I think I just heard the Web 2.0 bubble burst. Someone posted an analysis of the survival and exit rate of 2005’s Web 2.0 startups. Someone else just posted that a cat has a half million Twitter followers.
Also today, we learn that Facebook just raised more money. What’s it for? Hiring? Capital expenses? Nope. Facebook is raising money to pay for their employees’ stock-based bonuses. I’ve never heard of a company taking on debt or equity dilution to pay bonuses. When things get weird, either something fundamental has changed or things are broken. It’s like treasury bills with negative interest or credit spreads doing things like this.
What follows includes some stereotypes and generalities based on my experiences in life.
Some people, often less experienced people like new college graduates, are looking for change. When they see things that aren’t normal, it never looks like anything but progress. The world appears to be progressing in straight paths to them. They haven’t seen enough to notice that what they see as a new thing is usually very similar to something that happened about a decade before. They are full of energy, enthusiasm, and optimism. Those are fantastic qualities, but they cause cognitive biases.
Some people, often more experienced people like myself, see patterns repeat. When viewed myopically, every cycle looks a trend. Some people see Twitter as a revolution that will change the way we get news forever by disrupting their business models at a fundamental level. I see Webvan, HomeGrocer. I see microtransactions become virtual goods. Mainframe computing with dumb terminals became PC’s then network computers, Web 2.0, and cloud computing. Conservative/liberal politics, low/polyunsaturated/omega3-6 fats, centralized/decentralized computing – I’ve seen too many ‘”new things” and “fundamental shifts.” Such pessimistic bitterness also clearly causes cognitive biases.
When things get weird, either things are changing in fundamental ways or we are at a peak or a trough of a poorly-controlled dynamic system.
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