Slashdot Mirror
A Look Back At Ten Dot-Com Flops
climbing_monkey writes "CNET.com has posted what, in their opinion, are the top 10 dot-com flops." From the article: "The most astounding thing about the dot-com boom was the obscene amount of money that was spent. Zealous venture capitalists fell over themselves to invest millions in Internet start-ups; dot-coms blew millions on spectacular marketing campaigns; new college graduates became instant millionaires (albeit on paper) and rushed out to spend it; and companies with unproven business models executed massive IPOs with sky-high stock prices. Of course, we all know what eventually happened to this world. Few of these companies actually made enough money to recoup that cash, and when their investors fled to the hills, these start-ups died dramatic deaths. These are the celebrity victims of the new-economy bust."
- Manned space exploration
- Kozmo.com
- the original Napster
- The Concorde
- GM's EV1 (interesting)
- The original Palm Pilot
- Good keyboards
- Wires
- LPs
- The Newton
(I would have put kozmo at #1. Those who used it know what I'm talkin' about.) Read the part about the EV1 car, though. Pretty interesting.They spent something like $100 Million on those stupid 'cat' things. That has to be the biggest flop. The amazing thing is that Belo is still in business. (Papers and TV station)
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Interesting article - it actually lists Kibu as a Top 10 DotCom bust site.
There is a nice book by Lori Gottlieb and Jesse Jacobs called, "Inside the Cult of Kibu: And Other Tales of the Millennial Gold Rush" which talks about the madness during that era.
Nothing new, but it is an interesting read, written by some of the very people behind Kibu.
As those who saw the 2000 Super Bowl (I believe that was the one) can attest, much of this money was indeed spent on marketing. At the time, this made sense: let's establish ourselves with high profile commercials, designed to reach a huge audience.
But that didn't work. If only these companies knew then what we know now: these internet services don't need to be marketed to the masses. They only need to be marketed to a select few. Take websites and software like MySpace (please!), CDBaby, Delicious Library, and even Google: these are just a handful of current web success stories that are profitable, and they've never used television advertising. The goal isn't to reach everyone; the goal is to reach early adopters who will use and actually benefit from your product. The masses will come along...eventually.
concrete5: a cms made for marketing, but strong enough for geeks.
But at least it's CEO and his pals cashed out in time. Wonder if slashdot sucks so much now because CmdrTaco is living high on his LNUX riches.
First, I invested in some of those dot coms at ridiculous prices. I'm young, so it's not like I blew my life savings or anything, but still... lesson definitely learned.
Second, I worked in one of those never-quite-successful dot coms. A small company that started just late enough to miss the VC gold rush (or at least that's what we told ourselves). I had to exercise my options before I could tell if it was going to be bust. Regrettably it did bust. Oh well.
I'm feeling the heebie-jeebies about the housing market right now. Seems pretty similar: lots of institutional investment, lots of trendy discussion, lots of people moving around a lot... we'll see, but I'm not too hopeful about real estate right now.
Helping with organizational effectiveness is our job.
Wait till this one pop. It'll have the dot com era seem so yesterday. Go to this website http://www.stock-market-crash.net/housing-bubble.h tm. In 1989 Japanese housing bubble, housing prices tanked for 13 straight years. US might do the same. The hi-tech industry is recovering alright considering the short period of time.
Dot ComBack, Or More Of The Same?
Dotcom Era Fads
Dot-Com Service Memories?
The Dot Com Super Bowl
Another Dot-com Boom?
*sigh* the goo' ol' days
The best thing is, the next "big thing" that comes along and the same people (plus some new investors who were kids the last time) will repeat the exact same mistakes that they did during the dot-com era. Never underestimate the power of human greed (not to mention herd instinct as everyone around you is screaming "Buy, buy, buy") to fool the mind into thinking "This time it will be different."
BTW while I have seen plenty of news articles about how stupid investors and companies were during the dot-com era, how about some insiteful self-criticism about the role the media (including the tech media) played in building up all the hype that helped produce the atmosphere that allowed these excesses to take place, esp. in light of how they profited from the era (eg. advertising)?
...brings back some memories...
