The recent Internet explosion has revolutionized the world in more ways than one. A primary effect has been the reorganization of the way we interact with information, the economy, and our fellow man. One can almost think of the Internet as representative of a new social and economic order. One of the more tangible effects brought about by the Internet has been the tremendous growth of capital investment in computer and Internet related companies. What remains unclear is just how beneficial these developments will prove to be.

A casual market observer can not fail to notice the abundance of fledgling companies 'going public'. The benchmark of a company's success has become the IPO. That is, the Initial Public Offering, the first open invitation for public investors to infuse capital, and in doing so, acquire ownership shares in the company. Certainly, there are many success stories in the IPO ledger. The rapid development of new, better technology must also be attributed, at least in part, to the increased investing. A number of industry experts, however, are troubled by some of the implications.

A basic worry of company executives is maintaining the morale of their employees. Jonathan Nelson is CEO and co-founder of Organic Online, a San Francisco - based development firm that deals heavily with start-up companies. In a recent interview with the Silicon Valley Reporter (October 1998), Mr. Nelson confides that the company's reluctance to go public has actually been a boon to recruiting in the New York market. The company gives the impression of a more stable image, one of a company geared towards producing good work and developing strong relationships with clients. Many of Organic's new recruits have actually been switching over from companies going public or companies trying to do so. These employees have become disillusioned with the executive management teams because of their increased involvement with bankers and investors, rather than focusing on the business of their clients. The independent idealism that the Internet engendered has also been tarnished by such events as Netscape selling out to the industry giant, America Online. The message being sent: it's still all about money.

Another problem that worries insiders is just how viable these investments are. In another Silicon Valley Reporter piece, Douglas Rushoff decries the investment strategies of these companies, referring to them as 'Ponzi schemes'. In other words, less and less of a focus has been placed on the interactive potential that was the initial driving force behind the Internet. Rather, Fortune 500 firms are being sold on the idea of building pyramid structures of selling content and investment on the internet. The pyramid grows as money is continually poured in and invested in newer up to date material. Reluctant investors are being convinced that if they don't grab the opportunity, they will miss out on the windfall waiting to be reaped. At some point, the public will not support further expansion of the pyramid, having already reached satisfaction. As Rushoff and SAR editor-in-chief Jason McCabe Calacanis explains, the valuations and stock prices of these companies far outpace the companies' true intrinsic value. A frightening example is last summer's billion-dollar valuation of Broadcast.com. Last year's revenue: 6.8 million dollars. Broadcast.com and similar outfits, such as theglobe.com, which earn a large portion of their revenues in online hosting service fees, face stiff competition from large providers such as Globix and Exodus. How can these companies justify their valuations?

Of course, with all of this money being thrown around, it was only a matter of time before greed led to unethical behavior. Recently, GeoCities, a popular web-site hosting firm, was faced with an FTC complaint involving privacy infringements. GeoCities promised customers that their personal information would not be revealed to others without their permission, and, nevertheless, proceeded to secretly sell this information to third-party businesses without the required permission. These developments were particularly troubling to TRUSTe, an organization founded to assure online customers of their privacy. GeoCities had been an important member of the TRUSTe group.

Our world has been drastically reshaped thanks to the effects of the Internet, both for the better and for the worse. As we look towards the future, we must carefully consider the ramifications of misplaced capitalism on the Internet.