🫧 The Dot-Com Bubble

📝 Description

The Dot-Com Bubble (also known as the Tech Bubble) was a period of extreme speculative growth in equity markets during the late 1990s, fueled by the rapid rise of internet-based companies. During this time, traditional "Value" strategies, including Berkshire Hathaway's, significantly underperformed the broader market as investors ignored earnings in favor of clicks and "eyeballs."

🔑 Berkshire's Position

• The Refusal to Participate: Warren Buffett and Charlie Munger famously avoided investing in internet and technology companies, stating that their durable competitive advantages were impossible for them to predict.
• 1999 Underperformance: Berkshire recorded its worst relative performance year in 1999, gaining only 0.5% while the S&P 500 gained 21%. Many shareholders and commentators suggested at the time that Buffett had "lost his touch."
• "Old Economy" Defense: Buffett defended his stance in the 1999 Letter, arguing that it is better to be a spectator in a "game you don't understand" than to gamble on unproven businesses.

💡 Key Mentions

• 1999 Letter: Buffett explicitly addresses the market's "mania" and explains the discipline of staying within one's Circle of Competence.
• 1999 Meeting: Discussions on the valuation of internet companies and the "Geezer and the Geyser" anecdote involving LTCM.

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