LET’S TALK ABOUT FEELINGSA translation of the Testimony of Chairman Alan

Greenspan February 28, 2001

“OUR ECONOMIC MODELS HAVE NEVER BEEN PARTICULARLY

SUCCESSFUL IN CAPTURING A PROCESS DRIVEN IN LARGE PART BY

NON RATIONAL BEHAVIOR.”

MGMT 468 SPRING 2011SUMMERS MCKAY

THE WORLD IN Q3 & Q4 2000, Q1 2001

Pets.com – A puppet closes it’s doors Feb 2000 - $11/share Nov 6, 2001 - $.19/share

eToys.com raised $166M in May of 1999. Oct 1999 - $84/share Feb 2001 - .09/ share

Disney is in the game with Go.com but takes a $790M

write off in Jan 2001

Webvan continues to expand operations!

Digital Impact, an email marketing company hires

Project Manager, Summers McKay, September 2000 Clients include – Webvan.com Bevmo.com Pets.com and

Overstock.com

The past decade has been extraordinary for the American economy and monetary policy. The synergies of key technologies markedly elevated prospective rates of return on high-tech investments, led to a surge in business capital spending and significantly increased the underlying growth rate of productivity.

Translation: We had a great GOLD RUSH. We Got Some Gold from our Rich Orchard of Opportunity!

CRAZY MAKING GROWTH ISN’T A BAD THING

BUT

“Death is a normal consequence of life.” Ed Leamer, The Life Cycle of US Economic Expansions, March 2001

The problem is, we don’t know how to die gracefully, because fear of death and the confusion of loss are the most powerful of all forces. Summers McKay, Final Presentation MGMT 468, Spring 2011

THE SKY IS FALLING!

SHOULD WE HAVE SEEN THIS COMING?

Leamer: Life Cycles of US Expansions

WHAT ELSE DO WE SEE?

Changes in stock market wealth are an important determinant in shifts in consumer spending.

While corporate managers appear to maintain long term optimism, consumer spending on durables is declining.

Increase in information exchange and awareness of these market forces seem to be making consumers and lenders more risk averse and likely to withdraw from action.

We forecast a retrenchment following the excesses built up in 1999 and early 2000.

SHOULD WE HAVE SEEN THIS COMING?

Leamer: Life Cycles of US Expansions

SHOULD WE HAVE SEEN THIS COMING?

Leamer: Life Cycles of US Expansions

SHOULD WE HAVE SEEN THIS COMING?

Leamer: Life Cycles of US Expansions

SO WHAT CAN WE LEARN AND WHERE DO WE GO?

Logic now might indicate yes, but our behavior simply hasn’t been logical.

Are Gold Rush ‘Bubbles’ Bad? Information technology has catapulted;

productivity, inventory management, communications, and perhaps global trade.

And you can place an order online at bevmo.com and pick it up on your way home already paid for and packaged up!

OF COURSE THERE ARE STILL TECHNOLOGY SKEPTICS

“An email declaration of ‘I love you’ is more likely to be a virus than a credible promise of good things to follow.” Edward E. Leamer & Michale Storper: The Economic Geography

of The Internet Age, August 2001

A little foreshadowing…… Cupid.com has 23 million members, in 39

countries and generates more that £4 million a month in revenue.