As circus man and student of human nature PT Barnum knew so well, there's a sucker born every minute. If only he'd lived long enough to savour the frequent inanities of the Internet.
Last week, we had a prime demonstration of how the Net drives a particular kind of foolishness, based on the fast-paced nature of the technology industry and the megahype of the Internet shares world.
Exhibit A is the tale of PairGain technologies, a smallish, publicly-quoted US telephone equipment manufacturer.
Last week, in a story widely reported in the media, someone made a claim on a Yahoo investments message board that PairGain was about to be bought out by a rival Israeli firm, ECI Telecom, for $1.35 billion (€1.25 billion). The posting provided a link to a website on Angelfire.com, a division of portal site Lycos which offers free Web pages to Net users.
The Angelfire website purportedly contained a story on the deal from Bloomberg Business News, the respected business newswire. The Angelfire.com site was designed to mimic the appearance of the Bloomberg site, duping website visitors into believing that the news story was real and reliable.
Of course, it wasn't. But that didn't prevent some investors from rushing to trade shares, causing PairGain to shoot up as much as 32 per cent within hours. According to analysts, many or most of the buyers and sellers in the initial binge were "day investors", the high-risk, quick-profit individuals who use the Net to buy and sell shares instantaneously and make money mostly from technology stocks and their sudden gains and losses.
So now the Securities and Exchange Commission is investigating how the fiasco happened and the SEC believes it will nab the perpetrators in the next few weeks. It's extremely difficult, even for professional hackers, not to leave electronic footprints around the Net when creating a website.
On the other hand, you might think the obvious route would be to go to Lycos, since Angelfire.com users must register a name and address when they create a page. But, says Lycos, it does not verify them - it hardly could, when they host millions of pages. And Yahoo, like many other sites which host Net chatrooms and bulletin boards, says it is not responsible for what users say and do.
That stance has already come under fire and freedom of speech and liability is a growing area of friction. Yahoo has been asked to hand over names and email addresses of users who have posted sensitive company information on the message boards before.
Raytheon sued 21 message board users for disclosing information and this week, a US restaurant chain subpoenaed Yahoo for the names of users who posted claims that the company was filing for bankruptcy.
On the other hand, the advent of day-traders in particular has underlined the challenges online trading poses for the SEC, Wall Street, and the whole exchange system. When information about companies, true or false, moves so swiftly over the Internet and trades can be executed in the blink of an eye, the resultant trading environment works under a wholly new dynamic.
Risk is inherent in the markets, but the Net in many cases is amplifying risk in ways it has never been amplified before. The SEC is worried about how that changes the big investment picture and how it ultimately could affect the stability of global markets, especially as more and more trading is done online.
But to pull back from that bird's-eye view to the perspective of the individual investor: the PairGain case wouldn't have happened in the way it happened if investors used a modicum of common sense. Why would Bloomberg, which has its own site, use an Angelfire.com address for a story? (Some message board users apparently pointed this out, not that it restrained sales.)
And if some investors believed that an individual had copied a Bloomberg story onto a personal site, surely it makes sense to verify the story actually exists on the Bloomberg site before shelling out cash for trades.
As they say, there is one born every minute.
Karlin Lillington is at klillington@irish-times.ie
