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question 1: The Internet, the Media, and the Bubble
The Internet was supposed to "democratize the market" and "level the playing field." Yet it looks as though the new media associated with the Internet bubble -- the 24-hour cable outlets like CNBC and CNNfn, as well as The Motley Fool,, etc., together with the online trading firms -- instead gave rise to new demagogues in the form of venture capitalists, investment bankers, analysts, and business journalists, and enabled them, as never before, to manipulate the investing public. You may or may not agree with this premise. But what role did the Internet itself, as a new communication medium, really play in driving the Internet bubble? We hear how the Internet IPO frenzy "fed off of itself." Was something genuinely new going on here?

Steven Johnson
Co-founder and editor-in-chief of the online magazine FEED (, he is the author of two critically acclaimed books on technology and society: Interface Culture (1997) and Emergence (2001).

read the extended interview

I think before you can answer this question, it's important to stress that the Net medium never existed in a pure vacuum, where its intrinsic properties could do their thing in isolation. What happened in the late 90s was not just the birth of a new, more democratic and distributed medium -- it was also a clash between that medium and the traditional mass media. Certainly in the U.S., at least, I think it's fair to say that the top story between 1995 and 2000 was the rise of the Net and its social and financial implications. (Maybe the Lewinsky scandal was bigger, but even that played out on the Web in important ways.) Everything that happened on the Web was immediately broadcast out via the mass channels of big media. It was a bit like attaching this fledgling new medium to a giant loudspeaker -- which was ironic, since one of the "intrinsic properties" of the Web is its antipathy to loudspeakers. ...

I think you have to keep this in mind when you look at the role that the Web medium played in the dotcom financial bubble. The Web participated in that bubble by doing things that were genuinely cool and genuinely useful and genuinely unlike anything that had come before them. (Remind yourself how amazing it was when you first used a working search engine, or first bought something on eBay.) That generated a lot of hype, which attracted mass-media attention first, and then VC investment, and finally public investment via the endless summer of IPOs that lasted until mid-2000. Along the way, the hype about what the Internet was good for shifted from the relatively accurate hype about how it might change the way we communicate with one another to the lamentably short-sighted hype about the "long boom" in which the Web would change the fundamental laws of capitalism. (Never have so many so-called futurists been proven so wrong about the future in such a short amount of time.) I don't think it's stretching matters to say that the economic hype was primarily emanating from traditional media: print magazines like Fast Company and Business 2.0 and Wired; TV networks like CNBC or CNNfn. Sure, The and the Motley Fool may have played a part, but I don't think their contribution was particularly dependent on their being Web properties in any way.

The one place where it's probably fair to say that the Web as a medium contributed to the bubble is the day-trading/individual-investor phenomenon. It's clear that the Web does give individuals power that once was the exclusive province of "experts" -- and nowhere was this more evident that in the rise of the day trader. Of course, that rise was largely propelled by the mass-media hype mentioned above, but the fact is that the Web enabled a huge influx of new buyers into the marketplace -- buyers who were often more willing to ignore the traditional rules of investing -- and that influx necessarily drove up the prices of hot stocks to stratospheric levels. But the correction eventually came around, and we seem to have hit a more rational equilibrium point. And of course, beneath all of this, the Web has plugged away steadily, becoming increasingly essential to hundreds of millions of people's everyday lives.

James Fallows
National correspondent for The Atlantic Monthly and a former columnist for The Industry Standard, he has written extensively about technology, economics, and politics for more than two decades.

read the extended interview

It's intriguing to think that the very nature of the technology at the heart of this financial bubble made the bubble's expansion, and inevitable collapse, more violent or volatile than they might otherwise have been. And it is probably true that the unprecedented velocity-of-gossip created by Internet technologies made the financial climate extra nervous and panicky, both on the way up and on the way down. I may be one of the few computer-owning Americans who has never bought or sold a stock online, never looked for stock tips on Motley Fool or Yahoo chatrooms, never tried to get early shares of an IPO. But even I knew all this was going on around me, and felt vaguely nervous not to be part of it. That made me feel like a chump during the boom years, and leaves me with vague dread during the slump years. After all, those other people's nutty speculative habits are dragging down even careful, stolid types like me!

However: I still think that the exact nature and effect of Internet technology was less important in creating the bubble, compared to the simple fact that the technology was new. Because it was new, a lot of people making investment decisions didn't really understand it. (I'm being generous, as you know if you ever saw some financial "analyst" -- on CNBC, for example -- look puzzled when hearing a term like "URL.") Because it was new, even people who did understand it couldn't really be sure of what its full business potential might be. Because it was new, it was like other bubbles we've experienced before -- ones involving the oil industry, or newly opened land in Florida or the West, or biotech, or the spice trade with India centuries ago. Like other aspects of modern life, this one was bigger and faster than its predecessors, but the fundamental impetus was the same.

Is there any reason to think there's necessarily something new, in the sense of level playing fields?

We have learned from other technologies that they are not inherently democratizing or "leveling." Despite the existence of telephones and electricity and automobiles and computer chips, we still have bosses and hierarchies. On the other hand, each of those inventions has generally and eventually seemed part of a worldwide progress that has made life freer and more equal for most people. I think information technology will, generally and eventually, be part of that evolution too.

