dot con
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discussion: Who's to blame for the worst excesses of the Internet bubble? Did Wall Street betray the public's trust?


Your usual excellence glowed again in "Dot.con".

Let me share a personal experience. I was attempting to raise venture capital in 1999. Florida had a local office of its "Economic Development Corporation". The EDC was intended to develop new industry in our State - and I knew the director.

I approached EDC with my patented technology (with another two pending). My technology was a novelty in the fastest growing manufacturing sector of our US economy: the high tech, composites industry. I was invited to a venture capital program and as a member of the audience had to sit and listen to a dozen dot.con presentations. Perhaps one sounded like a viable business. But no one in the EDC office wanted to talk about my composites. "That industry only grows at 4 percent annually."

My point is this: the dot.con's pulled venture capital and venture capitalists away from real business. That's the bigger loss to America.

And note: 1) My friend (the EDC Director)has since retired. 2) A very large foreign company is currently infringing on my now two patents and making some great products that should have been my IPO.

Robert Guzauskas
west palm beach, florida


Although your program should be given a "A" for effort, it only receives a "C" for content and clarity. The program blurs too many lines and therefore loses its focus. "Dot con" should have been broken down to four segments with separate analysis of each area, rather than jumping back and forth and thereby dulling the point(s).

Specifically you should have focused on: (1) the irresponsible nature of the financial media (with special attention to CNN and CNBC) for their abdication of their journalistic responsibility by becoming cheerleaders for the companies and industries that they should have been objective about,

(2) The breach of the fiduciary responsibilities of the underwriters for the "money left on the table",

(3) the venture (vulture) capitalists and ther perversion of the capital markets, and

(4) (saddest) the SEC for its unconditional surrender of its legal (and moral) obligation to preserve the integrity of the investment marketplace.

If a black inner-city kid steals $7.00 its a crime for which he'll go to prison. If a big financial firm steals billions, well that's business.

Louis Katz
boardman, ohio


As usual you have done the type of investigative reporting that network television would not touch, and you've done it better than they ever could.

Thank you again for shining the light of truth.

maspeth, new york


I think we should not lose sight of the bigger picture here. While the pratice of laddering and other types of collusion between underwriter and IPO subscriber may be (or are) blatently illegal, take a step back and look at the after market.

WHO WAS the after market? WE WERE. Smaller independent buyers who wanted to get in on the next get-rich-quick scheme. As was pointed out before, who in their right mind would pay $60 a share for a company with no revenues, no profits ..... no history?

Buyer beware has never been more true.

Andy Estell
avon, ct


Tonight's episode outlines plainly the fatal flaw in today's financial system: perpetuated by the unwitting efforts of the SEC to create the illusion of a "level playing field", the public labor under the delusion that they have the same right to "make money in the stock market" as do the professionals that control it.

Perhaps the point needs to be stated more plainly: investing has nothing to do with "rights", and everything to do with assuming absolute and total responsibility for every investment decision one makes. Looking for "the culprit" or "the con man" or "the V.C." or simply "blaming an industry that could perpetuate such an unfair system" are all excuses that the public feel compelled to latch onto so they can go to bed that night knowing in their hearts that what they did was right and good, and it was only the evil doers in a rigged game that caused their best laid plans to go awry.

If the results weren't so tragic, the whole situation would be laughable.

The public are fools, and always will be, until they have learned this one, hard lesson.

Matthew Robillard
toronto, ontario


As a professional futures trader on the floor of the Chicago Mercantile Exchange, my fellow traders and myself grew quite tired of hearing about stock traders making tens of thousands of dollars every day buying internet stocks. The lure of the siren song pulled us all in and greed did us in as it always has throughout history. I bought those worthless pieces of paper and I deserved to lose every dollar I did! We have no one to blame but ourselves for ever believing that Wall Street cares one cent for the well-being of the public. The job of "the Street" is to bring Wall Street to Main Street and then to TAKE MAIN STREET for every dime they have.

This game is nothing new and the public should distrust anyone selling pieces of paper.

chicago, il


I would like to thank you for your special this evening. It was informative, but you should've disclosed the role of the lawyers and the amount of money at stake. They have a lot to gain from the lawsuits.

All of the investment bankers, VCs, "analysts" (note the quotation marks!), and media all played a role in this mess. They willingly and knowingly manipulated the stock values of companies. Most of these companies had no business plan, any feasible way of providing income, and any real product, and they were dropped on an unsuspecting public.

The trust of the public has been broken, and I'm sure that a lot of people will be thinking twice about investing and retirement, especially when you compound this with the Enron situation.

This is a clear indication that the system of safeguards to prevent this type of flat-out fraud has failed miserably. Heads will (and should!) be rolling, and I hope they get what they deserve. The sad part is most of them will get mothing more than a slap on the wrist.

sunnyvale, ca


Everyone is to blame - the VCs, the underwriters, the analysts, the companies, and finally the traders - that is, the public. An internet stock wouldn't have traded up 500% on its first day if someone in the public wasn't willing to buy it. People saw their neighbors get rich, so they had to be part of it too. It was a massive pyramid scheme, and everyone wanted in. The bubble did immense damage, and it will take time to recover from that damage. 2002 is not the year of that recovery. The tulips sent Amsterdam into a depression, so did the South Sea Bubble send London. Today is no exception - the recession will continue.

