Speaker 1: Brought to you by the reinvented two thousand twelve Camray.
Speaker 1: It's ready. Are you get in touch with technology? With
Speaker 1: tech Stuff from how stuff works dot com. Hello again, everyone,
Speaker 1: and welcome to tech stuff. My name is Chris Poulette
Speaker 1: and I am an editor at how stuff works dot com.
Speaker 1: Sitting across from me as senior writer Jonathan Strickland. The
Speaker 1: point is, ladies and gentlemen, that greed, for lack of
Speaker 1: a better word, is good. Oh I think I know
Speaker 1: where that one came from. Yeah, we are going to
Speaker 1: tackle a subject that a lot of listeners have asked
Speaker 1: us to talk about, both on Facebook and an email,
Speaker 1: possibly on Twitter as well. But we've received many requests
Speaker 1: to talk about the dot com bubble and crash of
Speaker 1: two thousand, two thousand one. And it's an interesting story
Speaker 1: and it's certainly has some lessons that we can learn, uh,
Speaker 1: particularly with certain companies that are operating right now. That's
Speaker 1: that's absolutely true. Um. I have the occasion to work
Speaker 1: in technology during the dot com bubble years um, and
Speaker 1: it was a crazy ride. Yeah, it was very exciting
Speaker 1: time for a while, and then it was a very
Speaker 1: terrifying time. But uh, but to build into this, we
Speaker 1: should really kind of give you a a bird's eye
Speaker 1: view of what was going on at the time. So
Speaker 1: the World Wide Web really started to make penetration into
Speaker 1: the public in ninety three or so. Yeah, it's funny
Speaker 1: because a lot of people, I think still really have
Speaker 1: no idea that the Internet, uh was born decades really
Speaker 1: before before you know, we were all using the web
Speaker 1: for you know, keeping up with everyone and and you know,
Speaker 1: communications of different kinds. Um. But yeah, I mean that
Speaker 1: once the Web arrived on the scene, that enabled a
Speaker 1: lot of people to do things that with computers that
Speaker 1: they wouldn't necessarily have done. So I remember it's funny
Speaker 1: because I was thinking about this on my way into
Speaker 1: the studio this morning. There was a game show I
Speaker 1: was watching, um and uh, I think it was Alan
Speaker 1: Ludden who was hosting it is one of the older
Speaker 1: shows on Game Show Network, and one of the prizes
Speaker 1: was a home computer. This was in the probably late
Speaker 1: nineteen eighties when this was the show is from. And
Speaker 1: he's he's like, okay, well, if you want to I'm
Speaker 1: paraphrasing because it's been so along, but you've won a
Speaker 1: personal home computer. Although I don't know what you would
Speaker 1: do with something like which cracks me up now because
Speaker 1: the Internet and especially the Web, has made it possible
Speaker 1: to do so many different kinds of things like online
Speaker 1: banking and watching uh shows and and keeping up with
Speaker 1: calendars and reading the news and kinds of friends. Yeah,
Speaker 1: but we we didn't do that before. And once the
Speaker 1: web came around, people started going, wait, I know you
Speaker 1: could make up you know, fill in the blank here,
Speaker 1: and there wasn't one already. You didn't say, you know,
Speaker 1: I could make an online banking site. Oh no, you know,
Speaker 1: the giant World Bank has already done that. Well, I
Speaker 1: maybe I could come up with a way to network
Speaker 1: with my friends. Now there's already a Facebook. These these
Speaker 1: people were creating these things from scratch and it was
Speaker 1: a really heady time because everybody wanted to be the
Speaker 1: first in and make loads of money from doing this,
Speaker 1: although they didn't really necessarily know how, right, I I
Speaker 1: equate the early days of the web, and really, even
Speaker 1: though ninety three was when the public started getting hold
Speaker 1: of the web, is when businesses started to really look
Speaker 1: at how can we use this as a way to
Speaker 1: make money? Or not just business is looking into it,
Speaker 1: but people looking into it thinking how can I form
Speaker 1: a business that uses the web as a platform. Uh,
Speaker 1: But I equate it to a land grab Like like,
Speaker 1: imagine that you have come to a new country and
Speaker 1: there's a huge territory that is open and it has
Speaker 1: a set amount of of land that's available for a
Speaker 1: set price, right, and there are and it's divided up
Speaker 1: into certain sections, and then essentially on a certain day
Speaker 1: you are allowed to go and stake your claim. You
Speaker 1: would actually go and you would stake your claim, put it,
Speaker 1: you know, say this land is what I'm purchasing and
Speaker 1: that would become yours. And you know there's risk involved
Speaker 1: in that because you might you might go and grab
Speaker 1: land and then find out that you thought that maybe
Speaker 1: there'd be a good place to dig a well and
Speaker 1: it turns out there is no good place to dig
Speaker 1: a well on that land. Or you know, you thought
Speaker 1: that the land that the section you grabbed was gonna
Speaker 1: be great for farming, and then you realize, oh wait,
Speaker 1: this is really rocky ground that's not going to be
Speaker 1: easy to farm at all. Same sort of thing with
Speaker 1: the web, really is this idea of this this this
Speaker 1: frontier that have been mostly unoccupied, especially from a business perspective,
Speaker 1: and it gave people the idea that anything is possible,
Speaker 1: and as long as I have a good idea, I
Speaker 1: can build up a customer base. And once I build
Speaker 1: up my customer base, I can find a way to
Speaker 1: make money from them. That was kind of the problem
Speaker 1: was that they first thought, I need to get people,
Speaker 1: and then I need to figure out how to make
Speaker 1: money from them. Yep, yep, and I think uh, I
Speaker 1: think it bears UM bears going into Also the it
Speaker 1: wasn't just the tech sector. People within the tech sector
Speaker 1: who were excited about this UM In the mid nineties,
Speaker 1: that's when people started getting really excited about UH internet
Speaker 1: access and getting home computers so that they could use
Speaker 1: the Internet at their homes. And once people realize this,
Speaker 1: they started thinking, you know what, I bet these companies, UH,
Speaker 1: you know, they might be worth something someday, especially because UM,
Speaker 1: I think people were saying, hey, you've really got something here.
