Let’s look at the differences between when technology is in a boom-cycle vs. a bust-cycle, and what happens as things transition between cycles.
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HOW CAN WE TELL WHAT CYCLE WE’RE IN?
- Right now, it feels like we’re in a bust cycle, or at least a correction-cycle, but how do we know what cycle we’re currently in - and more importantly - how do we know when the next cycle will begin?
THE GOOD TIMES, THE UNCERTAIN TIMES, AND THE BAD TIMES
- History repeats itself, hence why it’s good to study history.
- Follow the money. Is money cheap? Is money highly leveraged? What is motivating the money?
- Does it make sense to a layperson?
- Can the technology create a sustainable business model? Does it create an expanding ecosystem, or winner-takes-all?
- Do the stories highlight the people, or the excesses of the people, or do they highlight value-creation? Stories are bolder in a boom.
- Booms will start slow, will gain word of mouth, will sustain for a while, will begin to reach, and then crash hard. People are never quite sure when to jump into a boom. Reactions are faster in a crash.
- Crashes happen quickly, as they are usually highly leveraged.
- The winners in a crash are the ones with money to buy low, or are capitalized after a crash.
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