The Dotcom Bubble Revisited

It’s the big question hanging over America’s beleaguered economy: Whence is the next great wave of growth going to emerge? After the dotcom bubble burst at the end of the ‘90s, we moved immediately to the great Wall Street bubble of the ‘00s. First the investment dollars and best minds flowed into Silicon Valley and its various satellites around the country. Then they washed in great manic waves into the world of derivatives and financial arcana. Now that that is gone too, it’s not clear what’s next. What’s going to be the New New Thing? But Energy Secretary Steven Chu, a Nobel Prize-winning physicist, says that the question should not be posed quite so starkly. The information technologies that drove the dotcom phenomenon are still with us, he points out, and they will supply a good part of the revival of the U.S. economy when it comes—especially in driving innovation in the environmental and energy sectors. “Over the long term, the computer-slash-internet technologies have dramatically changed the way information has been used,” Chu told me in a recent interview. One outcome of the dotcom bubble, for example, is that “Google is now a verb,” Chu says. Another example of how both the dotcom and housing bubbles left some permanent progress behind, Chu says, is in the large number of fiber-connected homes, which surpassed 2 million at the height of the housing mania in 2007. Maybe this is just more happy talk from an administration that is ever-eager to jawbone up the economy, especially considering that the tech sector is still hurting (Sun Microsystems, which never fully recovered from the dotcom burst, has been engaged in wary talks with IBM). Still, Chu’s take is something to think about. Maybe bubbles aren’t all bad after all.