Speaker 1: So a lot of these companies would issue UH stock
Speaker 1: to join the stock market, and UH I was I
Speaker 1: was looking into this last night as I was doing
Speaker 1: my research. UH. Andrew Batty wrote an article about bubbles
Speaker 1: for Investipedia, and UM, I wanted to just give you
Speaker 1: the definition of a bubble based on on his article. Um,
Speaker 1: you know, he actually wrote about it. A lot of
Speaker 1: different famous bubbles that have happened, a lot of them
Speaker 1: in real estate. You know, there are many bubbles, not
Speaker 1: just this one. But the idea is that people are
Speaker 1: really excited about a product that is on the stock market,
Speaker 1: and they're so excited that they keep buying it. They
Speaker 1: want more stock, as much stock as they can get,
Speaker 1: and that drives the price at the stock up. And eventually,
Speaker 1: though the company, the the actual worth of the company
Speaker 1: can't match what the perceived value is in the stock market,
Speaker 1: and it keeps inflating and inflating, inflating, And so there's
Speaker 1: a company might be worth say twenty million dollars, but
Speaker 1: it has you know, in the stock market, it's far
Speaker 1: more than that. So eventually hundred million dollars and shares
Speaker 1: out exactly. And at some point when the company falters,
Speaker 1: the the bubble can burst. People suddenly realize, oh my gosh,
Speaker 1: this company is not worth but that much. It's sell
Speaker 1: their stock exactly. And then you you end up with
Speaker 1: a company where it's it's yeah, it starts to fall apart. Uh, Yeah,
Speaker 1: the we call this this this whole idea speculation, right.
Speaker 1: Stock market speculation and speculation is essentially when you bet
Speaker 1: it's it's usually it's it's um related to short term gains. Yes,
Speaker 1: you know, you're looking at the stock market momentum, and
Speaker 1: you're not necessarily a lot of people who were investing
Speaker 1: weren't necessarily looking into companies they were particularly interested in.
Speaker 1: They were betting that the company they were investing in
Speaker 1: was going to explode and that it would either are
Speaker 1: become wildly successful, in which case you become rich, or
Speaker 1: we get acquired by a bigger company, in which case
Speaker 1: you get rich. So it seemed like a no brainer.
Speaker 1: You know, you just you do. You throw in money
Speaker 1: and these small companies as soon as they become available,
Speaker 1: and then you just watch your your cash increase. Uh.
Speaker 1: But the problem is that when more and more people
Speaker 1: get involved in this speculation, it does drive the price up,
Speaker 1: and it drives it up well beyond the company's worth,
Speaker 1: like you were saying, And so it's very high risk,
Speaker 1: it's fast paced. Uh you can you I mean, if
Speaker 1: you want to indulge in in being a speculator on
Speaker 1: the stock market, you have the potential to make a
Speaker 1: lot of money, but you have to you have to
Speaker 1: be really nimble, and people are not gonna like you
Speaker 1: because you're you're not investing in a company in order
Speaker 1: to have that company succeed. You're investing in a company
Speaker 1: kind of like if you were in Las Vegas and
Speaker 1: you were making a bet on a poker game right now.
Speaker 1: Of course, it's not as simple as as coming up
Speaker 1: with an idea in your bedroom one night, writing it down,
Speaker 1: sketching it up on a napkin for five five friends,
Speaker 1: and then starting the company the next day and then
Speaker 1: becoming rich. There there's many many steps in between. Um.
