Yahoo sold its core business today to Verizon for $4.8Billion. Yahoo was worth $125Billion at the top of the 2000 tech bubble. The company still retains assets worth $40Billion, most of which consist of stock in Alibaba, a Chinese internet company and Softbank in Japan. This implies Yahoo dropped from $125Billion to $40 Billion, a 68% drop. It would be lower if taxes were paid on the appreciation of Alibaba stock.
Assuming that Alibaba experiences the fate of many tech companies and drops significantly in price the same degree as Yahoo or AOL did then Yahoo basically is worth about $4.8billion for the core, $4Billion for Alibaba, after tax, and another $5billion for Yahoo’s shares in Softbank, and a Billion for an auction of patents. This implies Yahoo dropped from $125Billlion in 2000 to $15Billion an 88% drop, (assuming an eventual steep drop in Alibaba). (If you are curious about Alibaba see the article in Fortune).
My point is that in its 20 years of existence it showed how in modern times the average company only lasts 15 years. 60 years ago the average corporate life was 75 years. Consider that Microsoft  sought to buy in 2008 the Yahoo core business for $45Billion then the core experienced an 88% drop in value in 8 years.
Buffett has a policy of not buying tech stocks because of various risks, including lack of a corporate moat to defend from competition. Buffett said that airlines never returned a profit in a century of aviation. What happens is that tech companies and airlines somehow trigger an emotional reaction where investors overpay in hopes of getting rich. Instead investors should seek out industries that have a less volatile corporate history and thus a greater chance of survival. The type of stocks to buy (assuming the market is not in a systemic bubble) are things sufficiently boring so that investors won’t overpay for them. Yahoo, like its peer group, has outrageously had high Price to Sales ratio and price to earnings ratio at its peak. Many other tech companies from 1997-2000 were much worse and didn’t survive, however, two wrongs don’t make a right.
I think the one key thought about how to succeed in investing in risk-on assets such as stocks, real estate, junk bonds, etc. is to buy “quality”. This is even more important than price to earnings ratio (sometimes referred to as “price”). What quality means is that the company is built like a tank and can’t be disturbed by anything; it has the best sustainable long term cash flows, best return on equity percentage, a strong corporate moat, etc. Tech companies, unless they manufacturer a proprietary product, preferably one that has enormous capital requirements, are at risk of being victimized by disloyal fickle consumers and lightening-fast changes in technology. As a result, on a risk-adjusted basis, tech companies, and airlines do poorly in the aggregate.
It is ironic that the exciting nature of tech companies not only hurts investors by making the stock overpriced but also hurts the corporations because of a rapid change in technology developed by competitors that undermines the incumbent tech company. By contrast, a low tech firm may be harder to undermine because some processes simply can’t be radically changed by new technology. An example is Buffett’s purchase of railroads. This industry owns proprietary tracks and right of way and its bulky, heavy industry, low tech equipment can’t easily be replicated by a competitor. Most importantly investors don’t get emotional about railroads and overpay to the extent that people overpay for tech stocks.
Investors need independent financial advice about the risks of a stock market bubble caused by retail investors chasing the glamour of tech instead of patiently investing in boring things with good financial metrics.