In a recent post on his blog, businessman, investor and Dallas Mavericks owner Mark Cuban compared the current state of the technology market to the dot-com bubble of 2000. According to Cuban, the tech sector is once again in a bubble, but this one is even worse.
Dot-Com Nostalgia
Cuban begins his explanation with a tongue-in-cheek recounting of the “good old days” of the dot-com bubble. At the height of the bubble, there were hundreds of companies going public on a seemingly daily basis.
“You just pick a stock and buy it,” Cuban recalls. “Then you pray it goes up. Which most days it did.”
Cuban describes the environment of a bubble by explaining that investors are constantly approached by people pitching ideas and making comparisons to billion-dollar success stories. Cuban sees this most recent bubble as the same scenario, but the list of dot-com success stories such as Broadcast.com, AOL Inc AOL 3.75% and Netscape have been modernized to include Uber, Twitter Inc TWTR 0.46% and Facebook Inc FB 0.39%.
The Current Tech Bubble Is Even Worse For Investors
While Cuban sees similarities between the current environment and the dot-com bubble, he sees one major difference that makes the modern environment even more dangerous for investors: lack of liquidity. While the dot-com bubble mostly included public companies, the modern tech bubble mostly involves small, private companies.
“Back then, the companies the general public was investing in were public companies,” Cuban writes. “They may have been horrible companies, but being public meant that investors had liquidity to sell their stocks.”
Private Crowdfunded Apps Replaced Public Websites
According to Cuban, the current bubble has come about largely as a result of the new crowdfunding movement, through which small investors can invest in private start-up tech companies. Cuban believes that the only difference between the majority of modern startups and the ones in 2000 is that modern startups are mostly pitching apps, while dot-com start-ups were pitching websites.
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