Was WorldCom a pyramid scheme? This essay suggests that it was:
Here's how the Pyramid worked, step by step:
1. WorldCom reports great results in the carriers' carrier market.
2. New entrants raise money, pointing to WorldCom's revenue and stock price
3. These entrants buy Dark Fiber from WorldCom, as they play Telecom Monopoly to build out their global networks
4. WorldCom reports improved fundamentals — driving its stock price up further.Then the cycle repeats itself:
1. More entrants raise money, using WorldCom's highflying stock price to justify raising more money at higher valuations in the private and public markets. WorldCom raises money too.
2. New entrants build out their own networks with all the capital they've raised
3. Everyone buys excess dark fiber capacity from each other.
4. Everyone's fundamentals and valuation improves, for a time…
(Thanks, John!)