Coca cola backed rocketcash was a pretty dumb idea. It was another virtual currency, I won 1000 dollar of it (yes it was worth that in USD) and tryed to order large amount on sites with it only to be harassed by their "partners" because all rocket cash did was fill in websites order info with your name and THEIR visa card. so I would get a call from (ebgames I believe it was) asking me to confirm my visa number and give them my DL # and all that and I would tell them ITS ROCKETCASH! I ended up having to call cokes marketing department and yelling at them. Anyone eles use that crap?
Wow. It's funny...albeit scary...that not only do I remember most of those but I actually used them. Webvan wasn't a bad idea, it just wasn't implemented correctly (or was ahead of its time like the Newton was). Kozmo just plain rocked. I was in Atlanta at the time and that was one of its markets. I didn't fully grasp it's model, but I had their magnet on my fridge and used them at the local burrito place. Oh yeah...back to the question. So for those of us that actually used these things, are we early adoptors or dumbasses? I will admit that Webvan had some damn good prices on some things if you did your shopping.
"He uses statistics as a drunken man uses lampposts...for support rather than illumination." - Andrew Lang
Boo.com became a cautionary tale by deciding that supporting MacOS was unnecessary. Although their target market was probably 95% Windows95, the journalists who reviewed the site were 95% Mac. Once you hit a screen that tells you that your OS isn't supported, you're probably not going to write anything nice.
Dec 10, 1999, 07:10 UTC
By Eric S. Raymond
A few hours ago, I learned that I am now (at least in theory) absurdly rich.
I was at my machine, hacking, when I got email congratulating me on the success of the VA Linux Systems IPO. I was working on my latest small project -- a compiler for a special-purpose language I've designed called Scriptable Network Graphics, or SNG. SNG is an editable representation of the chunk data in a PNG. What I'm writing is a compiler/decompiler pair, so you can dump PNGs in SNG, edit the SNG, then recompile to a PNG image.
"Congratulations? That's interesting," said I to myself. "I didn't think we were going out till tomorrow." And I oughtta know; I'm on VA's Board of Directors, recruited by Larry Augustin himself to be VA's official corporate conscience, and it's a matter of public record that I hold a substantial share in the company. I tooled on over to Linux Today, chased a link -- and discovered that Larry Augustin had taken the fast option we discussed during the last Board conference call. VA had indeed gone out on NASDAQ -- and I had become worth approximately forty-one million dollars while I wasn't looking.
Well, that didn't last long. In the next two hours, VA dropped from $274 a share to close at $239, leaving me with a stake of only thirty-six million dollars. Which is still a preposterously large amount of money.
You may wonder why I am talking about this in public. The first piece of advice your friends and family will give you, if it looks like you're about to become really wealthy, is: keep it quiet. It's nobody else's business -- you don't want to look like you're gloating, and you don't want to be deluged with an endless succession of charity appeals, business propositions, long-lost best friends, and plain bald-faced mooching.
Trouble with the "keep it quiet" theory is that I've made my bucks in a very public way. When you're already a media figure, and your name is on the S-1 of a hot IPO, and email from friends and journalists starts coming in like crazy as the stock breaks first-day-gain records, playing it coy swiftly ceases to look like a viable option.
Besides, it wouldn't be fair to dissemble. I serve a community. I'm wealthy today because my efforts to spread the idea of open source on behalf of that community helped galvanize the business world, and earned the respect and the trust of a lot of hackers. Larry thought that respect was an asset worth shelling out 150,000 shares of VA for. Fairness to the hackers who made me bankable demands that I publicly acknowledge this result -- and publicly face the question of how it's going to affect my life and what I'll do with the money.
This is a question that a lot of us will be facing as open source sweeps the technology landscape. Money follows where value leads, and the mainstream business and finance world is seeing increasing value in our tribe of scruffy hackers. Red Hat and VA have created a precedent now, with their directed-shares programs designed to reward as many individual contributors as they can identify; future players aiming for community backing and a seat at the high table will have to follow suit. In this and other ways (including, for example, task markets) the wealth is going to be shared.
So while there aren't likely to be a lot more multimillion-dollar bonanzas like mine, lots of hackers are going to have to evolve answers to this question for smaller amounts that will nevertheless make a big difference to individuals; tens or hundreds of thousands of dollars, enough to change your life -- or wreck it.
(Gee. Remember when the big question was "How do we make money at this?")
