The Brewing Crisis

Bubbles should not only be viewed as an economic phenomena, it should also be viewed as a social phenomenon. From the prospect of history, almost every bubble is accompanied with a peculiar trend of thought of the society. The dot com bubble is typically such a kind of bubble.

The human civilization has experienced five thousand years of agricultural civilization era, and experienced three hundred years of industrial civilization era. People will naturally think that the pace of the civilization is accelerated. On the occasion of the new millennium, the whole world is wishing a glorious future.

 

In 1994, the appearance of World Wide Web browser and Mosaic makes the Internet began to attract the attention of the public. In 1996, most of the listed companies in the United States own a public web site as necessities. People began to notice that the Internet can deliver information freely and are accessible to worldwide information as well as some other wonderful characteristics. These concepts attracted a lot of young people. They think the internet-based new business model will rise and they expect to become the first to earn money. Internet can lower the cost to contact with customer all over the world. Traditional business model has been greatly changed in the new form of advertising, selling and customer relationship managing. The Internet has brought a new business model which is still not possible several years ago. This, will of course draw the attention of venture capital.

The foundation of the development of the internet is not core technics, it is even not the capital, but the user. Once the users of internet get to know about the internet and be used to it, he can never live without it. From the prospect of economics, capital market is not isolated but an internal recycle system, like metabolism. The capital inflow to the internet business will outflow back to the to the capital market in the form of consumption of individuals. This means the investment of internet business is after all from each of the individuals which use the internet. As the old saying goes: Many a little makes a mickle. The source of wealth of internet business seems very steady and considerable. All these make the business about internet very attractive.

For investors, no dream is bigger and more realistic. At this very moment, in the stock market, www is like a Pandora’s Box. Releasing hope, but finally, as well as woe. In the next blog, let’s look into details about the formation of the bubble!