Over the past few months the stock market indices have slid down, nervously recovered, then declined once more. Now the Nasdaq is in the same territory as it was in August 1999, and there’s talk of economic slowdown and theorizing on the likelihood of a depression or recession.
And central to all this talk of doom and gloom is the issue of who is to blame. Well, according to common wisdom, a guilty party isn’t hard to find – it was the high-tech industries and, in particular, the dot-coms.
The general theory on how the whole mess happened goes something like this: It was all the fault of arrogant, wet-behind-the-ears college kids and opportunity-grabbing ne’er-do-wells building pie-in-the-sky companies with the intrinsic financial longevity of a moth homing in on a bug zapper, aided and abetted by rapacious, money-grubbing venture capitalists, all fueled by a rampant optimism that by March 2000 made Greenspan’s 1996 accusation of investor’s “irrational exuberance” look like one of the greater understatements of the decade.
Some of this hostility is justified – who can forget the dot-com businesses that burnt money faster than Larry Ellison’s yacht and were justified by theoretical revenue based on hypothetical advertising income? With the benefit of hindsight, it all looks pretty silly, but that’s not the full story.
We were all to blame. The promise of the future and the lure of fabulous wealth excited everyone. We watched the likes of Marc Andreessen go from being an unknown nerd to being a fabulously wealthy nerd faster than you can say “stock options.” We all thought, “If he can do it, so can I!” It was the American Dream on amphetamines, and it grabbed us.
Driving this were venture capitalists and angel investors who would never have paid many of the would-be entrepreneurs the slightest attention under normal circumstances.
But because of the irrational exuberance of the times, the investors stuck their hands in their pockets to fund even the silliest of ideas (“You want to start a what? A company selling dog food on-line? Only dog food? And there are a dozen other companies doing the same thing? And you will capture market share by capturing eyeballs through advertising? Here, take $10 million and call us if you need more.”).
Then March 2000 arrived, and irrational exuberance ran for the horizon with its butt on fire. Suddenly, the party was over, and the market mood-o-meter swung from wild optimism to deep gloom. In double quick time a sullen silence settled over the market disturbed only by the typing of journalists, as they worked on into the night over smug features about why the New Economy was doomed from the beginning.
What bothers me about the current situation is the lack of optimism. There’s an air of defeat that is clearly at odds with what the dot-com phenomenon created and the influence it had (and continues to have) on the entire world.
What we – the computer and network industry along with the dot-commies – created was a communications framework for our culture that in true American style was so seductive it penetrated and changed every culture it touched (the Levi Jeans Effect).
It is a framework so powerful it can’t ever be taken apart or even really controlled. Indeed, it could be argued that it is now as much a part of and as central to our culture as the telephone, the railroads and the automobile.
So let’s stop whining about what went wrong and start looking forward. Let’s recognize that wen – the nerds, the business people and the market in general – have transformed the world forever and for the better. Now, let’s see the Nasdaq start to rise again.
Gibbs is a contributing editor at Network World (US). He is at nwcolumn@gibbs.com.