This time it’s different? What’s new and what’s old about the 2017 technology bubble?

In April 2015 the NASDAQ composite index finally surpassed its March 2000 peak; for larger tech stocks on the S&P 500 technology index the dotcom peak was not bettered until July 2017. There is an emerging concern amongst commentators that we are reaching the end of a second dotcom bubble. It is in this context of disquiet that we reflect upon what is similar and what is different about 2017 relative to 2000. The paper presents longitudinal data on the financial characteristics of the firms that comprise the two indexes. Whilst it is recognised that 2017 S&P500 IT firms post more earnings than those of 2000, a number of questions remain about the sustainability of present valuations. We focus on three key challenges: capital, labour and regulation. With regard to capital, we note a tendency for current tech firms to invest in each other in a way that is reminiscent of the worst excesses of the 2007 crisis in CDOs and strongly suggests Ponzi-like forces at work. With regard to labour, platform-based companies like Uber have few direct employees, yet they are hugely dependent on externally sourced low-cost labour. This distinguishes them from immaterial 2000 new economy failures like Pets.com, but poses a risk if bogus self-employment contracts become increasingly less attractive. For a company whose present valuation is premised on expected future growth, any deviation from that growth trajectory may lead to goodwill impairments. Finally, many new economy business models are built on a series of regulatory loopholes and legal definitional arbitrages. While the state remains reluctant to regulate anytime soon, media attention surrounding unsavoury employment tribunals may well trigger writedowns.