The high-tech tulips that prove we've learnt nothing from history

In the 17th century, thousands of Dutch merchants, consumed by an intense greed, were destroyed by tulips. So enamoured were they by the recent arrival of the inoffensive bulbs from the east that they started spending mind-boggling sums on single bulbs.

Quasi-legal stock markets for the floral trade flourished and, on these stock market floors, the poor became rich and the rich became richer. Nothing could halt the trade of the hottest commodity the world had ever seen.

Soon all tiers of Dutch society were swept up in a tulip trading frenzy that peaked in the 1630s, selling "futures" on crops not yet grown. Bulbs were sold by weight, usually while still in the ground. All you had to do was plant bulbs and wait for the money to roll in. Traders were earning as much as £40,000 a month and people were so anxious to cash in that they re-mortgaged their businesses and flogged the family jewels to raise the seed capital (so to speak.)

Then the bulb bubble burst and thousands of businessmen - including the country's leading economic power brokers - were ruined. The whole epsiode was over in under two months.

Of course, Tulipomania, as it became known, was a vaguely comic by-product that took place in an age of economic idiots. It couldn't happen in the 20th or 21st century - the all-knowing media is too wise and the suits that stalk stock markets all over the globe too savvy to make such fundamentally stupid errors.

Wrong. The scale and speed of the dotcom crash and burn of the last couple of years is proof that we have learned absolutely nothing from our past mistakes. When greed, ignorance and novelty are brought together in just the right mix, people will stop at almost nothing in their undignified haste to lose spectacularly large amounts of money as fast as they possibly can.

Although there are so many high-profile, high-tech examples of the crash-and-burn approach to modern economics that typified the end of the last decade, perhaps the most striking example of the dizzying highs and terrifying lows of the internet age is Value America.com.

Value America was an online retailer which raised and spent hundreds of millions of dollars in its brief but eventful life, while promising to be at the vanguard of a retail revolution. Led by the charismatic, power-hungry and somewhat mad-sounding entrepreneur, Craig Winn, Value America was a pioneer in the field of e-commerce.

It was the first dotcom "one-stop shop" to retail household and electrical products and get them sent directly by the suppliers to the customers, thus cutting out the middleman. This approach to retailing also eliminated the need for Value America to invest in either inventory or warehouse space and removed the costs behind delivery.

The whole concept seemed like a great idea, a no-brainer that would make those involved a lot of money. Microsoft co-founder Paul Allen was sufficiently convinced that he invested tens of millions of dollars in the project. Federal Express chairman Fred Smith did likewise and when the company floated on the Nasdaq in April of 1999, it was valued at in excess of $1 billion.

Everyone at Value America became obsessed with their stock. "Good morning, Value America, I'm rich. How may I help you?" was how phones were answered by receptionists on the day of the company's initial public offering. That was the sum total of the work done that day as the staff sat back and watched the value of each share they held in the company rise from a few dollars to more than $70.

They would perhaps have been better advised to remain focused on customer service and their efforts to produce an effective e-commerce operation. But a desire to make money had supplanted the desire to lead a "retail revolution" and, within weeks, complaints were pouring in, products were not being delivered and financial analysts at Goldman Sachs and Morgan Stanley, amongst others, were turning their noses up at the stock.

Suddenly, the company went into freefall. The profit margins were too low. The advertising spend - hundreds of millions of dollars in less than 12 months - was too high and the customer service was appalling.

J. David Kuo was perfectly placed, as senior vice-president of communications, to document Value America's spectacular decline and fall, and his deft touch and easy prose style make this record a compelling read.

He relates the stupefying insanity of the Value America enterprise in a remarkably accessible fashion and effectively charts the delusions and wild miscalculations that led to the company's demise. He has produced a wonderfully timely account of our very own high-tech, high-stake Tulipmania.

Future generations will read this book and marvel at how stupid their forefathers must have been to have bought such an oversized suit of the emperor's new clothes to match the tulips their own ancestors had bought some 400 years before.

Conor Pope is an Irish Times journalist and is editor of the Computimes page which appears on Mondays