The Software Cycle

The significance of the comparison of 1970 and the late 1990s is the appearance of a market cycle in technology stocks. For example, today, software seems to be beset by such a cycle. In a sense, the cycle is the stuff of disappointment and disillusionment. New products come along supplied by a new company. As word of the products and the underlying technology gets out, the shares of the company leap in price. The company has momentum; people come to work for it and it compensates them with options to buy shares in the future. (In the past, options were ordinarily restricted to a company's executives. During the dot-com bubble, share options were frequently extended by companies to most and sometimes all their employees.) The ...

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