Investing Beyond the Hype Cycle
The graph looks like a hill followed by a slope. The hill shows a new technology's potential being hyped well beyond its capability, then falling precipitously and gradually picking up momentum toward its true potential.
Internet investors saw a long hype cycle, lasting right until the Time Warner-AOL merger in January 2000. The fall was profound, but some companies from that era including Priceline.com
Social investing went through a hype cycle, but the cycle crashed before the investing public was invited to the party. That's why the Facebook
The 3-D printing market has just gone through its own hype cycle. The space looked like a big winner last year, but if you got into the leading stocks -- 3D Systems
What the hype cycle really means for investors is that if you get in early, you have to be prepared for a hard fall. Those who get into the cycle, don't fall in love with the space, and get out quickly, like Mark Cuban did with Broadcast.com in the 1990s, can come out billionaires. Those who don't, like David Weatherell of CMGI, now ModusLink
Since Gartner came up with its chart I've seen countless hype cycles. There was a broadband boom, there was hype around the Internet of Things, there was a health IT boom and one around open source. In each case there was something real, but nothing like what the hype promised. In some cases the hope has yet to be realized.
All of which brings me to "the cloud."