Three Days That Changed Modern Life
I take it as my mission today to connect the dots among three events -- in reverse chronological order -- that occurred on this date, Aug. 9, in the not-too-distant past. 1
First, on this day in 1995, the internet stock sector was born, when Netscape Communications Corp., a company that just 16 months earlier was founded with the goal of creating the first commercial web browser, had its initial public offering. The shares, priced at $28 each, exploded on the first day of trading. Morgan Stanley, the lead underwriter, had wildly underpriced the IPO. 2 The shares opened at $71 and ended the day at $58.25. 3
So this marks the 22nd anniversary of modern society’s tech revolution; almost every aspect of life has been radically affected by the fallout from the rise of the graphical internet.
Consider just these a few things that unfolded as a result of Netscape:
It set off a Cambrian explosion of new technological life. Freed from the domineering monopoly that was Microsoft Corp., a robust internet unleashed a wave of online innovation and creativity. Before that, the Redmond regent dominated the desktop. Every venture-capital funding meeting before 1995 ended with the question of what would happen if Gates & Co. decided to add this feature/software/widget as part of its operating system? It may not have been obvious at the time, but Netscape changed all that.
The dot-com boom created a huge internet stock bubble that eventually collapsed, driving the Nasdaq Composite Index down about 80 percent from March 2000 to October 2002. There were many side effects of the dot-com collapse, but let’s consider a few of them:
- The huge build-out in fiber-optic bandwidth was done with lots of venture capital and money from the investing public. Thousands of miles off fiber-optic lines to replace aging copper cables were laid at huge expense by companies such as Metromedia Fiber, Global Crossing, Covad, WorldCom and many others. As Dan Gross taught us in “Pop!: Why Bubbles Are Great For The Economy,” what was built for billions of dollars was bought out of bankruptcy for pennies on the dollar. All of those big fat cheap pipes arguably led to such bandwidth-intensive services as YouTube, Google Maps, Facebook, Netflix and many others.
- The dot-com collapse set the stage for Federal Reserve Chairman Alan Greenspan’s ultralow rates, which turbocharged the credit expansion that fueled the market in everything from subprime mortgages to credit default swaps, both of which contributed to the financial crisis. If you think about it, you can trace a clear path from Netscape to the election of Donald Trump.
- The internet goes mobile in the early 2000s, first with email, then with web access. This tees up the opportunity for Apple Inc. to introduce the iPhone, which is changing the world in ways that we are still trying to grasp.
- Amazon.Com Inc., and the destruction of modern retail, easily traces back to that same set of events via Netscape.
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On this date, 21 years before Netscape’s IPO, was another historical thunderclap. Amid the burgeoning Watergate scandal that began with what appeared to be a minor burglary, President Richard M. Nixon opted to resign from office 4 after it became clear that Congress was prepared to impeach him and remove him from office.
Today, the parallels with America’s current president are almost impossible to avoid. Just this morning we learned that FBI agents last month raided the home of President Trump’s former campaign chairman, Paul Manafort, apparently amid a probe into his dealings with foreign governments. General Michael Flynn, Trump’s former national security adviser, is thought to be under similar scrutiny. Others close to the Trump campaign and the president himself are also potential subjects of former FBI director and independent counsel Robert Mueller’s investigation into Russia interference in last year’s presidential election.
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Did Trump’s invocation of “fire and fury” in reference to North Korea’s nuclear program disturb you? Well, we have one more anniversary to tie together, for Aug. 9, 1945, was the day that the U.S. dropped the second atomic bomb on Nagasaki, resulting in Japan’s unconditional surrender.
The good news is that nuclear weapons have not been used during war since then. The bad news is the rhetoric between the U.S. and North Korea is getting hotter, increasing the risks of a nuclear conflict the likes of which we probably haven’t seen since the Cuban Missile Crisis.
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Thus, we can see some of the connections between technology, politics and international affairs. As investors, citizens, consumers, workers, voters and savers, there is no aspect of our daily lives where we can escape their relentless grip.
And yet, here again, technology has a solution. If the stress of thinking about all this seems like too much, try setting aside a few minutes for quiet meditation, using one of the apps designed to help you cope. And if that feels like technology overload, there’s one last way to de-stress.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Special thanks to Jason Zweig’s "This Day in Financial History."
Pricing IPOs has been a perennial problem, as it is as much art as science, fraught with the potential for error. Price it too low, and you leave lots of money on the table, forgoing capital that could be used by the company selling itself to the public; price it too high and you discourage buyers.
See the book "1995: The Year the Future Began" for a much more detailed history.
Zweig reminds us that the Dow Jones Industrial Average dropped by a mere 1 percent to 777.30. Perhaps the takeway here is that if you have a long-term perspective, post-presidential resignations and impeachments (think 1998) create good market entry points.
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