Lucas's Reviews > Dot.con: How America Lost Its Mind and Money in the Internet Era

Dot.con by John Cassidy
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May 15, 2011

really liked it
bookshelves: computers, history, economics
Read from May 07 to 13, 2011 — I own a copy

It's especially fascinating to read now as it seems likely we'll have to refer to the events in this book as the first internet bubble. The new bubble at least would primarily wipe out venture capital investments- though I'm suspicious that if enough money was tied up in VC then the consequences of a crash could be bad for the rest of us in as in the way of the 'shadow banking system' of a few years ago was.

Valuations of companies derived from the share price when only 10% of shares are available for public purchase seems wrong: why can't I create a company with a 100 billion shares owned by myself, offer only a single share in the IPO, and find one person to pay $10 for it- now I'm a trillionaire? Valuation using that simplistic model doesn't make sense for highly assymetrical distribution of shares or even any good or service. The greater amount of something held relative to the amount available for sale, the more the total real value of it has to be discounted. Maybe this already exists?

"Most day traders were well educated. It took a certain level of intelligence and arrogance to persuade yourself that you could trade successfully against Wall Street professionals who had been doing it all their working lives" The chapter later mentions a study which showed that average returns from stock trading at a set of brokerages went down as the frequency of trades went up- a lot of that due to per-trade fees.

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