon like service, but for fashion
Speaker 1: instead of for books. Remember Amazon started off as simply
Speaker 1: a bookstore online and it gradually grew into everything. But
Speaker 1: back in the day, it was a bookstore. So they
Speaker 1: wanted to do the same thing that Amazon did, except
Speaker 1: they wanted to go with sports fashion. However, uh, they
Speaker 1: did it a different way. So they wanted to have
Speaker 1: that global presence. But Amazon got to its size organically,
Speaker 1: it grew. It started originally as a regional company, and
Speaker 1: it grew into a global company over time. Boo dot
Speaker 1: Com kind of wanted to skip all of that and
Speaker 1: go straight to the global company, part rail of the gate,
Speaker 1: so you could say they bit off more than they
Speaker 1: could chew. The company had more than three fifty employees
Speaker 1: at its height, with offices in London, New York, Paris, Munich,
Speaker 1: and Stockholm. They had all these moving pieces in play,
Speaker 1: but they hadn't secured something important, namely the participation of brands.
Speaker 1: As it turns out that's really important if you want
Speaker 1: to sell branded clothing in your online store. The brands
Speaker 1: had established distribution lines that weren't easily disrupted or added to.
Speaker 1: So the brands didn't really want to get involved in
Speaker 1: a company that was marketing itself as a way to
Speaker 1: save money by buying online, because then your premium brand
Speaker 1: might look like it's a discount brand, and that's not
Speaker 1: great as far as perception goes. Plus, there were all
Speaker 1: these relationships they had with brick and mortar retail stores
Speaker 1: and they didn't want to alienate their partners by working
Speaker 1: with this internet startup. So boo dot com was having
Speaker 1: some issues just getting stuff that they could sell. In addition,
Speaker 1: the founders were allegedly unable to answer potential investor questions,
Speaker 1: important ones such as how many people do you expect
Speaker 1: to visit your site, how many of those people who
Speaker 1: visit will convert to customers? How much must each cuss
Speaker 1: tim or spend for the business to be profitable, and
Speaker 1: so on, And when they were unable to provide answers
Speaker 1: to those questions, investors began to back away. So when
Speaker 1: the site launched, it had a point to five percent
Speaker 1: conversion rate. That means one quarter of one percent of
Speaker 1: all the people who visited the website actually used it
Speaker 1: to purchase something that's not great. So you had this
Speaker 1: service that brands were reluctant to work with for fear
Speaker 1: of alienating the retail partners, not to mention the stigma
Speaker 1: being associated with a bargain shopping experience. You had investors
Speaker 1: who had lost confidence in the team, and you had
Speaker 1: incredibly lackluster conversion rates. The website designed didn't do a
Speaker 1: many favors either. You can actually see pictures of the
Speaker 1: old boo dot com website. It was pretty jankee. At
Speaker 1: one point, Maumston said, unless we raised twenty million dollars
Speaker 1: by midnight, boo dot com is dead. Well they failed
Speaker 1: to raise twenty million, and bood dot com died. In retrospect,
Speaker 1: you could say it was a classic case of reaching
Speaker 1: far beyond your grasp, but of course that's a lot
Speaker 1: easier to say in hindsight. These days, Ernst Mouston is
Speaker 1: the CEO of the luxury clothing line Laura Bohnk, named
Speaker 1: after the company's creative director. There's also a website bearing
Speaker 1: his name that was put up by what I assume
Speaker 1: is a disgruntled former employee, which is yikes, y'all, m
Speaker 1: I'm not going to share that you r L. But
Speaker 1: it's easy enough to find if you do a search
Speaker 1: for his name, and it ain't great anyway. Mouston also
Speaker 1: wrote a book about the experience of Boo dot COM's
Speaker 1: failure and called it Boo Hoo. Kazia Leander, whose name
Speaker 1: I knew, I'm butchering, went on to become a consultant
Speaker 1: and lecturer for a while, then became a co founder
Speaker 1: of a branding agency called Studio Berg. Later, Leander became
Speaker 1: the produce certain director for a marketing and production agency
Speaker 1: called Vision and Art, leaving that job in two thousand
Speaker 1: and fourteen. And these days Leander works with Burga Bruke,
Speaker 1: a beverage company that makes organic drinks. They look tasty.
