Buy, Lie, and Sell High: How Investors Lost Out on Enron and the Internet Bubble

Smaller Bubbles and Less Damage

The Internet bubble did more damage to small investors and to the economy than it helped technology; in fact, it set technological advance back to a degree. In consequence, fewer bubbles—less excess in the capital markets—can be gained at little or no price in terms of innovation and progress in our economy.

The bubble was a result of financial institutions just doing their jobs. Venture firms took an unexpectedly large inflow of capital and spread it out to a large number of start-up firms, and quality of investments was lost in the process. Investment banks sensed the increasing public excitement about the Internet and packaged IPOs for sale. The media fanned the public mania; the government gave its blessing ...