This is team Karl marx and we will be talking about the dot com bubble.
The 1990s were a magical, optimistic time for technology.
Thanks to the tech called internet, we were connected like never before
. Much like the vast unending space to the internet itself, people felt there were no limits to
what their capabilities were. And naturally, hundreds then thousands of websites would pop
up, providing services for just about anything. Venture capitalists were all over it, throwing
money at just about anything that ended in dot com. For the first time in history, anything
was possible. What happens when we take things too far?
What followed would be an economic disaster of global proportions. As much as $5 trillion
lost, thousands of businesses are now bankrupt with very few survivors left over, and a
recession has formed. Ladies and gentleman, this is the dot com bubble.
The dot com bubble was a period of excessive speculation and inflated valuations of
internet-based companies, also known as the dot-coms, in the late 1990s and early 2000s.
Now let’s illustrate with an example. Pets.com was perhaps the most well known victim of
the bubble.Launched in 1998, Pets.com aimed to revolutionise the pet supply industry by
selling products online. With its famous sock puppet mascot and a $1.2 million Super Bowl
ad in 2000, Pets.com quickly captured the public's imagination. Investors were dazzled, and
the company went public in February 2000.needless to say, it was a dot com company. But
what is all worth the hype? Speculations show that it wasn't. It was just another over valued
company who struggled with their profits. And in November 2000, after the burst, the share
prices were only .25 dollars, from a staggering 14 dollar share price once in february. The
company filed bankruptcy
This is a classic example of what happened with hundreds of companies during that time.
The dot com bubble had its roots in the early 1990s when the internet gave us a sudden yet
new way to stay connected. The craze for .com companies had been through for almost a
decade long until they collapsed in the 2000s. What followed was a struggle for many small
and large companies, with most of them getting knocked out, while some still surviving, like-
Amazon, ebay etc.
Investors during those years were more into speculative investment and wanted profits
blindly without weighing out the long term game. With .com companies getting over hyped by
the media, venture capitalists were more and more drawn to the companies with a .com
attached to their name. All of these resulted in a massive over valuation of the companies,
with NASDAQ reaching over 800%, only to fall to 78% from its peak in October 2002.
Now let’s have a look at some graphs to understand the intensity of the situation. We can
see that at the height of the bubble, the stock market was 2.6 trillion dollars more overvalued
than the historical trend. This was caused due to a sharp rise in IPOs during that time as we
can see. Moreover, overhyping the dot com brands by the media also played an important
role.
Among all these chaos, there was one man who insinuated at the inflated prices of the
internet companies, he was mr. Alan greenspan. In a speech in 1995, he used the term
“irrational exuberance” while talking about the internet companies and suggested that their
valuations were well above average.