Speaker 1: I wouldn't mind trying one. Now. I never used Boo
Speaker 1: dot com and I was never a customer broadcast dot com.
Speaker 1: So I don't know what my value is, but I
Speaker 1: bet it's not ten thousand dollars. But there is one
Speaker 1: service I did use in the dot com days, I think.
Speaker 1: I mean, I definitely used a service like this one
Speaker 1: around that time, but the one I used might not
Speaker 1: have been this one. It definitely went out of business
Speaker 1: because I had to stop using it, and I was
Speaker 1: very upset. But my memory ain't what I used to be. Folks,
Speaker 1: get off my lawn. The business I referred to by
Speaker 1: the way as web van. Web Van launched in nine
Speaker 1: and it was essentially an online grocery store. So web
Speaker 1: Van created warehouses, refrigerated warehouses where they could store tons
Speaker 1: of different food. You would go onto the web band site,
Speaker 1: you would pick the food you wanted and order it,
Speaker 1: pay for it, and then it would get delivered to
Speaker 1: your door. You just pop right there on the web
Speaker 1: page and do it all there is great and you
Speaker 1: would get you know, the price of the items plus
Speaker 1: a delivery fee. It would all be wrapped up. Probably
Speaker 1: sounds a lot like services that are available in many
Speaker 1: parts of the world today, but back then it was
Speaker 1: a pretty much a brand new business idea. And at
Speaker 1: that time, my wife and I were living in Atlanta,
Speaker 1: and neither of us had a car, and so a
Speaker 1: trip to the grocery store involved an hour each way
Speaker 1: on public transportation. So you're talking a two hour round
Speaker 1: trip plus however long it takes you in the actual store,
Speaker 1: Plus you have to carry all that stuff on public transportation.
Speaker 1: And since you had to carry it, it meant that
Speaker 1: you were trying to go more frequently, so you didn't
Speaker 1: have to do big, big trips. It was a lot
Speaker 1: of hassle. So this was a really welcome service in
Speaker 1: my household. Too bad it wasn't meant to be. You
Speaker 1: wouldn't know from the heights the company reached, though, according
Speaker 1: to the next Web at its peak, web Van was
Speaker 1: worth one point two billion dollars. Louis Borders founded the company.
Speaker 1: That's the same Borders who created the Border's bookstore chain,
Speaker 1: and web Van initially launched as a San Francisco area service,
Speaker 1: so it was regional and it did well, and that's
Speaker 1: what inspired Borders to expand this to a nationwide company.
Speaker 1: It went public in n and like Boo dot Com,
Speaker 1: it attempted to grow at an incredible rate. They really
Speaker 1: tried to expand rapidly. They tried to make web van
Speaker 1: a fully operating service in multiple locations all at the
Speaker 1: same time, and it turned out to be an unsustainable strategy.
Speaker 1: The company bought warehouses across the US where else is
Speaker 1: cost about thirty million dollars each, and it bought out
Speaker 1: a competitor in the form of Home Grocer and burned
Speaker 1: through about a billion dollars. Investors could tell things weren't
Speaker 1: going well. The company's stock price fell from its high
Speaker 1: of thirty dollars per share down to an unbelievable six
Speaker 1: cents per share. Yikes. In two thousand one, there was
Speaker 1: just no more cash to burn through, and the company
Speaker 1: laid off two thousand employees and then faced liquidation. So
Speaker 1: what happened to Louis Borders, the guy who founded it. Well,
Speaker 1: the Borders bookstore chain closed down in two thousand eleven,
Speaker 1: so that was another blow to Borders. These days, he's
Speaker 1: heading up another go at the home delivery market with
Speaker 1: hd S Global and HDS stands for Home Delivery Service.
