Video Link: https://youtu.be/3EJoja6sfuw
In this episode, Mohnish Pabrai talks about the Dot Com Bubble and his experience during and after the bubble.
In this episode, you’ll learn:
2000 Dot Com Bubble.
The euphoria during Dot Com Bubble.
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MOHNISH PABRAI 00:00
If you look at the – you know, some of you were probably too young and you know, I certainly live through this and I think Arvind also was. Arvind, how old were you in the year 2000?
ARVIND NAVARATNAM 00:16
You're putting me on the spot, Mohnish. (Laughter)
MOHNISH PABRAI 00:18
Yeah, how old were you in the year 2000? (Laughter)
ARVIND NAVARATNAM 00:21
I was in the college. (Laughter)
MOHNISH PABRAI 00:27
Alright in college so we've got like a 8 years range or something, 6 years range. (Laughter) Okay so Arvind very much remembers the Dot Com Bubble.
And I think many of you in the room, if you are like in your mid twenties or so on. You know, so this would have been about when you're about 10 years old or something, maybe some of you were teenagers then. But anyways so I was actually an investor then and live through this as well.
So we had the Dot Com Bubble and you know, again the investor expectations were that the internet was a game changer, it was a massive disrupter. And they were right, it has improved our lives, big time.
And the economy would get reconfigured and they were absolutely right, we're still going through that reconfiguration and it's very significant reconfiguration. But nearly all 1999 investors in Dot Coms lost their entire investment, it didn't go so well.
And if you look at some of the names, you know, like Boo.com they spent $188 million in the first 6 months, Kozmo.com which is no relation to Cramer was trying to do 1 hour deliveries and so on. If you had a – you know, long list of companies that basically went under.
And here is a list of some of these companies which were bought. And so you know, if you look at for example, something like Broadcast.com which was sold by Mark Cuban to Yahoo! for $5.7 billion.
And Cuban was pretty smart, what he did is when Yahoo! gave him a chinese money also known as Yahoo! stock for Broadcast.com, he negotiated and hedged the entire position. And so after that when Yahoo! stock crash and burn, Cuban was mostly unaffected and hence, we see him on Shark Tank now. (Laughter)
And actually if you look at Mark Cuban's present net worth, I was just looking at it on the Forbes 400 recently, it's actually less than $5.7 billion. If I remember it's like $2 or $3 billion now.
So from that time till now, you know, he has done all these different things; bought the NBA team, made a bunch of investments and so on. But his net worth really hasn't done much, I think the single best decision he made was to hedge that Yahoo! stock.
And everything else is wonderful and then, you know, you even see IAC/Interactive buying Ask.com for $1.9 billion. And when you look at some of the other deals that Yahoo! has done, you know GeoCities for $3.6 billion and you look at the state of Yahoo! today, and all the – you know, talk about now failing the company.
And so you know this – there was a lot of euphoria at the time. And in fact, you know in the year 2000 in January, I was on the HBS campus and you know, I used to come to Harvard Business School every year for a week, part of this Executive Ed. Program where we do a kind of like a week of MBA school through YPO.
And there were 160 of us every year for a week, and the average person run a $400 million company. And I did this 13 years from 1999 till last year, and one evening we would hang out with the MBA students.
So there would be 8 YPO'ers and 8 Harvard MBA students, and we go out for dinner. And basically we sit you know, YPO'er, MBA, YPO'er...
And so on both sides of me, for example, were two MBA students. And I remember in that year in January 2000, you know, the bubble was fully on – I mean it was just full on at that time.
It popped in March and all these kids basically were had mostly already formed companies, some were dropping out of HBS, they didn't want to wait to complete that degrees. They were getting venture funding, some of these companies coming out of the HBS campus had you know, I would say pre-money – post-money valuation which were in the hundreds of millions and so these guys were on top of the world if you will.
And that year when they went to dinner with us, you know, the body language was that they really felt like they were wasting their time with a bunch of these old guys who just didn't get it about the internet, didn't get it about the way the world would be reconfigured and all of these. And they were all talking about that, you know, in 2 years they were all going to be billionaires.
And then you know a couple of years later, again on the HBS campus, again going to dinner with the MBAs, and you know the economy is in kind of recession and so on. And the – I would say the body language very different, they were giving business card, they were asking if they could get internships and so on so forth. (Laughter)
So the life and times change pretty fast. And what you had going on was that, you know, like there was a chemical – you know, ChemDex was formed then which was like a – supposed to be like this marketplace for industrial chemicals.
And so there were all these other Dex's being formed in HBS. On the Harvard campus with like looking at, you know, other aspects of industrial materials, there was a metals exchange, there were all kinds of stuff going on, you know paper exchange and so on so forth.
So those are – and if you just think about the – you know and then all the squatters are trying to – which still goes on today, you know, trying to get the name and sell it for a zillion dollars and so on. So fun times...