SYNOPSIS: Silly Londoners are placing big money bets on big but unimportant titles.
LONDON -- For a few days last week it suddenly occurred to U.S. investors that tech stocks might be a bit, um, speculative, and they hurried back to what they somehow imagine to be the safety of old-economy blue chips. (Hey, some of these mammals might not make it; better put your money on the dinosaurs.) But sitting in England, where tech fever is more recent but if anything runs even hotter, I feel the urge to put in something of a good word for the American technology boom. Put it this way: our investors seem moderate, sensible and on the right track -- at least when you compare them with their counterparts elsewhere in the world.
The big story of the week here was the I.P.O. of Lastminute.com, which has a concept very similar to that of Priceline.com. Martha Lane Fox, the firm's 27-year-old co-founder, graced the cover of just about every national newspaper. And why not? At the end of its first day as a public company the firm -- which needless to say loses money, and had fourth-quarter sales of only about $650,000 -- had a market valuation of more than $1 billion. Americans may be used to that sort of thing, but in England it's still a novelty.
But while Ms. Lane Fox is photogenic, and for all I know very much on top of her business, what the newspapers here really seem to like about her is that she comes from a very posh family (the double-barreled name is a giveaway). Her father is a well-known historian, and -- as every article managed to point out in the second or third paragraph -- she is descended from the sixth Marquess of Anglesey.
She is not an isolated instance. Last month's big British I.P.O. was Oxygen, an "incubator" firm that is supposed to make money by backing other people's business ideas. Its stock soared 3,000 percent on the first day, to a value something like 20 times its capital. (As an English friend put it, the valuation depends on Oxygen being able to find clients smart enough to come up with great business ideas yet dumb enough to sell those ideas for 5 percent of what they are worth.) What was Oxygen's appeal? Its extraordinary list of founders, including Elisabeth Murdoch (daughter of you-know-who) and Matthew Freud, a famed publicist who is the good doctor's great-grandson.
Even The Financial Times found itself moved to a bit of populist bile: "The internet, which was supposed to be a great leveler -- cutting through class and traditional networks -- has instead quickly become a platform for the rise of a new/old moneyed elite. The names of some individuals read like an extract from Debrett's [the reference book on the aristocracy]."
But I don't really mean to single out Britain. There are other places where the same phenomenon -- investor enthusiasm for the new economy mysteriously turning into a get-richer-quick scheme for elite families -- has literally run wild. In Hong Kong police had to be called out to control the crowds trying to purchase shares in Tom.com, an Internet offering by the powerful businessman Li Ka-shing. And the market placed such a high valuation on Pacific Century Cyberworks, a company founded by his son, Richard Li, that Mr. Li the younger was able to take control of Hong Kong's principal telephone company.
(An Asian version of AOL-Time Warner? Not quite: Pacific Century has no subscribers and almost no revenue.)
Now the U.S. is not a classless meritocracy. Our next president will not be a self-made man. Our business elite, as my M.I.T. colleague Peter Temin points out in a recent paper, still consists disproportionately of tall men from well-off WASP families. Still, it's hard to imagine American investors pouring money into a company that has no plausible business plan, simply because the founder comes from a prominent family.
Indeed, to a remarkable extent America's new economy seems to be the creation of new men (and a few new women). Not only weren't they born to wealth; in many cases they are immigrants or the children of immigrants. (Asians own nearly a quarter of Silicon Valley startups.) The old line that "It's not what you know, it's who you know" has never seemed less true.
So let's hear it for America, where our technology stars are selling ideas, not connections and -- who knows? -- might actually make money for their stockholders.
Originally published in The New York Times, 3.19.00