Over the years there have been many bubbles in software industry, spreading all the tech domains. Tech bubbles happen when there excessive speculation around a new piece of technology and everyone in the market wants to bet on it.
There is an increase in stock price of companies who are building products using this new technology, other industries supporting this technologies also see substantial gain in investments and stock price.
There will be new startups created everyday getting massive fundings. All the big tech giants will try to get a piece of this pie too. Media and other blogging platforms will publish articles on how this new technology will change the entire world. And this creates a hype, everyone wants to be part a of this new wave of technology.
And if the history is correct, eventually the bubble burst and all comes crashing down. Stock market crashes, layoffs happen and most of these newly formed startups go bankrupt.
So how is this good for tech? Does this mean that the new technology was useless and it was all just a hype?
No, the new technology is not useless, people would still keep using it even after the bubble is burst. There will still be new job openings for that new technology. The Tulips didn't vanish after Tulip Mania, we still use webites 25 years after the Dot Com bubble burst. In fact the usage is now 100x of what it was during the bubble. So why the crash?
The bubble is not about the new technolgy itself but how that technology is supposed to be used. Most of the companies during Dot Com bubble were not creating any customer value. Most of them had unsustainable business models, bad infra and no stable revenue stream. Eventually they all went bankrupt. But few survive to become billion dollar giants.
These billion dollar giants were the ones doing something right. Now there is no playbook on how to successfully navigate through a tech bubble. Its not different than 1 million monkeys with typewriters and eventually one of them writes Hamlet. That's an exaggerated example but thats how tech bubbles are. Bunch of startups doing random shit and eventually most of them fail and few succeede.
But now that bubble is burst we know how to work with this new technology, how its supposed to be used and what specific problems it can solve. This leads to further growth in this technology, and the next startups using this technology has better chance to succeede with it.
Because there was so much investment around this new technology, there was also increase in research. Common problems were identified and new libraries and frameworks are created to fix these problems. Now someone new picking up this technology does not have to worry about the problems that people before him/her faced. See how easy it is to create a website today compared to 2000s.
We have optimized libraries, ready made templates and everything is perfected. Bubbles are more about finding out how we can fail at this thing in 100 different ways.
There is also an invisible flow of knowledge during these bubbles. Becacuse there is so much money flowing in and everyone is getting high salaries, most of the engineers working in bigtech where they have experience working on complex high scale systems, leave those companies to start their own company or join a newly funded startup.
This migration result in flow of knowledge, which before this only small group of engineers working in the big tech had. Now every startup has this one engineer who has years of experties working on complex problems. Even if the startup goes bankrupt the knowledge persists.
The good practices and ideas becomes an industry standard.
Since most of the companies are starting from scratch, they adopt new technologies. They would pick the shiny new database and better security and monitoring tools. This attracts more open-source contributions to these technologies.
Most of the entry level grads joining these startup would get to work on real stuff which impacts customers. They get to wear multiple hats and be part of important decisions. They may not do everything right but they are full of energy allowing them to do more. This real world experience will play huge role in their professional careers.
There is still a lot of damage because of these bubbles. People lose their life savings and jobs. But the tech thrives.
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