After the Dotcom Crash: Recent Literature on Internet, Business and Society

By Geert Lovink

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Work hard, have fun, make history. (

If 2000 was the year of the NASDAQ crash, inevitably 2001 brought forth a slew of pitiful dotcom biographies. This essay browses through some dotcom histories as told by true believers who, having survived the storm and the immediate aftermath of the tech wreck, have tried to make sense of their dotcom experiences. As a theoretical entrée I will turn briefly to Manuel Castells, the Berkeley geographer and author of the widely acclaimed trilogy The Information Age,1 who in 2001 published The Internet Galaxy,2 an overview of recent Internet research from a social science perspective. After having dealing with Castells’ ambivalent take on the New Economy I will discuss David Kuo’s Dot.Bomb3 about the e-tailer Value America, and boo hoo,4 the story of’s founder Ernst Malmsten. I will consider two broader analyses; Michael Lewis’ The Future Just Happened5 that accompanied the BBC TV program of the same name, and Brenda Laurel’s Utopian Entrepreneur,6 which reflects upon the disappearance of her girls’ games venture, Purple Moon. These very different narratives all share a desire to convey the excitement of their historical moment, the intensity of the drive to ‘get there first’, and the collective belief in the value of almost slave-like, yet playful, hard work that went into dotcoms. Their continuing dedication to network technologies and trust in commercial applications is overwhelming. Remarkably, in all these works, authors writing from divergent perspectives, the ideological origins of the dotcom model remain uncontested.

In retrospect, dotcoms could be presented as allegories of the ‘greedy nineties’. Internet start-ups bundled together mythologies of entrepreneurial risk taking with a promise of ‘prosperity for all’. There was a place for anyone under the sun in this ever-expanding technology universe. With the computer geek and online day trader as its heroes, and the venture capitalist in the role of godfather, the dotcom saga tells the story of techno-culture becoming pop. For a short while, around 19982000, the rhetoric of the New Economy was hot and glamorous; Internet reporting was everywhere, from the entertainment sections to media pages and IT supplements. Tech stocks began to show up on the radar of the mainstream media and business magazines such as Red Herring, Fast Company, The Industry Standard and Business 2.0 achieved high visibility. The Internet was no longer the exclusive domain of technical experts but had entered the world of commerce. Only few years after the bubble, the romantic dotcom stories are about to fade away for good but before they do, let’s return to some of dotcom’s golden days and see how they’ve been reassessed during the Internet’s first recession of 20012002.

The Dotcom Solar System

The bull market of the late 90’s convinced analysts, investors, accountants and even regulators that, as long as stock prices stayed high, there was no need to question the company practices of these emerging ventures. That changed drastically in 2000. While publicity after March 2000 focused on the ever-rising list of dotcom bankruptcies, 2001 saw the NASDAQ’s crash overshadowed by a much bigger overall recession, September 11 and serious collapses such as that the energy giant Enron and the telco Global Crossing. Enron’s demise has been called the first morality play of the post-boom era and the enormous media attention it generated indicates a symbolic turn:

And then, as if to confirm that an era had ended, the nation’s seventh-largest company, one that had reinvented itself using the tools of the momenttechnology, faith in markets, canny lobbying and an ability to exploit deregulation to create new businesses—went poof.7

According to Bill Keller in The New York Times, Enron ’embodied the get-obscenely-rich-quick cult that grew up around the intersection of digital technology, deregulation and globalisation. It rode the zeitgeist of speed, hype, novelty and swagger.’ 8 Enron was once a ‘thinking-outside-the-box, paradigm-shifting, market-making company. In fact, it ranked as the most innovative company in America four years in a row, as judged by envious corporate peers in the annual Fortune magazine poll.’9 The core, and most profitable part, of Enron was its web-based energy trading platform. The Internet turned out to be the ideal vehicle to deliver this product. Consider Keller again: ‘Petroleum was hopelessly uncool; derivatives were hot. Companies were advised to unload the baggage of hard assets, like factories or oilfields, which hold you back in the digital long jump, and concentrate on buzz and brand.’10 Accountants who tried to impose the traditional discipline of the balance sheet were dismissed as ‘bean-counters’ stuck in the old metrics. Wall Street looked to new metrics, new ways of measuring the intangible genius of innovation, and the most important metrics were the daily flickers of your stock price. When the stock plummeted, Enron died. Liquid modernity was not crisis-proof. Keller sums up the change of mood, so different from a few years earlier: ‘The louder someone yells ‘free markets!’ the closer you want to look at his files (assuming they have not been shredded)’.11 Eventually, the purpose of business itself was at stake: making money or creating value and providing a service for customers?12 There was suddenly such a contrast between:

