What lessons did the 2000 Internet bubble bring to Web3 witnesses?

Here is a math problem: You earn 1 cent on the first day, and every day after that, you earn twice as much as the day before. If this is January (31 days), how much will you earn this month? Yes, $21 million! However, if you are in February (28 days), you can only earn $2.6 million this month - far less than January. The revelation brought by this simple arithmetic is that when something grows exponentially, the last 3 days are of extraordinary significance!

Although the crypto world is going through a difficult time, Web3 is at a critical stage of exponential growth. In 1997, the number of Internet users worldwide reached 300 million. In 2022, the number of crypto asset holders worldwide will be exactly 300 million! Web3's 2022 is Web2's 1997. This moment is just like that time.

Looking back at the Internet bubble in 2000 may provide some inspiration for Web3 witnesses.

The minimalist investment philosophy of the “Internet Queen”

Web2 is like a mirror to Web3. For those of us who are in the Web3 wave, it is helpful to look at Web2 from time to time so as not to lose our way and it may even bring some inspiration.

Let’s look back at the Internet bubble in 2000. Starting in 1990, the number of personal computers connected to the Internet skyrocketed, from 310,000 to 43.23 million in 2000, an increase of more than 130 times in 10 years, with an annual compound growth rate of more than 60%, which provided a breeding ground for the Internet bubble.

In 1990, the market value of Nasdaq stocks, which was home to many Internet companies, was only 11% of that of the New York Stock Exchange. By December 1999, the market value of Nasdaq stocks had risen to 80% of that of the New York Stock Exchange.

In March 2000, the Nasdaq soared to a peak of 5048.62. In April 2000, Microsoft was found guilty of losing the antitrust case and faced the risk of being split. As soon as the news came out, the Nasdaq index recorded its largest single-day drop of 349 points, and the Internet bubble officially burst.

During the rapid formation of the Internet bubble, the performance of Morgan Stanley analyst Mary Meeker, known as the "Queen of the Internet", is definitely worth paying attention to.

In 1995, when the Internet bubble was developing at an exponential rate, Mary Meeker, an analyst at Morgan Stanley, participated in the IPO of Netscape Navigator with her keen observation of the entire Internet and published a 300-page coverage report that thoroughly analyzed Netscape inside and out.

In the 1990s when the Internet was not yet popular, this was earth-shattering, and the report became a textbook on Internet investment that all Internet investors had.

Looking back 27 years later in 2022, Mary Meeker's investment logic for being so bullish on Netscape is now seen as follows: "Netscape is the gateway to the Internet and will inevitably generate huge advertising revenue in the future."

Yes! It's that simple.

Netscape was founded in 1994 and listed on NASDAQ in 1995. It was the leader in the US search industry at the time, but due to poor management, it was quickly killed by Microsoft and Google and delisted in 2003. It is worth mentioning that one of the founders of Netscape (Marc Andressen) founded a16z, the most well-known investment institution in the encryption field.

Back to Mary Meeker's accurate grasp of Netscape's profit model, it now seems that this is the current profit logic of Twitter/Facebook, Youtube, and even Alibaba.

But this is looking at the problem from a bird’s eye view. If we go back 27 years, few people could summarize the Internet business model so accurately. Standing in my position, at the critical time of Web3 development, we may or may not be able to use such a concise logic to describe what the killer application of Web3 will look like.

Let me make some predictions for the time being. The search engines of the Web2 era are likely to correspond to the public chains of Web3. Social networking and gaming, two areas that generated huge cash flows in the Web2 era, can be handled with just one address in Web3. The transaction track above the address is the user's identity proof, and the addresses are all based on the public chain. The Twitter/Facebook/Youtube way of registering an account and selling information in exchange for the right to use it is likely to no longer work.

At this critical moment when the global financial market is turbulent, how can we safely weather this storm? How can we survive the bull and bear markets?

The "stock god" who laughs last

In the past two months, Bitcoin has fallen from a peak of $69,000 to $33,000. Although it has rebounded, the entire market is shaky. In addition, under the triple threat of the Fed's reduction of bond purchases, interest rate hikes and reduction of its asset purchase balance sheet, the economies of major economies around the world are generally pessimistic.

Facebook, with a market value of nearly one trillion dollars, saw its stock price fall 23% in one day in early February. Paypal's stock price has fallen from US$310 to US$100 since mid-2021. This is by no means a simple correction.

The entire market seems to have fallen into its darkest moment. Obviously, we should not be pessimistic at this time. In the words of Warren Buffett, the stock god, I am fearful when others are greedy, and I am greedy when others are fearful.

Just recently, Buffett's Berkshire Hathaway invested $1 billion in the largest digital bank in Latin America that is "friendly to crypto assets." It doesn't matter whether it is aimed at the crypto industry or not. What matters is that Buffett always makes the right choice at important moments.

Looking back at the Internet bubble in 2000, Buffett never touched Internet stocks from beginning to end, even though the scale of Internet-related venture capital increased from US$8 billion to US$200 billion during this period, and the Nasdaq rose five times. During the subsequent Internet bubble burst from March 2000 to the end of 2001, the Nasdaq fell by more than 70% and Amazon's stock price fell by more than 95%.

Buffett, on the other hand, was unharmed and was still the happy old man drinking Coca-Cola.

If you think you are smarter than this 90-year-old man who has experienced countless changes in the financial market, you are probably not far from bad luck. Buffett's calmness seems to be showing the world: Don't follow blindly, be your own authority.

Looking back at the last bull market, there were many negative examples of authority failing, and Masayoshi Son is the most typical example.

In December 2017, at the end of the last bull market cycle, SoftBank CEO Masayoshi Son bought hundreds of millions of dollars worth of Bitcoin at its historical high of $20,000, and then liquidated his position in 2018, with a loss of $130 million. In the new track of Web3, even the big names of the Web2 era can "make mistakes".

In the process of investing in Web3, a brand new track, if you are not a hedge fund that makes collective decisions, but a lone individual, you are likely to give up in fear and try all kinds of methods in confusion. The more this happens, the more cautious you must be, otherwise there is a high probability of failure.

During difficult times in the industry, we need the calmness of Buffett and the agility and wisdom of Mary Meeker. Through continuous research, we need to grasp the essence of the problem and figure out what are the key factors that determine the future development of Web3. Don't blindly follow authority, because no one can control the depth of your thinking.

Finally, in 1995, 86% of adults did not use the internet, and in 2022, 97% of internet users do not own Ethereum.