Speaker 1: What the piece that we may that you may be
Speaker 1: missing if you're unfamiliar with a lot of this is
Speaker 1: the venture capitalists and these are these are people who
Speaker 1: are our business people looking to make initial investments. Um,
Speaker 1: you know you have your your five friends with you,
Speaker 1: you've started your company, but you know you've maxed all
Speaker 1: of you have maxed out your credit cards trying to
Speaker 1: get this thing off the ground. And you say, well,
Speaker 1: you know where am I going to come up with
Speaker 1: some money? I'm scratching my head but you can't see it. Uh,
Speaker 1: and a nice visual. Um, So, yeah, what am I
Speaker 1: gonna do? Well, these venture capitalists might want to talk
Speaker 1: to you. You might go into the boardroom, meet with
Speaker 1: the with the people at the firm and say, look,
Speaker 1: here's our idea. These are the five things you want
Speaker 1: to accomplish to do it. We figure we're gonna need,
Speaker 1: you know, fifteen million dollars to really tool up and
Speaker 1: make this thing a possibility. If you can convince those investors,
Speaker 1: those initial investors, uh, that you really have a case,
Speaker 1: they might be willing to give you some money and
Speaker 1: to to get the company started. So then you could
Speaker 1: go ahead and rent some office space, get your you know,
Speaker 1: copier and your computers, and you know, hire a couple
Speaker 1: of people to help you along. Yeah. Yeah, you've got
Speaker 1: a lot of overhead costs that you've got to take
Speaker 1: care of. These these uh initial investments come from these
Speaker 1: venture capitalists. And I was reading on an article in
Speaker 1: San Francisco Chronicle by Tom Abate, who um, who did
Speaker 1: a piece on the dot com bubble, and was saying that, uh,
Speaker 1: venture capital firms would, uh we're just going nuts funding this.
Speaker 1: In fact, that one of my supervisors want to work
Speaker 1: for a tech company left to join an adventure capital firm.
Speaker 1: We all thought that was really cool, um, which it
Speaker 1: which it was, But yeah, I mean, but again, this
Speaker 1: was a no brainer. They were coming up with the
Speaker 1: greatest ideas fresh off the right out of the UH factory,
Speaker 1: if you know, um, and they were. He said that.
Speaker 1: Abate said that venture capitalists in the in two thousand
Speaker 1: made about eight thousand investments valued at about a hundred
Speaker 1: point five million dollars um, which doesn't sound like a lot,
Speaker 1: it's like a hundred million dollars, but you know, that's
Speaker 1: the money that gets the company off the ground to
Speaker 1: the point where they can go ahead and raise enough
Speaker 1: interest from an investment firm to get you a an
Speaker 1: I p O an initial public offering of stock. That's
Speaker 1: where the public launch just stuck within that company. So yeah,
Speaker 1: you start your company, you get some people to to
Speaker 1: give you some funding to get off the ground, you
Speaker 1: get moving. Then you go to the big banks and say, hey,
Speaker 1: if we can launch some stock, I know we're all
Speaker 1: gonna get rich. And once they do that, and the people,
Speaker 1: and believe me, there were lots of stock watch pages.
Speaker 1: People speculated all the time about who was going to
Speaker 1: have an I p O and and which which new
Speaker 1: tech company was you know, these guys were any good
Speaker 1: who where they come from? You know, and people people
Speaker 1: were following which I p o s were coming in
Speaker 1: in the weeks and months ahead, so that you could
Speaker 1: go ahead and buy in on the first day and
Speaker 1: in a lot of cases the stock which you right
Speaker 1: up immediately out of the gate. Yeah. Yeah, to the
Speaker 1: point where if you were not in on it at
Speaker 1: the very beginning, then yeah, I mean there were still
Speaker 1: people who were purchasing stock prices even at high points
Speaker 1: because they were there were you know, the sky was
Speaker 1: the limit. There was no ceiling as far as anyone
Speaker 1: can tell for these companies and UM. And one of
Speaker 1: the risks of venture capital, and I find this interesting,
Speaker 1: is that there are times where um, a startup company
Speaker 1: will get more venture capital than it needs to get
Speaker 1: off the ground. And that's actually a problem. It's not
Speaker 1: you know, because the company has to figure out what
Speaker 1: to do with that money. And it may be like,
Speaker 1: let's say that there's a company that starts up that
Speaker 1: needs approximately twenty million dollars in venture capital to really start,
Speaker 1: but they get a hundred million dollars in venture capital.
Speaker 1: This is what leads to this can lead to bad habits,
Speaker 1: bad practices, for example, and a lot of these dot
Speaker 1: com companies fell into this trap where they started spending
Speaker 1: their venture capital on let's call them luxuries or lavish,
Speaker 1: lavish settings. Oh yes, because the dot com companies a
Speaker 1: lot of them in places like Mountain View, California, and
Speaker 1: San Francisco, San Francisco area, a lot of them. There
Speaker 1: will look quite a few of them here in Atlanta. Yeah,
Speaker 1: actually Atlanta had a lot of the dot com crash
Speaker 1: hurt Atlanta a lot. If you if you want to
Speaker 1: get an idea what it was like at the heyday,
Speaker 1: go to how Stuff Works dot com and read Jonathan's
Speaker 1: article on the Google Plex. Google still has offices very
Speaker 1: reminiscent of the kinds with the kinds of amenities that
Speaker 1: you would see in these places. But one of the
Speaker 1: cool things about the dot commerce was they wanted to
Speaker 1: attract the best in the brightest, so they would they
Speaker 1: would load up on these on things like foodsball tables,
Speaker 1: and arcades. They're trying to hire like like graduate students
Speaker 1: right out of school, so so schools like m I T.
