The End is Near

Dovi Frances
9 min readMar 21, 2022


By Roxane Googin, Chief Futurist, Group 11

“Thank God, it’s Doomsday — Season 16, Episode 19, The Simpsons”

“This is not the end, this is not the beginning
Just a voice like a riot rocking every revision
But you listen to the tone and the violent rhythm
Though the words sound steady, something empty’s within them
We say, yeah, with fists flying up in the air
Like we’re holding onto something that’s invisible there
’Cause we’re living at the mercy of the pain and the fear
Until we get it, forget it, let it all disappear”

“Waiting for the end”, Linkin Park, 2010

This Time is Different

Investors are comparing the 2022 growth stock decline to the 2000 dot-com bubble. It certainly looks similar. However, these two situations are fundamentally different. The dot-com bust was about a mis-understanding of the unit costs of rapidly changing technology operating inside a relatively stable business environment. Conversely, the current concern is about poor operating income visibility from more mature technologies selling into an increasingly chaotic environment. They appear the same because greed and fear have not changed in 20 years, but the drivers of these two cycles are not identical and the outcomes will also be different.

In this note we will review both the 2000-era bubble and the 2022 stock performance of publicly traded disruptive companies, outlining their similar performance yet starkly different underlying structure. Then we will compare and contrast the equally different environments under which they must operate, ultimately pointing to the direction of positive change. But caution; bumpy roads ahead!

The Y2k Bubble

I will describe the Y2k bubble in first person because I was there. The Y2k bubble was fueled by cash freed via declining bond prices mixed with images of what this new internet thing could bring; if trade routes drive wealth, imagine what a universal trade route would deliver! What if everyone could communicate with everyone else, practically for free? Just imagine the impact of this free flow of ideas! (Oops, be careful what you wish for). Imagine a time when you sensed the importance of services like search, YouTube, social media or Google Maps, but they were still pipedreams of things years into the future. Imagine a time when the smartphone most Americans spend five hours a day on did not exist, but you still could tell something was around the corner.

Importantly, we were able to ponder these possibilities in isolation. The larger society into which these new products would be sold was not an investment risk factor, as it was rightly expected to remain largely intact, changed mainly by the vagaries of time and the impacts of the internet itself. The internet would benefit by drawing value from its environment while enhancing productivity. Because these technologies sold into a largely stable social and financial structure, we could predict their growth based on smooth adoption curves within an existing paradigm. Importantly, in this world, technology could be freely applied to create large and highly efficient global trade systems without concern for redundancies.

The Unit Cost Achilles Heel

What went wrong with this initial vision were unit costs. For the visions of affordable universal connectivity to manifest economically those unit costs had to fall literally by a factor of 1000:1, upending multiple vertical industry segments at once. During the boom, Lucent ran ads about how they “make the things that make the internet”, albeit on aging circuit-switched SS7 technology. The stock went from $60 to $5 before vanishing entirely. Sun Microsystems similarly went from $60 to $5, then vanished into Oracle as people realized their proprietary servers would not serve as a universal internet back end. IBM management drummed up an “internet mainframe” that went nowhere, but at least they survived.

After a few years of pain where the cost realities hit and this entire group of would-be leaders got washed into the dustbin of history, the needed unit cost decline is exactly what happened. Moore’s Law was still on an exponential curve and open source software emerged to lower the cost of code. The fact that six fundamental and historically separate industries had to simultaneously redefine themselves and converge to make this happen made success seem impossible. Yet evolution has its way and the flower bursts through the concrete. The mobile cloud was eventually born from newly powerful silicon and commodity code and infrastructure, resulting in 20 years of astonishing profit growth.

While the decline was quick, the resulting rebound was long, slow and bigger than anyone could imagine in 2000, with individual companies now larger than entire countries. Importantly, while the 2000-era concept was correct, its manifestation was unrecognizable. This was not a drop-in solution, nor was it about fools investing in Rather, it was about a revolution so profound it was impossible to see. “Cloud” was not a word. Cellphones were voice-only bricks owned by the same executives who fly in private jets today. Yet inevitably, adoption happened and the internet did connect everything. It just did not look like what people expected in 2000.

The Current Swoon

While charts featuring 70–80% stock declines have a familiar look, it is what happens from here that matters. If investors learned one thing from the dot-com bubble is it that unit costs matter! Ever since that bust, no startup could get funding without proving their unit sales will be profitable over time. In the current situation what investors are betting on instead are operating margins; relying on profitable unit sales growth to cover operating expenses eventually. This is a successful model followed by companies like Amazon and It is actually proven to work if you have or can maintain the right product-market fit.

Unlike the 2000 era, looking forward technology should evolve slower than the environment around it, which we expect to be chaotic. Moore’s Law is creeping along and open source software is ubiquitous. Perhaps something disruptive related to crypto or quantum computing will join the fray, but beyond incremental improvements and possibly powerful synergies between currently separate sectors, say between AI and robotics or genomics, the drastic technology improvements of the past 20 years are largely behind us. What we see now should be more recognizable in 2040 than the internet was between 2000 and now. Adoption must therefore come not so much from novelty but from necessity. Buffeted by constant change, successful enterprises will become aggressive technology adopters, generating plenty of demand.

