Personal computers and information networks

© Condé Nast publications and Wired Magazine

The enormous excitement surrounding the Internet led to a massive boom in new technology shares between 1998 and 2000. Innovative Internet magazines such as Wired had previously helped build a community which nurtured the culture of the Internet whilst evangelising about the technology. The claim was that world industry was experiencing a ‘new economic paradigm’, the likes of which had never been experienced before:

We have entered a period of sustained growth that could eventually double the world's economy every dozen years and bring increasing prosperity for – quite literally – billions of people on the planet. We are riding the early waves of a 25-year run of a greatly expanding economy that will do much to solve seemingly intractable problems like poverty and to ease tensions throughout the world.

Peter Schwartz and Peter Leyden, Wired, July 1997

Investors in the stock market began to believe the hype and threw themselves into a frenzy of activity.

© boo.com

The Internet was thought to be central to economic growth and share prices implied that new online companies carried the seeds for expansion. This led in turn to a feverish level of investment and unrealistic expectations about rates of return. Venture capitalists flourished and many companies were founded on dubious business plans. The most notorious of these was the high fashion online retailer Boo.com, who spent their way through $200 million, only to collapse within six months of their website going live.

History offers a fascinating comparison to this period. The position the USA holds at the beginning of the 21st century as the world’s leading economy resembles that held by Britain in the mid-nineteenth century. The development of the railways created a similar level of excitement and uncertainty among the Victorians. Then as now, stock markets found that pricing shares associated with a new technology is extremely difficult. By the end of 1845 the railway bubble had well and truly burst, but just like the Internet boom, it had caused a fundamental transformation and left a real and lasting technological legacy. In both cases many investors lost money, but they also helped to finance the new system.