Speaker 1: Georgia Tech. I mean, these these te yeah, cal Tech. Yeah,
Speaker 1: these these schools we were like the seed farms for
Speaker 1: for these companies. I mean they were going after these
Speaker 1: these students, sometimes hiring them right off, like out of college.
Speaker 1: They haven't even graduated. Yes, I I know. People as
Speaker 1: a matter of fact, you think of that as being
Speaker 1: a sports phenomenon. Oh well he's not coming back for
Speaker 1: a senior year because he signed with you know, joined
Speaker 1: the draft or something. Yeah. They some of these uh
Speaker 1: tech wizards. You know, we're talking like you know, eighteen
Speaker 1: nineteen twenty years old, they would get pulled out of college. UM.
Speaker 1: You know, there there's an incubator, which is what you
Speaker 1: call a UM an office space where little companies go
Speaker 1: UM at the Georgia Tech campus that I've been to
Speaker 1: UM and you see like office after offices. You know
Speaker 1: there in each office is a little company that's just
Speaker 1: getting started. UM. They get a little office space and
Speaker 1: a chance to to to get started on their business.
Speaker 1: But yeah, I mean if you have this stuff happening
Speaker 1: right next to the campus, it's easy for them to
Speaker 1: to do some recruiting and uh and and also the
Speaker 1: companies that were slightly larger that had had an I
Speaker 1: p O UM they would lure people in with stock options. Yeah,
Speaker 1: you would get paid in stock options, and since the
Speaker 1: companies were doing so well, that made you instantly a millionaire.
Speaker 1: That's not a joke. There were people who were joining
Speaker 1: companies and essentially overnight being a millionaire. If you were
Speaker 1: able to consider the stock options as being equivalent to,
Speaker 1: you know, the their perceived market value at the time. Yes,
Speaker 1: that's that's correct. And you have to, uh, you have
Speaker 1: to think about like, well, okay, so what if I
Speaker 1: join Giant Internet Co. And I, you know, I just
Speaker 1: come there and they pay me all these millions in
Speaker 1: stock options and I, you know, buy the stock and leave.
Speaker 1: I could just be a millionaire. Well know, a lot
Speaker 1: of these had a vesting period, so you'd have this
Speaker 1: these options on paper, and you had the right to
Speaker 1: buy them at a at a low price um or
Speaker 1: at the price of the data issues. So if you
Speaker 1: joined the company when the stock was three dollars a
Speaker 1: share um that you had the right to that that's
Speaker 1: locked in. But in order to actually get that stock
Speaker 1: or the right to actually buy the stock, you have
Speaker 1: to work there for so and so many years. So
Speaker 1: in two that was four years. You could get your
Speaker 1: you know you can. You can get your eight thousand
Speaker 1: shares a stock at three dollars this year. Meanwhile, the
Speaker 1: stock price had risen to ninety nine dollars a year. Wham,
Speaker 1: you've got lots and lots of money. But unfortunately did
Speaker 1: not work out that way, not well for a lot
Speaker 1: of people, but for some people that did. But that
Speaker 1: was during the bubble, as the stock prices continued to inflate.
Speaker 1: And um, you know, because the bubble started forming, like
Speaker 1: we said in the mid nineties. Uh, and it really
Speaker 1: reached it's its height in two thousand. Yes, and again
Speaker 1: from the article in the Chronicle March tenth, two thousand
Speaker 1: the peak five. This is the NASTAC, one of the
Speaker 1: stock exchanges here in the United States, a lot of
Speaker 1: it's not exclusively a tech stock exchange, but there are
Speaker 1: a lot a lot of tech stocks on there. Um.
Speaker 1: The NASTAC hit its peak of UM five thousand onety
Speaker 1: two fifty two UM, and then it virtually overnight crashed.
Speaker 1: Now um, the low point of the NASDAC was a
Speaker 1: couple of years later October nine, two thousand two, where
Speaker 1: it reached one thousand eleven. That's a seventy eight percent
Speaker 1: drop over two and a half years, two and a
Speaker 1: half years, seventy eight percent of the value of that
Speaker 1: of that stock exchange gone. Well, that's because it's because
Speaker 1: of a lot of things. So a lot of the
Speaker 1: tech companies delivered on their promises, but all of them did.
Speaker 1: There let's let's talk about some of the companies that
Speaker 1: started during this this uh this bubble. There are a
Speaker 1: few that are still around. There's eBay, which did quite well.
Speaker 1: There's Amazon, which Amazon followed a pattern that a lot
Speaker 1: of companies followed. Amazon made it work and most of
Speaker 1: the other companies did not. And that was the pattern
Speaker 1: that was kind of talking about earlier, where you try
Speaker 1: to get as many customers as possible and then you
Speaker 1: figure out a way to make money from them. Amazon
Speaker 1: did followed this, get big, get fast, and then make money.
Speaker 1: So the idea was that, all right, well, we need
Speaker 1: to hit as many people as possible, because that was
Speaker 1: the promise of the web. Correct. I mean you think
Speaker 1: of your average store, all right, your average physical store,
Speaker 1: physical brick and mortar store. There's a limit to the
Speaker 1: number of people who can go in and out of
Speaker 1: that store in a single day. Yes, if you want
Speaker 1: to know. If you really want to get into uh
Speaker 1: depth on this, you can read Chris Anderson's article in
Speaker 1: Wired magazine, The long Tail. He actually did a book
Speaker 1: on that too that might be available to your local library.