Speaker 1: So more than a decade later, he's going at it again.
Speaker 1: He's trying to get another business up where it's a
Speaker 1: delivery service including groceries to customers. Now there's a new challenge.
Speaker 1: There's several competing services, many of them regional in nature,
Speaker 1: that already provide these kinds of services that HDS is
Speaker 1: interested in providing. Borders Louis Borders. That is has UH
Speaker 1: secured a lot of investment partners, and he tells HDS
Speaker 1: Global as quote the first robotic, highly automated end to
Speaker 1: end fulfillment system end quote. So we'll see how that
Speaker 1: turns out. Now. One of the big companies that crashed
Speaker 1: in the dot com bubble was called Excite e x
Speaker 1: C I t E like broadcast dot com. Excites roots
Speaker 1: date back before the bubble really began to inflate. It
Speaker 1: was a search engine and it was originally created by
Speaker 1: a group of Stanford students, including a guy named Joe Krausse,
Speaker 1: but a lot of others worked on it too. Way
Speaker 1: back in they built this search engine and at the
Speaker 1: time they called it Architect. In nine after receiving three
Speaker 1: million dollars in investments, the service rebranded itself as Excite.
Speaker 1: Well in nineteen six they decided to bring on George
Speaker 1: Bell to become the CEO of this new company. However,
Speaker 1: George Bell was a documentary filmmaker who had no experience
Speaker 1: leading a dot com company. Bell's first move was to
Speaker 1: gobble up some competition in a couple of acquisitions. Uh
Speaker 1: the Exite ended up buying another search engine called Magellan
Speaker 1: and another one called web Crawler. I actually remember web Crawler.
Speaker 1: Web Crawler is what I used before Google came along.
Speaker 1: I was a big web Crawler user back in the day.
Speaker 1: The company then later went public, followed by another acquisition
Speaker 1: in the form of net Bought. They bought net Bought
Speaker 1: for thirty five million dollars in nine and then in
Speaker 1: nine Bell made what some people would later consider to
Speaker 1: be one of the biggest mistakes in technology history. He
Speaker 1: turned down the opportunity to buy a little company called Google. Now,
Speaker 1: the story that everyone tells is that the asking price
Speaker 1: Google had was originally one million dollars and then later
Speaker 1: was knocked down to seven thousand dollars, but Bell refused
Speaker 1: to bite, and we know what happened with Google's right
Speaker 1: there in the alphabet. To be fair to Bell, though,
Speaker 1: he says that part of the deal required Excite to
Speaker 1: replace their technology with Google's tech that if they did
Speaker 1: infect agree to buy Google, part of that agreement would
Speaker 1: require them to strip out the Excite search engine and
Speaker 1: switch to the Google Technology search engine. But Bell felt
Speaker 1: that this would cause rifts in his company. I mean,
Speaker 1: he had teams who had built Excites technology, and he
Speaker 1: was worried that if he forced this change, he would
Speaker 1: alienate those employees. According to Bell, that is so it
Speaker 1: wasn't just the Bell didn't foresee the impact of Google.
