The investment world changed forever on August 9, 1995 -- for that matter, the whole world did. That was the day that Internet browser company Netscape launched its initial public offering, and the "Internet Boom" was born. (An interesting side note: a comparable paradigm shift happened 50 years earlier to the day when the second atomic bomb was dropped on Japan. The Atomic Age was born.)
If you sensed back then that this was a new investment opportunity, you were about to make a fortune. The Dow Jones Industrial Average was about to triple -- from about 3,800 in 1995 to about 11,800 by the end of 1999. The Nasdaq was up 86% in 1999 alone on the back of a huge boom in tech and Internet investing.
Those crazy multiples during the Internet Boom of the late 1990s were telling us something big was coming. It was more than just "irrational exuberance," a term coined by then Federal Reserve Chairman Alan Greenspan. Here are three seismic changes that were happening, and why these changes are still important to understand today.
Then: The analog world was giving way to the digital world. Intel (INTC), Cisco (CSCO), Oracle (ORCL) and Advanced Micro Devices (AMD) were on their way to doubling the speed of information flow and productivity about every two years.
Now: Life is 24/7. Alvin Toffler's Future Shock is here. Apple's (AAPL) latest cellphones fit in your hand and are 12,000 times more powerful than the original computer. The stock is still selling at less than a 10x price-to-earnings ratio. Founder and former CEO Bill Gates is one of the richest men in the world for a reason; Microsoft (MSFT) is still a great company. Any company that enhances this trend will be a winner.
Then: The hierarchical society was peaking in 1995 and giving way to the networking society. Remember books about the organization man? It used to be key who you met at school or how well you were doing in the corporate information chain with your boss or his lieutenants.
Now: Your personal network is really the key and can be even more powerful. Sometimes your network still can come from your school contacts or your company, but you can be as (or even more) successful getting key information from your new network. In part, that's why Alphabet (GOOG, GOOGL), Facebook (FB), Twitter (TWTR), and LinkedIn (LNKD) will continue to be successful.
Then: Machines were about to reach an inflection point where they were going to grow in processing and manufacturing power exponentially and take out mid-level line and management jobs and inefficient processes with a vengeance. For example, technology began to take over trading. About 80% of the NYSE's volume is now done by machines. The old business model of a broker selling stock ideas for $0.06 per share was destined to become obsolete; exit many stockbroker and trading jobs. This trend is also why newspapers and publishing fell into such decline; exit many journalist and conventional advertising sales jobs. The auto industry also was destined for dramatic change.
Now: Consider that quants -- like D.E. Shaw, Renaissance, Bridgewater and Two Sigma -- are among the very best investors and hedge funds of the last decade. Their investment style is primarily about using algorithms to invest and trading systems that work in milliseconds. Any company where machines create more efficiency will have an edge. Costco (COST), Wal-Mart (WMT) and Amazon (AMZN) come to mind. Privately held transportation companies like Uber, Lyft and Gett also do. Are there companies in your portfolio playing this trend?
The upshot? It's important to understand that 1995 was an inflection point. Technology was coming to the masses. Several seismic changes were happening affecting personal and business life. It must have felt similar for American farmers around 1834, at the dawn of the industrial revolution. The effects of this new wave of technology change are far-reaching and accelerating. If you can find companies that take advantage of this change, there are still fortunes to be made.