I remember about 7 or 8 years ago starting to see the runup of dot-com stocks like Yahoo that was based on unreasonable assumptions. I remarked that people were speculating on what the "present value of future value" is. I am glad that the internet bubble burst in 2000. It brought people back to reality. A couple of thoughts from that time still float through my mind.
- You can't take someone with little or no development experience and expect them to produce a quality product. Experience and intelligence costs money.
- Stock is just a promise. It is not cash. It is not real. It is merely a promise that someday, you might get something. I remember sitting in a meeting in 2000 where this company wanted me to come work for them. All their statements revolved around their stock prices was going to go through the roof. I told them that their stock had no value. It didn't exist at the time, nor does it now. From 1986, I remember a poster with the catch phrase at the bottom "Cash make friend, credit make enemy." I find it very disturbing that people in the technology field will trade significant money for stock ownership at an alarming rate. Some ownership is a good idea, however, you must be realistic with regards to the direction and growth of a company.
- People with great ideas don't necessarily know how to run a business. At the end of the day, the only thing that matters is "Did more money come in than go out." Thought of another way, "Is there more money in the bank account now than there was at the start of the day."
- Just because you think something is a great idea does not mean that the idea will be accepted within the marketplace. Market analysis is important before throwing lots of money at product development.
- My father says that the only difference between a small company and a large company is the number of zeroes. That is true about 90% of things. You need to be careful on the remaining 10%. For example, if Quicken/QuickBooks will work for your company, there is little reason to invest in something bigger. Don't spend $25,000 on a product that will suit your needs for 10 years, when a $100 product will suit your needs today and for the next few years. Don't laugh, I have seen small companies do this.