Who
is losing?
Towards the end of last week's 4th of July festivities—still giddy from hot dog- and apple pie-eating, Budweiser-drinking, baseball-tossing, fireworks-watching, and not yet sobered by the imminent return to our jobby-jobs—we were overcome by New Economy euphoria.
Might it be (we wondered in a patriotic haze)? Could it possibly be that, in the midst of this unprecedented inflation-free economic expansion, there are no losers? Sure, some are doing better than others, but isn’t everybody better off than ten years ago? Or, at least, no worse off?
And if this is the case, why should anyone waste time and energy on nay-saying the seemingly indomitable New Economy? Especially on Independence Day?
The challenge facing today’s New Economy skeptics is that the New Economy just seems to be happening. One would think that the voices of economic authority would be able to offer some sort of explanation—or at least be able to fake that they know what’s going on, and when pressed for clarification, offer a dismissive "you wouldn’t understand." But with all economic precedent blown out of the water, nobody seems to explain what’s happening.
With no real explanation to deconstruct, New Economy skeptics are at a loss. As long as the good times roll, the best they can do is argue that this economic phenomenon is inequitable, unregulated, and unsustainable—a smoke-and-mirrors phenomenon driven by a relatively intimate group of "haves," with few checks and balances governing their out-of-control bandwagon.
And, for what it’s worth, they’re right. The innovation that’s driving the New Economy is fueled by a small population of entrepreneurs, venture capitalists, and investment bankers that wields unimaginable amounts of money ("have-nots" need not apply), and attracts very little external governance.
Of course, to expect this group to self-administer any sort of restraint—in the name of equitable distribution of capital, external regulation, or any other high-minded reasoning—is absurd. Why would anyone on the roster of players in the New Economy game even consider it?
Entrepreneurs?:
The innovators starting companies are taking huge risks and, in some
cases, reaping huge rewards. As long as there is plenty of money to
be had, and as long as the rules of the game don’t penalize failure,
entrepreneurs will keep on playing.
Venture capitalists?: Though every VC expects some sort of private
equity market shakeout in the coming months (years?), every VC firm
is still raising, and investing, mad capital. And they're not as concerned
with quality as you might think.
Investment banks?: These cats have made ungodly amounts of money
bringing any and all technology companies to a ravenous public. And
if one assumes that only unknown banks are foisting unworthy companies
onto the public markets, think again. As Christopher Byron pointed out
in a recent "Back
of the Envelope" column in The New York Observer (a weekly
piece that, if you’re interested in the stock market, you should
read religiously), one need only take a glimpse at the wretched IPO
track record of the premier investment bank on the planet, Goldman Sachs
(with names like Snowball.com, eToys, PlanetRx.com, InsWeb, Webvan,
1-800-FLOWERS.com, NetZero, Agency.com, and E-Loan), for evidence to
the contrary.
Professional services firms?: Why would the lawyers, accountants, and
consultants, who have billed unimaginable hours in support of the entrepreneurial
process, bite the hand that feeds them?
And, for that matter, why would any of the potential industry watchdogs want to spoil the party?
The government?:
As long as the greatest economic expansion in history continues, federal
and state regulators will be reluctant to obstruct growth.
Market research firms?: The dark secret at firms like Jupiter
Communications and Forrester Research is that their primary source of
revenue comes not from their oft-quoted industry reports (invariably
wrought with over-enthusiastic projections), but from the research they
are contracted to do by the very technology companies they purport to
assess objectively. The potential for conflict of interest boggles the
mind. (Speaking of which…)
Tech-business/New Economy media?: Most chronicling the New Economy
are startups in their own right—Wired, Fast Company, Red
Herring, CNet, Marketwatch.com, Industry Standard, etc. As
a result, their entrepreneurial sensibility translates into an editorial
platform that is unavoidably sympathetic
and optimistic.
Of course, the trump card that all of these New Economy players wield over the New Economy skeptics is the "Markets are Inherently Perfect" argument—that, by definition, the private and public equity markets dictate what participants in the those markets can and can’t do, because the participants are only able to pull off as much as the markets will bear. Right.
However, there is good news for New Economy nay-sayers: At some level, whether they admit publicly to it or not, each of these New Economy participants agrees that the New Economy is unsustainable—that at some point, and nobody’s sure exactly when (though the stock market crash of April 14 still has everybody a bit antsy), the well is going to dry up.
And so the dance between the New Economy nay-sayers and the New Economy players continues. While entrepreneurs, venture capitalists, investment bankers, and professional services firms—all vesting, investing and/or billing at an astounding rate—continue to amass their fortunes, New Economy skeptics—all having sold their Yahoo or America Online years ago—continue to log nothing but untold opportunity costs.
So when all is said and done, who has lost? Seriously.
The "wakeup:call" is brought to you by Alarm Clock Communications, Inc. Copyright © 2000, All Rights Reserved.
