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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