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I don’t know about you guys, but I’m seeing a whole torrent of posts about the second Dot Com Boom. I generally agree with these assessments -there is a boom, and certain stocks are overvalued.

But one blog post I’ve been meaning to write for AGES is to pose this question – yes, a dot com bubble popping is bad for the overall economy, but does it have unanticipated beneficial side-effects? By which I mean this – during the last tech crash, entrepreneurs threw every business model they could think of at the economy. From these companies, we have modern email systems, search engines, Amazon. Equally, we learned what models don’t work and we’ve had a decade in which academics and canny business analysts have been able to digest what works and what doesn’t. And, during that tech boom phase, there is so much research and innovation into new technologies and business models that will prove to be the infrastructure for the next tech boom.

So, the question I want to pose is whether it is worthwhile extending a tech boom a tiny while longer so that we give a tiny bit more time to entrepreneurs to throw these ideas out there and build a foundation for the next tech boom. If the answer is yes, what conditions should we place upon the tech boom to control it? The 2000 tech bust was limited to a few localities and did not have the same economy-wide implications the GFC had (firstly because Fannie Mae/Freddie Mac amplified the effect of securitisation into a global contagion and secondly because the rot during the GFC struck at the financial system, which is the beating heart of the economy).


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