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Mass Hysteria

The strongest evidence for mass hysteria, not fraud, comes from the participation of professionals—executives and investors—people who should have known better but took baths in the bubble. If these smart people got burned, the argument goes, then it must have been because they truly believed in the financial potential, and it wasn't a fraud.

For example, George Shaheen, Chief Executive Officer at Andersen Consulting (now Accenture), the world's largest consulting firm, left to run Internet start-up Webvan for a compensation package heavy in stock options. Shaheen left Webvan early in 2001, just before it went bankrupt and closed. Shaheen had been a well-compensated executive at Andersen, but had been lured away by the promise of shares of Webvan—his shares and options at one time having been said to have been worth more than $100 million. But he left Webvan with nothing like this kind of money; he had sacrificed both substantial income and status by leaving Andersen. It does not seem to have been a successful move for him, but he was and is a sophisticated businessperson. Other similar examples exist. So it is argued that since smart people made mistakes, the bubble must have been based on more than transparent fraud.


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