Speaker 1: He was looking out for his team. He didn't want
Speaker 1: to create tension in the company culture. On September twenty one,
Speaker 1: two thousand, George Bell stepped down as the CEO of Excite,
Speaker 1: and the stock price had dropped more than a hundred
Speaker 1: dollars per share. In fact, that I lost about nine
Speaker 1: of its value over the previous year. By the end
Speaker 1: of two thousand one, the stocks were down to a
Speaker 1: dollar per share, and the company ran low on funds
Speaker 1: and eventually declared bankruptcy. George Bell would go on to
Speaker 1: join General Catalyst Partners, which is a venture capital firm,
Speaker 1: so he's an investor. Joe Krauss, one of these Stanford students,
Speaker 1: who helped build Excite, is now a general partner at
Speaker 1: g V. G V started out as Google Ventures. It's
Speaker 1: a small world. Joe Krause goes into working with Google
Speaker 1: and now it's been spun off. It's another investment firm
Speaker 1: that looks to tech and health sectors for an interesting
Speaker 1: and compelling businesses to invest in. Um. Now we're gonna
Speaker 1: take another quick break, but when we come back, I've
Speaker 1: got one more company I want to talk about in
Speaker 1: this episode, and then some thoughts to tie things together
Speaker 1: before we look to the next episode. So let's take
Speaker 1: a quick break and thank our sponsor. Alright, so we're
Speaker 1: down to the last company for this first section, and
Speaker 1: I figure it was time for one more company, uh
Speaker 1: in this half In our next episode, all there is
Speaker 1: a few more stories of companies that went belly up
Speaker 1: in the crash. But now let's in this talk with
Speaker 1: a conversation about pets dot com. And if you watched
Speaker 1: television in the late nineties, you probably saw the mascot
Speaker 1: for pets dot Com at some point. It was a
Speaker 1: sock puppet dog frequently holding a little puppet sized microphone
Speaker 1: with the pets dot Com logo on it and It
Speaker 1: all started with Greg McLemore, who is an entrepreneur, who
Speaker 1: in registered the domain name pets dot com, which is
Speaker 1: incredibly intelligent to do because that's a top level domain
Speaker 1: name and it's incredibly valuable. It's it's easy to remember,
Speaker 1: and it's very easy to direct people to it. And
Speaker 1: in n when McLamore got it, he didn't really have
Speaker 1: a plan for it. He just thought that it was
Speaker 1: going to be valuable, so he bought it and sat
Speaker 1: on it. He also had a web design firm technically
Speaker 1: still does called web Magic, it's still a thing, and
Speaker 1: in web Magic launched the site pets dot com and
Speaker 1: it sold pet supplies and pet food online. Julie Wainwright
Speaker 1: would become the CEO of the company in nine after
Speaker 1: McLamore sold it off. Now, the story most people tell
Speaker 1: is that pets dot com eight through its money by
Speaker 1: trying to attract customers through deals that were not profitable
Speaker 1: to the company, as in the company was actually selling
Speaker 1: stuff for less than it costs them to get that stuff.
Speaker 1: So let's say it cost him twenty bucks to buy
Speaker 1: this bag of food from a of company, a manufacturing company,
Speaker 1: and then they sold it for eighteen bucks, and so
Speaker 1: they were losing two dollars per sale on that particular
Speaker 1: hypothetical situation. It was also known for its ad campaigns,
Speaker 1: which featured that sock puppet I just mentioned, and those
Speaker 1: were wildly popular, and they were also wildly expensive. They
Speaker 1: spent more than a million dollars on a Super Bowl
Speaker 1: ad for example. In the company spent nearly twelve million
Speaker 1: dollars on advertising while bringing in about six hundred thousand
Speaker 1: bucks in revenue. So less than a million in revenue
Speaker 1: but twelve million in advertising. That's unsustainable. So the general
Speaker 1: story is that the company was selling stuff for less
Speaker 1: than it costs them to get it and spending way
Speaker 1: too much on advertising. But Waynewright says that's not the
Speaker 1: real story. In a letter she wrote to Business Insider,
Speaker 1: she said that the real trouble was an infrastructure and
Speaker 1: that there were no plug in play solutions that could
Speaker 1: support a business that needed to grow that quickly in
Speaker 1: order to become a nationwide or global site, and rather
Speaker 1: than using an integrated cloud based approach, which didn't exist
Speaker 1: in two thousand, the company had to employ lots of
Speaker 1: I T professionals to run the site to make sure
Speaker 1: it didn't go down. If it did go down, to
Speaker 1: get it back up and running, to oversee the UH,
Speaker 1: the actual inventory infrastructure, et cetera. And on top of that,
Speaker 1: they had a lot of competitors out there on the market.