the blue-collar firemen who did their duty without quibbling over widow’s pensions before they went into the burning building and senior Enron managers selling their stock as the price sagged, without warning humbler employees who subsequently lost everything on their 401(k) investments in the company.13

Blind faith in the New Economy and an anything-goes attitude were paradigmatic for the late nineties. So, when the dotcom crash came, the blame was variously sheeted home to the sixties, liberalism, the born-again materialists, Clinton or even the environmental movement.14

It seems that one of the ways to solve the crisis is to discriminate between the ‘pure’ and the ‘impure’; the innocent, spiritual and alternative (Californian) Internet as opposed to the Internet of the ‘dirty’, money-laundering, gambling Wall Street mafia. For example, Kevin Kelly, editor of Wired and author of the 1998 bible New Rules for the New Economy,15retrospectively smuggles away his personal responsibility into the whole affair:

Three trillion dollars lost on NASDAQ, 500 failed dotcoms, and half a million hi-tech jobs gone. Even consumers in the street are underwhelmed by look-alike gizmos and bandwidth that never came. This revised view of the Internet, as sensible as it is, is as misguided as the previous view that the Internet could only go up. The Internet is less a creation dictated by economics than it is a miracle and a gift.16

Kelly hastily abandons the CEOs he hung out with during the roaring nineties. In order to cover up his own involvement he then praises the army of amateur website builders:

While the most popular 50 websites are crassly commercial, most of the 3 billion web pages in the world are not. Companies build only thirty percent of web pages and corporations like The rest is built on love, such as or The answer to the mystery of why people would make 3 billion web pages in 2,000 days is simple: sharing.17

It is no doubt a comfort, for both those who missed out and those who lost their savings, to get such suave words. Volunteerism will be the penance for all the bullish sins.

John Perry Barlow, co-founder of the Electronic Frontier Foundation, has a more down-to-earth approach. Speaking in early 2002 Barlow admitted that being an Internet guru isn’t what it used to be:

I lost probably 95 percent of my net worth. But it’s been good for the Internet, and in the long term it’s going to be very good for the dot-communists. Never has there been a time when there are so many young people who have been poor and then rich and then poor again. I think it’s an educational experience that teaches you what’s valuable in life. To have a whole bunch of money at a really young age and see how completely useless it is—it trains a lot of folks in the real value of things.18

Like Kelly, he interprets dotcommania as a hostile take over attempt lead by forces from the past. Barlow does not name names but merely points the finger at venture capitalists, investment banks and other ‘established’ industries. He uses the familiar biological metaphors:

The whole dot-com thing was an effort to use 19th and 20th century concepts of economy in an environment where they didn’t exist, and the Internet essentially shrugged them off. This was an assault by an alien force that was repelled by the natural forces of the Internet.19

However, unlike Kelly, Barlow does admit his own errors in all of this, and suggests that he is, ‘trying to evaluate where to go because we’ve so massively screwed up’.20

During the Dotcom wave ‘workers got totally wrapped up in greed,’ a Sydney IT-professional told the Australian Financial Review. ‘They demanded huge salaries, changed jobs every 12 months—and now it’s payback time.’21 There is talk of retribution on the symbolic analysts, resulting in white-collar blues. In the same article, the journalist explains: ‘Suddenly, the old economy is outpacing the darlings of the new economy. If you can work a lathe or lay a concrete slab, you are in demand.’ Like everyone else, knowledge workers are ‘slaves to the forces of supply and demand’. This passing-off of doctrine as a revelation, can only be understood in the context of the dotcom promises of everlasting hyper-growth based on the capacity of technology itself to create new markets in a cycle that would simply transcend traditional economic laws.

