The Economist warns of the return of the bubble.

"NASTY memories have been stirred up by this week's reports that Microsoft is in talks to buy a big stake in America Online. After all, the last time that AOL was involved in a big deal—its $150 billion acquisition of Time Warner, a media giant, in January 2000—it soon came to symbolise the madness of internet-company valuations, during the turn-of-the-century dotcom bubble. "

Bobbie Johnson of The Guardian takes a less skeptical view:

"I'm not as sceptical as the Economist, which tends to take an establishment-line view of most things new, because I don't think success is only measured by the bottom line. And I don't think that we're in the same place as we were five years ago, either technologically or socially. Yes, there will be some losers who have paid big money for dud companies, but I'm not sure we're yet to see a spewing of cash-crazed speculation from investors trying to make a quick buck. When that arrives, then I'll be grabbing the tinfoil hat."

The Dotcom Generation

The question shouldn't be whether there will be another bubble or not  Bubbles are an inevitable and standard feature of economic cycles. Bubble 2.0 is really Bubble 200.0. You might be an über-optimist The Long Boom believer, but even in Swartz and Leyden's rosy scenario there are 'blips'. I've lived through two recessions / bubble-bursts during my working career.  I expect to live through at least another three bubble-and-bursts before I hang up my flip-flops (health permitting).

So, the question should be: 'what did we learn from the last bubble?'.

Who are the 'we'?  There are at least three generations who took an active part in the frenzy:

  • those born in the 80's (in their mid-20's today) - part of the Generation Y (GY)
  • Generation X (GX), born in 60's and 70's (my generation)
  • the Baby Boomers (BB), born between 1943 and 1960

Each of these three generations (let's call them collectively 'The Dotcom Generation') had their own working-career perspective of the bubble event and will recall and reflect on those years through lenses that are defined by the life-stage they were at during the dotcom boom and bust.

For example, take the experienced senior manager (BB) who risked all (a secure job, a pension, etc) to join the giant-killer start up. He/she lost the bet and then had to rejoin the recession-ridden work-market aged 45 ('I bet, I lost, holy crap!). He/she will have quite different view (trauma) compared to the first-time worker (GY) who thought it was a lot of fun killing the old establishments one day only to be made redundant the next ('hey, no-one has a job for life these days!').

Lessons Learnt

So collectively, what lessons did the Dotcom Generation learn?  I can't say now, sorry - we'll have to wait and see if we really learnt anything at all.

I'm Generation X. For what it is worth here my top 10 lessons I learnt during the last bubble and burst (in no particular order):

  • Don't be greedy
  • If it sounds too good to be true it probably is
  • The internet isn't going away
  • Ideas are cheap - it is all about the execution
  • Keep thinking - don't auto-pilot
  • Get into the profit zone early and stay there
  • Introduce business processes early (discipline) but keep them light-weight
  • Never ever compromise on the quality of your new recruits
  • Make the tough decisions early and follow through fast
  • Think like a customer

What generation are you and what did you learn (professionally) from the bubble and the burst?

Update:

  • 27 Sept 2005: The Stalwart has nice post on Metcalfe's Law, valuations and Bubble 1.0. This relates to my 2nd lesson above - 'If it sounds too good to be true it probably is':

"Another problem is that in all these [valuation] equations all I see is pluses and exponents.  Where are the Log functions?"

"I have to say my one piece of advice to startups is to focus on building your product and revenue and don’t waste time on partnerships. Maybe when you’re a huge company these things can work out, but the most important things in any startup are: 1. the product and 2. the bottom line."

"Whether the Web Design industry realises it or not, it has lost a lot of thinkers. Using the same example as above, others of those thinkers have gone to software companies, which is also a loss, as software companies (with possibly the exception of Sun) have no interest, other than in selling software."

"Over the next week or so I’ll be blogging about some of the Bubble 2.0 themes that I think will create opportunity and determine success. These include Reed’s Law (even more powerful than Metcalfe’s Law), the “long tail”, RSS and blogs, and wireless access."

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