If you look closely you'll see that even now the euphoria is still out there hanging on - "investors" are still looking for quick gains and as a result keeping the prices and market valuations of many unprofitable tech companies outrageously high. It'll be some time before the mania is completely squelched.

Did Wall Street betray the public's trust? Yes. For the most part it was the unscrupulous, so-called "analysts" who played the pump-and-dump game, taking advantage of an unsuspecting and naive public. But they still play that game today.

san francisco, california


In the immortal words of Gordon Gekko [in the movie "Wall Street] ... "Greed is good. Greed is right. Greed works. Greed cuts through, clarifies, and captures the essence of the evolutionary spirit."

The reality is that all of us that were involved wanted to believe that we were truly living in a new economy and that anything was possible. The mistake we made was that we were blinded by greed and didn't look to the one thing that could open our eyes - history.

frisco, tx


The narrator asks: Did the biggest names on Wall Street violate the public trust? My answer: Of course they did D#%! F#@* (explitives deleted). Remember, a central tenet of our system has been stated two ways. As Milton Friedman put it, "The social responsiblity of business is profit". Someone else put it differently, "There is a sucker born every second".

D Brookbank
spokane , wa


Hats Off to PBS for this excellent expose' on the inner workings of Wall Street.

There is plenty of blame to be shared here by greedy individuals, investment institutions, the media, and government officials.

Keep up the good reporting. The American people need to hear the truth, and they need the media to be on their side.

Jim Martin
cortland, new york


The bankers, et al took advantage of a situation created by the media. I find it interesting that your program focused on the greed of the bankers without pointing to the pivotal role played by the media in the creating frenzy. Of course, the bankers rode it for as long as they could.

All the ingredients for the mania were in place (ease of internet trading) but without the 'investing as entertainment' mindset of CNBC nothing of this scale would have been possible. For the period covered in your report (1997-2000) every tv in every public space (airports, doctor's waiting rooms, salons, restaurants, bars, etc.) was tuned to the CNBC talking heads (Maria, Ron, Joe, Tom, etc.) and the insiduous scrolling of the ticker constantly advertising the play of the day. They turned the market into a casino.

Without this how could unknown companies become brand names overnight? The bankers and analysts never had that kind of power. The 'street' used CNBC to sell to the public and CNBC enjoyed the fame and ratings.

CNBC was the one source of info that everyone around the world was tuned to find out, as Joe Kiernan was fond of saying 'where the action is.' By late 1999, after, single-handedly (without the help of bankers or analysts) creating a couple of 'One Day Wonders' that resulted in separating their least savvy viewers from their money, they seemed to become self aware. They became more cautious in their reporting. They toned it down.

I guess it's naive to expect the media to see their role in the mania but, the truth is, it couldn't have happened without you.

princeton, nj

FRONTLINE's editors respond:
Thank you for your response. It is important to point out, however, that one of the central themes running through this program is the role the financial media played as a platform for the hyping of Internet stocks. Indeed, the reason for using so much footage from CNBC and CNNfn was to make this very point.

Wen Stephenson


I very much enjoyed your story, however, I became concerned about its objectvity when you featured plaintiffs' lawyers to explain what was wrong with the IPO process without disclosing their interest in pursuing securities lawsuits. You should have explained that when these lawyers represent a class of hundreds or thousands of small investors in a securities class action or other lawsuit, the lawyers take anywhere from 20 to 50 percent of any recovery for themselves. In other words, if a lawsuit recovered $10 million for 1,000 investors, the lawyers would take up to $5 million, while each individual investor would receive only $5,000. While meritorious lawsuits of this nature serve an important purpose, this lack of disclosure seems similar to the investment bank analysts in your story, who did not disclose their interest in the stocks they were promoting.

salt lake city, ut


While it is bad enough to praise the value of a valueless company, leading millions of individuals to place trust in essentially empty words, it is unconscionable to withold clear public disclosure of self-interest, as in the case of the investment-house analyst turned Network IPO Guru. Most would consider this unethical in the least; I think it just stinks, and stinks really bad. Truly the love of money is the root of all evil.

Joseph Perkinson
victoria, texas


There is a broader economic effiency issue that your treatment, which I otherwise found exceptionally comprehensive and well documented, failed to address.

Venture Capitalists, who are often touted as unconventionally broad thinkers and visionaries, tend to act and invest more like hyenas than lone wolves. After a hyper successful retailing IPO, for example, the community coins a marketing jingle ("business-to- consumer") and every hyena in the pack scurries to fund a retailing concept and ready it for public consumption. Only after the "business-to-consumer" carcas is thoroughly picked over does the pack move on to capturing and exploiting "business-to-business" concepts or another such next best thing.

The result of this behavior is serial massive overfunding...a situation characterized by the existance of multiple newly funded online pet food retailers, search engines, e-commerce solution providers, and auction sites. As the markets for what these individual companies hawk is finite and often occupied by incumbent real businesses, it is known and inevitable that all but a few of these enterprises will perish.

Now, there are economic theories that one arguing a venture capitalist point of view on this wasteful behavior might point to. The notion of "creative destruction" has managed to find its way into the fabric of our shared conception of capitalism. But take a step back and consider this...

Most venture capitalists are funded by pension funds and other large institutional investors, each of which has a fiduciary responsibility ultimately to some individual. What might we tell that individual (a New York City Teacher, policeman in Atlanta, trash hauler in Detroit) who suffers as a result of the involvement of his pension fund in an inherently wasteful commitment of resources?

Glenn Evans
norwalk, ct


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