It would be easy to view the year numbered 2000 as one of great contrast; it was a year where the news focused on the rising power of stock options (January through April), to economic decline (April through September), to pregnant chads (September through December), without missing a beat.
…The anticipated but largely non-occurring Y2K failures
…The unwavering optimism of January, February, and March
…The continued willingness of Venture Capitalists to invest in unproven concepts, some without proven management teams, in Q1
…The rise of TLA (three-letter abbreviation) business models in search of venture capital…B2B, B2C, C2C, P2P, ASP, MSP, AIP
…The spectacular failure of such companies as boo.com, which consumed some of the greatest amounts of Venture Capital in history
…The proof that a great domain name, pets.com, furniture.com, garden.com, alone was no guarantee for success – or perhaps even equated failure
…The anticipation of virtual companies burying the established merchants
…The fire sale of virtual companies’ assets, where established merchants purchased these for pennies on the dollar (including those “great” domain names)
…The anticipation and hype of Peer-to-Peer, and how “Big Business” flexed its muscle in Napster’s direction
…The revenge of the traditional retailer, whose experience in handling merchandise, suppliers and customers proved to be a winning formula
…The NASDAQ’s decline of over 50 percent
…The apparent abandonment of so-called “new economy” Business-to-Consumer (B2C) models and other TLA’s by autumn
…The return of mega-consolidation – Time-Warner and AOL, Primedia and About.com – showing that there still is a perceived value in online users
…The squashing of MCI WorldCom’s merger with Sprint – showing that horizontal consolidation is still believed to reduce competition in an anti-competitive manner
…The verdict (for the meantime) that Microsoft is an old-fashioned monopolist
…The issue of globalization and how disparate legal systems will butt heads, as in the Yahoo! Nazi memorabilia case in France
…The issue of intellectual property and how a system’s rightful owners will protect it (DECSS) and how third parties will intervene (joint plans of disk drive manufacturers and content providers to provide copy protection based on cryptographic means embedded within the drive technology)
…The issue of globalization and the fact that 3G mobile systems will all be compatible with each other worldwide – but are not scheduled to be implemented worldwide in a coordinated fashion
…The fact that everyone now knows more about voting booth technology than had been imaginable one year ago
…The pink-slip parties in Silicon Alley in September, October, November, followed by pink-slip holiday parties in December for those whose Internet company was no longer around to host the requisite fabulous blowout event
…The revenge of the old economy, in the form of electricity generation on the West Coast of the United States, against new economy headquarters Silicon Valley, literally sending a chill down the Valley as thermostats are lowered to conserve electricity
Complacency might take hold; but that would merely change the dire into the disastrous. Perhaps this is not so much about “new economy” v. “old” as it is about “old school” v. “new school.” It is far too easy, given the dramatic failures we’ve witnessed in recent months, for those of the Old School to sit back and say, “See, it was just a fad.” ["Yes, Mother, this on-line thing is just a phase I'm going through."] “Now those eggheads will disappear and we’ll get back to traditional retail values.” It would be a colossal mistake to read this year as any more than an adjustment.
I’m continually cautious, however, with the “new economy” moniker. The hard evidence is scant; in fact, outside the durable goods and computer-manufacturing sectors, the improvement that is so ballyhooed in the press is negligible. Could it be that the great investment that most businesses are making to get the most out of the Internet revolution is failing to make a marked impact on the economy?
The fact is that goods and services are moving much more quickly through the pipeline, as are news and information, for that matter and that does give the “feeling” of a new economy.
But is it a revolution? What is commonly referred to as the “golden age” of productivity growth in the United States took place starting in the 1860′s and lasted until the turn of the century. The inventions and discoveries which came out of this time were nothing if not remarkable: electric power, the telephone, the internal combustion engine. As entirely new things, these were “first order” inventions. Like Johnny Appleseed, they went forth and planted the seeds for legion second- and lesser-order innovation. The discoveries of this era were truly revolutionary.
The current economic adjustment will only scare away the weak-kneed. Those who truly have a vision for the future of the economy will merely absorb these lessons learnt into the context of the history of the world
Then there are the recession mongers. If there’s a recession looming, abandon hope all ye who enter, and bury your heads in the sand. This might prove to be far too easy an approach. The failure rate of digital economy companies still hasn’t hit the average rate of failures for startups in general. There will be more failures, some spectacular, on the road to the true new path to economic success. [This is, however, a good moment to point out the one difference that is discernible between "old" and "new" economy companies: the "new" economy companies tend to post much much larger losses in their quarterly reports.]
In a few days, we will actually enter the twenty-first century. Such was the climate and thirst for celebration at the end of 1999, that most people celebrated the dawn of the new millennium one year early (the Gregorian calendar starts with the year 1, so only 1,999 years had elapsed since the start of the first millennium). Fortunately, the prospects for the first year of this new millennium are far more realistic and down-to-earth than was the case only one year prior.
Jonathan B. Spira is the CEO and Chief Analyst at Basex.