WEBVTT - The Dot Com Bubble Companies 0:00:04.160 --> 0:00:07.160 Get in text with technology with tech Stuff from how 0:00:07.240 --> 0:00:14.400 stuff Works dot com. Hey there, and welcome to tech Stuff. 0:00:14.440 --> 0:00:17.759 I am your host, Jonathan Strickland. I'm a senior writer 0:00:17.880 --> 0:00:20.640 with how stuff works dot com and on tech Stuff. 0:00:20.640 --> 0:00:24.400 We like to cover all things tech, whether we love them, 0:00:24.720 --> 0:00:27.960 hate them, or otherwise indifferent to them, as long as 0:00:28.000 --> 0:00:30.160 the stories themselves are interesting. And I think that the 0:00:30.240 --> 0:00:33.320 story we're gonna cover today or begin to cover today 0:00:33.640 --> 0:00:37.080 spoiler alert, this is a part one of a multipart episode. 0:00:38.040 --> 0:00:40.960 I think this is a particularly interesting story. It's got 0:00:41.000 --> 0:00:44.920 a lot of morals to it, write a lot of 0:00:45.000 --> 0:00:48.000 lessons to take home. And today we're gonna talk about 0:00:48.000 --> 0:00:50.280 the dot com bubble and what happened to some of 0:00:50.320 --> 0:00:55.280 the folks and companies that we're affected by that bubble bursting. 0:00:55.560 --> 0:00:58.840 And it's actually a really fascinating series of stories. And 0:00:59.080 --> 0:01:01.160 as I said this as part one of the discussion, 0:01:01.200 --> 0:01:03.440 it turns out there are more companies that are really 0:01:03.480 --> 0:01:08.840 important or were really important, that we should cover, including 0:01:08.880 --> 0:01:13.600 a couple that weathered the dot com disaster and stuck 0:01:13.640 --> 0:01:17.600 around and are flourishing even now. Cough Amazon, cough cough. 0:01:18.040 --> 0:01:20.920 But before we jump into a where are they now discussion, 0:01:21.280 --> 0:01:23.920 I should backtrack and talk about what the dot com 0:01:24.000 --> 0:01:28.200 bubble was. Some of you may even be young enough 0:01:28.200 --> 0:01:32.280 where you weren't around during the dot com bubble days, 0:01:32.400 --> 0:01:34.360 or maybe you were very young when it happened. I 0:01:34.440 --> 0:01:38.160 was actually entering into my professional career at the time 0:01:38.200 --> 0:01:41.679 of the dot com bubble bursting, and it was a 0:01:41.800 --> 0:01:45.000 rough time. I did not work directly in the dot 0:01:45.000 --> 0:01:47.760 com sector. I worked in a company that had a 0:01:47.760 --> 0:01:51.640 lot of clients that were dot com clients. There were 0:01:51.640 --> 0:01:54.360 there were companies that were using the company I worked for. 0:01:54.400 --> 0:01:56.560 I worked for a consulting firm back in those days, 0:01:57.320 --> 0:02:02.000 the dark dark days, pre health stuff works, and a 0:02:02.000 --> 0:02:04.480 lot of our clients were dot com companies. When the 0:02:04.600 --> 0:02:07.640 bubble burst, most of those companies ended up going away 0:02:07.840 --> 0:02:12.600 or otherwise having severe restrictions put in place, and that 0:02:12.720 --> 0:02:15.280 affected the company I worked for. So this was a 0:02:15.360 --> 0:02:19.200 big thing. It wasn't just that certain companies went under 0:02:19.240 --> 0:02:21.639 and people lost their jobs. There was a ripple effect 0:02:22.120 --> 0:02:28.720 that was felt throughout commerce in general for quite some time. Now, 0:02:28.800 --> 0:02:32.040 let's address this concept of what an economic bubble is 0:02:32.240 --> 0:02:34.560 in general, so that we can just understand what we're 0:02:34.560 --> 0:02:40.480 talking about. Business Insider offers this helpful definition. And economic 0:02:40.520 --> 0:02:43.480 bubble exists whenever the price of an asset that may 0:02:43.520 --> 0:02:46.680 be freely exchanged in a well established market first sores 0:02:46.800 --> 0:02:49.520 then plummets over a sustained period of time at rates 0:02:49.560 --> 0:02:52.200 that are decoupled from the rate of growth of the 0:02:52.240 --> 0:02:55.480 income that might reasonably be expected to be realized from 0:02:55.520 --> 0:03:01.080 owning or holding the asset. Thanks Business Insider, that clears 0:03:01.120 --> 0:03:04.680 things right up. Let's break that down because it's actually 0:03:04.680 --> 0:03:07.399 a pretty simple concept when you when you really look 0:03:07.440 --> 0:03:12.000 at it. But for some reason, some entities find it 0:03:12.040 --> 0:03:16.240 necessary to obviuse skate things with language rather than just 0:03:16.320 --> 0:03:20.359 say things in simple terms. And an economic bubble occurs 0:03:20.360 --> 0:03:23.800 when people are essentially paying more for something, then what 0:03:23.960 --> 0:03:28.320 that's something is ultimately worth. And keep in mind what 0:03:28.520 --> 0:03:32.720 something is worth is based upon our perception of its value. Right. 0:03:32.800 --> 0:03:36.800 There's nothing intrinsic about any one thing versus any other 0:03:36.840 --> 0:03:41.080 thing that makes it automatically worth more or less. It's 0:03:41.080 --> 0:03:45.680 how we perceive it. Uh. Some things are necessities, right, 0:03:45.760 --> 0:03:48.680 like food and water. Those clearly have a value in 0:03:48.720 --> 0:03:51.360 the sense that they keep us alive. And depending upon 0:03:51.600 --> 0:03:54.640 how hungry or thirsty you are, it may be of 0:03:54.760 --> 0:03:57.240 much greater value to you at that time. If you 0:03:57.280 --> 0:04:01.920 are absolutely stuffed with the last visit to the all 0:04:01.960 --> 0:04:04.440 you can eat buffet over at the Golden Corral, you're 0:04:04.440 --> 0:04:07.560 probably not really ready to pay a whole bunch of 0:04:07.560 --> 0:04:10.400 money for a steak. But if you haven't eaten for 0:04:10.600 --> 0:04:13.520 a couple of days, that might be worth everything to you. 0:04:14.000 --> 0:04:17.080 So the point being that while they were talking in absolutes, 0:04:17.960 --> 0:04:21.640 really you should remember these are gradients. So people start 0:04:21.680 --> 0:04:25.960 paying more for something than what the perceived value of 0:04:26.000 --> 0:04:30.480 that thing actually is. Eventually, this imbalance reaches a tipping point, 0:04:30.920 --> 0:04:33.440 and you might say people wisen up, or maybe they 0:04:33.480 --> 0:04:35.919 get cold feet. They realize that they're probably not going 0:04:36.000 --> 0:04:38.360 to get a return on any investment they put into 0:04:38.400 --> 0:04:41.960 that company. The point is everyone starts to pull away 0:04:42.080 --> 0:04:44.560 from that thing that they had been pouring money into, 0:04:44.839 --> 0:04:48.159 and then the vacuum created causes the market to destabilize 0:04:48.160 --> 0:04:51.159 and ultimately collapse in on itself, at least in the 0:04:51.160 --> 0:04:54.240 case of a bubble collapse. And there's been a lot 0:04:54.240 --> 0:04:57.520 of economic bubbles over the years, generally speaking. The dot 0:04:57.560 --> 0:05:01.160 com bubble began in the spring of nineteen ninety seven 0:05:01.440 --> 0:05:04.960 and collapsed initially around two thousand, two thousand one. That's 0:05:05.000 --> 0:05:10.359 when we started seeing the first major trouble spots arise, 0:05:11.279 --> 0:05:14.680 and then you would see the aftershocks of that continue 0:05:14.720 --> 0:05:18.840 further into the future of that time. Our past time 0:05:18.920 --> 0:05:22.520 is linear, and so it kind of shook out by 0:05:22.520 --> 0:05:25.159 two thousand three. So seven to two thousand three is 0:05:25.200 --> 0:05:27.680 generally the period of the dot com bubble, with a 0:05:27.800 --> 0:05:30.320 lot of the company's going out of business around two 0:05:30.400 --> 0:05:33.520 thousand two thousand one. So what caused this bubble and 0:05:33.600 --> 0:05:36.640 its collapse. Well, I've done a few episodes about the 0:05:36.680 --> 0:05:38.560 dot com bubble, so I'm just going to give you 0:05:38.640 --> 0:05:44.200 a summarized version of what happened this episode. In the 0:05:44.360 --> 0:05:47.640 f c C in the United States lifted restrictions that 0:05:47.760 --> 0:05:51.359 had up to that point outlawed commercial use of the Internet, 0:05:51.400 --> 0:05:54.320 so now people could actually use the Internet for commercial 0:05:54.360 --> 0:05:58.000 purposes starting in ninety one. One year earlier, back in 0:05:59.000 --> 0:06:01.840 Tim Burners Lee had built the first web server and 0:06:01.920 --> 0:06:05.839 web client. He was working with CERN, that's the institution 0:06:05.920 --> 0:06:09.440 that runs the large Hadron Collider, so he had built 0:06:09.480 --> 0:06:12.480 the first one of those back in So in ninety one, 0:06:12.760 --> 0:06:15.960 the web is brand spanking new, almost no one has 0:06:16.000 --> 0:06:20.240 heard of it. Really, it's in research facilities and universities. 