In the beginning, there was pump and dump. In the dot-com bubble of the late '90s, the stock-analyzing arms of investment banks would pump up a new stock's price with rave reviews. The banker arm underwriting the new stock issue would sit back, watch the price explode and then dump it — as would their favored customers. The folks who fell for the hype and bought in at inflated prices were the little investors, also known as "dumb money."

This scheme was deemed unfair to ordinary investors, so a reform was put in place that appeared to require analysts to keep their mouths shut before an initial public offering. It forbade analysts to publish written reports, be they on paper or electronic, containing new information about the company. Notably absent was any mention of telephones.

Along comes the fantabulous Facebook stock offering and ensuing fallout. Suspicions are high that a select few were told about Facebook's recently disappointing revenues, which might not justify the initial public offering price of $38. They got out the minute they could, or they sold the stock short or made other bets that the stock price would fall. The Securities and Exchange Commission is looking into the matter. And a shareholder class-action suit has been filed. Meanwhile, if the conversations about Facebook's revenues were done by telephone or over cocktails, it is unclear that anyone broke the law.

But this is clear. The Facebook IPO dance was not about investing for the long term, though the dumb money may have thought so.

Did you notice how, in the goodness of their hearts, Facebook and the bankers made an unusually high number of shares available to the public at the initial offering price? As of Tuesday, Facebook's stock ...

It is way too early to tell whether Facebook shares will end up being a good buy, but the reaction to the initial public offering (IPO) on the first day of trading should serve as a serious warning. While the website may have hundreds of millions of users worldwide, it is not clear that this will translate into profits for the company.  Facebook could follow in the footsteps of Pets.com, Webvan and other end-of-the-century start-ups that quickly collapsed following multi-billion dollar IPOs.

Of course Facebook is unlikely to go out of business, but it is certainly possible that its business model is not sufficiently robust to justify a position among corporate America’s elite in market capitalization. A year or two down the road it may well turn out that its share price ends up at half or less of its IPO price.

In this case there will have been an enormous transfer of wealth from the purchasers of Facebook stock to those able to cash out following the IPO. This will make many of those on the inside of the company fantastically wealthy. However, much of their wealth would not result from making a good product that society valued; rather it came from being part of a successfully hyped company.

These insiders benefitted from the ability of Mark Zuckerberg and his colleagues to convince investors that Facebook had much more profit potential than in fact was true. This ability to hype a product, in this case company stock, can be an incredibly valuable skill, but it provides nothing of value to society. In that way it is similar to the skills of Fabrice Tourre (a.k.a. "Fabulous Fab"), who was apparently very skilled in putting together complex mortgage derivatives for Goldman Sachs that were designed to fail.   

In the last two decades the economy seems to have created many openings for people whose primary skill is lifting money out ...

The Victorian era gave birth to a very unpleasant custom called slumming. Parties of swells in London and New York would descend on impoverished neighborhoods as a form of entertainment. In addition to breaking up the tedium of their posh lives, the adventure made them feel superior.

A much updated version of slumming has been taking place in Manhattan, where Facebook is arranging its initial public offering. This time, though, it's the super-rich visitor, Facebook founder Mark Zuckerberg, who is dressed in rags — his trademark T-shirt and hoodie. The Wall Street investors currying his favor are the ones in expensive business suits.

What Zuckerberg's costume says is: "They need me. I don't need them." Like the tuxedoed waiters scurrying about the four-star restaurants that tech tycoons visit in jeans and baseball caps, Wall Street heavies are merely another kind of servant. Of course, most eyes stay dry at images of investment bankers in the top half of the top 1 percent being dissed by a kid in the top 1 percent of the top 1 percent.

Less appetizing is the con perpetrated on Facebook users. The entire wealth of the enterprise is based on the munchkins' willingness to surrender their privacy and friends' names to Facebook — data to be packaged a thousand ways and sold to the highest bidder. To use the users, Zuckerberg must get them to trust him, hence the after-school sweats.

Elsewhere on Facebook's upper deck, another founder, Eduardo Saverin, has just renounced his American citizenship, a mere 14 years after the Brazil native obtained it. Saverin denies that he became a citizen of Singapore to avoid the American taxes he'd surely pay after the spectacular stock offering. Funny how no one believes him.

From the annals of ingratitude: Under a kidnapping threat, Saverin's wealthy family left Brazil for the safety of Miami.

Eduardo later attended Harvard. There he met ...