A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

Yet Another New-Issue Craze
In the first quarter of 2000, 916 venture capital firms invested
$15.7 billion in 1,009 startup Internet companies. Many were
playing catch-up: an astonishing 159 initial public offerings
(IPOs) had been successfully completed in the previous
quarter. It was as if the stock market was on steroids. As
happened during the South Sea Bubble, many companies that

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received financing were absurd. Almost all turned out to be
dot-com catastrophes. Consider the following examples of
Internet startups.
Digiscents offered a peripheral you could plug into
your computer that would make Web sites and
computer games smell. The company ran through
millions from venture capitalists trying to develop
such a product.
Flooz offered an alternative currency—Flooz—that
could be e-mailed to friends and family. It was not
quite money, because there were only a few places
you could use it, but it sure made a unique gift. In
order to jump-start the company, Flooz.com turned
to an old business school maxim that “any idiot can
sell a one-dollar bill for eighty cents.” Flooz.com
launched a special offer to American Express
platinum card holders allowing them to buy $1,000
of Flooz currency for just $800. Shortly before
declaring bankruptcy, Flooz itself was Floozed when
Filipino and Russian gangs bought $300,000 of its
currency using stolen credit card numbers.

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Consider Pets.com, a real dog if there ever was one.
The company had a sock-puppet mascot that starred
in its TV commercials and even made an appearance
at 
a 
Macy’s 
Thanksgiving 
Day 
parade.
Unfortunately, the popularity of its mascot did not
compensate for the fact that it’s hard to make a
profit individually shipping low-margin 25-pound
bags of kibble.
The names alone of many of the Internet ventures stretch
credulity: Bunions.com, Crayfish, Zap.com, Gadzooks,
Fogdog, FatBrain, Jungle.com, Scoot.com, mylackey.com,
and, moreover, Moreover.com. And then there was
ezboard.com, which produced Internet pages called toilet
paper, to help you “get the poop” on the online community.
These were not business models. They were models for
business failure.
Philip J. Kaplan proved to be a brilliant chronicler of the
stupidity of the new dot-com financings. Deciding to kill
some time during a Memorial Day weekend just after the
bubble deflated, he set up a Web site F**kedcompany.com
that offered the latest gossip about sinking dot-com

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companies as well as a betting pool on when the companies
would go under. (The Web site could be accessed by filling in
the expurgated characters censored above.) The site attracted
four million viewers. Kaplan then published a book named
after the site where he ridiculed a hundred of the most
ludicrous of the dot-com business ideas. Here is how Kaplan
described the flameout of SwapIt.com.
SO LET ME GET THIS STRAIGHT:
1) I send them a CD.
2) They give me useless “SwapIt Bucks.”
3) They go out of business.
4) I get nothing.
Great, sign me up!
SwapIt.com was a fiercely stupid idea. The premise
was that people could trade used CDs and video games
with one another by physically mailing their crap to
SwapIt.com. Users would then be issued “SwapIt
Bucks” that they could use to buy other people’s crap
that had also been sent to the company….
eBay’s entire success is based on the fact that they
have no inventory. By dealing with all the inventory and

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fulfillment, SwapIt is like all of the crap with none of the
benefit.