0:06:20.520 --> 0:06:23.240 I remember the first time I saw the Worldwide Web, 0:06:23.880 --> 0:06:26.720 first time I ever saw a web client was when 0:06:26.800 --> 0:06:32.400 I was going to a college in North Georgia, probably 0:06:33.560 --> 0:06:36.880 three so that's a few years after the invention of 0:06:36.920 --> 0:06:39.599 the web client and the web server, and I remember 0:06:39.600 --> 0:06:41.880 thinking when I looked at it, this is never gonna 0:06:41.960 --> 0:06:45.880 take off. It was way too slow. Even with our 0:06:45.960 --> 0:06:51.320 our our colleges computer connections, web pages just took forever 0:06:51.400 --> 0:06:53.360 to load, and they were really boring to look at. 0:06:53.480 --> 0:06:55.960 I thought, why bother with that? Just use tell net. 0:06:57.839 --> 0:07:00.440 So I probably would be one of these pulled back 0:07:00.440 --> 0:07:04.960 in the dot com days who made some misguided decisions, 0:07:05.000 --> 0:07:08.200 because I certainly didn't see the Web becoming nearly as 0:07:08.240 --> 0:07:11.120 popular as it did, nor would I have guessed that 0:07:11.200 --> 0:07:14.200 the Web would one day serve at least in part 0:07:14.520 --> 0:07:17.960 as the reason why I had a job. And now 0:07:18.120 --> 0:07:22.640 I am totally there. Anyway, The point was, it was 0:07:22.800 --> 0:07:26.320 early days, but everyone was really excited about it. The 0:07:26.360 --> 0:07:29.680 potential for the Internet was enormous, and everyone kind of 0:07:29.680 --> 0:07:32.840 recognized it. Eventually started hearing people talk about something called 0:07:32.840 --> 0:07:38.120 the Information super Highway referring to the Internet, and it 0:07:38.200 --> 0:07:44.000 was just starting to take hold. Even by the mainstream 0:07:44.080 --> 0:07:47.400 public was still largely unaware of the Internet and what 0:07:47.520 --> 0:07:49.080 it was all about. There were a lot of folks 0:07:49.280 --> 0:07:52.080 who thought that the Internet and the Web were the 0:07:52.160 --> 0:07:54.520 same thing. You could argue that there's still a lot 0:07:54.560 --> 0:07:56.720 of people who think the Internet and the Web are 0:07:56.760 --> 0:07:59.800 the same thing. They're not. The Web is just one 0:08:00.040 --> 0:08:02.360 facet of the Internet. It's kind of like a layer 0:08:02.520 --> 0:08:05.080 on top of the foundation that is the Internet, with 0:08:05.120 --> 0:08:09.040 other layers like email and FTP servers and that sort 0:08:09.040 --> 0:08:13.480 of thing also existing on this foundation. Remember, the Internet 0:08:13.520 --> 0:08:17.400 itself is a network of networks. It's the interconnectivity of 0:08:17.440 --> 0:08:21.200 all these different machines and the protocols that allow them 0:08:21.240 --> 0:08:24.360 to communicate with each other. That's what the Internet is now. 0:08:24.400 --> 0:08:26.480 You may have even seen some news clips from the 0:08:26.480 --> 0:08:30.960 mid nineties of various news anchors and television show hosts 0:08:31.000 --> 0:08:33.760 trying to suss out what the heck all this Internet 0:08:33.880 --> 0:08:37.679 terminology actually meant. There's a great clip a Bryant Gumbel 0:08:37.760 --> 0:08:40.839 who is trying to figure out the structure of an 0:08:40.840 --> 0:08:44.120 email address, and he's talking about the AT symbol. You know, 0:08:44.160 --> 0:08:46.080 the A inside the circle, and he's like, is that 0:08:46.120 --> 0:08:48.679 an AT? I heard it was an AT, but that 0:08:48.760 --> 0:08:51.920 can't be right, right, And so it's kind of charming 0:08:52.000 --> 0:08:56.080 really to see a time when the Internet had been 0:08:56.120 --> 0:08:58.520 around for a few years, people in the know had 0:08:58.559 --> 0:09:00.880 been using it, but it was just now starting to 0:09:00.880 --> 0:09:05.800 get into mainstream consciousness. Uh. It was a really exciting 0:09:05.840 --> 0:09:08.240 time and technology and a lot of companies were looking 0:09:08.240 --> 0:09:11.160 at the Internet as the next possible way to reach 0:09:11.360 --> 0:09:15.320 customers or to convert people into customers, and because the 0:09:15.400 --> 0:09:18.679 FCC had lifted those commercial restrictions on the Internet, companies 0:09:18.760 --> 0:09:21.840 had the opportunity to create a presence there and define 0:09:21.880 --> 0:09:26.760 their online brands. In an interview that same year that 0:09:26.800 --> 0:09:28.720 Bryant Gumble was trying to figure out what the ADS 0:09:28.720 --> 0:09:32.240 symbol was, Eric Schmidt, who would later on make a 0:09:32.360 --> 0:09:35.520 really big name for himself over at Google, proclaimed that 0:09:35.559 --> 0:09:38.880 by the year two thousand, every major company would have 0:09:38.960 --> 0:09:41.440 a presence on the Web in some way, and he 0:09:41.520 --> 0:09:44.160 was right on the money right there. Everyone needed to 0:09:44.200 --> 0:09:47.360 get on the web, even if they didn't understand exactly 0:09:47.360 --> 0:09:49.080 what they were going to do. Once they had a 0:09:49.120 --> 0:09:51.720 web presence, they knew that they needed to be there 0:09:51.800 --> 0:09:54.360 because people were going to go there. And while in 0:09:54.400 --> 0:09:56.480 the early days no one was really sure how the 0:09:56.520 --> 0:09:59.400 web might serve as a way to generate revenue apart 0:09:59.480 --> 0:10:02.800 from Internet service providers who were making money by charging 0:10:02.840 --> 0:10:06.600 people for Internet access, everyone was sure that the web 0:10:06.679 --> 0:10:09.480 was the pathway to fame and fortune or if you 0:10:09.559 --> 0:10:13.200 prefer if you're an Indiana Jones fan, origin and Glory kid, 0:10:14.120 --> 0:10:18.880 fortune and glory. Many people were becoming Web citizens, meaning 0:10:18.880 --> 0:10:21.560 that you had a lot of people subscribing to services 0:10:21.559 --> 0:10:24.280 that would allow them to access the Internet. Good Old 0:10:24.280 --> 0:10:28.000 American Online would be one of those, America Online giving 0:10:28.040 --> 0:10:35.400 me free CDs to act as coasters since six uh. 0:10:35.520 --> 0:10:37.080 But a lot of people were starting to subscribe to 0:10:37.080 --> 0:10:39.480 Internet service plans and start to serve the web. So 0:10:39.480 --> 0:10:42.200 there was definitely an audience there for companies, and the 0:10:42.200 --> 0:10:46.120 potential for customers was also there. So there was this 0:10:46.280 --> 0:10:50.959 unprecedented method of reaching out to people who would become 0:10:50.960 --> 0:10:54.880 your customers. That gave companies a chance to have a 0:10:54.920 --> 0:10:59.040 more personal connection with their customers instead of just blasting 0:10:59.040 --> 0:11:03.120 out ads everywhere. And this became something of a land grab, 0:11:03.160 --> 0:11:05.440 and in the midst of all this chaos, a new 0:11:05.600 --> 0:11:09.200 entity emerged, and these were companies that didn't just flock 0:11:09.320 --> 0:11:12.120 to the Web in order to extend an already existing 0:11:12.160 --> 0:11:15.760 brand like Coca Cola or Nike or something like that. 0:11:15.840 --> 0:11:19.920 These were companies that could not have existed before the web. 0:11:20.360 --> 0:11:23.800 These were the web based or web integrated companies that 0:11:23.840 --> 0:11:27.199 depended heavily upon the Web for their respective business models. 0:11:27.480 --> 0:11:32.520 These were the dot coms. Now, not every dot com 0:11:32.800 --> 0:11:35.640 was a web based company, I suppose. I mean, the 0:11:35.720 --> 0:11:40.280 dot com bubble affected more than just Internet related companies. 0:11:40.840 --> 0:11:44.120 Some possibly fell more into the general technology category, but 0:11:44.280 --> 0:11:47.720 many of the famous ones either depended solely or heavily 0:11:47.800 --> 0:11:50.080 on the Internet as part of their business. And in 0:11:50.200 --> 0:11:55.760 April nineteen seven, business was booming. Startup companies were receiving 0:11:55.840 --> 0:11:59.360 enormous amounts of investment capital. They were going to initial 0:11:59.520 --> 0:12:03.360 public offerings super early, so they were turning into from 0:12:03.400 --> 0:12:08.280 privately held companies into publicly traded companies at an enormous rate. 0:12:08.400 --> 0:12:11.080 I mean, we were seeing I p o s every 0:12:11.240 --> 0:12:14.480 few weeks, it seemed like, from these various startup companies, 0:12:14.480 --> 0:12:17.880 and people were eager to purchase shares in them and 0:12:18.160 --> 0:12:21.400 to join in this gold rush that was the early 0:12:21.480 --> 0:12:26.720 days of the commercial web. Uh so dot com companies 0:12:26.800 --> 0:12:33.320 represented this idea of of opportunity and potential, and no 0:12:33.320 --> 0:12:35.280 one was really sure where it was going to go, 0:12:35.679 --> 0:12:38.520 but everyone was pretty sure it was gonna get really awesome. 0:12:39.320 --> 0:12:41.319 If you back the right company, you would strike a 0:12:41.440 --> 0:12:43.560 vein of gold and you would be set for life. 0:12:43.960 --> 0:12:46.040 Companies that were a little more than a name and 0:12:46.080 --> 0:12:49.400 a cool sounding idea, we're getting millions of dollars and 0:12:49.520 --> 0:12:52.360 investments long before they could prove that they had any 0:12:52.440 --> 0:12:55.640 sort of working business plan or strategy. And so these 0:12:55.679 --> 0:12:58.800 new startups began to sell lots of stock, and those 0:12:58.800 --> 0:13:04.120 stock prices were skyrocketing. Many startups rewarded employees with stocks, 0:13:04.160 --> 0:13:07.880 paying them in shares of the company. Typically you'd be 0:13:07.920 --> 0:13:10.960 promised a salary that would be pretty good, but the 0:13:10.960 --> 0:13:13.559 stock options had the potential to turn you into a millionaire. 