Talking Points

What is today called the Internet bubble was actually an amalgam of four consecutive bubbles, creating an enormous rise and fall in the value of stocks. The bubble was fueled by a global revolution in technology and by the notion that the Internet would profoundly change the way we do business. The bubble intensified as key players, such as investment banks and venture capital firms, changed their own rules to take advantage of the public excitement. This was not the first bubble in history, but it's the largest we have seen so far.

The bubble was supposed to be part of a process by which the capital markets provided funding to emerging companies so that they could advance their business prospects. The outcome was quite different. Rather than support innovation, the bubble permanently damaged some very good companies.

The capital markets are supposed to provide returns on investment to those who buy shares in innovative firms. But again the outcome of the bubble was very different. Many investors who lost money lost a great deal of money. Looking back it seems that there was no net value creation at all during the up and down of the bubble.