Customer Reviews

Underwriting The Internet: How Technical Advances, Financial Engineering, And Entrepreneurial Genius Are Building The Information Highway

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Underwriting the Internet is a terrific read. Hiraoka does an outstanding job of bringing together the factors that caused the "boom and bust" of the Internet frenzy. The book clearly details how over-zealous and unscrupulous financial professionals, such as equity analysts and venture capitalists, hyped new technology start ups that had questionable business plans or no chance at becoming profitable. Most important is the way Hiraoka further connects the dots to show how US monetary policy, the global markets, and the decision made by old line technology companies to keep their focus on mainframe and supercomputer development contributed to the creation of an environment that allowed the Internet investment bubble to actually happen.

What makes the book so interesting and educational is the approach Hiraoka takes in profiling many of the e-commerce and Internet infrastructure companies that have come to define the Internet. He takes the reader behind the scenes of how firms such as Cisco, Ebay, Yahoo!, Amazon, and others were started by young, intelligent entrepreneurs. Hiraoka goes on to describe the role that venture capitalists and Wall Street investment bankers played in taking these firms public to produce instant wealth for the founders, while generating millions of dollars in fees, income, and personal bonuses for the financial firms. However, for every [...] or Amazon that survived, there were many other startups that ended up as "road kill". [...] The reader will find it very enlightening to see how these companies were conceived, funded, taken public and failed. It was especially interesting to learn how the venture capital and investment banking firms went about promoting these companies to ensure a run-up in the share price after the IPO.

Hiraoka's text is set apart from other books written about this extraordinary time in US industrial history due to the broad scope that he covers about the period while providing excellent detail of how quickly advances in technology were developed to exploit and commercialize the Internet. In addition to providing the reader with in depth insight into the financial dynamics that caused so many investors to be impacted by the bust, the book also serves as an outstanding history of the computer industry. I was fascinated how Hiraoka was able to capture the essence and significance of each advance in technology in very understandable language.

Hiraoka further concludes that the corporate greed witnessed in cases such as Enron, WorldCom and Global Crossing was a direct result of the market boom created by the Internet IPO offerings. The book includes one the best accounts of the Enron collapse that I have read. Hiraoka provides excellent detail not only into the accounting fraud committed by Enron, but he presents a fascinating look into some of the lesser known facts of the scandal. Reading about Enron's role in the California energy crisis was both educational and quite amazing.

I would strongly recommend this compelling book to anyone who has ever wondered how the Internet got started, how it actually works and is interested in reading a story of how capitalism run amok can have disastrous ripple effects throughout the economy.

Hiraoka offers a post mortem on the recent high tech bubble in the United States. There have been several books written by participants in failed dot coms and telco startups, about their experiences. But this book is an overview of the entire phenomenon. Unlike other texts, it covers both the technical and financial aspects.

Be warned that this is not a John Grisham novel. It is necessarily dry in parts, as the author explains the technical innovations that made the Internet and Web viable to a mass audience. But he also goes into discussing the survivors, like eBay, Amazon and Yahoo. Just a fabled few that came through the mass extinction. We also see massive fraud, especially for WorldCom, which falsely claimed that Internet traffic was doubling every quarter, instead of yearly. This was to prop up its stock. But it also rippled through the entire telco industry and the dot coms, by promising growth that never came in the expected time frame. So that many of those companies went broke first.

The book is a salutary warning of the damage that human excess and unbridled optimism can wreck. Yet, he concludes that the Internet is still inexorably growing.

"Greetings from Tajikistan. I
use the internet everyday. This is an excellent book for those who use internet or about to use it. Read this book if you want to know how the internet works." Khurshed.