Here is what drove the Internet bubble: during the whole nineties, the stock market went upwards. People thought we had entered a New Economy without recessions

Here is what drove the Internet bubble: during the whole nineties, the stock market went upwards. People thought we had entered a New Economy without recessions. There were plenty of good reasons to believe this. For example, due to the end of the cold war, we could allocate resources to much more productive areas and gain a lot through globalization and increased international trade. This effect was also known as the peace dividend. Furthermore, the Internet promised to bring enormous productivity increases. The sentiment was that everything will be done online sooner or later and that whoever is first to occupy a particular niche in the Internet would dominate that market globally and forever. For example, the first to create an online shop for pets would have such an advantage that if executed well, competitors would never be able to catch up anymore. By buying a share of pets.com, you did not want to buy a share of a company without profits, you wanted to buy a share of the future before it was too late. People thought they would be buying the equivalent of a few square feet of future Manhatten. Domain names changed hands for crazy prices. It was very hard to resist the general sentiment as it was repeated over and over, for years. One of the few that resisted was Warren Buffet - and the media pitied him for not understanding the New Economy due to his advanced age.