The first part of my answer is "I'll do nothing, until next June". Because I'm a VA board member, under SEC regulations there's a six-month lockout on the shares (a regulation designed to keep people from floating bogus offerings, cashing out, a
Ol' C. Everett just didn't know what he was getting into.
Read the EFF's Fair Use FAQ
The article was very interesting, for those that actually RTFA. The article definitely brought back memories. On another note, did the GovWorks logo remind anyone else of the NetBSD logo?
#include ".signature"
The author here misses the intended audience for Flooz, as far as I could tell at the time--which is to say, those people who cannot have credit cards. Kids and teenagers. Especially teenagers. Give a kid cash and they can spend it at a local store but not online. Give them a check and they don't have an account to put it in, much less a way to spend it after. But Flooz meant that you had your choice of ways to spend the money.
Nobody was going to actually put money into a Flooz account and then use it to buy stuff for themselves, I assume, but it was a halfway decent gift idea. Not worth the hype, though. Now that you can get prepaid 'credit' cards--which I'd never heard of or seen at that point in time, myself--there's no point. But some of us did have a use for it then!
Some of those ideas are good and can/will work. Targetting the female teenage market, or webvan, or govworks, or stuff like that are good ideas. Even the online currency thingie can work, although it will be in very tough competition against the credit card companies, debit cards, or even newer stuff like goldmoney.
It's just that nearly all dot-com companies were way too ambitious and arrogant. This was mostly because they were run by business-oriented individuals (these people tend to be like that). If some of these companies didn't squander away their capital, they would still be in business. Let's also not forget that these companies didn't have good cost controls (spending millions on the the Super Bowl ads, which incidentally is the most expensive advertising around, for a target market that generally isn't even tech-oriented looks lame to me).
For example, stuff like govWorks IS the future. There is a big opportunity to streamline and automate interaction between government and citizens. Not only is this cheaper, it is is more efficient too.
Sivaram Velauthapillai
Seeking the meaning of life... @slashdot of all places
One company did cash in it's superbowl ad: monster.com
There was a real brick-and-mortar, mail-order prescription drug fullfillment business footing the bill for this. It had been started by a father. He was semi-retired and had turned the business over to his two sons. The Web site was their idea and they were in charge.
We had a million dollars in middleware, a couple million in consulting to customize the middleware, an Orcale backend running on a high end Sun (E7500), and the Web site itself running on a top of the line, Sun E10k. At this point there was about $5 million sunk into the project, and we had not yet gone live.
Before going live, management felt the need to run a load test. At that point, you saw the IBM commercials on TV were dot coms went live only to see the site crash due to too much traffic. They didn't want to see that happen. The load tests showed that we could only handle 1000 simultaneous transactions. Clearly, that wasn't enough. So we bought another E7500, another loaded E10k, and another Oracle license. I don't know the exact numbers but I think this was close to another $3 million. With this new equipment and an additional DS3 line, we could handle 2500 simultaneous transactions.
Early in 2000 it comes time to turn the web site live and crank up the advertising. Tension was running high - and expectations were greatly disappointed. The largest number of visitors we ever had to the site was eight. We never had more than one active transaction.
I only stayed around for another couple of months. Before I left, the father, who founded the business and ultimately footed the nearly $10 million dollar tab, said:
Oh what a time it was. First...I like to play the market. I made a lot of money for myself and for friends and coworkers keeping tabs on these dotcom-era mysteries. I made one coworker a whoppin' $50k on some of my insight. Of course...the big pin came to pop the bubble and I lost $11k in one damn day (I wasn't even in town that day to watch the market so imagine my surprise when I got back).
I got called it from @work/@home for an interview. They flew me across the country, gave me a car, interviewed me. They had the foosball tables around. Totally chill place. I remembered reading about all the other companies that had pool tables, video games, stocked fridges, company cars, etc for their employees. Sounded fun. I didn't make the cut. A year later, the company didn't make the cut either.
I got a call to work for Alta Vista (remember them?) to do some HTML work. I had JUST received an offer to work at a more stable, multi-national company as a web developer but I was willing to entertain their offer. I asked what they wanted and they wanted nothing more than HTML coding. They were willing to pay $60k or so to do that. It was much more than my current offer but I took into consideration the fact I'd have to move the family across the country and still wasn't sure it was the safest thing to do. I'm glad I didn't because within five months the company had gone under. Go figure.
