The Next Generation

On the day of its IPO in May 1999, EToys’ nearly quadrupled in price.

Toys ‘R’ Us did 300 times more revenue than the new kid on the block, yet after its first day as a publicly traded company, the brick and mortar store had a market cap that was 35% below it.

EToys’ $7 billion valuation was based purely on hope, a number which was far removed from business fundamentals. From its founding until the IPO, the company had sold just $30 million worth of goods, and had lost $30.8 million.

The Wall Street Journal  sees parallels between the dot-com bubble and the current explosion in marijuana stocks:

The 51-year-old banker wants to focus on Qind, his San Francisco startup that organizes home parties to sell cannabis products, to get a piece of what he says could sprout into a $100 billion annual business in the U.S.

It’s possible that one day the marijuana business grows this large, but I doubt it will happen for a very long time, considering that beer sales in the U.S. were $111 billion in 2017.

With access to detailed information about every speculative bubble that humans have ever concocted, one would think that people would learn from the mistakes of previous generations. We don’t.

Harry Truman once said:

“The next generation never learns anything from the previous one until it’s brought home with a hammer. I’ve wondered why the next generation can’t profit from the generation before but they never do until they get knocked in the head by experience.”

Some lessons have to be experienced before they can be understood.