Palo Alto: A History of California, Capitalism, and the World Highlight

Paul Graham sold a web storefront software company called Viaweb to Yahoo! for around $50 million in Yahoo! stock and had the sense to cash out quickly. “By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme,” he wrote later. “Investors were excited about the internet. One reason they were excited was Yahoo’s revenue growth. So they invested in new internet start-ups. The start-ups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the internet was worth investing in.”