Response paper

Globe just like other dot-com bubble companies experienced a dramatic rise in their stock prices and they moved more rapidly with less vigilance than usual. They chose to alleviate their risks by starting many contenders assuming the market would decide which would be successful. Low interest rates of 1998-999 helped boost the start up capital amounts. Although the Globe had rational plans and managerial ability, they lacked the characteristics and were only able to market their ideas to investors through the dot-com concept.  The managers of Globe should never have placed their bet on harnessing network effects to expand the market share while the company was operating at a loss. During the loss phase, they should not have relied on venture capital and especially preliminary public offering of stocks to recompense their expenses when there was no income being generated.

           During the dot-com bubble, innovation was uncontrolled and as a capitalistic society, we kind of view innovation as an excellent thing. In my view, this is true in most industries not finance. Though many of the new websites and businesses were uncalled-for and many of them unsuccessful, the ideas, jobs and businesses that grew from the dot-com bubble after the dust settled were useful. Dot- com bubble crisis was a lesson that in finance, innovation should be synchronized.

        Economists predict there will be similar bubbles with new technologies. We have many people with capital and eager to spend in the next craze. These people do not even know the internet technology well, leave alone understanding its use and the codes used.  All these are fundamental to thrive with a web based or mobile based initiative. For instance, the Face book acquisition of Instagram has raised eyebrows as investors have been questioning the worth of Instagram in billions of dollars. We also have a further issue similar to the initial dot-com bubble to be that of venture capitalists not understanding technology as anticipated. What we have today are a group of individual investors with money, plenty of venture capitalists who are not conversant with internet technology, and many elegant entrepreneurs trying to make big cash. In my view, this combination is lethal and it is pointing to a possible dot- com bubble.

           Did investors learn any lessons from the crisis? Some lessons were learnt the hard way. Most investors are now trading cautiously as the technological market is thriving well. Thus, institutional investors that invest in venture capital are selective in choosing the firms they invest, and are undertaking sufficient research before investing their resources.  In some cases, they have been driving hard bargains for better management fees and shares of profits. As limited partners, they are aware in the occurrence of a bubble burst they would feel the most pain as they invested the bulk of the money.

        The days when institutional investors threw money at venture funds are long gone as they demand more lucidity. To avoid failings, big start ups should make small bets. Investors now know that maintaining a tight restraint on finances is the solution to a company’s survival especially in the current economic conditions. In modern times, technology stands out as the only global segment with additional net cash than debit on its balance sheet. This places investors in a safe spot. In most cases, the fund has a huge market cap bias with a range of more than 50 companies. In relation to its performance, it is ranked first quartile in its sector over five years with returns of 51 percent compared to 41 percent of an average fund.

           Dot- Com bubble era was a medium for the growth of the internet. Though most dot-com companies lost millions of dollars in what economists called definitive foolishness, the bubble no doubt was vital for the prosperous future of the internet. Thus, we can say that the economic impact of the bustling of the bubble was outweighed by the benefits of the internet we enjoy today. The following two effects of the dot- com bubble were constructive and worked to better the internet. It was obvious only those who could access internet with a decent band width and was facilitated with OFC with all network elements such as gateways and routers were allowed to transact businesses.

          The world wide expansion of network infrastructure was essential to make internet omnipresent and global.  It took 5 years for the internet to realize the infrastructural growth which would have taken at least 15 years. Since the usual business models were not applicable, the new rules of internet developed swiftly during the dot-com bubble. If the insanity for dot- com companies had not existed then, VC’s and other corporate entities would not have cared much about the infrastructures of the constantly growing internet. Most dot- com companies are surviving up-to-date, and numerous concepts developed still exist today.

           Research has shown that telephone applications similar to the ones designed for i-Phone and android phones experienced a bubble. This is because productivity growth has been stirred by profound investment in information and communication technology. The strong productivity growth after 2001 recession makes it probable that some gains of the late 1990’s may tolerate telephone applications intended for i-Phones experience.

           Google’s Android and Apples IOS have gained an enormous market share in the mobile phone industry. To generate the value with the capital it has invented, Apple will need to launch a new i-Phone each year to ensure consumers are constantly upgrading to newer models. Each time Apple launches a product, it gets accepted widely with consumers at times camping outside its stores to get the newest model of i- Phone and i-Pad. The market also expects Apple to maintain its growth in its top and bottom lines in the long term.   Failure to meet these prospects will result to a big drop in Apple’s share price. There is always some pressure on Apple’s future earnings releases as investors expect Apple to continue the successful trail. In conclusion, the dot-com boom and bust was “a case of too much too fast.”

References
Dot Coms Gone Bust- USA. (2008). Retrieved from: https://www.youtube.com/watch?v=FeJfvmO7gOg