The dot-com bubble of the late 1990s saw endless waves of investment in internet companies fueled by excitable media reports, creating a feedback loop where momentum fed itself. Some startups spent money extravagantly, such as a company that flew in a top New York hairdresser to redesign the hair of a digital avatar. More ordinary individuals also got swept up in the frenzy as investment clubs spread. The enthusiasm crossed social boundaries and involved much of the public, who were watching financial news networks closely. Traditional valuation of companies was ignored as momentum and hype took over.

1. The dot.com bubble
Does the media fuel bubbles?
Narrator
There were endless waves of investment in dot-com businesses fuelled by excitable news
reports – the momentum was now beginning to feed itself.
Interview Sync
Evan Davies: The City Uncovered Episode ‘The cash was flowing like Ancient Egypt. It
was amazing.
You could fund a drawer full of socks back in those days and people were giving 60 million
here, 80 million there; there was a hysteria here that we’ve never seen since.’
Narrator
Some of the dot-coms spent their money in extraordinary ways.
Rory Cellan Jones
‘And there was an atmosphere of incredible profligacy – a great example – Boo dot-com
decided that it needed on its front page an avatar, a person to invite people into the site, she
was called Miss Boo and they decided Miss Boo’s hair didn’t look quite right, so they called up
New York and got New York’s top hairdresser to fly across the Atlantic to Britain to re-style
Miss Boo’s hair. Not a real person, but they spent real money on a real hairdresser to come
and redesign the hair of Miss Boo.’
Narrator
More and more ordinary people were swept up in the excitement of the dot-com frenzy.
Barry Lake is a quantity surveyor from Essex, and a member of an investment club…
Barry Lake
‘I really didn’t know much about stocks at all, but a friend of mine had seen an idea,
investment clubs, I think he read it in the paper or something, and he rang up a load of his
mates, me included, and said right, okay, we’re meeting down the pub, be there. So I did.
We did feel that it was something the ordinary guy in the street wouldn’t do until you get an
investment club and we realised that, yeah, it is something the ordinary guy in the street could
not only do but could get some enjoyment and hopefully a bit of profit out of as well.’
Narrator
The enthusiasm for the dot-coms was spreading across social boundaries and the world.
John Coates
‘The dot-com wasn’t a bubble that was confined to the investment or trading Community. The
public was caught up in it.
Normally when you visit a bar in an airport in America, people are watching American football
or baseball, but during that period they weren’t. They were watching financial news networks
and punching the air when the stock ticker came up.
The whole population was caught up in that particular bubble.’
Narrator
Traditional valuation techniques for companies were set aside or ignored altogether.