Market crash: We are in the midst of the second dotcom bubble

The stock market is absolutely disgusting right now. Everything is down, except (as loyal listeners know) the CATAN portfolio. Cryptocurrencies have tanked, growth stocks have been devastated, and hedge funds are imploding. Why is this happening? Is this bubble Dot-Com 2.0? And what does it mean for the future of the US economy, investment and technology?

Investor, entrepreneur, and podcaster Jason Calacanis joins the show. He gives us a brief history of the 21st-century tech industry, explains why this is like and different from the summer of 2000, makes some bold predictions about crypto and the economy, and tells us how he’s mentoring young CEOs. Some of his conversation is excerpted below. If you have questions, comments, or ideas for future episodes, please email us at

Derek Thompson: So the market is absolutely disgusting right now. Tech stocks have been destroyed this year. Crypto has been demolished. Growth stocks are down 70 percent, if they’re lucky. What is happening right now? Do you think we are witnessing the bursting of the technological bubble 2.0?

Jason Calacanis: It’s a great question. There’s a lot going on at the same time, so this is unlike anything I’ve ever seen. We had the Great Recession of 2008 that was based on one thing, real estate, and a bunch of people who got mortgages who probably shouldn’t have gotten mortgages and didn’t pay. Then you had the dot-com bust, which I guess is more analogous since it’s the same cohort of companies, the same style of companies. But that was also very different, because at the time they had tens of millions of Internet users. Most of them were not on broadband. People were still afraid to put their credit cards online and the business models were not established. It was a very different world. The number of customers he could reach was typically in the millions to tens of millions. Now, they are billions. You go into the App Store, you can reach billions of people. You go to both app stores, that’s 3 billion people.

So what we’re seeing right now is we had a very vibrant market and then the pandemic happened. What happened when the pandemic passed? Everybody looked at tech stocks and said, “My God, it’s so easy to make money in tech stocks. They just go up.” No, they do not do it. They go to zero. I’ve seen a lot of stocks go to zero and people forget about it.

DT: So Jason, you were there for the dotcom bubble in 2000, and obviously you’re here now for whatever it’s called: the COVID bubble, dotcom 2.0, web3 bubble, the name will come. Can you give us a brief history of the 21st century in technology? How did we go from the dotcom bubble to the pandemic bubble?

JC: So how did we get here? For the last 20 years, we have talked about how few companies were publicly traded. And the argument I heard as a private market investor: I’ve invested in 300 companies privately; Before that, I was a journalist and entrepreneur. Does going public suck? The markets were a challenge for you and you had to reveal everything. So all of a sudden we have all these unicorns, we have all this amazing innovation going on, and the business models become incredibly juicy. And SAS as a business model, selling software to companies, recurring revenue starts to increase. Things like Salesforce and Slack are just printing money. And then you have consumer products like Instagram — all of a sudden they have 15 employees and a hundred million users. You’re like, “Wow, this is such incredible efficiency.”

So we have this industry setup where it’s like these companies don’t go public, and they’re money printing machines and you can’t lose. Right? And that’s when you should start to get nervous. Overfunding happens. And the founders say, “You know, every time I’ve raised money (series C, series A, B) it’s gotten easier and I don’t need to have discipline. I don’t need to worry about the end result because everyone is rewarding the end result.” And obviously Uber was a big beneficiary of this. They kept raising more and more billions of dollars. And it was like, well, what can Uber do? We go to 100 other cities. Let’s make food. Let’s make flying cars. Let’s be super ambitious. If money is cheap, our company is worth $20 billion, and we can give away 5 percent of the company and get a billion dollars, then we’ll figure out how to make it worth more than 5 percent.

And then, of course, the public markets start to get excited. Retail investors are joining the party again, always an interesting sign. And this time the retail investors are much younger and they are very sophisticated, they take a lot of risks and they have this app called Robinhood, which I was also an initial investor in. And it makes it super easy. They take out all the friction to exchange.

Remember, the friction to trade was $25. And you had to phone and tell a broker what your order was. Literally, when I started trading stocks in the ’90s, you had to call and say, “I want to buy 100 shares of this on the market.” They say, “Great,” they charge you $25 to place your order. Now you can buy a fraction of an Apple share, trade it 10 times a day, and pay nothing.

That’s all the settings. And people lost discipline on the investment side, people lost discipline running companies. And then they said the public markets, as they overheated during the pandemic, when everyone is home, there are no sports to bet on, and people have stimulus checks and people stop spending money. If you don’t go on vacation, if you don’t eat out, all that adds up, you start buying NFTs, you start buying stocks. What stocks do you buy? I don’t know. Reddit said that AMC and GameStop are fun stocks to buy. The rise of meme shares.

All of this starts to happen and people become disconnected from the fundamental reality of business, which is serving a customer with a product or service. You charge them a price or monetize them in some way, and then there’s a profit. At the end of the day, all of that went out the window. This is a full-fledged contagion. The good news is that there are many companies that are not sustainable, but most companies actually have real businesses. And even some of those who are most punished. If you look at some of the hardest hit companies, Peloton comes to mind, and people love their Pelotons. They got 3 million subscribers; having 3 million subscribers in the dot com era would be extraordinary. So even the ones that are absolutely decimated have well-liked products. Talk to anyone who has a platoon. They’re like “You can take this off me, take it off my dead hands when I have a heart attack.” As if they didn’t give up. And so this is a big change probably too far for overheated markets. But, you know, this is where fortunes are made. I always tell people that fortunes are made in falling markets. They are picked up in rising markets. And here we go, the cycle begins again.

This excerpt was lightly edited for clarity.

Host: Derek Thompson
Guest: Jason Calacanis
Producer: Devon Manze

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