ABSTRACT
In March 2000 the dot-com bubble peaked, and then the finger pointing began as market capitalization losses would reach $7 trillion. Financing evaporated for money-losing start-ups concocted by inept and criminally bent founders, and their corporate launching pads quickly folded. Enron, which had built an online empire trading energy and broadband contracts, became a huge casualty, seeking court protection from creditors in December 2001. It was followed by Global Crossing and WorldCom, which had also staked their future on broadband transmission by building and buying optical fiber networks to serve the exponential growth of high-speed Internet traffic. Like colleagues at https://Amazon.com" xmlns:xlink="https://www.w3.org/1999/xlink">Amazon.com and AOL, top management at the three bankrupt companies were intent on becoming big—fast!—in order to stake monopolistic claims on the World Wide Web and aggrandize Bill Gates–sized personal fortunes. The wannabes had Caesarian ambitions, but lacked both technical and financial abilities for sustaining bona fide business plans. With the unprecedented use of easy money from Wall Street, Ponzi schemes instead were promoted that bilked billions of dollars from investors, employees, creditors, and business partners. In this they were abetted by cronies in Washington, D.C., Wall Street analysts, investment banks, outside auditors, and law firms that received lucrative fees for their not entirely professional services. Carefully selected members of the boards of directors were also in on the take. Greed of this insatiable, personal variety was, as is often the case, a principal factor in the corporate debacles. As an integral part of human nature, it always watched patiently for an opportune time to strike in wood-paneled executive suites. And the Internet Revolution, with its ethereal promise of continuous productivity gains, became a perfect time for fabricating arcane and fraudulent schemes that grandly conned the media, investors, and oversight bodies. Even Fortune magazine was duped into naming Enron as the nation's most innovative company for five years in a row. This occurred at the height of the bull market, when its competitor Business Week was dubbing the AOL Time Warner merger the deal of the century. Journalists at such publications needlessly hopped on the bandwagon to cheer the new digital age while glossing over convoluted business prospectuses on, for example, broadband contract trading. Individuals, in contrast, who understood the involved dynamics of such transactions were busily starting up or at least investing in high-flying Internet companies that yielded spectacular returns, as opposed to merely writing columns on Microsoft, https://Amazon.com" xmlns:xlink="https://www.w3.org/1999/xlink">Amazon.com, or eBay and lumping them with such disastrous cases as Enron, Global Crossing, and WorldCom. The managerial abilities behind the successful franchises moreover were readily observable, since these businesses were built from the ground up while the likes of Enron were cobbled together based on jerry-built schemes and ill-fated plans. Such comparisons may have been difficult to perceive in the frothy boom times, but stand out clearly after the Sound and the Fury of the late 1990s dissipated. And for the benefit of a new generation of investors, the Enron stories and their lessons bear repeating in the probably futile hope that another $7 trillion will not go up in smoke.