0:13:14.679 --> 0:13:18.600 Several companies had employees who, at least on paper, had 0:13:18.640 --> 0:13:22.400 become millionaires because of these stock options. Uh Normally, you 0:13:22.480 --> 0:13:25.280 can't sell your stock options right away, so you have 0:13:25.360 --> 0:13:27.040 to wait for them before you can. You have to 0:13:27.040 --> 0:13:29.400 wait a certain amount of time before you can exercise 0:13:29.480 --> 0:13:32.720 them and then sell them, which meant that on paper. Sure, 0:13:32.760 --> 0:13:35.520 you're a millionaire, but you can't actually access any of 0:13:35.520 --> 0:13:37.560 that money or spend it in any meaningful way. If 0:13:37.600 --> 0:13:39.840 you started spending, you would essentially be going into debt 0:13:39.960 --> 0:13:42.120 and you would have to wait for your stocks to 0:13:42.640 --> 0:13:45.319 mature or you're really you're for you to be able 0:13:45.360 --> 0:13:47.560 to exercise your options is really what you would need 0:13:47.600 --> 0:13:50.080 to be able to do, and then sell that off 0:13:50.200 --> 0:13:53.920 in order to actually get access to that money. Meanwhile, 0:13:54.320 --> 0:13:59.280 you had companies creating ridiculous head hunting tactics in order 0:13:59.280 --> 0:14:02.160 to gain the right talent, and folks would jump from 0:14:02.240 --> 0:14:05.280 job to job. They get lured away from one company 0:14:05.320 --> 0:14:07.520 to another with a promise of more cash or better 0:14:07.559 --> 0:14:11.600 benefits and more stock. And this was really a crazy 0:14:11.720 --> 0:14:15.239 time to be working in any sort of tech industry. 0:14:15.600 --> 0:14:19.000 There was no such thing as loyalty on either side, 0:14:19.600 --> 0:14:23.880 because you had companies that were overinflated and then going 0:14:24.000 --> 0:14:26.440 under in the course of just a couple of years, 0:14:26.800 --> 0:14:30.440 and you had employees who would desktop from one company 0:14:30.480 --> 0:14:33.960 to another at the slightest indication that they would be 0:14:33.960 --> 0:14:38.200 able to get a favorable deal. So it really destabilized 0:14:38.240 --> 0:14:42.080 the workforce, and I think we're still feeling effects of 0:14:42.120 --> 0:14:45.600 that more than a decade later. The stock inflation in 0:14:45.640 --> 0:14:50.800 particular was ultimately unsustainable back in before the bubble began 0:14:50.840 --> 0:14:54.480 to inflate. The Nasdaq Stock Exchange, which is home to 0:14:54.600 --> 0:14:59.000 many tech company stocks, it typically has younger industry companies. 0:14:59.040 --> 0:15:02.400 The the old companies are on the Dow Stock Exchange, 0:15:02.880 --> 0:15:06.280 but the really the young, scrappy ones tend to be 0:15:06.320 --> 0:15:09.800 on NASDAC, including most of the tech companies. Uh. Well, 0:15:09.840 --> 0:15:13.040 the Nasdaq index was at one thousand points, but hang on, 0:15:13.080 --> 0:15:15.040 what the heck are NAZDAC points and what did those 0:15:15.080 --> 0:15:17.760 points even mean? Well, to get at this number, you 0:15:17.800 --> 0:15:19.880 have to follow a few steps, and to understand this, 0:15:20.000 --> 0:15:22.880 I'm going to use a hypothetical example. So let's say 0:15:22.960 --> 0:15:25.600 I have a company and I've launched my new company. 0:15:25.600 --> 0:15:29.040 We'll call it um Oh Ben would like this. I'm 0:15:29.040 --> 0:15:33.280 gonna call it Baby Jay's Lemonade stand and it gets 0:15:33.320 --> 0:15:36.360 listed on the Nasdaq Stock Exchange. So the number of 0:15:36.360 --> 0:15:40.440 shares I issue and the price that those shares trade 0:15:40.480 --> 0:15:44.880 at decide my company's market capitalization, which is the market 0:15:44.960 --> 0:15:48.720 value of my company. So for this example, let's say 0:15:48.720 --> 0:15:52.320 Baby Jay's Lemonade standards trading at ten dollars a share, 0:15:52.840 --> 0:15:55.480 and I have a hundred thousand shares available on the market. 0:15:55.600 --> 0:15:58.760 So we take those hundred thousand, we multiply that by ten, 0:15:59.280 --> 0:16:02.560 and that gives me one million dollars. That should mean 0:16:02.600 --> 0:16:05.560 that Baby Jay's lemonade stand has a market capitalization of 0:16:05.560 --> 0:16:08.480 a million bucks. Well, that's how much my company is 0:16:08.520 --> 0:16:11.680 worth according to the market. But what about the NASDAC points. Well, 0:16:11.680 --> 0:16:15.840 those points represent a market capitalization weighted approach, meaning the 0:16:15.880 --> 0:16:18.480 points give you a quick glimpse of the value of 0:16:18.520 --> 0:16:22.080 the stocks traded inside the index. Now, I'm talking about 0:16:22.120 --> 0:16:25.440 a collective value here, not an individual company, and the 0:16:25.440 --> 0:16:28.560 bigger companies have a stronger influence on the overall point 0:16:28.680 --> 0:16:32.040 value than the smaller companies because the bigger companies typically 0:16:32.040 --> 0:16:35.760 have way more shares on the market. So it has 0:16:35.800 --> 0:16:39.920 a relationship between the value of the shares and the 0:16:40.040 --> 0:16:43.480 number of shares that are out there in total across 0:16:43.560 --> 0:16:46.760 all of NASDAC. So if a few big companies are 0:16:46.800 --> 0:16:49.000 doing really well and a bunch of smaller companies are 0:16:49.040 --> 0:16:52.640 doing really not so well, the NASDAC point system may 0:16:52.680 --> 0:16:56.000 still indicate a healthy growth because those larger companies are 0:16:56.000 --> 0:16:59.640 making a bigger impact on the points than the smaller ones. Anyway, 0:17:00.080 --> 0:17:02.200 back in April nineteen nine five, like I said, the 0:17:02.280 --> 0:17:06.240 NAZADAC points were at about thousand. Five years later in 0:17:06.320 --> 0:17:10.720 two thousand, in March the index was closer to five thousand, 0:17:10.960 --> 0:17:15.560 so it had grown incredibly over the course of those 0:17:15.640 --> 0:17:17.840 five years. Keep in mind, when the Nazdac launched, it 0:17:17.920 --> 0:17:21.760 had one hundred points. That's how much they determined we're 0:17:21.760 --> 0:17:24.200 in there in nineteen seventy one when the NAZDAC launched 0:17:24.200 --> 0:17:27.560 one hundred points. So from nineteen seventy one to nineteen 0:17:27.640 --> 0:17:29.639 ninety five it went from one hundred points up to 0:17:29.680 --> 0:17:32.919 a thousand points. From ninety five to two thousand it 0:17:32.960 --> 0:17:36.520 went to five thousand points. That's an incredible amount of growth. 0:17:38.320 --> 0:17:41.399 The actual combined value of all those stocks back in 0:17:41.480 --> 0:17:45.159 March two thousand, before the bubble began to deflate, was 0:17:45.400 --> 0:17:51.560 six point seven one trillion dollars. Wow, that's a lot 0:17:51.560 --> 0:17:56.440 of cheddar By April sixth two thousand, so March two 0:17:56.480 --> 0:17:59.720 thousand six point seven one trillion. April the next month 0:18:00.080 --> 0:18:02.760 it had dropped to five point seven eight trillions, So, 0:18:02.800 --> 0:18:06.080 in other words, in one month, the market had lost 0:18:06.160 --> 0:18:11.280 nearly one trillion dollars, or if you prefer a real 0:18:11.280 --> 0:18:15.080 world scenario. During the two thousand Super Bowl, there were 0:18:15.119 --> 0:18:19.720 seventeen dot com companies that had ads that played during 0:18:19.800 --> 0:18:23.399 that Super Bowl, and collectively those ads cost about forty 0:18:23.440 --> 0:18:27.040 four million dollars. During the two thousand one Super Bowl, 0:18:27.119 --> 0:18:32.520 one year later, only three dot com companies had ads 0:18:32.560 --> 0:18:35.680 played during the Super Bowl. Most of the other companies 0:18:35.680 --> 0:18:39.520 that had advertised during the previous year didn't even exist anymore. 0:18:40.359 --> 0:18:45.480 That's how brutal this bubble bursting was. So what happened, Well, 0:18:45.520 --> 0:18:48.040 the big thing that happened was that people lost confidence 0:18:48.119 --> 0:18:50.560 in the tech sector in general and the dot com 0:18:50.680 --> 0:18:53.560 sector in particular. A bit of a panic began in 0:18:53.600 --> 0:18:56.639 March two thousand when Dell and Cisco, which are two 0:18:56.720 --> 0:18:59.640 large tech companies that had predated the dot com era 0:19:00.040 --> 0:19:03.960 and we're large enough to weather those issues. They had 0:19:03.960 --> 0:19:07.200 been growing more organically over time than the dot com 0:19:07.240 --> 0:19:11.240 startups had, so del and Cisco would get big, but 0:19:11.280 --> 0:19:13.800 they got big at a slower pace. These startups would 0:19:13.800 --> 0:19:18.000 suddenly just inflate to huge size out of nowhere. Well, 0:19:18.359 --> 0:19:23.600 del and Cisco both gave a little bit of a scare. 