What can the dot com crash of 2000 teach us about a potential AI bubble?
Here’s a different view.
The dot com crash got it wrong. The crash failed.
Why did it fail?
The Internet is an unbelievably massive, globally changing success story.
What did the crash get right?
It identified three things:
- Massive growth in the Internet existed, but it wasn’t as massive as the speculators thought.
- There were many second rate companies, without good products or services that were riding the coat tails of the good players.
- Computer companies and telcos did not transition to good Internet companies.
Why is this distinction important.
AI is not a bubble, we are building intelligence, and perhaps even consciousness. That is not a bubble, but we may be getting ahead of ourselves and there may be many second rate companies that have no compelling product or service.
- If there is crash, HODL (Hold on for Dear Life), a term borrowed from Bitcoin. Your investment may go down 90%, but given enough time, if you have invested in the right companies, your investment will go stratospheric.
- Don’t invest in edge companies, invest in the obvious next generation of Amazon or Google or Facebook.
- Will those next generation companies be Amazon, Google or Microsoft? Perhaps, perhaps not, but if you focus on AI only companies, and perhaps companies that are yet to exist, then that is the likely future according to history.
Altavista (owned by DEC) was dominant until Google, a search native company came along. That is the most important thing to understand, companies rarely disrupt their own business models.
But mostly, I want to highlight a strange concept. The 2000 dot com crash got it wrong.