The bubbles that built America

During the coincident, mutually reinforcing dot-com and fiber-optic bubbles of the 1990s, companies like Global Crossing and WorldCom plowed some $30 billion into the ground, building 90 million miles of fiber-optic cable. In 2001, it was estimated that just 5 percent of the fiber-optic capacity was being used. Consumer-oriented firms, from Amazon.com to Webvan, likewise squandered billions of venture capital and public money on breakneck expansion plans. The result was a vicious crash, which led to a sharp correction in the NASDAQ, accounting scandals, and widespread bankruptcies.

But the infrastructure built during the bubble wasn't dismantled. Instead, the Internet emerged from the crash as a cheap, reliable medium for businesses of all types. By 2006, some 84 million Americans, 42 percent of households, had broadband access. And millions of Americans had become accustomed to making purchases and buying products and services online.

The result: post-bust businesses could tap into a reliable infrastructure and a massive installed base of users. And so Web 2.0 companies like Google, Vonage, YouTube, and MySpace were able to gain scale overnight and succeed where many of the 1990s pioneers failed.