Internet Outsider: A Personal Note

Before sharing some thoughts from the Web 2.0 conference in San Francisco, I want to offer a heartfelt thanks to everyone who has posted or sent encouraging comments in the last few days. The readership of the blog exploded after John Batelle and others linked to the Microsoft note on Tuesday, and I am relieved and grateful that so much of the feedback has been positive.

Of course, some of the feedback has not been positive, and I also want to briefly address this. For those of you who aren’t familiar with my background, I was a high-profile Wall Street analyst during the Internet boom in the 1990s. My career followed the trajectory of many early Internet companies (i.e., a parabola). Over the course of eight years, I went from a training program to the top of my field—in 2000, I was the “most read” analyst on Wall Street—and then, ultimately, to humiliation and disgrace.

One reason for my success in the boom years is that I was optimistic about the prospects for a handful of Internet companies at the right time—namely, when, quarter after quarter, year after year, they were blowing even the most exuberant projections away. I expected a big future for some of these companies, and in some cases, happily, it came to pass. Of course, many other predictions I made did not come to pass, and I had numerous opportunities to agree with my first boss that one hazard of being an analyst is the frequent need to fall on your sword.

The first stage of my own personal dotcom bust came when, along with many others, I stayed optimistic too long. For me, this was especially frustrating because I had expected that there would be a major reversal at some point, that the industry would follow a typical boom-bust-boom pattern and that most early entrants would fail. I got the macro pattern right, but I blew the timing. I also vastly underestimated the impact the bust would have on the Internet leaders, the technology industry, and, ultimately, the broader economy. Like most economic phenomena, these events are screamingly obvious in hindsight, and I will always regret not nailing them ahead of time.

The second stage of my fall—the one that vaulted me from a vast pool of red-faced analysts into a regrettable place in history—was a regulatory investigation into the interaction between the research and investment banking functions at Wall Street brokerage firms. In the course of this investigation, the SEC alleged that some remarks that I and my colleagues made in emails were inconsistent with professional opinions in our published research, and charged me with civil securities fraud (to read the complaint and emails, please visit www.sec.gov). Along with other parties in the research complaint, I settled the charges without admitting or denying the allegations, paid a humongous fine, and agreed to be barred from the industry.

As anyone who has been involved in a legal proceeding can attest, one of the most frustrating and painful side effects is that, except for standard boilerplate, you can’t discuss the allegations publicly. In my case, for a variety of reasons, the blackout is still in effect, and I have been unable to talk about the details outside of a legal context. I won’t be able to talk about them here, either, unfortunately, but I do want to say that my silence is not an attempt to ignore or disavow the seriousness of what happened. Everyone who listened to me in my Wall Street years deserves forthright answers to many perfectly reasonable questions, and someday soon, I hope to be able to provide them (preferably this century, preferably pre-humously).

Since the 1990s, I have had the privilege and responsibility of having a lot of people be interested in what I have to say. I take—and have always taken—this responsibility extremely seriously. In the last few years, I have written a fair bit about the bubble, Wall Street, investing, and other subjects, and I have tried to shed light on many popular misconceptions about Wall Street and the investment world (including the role of research analysts in the investment process). I hope that you find some of this writing—as well as some of what appears here—worth reading.

Thanks again for the support.