What We Learned at the New Economy

Surprisingly interesting, contrite, and thoughtful apologia here on the economy of the late-1990s from Fast Company. Perhaps its best contribution is it explicitly refutes the false orthodoxy of technology wherein all new things supplant, rather than augment, what has gone before. The piece also does a mini mea culpa for the whole Free Agent Nation mythology, as well as conceding that first-mover advantage is generally a canard.

Mind you, I said all the same things in columns, lectures, and on television back in 1997-98. Maybe Fast Company isn’t so fast after all.

Pining for the Glory Days of Venture Capital

Is too much money still screwing up the venture capital business? There is no doubt that things were out of control in the late 1990s, with everyone and their Pomeranian opening a venture firm. But how about now?

Well, some think the situation is little better. At a recent venture capital conference, David Aronoff, a newly-minted general partner at Greylock Capital, pined for the good old days:

The motto in VC used to be “Undersupply of capital for oversupply of good ideas.” But now capital markets are increasingly willing to take on risk with VCs, and this situation has turned for the worse.

I take his point, and few things ruin an investing party faster than too much money. The question is, of course, at what level does a venture capital allocation become less competitive vis-a-vis other investments? I understand that incumbent VCs might prefer other VCs get less money, but that is not the same as saying that allocations should be lower across the board.

VCs and Billy Beane

Interesting piece here profiling some thoughtful recent comments by Sequoia Capital partner Michael Moritz. While Moritz engages in a bit of revisionism about his firm’s investments in Cisco and Yahoo — neither was originally as hang-dog as he self-servingly portrays them — he makes fair points about the role of contrarianism (Billy Bean-style) in venture capital, why putting “a lot of money to work” isn’t a good idea, and why patience is underrated.

Disney, Dot-coms, and the Muppets

A legit question for people who think well-known properties like Disney’s are licenses to print money is this: Why aren’t the Muppets worth more? News today is that Disney has purchased the Muppets from the Jim Henson Company for what was almost certainly a low-low price.

By way of background, back in 2000 media company EM.TV bought the Muppets for a staggering $680-million, which prompty drove that company into financial distress. The Muppets ended up back on the market shortly thereafter, with Jim Henson’s family re-purchasing the whole lot in 2003 for a “mere” $84-million. And now we have them turning around Kermit, Miss Piggy, and the Bear in the Big Blue House at a bargain price.

Business Professor & Dumb Clods

A Texas business professor has managed to alienate his town of Alpine, Texas, and a good chunk of the state by calling his students “clods”. The article is “A Strange Little Town in Texas”, and it has led to death threats and to his home being vandalized.

Larry Sechrest, a professor at Sul Ross State University, published the piece in the January issue of Liberty, a tiny libertarian journal with a circulation of around 10,000 — and only two Alpine subscribers, one of whom is Dr. Sechrest. People apparently still got wind of what he said in the piece, not all of which was flattering:

“…the students at Sul Ross, and more generally, the long-term residents of the entire area, are appallingly ignorant, irrational, anti-intellectual, and, well, . . . just plain stupid.”

And he continued:

“[I am] prepared to defend to the death the proposition that Sul Ross, and this area of Texas more generally, is the proud home of some of the dumbest clods on the planet.”

Speaking as someone who has spent a lot of time teaching at business schools, many students are clods. That said, a lot of people everywhere are clods, so I’m not sure students are all that different from the rest of us. I guess we will have to wait for the inevitable paper settling the issue in the Academy of Management’s Learning and Education journal: “Dumbest Clods: A Cross-Cultural Logit Study”.

Is Google’s Interface a Barrier to Entry?

With Google’s IPO almost certainly coming in the first half of this year, the pundits are at the post. Financial sorts can’t help playing Ladbroke’s on possible offering prices, while technologists pick holes in Google’s core technology.

I’ve staked out my punditry position on the Google IPO pricing issue already, so let me talk technology for a moment. Critics take one of two tacks (or a combination thereof):

  1. Google’s search engine has been badly gamed by Google-whackers and spammers. Google simply isn’t as effective as it once was.
  2. Competitors, like Microsoft and Yahoo, are targeting search, and the history of search is that it isn’t “sticky”.