It was time for the blame game. As a sign of backlash, the Australian Commonwealth Bank executive David Murray, in a speech at the 2002 World Congress on IT, warned of the ‘temptation of making IT a strategy in itself’.22 Proud of not having adopted the dotcom model, Murray signalled that technology was no longer providing his bank with productivity gains:

If every desktop a business puts in place is a royalty payment, if that desktop is used for staff emails, or for downloading pornography and hence creating legal risks if technology isn’t meeting the requirements, then you should question its value.23

He even went as far to accuse IT of wrecking the world economy:

Microsoft says information technology is going to lead the growth of the world economy. Well, let me tell you the IT industry in the US has single-handedly wrecked the world economy because the promises were large and by the time they were turned into investor promises at the casino-end of the equity markets, then the investments were entirely unrealistic.24

Here we see technology firms and capital accusing each other of being responsible for the dotcom crash and the following recession.

Underneath the dedicated excitement of the late nineties we can find a deep sense of inevitability. I am hesitant to say fatality because that may sound fancy and besides, Jean Baudrillard would have nothing but disdain for the dotcoms because of their all-too-obviously-obscene behaviour. Unfortunately, dotcoms lacked suspense. Without a long term power strategy and lacking in conspiratorial energy, dotcoms were reduced to mere cheating and bluffing. As with other aspects of the ‘transparent society’ they were driven by essential human blandness. Generation @ were nothing but ordinary people and there is perhaps no secret which needs to be revealed. There were no signs of despair or hope. At best there was gambling and white-collar crime. And now there is a sense of cold cynicism about a gamble lost. No depth, only light. No such thing as wrongdoing.

‘Rules were for sissies. These were invincible innovators, who sneered at rules,’ writes Keller on Enron’s self-conception.25 Management guru Tom Peters had called for revolutions, the breaking the rules and the smashing of systems—and so the Enronists did—presumably unaware of the obstruction-of-justice indictments ahead. ‘Suborning of governance was the modus operandi,’ Karel Williams, a Manchester professor of accounting, explains.26 The Enron power elite created an organization with an internal culture of recklessness. He argues that individual ‘misconducts’ were backed and rewarded by the business culture at large: ‘The stock market itself was complicit in the fraud insofar as every successful con trick needs a greedy gull who willingly suspends disbelief as much as the clever fraudster who pockets the gain’.27 The key is, it all happened so quickly. It was over before the antagonists had any idea what they were doing. The effects of time compression are part of the ‘organized innocence’ on display here. The speed cult of the ‘fast companies’ twinned with young, aggressive MBAs (better known as ‘baby suits’) eliminated the both the need to ask, and the possibility of asking, basic questions. In this collective hallucination it was inappropriate to even suggest that business-as-usual would have its ups and downs. Approaching the magic year 2000 everything seemed right.

Dot cons were at the forefront of much larger culture of speed that hollowed out traditional business standards, in particular in financing and accounting. Auditing had become hugely profitable. Alan Kohler in the (Australian) Financial Review explains the mechanism:

The auditor writes a brief formal letter to the board and the shareholders via the annual report which states that everything is just tip top. He/she then writes another—secret—letter to management listing all the problems. This is called the management letter and is the real audit. 28

Auditing, says Kohler, has become more a matter of checking whether a company’s books adhered to the letter of accounting standards, rather than whether they are true and fair. Company audits had become dependent on management figures. These flaky (‘fluid’) business practices are at the core of the dotcom scheme. As Kohler writes on the Enron case: ‘Andersen was so focused on its lucrative relationship with the company and on compliance with standards that it was able to ignore the fact that the accounts were actually false’.29 A fair number of dotcoms did not even make it to the point of fabricating their annual report. Their problems started with the required quarterly figures and made-up growth figures in business plans and pre-IPO (Initial Public Offer) documents. It’s now clear that without baby suits, ‘entrepreneurial’ accountants and ‘visionary’ bankers the dotcom phenomenon would not have occurred.

Yet, former dotcommers are still baffled. As they claimed that ‘everything would be different’, they were unaware of the historical reality that every revolution will eat it own children. Thus the crisis that overwhelmed the heralds of virtual enterprise seemed both unjust and without cause, and certainly happened without leaving anyone to blame. Perhaps lawyers may have advised the dot.bomb authors not to dig too deep for fear of class actions. That could explain the stunning lack of (self-) analysis. More likely is the superficial and packaged experience, sensed as something uniquely exciting that the dotcom generation, worldwide, went through. Dotcom antagonists had history on their side. Opportunities could only multiply. So what went wrong?

