The Internet, Capital Markets, and Innovation
The Internet is a classic example of the application of capital markets to innovation. Money was initially denied to the developers of Internet technology. Then it was dumped on them. Some of it was used to develop important technology, useful products, and viable companies. Much of it was wasted.
As excitement grew about the potential of the new technology and its commercial applications, the price of shares in Internet companies soared. Soon the price far outdistanced long-term real value. When the public perceived this inconsistency, the share market collapsed, taking with it many firms, many of which were not ever likely to be viable. However, the collapse also took down some promising companies ...
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