Back in the 80s "Throwing it All Away" was the first "Number One" hit for Genesis, a group my wife and I had followed since the early 70s. I found myself humming this theme throughout the year 2000. (I also thought that maybe Prince was right in his song "1999" but that's another story.)
History shows that every boom is followed by a bust and market consolidation. This was true in the cereal boom of the early 1900s, the radio boom of the 1920s, and the oil boom of the 1970s. The bigger the bubble gets the harder the fall when the bubble bursts. This was the mother of all bubbles.
Knowing what's going to happen, and warning about it, doesn't make the prophet feel any better when disaster strikes. In my case it's worse. It's like knowing there's a bomb on Pan Am 103 but getting on the plane anyway.
A market crash happens in slow motion, even in this age. This is partly because the stages of mourning don't change. Each stage must be gone through before true healing can begin. I heard denial from the stock analysts in March, rage during the May @d:tech show in San Francisco , and it seems acceptance is only now approaching. Employment and real estate prices are always lagging indicators - the fact that optimists don't see a real recession isn't my fault.
As the Internet Recession has become a little Internet Depression, good companies have begun to die along with the bad. In a conventional sense, you know, eToys' Toby Lenk did nothing wrong. Had he not advertised heavily and scaled fulfillment he wouldn't have won any funding. Had he economized in the spring he just would have gone under sooner. For some business problems there are no right answers.
John Doerr (Rice '73 ) is right in that there's still a real sector here, and the market can handle many winners He's just underestimating the degree of the short-term damage. Companies that fail this winter will exist again, under new ownership, three years from now.
So the failure of outfits like eToys doesn't guarantee success for its brick-and-click rivals. They, too, may have excess fulfillment capacity. They, too, may have advertised too heavily. They, too, may fail.
What Clue do we get from this? When the dinosaurs are made extinct, the winners aren't other dinosaurs. The winners are the cockroaches and the rats. If you run a small business, dear reader, you are the business equivalent of a cockroach or a rat. You have spent the last few years living in the nooks and crannies of the dinosaurs' world. There will be a global winter in this sector. There will also be a spring.
Starting with the New Year you'll get A-Clue.Com in a new format. Our e-mail subscribers will get a separate mailing each weekday, Monday-Friday. Monday's daily will be the think piece now known as "This Week's Clue." The Tuesday through Thursday issues will be the current "Takes on the News," only written closer to deadline. The Friday issue will be our popular "Clued-in and Clueless" feature. All five issues will be posted online at the end of each week.
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My Clues come from daily writing for ClickZ. I write monthly for Crain's B2B, and Boardwatch. I write weekly for WorkZ and Internet Content. My monthly column will launch next year in Publish Magazine. I have written for Advertising Age as well. Yes, I'm very busy, but you can still buy my book.
Remember that it's journalism that keeps the Clues coming...
Takes on the News
The Internet is a global network. But national governments insist on treating it as though this reality doesn't exist.
We got our second reminder of this in a month recently when a German court ruled that an Australian could be jailed for denying the Holocaust online . This came just a month after a French court had ruled that auctions of Nazi memorabilia in the U.S. could and must be rendered inaccessible to French readers. Never mind that the Australian was exercising what his government calls free speech, or that Yahoo's auctions are protected by the First Amendment.
But follow the thread a while. If European courts could succeed in jailing enemies in remote locations, couldn't Arab courts do the same to Jewish critics? Couldn't Chinese courts do the same to Taiwanese critics? Couldn't African dictators do the same to their critics? Would law enforcement depend entirely on the strength of the army enforcing the law?
The Internet creates contradictions no national government can deal with, but denial isn't just a river in Egypt. The ways and means for dictatorships to destroy online freedom are being created by Clueless democracies, aided and abetted by the nationalist and (sometimes) regionalist prejudices of their citizens. This will be the first major conflict of the 21st century.
Beginning of a New Error
The U.S. will head into a new error this January. Voters who wanted neither candidate and neither party wound up electing a government of one party dedicated to anti-government extremism.
This wouldn't be so bad if we weren't so threatened by economic conditions that look eerily like those of 1929-1933. Back then the Dow did seem to recover and hold for a time before undergoing its final collapse. Cries for liquidity went unheeded, because the government feared deficits.
The New Deal resulted in lower deficits than any Republican will ever admit, so it did less good than any Democrat will admit. The impact of World War II was an explosion of liquidity, and of debt, that could have stimulated the economy years earlier had it been tried.
If a new liquidity crisis (and deflation) do emerge, the best solution would be a great adventure, such as the exploration and colonization of Mars. (That's my personal preference.) The debt would stimulate investment and the creation of new technologies. It would provide both demand and liquidity. But that is not likely to happen. The incoming Administration has a Hoover-like aversion to debt, except in the service of wealthy people who are (until conditions change) unlikely to invest a tax cut.
Fasten your seat belts. It's going to be a bumpy night.
The Internet Depression is creating a lot of casualties. People who have seen their stock options become worthless are now finding themselves jobless as well, right at the holidays .
Few of the people in this business have ever experienced a recession. If you graduated from school after 1992, you haven't seen one in your working life. Fortunately I've seen several, so let me help you through this one.
First, find your passion. Figure out what you'd do for nothing, because that's what you'll be doing it for. Do what you most want to do, because that's what you'll do best.
Next, do it. Whether your passion lies in writing or design or programming, get to work. I have a friend named Roland Heath. He is an artist. Financial need caused him to do many other things on many days - he painted my house among other things. But he never lost faith. Now his son has grown, his financial needs have decreased, yet he still lives poorly. He does this so he can continue to do wonderful work, the work he's most passionate about. That's what is important.
If you have a PC and Internet access you can work. You can find confederates in similar straits and work together. You don't need a big home. It doesn't have to be in the center of town. It doesn't have to be in any particular town. You may even have to share your space. But if you keep to your dreams you will come through, better and stronger than before. One day you'll work back on the 1990s and see what you really were, a callow youth and a child in the world.
Now is a great opportunity for you to grow up. If you've been laid-off recently, get to work on it.
Clued in (right now) is cold hard cash . Keep your powder dry and your eyes open. Make money on every transaction until further notice.
Clueless (for now) are both debt and equity investment . Debt drags you down, and equity can destroy your freedom of action.
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