The Internet Galaxy

Let’s look into theory. Until late 2001 there was a widespread belief that the IT-sector would not be affected by economic downturns. It was presumed that there would always be strong demand for technology products and services and that, after many decades of growth, the tech industry itself simply could not be hit by a recession. Moore’s law—that the processing capacity of CPU chips doubles every eighteen months—was presumed to be apply to the tech-business at large. Overproduction could not occur. The industry was only familiar with overdemand for the latest models. Even Manuel Castells in The Internet Galaxy, his timely update to the monumental Network Society trilogy, is not free of this dogma. He writes:

For all the hype surrounding the firms, they only represent a small, entrepreneurial vanguard of the new economic world. And, as with all the daring enterprises, the business landscape is littered with the wreckage of unwarranted fantasies. (64)

Castells can see only bright futures ahead. He uncritically copy-pastes Maoist-type e-commerce growth forecasts into his text; predictions fabricated by the Gartner consultancy firm, itself a company that is highly dependent on continuous (stock value) growth in the IT-market.

Castells denies that economic growth in the ’90s was ‘speculative or exuberant’, and writes that ‘the high valuation of technology stocks was not a financial bubble, in spite of the obvious over-valuation of many firms’. (111) While he proclaims his approach to be ‘strict’ and ‘analytical’ (4) Castells does not analyse the ideological aspects of the New Economy paradigm, nor its manifestation in the ‘business porn’ magazines, conferences, management celebrities and its God-like IT-consultants. Instead, he neutralizes the term New Economy by using it to refer, at a general level, to all economic sectors that introduce network technologies. The ‘network enterprise’, for Castells, is neither a network of enterprises nor an intra-firm, networked organization. ‘Rather it is a lean agency of economic activity, built around specific business projects, which are enacted by networks of various composition and origin: the network is the enterprise.’ (67)

Unlike the New Economy prophets such as George Gilder, Tom Peters or Kevin Kelly, Manuel Castells does not sell a religion. He abstains from trying to electrify his readership with upbeat concepts. The Berkeley professor, part poster-boy for moderate academia and part Silicon Valley meets Haight-Ashbury, ‘correctly’ regards The Internet Galaxy as an ongoing attempt to reconcile industry and community. One thing Castells does not want is to upset technologists and business people. So he switches back and forth, praising the ‘real’ changes of IT while playing down the long-term effects of the speculative bubble. As a techno realist and ‘natural capitalism’ sympathizer, Castells favours regulation and sustainable growth models. In the face of the crisis of legitimacy being experienced by governments Castells argues for the necessity of political representation and effective public policy: ‘Until we rebuild, from the bottom up and from the top down, our institutions of governance and democracy, we will not be able to challenge we are facing’. (105) These are huge tasks and far too often the Internet is given the massive responsibility of ensuring their completion. Yet Castells did not travel to the edges of the Galaxy to explore the limits of his own discourse. For him, society equals network, and so we are inevitably drawn deeper and deeper into cyberspace. There is no room to question the utility of the network as a metaphor, let alone to question its agenda. There are no parallel poetic universes. As for many techno-determinists, Castells declares history a one-way street.

Within Internet theory, Manuel Castells represents the third wave of pragmatic social scientists researchers who have come after the computer scientists and the cyber- visionaries. For Castells the impact of network technology on business, culture and society is everything but empty: ‘betting on the technological revolution was not a foolish idea.'(105) On the other hand, the current economic laws are still in place. Ever since the mid-nineties, financial markets have dictating the patterns and rates of growth in the technology sector, not the other way round—and Castells is well aware of this fact. Technology in itself is no longer the driving force: ‘The new economy is not the fantasy land of unlimited high economic growth, able to supersede business cycles and be immune to crises’. (111) The new economy depends on ‘markets’ which in their turn are influenced by ‘information turbulences’. (86) Yet almost immediately, he switches position:

To consider that the Internet or genetic engineering are the driving forces technological engines of the 21st century economy, and to invest in firms that are producers or early users of these major technological innovations, regardless of their short-term profitability, does not seem entirely irrational. (86)

In the society of risk, theory can no longer produce a meta perspective of certainty. But neither does Castells wants to become a degraded PR tout for the ‘the Internet Age, characterized by systematically volatile, information-driven financial markets, the ability to live dangerously becomes a part of the business way of life’. But how dangerous is this world for Castells? Because he is adverse to both speculative thought and ironic negativism he finds himself in a somewhat difficult position. He wants to be part of the acceleratedZeitgeist and covered by the safety of an insurance policy. Castells provides us with a carefully positioned and impressive overview of new research which makes a modest contribution lacking in critical analysis. Paradoxically these tempered thoughts do not really help us in understanding the wild fluctuations in the State of the Internet.

