Dot-com bubble
Okay kiddo, imagine you have a bag of candy. You love candy, and so do your friends. So you decide to sell some of your candy to your friends and make a lot of money. At first, your friends are happy to buy your candy, but soon they start to realize that they don't need to buy all that candy from you. They can just bring their own candy to share with everyone!
That's kind of like what happened in the dot-com bubble.
In the 1990s, people started to realize that the internet was going to be a really big deal. Companies that were using the internet to do business - like Amazon and eBay - were making a lot of money. So other people started to think, "Hey, I can make a lot of money too!"
Lots of new companies started up - they were called "dot-coms" because their names all ended in ".com". They were selling all kinds of things online, from pet food to cars. And people were really excited about them! They thought these companies were going to be the next big thing.
Investors were willing to spend a lot of money on these dot-coms, even if they didn't make any profits yet. They thought that in the future, the companies would make lots of money and they would be rich!
But soon, people started to realize that some of these dot-coms were never going to make any money. They were spending more money than they were making, and they didn't have a clear plan for how to turn a profit. It was kind of like selling candy to your friends - it might be fun for a little while, but you can't keep doing it forever!
Investors began to panic and sold their shares in these companies, causing the stock prices to drop rapidly. This led to a sort of "bubble" bursting in the dot-com industry, where these new companies were suddenly worth a lot less than what investors had paid for them. Many of these companies went bankrupt as a result.
So, just like how you can't sell candy to your friends forever, these dot-com companies couldn't rely on new investors to keep them going forever either. They needed to make a profit in order to survive, and without it, they eventually "popped" like a bubble.
That's kind of like what happened in the dot-com bubble.
In the 1990s, people started to realize that the internet was going to be a really big deal. Companies that were using the internet to do business - like Amazon and eBay - were making a lot of money. So other people started to think, "Hey, I can make a lot of money too!"
Lots of new companies started up - they were called "dot-coms" because their names all ended in ".com". They were selling all kinds of things online, from pet food to cars. And people were really excited about them! They thought these companies were going to be the next big thing.
Investors were willing to spend a lot of money on these dot-coms, even if they didn't make any profits yet. They thought that in the future, the companies would make lots of money and they would be rich!
But soon, people started to realize that some of these dot-coms were never going to make any money. They were spending more money than they were making, and they didn't have a clear plan for how to turn a profit. It was kind of like selling candy to your friends - it might be fun for a little while, but you can't keep doing it forever!
Investors began to panic and sold their shares in these companies, causing the stock prices to drop rapidly. This led to a sort of "bubble" bursting in the dot-com industry, where these new companies were suddenly worth a lot less than what investors had paid for them. Many of these companies went bankrupt as a result.
So, just like how you can't sell candy to your friends forever, these dot-com companies couldn't rely on new investors to keep them going forever either. They needed to make a profit in order to survive, and without it, they eventually "popped" like a bubble.
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