Speaker 1: There were a lot of pets supply companies that were
Speaker 1: springing up online, and pets dot Com acquired a couple
Speaker 1: of them, but there were others that were popping up
Speaker 1: as well, and they were offering similar products, sometimes at
Speaker 1: similar prices, and they all had similar names, which meant
Speaker 1: that your customer base is divided among all these different companies.
Speaker 1: It was a tough market to work in, and so
Speaker 1: Wainwright came to a conclusion as the company began to
Speaker 1: run out of money. She said it would make more
Speaker 1: sense to shut down the company and return the money
Speaker 1: to shareholders, rather than to just keep on going until
Speaker 1: you were forced to declare bankruptcy. The business plan at
Speaker 1: that time was unsupportable. They really needed several years of
Speaker 1: operation in order to start turning around a profit, but
Speaker 1: they just didn't have the operating cash to be able
Speaker 1: to do that. So it made more sense to return
Speaker 1: investments rather than push on until the inevitable liquidation other
Speaker 1: dot com companies around this time, we're suffering worse fates.
Speaker 1: I mean, Wainwright was looking around and she could see
Speaker 1: the web vans of the world going belly up. And
Speaker 1: so this was a tough decision to cut losses and quit,
Speaker 1: but it was a tactical decision. All told, it took
Speaker 1: only two hundred sixty eight days for pets dot Com
Speaker 1: to go from its I p O to shutting its doors,
Speaker 1: So less than a year between when they first went
Speaker 1: public and when they first had and when they had
Speaker 1: to close up shop. Pretty crazy. Julie Wayne Right, according
Speaker 1: to Celebrity net Worth, received a severance package of around
Speaker 1: a hundred sixty five thousand dollars with a one sixty
Speaker 1: five thousand bonus and a performance bonus on top of
Speaker 1: that of fifty thou dollars. Waynewright went on to become
Speaker 1: the CEO of a company called The Real Real, a
Speaker 1: consignment website that sells luxury items pets dot com. The
Speaker 1: domain ended up being purchased by pet Smart for some
Speaker 1: undisclosed amount. The sock Puppet found work later on to
Speaker 1: an auto loan company called bar None Incorporated, bought the
Speaker 1: rights to the sock puppet for one five thousand dollars,
Speaker 1: slapped a new logo on the microphone, and gave the
Speaker 1: puppet a slogan, which was everybody deserves a second chance.
Speaker 1: So there's a happy ending for a sock. I love
Speaker 1: that the sock puppet was able to find work afterwards.
Speaker 1: Know where are they now? Story would be complete without
Speaker 1: telling you what happened to the sock puppet. On the
Speaker 1: next episode, I'm going to cover more companies that had
Speaker 1: their famous day in the sun back in the dot
Speaker 1: com bubble, and we'll talk about where their founders are now.
Speaker 1: And I can end this episode by saying there are
Speaker 1: some valuable lessons to be learned from these experiences, and
Speaker 1: some of those lessons only became obvious over time, such
Speaker 1: as it might be a good idea to wait for
Speaker 1: solutions to big infrastructure challenges before scaling up your business,
Speaker 1: but at that time, those solutions didn't yet exist, and
Speaker 1: no one was really aware of how hard it would
Speaker 1: be to go that big that fast, or if there
Speaker 1: ever would be solutions to those problems. Now. Granted, typically
Speaker 1: when you encounter problems and people are able to identify them,
Speaker 1: that's when folks start trying to think up solutions to
Speaker 1: those problems. So maybe this was a necessary step in
Speaker 1: the grand scheme of things, but it really taught us
Speaker 1: that if you want to become a big power player
Speaker 1: in the space, it might not be the best idea
Speaker 1: to try and tackle every single region simultaneously. It might
Speaker 1: be better to try and grow more organically so that
Speaker 1: you can build upon localized success and then scale up
Speaker 1: as you go, instead of trying to hit the ground
Speaker 1: running at a hundred miles per hour. As soon as
Speaker 1: you touch ground, it's tough to do. Another big lesson
Speaker 1: to take to heart is that you should avoid speculation.
