qatsi (qatsi) wrote,
qatsi
qatsi

A Load of Bull

Book Review: dot.con, by John Cassidy
This book opens with two threads. In the first, by a stretch, in the opening chapter of the book, John Cassidy manages to trace the development of the Internet back to 1890. More realistically, he chronicles the technical development between 1945 and the late 1960s when internetworking was a defensive objective for the US government. The other early thread describes some fundamentals of monetary policy, such as what it actually means mechanically for a government to change interest rates, bull and bear markets, and surveys the history of speculative economics, such as the South Sea Bubble, Tulip-mania, Railway-mania, and the radio and electrical boom of the 1920s.

For the greater part of the book, Cassidy narrates the rise of a number of internet-oriented companies. He begins with Netscape, moving through Yahoo! and Amazon, to pets.com and etoys.com. He clearly enjoys his subject and loves picking over a company that had no viable revenue-generating business plan, yet floated on the stock exchange in the mid-to-late 1990s and whose stock price soared, then collapsed in 2000. Plainly he did not invest in the internet, saw others acquire great paper wealth, but then lost it all. Revenge is a dish best eaten cold.

Cassidy does not specifically seek to pin blame; he hints that the reader may be to blame as much as anyone, which is probably true (for the record, the overall return on my investment in the New Star Technology Fund is approximately -32%). Fundamentally the boom was fuelled (like all others) by greed, with investors seeking a get-rich-quick strategy, and brokers and bankers seeing no need to turn away business. Alan Greenspan does come in for some veiled criticism, but to be fair, one would not really expect someone with essentially free-market views to be inclined for intervention under any but the worst of circumstances. Certain US media outlets, such as CNBC, come in for more significant criticism, as (city-slickers-style) presenters and journalists were not prevented from promoting stocks in which they had themselves invested.

The book was first published in 2002 and for the most part is quite current. One notable exception is in the closing chapters, where Cassidy asserts that no part of the 'old economy' has been substantially changed by the Internet age. I would disagree: the most extreme example is probably travel agency (somewhat ironic, given the Internet's global-village nature), where online activity is significantly hurting traditional outlets.

It's easy to be smart after the event and Cassidy clearly enjoys this, but he has also fairly chronicled the speculative boom in which, unlike Scrabble, 'e' and 'i' were the most valuable letters on the board. What's most disturbing, is that the principles of boom, over-valuation, and bust he describes, translate very directly to today's UK property market.
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