The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

The Hard Things About Hard Things draws its inspiration from the author’s experience during the first tech boom, which spanned from the mid-1990s to 2000. During this period, the Internet was becoming mainstream, thanks in large part to web browsers like Mosaic, Netscape Navigator, and Internet Explorer. The Internet was the harbinger of the Information Age, and the potential for selling goods and services online launched a multitude of startup companies eager to cash in. Many of these companies chose Internet domain names ending in dot-com (for example, www.CompanyA.com). This gave rise to the generic term “dot-com” to describe these startups.

Conflict arose when these companies began to trade their stocks publicly. Both institutional and private investors were eager to buy and happily snatched up dot-com shares, thereby dangerously inflating tech stock prices. The fact that venture capital was easy to acquire at this time accelerated the trend toward the overvaluation of tech stocks. Because high-tech companies were a novelty, investors were willing to buy shares based on the new technology’s potential earnings rather than insisting on a solid track record of past performance. The same Gold Rush mentality afflicted earlier generations of investors when the novel technologies of their day first appeared; stock shares for railroads, the automobile, radio, and television all went through similar boom-and-bust cycles.

The dot-com bubble continued to grow until two key events in 2000 caused it to burst. In March, investors learned that Japan was entering another period of recession. This triggered a massive sell-off of stocks in the global markets, with tech companies being hit hardest. During this same period, Microsoft was convicted of violating the Sherman Antitrust Act. The market reacted with an 8% drop in the value of NASDAQ stocks. Almost simultaneously, the Federal Reserve Bank tried to restrict the supply of investment capital by successively raising the prime interest rate. Many dot-coms went bankrupt because they had burned through all their startup capital and couldn’t deliver the projected earnings that had been promised to investors.

As money became harder to source, tech companies scrambled to find ways to avoid bankruptcy. This same pattern affected Opsware, and Horowitz explains the nerve-racking prospect of trying to go public with the company’s stock at a time when the rest of the market was teetering on the brink of collapse. Very few dot-com companies survived the end of the tech boom. Opsware was the rare exception, and Horowitz uses The Hard Thing About Hard Things to explain the skills that a CEO needs in order to survive a market meltdown.

Eventually, the tech sector stabilized, and investors began to insist on realistic profit projections. Only 48% of dot-com companies were able to stay afloat until 2004. The giants in the industry such as Amazon, eBay, and Google gained market share. In the aftermath of the crisis, the tech bubble had the unintended benefit of creating a robust Internet infrastructure. It also allowed Horowitz to glean some valuable life lessons, which he aims to impart to the next generation of tech entrepreneurs in The Hard Thing About Hard Things.