For the Week of September 22, 2003
One of the smartest statements I ever heard came during a Forrester conference at the height of the boom.
I forget which analyst was on stage at the time. But he said that media are defined by the generation that grows up inside it. TV was defined, not by "I Love Lucy," but by my generation, which grew up with TV as part of our cultural vocabulary.
The statement came in 1998. Time marches on. I was getting my oil changed the other day, near Emory University, and walking around the shopping center parking lot when I suddenly noticed new banners on some of the fast-food joints. Kyoto Joe, which left-coasters would call a "bento bar," was advertising its new Web site . Nearby, the Philly Cheesesteak unit was bragging about its online connection .
Suddenly it hit me. Today's college sophomore was 12 when I was working at the Interactive Age Daily, in 1995. They have been online, to their mind, practically forever.
The lead end of the "Internet Generation" is now at college, so this new application is a natural. Food is fuel. You want it fast, cheap, and hot. Using a phone, then a car, is sub-optimal. You will prefer the place that lets you stay online, the one that comes to you.
These students will take their preferences into the world. Sites like Campusfood are going to expand, and find competition. A new niche has been opened.
For all the bluster and bile of the RIAA's campaign against file sharing, the colleges who serve these kids know they can't succeed. Just look at the choice. On the Internet a PC is used to get the song, store the song and play the song. With a CD, it's just used to play the song. You have to drive to get the song (or wait for it to arrive in the mail), store it in a rack (in its jewel case, which you will likely lose), and you only get an hour per play. In terms of the experience there is no comparison.
Colleges can try to "educate" file traders all they want, they can try and control their networks. But every student knows an expert who can reach a Darknet. Every student knows how to back-up their MP3 collection to a DVD, so even if they make a great show of erasing the hard drive, they're not losing anything. File trading can exist from DVD-to-DVD, with all transactions being private. Colleges are desperate for a way out, proposing "music taxes," special fees on blank discs, and the creation of their own in-house networks for trading. If the movie industry does not learn the lessons of the music industry they will suffer just as badly.
During the boom there were several failures in the business of trading textbooks, but that opportunity is now open again. Attempts by the government to restrict online education for national security reasons are doomed to failure. Wires are no longer for telephony: that's what cells are for. Wires are there for bandwidth, for Ethernet access, and that's all they are good for.
If you are interested in making big money in Internet commerce next year or into the future, your strategy is simple. Talk to college students, as many as you can. Hire people who know these students, their likes and dislikes, their lifestyles and preferences, because they're going out into the world like that and will expect the same service.
As TV rose in the 1950s, the radio and then the movie industry had to change, retreat, and adjust. Every industry impacted by Internet commerce (which means nearly every industry) must now make the same adjustment. My teenage kids have had PCs all their lives, and leave the TV to me most nights - even on Fridays!
Even on Fridays. Get used to it and profit, or fight it and die.
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Takes on the News
More Dismal Science
My first big story was a pyramid scheme.
A man with $100 million to invest for a local college bought bonds. Then he got loans on the bonds and bought more bonds. And so on, and so on. So long as interest rates were falling he was golden. His collateral increased in value, he had plenty of coupon income to repay the loans. But when interest rates reversed and started rising, his collateral fell in value, his loans were called, and he was stuck.
The U.S. economy is being managed the same way. We're funding present spending with bonds. So long as interest rates stay low the bonds keep their value. Let rates rise and the bond's equity value falls.
Deficits are fine if they're invested in something worthwhile. If you borrow for a tractor and get a bigger crop, if you borrow for a car and do more business as a result, loans are good. But if you don't invest a loan's proceeds wisely - if you just spend it - you're going to go bankrupt.
In the case of the government, of course, this own't happen right away. In the short term you have more spending, which someone may use to hire people. You may even get some growth from that. That is the "growth" we are seeing now. The government thinks of it as kindling that will catch the whole bonfire. But I think they're all wet.
Yes, employment growth lags. Yes, a rise in stock prices usually means growth will come, first in earnings, then in employment. But today American companies are investing their money overseas. Employment in fact is growing, in the Philippines, Malaysia, Singapore, India, China. The investment is getting a return, in the form of products and services that sell at a profit to American buyers, often to other corporations. But technology moves companies to cut employment here, in accounting and management, and even ship the analysis work overseas.
