“Well, what are you going to do NOW?”

The recent crypto currency collapse eerily echoes the dot.com bubble of 2002 — two moments when disruption failed or at least appears to have failed. Center Director Jeffrey Cole explains.

By Jeffrey Cole


“Thank God I never invested in Crypto!”

“See, it was always a scam. Now the laws of nature have been restored.”

“Those who thought they would get rich quick have gotten what they deserved!”

“Now it’s back to business as usual.”

“Maybe the name Crypto.com Stadium will be removed, and it will be Staples Center again.”


It has not been a good year for investors. Even Amazon and Apple — and especially Netflix and Facebook — are down, more than just an adjustment.

But the year has been particularly harsh for those who invested in crypto currencies like Bitcoin: whether they saw them as extraordinary investments or a new and digital way of moving money around and eventually becoming a currency.

This month, crypto currencies lost over $200 billion in one day. By some estimates the world of crypto has lost over $3 trillion from its highest point. These are investments that can grow by 90% one day and be down 80% the next day. Perhaps this is just a blip on their way to economic dominance.

But that’s unlikely.

What is most interesting is the glee throughout much of the world because of what is perceived as a rightful and overdue comeuppance for crypto boosters. Many are joyous at the crypto investors’ pain.

This is a predictable and normal stage in the process of disruption.


A look back at the first digital bubble


In 1998, I became convinced that the internet (first the web and then mobile) would disrupt almost everything. I was hard pressed to think of an industry that would not be disrupted and believed that most would be transformed. Armed with those beliefs, I founded the World Internet Project (WIP) that would track the development and use of the internet around the world (35 countries). WIP’s mission has always been to share insights from our work so that governments, business, parents, and others could understand how the world was changing and would continue to change.

Twenty-three years later, the work progresses as we continue to build the findings in a unique longitudinal data set.

The early internet was an incredible boom (some thought it was just a bubble). Industries were disrupted (retail, music, books, telcos). New billionaires were minted. In those early days, I was a professor at UCLA’s Anderson Graduate School of Management. Every week, students came to me with web business plans and asked if I would serve on advisory boards. It was a heady time.

Then the bubble burst. From 2001 to 2003, internet stocks fell back to Earth.

During the bust, countless friends and business associates came up to me (who had invested so much time and energy in digital transformation) and asked, “Well, what are you going to do now that this internet thing is over?” Some couldn’t suppress half smiles as they attempted to show compassion for what they saw as my wasted efforts.

It’s too early to tell whether the story of Crypto will parallel the early internet: start with hype and inflated claims, fall disastrously back to earth, learn what it did wrong, and then restart the journey into the stratosphere of permanent transformation. Maybe crypto will eventually live up to the hype. Or maybe crypto will be a footnote in history, like Holland’s Tulip Mania in the 1630s. Or perhaps it will become a business school case study of “irrational exuberance” (how Fed Chair Alan Greenspan referred to the dot.com boom in the 1990s). We should be skeptical of anyone who says they know the future of crypto or any of the new disruptors.

Of course, the internet was not over: it was just beginning. The bust was a much-needed time for pausing and correction. It was the end of business plans written on the backs of napkins. It put to rest the belief that all you had to do was to spend massive amounts of money to get eyeballs on websites (usually by giving things away), at which point somehow, magically, those eyeballs would turn into money. The crash restored the laws of economics.

The bust delighted those who were not part of the internet. They didn’t have to learn (or re-learn) entirely new ways of doing things. No more going to people half (or one-third) their age to understand the new world. They could go back to doing what they had been doing before digital. Those in power at companies (usually in their 40s through 60s) were overjoyed: the end of the internet meant there was enough gas left in the tank to finish their careers along the paths they started. All that change could come much later when they were happily retired.

They were wrong. The World Internet Project showed that the web was increasingly becoming an essential part of daily life. Users were multiplying. Online commerce was exploding. The crash would prove to be a prelude to the greatest growth of capitalism in world history.


Crypto currencies and disruption in 2022


Disruption is painful.

When an entirely new way of doing things disrupts established players, the natural desire is to view it as a temporary fad and take delight when it is brought down to earth.

Right now, this is what many wish for NFTs, the metaverse, and especially, Crypto.

While many crypto investors were feeling immense (perhaps terminal) pain, many of the folks who didn’t invest were half-smiling as they tried to show compassion. Some didn’t even bother with attempted compassion and were joyous and mocking.

Traditional banks, regulators, conservative economists, and many who simply never “got” Crypto were ready to call it a house of cards that had never made any sense. They were thrilled to declare it over and go back to the ways they understood.

We don’t yet know who is right and who is wrong.


Lessons from Tesla


Tesla, leading the revolution in Electric Vehicles (EVs), completely disrupted automobile manufacturers (it’s now worth more than all of them combined), dealerships, advertisers (Tesla has never advertised), oil companies, and auto repair shops.

A lot of powerful players have been rooting for EVs to fail. Outside the conspiracy theories that they suppressed or even sabotaged electric vehicle technology, these players would cheer every report of an EV catching fire (but not the injuries or damage) and every story about drivers running out of fuel, not finding a place to charge, or the high cost of repairs.

Like the internet, the EV proposition was so compelling that the naysayers (and those who wanted to see them fail) have never gotten their day. EVs have passed the tipping point. It is clear the EV revolution is here to stay as manufacturers and nations begin the long, slow phase-out of gas-powered cars. Those who bought the EVs and invested in Tesla have not gotten their comeuppance (although Tesla’s stock is down in this bear market just like many other tech stocks).

It’s too early to tell whether the story of Crypto will parallel the early internet: start with hype and inflated claims, fall disastrously back to earth, learn what it did wrong, and then restart the journey into the stratosphere of permanent transformation. Maybe crypto will eventually live up to the hype. Or maybe crypto will be a footnote in history, like Holland’s Tulip Mania in the 1630s. Or perhaps it will become a business school case study of “irrational exuberance” (how Fed Chair Alan Greenspan referred to the dot.com boom in the 1990s).

We should be skeptical of anyone who says they know the future of crypto or any of the new disruptors.

At the Center, we believe that if crypto remains a “get rich quick” investment, it has no future. If crypto currencies can establish themselves as currencies (not just speculative investments) and be used to buy millions of things all around the world and offer benefits banks cannot (no currency exchange fees, effortless movement), they may have a real future.

More are rooting against it than for it. That’s just an everyday part of disruption.



Jeffrey Cole is the founder and director of The Center for the Digital Future at USC Annenberg.

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