The Dotcom bubble may have been a good thing.

When the internet went mainstream it was obvious that there was money to be made from it, and so lots of money was thrown at the web 1.0 retailers and it was largely misallocated. Some firms came through and made good for their investors, but most fell flat. Immediately post boom the people in tech who were any good and lost their jobs found new jobs and continued to be productive in new and better ways. In spite of us knowing much better now how to allocate our resources in tech there isn’t a frenzy of investment and has not been since the early 90’s. There is still strong investment but it is at appropriate levels. I think that there is a good case to be made that it was so many getting burnt when the dotcom bubble burst that has prevented a second techbubble from forming. Imagine if the web 1.0 bubble hadn’t formed and we transitioned straight into web 2.0, it would still be something new and you would still get a lot of attention for it and the bubble would have formed around an inherently stronger market. While there would have been even more left in the rubble after the bubble burst I suspect that that also would have meant that the bubble would have been a whole lot bigger when that time came. A bubble is all about leverage, and it only goes when people run out of leverage, had they had more real estate to go into a frenzy over the frenzy would have been bigger and even more capital would have been misallocated.


About opcnup

Emerson White is a biology student working on post grad while doing private research on the side.
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