Speaker 1: But um, but yeah, I mean, Jonathan's right, there's you've
Speaker 1: got your local store, but you know it's it's also
Speaker 1: got so much it can carry, so you're limited to
Speaker 1: the stuff they think they can move. And if you
Speaker 1: want something that was published fifteen years ago, it may
Speaker 1: not be on your local store shelves anymore. So you've
Speaker 1: got a physical limit to how much you can have.
Speaker 1: You have a physical limit to how many people can
Speaker 1: visit your regionally based right, So I mean there's gonna
Speaker 1: be a limit to how far people are willing to
Speaker 1: travel to get to your store. But on the web,
Speaker 1: all of those disappear yep, right, because you you can
Speaker 1: have an unlimited number of people well, assuming your bandwidth
Speaker 1: can handle it, you can you can have a virtually
Speaker 1: unlimited number of people visit your store. You can have
Speaker 1: a virtually limitless inventory because you can always order whatever, Like,
Speaker 1: if you start selling out something, you can always order
Speaker 1: from the manufacturer more items of that until that dries
Speaker 1: up and and there's no regional limit essentially, and then
Speaker 1: you might be somewhat limited by whatever country you're in.
Speaker 1: But that's a lot different than being like, if I
Speaker 1: have a store in Atlanta, Georgia, and that's my only store,
Speaker 1: then essentially I'm catering to Atlanta. But if I have
Speaker 1: a website and my my my website is based out
Speaker 1: of Atlanta, but it goes everywhere, then my customers are
Speaker 1: the world. That is a phenomenal thing. Yes, Now, I
Speaker 1: mean you have something else too at your disposal, which
Speaker 1: is a method of communicating with potential customers. Now you
Speaker 1: Jonathan Store here in Atlanta, Georgia, Um, well, you've got
Speaker 1: people where it has spread throughout the state, maybe to
Speaker 1: uh neighboring states like South Carolina, Tennessee, Alabama, and Florida.
Speaker 1: And you know, people buy something here and go home.
Speaker 1: So you know, five or six people in New York,
Speaker 1: a couple of people in California know about Jonathan Store.
Speaker 1: They think it's cool. Maybe he comes out with a
Speaker 1: mail order catalog and get some more at business or
Speaker 1: do I maybe I franchise or maybe he franchises. But
Speaker 1: the thing is the word word of mouth is spreading
Speaker 1: and there's only so much advertising you're gonna I mean,
Speaker 1: he's not gonna put TV ads on in Wisconsin because
Speaker 1: they can't come into the store. They could get a catalog.
Speaker 1: And you know, of course there are many many success stories,
Speaker 1: people like seers who managed to make that work. Um,
Speaker 1: but that that's a painstaking into the Internet makes that
Speaker 1: so much easier because using search engines you can find
Speaker 1: It's like, you know, new and used books, where am
Speaker 1: I going to find? Oh, there's a store called Amazon
Speaker 1: dot com? What's here? And then you know, Amazon for
Speaker 1: it's part two, only has to maintain a handful of warehouses.
Speaker 1: They can put one in the Northeast, they can put
Speaker 1: one in the Southeast, they could put one in the Midwest.
Speaker 1: They have four or five buildings from which they ship
Speaker 1: stuff in the United States. They keep their overhead low.
Speaker 1: People aren't browsing through and damaging copies, people aren't shoplifting.
Speaker 1: There are many advantages that that the Internet gives a
Speaker 1: store that it wouldn't have. And so e commerce was
Speaker 1: one of the huge things that happened during the dot
Speaker 1: com boom because, um, you know, and it's scared the
Speaker 1: Willie's out of other stores, I mean Barnes and Nobles, Borders, uh,
Speaker 1: you know, which are big chains here in the United States. Immediately,
Speaker 1: you know, started working on one, probably not immediately, but
Speaker 1: shortly after. Immediately UM started working on some kind of
Speaker 1: online strategy. And not everyone has succeeded at that. Yeah. See, Amazon,
Speaker 1: they got big fast, but they didn't overspend, right, They
Speaker 1: didn't invest in in warehouses they didn't need or technology
Speaker 1: that was superfluous. They were very wise about their spinning
Speaker 1: choices and that's part of what helped them survive that
Speaker 1: the eventual crash. Uh. eBay had a very strong community
Speaker 1: at the time. UM still does, but it was a
Speaker 1: little different because back back then we're talking mainly auction
Speaker 1: based transactions. Now today it's it's changed a little bit, right,
Speaker 1: It's it's it's closer Amazon than it used to be. UM.
