Another Bubble?

I got involved with the Internet in the early 1990s, and I joined the FCC to do Internet policy work in 1994. So I had the opportunity to see the last boom, bubble, and bust from start to finish. We’re clearly experiencing now another upsurge of both rational and irrational exuberance. Is it another bubble?

What’s different this time is that we have the experience of the 90s fresh in our minds. The excitement about the prospects of the medium feels similar to what I remember from 1994-1996, but back then the online community was tiny. The Net truly was a small world, barely on the radar of mainstream companies. Moreover, the level of entrepreneurial and venture capital activity in today’s “Web 2.0” explosion wasn’t the norm in the dotcom days until 1998 or so. Even in late 1998, Larry Page and Sergey Brin thought hard about open-sourcing the search technology that became Google, rather than starting a company.

I don’t know whether this means we’re more or less likely to experience a collapsing bubble this time around. Entrepreneurs and investors are more aware that what comes up ultimately goes down, and the recent Wall Street scandals should put a damper on the kinds of crazy IPOs we saw for dotcoms. On the other hand, the cycles are even faster now, the numbers even bigger, as Internet companies play to a target audience of billions.