Tracking the Internet industry's resurgence

By David Walker (Google profile)

Nearing the end of 2001, we look back on a year of dot-com collapses, Web redundancies, failed business models and broken Internet dreams. And we think, of course, of the British railway industry of the late 1840s.

OK, maybe you don't think of that. But to me the British Railway Mania of 1845-47 was the dot-com craze of its day, uncannilly like the weirdness that swept the Western world 150 years later. As commercial railways became viable, investors suddenly decided they were the way to riches. Railway stock offerings were mobbed. Princeton historian Jerome Blum's account of 1840s Europe, "In The Beginning", tells the story:

"The delirium of the public provided a golden opportunity for unscrupulous promoters to announce the creation of a new railway company. The promoter needed only a map of Great Britain on which he drew a line connecting towns of some size. He had the map lithographed, printed a prospectus abounding in specious statistics, and ran glowing advertisements in the newspapers ... Shares were priced without reference to the property on which they were based ... Lawyers and engineers lined their pockets with the exorbitant fees they charged, contractors grew rich, and the promoters' advertising campaigns proved a bonanza to the press."

Between late 1847 and early 1849, the railway bubble burst and the great railway entrepreneurs were disgraced. You can see the dot-com bubble parallels too clearly to need my help.

So what happened after the 1847 bubble - and what might we learn about our own era?

Within a few years, employment of railways construction workers had fallen by seven-eighths. Britain never again saw a railway-building boom to rival it.

But Britain found itself with five times the railway lines it had possessed just five years earlier. A few closed relatively quickly, but most remained in service, connecting all of Britain's great cities and commercial centres. The British public continued to embrace the railway for both passengers and freight. They changed lives, not least by making it affordable for many poorer Britons travel for the first time. They changed the very nature of time: all of Britain adopted London time.

Railways also became the focus not of new technology but of new thinking about corporate managment. Railway companies shaped ideas about managing large industrial workforces. They helped develop modern accounting, as companies grappled with the idea of investing millions before clawing back any return. And as the railway companies consolidated, they set about turning the huge mass of newly-built lines into profitable entities.

Does any of this give a clue to the future of the Internet and perhaps even of information technology more generally after the dot-com bubble?

Like Britain in the early 1850s, we have a vast new infrastructure. Ours is an infrastructure not just of physical assets, of cable networks and server farms, but also a network of protocols and programs and data models and usability rules.

We have a public still eagerly embracing the Internet. The UCLA Internet Report 2001 issued last month found found 72.3 percent of Americans online in 2001, up from 66.9 percent in 2000, and usage time increasing, while the Gartner Group expects Americans to buy 39 percent more online in the last quarter of 2001 than in the last quarter of 2000. Australian figures should follow the same medium-term trend.

But as in the British Railway industry of the 1850s, the builders and visionaries are ceding the field to the managers. If events of 150 years ago are any guide, 2002 and the years beyond will bring an ever-tighter focus on returns from the infrastructure we have already built. And it will bring new management techniques that bend the Web and all information technology to the will of the organisations that use it.

We may not be able yet to imagine what all these techniques will be. But we should expect them to make themselves more obvious in the next few years.