The result is that stock prices rise, earnings rise, real economic growth is detected, but there are actually fewer jobs. Yes the executives and investors making the money may hire some people to serve them. The question becomes where do we go from here?
The bulls want us to bugger the currency. Let the Chinese Yuan float. Its value will rise, its exports will become less competitive, and American manufacturers can compete, allowing them to hire, they say. But millions of Chinese still prefer freedom. Let the Yuan float, make it convertible into dollars, and many Chinese will buy dollars, not sell them, in hopes of escape. (Instead of leaving in the stinking hold of a cargo ship, they will hope to fly over on tourist visas.) The Yuan, in fact, may fall in value.
What else happens when you bugger the currency? You print more dollars, borrow more dollars and the value of a dollar goes down. Interest rates rise. Housing growth disappears. Housing prices go down (it costs more for the money to buy them). Foreclosures rise.
The piper must be paid. If you mortgage your home and live on the money, you can't pay the loan and the bank takes it away. If you mortgage your country and live on the money, you can't pay the loan and foreigners destroy your economy. It happened in Argentina a century ago, and it's happening now in the United States. But we were so rich in the 1990s, it's happening in slow motion.
Within a year I expect the damage to be obvious. The only rational solution will be to cut borrowing, increase competition, sell assets (let foreigners buy U.S. companies with cheap dollars), tighten our belts, and start working hard again. It will be the morning after the greatest party ever, and hopefully, we will never get that drunk again.
But meanwhile we buy guns, we buy butter, and we think we're on top of the world, with a growing economy, a popular President, and a mission to rule the Middle East like Gods. It's the delusion of a rich country drunk on power, throwing away its inheritance on a binge.
When the grownups come to power in 2005 there will be a hell of a mess to clean up.
SCO Attacks Open Source Directly
SCO's efforts to extort money from Linux users have escalated to terrorism. SCO is claiming the General Public License is illegal, and that anyone whose code is in it can, at any time, "exert their copyright claim" and start charging people
OEMs are laughing at this, as they should. But some analysts are concerned. "If you say that the GPL is no longer in force, and take away all the obligations to re-release software, then you diminish the open-source process to a great degree," said Chris Lanfear, an analyst for Venture Development Corp. Of course, what did we say last week about wishes and beggars?
The argument is based on the doctrine of pre-emption, in which federal law trumps state law. Since the GPL is based on state law, and the copyright law is federal law, the latter trumps the former when they come in conflict. But the federal law is about setting upward limits on the protection copyright enjoys, and not the downward limits that might be created by contracts. If a judge takes SCO's latest argument seriously, it is the best argument yet offered for re-writing the copyright law. And that would be a very good thing.
SCO CEO Darl McBride's pitiful attempts to change the spin on all this backfired, as expected. My guess is he better make something out of this because, in the real technology industry, he is now unemployable.
Some Courts Get Technology Right
My Pakistani friend sent me a story that he may have misinterpreted.
The story was about efforts to jam the picture-taking ability of new cellphones, so corporations can keep sensitive areas from being photographed, industrial secrets stolen.
"They are being clueless," Tariq wrote. "They can never dictate or even pursuade to have such 'controlling hardware/software' *inside* the mobile phone that will turn the camera off at the request of a 'begging' hardware placed at a sensitive location." Well, not exactly. For one thing, you could just jam the phone, rendering its frequencies useless for all applications. For another U.S. cellphone operators still act as "gatekeepers" to cellphone suppliers. (Most also use standards incompatible with Pakistan's GSM, making it easier for them to dictate what comes in.)
The question then becomes, can you either mandate this technology or forbid it? In this case, fortunately, U.S. courts are starting to say no on both counts. You can't keep someone from using Gator (or some other pop-up creator) that brings a competitor's ad onto your site. At the same time, you can't stop people from installing pop-up blockers, or programs like Ad-Aware that keep such crap off their machines.
The principle is becoming clear. You can bring that camera phone into my plant but I can jam its signal. You can try and hose me with pop-ups but I can keep them from popping. I control what I have, but you also control what you have. And right now that's the only reasonable standard.
Clued-in is Ann Handley , doing well at Marketingprofs after her career at ClickZ.
Clueless is Andy Bourland , who couldn't even get the name of his new company right. To be fair, it is easier to duplicate editorial success than business success.
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