0:19:23.720 --> 0:19:28.040 Two investors they decided to UH to authorize selling a 0:19:28.160 --> 0:19:34.040 huge amount of stock and end up being this kind 0:19:34.119 --> 0:19:39.560 of domino effect, right, so they placed large cell orders 0:19:39.640 --> 0:19:43.200 on their stocks. It's spooked some investors. People began to 0:19:43.240 --> 0:19:45.520 sell off their tech stocks in general. And when you've 0:19:45.520 --> 0:19:47.479 got a lot of people trying to sell a stock 0:19:47.600 --> 0:19:50.520 and not a lot of people trying to buy stock, 0:19:51.160 --> 0:19:54.879 prices began to drop. Demand had diminished. You suddenly had 0:19:54.920 --> 0:19:57.920 people trying to dump their stock as opposed to buying 0:19:58.000 --> 0:20:00.119 up more. And if no one wants to buy it, 0:20:00.800 --> 0:20:03.880 then your price goes down. If I'm selling lemonade at 0:20:04.040 --> 0:20:06.679 at Baby Jay's lemonade stand, but I'm selling it at 0:20:06.680 --> 0:20:09.760 five bucks of glass and no one's buying a glass, 0:20:10.440 --> 0:20:12.639 chances are I need to start lowering that price. And 0:20:12.640 --> 0:20:14.080 it might not be until I get all the way 0:20:14.119 --> 0:20:17.160 down to a quarter of glass before anyone even bites 0:20:18.520 --> 0:20:22.520 or SIPs. I guess it's lemonade, so you wouldn't bite 0:20:22.520 --> 0:20:26.880 it anyway. These startup companies, many of which have been 0:20:26.920 --> 0:20:30.600 burning through crazy amounts of investment money, had failed to 0:20:30.760 --> 0:20:34.240 show any signs of actually creating a viable business. Some 0:20:34.400 --> 0:20:37.000 companies were struggling to turn a profit, and others weren't 0:20:37.040 --> 0:20:39.520 doing much of anything as far as the average investor 0:20:39.560 --> 0:20:41.760 could see. A lot of them were spending all that 0:20:41.840 --> 0:20:49.400 investment money on lavish, trendy office spaces or crazy amenities, 0:20:49.600 --> 0:20:52.480 partly in an effort to attract talent from other companies, 0:20:52.520 --> 0:20:55.240 and partly just as an act of extravagance. It was 0:20:55.240 --> 0:20:57.480 a house of cards, and once people began to question 0:20:57.520 --> 0:21:00.199 it and wonder if they were ever going to a 0:21:00.240 --> 0:21:02.840 return of their investment, the whole thing began to topple. 0:21:04.040 --> 0:21:06.639 For many of those companies, the stocks they issued weren't 0:21:06.640 --> 0:21:09.439 worth the paper they were printed on. Employees who were 0:21:09.440 --> 0:21:12.840 promised a future filled with wealth watched as their compensation 0:21:13.160 --> 0:21:17.000 shriveled up and all those shares in the company became worthless. 0:21:17.480 --> 0:21:20.640 And many of the leaders of those companies were held 0:21:20.680 --> 0:21:23.560 up to scrutiny and some of them to ridicule. But 0:21:23.600 --> 0:21:26.399 I want to make this clear. I think most of 0:21:26.440 --> 0:21:29.879 those folks were genuinely trying to make a viable company. 0:21:30.400 --> 0:21:34.800 There are a few m M, let's call them jackasses 0:21:35.000 --> 0:21:39.640 in the group who were boasting about having lear jets 0:21:39.720 --> 0:21:44.119 and other crazy amenities, and perhaps some of the things 0:21:44.119 --> 0:21:47.119 that happened to them were well, let's just say they 0:21:47.119 --> 0:21:49.560 are probably people who were experiencing a sense of shot 0:21:49.560 --> 0:21:54.040 in freuda as it was unfolding. Uh. And in some 0:21:54.080 --> 0:21:57.080 cases they were just trying their best, but they didn't 0:21:57.080 --> 0:22:00.120 have a business plan that was very solid, or they's 0:22:00.119 --> 0:22:03.240 got too much money too quickly, and that paradoxically led 0:22:03.280 --> 0:22:06.600 them down to their eventual collapse. Now we're gonna talk 0:22:06.640 --> 0:22:09.560 about some specific companies and what happened to them in 0:22:09.600 --> 0:22:12.560 our next section, but first let's take a quick break 0:22:12.880 --> 0:22:22.480 and thank our sponsor. Alright, so that was the super 0:22:22.520 --> 0:22:25.200 fast version of the dot com bubble bursting. Now let's 0:22:25.200 --> 0:22:27.240 talk about some of the companies and founders that were 0:22:27.280 --> 0:22:31.359 involved in this mess. One of those companies was Broadcast 0:22:31.600 --> 0:22:36.399 dot Com. So the history of this company goes back 0:22:36.600 --> 0:22:39.520 aways before there was a web actually, So back in 0:22:40.600 --> 0:22:44.280 there was a guy named Cameron Christopher Jabe. It seems 0:22:44.320 --> 0:22:46.200 goes by Chris Jabe these days, and I may even 0:22:46.240 --> 0:22:49.360 be mispronouncing that it's j A E. B. If we're 0:22:49.359 --> 0:22:53.720 doing it as old English, it would be jab. Anyway, 0:22:53.720 --> 0:22:56.640 he felt he could really solve a problem that sports 0:22:56.680 --> 0:22:59.320 fans run into, and that problem is that if you're traveling, 0:22:59.640 --> 0:23:01.720 you might not have any way to tune into a 0:23:01.800 --> 0:23:06.320 station and listen to your home team whoopop on. I 0:23:06.320 --> 0:23:08.440 don't know. Let's say it's the New York Yankees, because 0:23:08.480 --> 0:23:11.560 they deserve it. It's my fantasy, let me live it. 0:23:12.280 --> 0:23:15.840 Jeb's initial approach was to ask various sports teams if 0:23:15.840 --> 0:23:18.879 he could get permission to broadcast the events of games 0:23:18.920 --> 0:23:22.000 to an audience, and he found an early investor in 0:23:22.080 --> 0:23:25.080 Mark Cuban. Now by this time we were talking about 0:23:25.080 --> 0:23:28.399 the nineteen nineties, and Mark Cuban had apparently been thinking 0:23:28.440 --> 0:23:32.840 about a similar idea for a while, and Cuban effectively 0:23:32.920 --> 0:23:36.119 took control of the company in return for his investment. 0:23:36.640 --> 0:23:40.040 Uh he brought on a guy named Todd Wagner who 0:23:40.040 --> 0:23:45.080 had attended Indiana University as did Mark Cuban, and Wagner 0:23:45.119 --> 0:23:46.840 held a law degree and was a c p A. 0:23:47.119 --> 0:23:51.840 And in they formed a company called audio Net. Three 0:23:51.920 --> 0:23:56.560 years later they would rebrand it as broadcast dot com. 0:23:56.680 --> 0:23:59.240 The core of the business remained this idea of streaming 0:23:59.359 --> 0:24:03.400 games over the Internet, or really not streaming a game 0:24:03.480 --> 0:24:07.920 so much as streaming the commentary about a game over 0:24:08.000 --> 0:24:14.080 the internet. In the company went public and stock prices skyrocketed. 0:24:14.480 --> 0:24:19.879 In Yahoo acquired Broadcast dot Com in a stock purchase 0:24:20.000 --> 0:24:24.639 deal that was valued at five point seven billion dollars. 0:24:25.960 --> 0:24:28.280 These days, it's often cited as one of the worst 0:24:28.359 --> 0:24:31.639 acquisitions of all time now around at that that point, 0:24:31.680 --> 0:24:33.399 in fact, we did a tech Stuff episode where we 0:24:33.440 --> 0:24:36.680 talked about this. Around then, there were about a half 0:24:36.760 --> 0:24:41.040 million users on broadcast dot com and they, you know who, 0:24:41.080 --> 0:24:43.960 spent five point seven billion dollars in stock, So it 0:24:44.080 --> 0:24:48.879 essentially worked out to being ten thousand dollars per user 0:24:49.200 --> 0:24:52.360 of broadcast dot Com. So yeah, who could have done 0:24:52.400 --> 0:24:54.320 the same thing by just going to everyone who had 0:24:54.359 --> 0:24:57.720 a Broadcast dot com active account and cutting them a 0:24:57.800 --> 0:25:00.320 check for ten grand and they would have spend the 0:25:00.359 --> 0:25:03.840 same amount of money ten dollars. I guess if I 0:25:03.880 --> 0:25:05.679 were a user of broadcast dot Com, I would have 0:25:05.720 --> 0:25:09.520 felt really flattered that I was valued so highly well. 0:25:09.600 --> 0:25:12.880 Cubans sold off his Yahoo shares, or most of them, 0:25:13.000 --> 0:25:16.639 and he secured himself as a billionaire. Todd Wagner also 0:25:16.720 --> 0:25:19.760 became a billionaire, but he would stay on with Yahoo 0:25:19.880 --> 0:25:22.640 until the year two thousand and he turned down an 0:25:22.640 --> 0:25:26.800 opportunity to become the chief operating officer of Yahoo. Jab, 0:25:26.840 --> 0:25:30.600 the founder of the feast, received a relatively paltry fifty 0:25:30.720 --> 0:25:34.880 million dollars. So even though it was his idea, and 0:25:35.960 --> 0:25:39.400 he often is overlooked in discussions about broadcast dot com. 0:25:39.400 --> 0:25:41.760 If you talk about broadcast dot com, you talk about founders, 0:25:42.240 --> 0:25:45.440 it's almost always Mark Cuban and Todd Wagner. They almost 0:25:45.680 --> 0:25:49.439 never mentioned Jab, who had actually come up with the 0:25:49.480 --> 0:25:52.320 idea in the first place. As for the company, even 0:25:52.400 --> 0:25:55.359 with y'all whose considerable wealth and size behind it, it 0:25:55.520 --> 0:26:00.200 never really turned into anything profitable, and so in two 0:26:00.200 --> 0:26:04.760 thousand two, Yeahoo effectively shut it all down. Mark Cuban 0:26:05.560 --> 0:26:07.800 is still an investor. He's also the owner of the 0:26:07.840 --> 0:26:10.000 Dallas Mavericks, so he's been doing all right. You might 0:26:10.000 --> 0:26:12.119 have seen him on Shark Tank. He also tends to 0:26:12.480 --> 0:26:17.400 speak out on matters of political significance. Todd Wagner has 0:26:17.440 --> 0:26:21.199 become known as an entertainment investor. He has interests in 0:26:21.400 --> 0:26:24.800 several television and movie ventures, and he's also the head 0:26:24.840 --> 0:26:28.560 of a large charitable foundation. So that's pretty cool. And 0:26:28.760 --> 0:26:30.440 asked for the guy who came up with the idea 0:26:30.440 --> 0:26:32.760 of Chris Well, he became the owner of a company 0:26:32.800 --> 0:26:36.720 called common Ground Kawaii for nine years, and according to 0:26:36.800 --> 0:26:41.320 his LinkedIn profile, that was a sustainable resource center established 