Robert Shiller
He is the Stanley B. Resor Professor of Economics at Yale University and the author of Irrational Exuberance (2000).

read the extended interview

The Internet, and related information or communications technology, is helping to integrate world markets -- not just financial markets, but every market, even the labor market. People in remote places of the world are no longer so cut off from the world economy. People in Calcutta or Shanghai can now do office and telephone work for New York and Hong Kong. Maybe you could call this "leveling the playing field."

But, in thinking about this, we must remember that some of us may be the losers when we face new competition from afar. The Internet certainly breaks up the playing field, creating new losers and new winners. But, this effect may not be to level incomes. On the contrary, it may make them more unequal. Improved information technology can enhance a "winner-take-all" economy, where a few people are able to monopolize the market better.

Is there something about the Internet itself, as a medium, that fed the bubble?

Public impressions of technological progress are heavily influenced by our personal involvement in the new technology. When radio stations first started appearing in the United States in the early 1920s, and when radio shows began to be as engaging as our modern TV shows (though without the picture) by the late 1920s, people had the very visceral sensation that important new technology arrived. The Internet has given a similar sense of remarkable progress. But, this sense is substantially exaggerated in our minds.

Michael Mandel
Chief economist at BusinessWeek, he is the author of The Internet Depression: The Boom, the Bust, and Beyond (2001).

read the extended interview

The Internet clearly allows access to more information than ever before. Combined with regulatory changes, investors now have easy access to all the public documents, the earnings conference calls, the background information. In that sense, it really has leveled the playing field, when it comes to information.

Moreover, small investors weren't being deprived of accurate information. There was plenty of negative or cautionary information out there if people wanted to read it. I can make a long list of well-known journalists and market strategists who repeatedly warned of the downside risk. For myself, at the same time I was writing positive stories about the long-run benefits of the New Economy, I was also writing negative pieces warning of the possibility of a tech-led bust.

But there's one important thing to remember. Having more information does not necessarily make a system more stable. In fact, the nature of the New Economy -- with its close link between technology and the stock market -- makes it less stable rather than more. On the upside, each innovation in technology fueled a rise in the stock market, which provided more money for the next round of innovation. That was the upward spiral. But technology and finance feed off of each other on the downside as well.

So would the bubble itself have been as inflated if not for the role the Internet played in the flow of information and communication. Is that one way in which "technology and finance feed off of each other"?

Did the Internet itself contribute to the stock market bubble of the 1990s? Only to a small extent. In reality, both the Internet and the soaring stock market were caused by the same factor -- the rush of money seeking higher returns from a new wave of innovations. Risk capital funded the dotcoms and the new telecom companies. Risk capital also poured into the stock market, hoping to get a piece of high returns.

Thomas Frank
Editor of The Baffler magazine and a contributing editor of Harper's, he is the author of One Market Under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy (2000).

read the extended interview

Democracy through investing seems to be a recurring dream of the financial industry, cropping up whenever a really impressive bull market is burning up the charts -- the 1920s, the 1960s, the 1990s. After all, you can't have much of a bull market without mass participation, and you can't have mass participation without the general public feeling secure about participating. The other reason Wall Street periodically spins such elaborate fantasies of democratization is that it looks forward to a world where the common people have come around to their way of thinking, have bought shares and are ready to agree that corporate taxes have to be lowered, that Social Security has to be privatized, that the unions have to be busted and the work outsourced, that the regulations have to be rolled back, that environmentalism is a crock.

Wall Street really doesn't welcome economic democracy, as the term is properly understood -- a more equal distribution of wealth, powerful labor unions, an elaborate social safety net, a well-paid working class, and so on. But during the 90s it made a great show of embracing a sort of cultural democracy, always announcing their belief that the People knew best, that the little guys are finally claiming all the big percentage gains for themselves, that they're humiliating the hated WASPs, that they're pouring down the marbled halls of Wall Street and whipping the "smart money." This is a vision of "revolution" that Wall Street holds dear, that it encourages, that it brought to life for us in a hundred different brokerage TV commercials in the late 1990s.

So when the Internet did finally come along, it was simply plugged into this existing storyline. You mention two of the ways in which this was done: Trading and researching online. These are important, of course, but I suspect their impact has been exaggerated.

The Internet's greatest impact, in my opinion, was as a symbol and as an investment. Everywhere one turned in the 90s one heard how the Internet had brought more social advance in a few years than ever before in history, how this miraculous, mysterious device had empowered people to a degree that was basically incomprehensible, how it had inverted the old hierarchies of boss and worker, of first-world and third-world. This was God Himself coming down to earth and telling us that markets were democracies; that the corporate way was the only way; that regulation and taxation were fundamentally wrong; that organized labor was obsolete; that free trade was the one true path. It was capitalism's second coming. It was opportunity incarnate.

So naturally we wanted a piece of it. ...

You ask whether the dotcom mania was the product of a few "new demagogues." Maybe it was, in certain very particular cases (i.e., Jim Cramer picked this stock rather than that stock). But I think the blame has to be spread more widely. After all, the worshipful tech chorus of the late-1990s sang out from Time magazine and the MIT economics department and the Heritage and Cato institutes and the floor of Congress and The Wall Street Journal just as loudly as it did from Wired or Merrill Lynch or CNBC. The entire American establishment puffed for this one all together. How so many got the story so wrong is the real cultural question here.

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