Speaker 1: And then you had Craigslist that also started during the
Speaker 1: dot com boom, and that was a different model entirely
Speaker 1: because that was sort of a it was sort of
Speaker 1: an extension of the old BBS community boards. Yeah. Yeah,
Speaker 1: well and and and correct me if I'm wrong, but
Speaker 1: both eBay and Craigslist were local, yes, operations until you know,
Speaker 1: word got out and people started saying, hey, I want this,
Speaker 1: I want to be able to you know, eBay was
Speaker 1: initially designed to be for the San Francisco area, right
Speaker 1: the Bay right, So that's uh, it's it's just funny
Speaker 1: how you know, well San Francisco man, you guys with
Speaker 1: your little Silicon valley and stuff. Um But there were
Speaker 1: other other big sites that also started in the in
Speaker 1: the in the boom that didn't ultimately do so well,
Speaker 1: like geo cities Cities. Geo Cities actually got so big
Speaker 1: that um, Yahoo decided to purchase them in for an
Speaker 1: enormous some three point five seven billion dollars. And where
Speaker 1: is geo now anyway, it's gone. Yeah who shut it
Speaker 1: down in two thousand nine. So you know that it
Speaker 1: was one of those purchases that at the time it
Speaker 1: seemed like it was a wise decision because everyone was
Speaker 1: getting a geo cities account and we saw so many
Speaker 1: terrible websites with with looping middies and animated gifts and uh,
Speaker 1: and there was the required under construction image that had
Speaker 1: to be on there something. Yeah, usually the guy with
Speaker 1: a shovel or it was a hard hat, or it
Speaker 1: was like the tape. But yeah, there was always an
Speaker 1: under construction. And guys, just so you know, if you're
Speaker 1: building your first website, I know all of you know this.
Speaker 1: We understand it's under construction. The web is a fluid thing,
Speaker 1: so you don't need to tell us it's always going
Speaker 1: to be changing. But um also A O L at
Speaker 1: that time, this is how big these companies were getting. Okay,
Speaker 1: so during this this boom, a O L A a
Speaker 1: web based company now grant. They had started off with
Speaker 1: sort of there were no spahns, an online service provider,
Speaker 1: so they weren't they weren't part of the internet. You
Speaker 1: dialed directly into that. They did a podcast. Yeah, they
Speaker 1: were their own network. But then they of course transition
Speaker 1: to the internet. When the web started to take off,
Speaker 1: A O L acquired Time Warner. This was a huge story,
Speaker 1: still is actually because now it's looked at as one
Speaker 1: of the worst business decisions of all time. For now anyway, Yeah,
Speaker 1: I'm sure someone else will do something even more but crazy,
Speaker 1: but at any rates, one of those where in retrospect,
Speaker 1: it was one of those things where just because the
Speaker 1: company can do something, maybe they shouldn't. It might not
Speaker 1: need to so, but there were other ones like pets
Speaker 1: dot Com. Oh, pets dot com was was one of those.
Speaker 1: There were there were many, Uh, there are many of
Speaker 1: these startups that became big and you can look back
Speaker 1: on them now and go, what on earth were they thinking?
Speaker 1: But pets dot Com was not one of them. It
Speaker 1: was an online uh pet retailer, so I mean not
Speaker 1: not pets but pet supplies and uh their commercials were
Speaker 1: very famous because they had a talking hand puppet dog
Speaker 1: with a microphone. Um he he actually went on to
Speaker 1: work for someone else. But pets dot Com, uh, you know,
Speaker 1: just did not did not end up working out. And
Speaker 1: of course the major uh pet um stores in the
Speaker 1: United States here all have an online presence sort of
Speaker 1: like pets dot Com. But at the time, I guess
Speaker 1: we weren't ready for it. Yeah, I can tell you
Speaker 1: if you want to hear about some big companies. That
Speaker 1: are some companies that made big news in in in
Speaker 1: the world of failure. Uh boo dot com is hard
Speaker 1: to beat. You boot dot com. Of course, if you're
Speaker 1: in the United States, you're gonna be going. I'm not
Speaker 1: sure I've heard of them. But in the United Kingdom,
Speaker 1: I bet you have Boo dot com fashion clothing supplier
Speaker 1: of website so Boo dot Com spent over a hundred
Speaker 1: million dollars. The company spent over a hundred million dollars
Speaker 1: before ever offering a single article of clothing for sale
Speaker 1: on its site. Also, they decided to push the envelope
Speaker 1: and be really uh cutting edge with their tech. So
Speaker 1: there was an animated personal assistant, a sales assistant who
Speaker 1: would help you on the site so that you have
Speaker 1: this animated character. The problem was, at this time, in
Speaker 1: the late nineties early two thousand's, uh, people were still
Speaker 1: using dial up. You know, the broadband was not an option,
Speaker 1: and so using something as as broadband intense, as an
Speaker 1: animated character to deliver your your product or to deliver
Speaker 1: the experience to the consumer, meant that it was even
Speaker 1: harder to get there and to experience it. So in
Speaker 1: its brief life, it's sold just a few hundred thousand
Speaker 1: dollars worth of clothing to around three and customers, and
Speaker 1: its spent over in six months, spent a hundred and
Speaker 1: eighty eight million dollars. So you know that that's like
Speaker 1: the classic story of the dot com crash, right, a
Speaker 1: company that just balloons beyond its its capacity to deliver
Speaker 1: upon the promises, and then burns through way too much
Speaker 1: money buying things that are not core to the business.