But dotcommania happened, and its history needs to be analysed. According to Castells:

a typical Silicon Valley sequence in the late 1990s started with a daring business plan, and with some knowledge of how Internet technology could contribute to it, yet focusing more on business innovation rather than on technological innovation. After all, most technology these days is open source or ‘off the shelf’: the real issue is what to do with it, and for this the essential item is talent. (79)

I would rather say that the crucial step is to shape, armour and then blow up concepts, ‘memes’, and ideas so that they can then become operational entities. A productive discourse is not mere talk. The creation of a compelling ideology is not just a matter of talent. The killer application is not just people but the collective ability to mobilize and direct the Network Spirit. There could only have been a dotcom doctrine because it assembled ideas from elsewhere and energized these different pieces of a jigsaw towards the Future. The dotcom narrative drew on and feed from an accelerating feedback loop. It relied on much larger forces—privatisation, deregulation and globalisation—and was embedded in a structurally unstable situation, caused by ‘information turbulences’. Castells knows the limits of his bureaucratic categorizations and counters his own quasi-neutral instrumental rationalism with ambivalent conclusions.

Throughout his research, which covers the ‘dotbomb’ period (March 2000 March 2001), Castells is critical of old-economy liberals who regarded dotcom mania as merely a ‘speculative financial bubble’:

I think the ‘bubble’ metaphor is misleading because it refers to an implicit notion of the natural market equilibrium, which seems to be superseded in the world of interdependent global financial markets operating at high speed, and processing complex information turbulences in real time. (105)

Both the overvaluation of tech stocks in 19962000 and the following devaluation happened ‘regardless of the performance of companies’. Here, Castells is searching for a valuation of the network economy outside of the financial markets—and fails to find it, instead describing the 2001 downturn as ‘a new form of business cycle’. What he attempts here is the conceptually heroic task of unravelling the technology sector and the stock market. He is right to say that the volatility is systemic. Post-Marxists would perhaps describe it as in ‘permanent crisis’. Yet it is significant that Castells does not blame fraudulent schemes but the ‘nay sayers of the old economy of the industrial era’.

Here I disagree. The capitalist logic is fundamental to the IT-sector—perhaps only a massive delisting of IT-companies on the stock exchange and a closure of the NASDAQ, both very unlikely moves, could disentangle capital from the computer industry. There was no ‘alien’ assault from ‘old’ Anglo-Jewish Wall Street money on the ‘new’ West coast hippie engineers, coding for the common good. Still, Castells’ intent to think business and society together is the right strategy. There is no ‘pure’ Internet any longer that can be situated outside of the market. Despite the utopian work of coders, artists and activists, the Internet cannot easily be disassociated from the capitalist logic. Castells’ message: we live inside the Internet Galaxy (as if we could pretend otherwise?) is a pragmatic message. At this point it bears a remarkable resemblance to Michael Hardt and Toni Negri’s thesis in their millennial work Empire: we live inside Empire (and do pretend there is an outside).30 And so with Castells’ closing remarks:

If you do not care about the networks, the networks will care about you. For as long as you want to live in society, and this time and in this place, you will have to deal with the network society.31

Even after the dotcom crash, technological innovation will be economically driven—perhaps more so then it ever was. The fight has just started over the terms and conditions under which a techno-renaissance could unfold: free software, open source, copyleft, barter, free money, ‘love’, etc. The role of financial markets and large corporations in this process of ‘freedom enhancement’ is highly disputed—and yet unclear. If the trajectory from bubble to burst is not to be repeated, the Internet community at large need to dream up alternative economic models quickly, otherwise capital will again knock on the door.

