From the book Engines that Move Markets: the British railway boom, 1820s -1840s
When interest rates dropped from 4% to 2.5% "it was not long before a remarkable effect occurred in the general increase in all kinds of schemes and speculations."
Factors as the bubble popped:
-Continued need to raise capital overwhelmed investors (aka cash burn)
-Projections "wildly overoptimistic" and underestimated competition
-"A fair amount of fraud"
-Higher rates, decline of liquidity
This was hilarious: they tried to regulate the boom by imposing a deadline for railroad proposals. More than 800 groups of promoters fought each other to get their coaches into London on time, jamming up the roads. "Feed the ducks while they're quacking."
"Paying dividends out of capital or fraud in general were not the reasons for the disaster of the Railway Mania. Its rise and collapse were due to overoptimistic business plans, plans that forecast lower costs and higher revenues than were realized." dtc.umn.edu/~odlyZko/doc/m…
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“Ego is the single most destructive force you can confront in business. I treat every trade as a business decision. You have to be sure you have the discipline to get out of a losing trade.”
Some notes from the book Dot.con "How America Lost Its Mind and Money in the Internet Era," a play-by-play of the dotcom bubble.
Written in 2003 the pessimism around the web is striking in hindsight.
"Online economy... grossly exaggerated. Internet not a disruptive technology"
"Most internet startups failed because they were based on the mistaken premise that the internet represented a revolutionary new business model, which it didn't." Oof.
"Any retailer is basically a distributor. And arduous and costly operation."
Yes, there were bears. But many had been bearish long before the actual bubble took off.
"You've got companies going public that don't even have earnings."
"Everybody is tired of being bearish and wrong. Clients don't want to raise cash."
"Bill Gates came to see me with a six pack of beer and a pizza when negotiating a contract. He told me one time he said, John, forget about hardware. There's no piece of hardware that can't be emulated in software. And damn, I failed to listen to it."
Sun Valley:
"After hearing Gates describe his new company, sitting with Warren Buffett and having him ask: 'would you invest in that?' And I said, Hell, I don't know. Warren, I don't see the moat. It's probably pretty good. But isn't he gonna have a hell of a lot of competitors?"
[24] Growth vs value
"If you’ve ever watched one of those bank heist movies where they’re trying to get into the vault. They have two sets of keys, and two different bank tellers, and they twist together. Unless you have both of them, you’re not going to get into the vault."
"I’m looking for stocks with high barriers to investment. I need things that keep out my competition. They can be either physical barriers, like a geography with less competition, or they can be intellectual barriers."