With the bursting of the high-tech bubble, the prevailing social mood is shifting from Internet worship to cynicism. The attitude that "the Internet changes everything" has given way in some quarters to denigration of the Net as a fad-the citizen's band radio of the 1990s. Yet just as the early tone was overoptimistic, the new one could easily become unjustifiably pessimistic. To avoid overreactions, it might be useful to analyze what propelled the dot-com craze to the ridiculous heights it reached in 1999 and early 2000.

That this was a craze is becoming ever clearer. In the spring of 1999, for example, Silicon Valley venture capitalists vied for the privilege of funding more than half a dozen companies operating Web-based portals for pet-related products, services and information. In retrospect, it is clear that not even one of those companies could have been successful. Yet somehow all those venture capitalists, as well as the staffs of the startups, went along for the wild ride. The press and the general public also willingly and enthusiastically joined in the celebration of what promised to be a brave new world, where conventional business principles no longer applied.

Why were they all so wrong?

A few key interrelated and mutually reinforcing ideas appear to have led even the most experienced people astray. The most important was that of "Internet time." This was the perception that product development and consumer acceptance were now occurring in a fraction of the time that they traditionally took. Closely related to the concept of Internet time was the idea that the first company to establish itself in a new market would have an almost unassailable advantage over latecomers-the so-called first-mover advantage. Further support for the dot-com craze was provided by the notion of "network effects," in which consumers and producers adopting a new product or service would induce others to do the same.