Netscape, the Internet and Creative Destruction

`My name is Ozymandias, King of Kings: Look on my works, ye mighty, and despair!'

As Jacob Zuma said in Davos, "I’m not certain whether when there has been some shortcomings that we should punish people for that. Once decisions have been taken by a collective, you can’t punish individuals as if they’ve done something deliberate."

Without individual responsibility there can be no action. Without action there can be no innovation.

Nothing demonstrates the power of open markets more than the difference in Internet adoption rates. By the end of 2007, 71% of Americans were Internet users, 43% of Europeans, but only 4.7% of Africans.

In 1998 the US Government passed the Internet Tax Freedom Act and deliberately chose not to interfere. All the best minds coming out of Stanford and MIT universities flocked to the industry. Brains from around the world stormed the US like a tsunami.

The genie escaped the bottle on August 9, 1995, when Netscape Communications listed on the Nasdaq technology exchange in New York. The shares were priced at a rather optimistic $28 each. Within minutes of the listing the shares shot up to $75 before closing at $58. This priced the company at $2.7 billion.

It was the beginning of an era. Netscape introduced the first mainstream graphic interface web-browser and, with their listing, started the Dot Com boom. In 1998 AOL, an Internet Service Provider, acquired Netscape for $4.2 billion in a stock swap.

The froth of Dot Com frenzy wasn't to last. Billions of dollars were being spent on companies that could never justify their expectations.

During 2001 the Nasdaq stock index lost 79% of its value. And on 1st February 2008 AOL Time Warner stopped supporting Netscape. Between 1995 to 2008 Netscape's market share went from 80% of all web-browsers in use, to 0.7%.

It is the end of a company that launched an era which changed so much about the way we live and communicate. In the space of 13 years, the door which Netscape first opened has propelled an unknown technology into an industry that employs millions and has 1.3 billion users.

As much money as has been lost and gained, it has all been entirely in the hands of individual investors. The great fortunes and great losses have been in private hands.

Compare that with the products and services that governments decide are essential and that they feel are too important to be left to the private sector. Like electricity, for instance. But it was private endeavour that created power generation in the first place.

The price of internet use has plunged in South Africa, from hundreds of rands a month for dial-up services to as little as R 45 per month for broadband now. Bandwidth has exploded as prices have dropped.

This has come about not because of state subsidies, protected industries or glib political five-year-plans, but because of frenetic competition, frenzied innovation and the serious pursuit of profits.

It is no accident that the poorest countries in the world are also those that demonstrate the least trust for open markets and open minds.

Consider that most of the services offered online are free; from online email to blogging, photo albums, and vast amounts of games and software. Cost isn't what is keeping the world's poor from using the Internet. It is state ownership of the infrastructure required to access it that does it.

The Eskoms of the world are not accidents. They happen because governments refuse to trust that a chaotic market-driven system, with nothing but the individual pursuit of profit, can benefit society.

Compare the availability of the Internet with the availability of electricity. Decide for yourself which world you trust more; the world of politicians, or the world of markets.