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Irrational Exuberance of the Dot Com Days Discussed

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It is hard to disagree that there was much irrational exuberance during the Dot Com run-up. Some of the money that flowed into investments for companies with little more than an idea for the Internet or a program that should have ended up Freeware because quite frankly that was all it was really worth, ended up funded with millions in venture capital on their way to a public offering.

Many have said including recently an employee for Deloitte that; “Everyone loves the free market until the following things happen: One: They find they can't compete because of their own miscalculations and get jealous. Two: The questionable investment endeavors they participated in go from hot to not.”

Indeed this is hard to debate, as we have seen many examples of this and we see this in many other aspects of life; Indeed, as long as you are winning everyone loves you and those who cannot compete honestly look for ways to cheat. This is why we have referees in Sports.

Many a regulator or detractor of free markets will point out one or two folks which have fraudulently used the free market to defraud investors and they will point out those as an example of the need for over regulation. Out employee for Deloitte also has words to say on this; “Every one loved the entrepreneurial spirit and the Greenspanian "Irrational Exuberance," - which is what it was - until people such as Frank Quattrone got exposed for what they really were: boosters, prospectors, speculators.”

When a regulator who is wet behind the ears, a graduating college student brainwashed in liberal academia or a man who makes his money in accounting and overseeing such industries takes this viewpoint in their infinite wisdom and perception, they so often fail to realize what commerce is. Free enterprise is without unnecessary barriers to trade, that regulators promote, lawyers make money on and regulators are employed to oversee. However it is true we did see some major hype going on during the dot com days. Lets take a look at the WebVan example, a billion dollars lost. Who was running the company? The former CEO of Arthur Anderson, yes an accounting firm; it is interesting that behind every single major fraud there is a bean counter. Who is regulating the regulators, lawyers and bean counters who have hijacked free enterprise? In the WebVan example one of their VC supporters funded a PR firm, which hyped WebVan, convenient indeed? So yes, one must agree that things did get a little over blown. But also the FTC went after every .DotCom they could find starting investigations. They had clipboards hanging on the doorways of the FTC offices with pages and pages of .Dotcom targets. How do I know? I saw them. Same with the SEC, because the complainers, the old Dow Stocks and Companies, were not getting the support from short term investors in their stocks, so they used the government to attack the .Dotcoms.

Immediately we had all the so called .DotCom rule breakers getting pummeled by the in-efficient dinosaur rule makers, which did not want to dump their own bureaucracy and innovate. The larger companies using court system, political style tactics and BS hype on the other side by those who labeled the .DotComs as fraudsters, some were, I suppose, but the government attacks were vast and poorly profiled, they just created cases out of thin air.

This is typical, but it was incompetent and corrupt government regulators who intervened rather than larger old companies getting lean and mean to compete in the future efficiencies of the net. GE and other companies, which embraced it; IE - setting up vendor bidding auctions, etc. Do business with us online, saw efficiencies and seized the day. We saw quite a few newbie dot coms coming into our markets and trying to get between my company and my customer. Like the Travel.coms, so I modified my company’s image to the customer to perceive they could do business direct with me the same way. We even went so far as to get between our competitors customers and them for a fee? Selling them their own customers. You know one thing people do not realize is the .COM boon was more about virtual turf than anything else. The hype was shown up and it was crumbling only a few companies were making money riding on the "_ _ _ _Soft" type names. There were so many VC, first public offerings going on and it was silly, watching 7-10 of these every day at the NASDAQ. But some folks got filthy rich and today although we had the .com burst, which reminded markets and investors of reality for reality sake, it was inevitable. More investors who were long-term retirement investors should have heeded the warnings of Warren Buffet, they did not, so they got stung. We did much business in San Jose, Santa Clara, Palo Alto, San Carlos, South San Francisco, Foster City, Mountain View, Pleasanton, Danville, Walnut Creek, Sunnyvale, Milpitas and Cupertino. Money flowed like water, we were constantly scraping for labor and everyone was paying $10.00 for a hamburger, $1500 for single bedroom apartment and $500,000 for a single family dwelling-shack. Our customers started moving to middle class neighborhoods in Manteca, Turlock and other god forsaken places, commuting hours just to find a home, so we washed their cars at work; www.carwashguys.com . But the same thing is happening now around DC, look at the suburbs their, traffic on the beltway, mixing bowl. Heck it is a free parking lot like San Jose before all the Expressways went thru.

We still see mini-Irrational exuberance in the Boston Subs, Atlanta Subs, Dallas Subs and in Austin, San Diego, Denver and Chicago Subs. We saw lots of things and we are seeing some of this today. And again everyone in the Venture Capital Business is looking for the new thing whether it be in materials like NanoTech; healthcare like BioTech; Robotics, Space, Homeland Security, Military SensorTech, etc. Everyone wants the next new thing.

This is how we get money to flow and release back into the game, if not we will not progress as fast in innovation or keep the flow here in the United States. Problem is when you have 1500 new start-ups hyping BioTech and only 12 which are making money. If the SEC goes after all of them you lose the 12 companies, which are actually making a profit causing a negative sector rotation and about 40 more who are actually coming out with something that can help mankind. You lose the 40 new inventions and hurt the strongest 12? That is not leveling any playing field that is robbing America, and I will have no part of endorsing that.

By doing this we end up moving innovation to foreign shores, send company HQ to offshore HQs, lose jobs to emerging nations and you will see the capital leave as well. This is why when the regulatory bodies attack free markets it is not enforcement; it is pure extortion. Is the government wishing to take over the role of the mafia? If so then we may as well turn it over to a dictator and be done with our 200-year experience and use the rolled up Constitution to the light the fire of revolution? We need to have a national discussion about the corruption in government regulatory endeavors and we need to clean house. Think on this.

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