(MONEY Magazine) – On reviewing my published columns, I find a glaring omission. It's been all money, no sex. I was reminded of this oversight by a report that the most popular face and figure on the Internet belongs to none other than Pamela Anderson Lee. As many as 145,000 Web pages offer some tie-in to the former Baywatch star, according to the Wall Street Journal--"the equivalent of walking into the New York Public Library and finding that 13,300 of the volumes there are written about her."

What is truly new about the New Era of 1999 is that the breakthrough technology is all-consuming. You can Pamela-gaze online, and you can speculate online. In previous technological revolutions--remember the telegraph, telephone and incandescent bulb--the sexual aspect was muted. The Internet provides the complete human experience.

Probably the closest, though sexless, antecedent to the great Internet stock market of 1999 was the British railway boom of more than a century and a half ago. A chapter in Edward Chancellor's fine and suggestive new book, Devil Take the Hindmost: A History of Financial Speculation (Farrar Straus & Giroux, $25), tells the story of the great railway mania. Reading it will help you understand the contents of today's Wall Street Journal.

Revolution, an overused word in connection with technological change, describes the transition from horse to steam precisely. Railroads profoundly changed not just the economics of production and transportation but also the perceptions of time and distance. Even so, the promoters did not imagine that they were the agents of progress.

Imagination itself entered a bull market in that distant day, just as it has in our own. "Gentlemen," the leading railroad stock promoter of the day, George Hudson, once urged at a gala dinner gathering, "there is something in imagination. I don't say it ought to govern us; but having formed our judgment, let imagination have a little play...."

As in the Internet levitation of 1999, the railway bull market was not constrained by corporate earnings--far from it. Hudson, for one, believed that a published income statement and balance sheet could make no positive contribution to the success of a public enterprise. "I will have no statistics on my railway" is the way he put it.

The early 1840s, anticipating the late 1990s, provided an ideal environment for financial investment. Interest rates were low and faith in a newly reformed central bank was high. Railroads promised to deliver nothing less than universal peace and prosperity--"nothing, next to religion, is of so much importance as a ready communication," a meeting of railway shareholders was told.

Hudson's glittering example--they called him the "Railway King"--was not lost on other would-be capitalist titans. The content providers of that day too caught the speculative spirit: "In the early 1840s," relates Chancellor, "there were three railway journals, led by the authoritative Railway Times, and during the 'mania' year of 1845, new railway papers appeared nearly every week. They included 14 weekly papers (which were issued twice weekly at the height of the fever), two daily papers, and both a morning and an evening paper." In short, everything but a Pamela-related website.

You will not be surprised to learn that a voracious demand for new railway shares was met by increased supply, that soaring prices did not improve the honesty or prudence of the promoters, or that certain bearish elements of the financial press didn't seem to understand. Chancellor quotes a letter to the editor of the London Times (I almost feel as if I know the author): "There is not a single dabbler in [stock] who does not steadfastly believe--first, that a crash sooner or later is inevitable; and, secondly, that he himself will escape it.... In this, as in other respects, 'men deem all men mortal but themselves.'"

Overbuilding, intense competition, rising interest rates and high construction costs combined to cut short the boom. Interestingly, Chancellor writes, the new technology itself contributed to a downturn in business activity: "The rapid switch to railway transport, which allowed for smaller inventories to be kept by businesses and caused a one-time reduction in demand, worsened the situation." Brick-and-mortar retailers, pitted against their new, virtual competitors, will sympathize with the revolution-induced troubles of their railroad-age forebears.

In America--where the Internet has captivated both major spheres of the brain--never have so many people risked so much in the stock market. But the middle class was deeply involved in the Victorian railway boom too, the lack of evident sex appeal notwithstanding. At the end of the cycle, Britain was richer in railroads but poorer in stock market capitalization. Bankrupts recovered (or not), and the railroads facilitated the next great wave of growth. Life went on.

In conclusion, Chancellor aptly quotes Bill Gates: "When the frenzy is behind us, we will look back incredulously at the wreckage of failed ventures and wonder, 'Who funded those companies? What was going on in their minds?'" Answer: What always goes on in their minds.

James Grant edits the Grant's Interest Rate Observer newsletter.