But how do you project the long-term product-market fit needed to attain operating profitability in a chaotic environment, which we will describe below? This, we believe, becomes the essential question. What can you bet on, over time, in times of low visibility? Equally important in public markets is the question of what everyone else will believe. In times of great change, that all-important sustained product-market fit may become something not fixed, but rather based on constant adaptation. This replaces “moats” with “agility and disruption” as winning investment strategies. While some of these new winners already exist, many do not. And now on to the real problem, the analogue to the 1000:1 unit cost reduction challenge faced by dot-com bubble participants; chaos.

The Next 20 Years

In Managing the Coming Era of Chaos, we predicted a startlingly different post-Covid world order would replace the stability of the first 20 years of this century with a period of chaos. Not only do we all see unexpected change around us, but serious thinkers on this subject are not optimistic about the 2020s. We are specifically referring to Neil Howe and William Strauss in The Fourth Turning, and Ray Dalio in The Changing World Order. While the Fourth Turning analysis posits the time is due for social upheaval and conflict due to generational cycles, the Dalio Changing World Order sees it coming from finances. Importantly, while neither of these analyses should be ignored, it is their convergence that is most convincing. Finally, just look around; things look dicey already! The bet is these are not idiosyncratic events but rather the start of larger trends.

The Changing World Order

We will review the Dalio analysis because it is financially based. His observation is that very low interest rates and high income inequality are historically bad signs. In response to these signals of stagnation, a government effectively prints money to get the economy moving in order to keep social unrest at bay. In a no-growth environment this fails to stimulate demand even as it degrades current income. Unfortunately, this money also amplifies problematic income divides by moving largely into the assets already owned by the rich, fomenting further political polarization and social unrest. If not actively managed, this leads to open conflict. Fighting instead of working is bad for the economy and everything spirals downward. Maintaining a productive and civil open society is like spinning plates; there is one carefully balanced way to make it work, but many ways for it to fail.

Global Factors beyond Currency

But wait; there is more! Being over indebted is not a good thing if times are about to get bad, and they are. On a global scale we are entering a biblically negative combination of; fire, flood, famine, disease and drought. You may be over with Covid, but Covid is not over with you. In addition to these environmental forces, we face the approaching time horizon of the end of a fossil fuel based economy, and perhaps the U.S. hegemony and dollar based world reserve currency that came with it. Then, we have aging northern hemisphere populations and worker shortages. Together these forces are unwinding the globalization that supported economic growth earlier this century. We probably missed something, like nuclear war, but this is plenty.

The Future is Here!

The event horizon of many of these forces is already evident. We have unequal income distributions, low interest rates and social unrest in many Western economies. Jobs are increasingly difficult to fill as we face the leading edge of an upside down population with too few workers and too many retirees to support. The cost of oil is becoming unacceptable not only as its price becomes unpredictable and it degrades the environment, but also because we either have to wage war or support dictators in order to get it. Fires, floods and droughts have reached epic proportions, yet we just keep madly pumping more CO2 into the system. Famine is already a growing problem even before we take the number one and number five wheat exporters off the market. Covid is just getting started in China, with 1.4B fresh opportunities for it to mutate. None of these trends show any evidence of stopping, in fact most are just getting started with no solution in sight.

The Investment Environment

Times may get tough, but when the going gets tough, the tough get going. If the dot com boom, bust and 20-year rebound anticipated changing technology within a relatively stable socio-economic structure, the current swoon anticipates the opposite. Visibility replaces unit costs as the big investment risk. Importantly, innovation is our only positive way out of this mess and is probably our domestic ace in the hole. The worse the environment, the better the demand we expect to see.

As existing structures shudder in response to unsettling forces, it is likely new disruptors who facilitate success in a dynamic environment that will thrive. As we wrote In Managing the Coming Era of Chaos this past January, it is the antifragile agile most likely to thrive at the expense of the complex and efficient. That was fast; that era is already here. Importantly, growing into your operating margin via profitable unit growth will require not only allowing customers to adapt to change, but perhaps also to require companies to reinvent themselves on a dime. That puts a premium on both technology and management. The value of long dated investments will increasingly be based on that faith.

Innovation to the Rescue

In a world of chaotic change, it is imperative to watch what does not change. One constant ever since hominids sharded rocks in caves is that in the face of setbacks, we brush off, innovate, use tools and move on. That is, in the rare times when we are not fighting. Even Ray Dalio, with his 500 years of minute measurements of thousands of variables describing human progress, sees this upward trend based on innovation, punctuated by negative reset cycles, as the one constant of mankind.

To that end, if the future looks uncertain, it is time to bet on the agile and the smart over the staid and the bureaucratic. Now is the time to ease in rather than to hide.

This future may look tough, but it is the only one we have.



Dovi Frances

Dovi Frances is a financial services entrepreneur and founding partner of Group 11, a venture capital firm based in Los Angeles, California.