Internet Boom Essay

Going public early will not be the right plan for every company.

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And as soon as these startups got the money, what did they do with it?

Buy millions of dollars worth of advertising on Yahoo to promote their brand.

But most of the winners will only indirectly be Internet companies; for every Google there will be ten Jet Blues.3. The general argument is that new forms of communication always do.

They happen rarely (till industrial times there were just speech, writing, and printing), but when they do, they always cause a big splash.

Recognizing an important trend turns out to be easier than figuring out how to profit from it.

The mistake investors always seem to make is to take the trend too literally. In fact most of the money to be made from big trends is made indirectly.The specific argument, or one of them, is the Internet gives us more choices.In the "old" economy, the high cost of presenting information to people meant they had only a narrow range of options to choose from.The tiny, expensive pipeline to consumers was tellingly named "the channel." Control the channel and you could feed them what you wanted, on your terms.And it was not just big corporations that depended on this principle. It's very easy for people to switch to a new search engine.September 2004(This essay is derived from an invited talk at ICFP 2004.)I had a front row seat for the Internet Bubble, because I worked at Yahoo during 19. He tried to sound indignant, but he didn't quite manage it. The finance guys seemed scrupulous about reporting earnings.One day, when the stock was trading around 0, I sat down and calculated what I thought the price should be. I went to the next cubicle and told my friend Trevor. He knew as well as I did that our valuation was crazy. It was not just our price to earnings ratio that was bogus. What made our earnings bogus was that Yahoo was, in effect, the center of a Ponzi scheme.The stock of a company that doesn't yet have earnings is worth something.It may take a while for the market to learn how to value such companies, just as it had to learn to value common stocks in the early 20th century.But markets are good at solving that kind of problem.I wouldn't be surprised if the market ultimately did a better job than VCs do now.