Dot.Con

markwelch writes: "Late last year, I read a truly awful book: Stephan Paternot's A Very Public Offering, a poorly-written account of the rise and fall of TheGlobe.com. The company has consistently been cited by critics as one of the worst/best examples of absurd internet-stock mania, but this book by the company's founder offered no real apologies, and provided very little insight. I don't blame Paternot, a young man who was willingly manipulated by market-makers, and who clearly is not a professional writer." Marc is less forgiving of writer John Cassidy, whose recent book Dot.Con he dissects below -- read on as he completes the thought. Dot.Con: The Greatest Story Ever Sold author John Cassidy pages 384 publisher HarperCollins rating 4 reviewer markwelch ISBN 0060008806 summary A disappointing, meandering examination of the boom-and-bust world of Internet commerce which doesn't even deliver on the promise of its title by naming names.

But John Cassidy can make no such excuses for Dot.Con: The Greatest Story Ever Sold. Cassidy offers no insight, and even fails to identify the "con" promised by the book's title. And his sloppy writing, riddled with factual and typographical errors, ensures that the book can't be accepted even as a "digest" of the events he reports.

A much better and more insightful book in this category is Michael Lewis' Next: The Future Just Happened An earlier example of a competent "industry chronicle" is Fire in the Valley: The Making of The Personal Computer, by Paul Freiberger and Michael Swaine. For a fascinating account of the "experience" of a dot-com bubble company, read dot.bomb,by J. David Kuo, or watch the movie Startup.com.

The book's eight-page prologue was mildly promising, and led me to expect a chonological report of the rise and fall of the "internet industry." I've never read any of Mr. Cassidy's articles, but the book jacket assures that he is "one of the country's leading business journalists" and "has been a staff writer at the New Yorker for six years." My expectations were low: I expected a competent journalist's account of the stock market's dot-com bubble. I was disappointed.

First, the book is riddled with mistakes: obvious typographical errors, embarassing spelling and grammatical mistakes, confusing shifts in time, and bizarre factual errors.Clearly, this book somehow avoided the common year-long delay to publication (Cassidy discusses the impact of the September 11, 2001 terrorist attacks, in a book that reached bookstores during the first week of February 2002). Apparently, time was saved by skipping all proofreading, editing, or fact-checking.

Cassidy's first chapter attempts an impossible yet necessary task: recounting the entire histories of computing, the internet, and the "World Wide Web" in just 16 pages. As I read this section, I was uncomfortable, because too much of what Cassidy wrote seemed incorrect. Then, I was jarredby a glaring mistake: Cassidy wrote that the Altair computer, released in 1975,was named "after a character in Star Wars." (Like most Americans, I saw Star Wars during its first year-long run in theaters in 1977, and I recall no character named "Altair." I do recall references to Altair as a star and solar system in the Star Trek TV series.) Perhaps my training as a journalist and editor make me "more aware" of the book's many spelling and grammaticalerrors,but finding such an obvious factual error on the fifth page of the first chapter made me quite anxious about the reliability of the rest of the book.

A few pages later, Cassidy writes: "In 1978, two Chicago students, Randy Seuss and Ward Christensen, invented the modem...." As a long-time computer geek, I knew this was another mistake: programmers Seuss and Christensen didn't invent the modem (which is a piece of computer hardware). In 1977, Christensen wrote Xmodem, the first computer program used to transfer files between computers equipped with modems; a year later, he teamed with Seuss tocreate the first "bulletin board system" software.

After seeing such obvious mistakes in the book's opening pages, I knew that Dot.Con would not be a reliable account of anything, but I read the book with the hope of gaining some insight into the stock market's dot-com bubble.

Second, the book's chronology keeps shifting: Dot.Con shifts between several modes. Some chapters appear to relate a chronological sequenceof events. Other chapters focus on particularcompanies (Netscape, AOL, Amazon.com).Other chapters focus on broad themes. Unfortunately, even the most "chronological" chapters don't maintain a clear chronology, often including facts and events from earlier or later years.

Often, Cassidy's "factual time-shifting" seems designed to make key events or statementslook even more foolish. But usually, it simply confuses and distracts from the real absurdity.

Finally,the book offers no new insight:Nearly everything I read in Dot.Con, I had read somewhere else before. Indeed, the book's many footnotescredit nearly all of the book's contenttomainstream news articles and other books. The main theme of the book is that the spectacular rise and fall of internet or dot-com companies in the stockmarket was a classic "speculative bubble," no different from earlier absurd bubbles. Buthundreds of critics had been saying that since the mid-1990's (and Cassidy cites many skilled analysts and brokers whose careers were ruined by their refusal to join in the feeding frenzy).

After I finished Dot.Con, I sought to identify a single fact or insight that seemed original to Cassidy, or even some fact or insight that hadn't already been recounted many times before.

