Julie Myers: The Years of the Techies – Mythology of the Dotcom Bubble Burst

If you are, or have been an investor, then you’re familiar with that old standby of investing, the Price-Earnings Ratio – a valuation of a company’s current share price, compared to its per-share earnings.

The P/E Ratio is only one tool which can be used to evaluate the share value of an enterprise; but, it’s an important one. In the current dotcom era however, it seems earnings ratios have fallen out of favor – once again.

In a bit of déjà vu perhaps – where Twitter (which has yet to show a penny of profit), is valued at 10 Billion dollars, Zynga and its FarmVille game has been valued at 9 Billion dollars, and Facebook purportedly tops all the dotcoms with an estimated value of 60 Billion dollars – are we looking at the return of the dotcom bubble burst? Some astute observers seem to think so.

Guest writer Julie Myers, takes a rather light-hearted view of the last bubble burst – but, the critical lessons – which are too often ignored, stand out.

It can seem like a mystery why the Dotcom bubble burst in 2000. What caused it and what happened? After years of research our anthropologists have come up with an answer. Please be warned, this material may not be suitable for the serious at heart.

In The Beginning

The year was 1997, which we will call The First Year of the Techies. The Techie Gods (a.k.a. lots of investors) were smiling down upon many towns and made the IT industry boom and the sun shine. Oh! How the good pay, extensive training and good career opportunities over flowed for all. To keep the Gods (a.k.a. lots of investors) happy many gave offerings and sacrifices, and in return all Techies were protected in one large bubble and treated like gold. Things were good. Then one day, in 2000 (during The Fourth Year of the Techies), the Gods became angry and burst the bubble wide open causing a 12 month flood that many never recovered from.

What lead up to this disaster? Many things, but here is our favorite example, The Y2K Scare (insert scream). At the stroke of midnight, between December 31, 1999 and January 1, 2000, it was feared that all software programs would travel back in time to the year 1900 instead of continuing on to the year 2000. Sound like fun? I’m sure it would have been, except for the fear that if computers reverted back to the year 1900 they would painfully crash, one right after another, causing data (especially financial) to be lost forever and your electricity to uncontrollably shut down. Chaos would reign and stories like this would be common: “What? I have a mortgage still to pay? I paid that off Mr. Banker. Honestly.”

So, the world as we knew it was going to end. “How could we have been so stupid?” many people cried out while buying a whole lot of safety and emergency equipment. Feeling the end, we all prayed to the Techie Gods for forgiveness and the Gods replied: “Spend the money to fix your programs that need fixing and to buy new hardware, and things will remain good. However, no one take advantage of this for they will make us very angry.” Well, not everyone listened to this warning as many people took advantage of the Y2K scare and made a lot of money off of systems that were never going to be affected in the first place. But, the Gods punished these people by making their Y2K skills useless in the job market a few months into the year 2000.

Of course The Y2K Scam…I mean Scare (insert scream) wasn’t the only thing that made the Techie Gods angry. Not enough or any return on investment was another. At any rate, the bubble had been burst. Many Dotcom startups folded, IT staffs were cut in half, training was mostly discontinued, jobs began to be shipped overseas to save money (but not frustration), and Techie’s were no longer considered to hold the wealth of gold. The Years of the Techies were over. And so life went on and…

You, the reader, raising your hand: “Hold on there, Miss. Author. I want to know more. Like what else angered these Techie Gods? And what happened during years two, three and four?”

Ok reader, keep your pants on. Let us travel back to The Second Year of the Techies when gold and silver fell from the sky.

THE LEGEND CONTINUES

Wealth From Above – The Second Year of the Techies (1998)

They were in their prime. Money fell from the sky in the form of gold and silver. The Techie Gods were very pleased. And how could they not be? Advancements in computer technology were being made at a very fast rate and consumers were switching out their computers at an equally fast rate. Dotcoms still had the promise of making millions. Money was flowing. All involved from developing to repairing these inventions were proud, rewarded and considered indispensible. Software developers received high salaries, company cars and sign on bonuses since they were the ones creating the inventions. IT Managers received the same since they were the ones to lead the company down the road of financial success. Computer Support techs received great benefits, yearly raises and praise from an audience of end users. And everyone received all the paid training they could hope for to advance their worth.

So, gold and silver fell from the sky to keep the technical landscape fertile and green. Then something started to change.

The Beginning of the End – The Third Year of the Techies (1999)

During the Third Year, many dotcoms were struggling to bring in any profit causing some to close up shop. But, some still showed promise and still other new comers were showing up. More money was being spent then made. Despite this money kept flowing, though The Gods were becoming irritated and the Techies worth started to deplete. In addition to the lack of return on investment the Y2K Scare took shape with companies spending a ton of cash to fix the issue. Again, more money being spent then made. To add to the growing frustrations a shift in power was forced upon all to see.

To everyone’s surprise, the Techie Gods were not the highest authority. Between 1999 and early 2000, the U.S. Federal Reserve increased interest rates six times causing the economy to slow down. The Gods tried to stop them, but got over ruled with threats of no longer being worshipped or given sacrifices. The Gods had no choice but to give in. Shock waves went though out the land. The beginning of the end had started.

All the Gold and Silver Spent – The Fourth Year of the Techies (2000)

The Y2K scare was over, but the financial down turn continued on. Many Dotcoms were still struggling to show enough profit (or customer base) and the Techie Gods (a.k.a. investors) got tired of not having enough return on investment from all the free spending they had done. Other contributing factors such as the Microsoft vs. United States lawsuit and the massive multi-billion-dollar sell orders for major bellwether high tech stocks (Cisco, IBM, Dell, and others) on Wall Street were thought to have a negative financial impact on the Dotcoms as well. To top it all off consumer spending on technology toys had gone from a lot to more conservative, partly because people were losing their jobs or no longer felt secure in their jobs; thus consumer spending was on the decline. All in all, the money stopped flowing. The bubble had burst. Gold and silver no longer fell from the sky.

Passes in to Legend – The Fifth Year of the Techies (2001)

The Dotcom era was over. Money had run dry and the Techie Gods started to fade into legend. This is the year that many IT departments felt the failure of the dotcoms. While we could not come up with any conclusive evidence of why IT departments decided to cut pay and staffing as much as they did, we do know it happened in a lot of companies. Software developers no longer received sign on bonuses and company cars. More and more technical support jobs were shipped overseas and salaries lowered for those in the U.S. No longer protected by the Techie Gods, job security thus job loyalty became a thing of the past. The Years of the Techies was over. The Years of Cleaning up the Mess had started. But, that’s a whole other story.

Thank you for reading my interpretation of the Dotcom years. I hope you have enjoyed it as much as I enjoyed researching and writing it. — Julie Myers

Biography:

Guest writer Julie Myers has been in IT Support for 14 years, surfing the Internet since the mid 90s, and has been playing around with computers since the Apple II. Currently, Julie is tinkering with creating websites and she’s in the process of learning Java.

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