As a CMU grad right about the time the net bubble was growing, I saw A LOT of "and we're the coolest company on the planet" propoganda. I watched Cramer on CNBC talk about how all these companies (of course, Amazon, Yahoo, eBay were some of them too) had nothing to stand on. "Get out! It's gonna crash!" It did. Still...it's interesting to see what survived and what didn't.
"He uses statistics as a drunken man uses lampposts...for support rather than illumination." - Andrew Lang
"If only these companies knew then what we know now: these internet services don't need to be marketed to the masses."
You hit the nail on the head. The level of misunderstanding at the time was immense. I vividly remember one keynote address at the 1999 World Wide Web Conference in Toronto, given by Bob Metcalfe.
Bob had this nice tight little riff he'd made up, wherein he announced that in order to thrive on the web, a company had to eyeballize, memberize and then monetize their website. His message, as much as any other, epitomised the Oklahoma-land-rush feeling at the time, where people grabbed turf first and asked questions later.
Unfortunately, some of those questions were rather nuanced. Like, for example, 'do you not like ads at all, or do you just not want to be distracted while you're reading online?' Google found the answer to that. Go.com and others did not, to their chagrin.
MSN has only recently begun learning the folly of 'memberizing'. And people are still struggling with the problem of 'monetizing' their websites.
At the time I heard Metcalfe's talk I remember shaking my head in disbelief. Now, don't get me wrong, I respect him greatly for inventing ethernet. But further proof of the folly of the Dot Com boom was the blind faith that investors put in the business acumen of the alpha geek. Visionaries, generally speaking, are not too great at dealing with the messy details of day-to-day life, and as often as not need to be protected from it (that's one good use for tenure in Universities, by the way). Investors allowed these same dreamers into the driver's seat, and paid in spades for the decision.
Crumb's Corollary: Never bring a knife to a bun fight.
Alternative Minimum Tax laws are not just for the super rich. For those of us who happened to get in early enough into a dot com, work our asses off, go public, vest, exercise when they were high, hang onto the shares for 12 months for the capital gains taxes, watch the share price collapse in those 12 months, and got lucky enough to sell off before getting caught by some of the dumbest tax laws out there. I escaped by the skin of my teeth, and other I know did not.
SUNW at $85 was a deal. SUNW at $75 was even a better deal. SUNW at... Lots of new lessons on the stock market in general. Watched friends lose houses when trading margins.
PETS.com stock certificates made great white elephant gifts. Worth every penny. Just waiting for SCOX to get under $2 a share to do it again. It will be framed next to some of the other stinkers decorating my office.
Miss the beer in the soda machine. You can imagine our shock when a customer actually wanted a tab soda.
A Sun 440 is not needed for an email server. Makes for a lousy counter strike server too.
When the economy started exploding, the financials of the company were more important than the foosball table.
Remove the Diablo mule characters from CVS before you sell the company.
You can pour your heart and soul into work. Rarely matters. Never forget your family.
+++ UGUCAUCGUAUUUCU
Some items on there are ok, like manned space exploration or to-your-door delivery but most of the list is just dumb. Some of the worst ones:
The EV1. WTF? Why the hell would you miss this. I got the chance to try one at high school, I forget which teacher arranged to have it shown off. The thing was underpowered to the extreme, didn't have long range and was apparantly plagued with failures. However that aside it was inefficent as hell. People like to pretend like it's non-poluting because there's no tail pipe. News flash: That power was generated somewhere and coal probably did the generation. Because of the multitudes of conversions of form the power underwent, the efficency was for shit. The straight mechanical transformation of an ICE was much better.
IBM keyboards. Oh give it a rest. I have an old IBM keyboard and it's annoying. Takes a lot of pressure to hit a key and makes an excess amount of noise. Give me my nice modern keyboard any day.
Wires. Another news flash: It's easy, really easy, to get wired shit. I have a wired network, wired phone with a wired headset, wired mouse, etc. I didn't have to search for any of it either, all was readily available at my local stores and from major online shops. I also have wireless things like a cellphone, but let's not pretend like wired items are special order.
