Brad Gerstner: evaluation

Transcript context

…I think this is such an important thing to realize about the dot-com bubble, because everyone looks back at it and makes jokes, but the consumer behavior was there. It was an objectively better way to transact in all these different mediums. The bubble burst because it was a speculative asset bubble and capital went away if you didn't have a business model. But for those who did and who could be free cash flow–positive, this is where all the demand was going. That never went away. Could you feel that in the moment of, people still want to do this as long as... I can't say that I did. You have to remember, the size of the bubble burst, the change in risk premiums, and then the events of September 11th 2001 were also compressed. It's the fog of war. I think about all we really knew for sure is this internet thing wasn't going away. There are going to be real businesses built around it. But it was very unclear when you would have the capital required to build the businesses, where the capital was going to come from. In hindsight, it seems pretty simple. I would say 2001, 2002, 2003, it turned out to be a gift, but that's a slog when you're going through it. I look at business models today that have negative unit economics, negative gross margins, raising money at super high valuations. I have post-traumatic stress from that period because if you are a high-burn business with negative unit economics and you fly into a world where risk premiums change, it doesn't matter how good you are. You cease to exist. And they will change eventually. That's the thing.…

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