0:26:41.320 --> 0:26:44.800 to make it easier to gain access to education, products 0:26:44.920 --> 0:26:49.040 and services that enhance the environment, build community, and support 0:26:49.040 --> 0:26:53.600 the local economy. It's pretty cool thinking about making a change, 0:26:53.680 --> 0:26:56.280 using his money to help make a positive influence on 0:26:56.320 --> 0:27:00.000 his community. And in twenty sixteen, he founded a new company, 0:27:00.000 --> 0:27:04.080 all the b Well Media Company, and he said, I 0:27:04.280 --> 0:27:09.159 envision a uniquely organic, secure health and information service that 0:27:09.240 --> 0:27:14.119 allows people to create improved relationships between themselves, their community, 0:27:14.440 --> 0:27:17.360 and the environment. And he's living in Kawaii, Hawaii, which 0:27:17.440 --> 0:27:20.960 is pretty awesome. I've been to Kawai and I love it, 0:27:21.800 --> 0:27:23.640 So if he ever wants me out there to talk 0:27:23.680 --> 0:27:26.520 about his company, I am willing to make that trip. 0:27:27.440 --> 0:27:30.240 But moreover, I think it's really cool that he has 0:27:30.280 --> 0:27:33.440 taken his money and while he might have been essentially 0:27:33.440 --> 0:27:36.680 written out the history books in large part with this 0:27:36.680 --> 0:27:40.600 whole story, he really was trying to create a solution 0:27:40.640 --> 0:27:44.800 to a problem. And then after all of that, he's 0:27:44.840 --> 0:27:49.399 still working to better his community. I think that's admirable. 0:27:50.320 --> 0:27:56.200 Although Broadcast dot Com itself obviously didn't stick around, so 0:27:57.480 --> 0:28:00.600 they were both both Mark Cuban, actually all Mark Cuban 0:28:00.680 --> 0:28:02.720 and Christi Yap. We're both essentially out of the picture 0:28:02.720 --> 0:28:05.560 by the time Broadcast dot Com fizzled out, and recently 0:28:05.680 --> 0:28:09.000 Fortune reported that Cuban is interested in buying back the 0:28:09.040 --> 0:28:13.560 broadcast dot Com brand. This was from some articles that 0:28:13.600 --> 0:28:17.600 were written in mid August, and according to Barbed Darrow, 0:28:17.960 --> 0:28:20.880 who wrote a piece for Fortune, Cuban wants to use 0:28:20.920 --> 0:28:24.000 the domain as the home of a private chat app 0:28:24.320 --> 0:28:28.040 that leaves no trace on servers of messages between people. 0:28:28.520 --> 0:28:30.399 And if you were to use the app, if you 0:28:30.440 --> 0:28:33.720 ever wanted to keep a record of what was said, 0:28:33.760 --> 0:28:36.600 you could do screen grabs, but they would end up 0:28:36.600 --> 0:28:39.560 blurring out the names of the people who were involved 0:28:39.560 --> 0:28:43.080 in the conversation, so everyone would become anonymous in the 0:28:43.120 --> 0:28:46.160 screen grabs. During the actual conversation, you know who you're 0:28:46.200 --> 0:28:50.680 talking to, but the records would not leave a trail 0:28:50.760 --> 0:28:54.120 to follow. And you can imagine in this day and 0:28:54.160 --> 0:28:58.120 age why people would be interested in such a piece 0:28:58.160 --> 0:29:03.040 of technology. With some governments, including the United States, occasionally 0:29:03.080 --> 0:29:08.120 getting a little nosy about who is saying what and 0:29:08.160 --> 0:29:12.200 to whom, uh, it's an issue and if you are 0:29:13.640 --> 0:29:17.160 criticizing our current administration, they seem to take a big 0:29:17.160 --> 0:29:20.040 interest in that, which is somewhat worrisome when you live 0:29:20.080 --> 0:29:23.920 in a nation that is supposed to be valuing free speech. 0:29:24.160 --> 0:29:25.719 So this is kind of a way to train and 0:29:25.800 --> 0:29:30.120 ensure free speech by removing the ability for other parties 0:29:30.160 --> 0:29:33.800 to look into it in the first place. All right, 0:29:33.840 --> 0:29:36.160 we're gonna stick with the b companies here. We just 0:29:36.200 --> 0:29:38.400 talked about Broadcast dot com, but now we're going to 0:29:38.520 --> 0:29:42.080 talk about a different company called Boo dot com. B 0:29:42.480 --> 0:29:45.600 o O as in what a ghost says when it 0:29:45.640 --> 0:29:49.440 wants to scurre you. This was an e commerce company 0:29:49.480 --> 0:29:52.680 that was all about selling branded fashion apparel, mostly in 0:29:52.760 --> 0:29:58.320 the sports and active activewear categories. It was founded by 0:29:58.640 --> 0:30:04.880 Ernst mom Shton, Casa Leander, and Patrick Headland, three Swedish 0:30:05.040 --> 0:30:09.320 entrepreneurs who founded the company in nine And while I 0:30:09.480 --> 0:30:14.040 had problems with Jab's name or Jabe, I definitely butchered 0:30:14.040 --> 0:30:16.880 all three of their names, so my apologies to them. 0:30:16.880 --> 0:30:20.720 Malmstein and Leander had previously founded an online book store 0:30:20.800 --> 0:30:24.440 called Bocus dot com b O k u s and 0:30:24.440 --> 0:30:27.040 then they were able to sell that for Bouckoo's of cash. 0:30:27.080 --> 0:30:30.200 They became millionaires, and Boo dot Com was their follow up. 0:30:30.600 --> 0:30:33.320 They decided they wanted to try a new approach and 0:30:33.360 --> 0:30:36.360 create a new company. They launched the site in nineteen. 0:30:38.240 --> 0:30:41.680 Within a year it would collapse. So it goes up 0:30:41.680 --> 0:30:44.080 in ninety nine and comes down in two thousand, having 0:30:44.080 --> 0:30:48.480 burned through more than a hundred thirty million dollars in 0:30:48.480 --> 0:30:51.800 investment money in the process. So that's more than ten 0:30:51.880 --> 0:30:56.480 million dollars a month. So what went wrong? Well, part 0:30:56.520 --> 0:30:59.880 of it was just plain old hubris. The founders wanted 0:30:59.880 --> 0:31:04.040 to create an instant Amazon like service, but for fashion 0:31:04.320 --> 0:31:07.600 instead of for books. Remember Amazon started off as simply 0:31:07.640 --> 0:31:13.080 a bookstore online and it gradually grew into everything. But 0:31:13.160 --> 0:31:14.840 back in the day, it was a bookstore. So they 0:31:14.880 --> 0:31:17.000 wanted to do the same thing that Amazon did, except 0:31:17.000 --> 0:31:20.520 they wanted to go with sports fashion. However, uh, they 0:31:20.600 --> 0:31:22.480 did it a different way. So they wanted to have 0:31:22.560 --> 0:31:27.680 that global presence. But Amazon got to its size organically, 0:31:27.800 --> 0:31:32.560 it grew. It started originally as a regional company, and 0:31:32.600 --> 0:31:36.000 it grew into a global company over time. Boo dot 0:31:36.040 --> 0:31:38.280 Com kind of wanted to skip all of that and 0:31:38.320 --> 0:31:41.000 go straight to the global company, part rail of the gate, 0:31:41.600 --> 0:31:43.239 so you could say they bit off more than they 0:31:43.240 --> 0:31:46.760 could chew. The company had more than three fifty employees 0:31:46.800 --> 0:31:51.000 at its height, with offices in London, New York, Paris, Munich, 0:31:51.160 --> 0:31:54.680 and Stockholm. They had all these moving pieces in play, 0:31:54.720 --> 0:31:59.320 but they hadn't secured something important, namely the participation of brands. 0:32:00.160 --> 0:32:01.959 As it turns out that's really important if you want 0:32:01.960 --> 0:32:04.840 to sell branded clothing in your online store. The brands 0:32:04.840 --> 0:32:08.520 had established distribution lines that weren't easily disrupted or added to. 0:32:09.200 --> 0:32:12.680 So the brands didn't really want to get involved in 0:32:12.720 --> 0:32:15.200 a company that was marketing itself as a way to 0:32:15.280 --> 0:32:20.440 save money by buying online, because then your premium brand 0:32:21.080 --> 0:32:24.560 might look like it's a discount brand, and that's not 0:32:24.720 --> 0:32:27.920 great as far as perception goes. Plus, there were all 0:32:27.960 --> 0:32:31.920 these relationships they had with brick and mortar retail stores 0:32:32.280 --> 0:32:35.560 and they didn't want to alienate their partners by working 0:32:35.600 --> 0:32:40.120 with this internet startup. So boo dot com was having 0:32:40.160 --> 0:32:44.800 some issues just getting stuff that they could sell. In addition, 0:32:44.920 --> 0:32:49.400 the founders were allegedly unable to answer potential investor questions, 0:32:49.760 --> 0:32:53.280 important ones such as how many people do you expect 0:32:53.280 --> 0:32:56.080 to visit your site, how many of those people who 0:32:56.160 --> 0:33:00.000 visit will convert to customers? How much must each cuss 0:33:00.000 --> 0:33:02.520 tim or spend for the business to be profitable, and 0:33:02.600 --> 0:33:07.280 so on, And when they were unable to provide answers 0:33:07.360 --> 0:33:11.200 to those questions, investors began to back away. So when 0:33:11.200 --> 0:33:14.640 the site launched, it had a point to five percent 0:33:14.840 --> 0:33:19.520 conversion rate. That means one quarter of one percent of 0:33:19.680 --> 0:33:22.440 all the people who visited the website actually used it 0:33:22.480 --> 0:33:26.200 to purchase something that's not great. So you had this 0:33:26.280 --> 0:33:29.080 service that brands were reluctant to work with for fear 0:33:29.080 --> 0:33:31.720 of alienating the retail partners, not to mention the stigma 0:33:31.760 --> 0:33:35.160 being associated with a bargain shopping experience. You had investors 0:33:35.160 --> 0:33:37.640 who had lost confidence in the team, and you had 0:33:37.720 --> 0:33:41.720 incredibly lackluster conversion rates. The website designed didn't do a 0:33:41.800 --> 0:33:44.320 many favors either. You can actually see pictures of the 0:33:44.360 --> 0:33:48.719 old boo dot com website. It was pretty jankee. At 0:33:48.760 --> 0:33:52.960 one point, Maumston said, unless we raised twenty million dollars 0:33:53.000 --> 0:33:57.880 by midnight, boo dot com is dead. Well they failed 0:33:57.920 --> 0:34:02.760 to raise twenty million, and bood dot com died. In retrospect, 0:34:02.760 --> 0:34:04.640 you could say it was a classic case of reaching 0:34:04.680 --> 0:34:06.760 far beyond your grasp, but of course that's a lot 0:34:06.760 --> 0:34:11.560 easier to say in hindsight. These days, Ernst Mouston is 0:34:11.600 --> 0:34:16.000 the CEO of the luxury clothing line Laura Bohnk, named 0:34:16.040 --> 0:34:19.920 after the company's creative director. There's also a website bearing 0:34:20.120 --> 0:34:22.760 his name that was put up by what I assume 0:34:22.960 --> 0:34:28.480 is a disgruntled former employee, which is yikes, y'all, m 0:34:29.280 --> 0:34:30.880 I'm not going to share that you r L. But 0:34:30.920 --> 0:34:32.600 it's easy enough to find if you do a search 0:34:32.640 --> 0:34:38.240 for his name, and it ain't great anyway. Mouston also 0:34:38.239 --> 0:34:40.760 wrote a book about the experience of Boo dot COM's 0:34:40.760 --> 0:34:47.239 failure and called it Boo Hoo. Kazia Leander, whose name 0:34:47.320 --> 0:34:51.680 I knew, I'm butchering, went on to become a consultant 0:34:51.719 --> 0:34:55.360 and lecturer for a while, then became a co founder 0:34:55.400 --> 0:34:59.560 of a branding agency called Studio Berg. Later, Leander became 0:34:59.560 --> 0:35:02.480 the produce certain director for a marketing and production agency 0:35:02.520 --> 0:35:05.320 called Vision and Art, leaving that job in two thousand 0:35:05.320 --> 0:35:09.320 and fourteen. And these days Leander works with Burga Bruke, 0:35:10.239 --> 0:35:14.400 a beverage company that makes organic drinks. They look tasty. 0:35:14.920 --> 0:35:19.520 I wouldn't mind trying one. Now. I never used Boo 0:35:19.560 --> 0:35:22.719 dot com and I was never a customer broadcast dot com. 0:35:22.800 --> 0:35:25.440 So I don't know what my value is, but I 0:35:25.440 --> 0:35:28.239 bet it's not ten thousand dollars. But there is one 0:35:28.320 --> 0:35:31.880 service I did use in the dot com days, I think. 0:35:32.600 --> 0:35:35.080 I mean, I definitely used a service like this one 0:35:35.480 --> 0:35:40.000 around that time, but the one I used might not 0:35:40.120 --> 0:35:42.360 have been this one. It definitely went out of business 0:35:42.960 --> 0:35:44.840 because I had to stop using it, and I was 0:35:44.920 --> 0:35:47.560 very upset. But my memory ain't what I used to be. Folks, 0:35:47.560 --> 0:35:50.680 get off my lawn. The business I referred to by 0:35:50.680 --> 0:35:54.160 the way as web van. Web Van launched in nine 0:35:55.320 --> 0:35:58.959 and it was essentially an online grocery store. So web 0:35:59.000 --> 0:36:03.240 Van created warehouses, refrigerated warehouses where they could store tons 0:36:03.280 --> 0:36:06.080 of different food. You would go onto the web band site, 0:36:06.400 --> 0:36:08.480 you would pick the food you wanted and order it, 0:36:08.840 --> 0:36:10.920 pay for it, and then it would get delivered to 0:36:10.960 --> 0:36:14.040 your door. You just pop right there on the web 0:36:14.080 --> 0:36:17.080 page and do it all there is great and you 0:36:17.120 --> 0:36:19.560 would get you know, the price of the items plus 0:36:19.560 --> 0:36:21.880 a delivery fee. It would all be wrapped up. Probably 0:36:21.880 --> 0:36:24.239 sounds a lot like services that are available in many 0:36:24.280 --> 0:36:26.200 parts of the world today, but back then it was 0:36:26.239 --> 0:36:29.359 a pretty much a brand new business idea. And at 0:36:29.400 --> 0:36:32.719 that time, my wife and I were living in Atlanta, 0:36:32.840 --> 0:36:35.560 and neither of us had a car, and so a 0:36:35.600 --> 0:36:38.800 trip to the grocery store involved an hour each way 0:36:38.880 --> 0:36:42.200 on public transportation. So you're talking a two hour round 0:36:42.200 --> 0:36:44.880 trip plus however long it takes you in the actual store, 0:36:45.080 --> 0:36:48.839 Plus you have to carry all that stuff on public transportation. 0:36:48.840 --> 0:36:50.360 And since you had to carry it, it meant that 0:36:50.400 --> 0:36:52.759 you were trying to go more frequently, so you didn't 0:36:52.800 --> 0:36:55.160 have to do big, big trips. It was a lot 0:36:55.160 --> 0:36:58.960 of hassle. So this was a really welcome service in 0:36:59.040 --> 0:37:02.799 my household. Too bad it wasn't meant to be. You 0:37:02.800 --> 0:37:05.880 wouldn't know from the heights the company reached, though, according 0:37:05.920 --> 0:37:09.160 to the next Web at its peak, web Van was 0:37:09.200 --> 0:37:15.920 worth one point two billion dollars. Louis Borders founded the company. 0:37:16.440 --> 0:37:19.279 That's the same Borders who created the Border's bookstore chain, 0:37:20.400 --> 0:37:23.960 and web Van initially launched as a San Francisco area service, 0:37:24.400 --> 0:37:27.600 so it was regional and it did well, and that's 0:37:27.600 --> 0:37:32.840 what inspired Borders to expand this to a nationwide company. 0:37:33.080 --> 0:37:36.439 It went public in n and like Boo dot Com, 0:37:36.640 --> 0:37:39.720 it attempted to grow at an incredible rate. They really 0:37:39.760 --> 0:37:43.799 tried to expand rapidly. They tried to make web van 0:37:43.880 --> 0:37:46.319 a fully operating service in multiple locations all at the 0:37:46.360 --> 0:37:49.640 same time, and it turned out to be an unsustainable strategy. 0:37:49.719 --> 0:37:53.279 The company bought warehouses across the US where else is 0:37:53.360 --> 0:37:57.040 cost about thirty million dollars each, and it bought out 0:37:57.040 --> 0:38:00.360 a competitor in the form of Home Grocer and burned 0:38:00.400 --> 0:38:04.680 through about a billion dollars. Investors could tell things weren't 0:38:04.680 --> 0:38:07.479 going well. The company's stock price fell from its high 0:38:07.520 --> 0:38:11.640 of thirty dollars per share down to an unbelievable six 0:38:12.040 --> 0:38:17.600 cents per share. Yikes. In two thousand one, there was 0:38:17.640 --> 0:38:19.680 just no more cash to burn through, and the company 0:38:19.719 --> 0:38:23.600 laid off two thousand employees and then faced liquidation. So 0:38:23.640 --> 0:38:26.680 what happened to Louis Borders, the guy who founded it. Well, 0:38:26.760 --> 0:38:30.000 the Borders bookstore chain closed down in two thousand eleven, 0:38:30.480 --> 0:38:33.439 so that was another blow to Borders. These days, he's 0:38:33.440 --> 0:38:36.640 heading up another go at the home delivery market with 0:38:36.920 --> 0:38:41.440 hd S Global and HDS stands for Home Delivery Service. 0:38:41.520 --> 0:38:44.640 So more than a decade later, he's going at it again. 0:38:44.680 --> 0:38:47.960 He's trying to get another business up where it's a 0:38:48.120 --> 0:38:54.280 delivery service including groceries to customers. Now there's a new challenge. 0:38:54.320 --> 0:38:57.960 There's several competing services, many of them regional in nature, 0:38:58.280 --> 0:39:02.360 that already provide these kinds of services that HDS is 0:39:02.600 --> 0:39:07.080 interested in providing. Borders Louis Borders. That is has UH 0:39:07.200 --> 0:39:10.720 secured a lot of investment partners, and he tells HDS 0:39:10.760 --> 0:39:15.640 Global as quote the first robotic, highly automated end to 0:39:15.960 --> 0:39:19.719 end fulfillment system end quote. So we'll see how that 0:39:19.800 --> 0:39:23.280 turns out. Now. One of the big companies that crashed 0:39:23.280 --> 0:39:26.799 in the dot com bubble was called Excite e x 0:39:26.880 --> 0:39:30.839 C I t E like broadcast dot com. Excites roots 0:39:30.920 --> 0:39:34.080 date back before the bubble really began to inflate. It 0:39:34.160 --> 0:39:36.400 was a search engine and it was originally created by 0:39:36.440 --> 0:39:39.800 a group of Stanford students, including a guy named Joe Krausse, 0:39:40.120 --> 0:39:42.680 but a lot of others worked on it too. Way 0:39:42.680 --> 0:39:46.200 back in they built this search engine and at the 0:39:46.239 --> 0:39:51.359 time they called it Architect. In nine after receiving three 0:39:51.400 --> 0:39:56.360 million dollars in investments, the service rebranded itself as Excite. 0:39:57.560 --> 0:40:00.720 Well in nineteen six they decided to bring on George 0:40:00.760 --> 0:40:04.080 Bell to become the CEO of this new company. However, 0:40:04.120 --> 0:40:08.160 George Bell was a documentary filmmaker who had no experience 0:40:08.239 --> 0:40:11.640 leading a dot com company. Bell's first move was to 0:40:11.800 --> 0:40:15.359 gobble up some competition in a couple of acquisitions. Uh 0:40:15.440 --> 0:40:19.120 the Exite ended up buying another search engine called Magellan 0:40:19.200 --> 0:40:22.960 and another one called web Crawler. I actually remember web Crawler. 0:40:23.600 --> 0:40:26.720 Web Crawler is what I used before Google came along. 