I can recall only one notion that I don't recall reading elsewhere:the impact of Adam Smith's concept of"perfect competition" in an age when the internet reduces barriers to entry and removes friction from transactions. Cassidy writes: "In perfect competition, all goods sell at cost, and profits are zero." This insight helps us understand the folly of the recurring theme that because the internet is so big, it's inevitable that internet companies which holda "first mover advantage" or which capture millions of "eyeballs" will somehow earn huge profits from their vast audiences. But Cassidy doesn't seem very committed to this theory.

I expected that a book called "Dot.Con" would name names: who were the con artists, and what were the confidence schemes? Who was really to blame? Cassidy seems to waver, and I'm not sure if he intends to suggest that the dot-com crash was Alan Greenspan's fault, or whether it was the fault of brokerage-firm analysts and of journalists -- he seems to partially blame yet partially acquit each. Or perhaps it was really all just an inevitable "herd mentality" speculative bubble that was really nobody's fault.

Certainly, Cassidy does an able job of reporting that the absurd valuation of internet companies was a major aberration for the analysts and investment bankers. He often repeats that the quest for fees and profits led many investment banks to seek ever-more-absurd valuation strategies, in order to float IPOs for companies with no history of profit or even revenue. Over and over, he recounts the absurd financial figures for companies valued at billions of dollars despite short histories that promise only greater losses and virtually no prospect of profitability. He finds lots of targets for ridicule, but they are all easy targets, and the stories have been reported many times before.

Cassidy never digs below the surface, and he mostly views the rise and fall of dot-com stocks as a single cycle, one giant wave that lifted and then sank. He mostly ignores the flow of different "sub-industries" that may explain why the "bubble" continued for so long with several surges.

He ignores the impact of "buzzword investing" as venture capitalists and investors sought to stay one step ahead. (The buzzwords include: "Internet Service Providers", "e-retailing" or "business-to-consumer," "portals," "business-to-business," "Application Service Providers," and "internet infrastructure," each of which can be viewed as a separate "wave" -- or perhaps as "more hot air" that delayed the collapse of the "bubble.")

Maybe it's too soon for anyone to write a definitive account of "the Internet Mania." And maybe John Cassidy did not want to assign blame, but instead to maintain the role of an impartial reporter of the various events, and the various theories. Whatever he intended, he did a poor job. I don't recommend Dot.Con.

You really can purchase Dot.Con at Fatbrain. If you'd like to praise (or skewer) a book here yourself, it's easy. Just read our book review guidelines, then submit your own review with Slashdot's web interface.

Comments

they read like romance books

[lemonhed]

These dot-bomb books are turning into Sweet Valley High series books. I read the first one, but they are all the same.

Maybe the VC will not have an IPO exit strategy but instead use the book signing as their exit strategy!

I can see it now.... Dot Bomb Vol. XIX, Amazon's rise and fall

Re:Why tell us where to buy it...

[JamesOfTheDesert]

Did I miss something?

Yes, you did. See, this is a review, not a dictatorial decree, and both the review and the link are provided so that the reader may decide on his or her own whether or not to buy the book.

Observe: you read the review, and even though a link was provided, you were not compelled to buy the book. Amazing. Just like free will.

Isn't the editor obvious?

[Dodger_]

[inside cover of book]

Dot.Con
by Stephan Paternot

Editors: CmdrTaco and Roblimo

greetings

[tofupup]

i was one of the first 10 employees got and fired during the first expansion of the company. i had a strong feeling that the company should have focused on technology - i was told i was "not all there" - and they were there to make money.

you see, they (todd & steph) got a big jumpstart by perfecting chatting over the week and i felt that the only way the could keep up the momentum was to stick with being on the bleeding edge. i was pushing them to do some (oddly enough) p2p stuff; yes this is back in 1996 and i was a big distributed system crackhead (still am). it is interesting to look back because in a way we were both right

1. (they had the short term vision)it was a feeding frenzy and there was money to be made

2. (i was considering the long term vision)you can aways push products if you have the technology - you just have to get business and tech to work together to hash new products.

from my perspective with so much capital very little was done with in terms of what they brought to the great dinner table of computing. yet is it hard to keep a level head when anyone is in that position.

as for me i am happy part of academia and don't plan on leaving anytime soon - think this is where i belong.

as an aside - i really think tech people/business need to slow down a bit and ask themselves if computers were taken away tomorrow would you be doing the same things? for example theglobe did online communities - would theglobe be working to build communities in the real world if they lost computers tomorrow? if the answer is not they you have to ask yourself how in tune (mentally and spirtually) you are with the fundamental problem you are seeking to solve.

keeping it organic tofu 2k

PBS Special

[passion]

There was a rather fascinating program on PBS a few weeks ago entitled "Dot Con". The thesis of the program alleges that investment analysts had an awful lot to gain by offering "hot buy" advice on stocks that their employers had vested interest in.

Ultimately, this led to consumers/investment speculators getting screwed, and unripe companies being shipped off to IPO land for quick cash.

