In a Bubble Economy, Recognition Comes Too Late
In Euphoria, Key Players Looked Away
By Steven Pearlstein / Washington Post Staff Writer / Nov 10, 2002
<Great Series of Articles Reviewing the Euphoria in the Wash Post - PQ
washingtonpost.com;
Mention the Bubble Economy and, for many Americans, it now conjures up images of shredded documents and half-built Houston mansions, depleted pension accounts and executives being led off in handcuffs. But it didn't start out that way.
Roughly from 1995 through the end of 2000, the Bubble Economy was known as the new economy, and nearly everyone thought it was a marvelous thing.
Billions of dollars poured in from all over the world from people hoping to get in on the ground floor of the Internet, a medium that held the promise of transforming not only the economy, but life as we knew it. Stock prices rose higher and faster than at any time in history, making the ups and downs of the Nasdaq Stock Market a national obsession.
Now, of course, we know it wasn't all real, and it certainly wasn't enduring. Twenty months after it tipped into recession, the economy is barely growing. Stock prices are back where they were four or five years ago. And nobody is sure how much of the revenue and profit growth during the bubble was real.
How could this have happened? Why did otherwise honest people resort to obfuscation, game-playing and outright fraud just to keep going? Where were the safeguards that were supposed to warn against the dangers and prevent the excesses?
This week, The Post will explore these questions in a series of stories that focuses on six individuals and companies at the center of the Bubble Economy. The theme running through all of them is that many of the key people involved in the economy got so caught up in the euphoria, so blinded by the financial rewards dangled in front of them, that they stopped doing their jobs -- or convinced themselves that the nature of their jobs had changed.
First and foremost were the corporate executives, the subject of today's installment, who began to focus more on managing their stock prices than managing their businesses. They were encouraged by pension and mutual fund managers who shed their roles as patient custodians of capital to make it big in the quarterly rankings game. And they were egged on by a money culture that lionized CEOs who could reliably deliver quarter after quarter of double-digit earnings growth..........<snip> |
