[The Editors' Verdict] Lessons from the Dot-Com Bubble

[Asia Economy Reporter Myung Jin-kyu] In 1999, on the eve of the millennium, the controversy over the ‘dot-com bubble (IT bubble)’ began. The sandcastle built on greed collapsed in 2001 under the market’s fear. At that time, the government poured out measures to foster venture companies to overcome the foreign exchange crisis. Investments were concentrated on IT companies that advocated ‘innovation.’

Park Hyun-joo, chairman of Mirae Asset Financial Group, created Korea’s first mutual fund, ‘Park Hyun-joo No. 1,’ in 1998, which made a legend by investing 2.4 billion won in Daum Communications and earning 100 billion won. Hyundai Securities (now KB Securities) created the ‘Buy Korea Fund,’ launched patriotic marketing, created a huge theme stock, and fueled the bubble. The market was full of expectations, but the IT industry was struggling with insufficient infrastructure.

At that time, the internet network was mainly formed by 56k modems. The severely insufficient infrastructure slowed down innovation. Due to repeated deficits, investors became skeptical, and the bubble began to collapse. The once ‘jackpot’ Buy Korea Fund recorded a 100% return in 1999 but suffered a -77% loss in early 2000, causing many investors to go bankrupt. Despite this situation, some venture companies lobbied the political circles to extend the bubble. Eventually, with the emergence of the Yoon Tae-sik Gate (Pass21) and Jin Seung-hyun Gate (MCI Korea), the government had to abandon venture company fostering policies and shift the core policy axis toward protecting large corporations.

The year 2022 closely resembles 1999. The millennium has changed to post-COVID, and the internet has transformed into the metaverse (extended virtual world) and NFT (non-fungible token). Robert Shiller, a Nobel laureate in economics who predicted the IT bubble collapse in his book Irrational Exuberance, pointed out, “We need to compare how innovative technologies labeled as ‘new era’ measure up against past innovative technologies,” and “The term ‘new era’ used by companies and the media is just part of a feedback process that amplifies the boom.”

Shiller’s observation fits the current situation perfectly. Infrastructure is lacking. In the case of the metaverse, there is no standardized protocol like the World Wide Web (WWW), so companies offer fragmented services, increasing fatigue and disappointment. Regarding NFTs, while there is consensus that they are assets with unique value in the digital world, there is no clear answer on where and how they can be used, making valuation difficult.

However, there is no need to be entirely pessimistic. Companies like Apple, Google, Amazon, and Netflix, which survived the past IT bubble, dominate global platforms and continue to grow. Korea also has survivors such as Naver, Kakao (Daum), and Nexon. Crisis always comes with opportunity. If trial and error can be reduced, more companies can survive and become the leading players in the upcoming metaverse and NFT era.

Although it may be disappointing to the transition committee members, there are frequent concerns that the transition team of President-elect Yoon Seok-yeol lacks ICT experts. Since the election, the transition team has been repeating past policies such as enacting special laws for metaverse technological innovation, reforming the financial system to activate NFTs, and training 100,000 personnel in metaverse-related industries. The internet has just changed to AI, and AI has again changed to the metaverse and NFTs.

There is no foresight to invest in infrastructure expansion. If this continues, long-term side effects after the bubble collapse are inevitable. This is why it is essential for experts who can accurately diagnose the current situation and prepare countermeasures to join the transition team.

This content was produced with the assistance of AI translation services.