Re: More thoughts on the mistakes....
 

Thanks Martin, we've had some fascinating answers.... (I'll write more replies later....)

That was an interesting story!

I guess in a way, some of these dot-commers did "succeed" but not in the "traditional" sense....

One of the "laws" of business is "you have to sell something to somebody" (I borrowed that from Jim Straw), and I guess when you think of it, they did sell something to somebody.... They sold their stock.

That seems to have been the essential business model.... Create an internet company, sell the stock, get rich.

It worked for a while, but it's unsustainable - it's a bit like a chain letter or pyramid scheme in that sense, each person gives the people higher up on the chain some money, and you'll get more later yourself. Eventually, it comes crashing down, and just like pyramid schemes, the ones at the end of the chain lose the most.

These venture capitalists were very experienced at business, so I'm sure they know all this stuff. They just thought they'd get rich while they could from the above scheme - not by selling products to consumers, but by selling hyper-inflated stock to a hungry public.

That was a very interesting story, Martin, and I can certainly see how it could be hard to tell many of these people that their ideas would not work. Especially since there was a kind of "arrogance" about it as well.... The standard reply was, "you just don't get it." Of course, you DID "get it," but they were under the delusion of the bubble....

- Dien

The Rise and Fall of Dot Coms
 

Hello,

It is true that during the internet boom, mistakes were made by both investors and entrepreneurs alike. But that doesn't mean the internet doesn't hold some promise. The truth is, the internet does change the way some businesses operate, as transaction costs come down and more specialised "niche" businesses become viable.

There are other advantages for the successful dot com, arising from increased user selection and convenience in the case of Amazon.com, and the possibility of a huge marketplace of buyers and sellers in the case of (profitable) Ebay.

My guess is that many uninformed investors got some sense that the internet held great growth, but without really understanding the sector or the microeconomic factors determining the success or failure of individual companies, many investors blindly invested in the internet sector as a whole, rather than trying to identify superior companies that did have some underlying competitive edge. In this flurry of market action and unbelievable returns, more people subscribed to "momentum investing" and other such methodologies which always eventually crash back to reality when profits fail to materialize.

Seeing this great flow of money to the industry, I think this encouraged entrepreneurs to this modern-day gold field in an effort to speed up their retirements. Of course, this isn't a blanket statement; I know there are entrepeneurs out there that have entered the internet arena due to genuine ideas about viable businesses.

I think the above reasons were the main reason for a prolonged "internet boom". And there are some big companies that are still around today, and I'm sure they will be tomorrow. At the moment, I believe EBay is a company with sound economics that will be around for quite some time; whether it's at an attractive price right now is another story though.

Cheers,

Thomas.

> Greetings,

> Way too much money. It is the smaller
> operations that are still around. Everyone
> here knows the Internet is a great way to do
> business. Christmas retail sales are down
> because of the Internet. But everyone
> "knew" the Internet was HUGE - and
> they didn't take the time to build a base to
> start from and grow. They were willing to
> spend millions thinking the Internet
> couldn't fail. Now they know they can - and
> businesses will start to grow online in a
> more realistic fashion.

> Stephen Dean
> ebizknowitall.com
> Home of the Tombstone Sales Letter

Re: The Rise and Fall of Dot Coms
 

Hi Thomas!

Thanks for your post....

(For those who don't know, Thomas is my youngest brother. He's currently working for a hedge fund in New York City for a short time, as he's in the process of completing his university studies in finance....)

> The
> truth is, the internet does change the way
> some businesses operate, as transaction
> costs come down and more specialised
> "niche" businesses become viable.

Yes, I agree with you here.... The internet makes it much easier for "niche" businesses to reach their audience. I think this is the real power of the internet for business....

> Seeing this great flow of money to the
> industry, I think this encouraged
> entrepreneurs to this modern-day gold field
> in an effort to speed up their retirements.
> Of course, this isn't a blanket statement; I
> know there are entrepeneurs out there that
> have entered the internet arena due to
> genuine ideas about viable businesses.

I agree with you here, it sure was like a "gold rush" !

Some of the ones who have done the best seem to be those who have "sold shovels to miners" - that is, those who have sold the tools of ecommerce to the people seeking gold....

That is, when there is a "rush", instead of joining the crowd they treat that crowd as a great potential market, and ask themselves, "what do these people need" ? It's an interesting perspective....

Thanks Thomas for your insights! :)

- Dien Rice