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What I Saw at the Meltdown

Five years on, the dot-com boom seems like another world.

By 3.20.05

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NEW YORK -- Last week marked five years since the stock market bubble finally began to burst. The Nasdaq hit its all-time high on March 10, 2000, and then began a steady plunge that marked the birth of a long bear market.

The long bull market that preceded it was a remarkable time, but also a costly one. On the plus side, we got a technology whose transformational effects can't be overstated. On the down side, the dawn of the Internet also spawned the dot-com craze, one of the loopier periods in American business history and proof positive that so long as there are human beings, we will remain vulnerable to the Utopian impulse.

I know: I was there. Well, sort of.

In keeping with a lifelong habit of boarding trains just as they are leaving the station, I joined a Manhattan-based dot-com in March 2000. The company was actually not a dot-com strictly speaking, in that its product was not a website hawking goods or distributing content, but its fortunes, such as they were, relied on the continued boom of what was then called the New Economy.

Like most dot-coms, the company had no profits to speak of, and it had been trying longer than most. The leadership was not concerned, however. On the contrary, when I joined that March the mood was euphoric. Convinced they were in the vanguard of a new way of doing business and that naysayers just didn't "get it," the leadership instituted a massive hiring plan.

"Right now, the priority is to get big," the CEO told employees at my first company meeting. "We need to ramp up the hiring process."

I wondered how more hiring was going to help us get to profitability sooner, but then I was pretty new to the business world and figured I was being small-minded. No one else seemed concerned about profitability, and they were all so bright. Most company meetings were spent mocking our competitors or old-line, established companies that any day now would wash up on the rocks of obsolescence. Profitability was not mocked so much as ignored.

The HR department instituted a lavish employee entertainment program, with regular company parties, cruises, and a raft of perks and benefits. Fortunately, it never got to where employees were playing foosball in the kitchen, or bringing their dogs to work, but hey, we were New Yorkers, not San Franciscans.

Still, self-indulgence was the rule: to this end, employees generally chose their own job titles. As Manager of Corporate Communications, I managed no one and reported to a Director of Corporate Communications, who directed me and not much else except an occasionally sharp British wit. We worked with a VP of Marketing who would have been fired for sexual harassment before lunch at any reputable company; he supervised a Marketing Director, who did all the real work in the department. Weekly marketing meetings were a frontal assault on stale old concepts like project management and accountability, along with extensive discussion of new movies. When it came to work, efforts were modest.

"I'm sending out an e-mail a day on this," the VP said, referring to whatever spontaneous initiative we were pursuing that week on company debt. He could only fit in one e-mail a day because the rest of the time he was web surfing (a popular employee pastime) or ogling women half his age. When some in the marketing department couldn't get out of bed in time for our 11:00 meetings, he helpfully moved them to afternoons.

Our ostensible mission was to "brand" the company and increase visibility, but this was a tall order because none of us was entirely sure what the company did. We were struggling because the CEO kept changing his mind about that, and also because, all in all, the company really didn't do much. Given this vacuum, others in the company were free to define what they did almost however they wished.

MY FAVORITE SELF-APPOINTED fiefdom belonged to the 24-year-old Director of Software Architecture. He was in charge of the company's "technology platform," which was, of course, a half-baked nonstarter designed to burn cash. He heard that I had been assigned to write some copy on the technology and took me out to lunch, wherein he ambushed me with geek questions, shaking his head as I demonstrated my ignorance of APIs and the changes to human consciousness that were just around the corner.

"How can you write about the platform when you don't understand it?" he fumed. "We're trying to change the world here." The Architect, as I came to view him, saw himself as a new mandarin of the digerati, and he was dancing on my analog grave. I wondered why I'd ever left the nonprofits.

Another fiefdom was inhabited by a lovely Spanish woman who came in at 11 and left at three every day. She always dressed like she was going out to a very upscale after-hours club, which in a sense is what the company was, except it kept shorter hours. No one really knew what she did. She was in charge of competitive research one month, quantitative analytics another. All anyone knew was that she was beautiful and had a hypnotic voice, and for a very long time, this more than sufficed. Some colleagues liked to leave her voicemails just so they could hear her outgoing message.

"I think she was the most beautiful woman I've ever seen," an old colleague told me recently. "What did she do, though? Was she in marketing?"

When the market started hemorrhaging, the leadership was very slow to react. Hiring continued for a time, and the delusional company meetings persisted for much longer. Morale remained high since the CEO steadfastly refused to lay off anyone, thereby upholding the company's core value, immunity from consequences. We staggered through the rest of 2000 as the dot-com collapse became first a trend and then a fait accompli. But the values of the new utopian capitalism died hard.

Finally in early 2001, the layoffs began, first in a surgical strike that the CEO promised was a one-time event, and then in ongoing, and often unannounced, waves. People finally began to lose faith, and they scrambled for soft landings, but the job market was none too hospitable. Those of us who remained took on more responsibility, at least in a manner of speaking. I began managing a graphic designer who reported to work sporadically, with excuses for his absences ranging from apparently ongoing deaths in the family, to a sudden marriage, to troubles with the INS. HR was very supportive of me in making clear to him that if he messed up for a seventeenth time, he was really going to be in trouble.

The new realities were most bitter for the company's legion of younger employees, many of whom were working their first job after school. For them, the dot-coms had been a glorious extension of college, with salary and benefits thrown in. Now it was all crashing down and they would have to get real jobs. It was reminiscent of the 1960s, when the student radicals had to traipse off to graduate school once the fun was over burning flags and slandering soldiers.

By the time the planes hit on September 11, 2001, the company was down to about half of its peak size. The events of that day, and their devastating effect on the economy, accelerated the shakeout. I knew that my own days were numbered, but I wasn't having any luck in the job market. I managed to hold on at the company for another six months.

AS DIFFICULT AS THAT PERIOD was for everyone -- the recession may have started with the dot-coms, but it didn't end there -- I couldn't help but find pleasure in seeing the guilty punished. The many industry magazines devoted to Internet coverage shrunk from 200-page, ad-laden manifestos, to 80-page, elegiac husks. Underlying the post-mortems was the barely-contained rage that the house party had ended, and that accountability had returned like a couple of angry parents. I thought that this must have been what it was like to read Ramparts after Nixon was re-elected.

Now it all seems so much further away than five years. Our culture purges dead wood and elevates upstarts with such ruthless rapidity that the dot-com euphoria hardly seems any more relevant in 2005 than the pet rock craze of the 1970s. It was just one of those moments in time when a group of people -- Investors? Venture capitalists? Journalists? All of us? -- went a little mad, but the spasm passed.

The technology marches on, and god bless it. The culture is gone, and good riddance. Or, as one of my colleagues used to say at the end of every vaporous marketing meeting: "Whatever, dude."

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About the Author

Paul Beston is associate editor of the Manhattan Institute's City Journal.