How can so many people have completely forgotten the painful lessons of not one, but two, recent bubbles?
The bursting of the DotCom bubble in 2000 was traumatic. “Eyeballs” were favored for a time over “earnings.” But then investors woke up to the fact that all of their rationalizations for the sky-high valuations of profitless companies were actually ridiculous.
Okay, fine. Lesson learned. Earnings are actually important.
But here we go, again, less than 20 years after the DotCom bubble (and only 10 years post-subprime bubble — both far less than a full generation later to allow the keepers of the memories a chance to die off) with exactly the same dynamic at play:
In the pre-
Just as it was in 2000.
By way of example, let’s look at Uber and Lyft. Both companies aren’t just unprofitable, but wildly so. The more these companies make in revenue, the greater the accompanying losses:
This is the very essence of a broken business model. It’s no different – literally, exactly the same – as a circa-1999 DotCom losing gobs of money on a pie-in-the-sky business scheme that sounded great but didn’t actually work.
No matter to Lyft’s stock price, though, as the market (or ““market”” as I refer to it because it’s so deformed it needs double quote marks to signify that condition)
What matters during an asset price bubble is not the rational, but the rationalizations. Uber and
- Source, Peak Prosperity
