The Dot Com bubble
An excellent analysis of WTF happened by an insider.
From Gullyborg writing at
Resistance is futile!:
Dot com bubble burst - what really happened in 2000?
The comments to this post demonstrate a general lack of understanding, so allow me to explain - at least about the dot com part.
Before I begin, some background. I used to work in the dot com world, before, up to, and very shortly after the bust. I was, among other things, my employer's unit coordinator for Y2K readiness. In case you forgot, or lived in a cave, or are under 9 years old, back before the year 2000, programmers lacking foresight wrote lots of software (and manufactures built many microprocessors hard coded) to a two-digit standard for years in dates. The problem being, when the year rolled over in 2000, the systems would make the assumption that the year was 1900. There was much panic, mostly unfounded, that malfunctioning computers would result in nuclear missiles firing themselves, airplanes and satellites falling out of the sky, every grid going down, dogs and cats living together, and the end of the world as we know it.
Unfounded as much of this was, there was a legitimate need by the industrial world and the information society to correct the problem. This led to a huge upturn in business, starting around 1998 or so, in the tech sector. Companies like Dell, HP, etc., were cranking out new machines loaded with Y2K compliant software. That's what most consumers saw. But behind the scenes, industry was buying a ton of products and paying for a ton of services to ensure that things like robotic equipment, networking systems, telecommunications, medical equipment, and vast numbers of other devices were fully upgraded. In my workplace, we installed new operating systems on industrial tools used to manufacture memory chips because they would have malfunctioned otherwise. This resulted in a huge demand, so the tech sector ramped up production while prices climbed.
Many purchasers, at the personal computer level as well as at the level of massive industrial applications, saw this as a good time to invest in complete system upgrades rather than simply spending on more cost-effective patches. Why spend $500 on a new operating system and software when, for $900, you could buy a whole new system, complete with a faster processor, bigger hard drive, etc.?
You've heard the phrase "a rising tide lifts all boats." Well, it was true in the tech sector. The demand for products resulted in a corresponding demand for related goods and services. Sales of new computers meant sales of more memory chips - so my employer was rolling in profit. Similar situations occurred with manufacturers of modems, monitors, floppy discs and CD ROMs, and applications software. And companies that made these things all needed to expand their factories, resulting in huge profits for companies making things like assembly-line robots, photolithography equipment, silicon wafers, and the like. And this trickled into raw materials. Companies selling chemicals, industrial gases, even cardboard for boxes, made more money.
All this profit resulted in a stock surge. The NASDAQ doubled. Then it doubled again. Fast.
I was working at MSFT at the time and the worry there wasn't so much Microsoft's own software but all the embedded systems in the HVAC and the electrical power distribution equipment. They had standby generators for crucial buildings. Nothing went down and there were only a few 'interesting' incidences nationwide.
Posted by DaveH at August 2, 2009 12:33 PM