Posts tagged as: bubble

Testing: 1, 2, 3

It looks like my blog code made it over the hump to 2006 with no problem. Ever since Y2K I've been uncomfortable having Web-based code running over New Year's Eve. Y2K is one story that the MSM completely misreported and might make an interesting history of technology book. When Y2K finally arrived and planes didn't drop out of the sky, the media shrugged and called the whole thing hype. They didn't mention that they had played a huge part in magnifying the hype. What they also didn't report was the tremendous effort by computer people all over the world to root out many potential Y2K bugs. At Andover.net we tested all of our code, our desktop machines, and our servers. We found plenty of problems that would have brought our sites down and fixed them in advance. Many corporations with much older hardware simply bought new machines as a way of protecting themselves.They also hired thousands of programmers to review decades of old code. I view it as the greatest engineering feat in history that was never reported.

The biggest promoters of the Y2K crisis also seem to be trying to forget it. My favorite doomsayer from that period was Gary North. He had built a bunker in an undisclosed location in the Ozarks and was stocking up on food and amunition. Since then he has become a financial advisor and removed all of his pre-Y2K predictions from his website. Thanks to the Wayback Machine, however, we can still appreciate the power of his rhetoric. Here is a quote from April 29, 1999:

It wasn't the Y2K bug that caused the crash directly. It was the hangover from the efforts to fix the problem. In the months leading up to Jan. 1, 2000 corporations were buying new hardware as fast as it could be manufactured, and the Federal Reserve was pumping liquidity into the system to prevent the bank runs that North was predicting. All of this activity inflated the bubble even further, as you can see on the chart. When Y2k passed safely, the hardware purchases stopped, the extra programmers were laid off, and the Fed pulled the plug on its cash machine. The result was a bubble pop that we are still recovering from.

Gary North was right about Y2K causing a cataclysm, trillions of dollars were lost over the following year. In this season of predictions we should remember that they often come true, just not the way we expect them to.

I don't know how to evangelize Web 2.0

I just got back from a Christmas party thrown by my old boss, Bruce Twickler. I also got to talk with a couple of other people from Andover.net and one of its earliest investors. These guys were all true Web 1.0 pioneers, so they know what a real wave looks like. They also know me and trust me enough to understand that if I am really excited about something it must be hot, and yet I was unable to explain exactly what changes would be brought about by Web 2.0 techniques. Frankly, tagging is an extremely weak thing to explain, and collective bookmarking and looking at other people's pictures also sound scarily geeky. One thing that did resonant with them was the idea of moving your identity online. Whatever that means. We need some really hot exemplars. Google Maps may have caught some people's attention, but there have to be several more killer Web 2.0 apps to really get the public excited. Does anyone have a way of explaining the changes Web 2.0 will bring to the majority of Internet users in the next couple of years that doesn't involve a multipoint bullet chart? I need one sentence and five sentence explanations.

Get over the Bubble already

The blogosphere needs to get over its obsession with there being another market bubble. Yes, there is a lot of hype around Web 2.0, and many of the start-ups will fail, but none of these "signs" of a bubble have anything to do with the dot-com bubble. That was a singularity, not a model for a repeating cycle. Do any of these reasons for the stock market rise in the late Nineties pertain to today?

• Massive rebuilding of infrastructure in preparation for Y2K. Corporate IT departments around the world bought new computers to replace those that were suspect and hired legions of programmers to check and rewrite code. These programmers were no longer needed after January 1, 2000, just before the crash.
• Deregulation of telcos in 1996 which set that industry on a massive capital expenditure binge.
• The adoption of the Internet. It didn't live up to all of its promise in the first few years, but the mass-market, commercial Internet which appeared in the mid-Nineties will be a major force for change for decades to come. Just because we are calling this Web 2.0, doesn't mean that there is any expectation that this will be as big as the first wave of adoption. That is no longer mathematically possible.
• The intervention by the Federal Reserve in the collapse of Long-Term Capital Management in the fall of 1998 pumped massive liquidity into the financial system, much of which eventually sloshed into the equity markets.

Is Web 2.0 a bubble or a revolution?

It seems like "bubble" is getting thrown around way too frequently these days, when a more appropriate word is "revolution." That's what we called it in the early 1980s and late 1990s. There were economic bubbles surrounding both periods, but there is no doubt the personal computer and the Internet caused massive change globally.

I asked Google about this and was told that there are 1.7 million documents for the query web 2.0 bubble and 6.7 million for web 2.0 revolution, so perhaps there is a belief in another revolution?

I then asked Blogpulse and was shown a burst of attention surrounding both bubble and revolution starting at the end of September, the week before the Web 2.0 conference.Unfortunately, it looks like the fear of a bubble has drowned out the hope and perhaps greed for a revolution.

Is the price of Google news?

Announcing the new highs for GOOG stock may or may not be a good sign. Its good that tech stocks are going up. That tide will raise all boats, but if we tie ourselves to the price of GOOG, are we tied on the way down?

Multiple bodies colliding with their heads cut off

Ah, for the simple days when it was just Netscape with a browser causing the fuss, and all Microsoft had to do was suck out all their air with IE to kill them. Today, with Google, Microsoft, Amazon and Yahoo all competing to do EVERYTHING anyone could ever want (even that is questionable) with a computer, it is almost impossible to tell where the leading edge is leading to. I guess the computer industry expanding in all directions at the same time is the definition of a bubble. The real reason why bubbles form and then expand to extremes is that there is no chance for customer feedback. The Web 1.0 bubble was funded by VC money chasing markets without any time to see if there was any money to be made. Web 2.0 is expanding because the Big Four are locked in a steel cage deathmatch and don't have time to see if any of their new projects in beta will find a positive response from the market. By market I mean actual users in the millions, not just tens of thousands of bloggers.

Lost Generation

Cringely had an interesting post about the aging of the computer industry. His main point is that as baby boomers move "past the peaks of their careers" they will be more willing to publish their work as open source. He has a point, but he misses a more important issue of generational change. The dotcom bust is an event with as much long-term impact as the Great Depression. There will always be a division between those who lived through it and those who were too young. I'm willing to bet that the people who are screaming "Web 2.0 Bubble" the loudest are the ones who ended up with a pile of worthless stock options. These people will never be the same. They'll always have a deep seated fear of hype, even if it is based on real technological and cultural advances.

The peak of the boom was 1998-1999, so anyone who is now 25 years old or less has grown up with the Internet as a fundamental part of their lives, but never went through the trauma of being in a failed dotcom. The talk I went to last week at Harvard was a perfect example. The majority of the attendees were in their early twenties, and they had no fear of making bold predictions about the future of the web.

Cringely may be right in saying that the boomers are past their peak creative years, but the generation who has suffered the greatest loss is Gen X. They came out of college and stepped right into $100,000+ jobs. They ended up thinking that this was their proper salary. Its hard to tell if they'll ever get back to that level, and it isn't likely that many of them will trust another start-up. In many ways they are the lost generation of the Internet.