In the US, the NASDAQ is flirting with new record highs just about every day. In the UK the FTSE 100 has now passed, what for so long was its record high, the 6,930 reading set on 30 December 1999 – a record that stayed in place until last year, before the index then fell sharply.
Does this show that the dreams of the dotcom entrepreneurs, that for a while felt like nothing but naive hope, have been realised?
It is said that there are two types of bubbles – that is to say bubbles in the business/economic context. A bubble occurs when markets or entrepreneurs jump on a bandwagon, asset prices explode, and then they burst. But it is possible that there are good and bad bubbles.
It has happened many times: The Mississippi Bubble, the South Seas Bubble, the Tulip Bubble, the 1929 Bubble, and the Sub-Prime Bubble.
There have been other occasions too: The Dotcom Bubble of the late 1990s, for example. Or the insane telegraph wires craze in the US seen in the early 19th century and then the US railroad boom. In both cases, entrepreneurs, drunk on the promise of riches, went out and built and bought, and speculated, and, in many cases, went bust spectacularly.
Bubbles can claim money from the wisest amongst us. Isaac Newton lost a fortune from the South Sea Bubble leading him to say: “I can calculate the movement of the stars, but not the madness of men.”
Yet the lasting legacy is not always negative.
As Daniel Gross said in his book ‘Pop!: Why Bubbles Are Great For The Economy', the telegraph wire and railroad boom left a legacy that may have provided the foundations for modern America.
And ask yourself this: what would the internet be like today if it wasn’t for the insane, illogical high spending of the dotcom boom?
Back in the late 1990s, dotcom businesses were set-up which seemed to pay scant regard to making money.
Today, Apple, Alphabet, Facebook and Amazon are among the world’s largest companies. They know a thing of two about making money, too.
Some say we are seeing a re-run of the dotcom boom. But this time the bubble is occurring with private companies, as venture capital, private equity and crowdsourced funding prove more alluring than a listing on the stock market.
Maybe, but on the other hand, new technologies feel more real than those of the late 1990s which were often based on business models that no one quite understood.
Technology cynics say that the fact that the NASDAQ is riding so high, and that the FTSE 100 is once again past its dotcom high, shows that the madness, which neither Newton nor investors of the late 1990s saw coming, has returned.
Maybe, but perhaps we are on the verge of a new technological revolution. A cynic might scoff ironically and mutter “this time it is different.” Maybe such scoffing is appropriate, and no doubt stocks, both private and public, will see valuations oscillate wildly.
With the benefit of hindsight, we can look back at the Year 2000, and say that actually it wasn’t madness, the internet really did change the world. Now we can ask: will the Internet of Things, blockchain, AI, robotics, nanotechnology, genetics/genome sequencing, virtual/augmented reality, graphene, big data, 3D printing, prosthetics/exoskeletons, brain interfaces, and quantum computing change the world over the next 15 years?
If they do: the NASDAQ may well double in value over that time frame.