Panic, Prosperity, and Progress: Five Centuries of History and the Markets

CHAPTER 23

Captured by the Net

The Internet bubble, which inflated throughout the late 1990s and peaked early in 2000, was unique in several ways: first, unlike so many bubbles of centuries past, it involved not hundreds but instead millions of people. It was not confined to a small geographic region or the machinations of a crafty confidence man; instead, it revolved around what was, in fact, an important technological advancement whose promises were in many ways fulfilled later but whose early attempts were often misguided.

A few of the world’s largest and most successful company emerged from the bubble, but in the process, trillions of dollars of wealth were destroyed and millions of people were gravely disappointed at the difference between what was promised and what was actually realized. Many of these people suffered substantial financial losses along the way.

In just two years, from 2000 to 2002, technology companies alone accounted for a $5 trillion loss in shareholder value. The top 10 failed dot-com start-ups—not public companies, but just the privately funded small businesses—accounted for $2.7 billion in losses for their investors.

A few notable examples of the so-called “dot-bombs” of the era include:

• Pets.com—a loss of $300 million, and whose sock puppet became emblematic of the Internet collapse.
• eToys.com—a $247 million loss.
• Kozmo.com, which delivered, usually by bicycle, whatever a person at home might want brought to their home—$280 million loss.
• Go.com, which ...