Chapter 13. Sell, Sell, Sell!

In this chapter we briefly summarize the major elements of damage done by the bubble. Those who believe that financial market excesses such as we've just experienced are an acceptable price of capitalism accept the costs below as the road kill of capitalism. To people who think this way, the financial and human casualties identified below are the necessary cost of economic progress, just as the carcasses of animals left beside the nation's highways are the necessary cost of automobile travel.

That these are human victims does not disturb those who believe financial manias serve a useful purpose. Whether or not it disturbs the majority of our society remains to be seen.

We begin by recounting the story of theglobe.com—one of the most publicized of the dot-coms. This is a tale that neatly encapsules many of the topics we've addressed previously, and shows their consequences. The entrepreneurs were young and inexperienced, but angels and venture backers gave them money because they had imagination and energy—which in this event were not enough to make the company successful. Venture capitalists pressed on the skeptical managers of the company too much money. At the IPO, the bankers grotesquely undervalued the issue, leaving the company with far less money than it could have used, the entrepreneurs with paper—not real—wealth, and speculators, including some favored by the banks with otherwise hard to obtain IPO shares—with riches. Finally, after the company was public, Wall Street analysts threatened to withdraw support if the company didn't lose more and more money in the attempt to gain sales and market share. When the bubble burst and the shares tumbled, the analysts turned away and left the company to its fate.