BROUGHT TO BOOK: Those who lost their shirts during the internet bubble would have a lot to share should they bump into ghosts from the railway-mania era

Engines That Move Markets

(Technology investing from railroads to the internet and beyond)

By Alasdair Nairn

Wiley £19.95 (UK)

With many investors licking their wounds after the bursting of the internet bubble, a book examining the impact of new technology over the past 200 years is timely.

Just as the recent internet phenomenon was a sure-fire thing, so too were investments in canals and railways at the outset of the Industrial Revolution. And with just as many casualties.

The problem for investors now is to identify what tech investments are likely to be profitable.

Alastair Nairn says history shows us euphoria over new technology is understandable, but that a study of the record leaves us with an appreciation of just how little certainty there is for either entrepreneurs or investors.

Predicting the future is a tricky business. Trying to drum up interest in his telegraph model, Samuel Morse was dismissed by the US government, which described him as an individual "whom 10 Congresses regarded as a nuisance".

The corporate history of technological change is as much about heroic failure as megabucks triumph.

Those who lost their shirts during the internet bubble would have a lot to share should they bump into ghosts from the railway-mania era, for example.

Nevertheless, investors cannot afford to ignore genuine technological shifts that sweep away entire industries or established business practices.

The problem is that, in the absence of patent protection or other monopoly features, new technology is always high-risk, high-reward.

Mark Twain said history does not repeat itself exactly, but it often rhymes. With this in mind, Nairn weaves the themes together and tries to answer some of the questions raised.

He does this in a thorough but perhaps too methodical fashion. Engines That Move Markets would benefit from being half the length, with a more fluid style.

But Nairn provides models that chart a way forward for investors, based on close study of previous bubbles and breakthroughs.

The bottom line is that it is the practical application of technology that is vital, not its weird and wonderful possibilities.

Investors ignore reasonable valuation parameters at their peril.

The typical result, Nairn says, is picking a winner but never actually making any money.

Engines That Move Markets succeeds in placing internet hysteria in context and giving guidelines to investors as they pick their way through the wreckage.