LPs. Give me a break. Ok so we can debate all you want if a $50,000 audio setup with a good truntable, awesome stylus and tube amps sounds better than a digital setup with transistor amps. Whatever, point is LPs at consumer pricepoints blow, are fragile, and aren't portable. For $150 you can get a digital system that will fit in your pocket and give you nice distortion free (relitively speaking) music. For $150 you can get a marginally acceptable LP player, and none of the supporting hardware required to make it useful.
I personally find that there's basically no technology I miss. I find that I either like the new stuff better, or I can get the new equivilant of the old stuff for a better price. Like I've heard some people lament the death of good VCRs. They talk about the old VCR they had that lasted 10 yeasr, and how their new one sucsk. Of course the old unit was bought when VCRS were $500 in today's dollars, the new one was $30. Guess what? You can get a $500 VCR today, it'll be a professional unit and it'll look great and last forever.
Your comment on it being "real" makes me think of one thing a simple construction worker has over a $60k/yr software engineer. 50 years from now, it's pretty likely their handywork will still exist. 10 years from now, It's very doubtful what a software designer made will be in use (at least it shouldn't), let alone 50 years.
In undeveloped countries, the consumer controls the market. In capitalist America, the market controls you.
These companies weren't expected to succeed. The VCs even said so: profits didn't matter, sales prospects didn't matter, even embarrassingly stupid products didn't matter. What mattered was that large amounts of money could change hands with very little oversight. It was money launderers' heaven.
If you want to pay somebody off, buy their company at a massively inflated price. (No company to sell? Start one!) Want to hide paper profits? Stage a stock collapse. Want to reward a toady? Make him CEO or CFO of a startup. (The CEOs were all directors of one anothers' companies.) Want to pocket the investors' money? Have your CEO spend it all at your marketing or advertising service.
None of the money was wasted. It wasn't burnt. Every dollar went into somebody's pocket. Every dollar came from somebody else's. One group got most of it, another lost most of it. The ones who lost were pensioners, whose pension funds were "mismanaged" into oblivion. Did the pension fund managers suffer? Or did they make out like, er, bandits? Which do you think is more likely?
This is not to say that everybody involved was a crook. Lots of people worked really hard to try to make something new, and most of them suffered as much as the pensioners.
How do you imagine W funded his campaign? His father used banking fraud, and had to bait Saddam into invading Kuwait to keep son Neil (Silverado) out of prison. The W crew relied on more modern, less legally-risky securities fraud (Enron). They're not very imaginitive, though: count on the VCs to ramp things back up before the next election season.
I've still got my IBM keyboard. It came with the first computer I ever owned (and still own, it is in the closet of my room at my parents' house): An authentic IBM Personal System/2 Model 8556. Made in 1993, it sported a 486SX (no heatsink or fan needed here!) at 50mHz, MDA graphics, a token ring adapter, external SCSI port, internal XT hard drive (200MB, I've got more than twice that much RAM now), 3.5" floppy drive, 16MB RAM, excessively crappy mouse, equally crappy 14" monitor, and a wonderful wonderful keyboard. All for 25$ at my scout troop's rummage sale.
I am typing on that keyboard right now. Yes, it is hellishly loud, but the feel of the keys is unmistakable, and I never, ever have problems with keys sticking, or not responding, or any of the things I hate about almost every other keyboard I've ever used. Plus, the key caps come off easily, and most are interchangeable... This is fun. My little sister is perpetually confused by the arrow keys (point in opposite directions), and most people have a hard time with the swapped F-key row and numeral row.
But, suffice it to say, this 12 year old keyboard is the most beloved and probably most irreplaceable part of my computer today.
SIGSEGV caught, terminating
wait... not that kind of sig.
How many times have you signed on with a new company, looking to see if they live up to their own hype, only to find yourself with broken equipment, grossly inadequate service, and ridiculous overcharges? How many times have you then gotten on the phone with them, only to find yourself talking to a "customer service" rep for whom "retarded" would be a grandiose compliment to their intelligence?
And on the other end, how many companies have you seen lay off more and more of their engineering, manufactoring, production, and anything else that constitutes actual work, while they keep expanding the marketing? With quotas for the phone reps to sell you more stuff instead of fixing what's wrong with what you already bought? I see something wrong with a ratio of ten managers, five marketers, and seven phone reps to every one producer, particularly when payday rolls around and instead of the raise I wanted, I get a stress-squishie or a dead calculator with the company name encrested on it as my "employee appreciation gift".
