We Study Billionaires - The Investor’s Podcast Network TIP777: The 1999 Dot-Com Bubble w/ Clay Finck
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Dec 19, 2025 Explore the wild ride of the dot-com bubble, driven by distorted incentives and speculative excess. Discover how stock options misaligned executive motivations and led to financial engineering abuses. Delve into the rise and fall of tech stocks like Amazon and eBay, revealing that visionary technology doesn’t always mean sound investments. Learn about Enron's role in showcasing market failures and the ensuing regulatory reforms. Most importantly, gain insights on avoiding future speculative manias and the importance of financial literacy.
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Options Can Misalign CEO Incentives
- Stock options often create risk-seeking CEOs because options feel like "house money" and remove downside for managers.
- Clay Finck explains that handed options dilute alignment compared with owners who paid real money for shares.
Quarterly Numbers Drove Creative Accounting
- Quarterly earnings obsession pushed companies into financial engineering to hit short-term EPS targets.
- Clay Finck notes CFOs rose in prominence as firms treated reported earnings as the central metric to manage.
eBay's Meteoric IPO Example
- eBay's IPO climbed from $18 to $47 day one and later to $241, trading at 1,800x trailing earnings.
- Clay Finck contrasts that with unprofitable dot-coms like theglobe.com which 10xed despite tiny revenue.