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Financial Bubbles 101 – The process of innovation coming to market

February 11th, 2009 · 2 Comments

An entrepreneur sent me a link to a presentation about the process of technology coming to market, creating value (real and perceived) in the market, who benefits, and the motivations behind the process.



View more presentations from Konstantyn Spasokukotskiy. (tags: do responsibility)

This presentation hit me on many levels.  I am an economist by training, a entrepreneur by choice, and a bubble maker by fate.  The economic process described for products coming to market and getting to the point of delivering an artificial product in the form of stock is simple, yet elegant in its delivery of a complex message.    At the higher level, I think it is insightful and brilliant because this is exactly what we saw happen during the dot.com rise and fall.   Exactly.  

During the meteoric rise and fall of the market for technology, now called the dot-bomb, a lot of that false value could be attributed to the process described in Financial Bubbbles 101.  As with most things, it is more complex than that, because throw in corruption from Enron and MCI/World Telecom to shake the stock markets, and the crippling effects of Sarbane-Oxley as an over reaction to that corruption (just wait to see what happens now in response to the current melt down), but the fundamental premise stands….a lot of the technology only had percieved value and not real value, the stocks that were bought and sold, reflected that bubble with nothing but air in side and it popped.  

Lastly Financial Bubbles 101 struck me as way too cynical.  At the macro economic level, yes these bubbles represent the cycle, but we must remain faithful that at the micro economic level, there is valuable technology being created that is worthy of investment to bring to market and for an investment banker to create even further value for the company and stock holders so more money can be used to bring expand the value the technology has brought to the market.   Otherwise it is almost a kafka-like exercise in futility.   We only need to look around to see that there has been and continues to be great innovation that changes our daily lives (mostly for the better) on an almost daily basis and that innovation would not be in the market had it not been for the investor and investment banker that saw some potential, mostly to make money, in helping that entrepreneurs bring that technology to market.  And as shown in the first part of Financial Bubbles 101, making that money helps fuel everything else….they buying of goods and services, creating of jobs, donating to worthy causes, investing in other things besides technology whether for wealth creation or to benefit mankind.  

In conclusion, I’ll end where I started….simple, but elegant in its description of the process of an innovation coming to market and the basic insiders secret of what an entrepreneurs needs to do to attract that investor to begin with.  The concluding points 1-5 hit the nail on the head in establishing the noble purpose in being an entrepreneur and one who encourages entrepreneurs.

NOTE: One point of clarification.   The banker described is an investment banker or broker/banker, not your SBA Lender type of banker.

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Tags: Entrepreneur Biz-Buzz · Entrepreneurs Seeking Capital Corner

2 responses so far ↓

  • 1 pbycall // Feb 23, 2009 at 12:36 pm

    Wanted to add on the micro economic issue. It is our entrepreneurial holly cow.

    Yes, good companies thrive. Basically those, which can demo 500% and up superiority upfront. The second category are those, who can help big Corporations to demo their superiority (example: Animoto flashes value for Amazon and is financed by the later too)

    The perceived value phenomenon works like a magnifying glass. Big are going to be bigger. Small are going to be smaller. And in my terms it is a great danger for technology community. It sets a threshold (now by 20-80.) Great innovations never grow big instantly. Greatness is correlated with complexity. Complexity isn’t normally reduced in one jump. One emeritus in Harvard thinks that most significant innovations were made before 1939. It just that some of them needed time to mature. IT industry included. The ever increasing in significance magnifying glass is acting as a baby killer. Soon there will be no productive adults any more and the bubble will consume the entire futile society.

  • 2 TonyB // Apr 1, 2009 at 6:50 pm

    Hi Everyone,
    I have a carpet cleaning business in Houston,TX that was doing pretty good until the economy went bad, and with it my clientele. I have a website for the business but I dont
    know what I have to do the get it to show up in a search. Right now it’s somewhere in the yahoo/google netherworld (LOL).

    Is there someone on here that can give me some insight or know of anyone that coud give me insight on how I can get my local website on the front
    page of a Yahoo or Google search to increase my business without it costing me 5 or 10k $$$? If so please share with me.

    I thank you and my hungry over-eating children thank you.


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