When the full panic hit, prices dropped by the hour, and the tulip bulbs became worthless. More than 200 years later, America had its own version of tulip mania in the form of railroad stock speculation and the Comstock Lode silver rush. The twentieth century has had speculative manias as well, in the Florida real estate boom and the stock-market frenzy of the 1920s. In both cases, stories circulated of fortunes made overnight, and there was constant talk of prime real estate, hot companies, and surefire stock tips. Veteran technology investor Roger McNamee likes to distinguish between the industrial and technological manias that led to something lasting and mere fads such as the tulips that came to nothing.
Speculation tends to go hand in hand with entrepreneurship.
Companies with sustainable business models survive, but the vast majority implode. As capital floods the market, companies not only get started faster, but go public sooner. Many have only a vague idea what their strategy is. Over the last four years, demand for Internet stocks has been insatiable. As investor demand rises, the quality of the companies generally sinks.