Speaker 1: That is, you should avoid investing in things because you
Speaker 1: have the hope that's going to have a wild payoff
Speaker 1: down the road. And part of the reason for that
Speaker 1: is if you do engage in that behavior, it inspires
Speaker 1: other people to engage in that behavior, and pretty soon
Speaker 1: you end up with a overinflated market which will eventually
Speaker 1: correct itself, and maybe you will get out of the
Speaker 1: market before it corrects itself, and maybe you'll end up
Speaker 1: being all right. You might make a profit in the process,
Speaker 1: but maybe you won't. Maybe you'll take a bath and
Speaker 1: all that money you poured into this company with the
Speaker 1: hopes of having these crazy returns will be gone. In
Speaker 1: either case, there are going to be real people who
Speaker 1: are affected by these companies suddenly inflating and then deflating,
Speaker 1: and that's a shame. You shouldn't really be a part
Speaker 1: of that either. If you are running a business and
Speaker 1: you're looking for investment, you probably don't need those ridiculous
Speaker 1: amounts that are being poured into these companies early on,
Speaker 1: because you then have the temptation to put that money
Speaker 1: towards things that are not really important for your bottom line.
Speaker 1: You might be spending them on extravagances, and so you
Speaker 1: are not making good use of that cash. And later
Speaker 1: down the road, when things start to dry up, you
Speaker 1: have to start going to the well again and asking
Speaker 1: for more investment money, which gets harder and harder to
Speaker 1: do each time you have to do it. Especially if
Speaker 1: you've already decided to go public, then you've really need
Speaker 1: to have your ducks in a row. You need to
Speaker 1: be able to explain how your company is going to
Speaker 1: make money, as opposed to just staying afloat on the
Speaker 1: investment dollars of people who are maintaining desperate hope that
Speaker 1: they're going to see a return on that investment one day.
Speaker 1: So these are valuable lessons and there's plenty of other
Speaker 1: ones we could talk about, and in our next episode
Speaker 1: will cover some of that as well. Uh, you don't
Speaker 1: want to go and spend all your money. You don't
Speaker 1: want to go and pour money into something that's unproven,
Speaker 1: at least not a huge amount of money in it.
Speaker 1: You know, you don't want to brag about how extravagant
Speaker 1: your lifestyle is when you don't have a business plan.
Speaker 1: These are just basic rules that I think people need
Speaker 1: to follow, and most people do, although we still see
Speaker 1: examples of folks committing these sort of errors today, well
Speaker 1: after this startup dot com bubble burst, some people argue
Speaker 1: that we're in another bubble right now with the venture
Speaker 1: capital and angel investors that you see out there, which
Speaker 1: is a slightly different world than what is going on
Speaker 1: in the dot com days. In our next episode, I
Speaker 1: will talk about some more of these companies, tell you
Speaker 1: what happened to them and where their executives have gone
Speaker 1: off to. Maybe we'll chat a little bit about some
Speaker 1: of the big companies that made it all the way
Speaker 1: through the dot com era and came out the other
Speaker 1: side and flourished like Google and Amazon. But if you
Speaker 1: have suggestions for topics that I should cover on tech stuff,
Speaker 1: or you've got questions or comments, you can get in
Speaker 1: touch with me my email addresses tech stuff at how
Speaker 1: stuff works dot com, or drop me a line on
Speaker 1: Facebook or Twitter to handle at both of those locations.
Speaker 1: Is tech Stuff h s W. I look forward to
Speaker 1: hearing from you, and I'll talk to you again. Releason
Speaker 1: for more on this and thousands of other topics. Is
Speaker 1: it how stuff works dot com.