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Overview
The Internet stock bubble wasn't just about goggle-eyed day traderstrying to get rich on the Nasdaq and goateed twenty-five-year-olds playing wannabe Bill Gates. It was also about an America that believed it had discovered the secret of eternal prosperity: it said something about all of us, and what we thought about ourselves, as the twenty-first century dawned. John Cassidy's Dot.con brings this tumultuous episode to life. Moving from the Cold War Pentagon to Silicon Valley to Wall Street and into the homes of millions of Americans, Cassidy tells the story of the great boom and bust in an authoritative and entertaining narrative. Featuring all the iconic figures of the Internet era -- Marc Andreessen, Jeff Bezos, Steve Case, Alan Greenspan, and many others -- and with a new Afterword on the aftermath of the bust, Dot.con is a panoramic and stirring account of human greed and gullibility.
Product Details
| ISBN-13: | 9780060008819 |
|---|---|
| Publisher: | HarperCollins |
| Publication date: | 05/13/2003 |
| Edition description: | Reprint |
| Pages: | 416 |
| Product dimensions: | 5.31(w) x 8.00(h) x 0.95(d) |
About the Author
John Cassidy, one of the country's leading business journalists, has been a staff writer at the New Yorker for six years, covering economics and finance. Previously he was business editor of the Sunday Times (London) and deputy editor of the New York Post. He lives in New York.
Read an Excerpt
Chapter One
From Memex to World Wide Web
The Internet story begins with a familiar figure in American history: the Yankee inventor. Vannevar Bush (no relation to the political family of the same name) was born into a middle-class family in Chelsea, Massachusetts, in March 1890. Adept with numbers and fascinated by gadgets, he studied engineering at Tufts University, where, in 1913, he invented a device to measure distances over uneven ground. Made from a bicycle wheel, a rotating drum, some gears and a pen, this contraption, which was called a Prolific Tracer, earned Bush a master's degree and his first patent. Two years later, Harvard and Massachusetts Institute of Technology jointly awarded him a Ph.D. for his research into how electrical currents behave in power lines. Bush then moved into the private sector. He returned to academic life in 1919, joining the electrical engineering faculty at MIT, where he was to remain until the Second World War.
During the interwar years, a series of revolutionary inventions transformed daily life. For the first time, ordinary Americans gained access to electricity, motor cars, refrigerators, and radios, Economists spoke of a "New Era" of technology-based prosperity. The stock market crash of October 1929 and the subsequent Great Depression put paid to such language, but scientific progress continued unabated, especially in Bush's field of electrical engineering, where useful applications seemed to emerge from the laboratory every week. MIT has always had close links to industry, and Bush lent his expertise to numerous manufacturing ventures, including firms that later became part of Texas Instruments and the Raytheon Corporation.
In 1931, Bush and his students invented an unwieldy contraption consisting of levers, gears, shafts, wheels, and discs, all mounted on a large metal frame, which they called a "differential analyzer." The first digital computer, the ENIAC, wasn't invented for another decade and a half, but Bush's invention was a mechanical computer designed to mechanize the solution to differential equations, a mathematical problem that had tormented students for decades. It cemented his reputation as an ingenious engineer. During the Second World War, the U.S. Navy used an updated version of the differential analyzer, one weighing a hundred tons, to help it calculate missile flight trajectories.
In 1938, Bush was appointed president of the Carnegie Institution, a prestigious research institute based in Washington. After moving to the capital, he became friendly with Harry Hopkins, a senior aide to President Roosevelt. Hopkins and Roosevelt were keen to mobilize the nation's scientists and engineers behind the war effort, and they picked Bush as the man for the job. In 1941, Roosevelt named Bush as director of the newly formed Office of Scientific Research and Development, which operated independently of the Pentagon and the civilian agencies. Bush quickly justified his selection. Riding roughshod over bureaucrats, military and civilian alike, he granted military research contracts to Harvard, MIT, Cal Tech, and other leading universities. At the war's peak, he had more than six thousand scientists working for him. The research carried out by these scientists facilitated the development of the proximity fuse, radar, and the hydrogen bomb.
In 1944, Roosevelt asked Bush to explore how scientists and the government could work together when the war was over. The following year, Bush published Science, the Endless Frontier, in which he proposed federal financing of basic scientific research, especially in the fields of health and national security. This report led directly to the creation of the National Science Foundation, which became the main government agency for supporting scientific research. Bush also dusted off an essay about the future that he had written before the war, when he had been doing some research into information retrieval systems. He did a bit of rewriting and published the essay in the July 1945 edition of Atlantic Monthly under the title "As We May Think."