Both points are fair. On the second point, yes, search is not sticky, if by that critics mean there are few obvious barriers — like eBay’s traffic, or Amazon’s reviews — to users changing favored search sites. Consider my own case: I started off using Yahoo years ago, then went to Altavista, was briefly at Hotbot, and then moved to Google, where I’ve been for some time.

But there are other kinds of stickiness. In addition to file formats, the main reason I don’t switch from Microsoft Office to other office suites is mundane: the interface. Not that Microsoft has it right, it doesn’t, but I don’t want to learn how to use another word processor that works differently from Microsoft Word. Life is too short.

Google’s case is somewhat similar. Have recently tried the new Microsoft search beta I got that feeling of revulsion I get when contemplating learning a new piece of software. I ran back to Google. What people are forgetting, in other words, is that search engines are increasingly packaged software applications, and as such there is an unremarked barrier to entry: the interface design.

Is an idiosyncratic and reasonably intelligent interface enough to warrant a $15-billion market capitalization for Google? Certainly not, but there is also more to site stickiness than traffic.

Humorless Harrods Loses Loof Lirpa

A U.K. court today ruled against Harrods in its silly Loof Lirpa defamation case against the Wall Street Journal. That is a good thing, of course, but Harrods comes off awfully badly.

First, it is obvious Al Fayed can tell a joke, but he can’t take one. While that is bad enough, Harrods is also saddled with $960,000 in legal bills. It is a sizable price to pay for not knowing when to laugh.

Harrods, Enron, and Loof Lirpa

As the saying goes, you just can’t make this stuff up:

Luxury British department store Harrods launched a High Court action against Dow Jones, publisher of the Wall Street Journal, on Monday, accusing it of libel after it ran a story triggered by an April Fool’s hoax.

The piece, entitled “The Enron of Britain?” appeared in 2002 in one of the Wall Street Journal’s regular columns, four days after the paper was taken in by an April Fool announcement from Harrods’ owner Mohammed Al Fayed that the store was to be floated on the stock exchange.

The WSJ column said that should Harrods ever go public, “investors would be wise to question its every disclosure”. It was, in other words, a joke — even if the paper’s editors were likely dismayed to have been taken in by the loopy idea that people interested in buying shares in Harrods-on-Thames should contact Loof Lirpa (“April Fool”, backwards).

Expensive Chips

The following table comes from Fred Hickey’s High Tech Strategist newsletter, courtesy of this weekend’s Barron’s. Put bluntly, chips aren’t cheap.


I pointed out something similar in a column this week for RealMoney. I ran a graph there of Apple Computer’s price/sales and price/earnings multiples over the last twelve years as its sales growth has slowed.


Entertainingly, and almost certainly paradoxically, the multiples have climbed as growth has slowed, suggesting that investors Apple value the (current) low-growth Apple more than the (old) high-growth Apple. Who would have thought?

Abelson Suggests Outsourcing Mankiw

Curmudgeonly Barron’s columnist Alan Abelson follows up on Council of Economic Advisers chief Gregory Mankiw’s laudatory comments about outsourcing earlier this week with a proposal:

“We suspect there are legions of highly qualified economists in Bangalore or Guangdong who would leap at the opportunity to do the council’s work for a modest fraction of what the council pays its people. We respectfully propose that Mr. Mankiw practice what he preaches by introducing the glories of free trade into his little bureaucracy.”

While cost is part of Abelson’s argument for outsourcing Mankiw’s job, he also thinks there could hardly be any reduction in quality:

“Early last year (under a different but equally luminous honcho), it predicted that in 2003 payrolls would swell by 1.7 million. As it happened, that forecast was a tad errant since not a single, solitary job was added last year and, indeed, some were lost; and we confidently venture that this year’s estimate of 2.6 million net new jobs also will prove wildly — make that ludicrously — optimistic. So, operating on the basis, as the council manifestly does, that a miss is as good a mile, our putative Indian economists couldn’t have done — or possibly do — any worse.”

I disagree with Abelson, and I’m sure he does too, but that doesn’t mean his suggestion isn’t at least a little bit funny.