Dot-com bust? Tip 'o the iceberg!
There are also other issues at play here. Namely, you get a tax deduction for your mortgage interest and property taxes paid.
The problem is people are relying heavily on ARMs and cashing out their equity resulting in them being upside down on their investments.
Think about the conditions that led up to the Great Depression, i.e. everyone trading on margin with no way to pay it off = people overextending their credit to buy houses now. And, the old adage (supposedly attributed to Joseph Kennedy) that when shoeshine boys start talking about the market, it's time to get out (which turned out to be true in the dot-bomb era too, although it was waiters and barbers who did the talking). Nowadays, everyone's talking about real estate.
Those who ignore the lessons of history are doomed to repeat it. I see a world of hurt coming to the housing market soon, especially as interest rates inevitably rise, even on the 30 year termed debt instruments.
Would I invest in real estate now, especially as I live in the DC area, which Mr. Greenspan specifically identified as having "froth", no way. Am I happy that I did 4 years ago, the answer is an unqualified yes.
J. David Kuos "Dot.Bomb" was a brillantly written account of how to burn an extra-ordinary amount of money by doing some of the most astonishingly idiotic business decisions ever.
Very, very good read. Highly recommended.
Why is nobody mentioning the dot-com that started it all, Excite? Yes the website is still up, but it's no where near the glory they once were, not since they went bankrupt in 2001 and got bought up by some other firm.
Here's what I learned co-starting a few web companies in Sweden between '97 and '00, one of which was a bonafide dot-com (although we only burned ~$20M).
The money came mainly from the risk branches of investment firms started off of regular industry money. Risk capital typically is 5% of the total capital. This money is more or less expected to go out the windows, hence the "risk."
The model these guys worked from was to seed a company with some potential to attract more investors, then sell their shares at 10x the buying price as soon as that happened.
They were not morons. They didn't care if your business model made it likely that you would ever actually make money. It was a pyramid game. I seed this company, in the hope that another investor will step in and buy a large chunk of the stock for signifficantly more than I paid, before it all goes to hell. The second investor makes the same gamble, praying to God that there will be someone coming in after them, buying stock for an even higher price. And so on. It had nothing to do with business plans, except that plan was part of the general image of the company.
This is what the crazy expansions were about. The seeding investor needed the company to grow fast, so they get a fast return on their money. The entrepenours were usually a lot more sane in their plans. It was, in my experience (and I mingled with the founders of most European dot-coms) that it was the investors who insisted on opening offices on the most expensive streets, start branches in London, San Francisco, and Hong Kong, and hireing a thousand people, not the founders. Because that was the only way to quickly attract the next batch of investors.
So here are some conclusions: What really happened during the dot-com boom was that regular industry money were pumped into a lot of advertising companies and computer consultancy firms, to force along development projects with broken project plans and unrealistic time tables. But it put food on the tables of a lot of consultants. It might perhaps have advanced some web technologies (such as application servers) as well.
Eventually the investors realized the game wasn't working, and they pulled out. It was an investor-driven process, and most of the money was expendable. No big loss.
I wasn't talking about markets in general, dolt. I was talking about the stock market, which - despite its occasionally-used function of helping businesses raise capital (i.e. when new shares are put up for sale) - generally serves no purpose except to allow people to try to make deals that benefit them financially (at others' expense, of course).
If you want to buy or sell financial instruments, you go the goddamn stockmarket.
Exactly. But the buying and selling of "financial instruments" is no of real value to society. It's a vacuous, pointless game that - unfortunately - is becoming the basis of our economy, rather than activities that have some actual value, such as manufacturing things, or producing food, or providing practical services. The "financial instrument" market is just buying and selling... money. (Hell, even the drug market is more useful: it brings people a product they demand, and provides income for the suppliers.)
http://alternatives.rzero.com/
While we feel close to the 'huge' losses of the dotcom boom/bust, we must not loose sight of the fact that two US corporations (Enrom, $80+ billion, WorldCom $74+ billion in 2000/2001 alone, and Tyco) probably account for more direct losses than all the dotcom spending. It was these big corporate failures trashing the stock market, that led to widespread losses amounting to trillions of dollars (billions from State pensions alone), that then brought down our favourite dotcoms.
The dotcoms may have been pretty fireworks, but they were not the monetary black hole that snak the economy.