0:40:27.680 --> 0:40:30.840 I was a big web Crawler user back in the day. 0:40:30.960 --> 0:40:34.520 The company then later went public, followed by another acquisition 0:40:34.560 --> 0:40:36.759 in the form of net Bought. They bought net Bought 0:40:36.800 --> 0:40:41.120 for thirty five million dollars in nine and then in 0:40:41.280 --> 0:40:45.160 nine Bell made what some people would later consider to 0:40:45.160 --> 0:40:49.640 be one of the biggest mistakes in technology history. He 0:40:49.840 --> 0:40:56.239 turned down the opportunity to buy a little company called Google. Now, 0:40:56.320 --> 0:40:59.040 the story that everyone tells is that the asking price 0:40:59.120 --> 0:41:02.200 Google had was originally one million dollars and then later 0:41:02.400 --> 0:41:06.839 was knocked down to seven thousand dollars, but Bell refused 0:41:07.000 --> 0:41:11.279 to bite, and we know what happened with Google's right 0:41:11.280 --> 0:41:14.759 there in the alphabet. To be fair to Bell, though, 0:41:15.080 --> 0:41:18.759 he says that part of the deal required Excite to 0:41:18.840 --> 0:41:21.960 replace their technology with Google's tech that if they did 0:41:22.040 --> 0:41:26.120 infect agree to buy Google, part of that agreement would 0:41:26.120 --> 0:41:30.319 require them to strip out the Excite search engine and 0:41:30.440 --> 0:41:35.920 switch to the Google Technology search engine. But Bell felt 0:41:35.960 --> 0:41:38.719 that this would cause rifts in his company. I mean, 0:41:38.760 --> 0:41:42.160 he had teams who had built Excites technology, and he 0:41:42.239 --> 0:41:45.120 was worried that if he forced this change, he would 0:41:45.120 --> 0:41:49.600 alienate those employees. According to Bell, that is so it 0:41:49.680 --> 0:41:52.640 wasn't just the Bell didn't foresee the impact of Google. 0:41:53.480 --> 0:41:55.440 He was looking out for his team. He didn't want 0:41:55.480 --> 0:42:01.359 to create tension in the company culture. On September twenty one, 0:42:01.520 --> 0:42:05.960 two thousand, George Bell stepped down as the CEO of Excite, 0:42:06.080 --> 0:42:08.560 and the stock price had dropped more than a hundred 0:42:08.600 --> 0:42:11.879 dollars per share. In fact, that I lost about nine 0:42:12.600 --> 0:42:16.120 of its value over the previous year. By the end 0:42:16.160 --> 0:42:18.360 of two thousand one, the stocks were down to a 0:42:18.520 --> 0:42:21.640 dollar per share, and the company ran low on funds 0:42:22.160 --> 0:42:26.440 and eventually declared bankruptcy. George Bell would go on to 0:42:26.600 --> 0:42:30.239 join General Catalyst Partners, which is a venture capital firm, 0:42:30.280 --> 0:42:34.000 so he's an investor. Joe Krauss, one of these Stanford students, 0:42:34.000 --> 0:42:37.520 who helped build Excite, is now a general partner at 0:42:37.600 --> 0:42:43.839 g V. G V started out as Google Ventures. It's 0:42:43.840 --> 0:42:47.160 a small world. Joe Krause goes into working with Google 0:42:47.560 --> 0:42:50.919 and now it's been spun off. It's another investment firm 0:42:51.000 --> 0:42:54.080 that looks to tech and health sectors for an interesting 0:42:54.120 --> 0:42:59.000 and compelling businesses to invest in. Um. Now we're gonna 0:42:59.040 --> 0:43:02.160 take another quick break, but when we come back, I've 0:43:02.160 --> 0:43:04.200 got one more company I want to talk about in 0:43:04.239 --> 0:43:08.160 this episode, and then some thoughts to tie things together 0:43:08.239 --> 0:43:11.839 before we look to the next episode. So let's take 0:43:11.880 --> 0:43:22.640 a quick break and thank our sponsor. Alright, so we're 0:43:22.680 --> 0:43:24.960 down to the last company for this first section, and 0:43:25.000 --> 0:43:27.520 I figure it was time for one more company, uh 0:43:27.520 --> 0:43:29.560 in this half In our next episode, all there is 0:43:29.560 --> 0:43:31.560 a few more stories of companies that went belly up 0:43:31.560 --> 0:43:34.240 in the crash. But now let's in this talk with 0:43:34.480 --> 0:43:38.880 a conversation about pets dot com. And if you watched 0:43:38.960 --> 0:43:41.920 television in the late nineties, you probably saw the mascot 0:43:42.000 --> 0:43:44.279 for pets dot Com at some point. It was a 0:43:44.320 --> 0:43:48.680 sock puppet dog frequently holding a little puppet sized microphone 0:43:48.719 --> 0:43:51.680 with the pets dot Com logo on it and It 0:43:51.760 --> 0:43:56.640 all started with Greg McLemore, who is an entrepreneur, who 0:43:56.680 --> 0:44:01.279 in registered the domain name pets dot com, which is 0:44:01.320 --> 0:44:05.360 incredibly intelligent to do because that's a top level domain 0:44:05.480 --> 0:44:09.720 name and it's incredibly valuable. It's it's easy to remember, 0:44:09.800 --> 0:44:12.359 and it's very easy to direct people to it. And 0:44:12.480 --> 0:44:15.799 in n when McLamore got it, he didn't really have 0:44:15.880 --> 0:44:19.120 a plan for it. He just thought that it was 0:44:19.160 --> 0:44:21.200 going to be valuable, so he bought it and sat 0:44:21.280 --> 0:44:24.880 on it. He also had a web design firm technically 0:44:24.920 --> 0:44:29.080 still does called web Magic, it's still a thing, and 0:44:29.120 --> 0:44:33.640 in web Magic launched the site pets dot com and 0:44:33.680 --> 0:44:37.799 it sold pet supplies and pet food online. Julie Wainwright 0:44:37.880 --> 0:44:40.879 would become the CEO of the company in nine after 0:44:40.960 --> 0:44:45.240 McLamore sold it off. Now, the story most people tell 0:44:46.000 --> 0:44:48.480 is that pets dot com eight through its money by 0:44:48.480 --> 0:44:52.120 trying to attract customers through deals that were not profitable 0:44:52.160 --> 0:44:55.440 to the company, as in the company was actually selling 0:44:55.800 --> 0:44:59.520 stuff for less than it costs them to get that stuff. 0:44:59.719 --> 0:45:02.800 So let's say it cost him twenty bucks to buy 0:45:02.840 --> 0:45:07.640 this bag of food from a of company, a manufacturing company, 0:45:07.719 --> 0:45:09.960 and then they sold it for eighteen bucks, and so 0:45:10.000 --> 0:45:12.920 they were losing two dollars per sale on that particular 0:45:12.960 --> 0:45:18.399 hypothetical situation. It was also known for its ad campaigns, 0:45:18.600 --> 0:45:21.000 which featured that sock puppet I just mentioned, and those 0:45:21.040 --> 0:45:25.120 were wildly popular, and they were also wildly expensive. They 0:45:25.160 --> 0:45:27.640 spent more than a million dollars on a Super Bowl 0:45:27.680 --> 0:45:33.160 ad for example. In the company spent nearly twelve million 0:45:33.200 --> 0:45:36.720 dollars on advertising while bringing in about six hundred thousand 0:45:36.800 --> 0:45:40.920 bucks in revenue. So less than a million in revenue 0:45:40.920 --> 0:45:46.000 but twelve million in advertising. That's unsustainable. So the general 0:45:46.080 --> 0:45:49.040 story is that the company was selling stuff for less 0:45:49.040 --> 0:45:51.000 than it costs them to get it and spending way 0:45:51.000 --> 0:45:53.799 too much on advertising. But Waynewright says that's not the 0:45:53.880 --> 0:45:57.400 real story. In a letter she wrote to Business Insider, 0:45:57.800 --> 0:46:01.799 she said that the real trouble was an infrastructure and 0:46:01.800 --> 0:46:04.239 that there were no plug in play solutions that could 0:46:04.239 --> 0:46:06.960 support a business that needed to grow that quickly in 0:46:07.040 --> 0:46:11.239 order to become a nationwide or global site, and rather 0:46:11.280 --> 0:46:14.960 than using an integrated cloud based approach, which didn't exist 0:46:15.000 --> 0:46:18.239 in two thousand, the company had to employ lots of 0:46:18.239 --> 0:46:20.919 I T professionals to run the site to make sure 0:46:20.920 --> 0:46:22.759 it didn't go down. If it did go down, to 0:46:22.800 --> 0:46:25.720 get it back up and running, to oversee the UH, 0:46:25.760 --> 0:46:30.160 the actual inventory infrastructure, et cetera. And on top of that, 0:46:30.880 --> 0:46:33.120 they had a lot of competitors out there on the market. 0:46:33.120 --> 0:46:35.279 There were a lot of pets supply companies that were 0:46:35.280 --> 0:46:38.360 springing up online, and pets dot Com acquired a couple 0:46:38.400 --> 0:46:40.440 of them, but there were others that were popping up 0:46:40.480 --> 0:46:44.000 as well, and they were offering similar products, sometimes at 0:46:44.080 --> 0:46:48.400 similar prices, and they all had similar names, which meant 0:46:48.440 --> 0:46:52.120 that your customer base is divided among all these different companies. 0:46:52.120 --> 0:46:54.360 It was a tough market to work in, and so 0:46:54.480 --> 0:46:57.400 Wainwright came to a conclusion as the company began to 0:46:57.520 --> 0:47:00.439 run out of money. She said it would make more 0:47:00.480 --> 0:47:04.040 sense to shut down the company and return the money 0:47:04.120 --> 0:47:07.720 to shareholders, rather than to just keep on going until 0:47:07.760 --> 0:47:11.239 you were forced to declare bankruptcy. The business plan at 0:47:11.239 --> 0:47:15.799 that time was unsupportable. They really needed several years of 0:47:15.840 --> 0:47:18.200 operation in order to start turning around a profit, but 0:47:18.239 --> 0:47:20.919 they just didn't have the operating cash to be able 0:47:20.960 --> 0:47:23.480 to do that. So it made more sense to return 0:47:23.600 --> 0:47:28.200 investments rather than push on until the inevitable liquidation other 0:47:28.280 --> 0:47:31.040 dot com companies around this time, we're suffering worse fates. 