Subject: Re: Replaying 2000-2002
If you knew then what you know now, how would you have invested in 2000 - 2002?

I don't want to use hindsight too much, but one of the main lessons is that valuations matter. One of my favorite examples is Cisco. Great company. Consistently profitable. It did in fact provide the hardware backbone of the Internet just as promised. But its peak stock price was way too high. Cisco's stock still has not returned to its inflation adjusted peak price.

One of the other the lessons of the dot.com bubble was the hype was real. Not all the hype, but by that I mean the Internet really did transform how everyone interacted and did business and the companies who controlled the Internet did in fact wind up controlling the future. That part was absolutely true. The part that was false was that it wasn't enough to be an Internet company, you had to be a good Internet company.

Amazon was a good Internet company. Bezos had an extreme amount of guts. He was willing to lose money for years in order to set up Amazon up as an untouchable behemoth, which was the model most dot com's were trying to follow. He actually made it work though. He wasn't afraid to fail either. He'd try different things and if they didn't work he'd move onto the next thing. Remember Amazon Auctions? Didn't work, they moved on. It is unfortunate that Andy Jassy is slowing killing the golden goose.

eBay was hyped beyond all imagination, but was a solid business and emerged in good order and even got stronger.

Microsoft is an interesting case. A lot of people view the 2000's as as sort of a lost decade for Microsoft. They missed out on search. They whiffed on mobile. Vista was disaster. They went from total domination of the browser world to an after thought. Even Microsoft eventually gave up on Explorer. Their new browser Edge, is based on Chrome. The stock price remained flat for the next decade. Almost unnoticed the whole time was they were making money faster than they could count it. Ballmer talent spotted Nadella and correctly saw the world was moving to the cloud, and he successfully transitioned Microsoft into an enterprise software company. A lot of people knock Ballmer as being sort of a mid-CEO. But he had a lot of success and did a lot. He also didn't buy Yahoo! which a lot of people thought was a mistake at the time.

Google's IPO was post-dot com in 2004 but it was founded in 1998. So it is kind of dot commie. At IPO, the stock market was still a little hung over and the IPO price was a bargain. On the business side of things Google cleaned everybody's clock. Fun fact: Jeff Bezos provided 25% of Google's initial funding round.

And of course Cisco. With dividends reinvested, it has returned approximately 1000% from the bottom until today. Not as much as some, but not bad at all.

So the lesson is: Valuations matter. Memorize it. Write it on a piece of paper. Stick a pin in it.