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- EricJ
I brought up the point off the top in another thread, where it seemed off-topic, so thought I'd move it here where it had more appropriate room:
It was after I'd seen an article on China's AliBaba investment craze, which ended up reminding me of Facebook's IPO and the Dot-Com bust, which got me into a layman's conversation about how the mortgage meltdown and the 20's stock crash happened--
And all of a sudden it hit me: I didn't major in Economics at college, so I'm looking for anyone more qualified to fact-check me on this but...just looking at the UVVU craze, and the bloodthirsty rah-rah'ing for Digital to "replace the dying physical industry", unless I'm not reading my historical harbingers and omens right, this has all the economic/psychological makings of a Bubble, about to pop when the bills come in:
Judging from past cases, what a Bubble needs to happen is:
- The product being sold as a "new investment" by a company who--either through being an all-new industry, or having no regulatory laws--is accountable to no one, and playing up their opportunity in the press,
- Investors who don't really understand the more elaborate workings of the product or technology, but see how it hits some associated connection with the trendy zeitgeist of the public at the moment, so it must be ahead of its time and sure to catch on
- Press trend-articles pointing out, completely out of context, how one other similar company came out of nowhere and caught on like wildfire, so it's just a matter of catching the next tiger by the tail!
- New startup companies jumping onto the trend just to exploit the investments, without any of their own real clear understanding of the product or much sensible grasp of the business strategy,
- Reports of the company's "success" being largely "Phantom profits", cooked out of number figures of how much product was supplied before the actual money has come in yet (ie., how many UV users are actually buying their movies, and how many "subscribers" simply cashed in their free disk codes without paying anything?)
- Voice-in-the-wilderness experts warning that the entire industry is based on a shaky or non-existent foundation if there's no accountability for where the money is coming from...
- ...Promptly shouted down by investors' and biased economists' cheering over the "success" of the companies' dubious sales figures, and rubbing salt into wounds that anyone who can't see the new innovation is just clinging to old ways, and business doesn't stand still,
- Inflating investment prices causing companies to reconsider other alternatives and jump on the bandwagon,
- A sudden plunge in prices after that missing money suddenly didn't come in as expected, either from public apathy, less disposable economy from unexpected troubles in another dependent industry (eg. higher Internet rates), or the product's realistic inability to deliver on its promises and turn a profit in a real-world market.
Again, I've only got the average-joe's grasp on economic strategy, so I'm not sure if I'm getting this all correct--
I do, however, remember watching the Dot-Com boom in the 00's, and thinking, "No, really, can anyone explain how Excite is supposed to make its money?"
It was after I'd seen an article on China's AliBaba investment craze, which ended up reminding me of Facebook's IPO and the Dot-Com bust, which got me into a layman's conversation about how the mortgage meltdown and the 20's stock crash happened--
And all of a sudden it hit me: I didn't major in Economics at college, so I'm looking for anyone more qualified to fact-check me on this but...just looking at the UVVU craze, and the bloodthirsty rah-rah'ing for Digital to "replace the dying physical industry", unless I'm not reading my historical harbingers and omens right, this has all the economic/psychological makings of a Bubble, about to pop when the bills come in:
Judging from past cases, what a Bubble needs to happen is:
- The product being sold as a "new investment" by a company who--either through being an all-new industry, or having no regulatory laws--is accountable to no one, and playing up their opportunity in the press,
- Investors who don't really understand the more elaborate workings of the product or technology, but see how it hits some associated connection with the trendy zeitgeist of the public at the moment, so it must be ahead of its time and sure to catch on
- Press trend-articles pointing out, completely out of context, how one other similar company came out of nowhere and caught on like wildfire, so it's just a matter of catching the next tiger by the tail!
- New startup companies jumping onto the trend just to exploit the investments, without any of their own real clear understanding of the product or much sensible grasp of the business strategy,
- Reports of the company's "success" being largely "Phantom profits", cooked out of number figures of how much product was supplied before the actual money has come in yet (ie., how many UV users are actually buying their movies, and how many "subscribers" simply cashed in their free disk codes without paying anything?)
- Voice-in-the-wilderness experts warning that the entire industry is based on a shaky or non-existent foundation if there's no accountability for where the money is coming from...
- ...Promptly shouted down by investors' and biased economists' cheering over the "success" of the companies' dubious sales figures, and rubbing salt into wounds that anyone who can't see the new innovation is just clinging to old ways, and business doesn't stand still,
- Inflating investment prices causing companies to reconsider other alternatives and jump on the bandwagon,
- A sudden plunge in prices after that missing money suddenly didn't come in as expected, either from public apathy, less disposable economy from unexpected troubles in another dependent industry (eg. higher Internet rates), or the product's realistic inability to deliver on its promises and turn a profit in a real-world market.
Again, I've only got the average-joe's grasp on economic strategy, so I'm not sure if I'm getting this all correct--
I do, however, remember watching the Dot-Com boom in the 00's, and thinking, "No, really, can anyone explain how Excite is supposed to make its money?"