<div align="justify"> <p><b>In years to come people will doubtless see the web as no more than the culmination of a communications revolution spanning a little over a century and a half. It is, after all, just a computerised refinement of the telegraph, the invention that launched the revolution. Yet it was a step change, and its importance was clear from the start.</b> </p><p>Many of those who downloaded the first Mosaic browser in 1993 knew they were involved in something momentous: the equivalent of riding in Stephenson's steam-powered Rocket, or Orville and Wright's aeroplane. </p><p>Mosaic transformed the internet from a cumbersome academic tool to a friendly mass-medium, and the world would never be quite the same again. </p><p>The railway parallel is apt because that technology, like the web, spawned a speculative boom and bust in its early days. </p><p>The dotcom madness is commonly attributed to the hype surrounding the technology but, as John Cassidy points out in his fascinating Dot.Con: The Real Story of Why The Internet Bubble Burst, it would not have happened without a real basis for the excitement. </p><p>The web and the railways each had a potential that was almost beyond hype; the problems began when people started to believe that anything to do with the technology was bound to make money. </p><p>Cassidy relates how several factors served to inflate the web bubble. Tax changes encouraged people to put money into mutual funds, making vast sums available for investment. </p><p>Regulatory changes, and the web itself, made it easier for ordinary people to buy shares. A near-mystical faith in the primacy of the market delayed US government intervention. </p><p>People bought shares in dotcoms, which sent prices higher, and, in turn, encouraged more people to buy at yet higher prices. It was a self-reinforcing cycle exemplified early in an initial public offering (IPO) of shares in Netscape, co-founded by Silicon Graphics founder Jim Clark and Mosaic developer Marc Andreessen. </p><p>Shares were offered at $28, which was thought high, but within a day the price more than doubled, valuing the company at $2.2bn. </p><p>If Netscape had owned basic browser patents this might have made sense. But it didn't, and it was giving away most copies of its browser in the hope (vain, as it happened) of capturing the market before Microsoft got in. </p><p>A pattern was set that someone pitched a web-related business idea to a new breed of trendy venture capitalists who, in turn, financed the launch and heavy promotion of the company, which was usually, but not exclusively, a dotcom. </p><p>The company then issued an IPO - an acronym that quickly turned into a buzzword - as soon as possible and amid considerable razzmatazz. </p><p>Cassidy explains one of the most puzzling aspects of the bubble: where the finance for the fantastic valuations that ensued came from. They were based mostly on 'funny money'. </p><p>Only a small amount of stock was sold for real money at the inflated price, but the same value was attributed to the majority shares owned by the founders and original investors. </p><p>The flimsiest of enterprises created paper multimillionaires overnight, and the IPO quickly became more important than products and profits. </p><p>This speculative frenzy became an industry in itself. Entire TV channels and websites were devoted to it. Many people knew they were caught up in the bubble but went along with it because there was a lot of money to be made. </p><p>More astonishing was the number of people who appeared to believe the valuations. TV channels only wanted people who would spout good news, and paraded a succession of 'experts' talking up stocks. </p><p>Gainsayers, according to Cassidy, were simply not invited back. Even more dubious was the role of some of the leading US financial institutions, whose star analysts both talked up values and profited from them by floating IPOs. </p><p>These rejected all the usual valuation metrics on the grounds that this was a new economy with new rules. </p><p>Some of these true believers seem naive, and you wonder how they got where they did; some undoubtedly deceived themselves. </p><p>However, the assumption must be that many people on Wall Street were deceiving investors. The culture that bred scandals like Enron had deep roots. </p><p>The trick in profiting from a bubble is to get out before it bursts. Cassidy reckons one of the smartest moves was made by Steve Case of AOL when he made a bid for Time Warner, buying solid assets with his own stratospherically overvalued stock. </p><p>In the spring of 2000, a small stock issue by Palm Computing reached $60 (£38) per share within a day, valuing the company at $54.3bn, which was $26.3bn more than its parent company, 3Com, which still owned 95 per cent of Palm stock. </p><p>The absurdities were becoming impossible to ignore, and within days the market began to slide. </p><p>The irony is that the web is flourishing, even in its primitive infancy, and will become all that it was ever trucked up to be by the hucksters of Wall Street. By then they will be largely forgotten, as are the men who went bust building the railways. </p><p>Cassidy has done us a service by providing a gripping account of how history can repeat itself. </p></div>