The economy is sneaking toward a second run at recession, even as GDP appears to be lingering positive. The monster never really left. It just hid behind tariff front-running.
Does anyone else remember when Amazon was just a bookstore? Their only product was ink-on-paper books, sent by mail (now called snail mail). A gazillion other small internet sellers wanted their piece of the pie, so most emulated Amazon in becoming a one-category mail order seller. One company sold kitchen gadgets. Another sold hardware store items. And so forth. Some companies decided to concentrate on services. Travelocity was an online travel agent, booking only plane tickets (back when airlines paid travel agents to book their tickets, because travelers did not buy tickets directly from the airlines back then). eBay was an online auction (you actually bid for items online in a fixed time frame; no “buy it now” buttons back then). People quickly learned that eBay sellers stole their money and never shipped the goods, until eBay itself started guaranteeing performance when you paid with their credit service (now called PayPal).
How was all this possible? Venture capitalists lent millions to entrepreneurs with nothing but an idea. Everyone was going to be the next Amazon in their little niche of the market. And they burned through billions in VC to “gain market share.” The holy grail was “market share.” Company officers were living the high life on VC. Advertising agencies and the media were getting rich on VC. VC was buying server farms and internet backbone time. But the VC folks were not getting anything in return. Until seemingly overnight, the venture capitalists realized that “market share” did not pay a return on their investment, so they cut the spigot. And the dot-com boom became the dot-com bust.
Companies closed their virtual doors. Company officers were sacked. (My brother was pretty high up in AT&T, until he quit to become VP of an online customer resource management (CRM) startup. Within 6 months of jumping ship at AT&T, he was unemployed.)
Like you, I see an amazing parallel between the AI bubble and the dot-com bubble. It will end the same way. A few strong companies will survive, like Amazon and Travelocity from that era, but far more will go bust, such as the tens of thousands of companies like my brother’s that you’ve never heard of.
Well articulated, and not unlike the boom in the American automotive buisness in the early 1900s that finally consolidated down to just a few manufacturers who still remain.
Does anyone else remember when Amazon was just a bookstore? Their only product was ink-on-paper books, sent by mail (now called snail mail). A gazillion other small internet sellers wanted their piece of the pie, so most emulated Amazon in becoming a one-category mail order seller. One company sold kitchen gadgets. Another sold hardware store items. And so forth. Some companies decided to concentrate on services. Travelocity was an online travel agent, booking only plane tickets (back when airlines paid travel agents to book their tickets, because travelers did not buy tickets directly from the airlines back then). eBay was an online auction (you actually bid for items online in a fixed time frame; no “buy it now” buttons back then). People quickly learned that eBay sellers stole their money and never shipped the goods, until eBay itself started guaranteeing performance when you paid with their credit service (now called PayPal).
How was all this possible? Venture capitalists lent millions to entrepreneurs with nothing but an idea. Everyone was going to be the next Amazon in their little niche of the market. And they burned through billions in VC to “gain market share.” The holy grail was “market share.” Company officers were living the high life on VC. Advertising agencies and the media were getting rich on VC. VC was buying server farms and internet backbone time. But the VC folks were not getting anything in return. Until seemingly overnight, the venture capitalists realized that “market share” did not pay a return on their investment, so they cut the spigot. And the dot-com boom became the dot-com bust.
Companies closed their virtual doors. Company officers were sacked. (My brother was pretty high up in AT&T, until he quit to become VP of an online customer resource management (CRM) startup. Within 6 months of jumping ship at AT&T, he was unemployed.)
Like you, I see an amazing parallel between the AI bubble and the dot-com bubble. It will end the same way. A few strong companies will survive, like Amazon and Travelocity from that era, but far more will go bust, such as the tens of thousands of companies like my brother’s that you’ve never heard of.
Well articulated, and not unlike the boom in the American automotive buisness in the early 1900s that finally consolidated down to just a few manufacturers who still remain.