Intangible Worth
As we come to the end of our studies of the history of the internet, I’ve been inspired to think about its more recent history; namely, the tremor that kicked off the internet age- the dot com bubble.
In the late 90s, as the internet turned from a thing accessible only to academics and the science literate to a public good of massive proportions, people began to funnel their money into the numerous tech startups popping up around the web. These websites had high valuations and low profits, but no one seemed to care. The internet was new, fast paced, the next big thing. It was here to revolutionize the world. And make people rich.
Except, of course, the bubble burst. Capital ran out and many of the new companies burned out. I was too young to remember any of the rise or the fall, but no one else seems to remember the dot com bubble either. After all, when I look around, I see tech companies operating at a loss quite frequently; Uber and Twitter come to mind first. At the same time, cryptocurrencies have been attracting billions in investments, and now look poised to finally come under international scrutiny. When they do, with such a volatile market, the damage to currency owners as the market gets skittish could be immense.
All this being said, none of these technologies are inherently bad. Internet companies make my life easier. I am a (proud?) consumer of both Amazon and Youtube. Twitter does create some funny jokes. And cryptocurrencies offer an enticing view of a world without hard cash. My question is this; when the link between all of these things, from stock prices to bitcoin valuations, is flimsy human confidence, what surety can we expect to have? Humans are fickle, often scared, easily angered. We look out for ourselves and our kin much of the time. We run at the first sign of danger. It seems to me that we have failed to learn from the dot com bubble not to put our faith in human psychology as a backer of our finances.
What good does a dollar invested in bitcoin do, other than give to the investor some wealth that is as tangible as fog in the sunlight? Should we promote a model, much like that of Amazon, of ensuring that our investments go into research and development, and not just into someone’s pockets? Or is research and development still too intangible a backing for a financial system? How do we balance safety and innovation?
These are the sort of questions that, I hope, will be put forth into the public eye in the coming months. I only hope that it won’t take another painfully bursting bubble to get them there.
Jim Waldo
September 20, 2017 @ 12:53 am
Ah, the internet bubble (which was really the world wide web bubble, that that doesn’t have the same ring to it)– I remember it well.
There were actually other major bubbles in technology– there was the minicomputer bubble, and the workstation bubble, and there have been at least two different Internet of Things bubbles (and we are entering a new one). The tech industry seems to be subject to boom and bust, where the booms are pretty spectacular, and the busts even more so.
We will be talking about these sort of things starting this next week. But understanding that there is a history of this sort of thing helps. The computer and tech industry is not very good at understanding that it has a history, so it does seem to repeat…
Mike Smith
September 21, 2017 @ 2:36 pm
Like Jim, I remember the dot com bubble. A buddy of mine and I started a software company at the end of that bubble. Literally. We incorporated our company in January 2001, and the venture capital market for tech start-ups was completely dry in February 2001 (the stock market slide and the demise of companies continued through 2001). There are lots of fun stories I could tell from that time, which maybe we can do if some of you would like to get together for a classroom-to-table lunch or dinner.
I wanted to mention something in relationship to your question about “flimsy human confidence.” While I think you’re asking all the right questions, so much of our physical world today rests squarely on flimsy human confidence. Remember that the only reason I’ll give you an actual object of value or agree to perform a service in exchange for U.S. dollars is because I believe, like you and the rest of our society, that dollars have worth. Without faith in the monetary system behind it, those dollars really aren’t anything but marked-up paper.