IP: THE RETURN OF REALITY

[Dave Farber <farber () cis upenn edu>]

> Subject: IP: THE RETURN OF REALITY
> To: farber () cis upenn edu
> X-Mailer: Lotus Notes Release 5.0.4  June 8, 2000
> From: jspira () basex com
> Date: Mon, 1 Jan 2001 09:55:51 -0500
>
>
> Dave, hi and Happy New Year... This piece will be distributed to Basex
> clients on the first; I thought IP'ers might enjoy a preview.
>
> /s/ Jonathan
>
> ==========================================================================
>
> THE RETURN OF REALITY
> by Jonathan B. Spira
>
> It would be easy to view the year numbered 2000 as one of great contrast;
> it was a year where the news focused on the rising power of stock options
> (January through April), to economic decline (April through September), to
> pregnant chads (September through December), without missing a beat.
>
> To wit...
> ...The anticipated but largely non-occurring Y2K failures
> ...The unwavering optimism of January, February, and March
> ...The continued willingness of Venture Capitalists to invest in unproven
> concepts, some without proven management teams, in Q1
> ...The rise of TLA (three-letter abbreviation) business models in search of
> venture capital...B2B, B2C, C2C, P2P, ASP, MSP, AIP
> ...The spectacular failure of such companies as boo.com, which consumed
> some of the greatest amounts of Venture Capital in history
> ...The proof that a great domain name, pets.com, furniture.com, garden.com,
> alone was no guarantee for success - or perhaps even equated failure
> ...The anticipation of virtual companies burying the established merchants
> ...The fire sale of virtual companies' assets, where established merchants
> purchased these for pennies on the dollar (including those "great" domain
> names)
> ...The anticipation and hype of Peer-to-Peer, and how "Big Business" flexed
> its muscle in Napster's direction
> ...The revenge of the traditional retailer, whose experience in handling
> merchandise, suppliers and customers proved to be a winning formula
> ...The NASDAQ's decline of over 50 percent
> ...The apparent abandonment of so-called "new economy" Business-to-Consumer
> (B2C) models and other TLA's by autumn
> ...The return of mega-consolidation - Time-Warner and AOL, Primedia and
> About.com - showing that there still is a perceived value in online users
> ...The squashing of MCI WorldCom's merger with Sprint - showing that
> horizontal consolidation is still believed to reduce competition in an
> anti-competitive manner
> ...The verdict (for the meantime) that Microsoft is an old-fashioned
> monopolist
> ...The issue of globalization and how disparate legal systems will butt
> heads, as in the Yahoo! Nazi memorabilia case in France
> ...The issue of intellectual property and how a system's rightful owners
> will protect it (DECSS) and how third parties will intervene (joint plans
> of
> disk drive manufacturers and content providers to provide copy protection
> based on cryptographic means embedded within the drive technology)
> ...The issue of globalization and the fact that 3G mobile systems will all
> be compatible with each other worldwide - but are not scheduled to be
> implemented worldwide in a coordinated fashion
> ...The fact that everyone now knows more about voting booth technology than
> had been imaginable one year ago
> ...The pink-slip parties in Silicon Alley in September, October, November,
> followed by pink-slip holiday parties in December for those whose Internet
> company was no longer around to host the requisite fabulous blowout event
> ...The revenge of the old economy, in the form of electricity generation on
> the West Coast of the United States, against new economy headquarters
> Silicon Valley, literally sending a chill down the Valley as thermostats
> are lowered to conserve electricity
>
> Complacency might take hold; but that would merely change the dire into the
> disastrous.  Perhaps this is not so much about "new economy" v. "old" as it
> is about  "old school" v. "new school."  It is far too easy, given the
> dramatic failures we've witnessed in recent months, for those of the Old
> School to sit back and say, "See, it was just a fad." ["Yes, Mother, this
> on-line thing is just a phase I'm going through."]  "Now those eggheads
> will disappear and we'll get back to traditional retail values."  It would
> be a colossal mistake to read this year as any more than an adjustment.
>
> I'm continually cautious, however, with the "new economy" moniker.  The
> hard evidence is scant; in fact, outside the durable goods and
> computer-manufacturing sectors, the improvement that is so ballyhooed in
> the press is negligible.   Could it be that the great investment that most
> businesses are making to get the most out of the Internet revolution is
> failing to make a marked impact on the economy?
>
> The fact is that goods and services are moving much more quickly through
> the pipeline, as are news and information, for that matter and that does
> give the "feeling" of a new economy.
>
> But is it a revolution?  What is commonly referred to as the "golden age"
> of productivity growth in the United States took place starting in the
> 1860's and lasted until the turn of the century.  The inventions and
> discoveries which came out of this time were nothing if not remarkable:
> electric power, the telephone, the internal combustion engine.  As entirely
> new things, these were "first order" inventions.  Like Johnny Appleseed,
> they went forth and planted the seeds for legion second- and lesser-order
> innovation.  The discoveries of this era were truly revolutionary.
>
> The current economic adjustment will only scare away the weak-kneed.  Those
> who truly have a vision for the future of the economy will merely absorb
> these lessons learnt into the context of the history of the world
>
> Then there are the recession mongers.  If there's a recession looming,
> abandon hope all ye who enter, and bury your heads in the sand.  This might
> prove to be far too easy an approach.  The failure rate of digital economy
> companies still hasn't hit the average rate of failures for startups in
> general.  There will be more failures, some spectacular, on the road to the
> true new path to economic success.  [This is, however, a good moment to
> point out the one difference that is discernible between "old" and "new"
> economy companies: the "new" economy companies tend to post much much
> larger losses in their quarterly reports.]
>
> In a few days, we will actually enter the twenty-first century.  Such was
> the climate and thirst for celebration at the end of 1999, that most people
> celebrated the dawn of the new millennium one year early (the Gregorian
> calendar starts with the year 1, so only 1,999 years had elapsed since the
> start of the first millennium).  Fortunately, the prospects for the first
> year of this new millennium are far more realistic and down-to-earth than
> was the case only one year prior.
>
>
> Jonathan B. Spira is the Chairman and Chief Analyst at Basex, a research
> and consulting firm based in New York City.
>
> Jonathan B Spira         Basex, Inc.
> Chairman            Empire State Building
> jspira () basex com         350 Fifth Avenue
> http://www.basex.com     New York, NY  10118
> Tel: +1(212) 760-1555    Fax: +1 (212) 760-1724
> --------------------------------------------------------------------------------------------



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