‘Perhaps we, as a society, have become so accustomed to associating the act of running a business with the act of making money—or rather, the act of booking revenue in accordance with the arts of accountancy—that corporate analysts appear not to have had an institutional framework capable of distinguishing between an accounting trick and a business process, between a revenue stream and the production of value.’ (Jonathan Siegel, posted by Steve Brant on the Triumph of Content list, 20 January 2002).



1 Manuel Castells, The Information Age: Economy, Society and Culture, 3 vols, Blackwell, Malden, Mass., 19961998.

2 Manuel Castells, The Internet Galaxy, Reflections of the Internet, Business, and Society, Oxford University Press, Oxford, 2001. Further references are given after quotations in the text.

3 J. David Kuo, Dot.Bomb: Inside an Internet GoliathFrom Lunatic Optimism to Panic and Crash, Little, Brown and Company, New York, 2001. Further references are given after quotations in the text.

4 Ernst Malmsten, with Erik Portanger and Charles Drazin, boo hoo: A dotcom Story from Concept to Catastrophe, Random House, New York, 2001. Further references are given after quotations in the text.

5 Michael Lewis, The Future Just Happened, Hodder & Stoughton, London, 2001. Further references are given after quotations in the text.

6 Brenda Laurel, Utopian Entrepreneur, MIT Press, Cambridge, Mass., 2001. Further references are given after quotations in the text.

7 Richard W. Stevenson, ‘Why a Business Scandal Became a National Spectacle’, New York Times, 17 February 2002.

8 Bill Keller, ‘Enron for Dummies’, New York Times, 26 January 2002 (online edition).

9 Keller.

10 Keller.

11 Keller

12 ‘Perhaps we, as a society, have become so accustomed to associating the act of running a business with the act of making moneyor rather, the act of booking revenue in accordance with the arts of accountancy—that corporate analysts appear not to have had an institutional framework capable of distinguishing between an accounting trick and a business process, between a revenue stream and the production of value.’ (Jonathan Siegel, posted by Steve Brant on the Triumph of Content list, 20 January 2002).

13 Karel Williams, ‘The Temptation of Houston’, Australian Financial Review, 15 March 2002, p. 3.

14Timothy Noah, ‘Blaming Liberalism for Enron’, <>, 21 January 2002.

15 Kevin Kelly, New Rules for the New Economy: 10 Ways the Network Economy is Changing Everything, Fourth Estate, London, 1998.

16 Kevin Kelly, ‘The Web Runs on Love, Not Greed’, Wall Street Journal, 4 January 2002.

17 Kelly, ‘The Web Runs on Love’.

18 Rachel Konrad, ‘Trouble Ahead, Trouble Behind’ (Interview with John Perry Barlow),, 22 February 2002, <>.

19 Konrad.

20 Konrad.

21 Stephen Long, ‘White Collar Blues, The Professional Job Crisis’, Australian Financial Review, 2324 February 2002, p. 1.

22 Konrad.

23 Katrina Nicholas, ‘CBA Chief Attacks IT for Wrecking World Economy’, Australian Financial Review, 1 March 2002, p. 37.

24 Nicholas.

25 Keller.

26 Karel Williams, ‘The Temptation of Houston’, Australian Financial Review, 15 March 2002, p. 3.

27 Williams.

28 Alan Kohler, ‘Noble Profession Crumbles in the Rubble of its Own Sept 11’, The Australian Financial Review, 2324 March 2002, pp. 72, 13. Kohler quotes the newsletter editor for the accounting industry Michael Latterty: ‘This crisis … is the profession’s equivalent of the horrors of September 11. Like 9.11 it is a wake-up call—because there are more Enrons out there, some possibly of national dimensions.’ According to Kohler the ‘national dimension’ refers to the insolvent Japanese banks which all big five accounting firms have signed unqualified audit reports for.

29 Kohler.

30 See Michael Hardt and Toni Negri, Empire, Harvard University Press, Cambridge, Mass., 2000.

31 There is a nice analogy in Moholy-Nagy’s warning, proclaimed in the 1920s, that those who are ignorant in matters of photography will be the illiterates of tomorrow. SeeHubertus von Amelunxen, ‘Afterword’, in Vilem Flusser, Towards a Philosophy of Photography, Reaktion Books, London, 2000, p. 90.

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