Most people are not even aware of them but buildnet.com burned 2 billion in 12 months with nothing to show for it. They swallowed up about a hundred small companies and took them down also. I and the company I worked for came out ok. We delivered a contracted software product to them just months before they collapsed and by some miracle we got paid!
If something exists that does not need a creator (god) then why must the cosmos need one?
So, barring really stupid investements, you never lose everything.
If you buy a property with cash, maybe, but if you fund a property with debt, which almost everyone does, you might just lose more than everything.
Even if you don't decide to really invest and get pure investment properties, you should get a house if at all possible. When you rent, your money goes nowhere. It just dissappears to your landlord every month.
As opposed to when you buy a house with a mortgage, and your money just disappears to the bank (interest), home depot (repairs), and the government (real estate taxes)? Yes, a growing portion is going to be going toward equity, but if you had taken that down payment and invested it you'd get to see compounded interest work in your favor as well.
Not all people should buy rather than rent. It depends on your tax bracket, how much cash you have for a down payment, how good your credit is, how secure your job is/how often you plan on moving, etc.
Granted, as long as you are sure you're not going to move within about 10 years, and you have at least good credit, the numbers usually work out in your favor. But even then you usually have to consider the tax benefits, and you have to assume the value of the house is going to grow.
Not everyone wants to get in to actual real estate investment (like buying rental properties and such) but nearly everyone should look in to investing in to a home.
I'd say just the opposite. The way the numbers work out, it's usually better financially to own a rental property and rent yourself. This is because for tax purposes you can depreciate a property you rent out, but you can't depreciate a property you live in. As a quick example, if two families own equivalent $100,000 homes that would rent out for $1000/month, they'd be better off if each rented the property from the other rather than if they lived in the house they owned, because they'd get to depreciate the value of the property on their taxes.
Of course, this ignores the intangible benefits of owning a home. You don't have to deal with as many rules. You can paint the walls however you want. You can install solar panels on the roof. That kind of stuff.
Maybe you have to take a step down and buy something older, and smaller than you are used to living in, but at least your money is then going somewhere that will do you some good.
Why not rent something older and smaller, and invest the extra money you save?
you need to find an investment that would outperform real estate appreciation
That's not very hard to do, especially when the housing market is in a bubble. Or, trivially, you could get an equal investment to real estate, and invest the money in...real estate!
you need two sets of money: one to pay your rent with, and one to invest with.
What, so it isn't all combined on one easy to read statement so you can't do it? I never said a trained monkey could do it. Some people don't know how to save. For them, maybe forcing them to save through a mortgage makes sense. But what would make more sense is teaching them how to save in the first place. To buy a $150,000 condo equivalent to my $750/month apartment I'd have to pay at least $1250/month in mortgage payments, PMI, property taxes, repairs, and homeowners insurance, plus $15,000 down. That $15,000 plus $500/month can grow quite nicely when invested properly. In the end, it comes down to a matter of which do I think will appreciate more, the housing market or the stock market. I think the housing market is overvalued right now compared to the stock market, so that's where I'm putting my bets.
And 10 years? Come on, within a year of purchasing my last house (haven't checked the value on this one), it had appreciated enough to cover all my closing costs. Within 5 years it appreciated enough so I could use the profits to make almost 40% downpayment on my current house.
You got lucky. You entered at a time when housing prices were soaring. But there's no way to know whether that's going to continue or not. One year from today home values may be down, not up. Sometimes home values grow faster than other investements. Sometimes they don't. Making a blanket statement that it's almost always better to own a home is incorrect, especially in today's housing market.
Yes, not everyone is better off buying, but from what I've seen, most people who could afford a house would be better off doing so.
Better than what? You're making way too broad of a statement. In hindsight, can you point to a home that a person could have bought which would have been better financially than investing in some random investment (say the S&P 500 index) and renting from some random landlord? Sure. But if you have the benefit of hindsight, why not just invest in Google?
What does it mean to be able to afford a house? Obviously you don't mean that they can afford to pay cash for the house. But if you include mortgages, then just about anyone can afford a house. The only real question is how high an interest rate they're going to get. If you haven't declared bankruptcy, and aren't in default on any loans, you can get a mortgage, and if you're willing to pay a high enough interest rate and PMI, you can even get a fixed rate mortgage.