Was Netmania Another Tulipmania? Hardly
By Heather Green
I'm hoping that the movie Startup.com will mark the end of an era of rubbernecking over the dot-com crackup. During the past six months, we've been swamped with stories about how far the fortunes of dot-comers have fallen and why business-school grads plan to spurn tech startups, heading instead for old corporate havens. We've been larded with lists of lessons learned from the Net frenzy of 1999 and 2000, as well as timelines tracking the implosion of Net business models and companies.
These are all valuable records of the aftermath of the past few years, but too often the underlying theme is that we were caught up in a 20th century Tulipmania. That's partly true, but there's more to say about the past few years than that.
To liken our recent Net frenzy to the 17th century's Tulipmania is to basically say nothing of value came out of the experience. After all, the traffic in tulips was all speculation on the prices of bulbs, which were beautiful and rare, but they didn't really add anything tangible to the Dutch economy or society. That can hardly be said about the Internet.
During our Net mania, we built a high-speed, standards-based, global communications network. Compare the six years it took to create that network with the 20 to 30 years it took for the electrification of the U.S. Like the electrical network, the digital network can be a springboard for future advances in technologies, business models, and more efficient business processes.
Another big change the past half-dozen years have wrought is just how much at ease most people have become with technology and the idea of being plugged in digitally. It's pretty well accepted now that digital networks are a necessary part of doing business. And, for better and worse, our notion of time has been compressed. We're a lot less patient about waiting for information or for someone to return our calls, e-mails, or instant messages.
The Net has always been about improving communication. Like any disruptive technology, it went through a period of hype as entrepreneurs, companies, and investors struggled to understand what problems the Net could solve -- and then overshot with their predictions and promises.
LONG WAY TO GO.
Still, even in the current hangover stage, the Net's underlying advantage is undeniable. Standards-based, connected networks make it possible to eke out efficiencies and create new business processes. From Boeing to Delta Airlines, Sears to Microsoft, companies still have a long way to go before they exhaust the opportunities in connecting more closely with suppliers, customers, and employees.
The fascination with all the train-wreck stories of the past year is understandable. We're trying to figure out exactly how we could have gone so far over the edge, believing that everything was different and not subject to old rules because of the Net. Lots of things contributed to the intensity of the frenzy, such as torrent of new money flowing to venture capitalists to fund new companies and the hordes of individuals investing directly in the stock market, particularly in Net and tech startups.
Another key to understanding the Net frenzy is that Americans are fascinated by wealth. We admire successful businesspeople perhaps above anyone else and, as a result, we aren't skeptical enough about them.
That's what's so interesting about Startup.com, which portrays the rise and fall of govWorks.com, a company aimed at making it possible to handle all those niggling government tasks, like paying car tickets, over the Net. What we see in that movie are the hubris and intelligence of two young entrepreneurs. We find out how Net sausage was made, and made badly. Boy, does that strip any sense of fascination we might have had with that group of people. It's a good closing chapter for the past couple of years.
History is marked by manias, hysterias, and speculative booms. A great book that outlines the history of "great human mass movements," including the South-Sea Bubble, alchemy, witchhunting, and, yes, Tulipmania, is Extraordinary Popular Delusions & the Madness of Crowds by Charles Mackay. Though it was first published in 1841, the book's observations ring true today. Mackay says throughout history "whole communities suddenly fix their minds upon one object and go mad in its pursuit."
That's certainly true for Netmania. Unlike Tulipmania, though, this one is having positive results: those standards-based, connected networks. Eventually, we'll start pushing hard again to figure out how to make the most of them. That's a fundamental change that's here to stay.
Green covers the Internet and e-commerce for BusinessWeek