“Bob and I had no idea of any of the potential back then.” Those are the words of cable television visionary John Malone in his recently released memoir, Born To Be Wired.
Malone was writing about Tele-Communications Inc. (TCI) “hanging coaxial cable across the country” in the early 1970s to provide rural areas with better television reception, but it didn’t occur to him or TCI founder Bob Magness that decades later the cable would be “the platform for the likes of Amazon, Facebook, and Google, and unlocking immense value in a new digital economy.”
Malone’s recollections are useful as investors muse about the meaning of all the frenzied investment in artificial intelligence (AI). Looking back, there was a great deal of carnage that followed even greater amounts of investor optimism about the internet future. The question now is whether AI investment will yield an abundance of crack-ups of the Global Crossing, eToys, and theglobe.com variety.
The answer to the question should be yes, let’s hope. Information is wealth, and the hundreds of billions presently being put to work promise to yield copious amounts of information, a lot of it initially bad much like the internet gold rush did as the 21st century dawned.
It recalls an adage that skiers (both water and snow) know well: falling is your friend. The audacious leaps teach us, though sometimes the lessons are late in coming. Think Malone once again.
While the cables were stretched across the U.S. at great expense in the 1970s, it realistically wasn’t until the 2000s that they finally realized their full, life and business-enhancing potential.
What’s interesting about how things transpired is how seemingly “dead” the internet boom was by 2001. With former high-flyers dying all around us, the consensus was that “Wall Street” had erred, and erred in crooked fashion as it supposedly put the glossiest of lipsticks on the most unappealing of pigs.
So negative was the perception of the internet’s future that former Merrill Lynch analyst Henry Blodget was literally banned from the securities industry for having had the temerity to place a $240-$400 projection on the price of Amazon shares. Blodget’s prescient call that initially disgraced him vivifies how much politicians, pundits and the public overdid it with their post-mania negativity.
That’s because the internet is a persistent fact of life that would not be just that absent all the investment that looked great, then really bad, only to reveal its good side once again. Which is why we shouldn’t fear another repeat with AI.
As the large amounts of money being put to work almost certainly attest, substantial belly flops await as some of the darlings that we can’t keep our eyes off today become tomorrow’s ugly accident that we can't bring ourselves to look at. Embrace the wealth that is failure. The data centers and other AI-adjacent concepts won’t disappear if and when some of their creators implode, as much as they’ll be released to new owners eager to cheaply capitalize on the knowledge gleaned from the initial mistakes.
A collapsing market for internet stocks didn’t signal the end as much it was a sign of rebirth as a reduced number of survivors created a much better future with the impressive internet infrastructure left behind. Look for something similar to reveal itself after an expensive AI buildout. Falling is rich information personified, and it will once again be our friend.