This site has much more detail, including interviews, stats, etc. - including the program itself on quicktime:

http://www.pbs.org/wgbh/pages/frontline/shows/dotc on/

Re:PBS Special

[craw]

I also saw the PBS special (Frontline, IIRC). One of the central themes was that banks/underwriters (e.g., Credit Suisse First Boston) of the some IPO's manipulated the market to their benefit. CSFB recently settled with the SEC over this; for instance, you can read this article. To quote:

Specifically, the commission said, CSFB allocated shares of IPOs to more than 100 customers who, in return, funneled between 33% and 65% of their IPO profits to CSFB. The customers typically sold the stock on the day of the offering, often collecting big profits. The customers then transferred a share of their gains to CSFB by way of excessively high brokerage commissions.

Of course, one of those IPO's was LNUX.

Wrong - this is a very good book. Read it.

[dipfan]

That was not so much a book review as one long sour grapes session ... in truth this is a very well written book that deserves to be read by a wide audience.

John Cassidy is The New Yorkers' business writer, and I've been reading his weekly column there for some time. He's an insightful writer with a good turn of phrase and an eye for strong themes. And that's what Dot.con is about: why did the US economy get transfixed by a speculative bubble involving the internet? That's the question he's exploring, and it's a complex issue, so readers shouldn't be disappointed (unlike whoever wrote the Slashdot review) if he doesn't come up with black and white answers. It's not that simple, and only a moron would expect it to be. However, Cassidy is pretty plain who he blames for letting the whole circus get out of hand: Alan Greenspan, the media, and the investment banking community. But he has the insight to explain why each of those groups did what they felt they had to do.

It's true there a few typos (mistakes) in the book, and I have no idea who invented the modem and it doesn't matter. From what I can see the guts of the book is accurate, and any (minor) mistakes don't detract from its strength. What Cassidy has done is write an excellent narrative of the financial markets and the internet from 1995 to 2001. As a history of its type it can be compared to JK Galbraith's The Great Crash - and it's no coincidence that Galbraith has been a big fan of the book, supplying a glowing endorsement.

Nothing new in here? Well, it's a history of the very recent past, so lots of the events are very familiar to most readers, but Cassidy's ability to tie it all together makes this better than so many cut-and-paste jobs. And its aimed at the good old general public - the type of people who might have been tempted to buy some Priceline shares because their brother-in-law made big money on the IPO.

Slashdot readers can still enjoy it though, even if it is too general for them: the hubris, the schadenfreude, makes it very enjoyable. Cassidy paces the book so well, almost like a good novelist, that the book has a racy plot. And he focuses in on some key parts of the bubble as it expanded: the chapter on Amazon is particularly good. It doesn't bear any resemblence to Michael Lewis's book: that was written at the top of the "the internet's going to change everything, man" phase, which (as Cassidy points out) turned out to be hyperbole at the very least.

Don't trust whoever wrote Slashdot's review: this book actually stands a good chance of being the standard history of the dotcom boom-and-bust. It's the book that, years from now, when someone asks you, "why did everyone go so crazy about the whole dotcom thing?", you can pull out this book and say: "it's all in here...."

Captains Go Down with Ships

[4of12]

One of the more interesting aspects I've read about the dot{bomb,con} phenomena was that, by and large, many of the chief officers of the companies rode them gallantly into failure: despite having huge paper gains as measured by stock values right after the IPO, they held on to those shares even as their companies went into power dives.

From that perspective, the former CEO's and CTO's of the dot.gone companies deserve a little more respect than, say, the former executives of Enron, who finagled with SPE's while selling out stock at high prices.

Given that it isn't really about computers...

[drauk]

Given that the book isn't really about computers or the Internet, but about economics, perhaps a more reliable review might be found in a publication more closely aligned with that subject. "The Economist" gives the book a glowing review (available to subscribers only). Some readers may even find The Economist to be a more learned journal than Slashdot and therefore more likely to deliver a balanced review.

Interpretive Errors in Review

[gmhowell]

I can recall only one notion that I don't recall reading elsewhere: the impact of Adam Smith's concept of "perfect competition" in an age when the internet reduces barriers to entry and removes friction from transactions. Cassidy writes: "In perfect competition, all goods sell at cost, and profits are zero." This insight helps us understand the folly of the recurring theme that because the internet is so big, it's inevitable that internet companies which hold a "first mover advantage" or which capture millions of "eyeballs" will somehow earn huge profits from their vast audiences. But Cassidy doesn't seem very committed to this theory

The problem is the layman's use of the word 'profit' and the understanding of the concept by economists.

Without getting too technical, the layman thinks of profit as anything above and beyond the cost of manufacture. To the economist, monopolist profit taking means the excess taken over the fair market price.

Also, please read my journal article regarding 'perfect knowledge'. It is a key ingredient to any discussion of 'perfect competition', and one sorely lacking in many/most internet business transactions.