February 10, 2002 — 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.

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, insures 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 jarred by 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 journalist and editor make me “more aware” of the book’s many spelling and grammatical errors, 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 to create 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 sequence of events. Other chapters focus on particular companies (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 statements look 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 footnotes credit nearly all of the book’s content to mainstream 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 stock market was a classic “speculative bubble,” no different from earlier absurd bubbles.  But hundreds 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 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.

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.

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