Speaker 1: And then as a result, once everyone says, hey, well
Speaker 1: we'll wait a minute, maybe we're getting maybe we're overreacting,
Speaker 1: maybe we're overvaluing these companies, it crashed hard. Another one
Speaker 1: that I was very sad to see go was web Van. Yes, now,
Speaker 1: for a while, uh there were a couple of competing
Speaker 1: UH stores, at least here in Atlanta, I know there
Speaker 1: were there were others in other parts of the country.
Speaker 1: Web Van, I believe was at least semi national here. Yeah,
Speaker 1: it was in several cities across the country. It was
Speaker 1: not it wasn't nationwide or anything, but there were there
Speaker 1: were like eight or nine at ease, and it was
Speaker 1: a good spread across the country. Yeah. And the idea
Speaker 1: was you would order your groceries online on the website
Speaker 1: and someone would deliver them to your house within a
Speaker 1: thirty minute window. You would tell them like, you would
Speaker 1: tell them approximately what time you would be home, and
Speaker 1: within thirty minutes of that time you should receive the delivery. So, actually,
Speaker 1: I don't know anybody who tried web van, or I
Speaker 1: would just let me finish, go ahead, or I believe
Speaker 1: the other in here in Atlanta was a home grocer,
Speaker 1: might have been. I don't know. I was a webvan customer.
Speaker 1: I don't know anybody here in Atlanta who tried those
Speaker 1: services and didn't love them. Oh my god, I loved them, um,
Speaker 1: And I think virtually everything else I've read online about
Speaker 1: them was not positive, extremely positive. The problem was that
Speaker 1: they were suffering from poor adoption. People didn't I don't
Speaker 1: know that they didn't necessarily know what these companies were,
Speaker 1: but they they in a way, it's kind of a
Speaker 1: throwback to old style services, like you know, the milkman
Speaker 1: delivering these things to your house. Maybe they considered it antiquated,
Speaker 1: but for whatever reason, UM, none of them really took off.
Speaker 1: The Florida Grocer Publics was also considering a move into
Speaker 1: that and and abandoned that. Um. There are some places
Speaker 1: where there are services like that. I have slowly crept
Speaker 1: back in Peapod for a while was sort of making
Speaker 1: a niche. And and you may you may have heard
Speaker 1: of things in your in your area Community supported Agriculture
Speaker 1: c s a S. Yes, these are are farms that
Speaker 1: sell a certain a certain amount of produce that's produced.
Speaker 1: Usually there's some sort of collective involved, and you might
Speaker 1: pay a weekly fee and you get a delivery of
Speaker 1: produce sent to you. So that's kind of similar, but
Speaker 1: it's on a much more regional, like a very local base,
Speaker 1: as opposed to national. One of the things Web did,
Speaker 1: besides the fact of a poor adoption that that led
Speaker 1: to its downfall, was it spent a lot of money
Speaker 1: to It spent over a billion dollars on warehouses, and
Speaker 1: it's spent it spent faster than it could bring in money,
Speaker 1: and so once confidence began to waiver in the tech
Speaker 1: market overall, there was no way it could cover its costs,
Speaker 1: and thus it went bankrupt and around two thousand one,
Speaker 1: and actually several companies did go bankrupt around that time,
Speaker 1: the two thousand two two period, because that's what was happening.
Speaker 1: Uh As you know, the people started to realize very
Speaker 1: quickly in two thousand that the companies they had been
Speaker 1: investing in they had overvalued. There was there was no
Speaker 1: way that any company could deliver on that that potential
Speaker 1: at that stage in its life, and as a result,
Speaker 1: people began to abandon in droves, and there were other
Speaker 1: reasons that contributed to people getting out of the market.
Speaker 1: Interest rates were going up. It's actually a really complex story,
Speaker 1: and there have been books written about this, but in general,
Speaker 1: what happened was people abandoned ship and as a result
Speaker 1: these companies their value plummeted. So the company that had
Speaker 1: been worth millions, hundreds of millions of dollars, it's now
Speaker 1: effectively worthless. They don't have the money to pay their overhead,
Speaker 1: they can't pay their employees. They had to start laying
Speaker 1: people off. All those stock options that were initially worth
Speaker 1: potentially hundreds of millions of dollars were now you know,
Speaker 1: you hear stories about people just like boxes of stock
Speaker 1: options or stocks that were worthless that you could have
Speaker 1: turned it into you know, uh, packing paper if you
Speaker 1: wanted to and um and so if you if you
Speaker 1: didn't cash in at the right time, you were out
Speaker 1: of luck. And as a result, also the job market
Speaker 1: became glutted with tech people, especially like web administrators, I T. Professionals.
