Commentary
on
UpSideDown Economics
What Is Wrong With This Picture?
A recent article in The Standard (February 5, 2001) profiled the cut backs at Amazon.com. Amazon will be profitable by the 4th quarter but is now being criticized for no longer being a growth oriented company. It seems Amazon will enjoy a “dismal” 20 to 30 percent growth this year and this is no longer interesting to a jaded market. It is being called the end of the e-retail revolution - or at least Amazon’s leadership of it.
Amazon will reach 3.4 to 3.6 billion this year - this from scratch a few years back. Was a time when an accomplishment like this would have been applauded. Five years ago the question on the street was if people would really buy on line. Seems like a revolution to me.
In over 50 years of watching the US economy, this is the first time I have seen people offended because they discovered that getting rich with out thinking or effort is not a sacred right.
The DOT whatever is a tale of HYPE and ANTI-HYPE. It became a gold rush with no purpose or dignity and now is a whimper with the analysts presiding over the Freudian couches. You can’t have it both ways from Sunday but many are still trying.
All of this, of course, stems from the totally false assumption that the purpose of business is to make money. In particular, to make money for absentee landlords of passive capital. Until this UpSideDown premise is righted, market dynamics will continue to wildly swing the foolish between godlike arrogance and their despairing the end of the world.
How about this idea? Business is about creating, marketing and servicing GOODS. Goods as in good-for-you. These goods are provided by people who are passionate about what they do. Passionate, not impassioned about seeing how rich they can get in three years. They build their organizations to be ValueWeb enterprises that serve, equally, the investor, user (customer/consumer) and producer. These are stable enterprises managed as a commons should be - not as egocentric expressions of who is on top this week. They create WEALTH. They do not destroy people or the environment in the process of doing so - people are happy, Gaia is happy, LIFE is the dominate principle. Those that make the truly great hacks get recognition and a fair share of the earnings. Everyone is respected.
Sounds crazy? It is what is going on today that is crazy. If a single individual acted the way our “economy” does (us collectively) they would be judged clinically insane by the standards of modern psychiatry. If we saw animals doing the equivalent imagine what we would say. We would call it brutish, dumb, tooth and claw, lemming-like and bent on self-destruction.
First off, someone comes up with some neat ideas which almost everyone ignores or declares not useful. Then, there is a breakthrough of some sort and the utility of the new thing is demonstrated. One of the gatekeepers who controls access to the financial citadel expresses interest. Then, all common sense is thrown to the wind. 10,000 years of human history is ignored. The keepers of the system find out they can make tons of bucks by lending their name to any jackass idea that comes along. Things really get manic. A giant positive feedback loop roars into motion. IPO after IPO each more outrageous than the last. Basic businesses cannot compete for capital because it is so easy to get rich in the new “economy.” Hype on hype as fortunes are “made” overnight. The new Gurus are godlike as everyone sits at their feet believing their every utterance about anything and everything. People who just go out and make useful things for a decent profit are ignored. On it goes until one day this manic-depressive trip comes crashing down on the rocks of reality. The very same people who cheered on the excess now become wolves. Budgets are slashed, people are laid off, and an entire economy goes into chaos. Some get out with a lot a cash. Many are left holding the bag of their delusions. Already, the hunt is on for the next BIG thing...
Companies with real potential get junked along with the trash. Management Teams struggle to redefine their strategy and read the tea leaves of the “disappointed” market analysts. A few people in each sector, who do not invent, create nothing, have nothing at stake and are beholding to no one exercising enormous power - the power to take 30% from a companie’s value in one day. A value they were in large part responsible for making in the first place. Both “values” cannot be right - not from one day to the next, even a quarter apart.
Folks, there is a name for this behavior. Fortunately, it couldn’t happen here - not to us, surly. No harm done, I guess, as long as we see it as a game on the level of Monday Night Football. However, if we believe in it... Anyway, it is just the peasants who lose their job, what do they count? The smart money gets out. Naturally. The market just churned one more time pouring billions into a few hands while opening the doors to some new comers who get to join the ranks of the financial elite. Where is the economy “for the rest of us?”
Is this what you want your life to be about?
Don’t get me wrong, by the way, I totally believe in free enterprise. Regulation is not an answer. I just point out there are choices in how we use this tool. I also point out that when the keepers of the system get in the game this is not only a breach of fiduciary duty it quickly destabilizes the system itself to an inevitable result. You might ask yourself just how free this economy is. Ever try to do an IPO on your own?
When something like the recent dot burst happens look closely at who benefits.
Tulips anyone?
Matt
Taylor
Palo Alto
February 4, 2001
SolutionBox
voice of this document:
BUILD • TACTICAL • EVALUATE
posted February 4, 2001
revised
February 6, 2001
• 20010205.429998.mt • 20010206,129834.mt
•
note: this document is about 10% finished
Copyright© 2001 Matt Taylor
update to Matt’s Notebook