The dot com bubble was a stock market bubble that burst with ravaging effects in 2001. This bubble was created by the rise of Internet sites and tech in general. Many businesses and companies invested in online start ups, even though the stock market held no proof that they were worth anything.
Tim Berners-Lee was a British computer scientist that developed a network that would come to be known as the World Wide Web (WWW), or the Internet. The Wed connects different informational pages together with hyperlinks, using a programming language called HTML. The Internet began existing in the 1980s, but for the first decade it was used primarily by researchers and students, until the 90s when businesses and the general public began using them as well. As the Internet began to catch on, Americans were doing well financially, as under the direction of President Clinton the American budget had been balanced, meaning more money was left in the economy rather than going to taxes. As a result, the economy boomed and many opportunity for investment popped up. In 1997, Congress passed the Tax Payer Relief Act, bringing down taxes on capital gains, like investing. Many businesses saw the Internet as a great opportunity to expand and reach new clientele. They didn’t really consider how new of an invention this was, how many people weren’t skilled with navigating it, or how difficult it would be to make themselves known.
During the height of the Dot Com bubble in 1998-2000, approximately $100 billion was spent on new start ups each year. This estimate didn’t even include money spent on start ups already in place.
Many of these companies took daring risks to gain recognition and tried to work with a growth over profit setup, hoping that if they built up their clientele that profit would rise. Investors responded to daring business practices with money, throwing lavish parties and hosting extravagant events to sponsor the companies they had invested in. Unfortunately, the tech growth wasn’t as large as it seemed, and there were many high-profile court cases against businesses for going overboard and a lack of morality in their business practices. The stock market began breaking down rapidly as business spending declined and serious market corrections were made, causing devastating effects on many dot coms.
Many people had over invested in these dot coms. They payed more than they were worth, and when goods are overvalued, the market must make a correction. A good amount of these dot coms were legit, but not all and not enough to continue the bubble. The bubble burst in 2001. Not much happened in the field until 2003, when a new tax law was passed raising the capital gains tax once more. Worried about the taxes they would have to pay, everyone began selling their investments and many dot com businesses failed and collapsed, while others were brought close to bankruptcy. This resulted in a bust phase, until some of the businesses proved they were worth the investment.
Google and Amazon, huge companies today, weathered the dot com bubble and came out strong. Web-based companies control a good portion of the consumer market and social media sites dominate the web. Everything seems to be doing amazingly well now, but many investors fear that we are coming upon a bubble 2.0.
the problems not the problem 