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I will admit it -- I am a financial idiot. My checkbook
register has been screwed up since 1997, and the only stock I’ve
ever held was $200 worth of K-Mart that an old boyfriend bought
me because the ticker symbol matched my initials. If I ever had
an idea for a business venture, it would be quickly squashed by
my own ineptitude. It is not that I am proud of any of this. To
the contrary, it is rather embarrassing. But I am
becoming increasingly thankful for my lack of financial savvy.
You see, despite my apparent inability to grasp the finer
points of Wall Street, I am gainfully employed. This is more
than I can say for a lot of folks in the weird world of
e-business. News of layoffs dominates business headlines, and
the latest casualties of the dot-com implosion are none other
than the ones covering the carnage -- the folks at The
Industry Standard.
The rise and fall of this Silicon Valley insider magazine is
strangely parallel to those of so many of the online business
ventures it once covered. From its beginnings as the brainchild
of an entrepreneur and a journalist in 1997, to its meteoric
rise to the top of its class by 1999, to its stunning demise
last Thursday, The Industry Standard was a virtual mirror
image of the typical technology upstart of the late 1990’s.
A few years ago, as an outsider, I watched with fascination
as literally thousands of companies with nothing more than a
couple of bright-eyed young guys and a questionable but cleverly
worded business model secured millions of dollars in venture
capital. I naively assumed they needed the money for things like
technical equipment and personnel, but a quick look at the
online auction houses reveals they needed it for $700 Aeron
chairs, a circular coffee bar, and a foosball table. Other
published evidence suggests they also needed it for lavish
rooftop parties and employee happy hours complete with top shelf
liquor.
Now, I may be a financial idiot, but I think I know what went
wrong in the brave new world of e-commerce. The most painfully
obvious reason for the failure of these "New Economy"
businesses is simply that they spent all of their money on
useless crap. If there is any reason the company I work for
still exists, it is because its employees sit on 15-year old
K-Mart chairs and only get free drinks on very special
occasions. Company funds are spent on things like production and
marketing -- stuff that keeps you in business. Money also goes
to employees’ salaries -- something that certain participants
in the "New Economy" were apparently happy to all but
give up in favor of stock options and cocktail parties.
The other two major problems this financial idiot sees with
the "New Economy" businesses are that few of them
offered anything useful, and most of them offered their useless
services free of charge. Take, for example, another
soon-to-be-kaput company (closing Aug. 26th),
beenz.com.
Beenz.com offered points for visiting partner websites. All
one had to do was download a "beenz counter" which
kept track of the points, surf the various partner sites to earn
the points, and go back to beenz.com to redeem the points. A
beenz.com participant could use their beenz to purchase various
items at the partner websites. The concept was not unlike that
of a mall arcade, where you can play Skeeball for about three
months straight, save up all the tickets you win, and then trade
20,000 or so of the tickets for a CD boom box. The main
difference between the mall arcade and the "beenz
economy" (I am not kidding, they really did call it that)
was that the beenz economy required no hand-eye coordination
(unless you count the complicated "point-and-click"
maneuver).
Perhaps the "beenz economy" was useful to Skeeball-deficient
fourth-graders, but the adult (read: business) world has neither
the time nor the inclination to sit in front of a computer for
two months counting beenz to earn a free CD player. Grown-ups
simply work for a paycheck, then spend the money on whatever CD
player strikes their fancy.
Speaking of money, I have yet to hear a sufficient
explanation as to how beenz.com expected to make any. The site’s
founders touted beenz as ‘a globally accepted alternative to
money,’ but since all six billion of Earth’s citizens
currently use money as currency, the beenz.com management faced
an uphill battle of ludicrous proportions. Even if beenz.com had
a snowball’s chance in hell at achieving economic world
domination, its founders would have needed some sort of real
income to use to reach that goal. Apparently, like many failed
dot-com entrepreneurs, beenz.com’s founders expected to secure
round after round of financing based on nothing more than a
promise of planned success.
If I applied for a multi-million dollar loan based on a
promise that I was ‘planning’ to win the Powerball lottery,
I would be laughed out of the bank. But this is basically what
thousands of young men and women have asked for -- and received
-- by wooing investors too awed by new technology to realize
they are being had. Kids fresh out of college were walking into
venture capital offices as recently as last year armed with only
a PowerPoint presentation and a get-rich-quick scheme. They
walked out of those offices with money to burn, and burn it they
did. Thanks to their actions, the economy is tanking, and it
took a financial idiot to figure out why. Now, will someone
explain it to Alan Greenspan?
See also: Mario
responds...to the hundreds of e-mails received after his
appearance on Hannity & Colmes
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