According to Bush, the biggest problem facing scientists after the war would be information overload. "The investigator is staggered by the findings of thousands and thousands of other workers -- conclusions which he cannot find time to grasp, much less to remember, as they appear. Yet specialization becomes increasingly necessary for progress, and the effort to bridge between disciplines is correspondingly superficial." Fortunately, Bush went on, the very phenomenon that had caused the problem -- the explosion of scientific research -- also provided two potential solutions to it: microphotography and the cathode ray tube. The former could reduce the Encyclopaedia Britannica to the volume of a matchbox. The latter could be used to display text and pictures on glass screens. Put them together, Bush wrote, and you could construct a device "in which an individual stores all his books, records, and communications, and which is mechanized, so that it may be consulted with exceeding speed and flexibility."
Bush called his proposed machine a "memex." He said it would feature "translucent screens, on which material can be projected for convenient reading. There is a keyboard, and sets of buttons and levers. Otherwise it looks like an ordinary desk." All entries in the memex would be indexed by title and by subject, just as in a regular library, but users could also move between items of interest more directly, via what Bush called "trails." Each time a researcher created a new file, he would be able, by tapping in a code, to link it to a second file of his choosing, which, in turn, could be linked to a third, and so on. Thereafter, anybody looking at the first file could call up the other files by pressing a couple of buttons. The great attraction of this filing system, Bush argued, was that it would mimic the human mind and work by "association." Vast amounts of related information would be grouped together in an easily accessible format.
What People are Saying About This
John Cassidy is one of the world’s best financial journalists. Dot.con [is] compelling.
Interviews
Author Essay
On August 9, 1995, Netscape Communications Corporation issued stock for the first time on the Nasdaq at a price of $28. At the close of trading, the stock stood at 58-1/4, and Marc Andreessen's company, not yet 18 months old, was worth just over $2 billion. It was the most successful initial public offering (IPO) in Wall Street history. A few weeks later, I joined The New Yorker magazine to write about economics and business. I didn't know it at the time, but my timing could not have been more fortuitous. For the next five years, the biggest story in the country, arguably in the world, was happening on my beat: the boom and bust in Internet stocks.
During that period, I wrote stories about many aspects of what was happening in the American economy. I wrote about Alan Greenspan, the Federal Reserve chairman who had come to believe in the "New Economy." I wrote about Mary Meeker, a stock analyst at Morgan Stanley who became a celebrity for her championing of Internet stocks. I wrote about CNBC, the cable channel that was the media voice of the bull market. I wrote about the old-timers on Wall Street, the gray-haired fellows who just didn't "get" what was happening, and saw their reputations suffer as a result. And I wrote about the ordinary Americans who were investing in the stock market, in many cases for the first time.
What I didn't do, and neither did anybody else, at least not adequately, was pull all the pieces of the story together and explain how they combined to produce the biggest speculative bubble in American history, one that at its peak was producing new "Internet billionaires" by the week. After the bubble burst, in April 2000, I started to think about doing just that in a single narrative. A few months later, I decided to go ahead with the project, and I took some time off to work on my book. The first version of the manuscript was completed in August 2001. After the tragic events of September 11, 2001, I rewrote part of the book to take account of what had happened.
The result of this process is Dot.Con: The Greatest Story Ever Sold. The title is meant to be an amusing double pun, but it also makes a serious point. At the heart of the speculative bubble, there was deception. Some of this deception was intentional. Internet entrepreneurs, venture capitalists, investment bankers, stock analysts, and journalists misled the public about the prospects for e-commerce in general and Internet start-ups in particular. However, a lot of the deception was self-deception. Many of the so-called experts, and many hopeful investors, deceived themselves about what was happening. In the rush to make quick money, they suspended their disbelief and followed the herd.
The book traces the rise and fall of the Internet boom, placing it in its historic context and identifying the factors that sustained and eventually undermined it. There are sections on most of the big Internet companies, but the book's focus is an attempt to explain the bubble's internal logic, which created trillion of dollars of paper wealth and took the Nasdaq from below 2,000 to above 5,000. Due to a combination of competition, peer pressure, jealousy, and greed, many people did things they later regretted but which at the time seemed to make sense.
If the book has a central message, it is this: Rational behavior on the part of individuals can sometimes add up to collective insanity. When it does,there is often an entertaining story to tell. Hopefully, Dot.Con tells it engagingly enough for people to learn something and enjoy the yarn at the same time. If it does, I will be satisfied. (John Cassidy)