Dot.Con: The Greatest Story Ever Sold

This is an interesting look at the Dot.Com Nasdaq bubble ,which started in the early 1990's and collapsed in 2000- 2001.This is not surprising since every bubble in history has collapsed. The author pinpoints three groups and/or individuals that he feels are specifically to blame for allowing this fiasco to occur.The first group is the financial journalists and analysts,such as Mary Meeker ,Blodgett,and Abby Joseph Cohen,who used their positions to hype the sale of Dot.com stocks that they knew were purely speculative in nature.The second is a group of one,Alan Greenspan.The author overlooks that Greenspan had no authority over the giant investment banks that were the source of the problem.They were supposed to be regulated by the Securities and Exchange Commission(SEC).Unfortunately,the SEC had been stuffed full of University of Chicago type economists, who did not believe that bubbles were possible ,based on their artificially constructed Efficient Market Hypothesis(EMH). .Of course,Benoit Mandelbrot had already demonstrated repeatedly over the time period 1958-2008 that the EMH was false.The economists at the SEC simply refused to accept the ancient wisdom of Adam Smith-the goal of all financial regulation is to prevent speculation.Greenspan certainly is partly culpable,however. The third group is the American public,which,as first pointed out by Michael Lewis,came to believe that the way to riches was not productive,hard work but speculating in stocks. I have subtracted one half of a star because the author is apparently ignorant of the fact that Adam Smith devoted 80 pages in The Wealth of Nations(1776;Modern Library(Cannan)edition with the foreward by Max Lerner) to discussing the problem of banking and speculation.Smith was well aware of the severe problems resulting from the Mississippi and South Seas bubbles inthe 1719-1721 time period.Smith also knew that such bubbles could not inflate without the explicit support of the private banking industry.Smith's solution was the creation of a central bank that would prevent the private banking industry from making loans to three categories of borrower-projectors,prodigals,and imprudent risk takers.These three categories are the same as Keynes's two categories,speculators and rentiers ,in The General Theory(1936).Smith's policy is thus a preventive one-do not allow the savings deposits of savers to be loaned out to speculators.Smith's warning is very clear.Loans made to speculators will be wasted and destroyed.That is precisely what happened in the Dot.Com bubble and has happened in every bubble in history. A final point to ponder was the author's belief that the Dot.Com bubble was an aberration that would not be repeated.Unfortunately,it was quickly followed by simultaneous bubbles in housing and the DOW.These bubbles have also collapsed,just as predicted over 230 years ago by Adam Smith.Unfortunately,Greenspan,Paulson,Bernanke,et. al.,never read Smith.

During the 1995-2000 period, investing was fun. Everyone was making money. Like the Dutch tulip frenzy and the pre-1929 Era in the United States, greed overcame common sense. History repeated itself again during the internet craze. The detailed chronicle of the event in the text brought back too many bad memories, especially my investment losses.

I loved this book! For a while there I was starting to wonder if the dot com boom was just a dream. But this book spelled it out, it set in stone, and as a victim of it, I felt like it brought closure to my experiences. I don't feel so stupid and alone anymore, at least not any more than most of America that eventually went along with the ride. The book tells the stories of many of the biggest firms, how they rose to power, how they go their funding, and how the expanded under false ideas and predictions. The author was surprisingly harsh on the Federal Reserve, which was a refreshing point of view as apposed to all the simple-minded free-marketer propaganda that the pundits and government officials spew constantly in the media, along with their hero-worship of Alan Greenspan. This book told the story of the dot com boom and bust, and probably since it was an experience that hit me so close to home, I really enjoyed it. While many are debating whether this experience was really a `bubble' because in a bubble things usually get worse after they burst, in this case productivity gains seem to be real, technology advances were real, and some real business did emerge (if only a few) from the carnage. But the dreams and promises of riches were definitely a bubble that burst for many. I myself was only in it for the experience from the start. But weren't we all...