Business Monthly: `It Was a Perception Problem' ; Analysts and Survivors of the Late-Nineties Dot.com Bust Are Meeting at a Conference to Discuss the Future of the Digital Economy. by JOEL BUDD
budd, joel, The Independent (London, England)
On Thursday, a group of entrepreneurs, academics, pundits and politicians will assemble in London's Portland Place. Their purpose: to convince the nation that the digital economy was - and is - a real economic and cultural phenomenon, and not just a fraud concocted by a bunch of twentysomethings who liked to wear combat trousers to work.
"Beyond the backlash: where next for the digital economy?" is a conference supported by four centre-left thinktanks: Forum for the Future, Demos, the Work Foundation, and the Institute for Public Policy Research. Economic gurus Will Hutton and Charles Leadbeater will be on the platform as will a parade of internet analysts, futurologists and old favourites like Lastminute.com's Martha Lane Fox. Already, the organisers are talking about an "agenda- setting conference".
You may remember the digital economy. It was a golden era for new businesses, when it seemed all you had to do was stick ".com" after your name and you would be besieged by chequebook-waving venture capitalists. It was also a revolutionary time, when the old rules of corporate growth and valuation were swept away. But it was even more than that. Once the new technology had worked its magic, we were told, we would all become participants in a high-productivity, low- pollution economy. Utopia would arrive at last.
In Britain, which was a couple of years late climbing onto the internet bandwagon, this brave new world lasted little longer than 12 months. By early summer 2000, investors were beginning to suspect that the dot.coms were taking them for a ride. They abruptly pulled the plug, leaving several good businesses (as well as many bad ones) to perish. Stock traders tore into the sector, taking 90 per cent off the value of anything that seemed remotely high-tech. And an entire generation thought again about management consultancy.
But the dream didn't die. Even in the dark days, a few souls kept faith in the digital economy. They shrugged off the contempt of investors and Old Economy braggarts, and waited for the revolution to begin again.
Over the years, these true believers have been comforted by an indisputable fact. Although the dot.com boom went bust, the technology that made e- commerce possible in the first place is still developing. Computers are becoming smaller, faster, and cheaper. Ordinary people are going online in increasing numbers. Quite a few are even buying things, although not to the extent that had been forecast in the late Nineties.
Martha Lane Fox, co-founder of Lastminute.com, and the most famous survivor of the dot.com crash, insists that internet retailing was always healthier than many analysts thought. "There's a big difference between what customers were doing and the perception of e-commerce in the media and the City," she says. "Yes, the stock market collapsed, a number of companies went out of business, and people couldn't raise money any more. But consumers were still buying online in hugely growing numbers, and lots of good businesses were beating estimates. There was never a fundamental problem with the industry. It was a perception problem."
Not everyone is so sanguine about the health of Web-based retailers. But many New Economy watchers agree that the bursting of the internet bubble has created a loathing of e-commerce that is just as irrational as the late-Nineties hysteria. One day, they believe, the dot.commies will stage a comeback.
Charles Leadbeater says that the collapse teaches a number of painful lessons about the nature of entrepreneurship and how quickly businesses can expect to grow. …