One of the original tech bubbles did not involve the internet, clean energy or telecoms but a much older invention: railways.
In 1840s Britain, a combination of falling interest rates, a growing investor class and deregulation meant money poured into rail company shares from a Victorian public that became inebriated on the promise of the new technology.
Newspaper adverts were filled with inflated claims about railways’ future profitability, and thousands of miles of new routes were approved by parliament. Railway shares doubled in the course of a few years, and investment surged to 7pc of GDP. By 1845, stocks had doubled, before falling by two thirds. The bubble burst as it became clear that investors who had promised to buy stock could not back it up with capital.
Railway Mania meant heavy losses for those who bought in at the peak, but the bubble’s impact did not end there. In the second half of the century, as a result of massive capital investments, Britain had a world-beating rail network that propelled it to economic greatness. The railway hype was correct, just not in the short term.
The dotcom bubble at the end of the 20th century had a similar effect. Today, most people remember the outrageous valuations of companies that had no profits, sometimes no revenues, and little more than a website: names like WebVan, Pets.com and LastMinute.com, which achieved valuations far in excess of the existing market.
Many of these ideas, like the railways 150 years earlier, were ludicrously ahead of their time, serving a world in which relatively few people had high-quality internet connections.
But this was at least partially understood: the internet boom was accompanied by huge investments in telecoms networks in an attempt to bring broadband and mobile internet to a much wider market.
The companies that built those networks – names such as Worldcom and Global Crossing, went bankrupt. But as the market crash faded, parts of the world, particularly the US, were left with much faster internet connections than they knew what to do with. As internet historian Brian McCullough has pointed out, by the time new technologies such as the iPhone and Facebook came along, there was plenty of spare bandwidth for them.
It is very possible that without the telecoms investment bubble of two decades ago, Silicon Valley’s giants would not be where they are today.
Unlike their dotcom predecessors, today’s biggest tech companies are highly profitable and serve huge markets. But there have been growing fears of a separate bubble building up around electric cars.
Just as with the late Nineties and the internet, today there is little doubt that battery-powered vehicles are the future. Sales of petrol and diesel vehicles will be banned in the UK after 2030, and many US states are following.