0:47:31.080 --> 0:47:33.439 I mean, Wainwright was looking around and she could see 0:47:33.440 --> 0:47:36.799 the web vans of the world going belly up. And 0:47:36.840 --> 0:47:39.880 so this was a tough decision to cut losses and quit, 0:47:39.920 --> 0:47:43.200 but it was a tactical decision. All told, it took 0:47:43.280 --> 0:47:46.560 only two hundred sixty eight days for pets dot Com 0:47:46.560 --> 0:47:50.440 to go from its I p O to shutting its doors, 0:47:51.080 --> 0:47:53.839 So less than a year between when they first went 0:47:53.920 --> 0:47:56.440 public and when they first had and when they had 0:47:56.440 --> 0:48:00.760 to close up shop. Pretty crazy. Julie Wayne Right, according 0:48:00.800 --> 0:48:03.840 to Celebrity net Worth, received a severance package of around 0:48:03.840 --> 0:48:07.360 a hundred sixty five thousand dollars with a one sixty 0:48:07.440 --> 0:48:10.400 five thousand bonus and a performance bonus on top of 0:48:10.440 --> 0:48:13.720 that of fifty thou dollars. Waynewright went on to become 0:48:13.760 --> 0:48:16.160 the CEO of a company called The Real Real, a 0:48:16.200 --> 0:48:21.080 consignment website that sells luxury items pets dot com. The 0:48:21.160 --> 0:48:25.120 domain ended up being purchased by pet Smart for some 0:48:25.600 --> 0:48:30.719 undisclosed amount. The sock Puppet found work later on to 0:48:31.640 --> 0:48:36.040 an auto loan company called bar None Incorporated, bought the 0:48:36.160 --> 0:48:39.840 rights to the sock puppet for one five thousand dollars, 0:48:40.200 --> 0:48:43.000 slapped a new logo on the microphone, and gave the 0:48:43.000 --> 0:48:47.440 puppet a slogan, which was everybody deserves a second chance. 0:48:48.239 --> 0:48:51.439 So there's a happy ending for a sock. I love 0:48:51.480 --> 0:48:53.960 that the sock puppet was able to find work afterwards. 0:48:54.280 --> 0:48:56.759 Know where are they now? Story would be complete without 0:48:56.840 --> 0:49:00.279 telling you what happened to the sock puppet. On the 0:49:00.280 --> 0:49:02.680 next episode, I'm going to cover more companies that had 0:49:02.680 --> 0:49:04.959 their famous day in the sun back in the dot 0:49:05.000 --> 0:49:08.239 com bubble, and we'll talk about where their founders are now. 0:49:08.920 --> 0:49:11.080 And I can end this episode by saying there are 0:49:11.120 --> 0:49:14.000 some valuable lessons to be learned from these experiences, and 0:49:14.080 --> 0:49:17.919 some of those lessons only became obvious over time, such 0:49:17.960 --> 0:49:19.600 as it might be a good idea to wait for 0:49:19.600 --> 0:49:23.520 solutions to big infrastructure challenges before scaling up your business, 0:49:24.000 --> 0:49:27.480 but at that time, those solutions didn't yet exist, and 0:49:27.520 --> 0:49:29.759 no one was really aware of how hard it would 0:49:29.800 --> 0:49:32.319 be to go that big that fast, or if there 0:49:32.360 --> 0:49:36.200 ever would be solutions to those problems. Now. Granted, typically 0:49:36.239 --> 0:49:39.200 when you encounter problems and people are able to identify them, 0:49:39.280 --> 0:49:41.880 that's when folks start trying to think up solutions to 0:49:42.000 --> 0:49:44.560 those problems. So maybe this was a necessary step in 0:49:44.600 --> 0:49:48.919 the grand scheme of things, but it really taught us 0:49:48.960 --> 0:49:52.560 that if you want to become a big power player 0:49:52.600 --> 0:49:55.440 in the space, it might not be the best idea 0:49:55.480 --> 0:49:59.160 to try and tackle every single region simultaneously. It might 0:49:59.200 --> 0:50:02.359 be better to try and grow more organically so that 0:50:02.400 --> 0:50:07.239 you can build upon localized success and then scale up 0:50:07.280 --> 0:50:09.840 as you go, instead of trying to hit the ground 0:50:09.920 --> 0:50:12.680 running at a hundred miles per hour. As soon as 0:50:12.719 --> 0:50:16.800 you touch ground, it's tough to do. Another big lesson 0:50:16.840 --> 0:50:21.440 to take to heart is that you should avoid speculation. 0:50:22.360 --> 0:50:26.839 That is, you should avoid investing in things because you 0:50:26.920 --> 0:50:29.560 have the hope that's going to have a wild payoff 0:50:29.600 --> 0:50:33.520 down the road. And part of the reason for that 0:50:33.640 --> 0:50:36.160 is if you do engage in that behavior, it inspires 0:50:36.160 --> 0:50:39.000 other people to engage in that behavior, and pretty soon 0:50:39.080 --> 0:50:43.080 you end up with a overinflated market which will eventually 0:50:43.120 --> 0:50:46.600 correct itself, and maybe you will get out of the 0:50:46.640 --> 0:50:49.839 market before it corrects itself, and maybe you'll end up 0:50:49.880 --> 0:50:52.960 being all right. You might make a profit in the process, 0:50:53.920 --> 0:50:56.600 but maybe you won't. Maybe you'll take a bath and 0:50:56.640 --> 0:51:00.319 all that money you poured into this company with the 0:51:00.320 --> 0:51:04.560 hopes of having these crazy returns will be gone. In 0:51:04.600 --> 0:51:07.160 either case, there are going to be real people who 0:51:07.160 --> 0:51:11.440 are affected by these companies suddenly inflating and then deflating, 0:51:12.120 --> 0:51:15.000 and that's a shame. You shouldn't really be a part 0:51:15.000 --> 0:51:19.000 of that either. If you are running a business and 0:51:19.080 --> 0:51:25.040 you're looking for investment, you probably don't need those ridiculous 0:51:25.080 --> 0:51:27.640 amounts that are being poured into these companies early on, 0:51:28.680 --> 0:51:31.800 because you then have the temptation to put that money 0:51:31.880 --> 0:51:35.320 towards things that are not really important for your bottom line. 0:51:35.560 --> 0:51:38.759 You might be spending them on extravagances, and so you 0:51:38.840 --> 0:51:41.879 are not making good use of that cash. And later 0:51:41.920 --> 0:51:44.000 down the road, when things start to dry up, you 0:51:44.040 --> 0:51:46.160 have to start going to the well again and asking 0:51:46.239 --> 0:51:48.600 for more investment money, which gets harder and harder to 0:51:48.640 --> 0:51:51.560 do each time you have to do it. Especially if 0:51:51.600 --> 0:51:55.000 you've already decided to go public, then you've really need 0:51:55.040 --> 0:51:56.480 to have your ducks in a row. You need to 0:51:56.520 --> 0:51:59.400 be able to explain how your company is going to 0:51:59.440 --> 0:52:03.800 make money, as opposed to just staying afloat on the 0:52:03.880 --> 0:52:08.200 investment dollars of people who are maintaining desperate hope that 0:52:08.200 --> 0:52:10.800 they're going to see a return on that investment one day. 0:52:10.920 --> 0:52:14.279 So these are valuable lessons and there's plenty of other 0:52:14.280 --> 0:52:16.520 ones we could talk about, and in our next episode 0:52:16.520 --> 0:52:20.760 will cover some of that as well. Uh, you don't 0:52:21.200 --> 0:52:24.239 want to go and spend all your money. You don't 0:52:24.239 --> 0:52:26.719 want to go and pour money into something that's unproven, 0:52:27.000 --> 0:52:28.799 at least not a huge amount of money in it. 0:52:29.840 --> 0:52:33.879 You know, you don't want to brag about how extravagant 0:52:33.880 --> 0:52:36.600 your lifestyle is when you don't have a business plan. 0:52:37.120 --> 0:52:39.680 These are just basic rules that I think people need 0:52:39.719 --> 0:52:42.239 to follow, and most people do, although we still see 0:52:42.280 --> 0:52:46.440 examples of folks committing these sort of errors today, well 0:52:46.480 --> 0:52:51.440 after this startup dot com bubble burst, some people argue 0:52:51.440 --> 0:52:55.760 that we're in another bubble right now with the venture 0:52:55.800 --> 0:52:58.000 capital and angel investors that you see out there, which 0:52:58.040 --> 0:53:00.440 is a slightly different world than what is going on 0:53:00.520 --> 0:53:03.920 in the dot com days. In our next episode, I 0:53:03.960 --> 0:53:06.839 will talk about some more of these companies, tell you 0:53:07.040 --> 0:53:10.439 what happened to them and where their executives have gone 0:53:10.440 --> 0:53:12.920 off to. Maybe we'll chat a little bit about some 0:53:12.960 --> 0:53:14.719 of the big companies that made it all the way 0:53:14.719 --> 0:53:17.839 through the dot com era and came out the other 0:53:17.880 --> 0:53:22.759 side and flourished like Google and Amazon. But if you 0:53:22.880 --> 0:53:25.960 have suggestions for topics that I should cover on tech stuff, 0:53:26.040 --> 0:53:28.080 or you've got questions or comments, you can get in 0:53:28.120 --> 0:53:31.279 touch with me my email addresses tech stuff at how 0:53:31.360 --> 0:53:34.000 stuff works dot com, or drop me a line on 0:53:34.040 --> 0:53:37.160 Facebook or Twitter to handle at both of those locations. 0:53:37.280 --> 0:53:40.040 Is tech Stuff h s W. I look forward to 0:53:40.080 --> 0:53:43.520 hearing from you, and I'll talk to you again. Releason 0:53:48.920 --> 0:53:51.360 for more on this and thousands of other topics. Is 0:53:51.360 --> 0:54:02.360 it how stuff works dot com.