{"id":233,"date":"2006-01-27T10:58:39","date_gmt":"2006-01-27T17:58:39","guid":{"rendered":"https:\/\/www.roughtype.com\/wp\/?p=233"},"modified":"2006-01-27T10:58:39","modified_gmt":"2006-01-27T17:58:39","slug":"the_supplyside","status":"publish","type":"post","link":"https:\/\/www.roughtype.com\/?p=233","title":{"rendered":"The supply-side boom"},"content":{"rendered":"

In The New Boom<\/a>, a short article in the new edition of Wired, Chris Anderson makes a cogent case for why the current resurgence in internet entrepreneurship is “a healthy boom, not a fragile bubble.” His case boils down to three points. First, the market for internet content and services is more mature than it was in the 90s – there are real rather merely theoretical customers out there. Second, the drop in prices for bandwidth and computing means that you don’t need anywhere as much capital to launch an internet business as you used to. Third, and related, the lower capital requirements mean that entrepreneurs require less venture funding, which in turn means less pressure to make a quick and lucrative exit.<\/p>\n

I think Anderson’s right to say that the current boom is not a bubble. Other than some isolated examples of frothiness – most notably, if also arguably, Google’s stock price – there’s little evidence of any kind of broad speculative fever. And I think Anderson accurately sums up why the entrepreneurial environment is very different today than in the late 90s.<\/p>\n

But there’s a flaw, or at least a missing element, in the analysis. Bubbles are simply a matter of supply and demand – too much demand (investor cash) chasing too little supply (investment opportunities). Anderson’s article focuses entirely on the supply side. The lower costs required to launch an internet business today means lower barriers to entry and thus a robust supply of startups. At this point, there’s relatively little interest (compared to six or seven years ago) in these startups among the broader investor community – ie, the individual investors who ultimately control the bulk of investment capital. But that could change at any moment. An investor stampede would render Anderson’s analysis moot. And all those seemingly disciplined entrepreneurs who today pronounce their allegiance to “steady, organic growth” would turn into frothing-at-the-mouth IPO hounds faster than you can say “sock puppet.” Bubbles are born on the demand side, not the supply side.<\/p>\n

Anderson, in other words, is making a rational analysis of an irrational phenomenon. The people that turn healthy booms into fragile bubbles are investors, not entrepreneurs. And so far, the exuberance about Web 2.0, or whatever you want to call it, remains much more pronounced on the supply side than on the demand side. As long as that remains true, there won’t be a bubble.<\/p>\n","protected":false},"excerpt":{"rendered":"

In The New Boom, a short article in the new edition of Wired, Chris Anderson makes a cogent case for why the current resurgence in internet entrepreneurship is “a healthy boom, not a fragile bubble.” His case boils down to three points. First, the market for internet content and services is more mature than it […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[1],"tags":[],"class_list":["post-233","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/posts\/233","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=233"}],"version-history":[{"count":0,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/posts\/233\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=233"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=233"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=233"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}