Sizing up the market's swift demise
Michael Goguen isn't afraid to admit he made mistakes in the bull-run days of 1999 and early 2000, when the partner at venerable venture firm Sequoia Capital served on 14 boards and pushed hordes of fledgling companies toward Wall Street.
"All the VCs were throwing out money, competing to take companies public," Goguen said. "We got sucked in, like everyone else, to businesses that simply weren't real...We'd pat ourselves on the back and say, 'We got it, isn't that great?' Then six months down the line the company was a mess and we'd regret it."
Few executives with high stakes in the technology industry are willing to admit that greed and ego fueled irrational choices, and in that respect Goguen's candor makes him stand out. But as the peak of the Nasdaq Stock Market approaches its one-year anniversary on March 10, when it closed at 5,048.60, a growing number of academics, analysts and executives are pointing fingers, cracking history books, rethinking careers, and otherwise attempting to assess how the Internet Economy went from boom to bust so quickly.
Some, like Goguen, are examining their own roles in the debacle. Even more are casting an increasingly disdainful eye on almost everyone who contributed to the mania: day traders who gambled on obscure companies; midlevel engineers who cashed in stock options and retired at 29; Wall Street analysts who preached that "eyeballs," "stickiness" and price-to-sales ratios should trump profits; forecasting companies that predicted exponential growth in seemingly everything digital; and business publications that canonised the rich and gave others hope of striking similar fortunes.
Finally, in what might be called a classic case of blaming the victim, many executives are criticising individual investors for succumbing to greed and emptying their bank accounts to take part in the new Gold Rush, thereby helping to fuel an artificial boom.
"The depravity of it all is what is so stunning," said Lawrence Haverty Jr., senior vice president of State Street Research, who likened the Internet boom to the savings and loan scandal of the late 1980s and early 1990s. "It will be remembered as a true, unmitigated investment tragedy." Haverty said the stock market losses for America Online, now AOL Time Warner, Yahoo and Amazon.com alone have erased US$300 billion in market capitalisation since the March 2000 market peak. That's roughly 10 times the market capitalisation of General Motors, the world's largest manufacturing company by revenue.
