Lets' face it. A few years ago we thought we were
pretty smart. We bought technology stocks and they went up. We knew
what we were doing. During the 90's the US economy was growing at
5.5% a year, so we figured that any company not growing by at least
30% was being mismanaged. If slow growth companies were unwilling
to change their ways, we took our investing dollars elsewhere.
In many cases, honest management could not deliver the results
we demanded, so the money flowed to dishonest management who could.
We all know now that much of this growth was achieved via accounting
tricks and even outright lies, but through it all, the warning signs
were in plain sight. The public did not know the extent of the troubles
WorldCom, Enron, or the hundreds of dotcoms, but the numbers they
reported to the SEC told us that something was very wrong.
In fact, some of the worst of the excesses were not only disclosed
but publicized. We cheered the twenty million dollar salaries, the
multimillion-dollar interest-free "loans", the outrageously
expensive parties, and the luxury homes bought for the corporate
executives. Somehow it was all part of the magic that kept the stock
prices climbing ever skyward and that's what really mattered.
We now know that the problems were far deeper than the reported
numbers. Unsurprisingly, executives who are willing to distort inventory
figures, double book revenues, and pack sales channels to deliver
the earnings we demand also tend to systematically pillage corporate
assets for personal gain. It seems there is little honor among thieves.
Throughout the bubble there were plenty of analysts pointing out
the problems, but we chose not to listen. In fact, when Allen Greenspan
commented on the "irrational exuberance" of the market,
he was sharply criticized for "shaking investor confidence."
It was as if we were all in on the scam and knew what would happen
if people started thinking seriously about what was going on.