Speaker 1: You suddenly had an influx of all these tech folks
Speaker 1: and not enough jobs because the companies that had been
Speaker 1: supporting them didn't exist anymore. Yeah, and this is you
Speaker 1: know it. It eventually settled out, but not before a
Speaker 1: lot of tech people lost their jobs and a lot
Speaker 1: of theoretical money on stock options, and a lot of
Speaker 1: real investors lost a lot of real money on their
Speaker 1: investments too. And of course it's made people very wary,
Speaker 1: which is why these days when people like group on
Speaker 1: are talking about the possibility of an I p O,
Speaker 1: people like Facebook, Twitter, Twitter. Twitter is a really good example. Actually, yeah,
Speaker 1: Twitter is is particularly uh nerve wracking because if you
Speaker 1: think about the definition of the bubble um, they're people
Speaker 1: are excited about it. But Twitter has been sort of
Speaker 1: reluctant to give us a business plan that that's publicly
Speaker 1: available so that we can see it. So uh, you know,
Speaker 1: a stock might go up. And if the company can't say, oh,
Speaker 1: yes we raise this much money through for example, advertising,
Speaker 1: you know it it that's what has people talking about
Speaker 1: it again. But I think people in general are more
Speaker 1: aware than they were in that and they also have
Speaker 1: an idea. People are more tech savvy as a whole
Speaker 1: than they were back then when everything seemed like, oh,
Speaker 1: that's a really neat idea. Yes, it's a neat idea,
Speaker 1: but you can't put it off. Yeah, you still see stories.
Speaker 1: I mean there are especially a couple of years ago,
Speaker 1: before we had the economic downturn again, uh, you heard
Speaker 1: stories about venture capitalists sinking more money into various uh ventures.
Speaker 1: Then you might think is wise. But in a lot
Speaker 1: of cases those panned out not because the companies were successful,
Speaker 1: but because some other larger company came along and acquired
Speaker 1: it for quite a bit of money, and then the
Speaker 1: investment pays off that way, which I mean, that's another
Speaker 1: like you're making a long shot bet. So you might think, oh,
Speaker 1: this little company here that's just starting up needs venture capital.
Speaker 1: I don't see it as being particularly successful in any
Speaker 1: way that's going to generate a lot of money, But
Speaker 1: I bet Google is going to buy it. Then you
Speaker 1: would go and you would invest in the small company
Speaker 1: with the hope that Google would come along and munch
Speaker 1: it up, and you know, the way things are, you'd
Speaker 1: probably have a seven percent chance of being right. And
Speaker 1: that that that's not to say that Google would do
Speaker 1: anything with it that would be successful. It just that
Speaker 1: seems to be the way it works. Now. I love Google,
Speaker 1: and they have done some wonderful things, but some of
Speaker 1: their purchases have not really worked out Jaiku. Yeah, I
Speaker 1: knew you were going to pick them, so so we'll
Speaker 1: have to We'll have to see where, because I think
Speaker 1: the market is going to be a little bit more
Speaker 1: cautious and if there is a bubble, it won't inflates
Speaker 1: so spectacularly as the last one did. Yeah, probably simply
Speaker 1: because it's so close in proximity to the previous one.
Speaker 1: But um, that doesn't mean that people shouldn't try to
Speaker 1: get some investment and move out there. You know, I
Speaker 1: hope to see that that uh, there're more new tech
Speaker 1: companies willing to make the plunge. You know, we definitely
Speaker 1: don't want to see innovation suffer, right, but you want
Speaker 1: me to make it happen. We just gotta be careful
Speaker 1: because I mean, I can tell you Atlanta suffered, really,
Speaker 1: it suffered quite a bit after the dot com crash.
Speaker 1: I worked for a company that was not directly related
Speaker 1: to tech, but had a lot of clients that were
Speaker 1: tech companies, and once that crash happened, the revenue for
Speaker 1: the company I worked for suffered. So that kind of
Speaker 1: thing can happen where even if you aren't directly related
Speaker 1: to it. You feel that impact. And of course I
Speaker 1: was a web band customer, so when webban went belly
Speaker 1: up that I didn't have a car at the time.
Speaker 1: I lived a mile away from the nearest train station,
Speaker 1: and then I'd have to take a train and a
Speaker 1: bus to get to the closest market, and then I'd
Speaker 1: had to carry all that stuff back. You know. Web
Speaker 1: Ban was exactly what I needed at the time, now,
Speaker 1: you know, so I keep hoping for something like that
Speaker 1: to really start to make its way back, even if
Speaker 1: it's locally supported as opposed to being a big national chain. Yeah,
Speaker 1: I would imagine that that the failure probably still has
Speaker 1: some people weary, but I think it could succeed given
Speaker 1: the opportunity. All right, Well, that was a great discussion
Speaker 1: on the dot com crash. If you guys have input,
Speaker 1: If you were directly affected or indirectly affected by the
Speaker 1: dot com crash and you want to share your story,
Speaker 1: you certainly can feel free to do so. You can
Speaker 1: shoot us a message on Facebook or Twitter or handle
Speaker 1: at both of those is tech stuff h s W.
Speaker 1: Or you can shoot us an email and that address
Speaker 1: is tech stuff at how stuff works dot com and
Speaker 1: Chris and I will talk to you again really soon.
Speaker 1: For moral on this and thousands of other topics, visit
Speaker 1: how stuff works dot com. To learn more about the podcast,
Speaker 1: click on the podcast icon in the upper right corner
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