Ashes, Ashes, They All Fall Down

Maybe nothing new exists under the sun.

One of the most exciting aspects of the Internet was that it introduced new business models for buying and selling. It was going to be big, really big.

You chuckled at that last line, didn’t you? That’s because you’re clued in and realize that it’s the tagline for William Shatner’s priceline.com ads. When the Internet bubble was highest, priceline.com was platinum, an Internet blue chip. Founder Jay Walker was a genius and a star, and Shatner made everyone forget Patrick Stewart because he was smart enough to get paid in stock.

Well, now we know the rest of the story. Priceline.com never made a profit, the stock plunged into the toilet, and Walker resigned late last year in disgrace.

But the name-your-own-price auction wasn’t the only service whose patent apparently wasn’t worth the paper it was printed on. Even Paul Allen’s megabillions couldn’t save Mercata from going under last week. Getting people together to create bulk prices worked great for the bargain hunters, but, again, it didn’t work on the bottom line. Allen said Mercata blew through $89 million in funding and he couldn’t get (or wouldn’t give) any more — that’s how multibillionaires keep from becoming multimillionaires.

To me the epitome of the craziness came in a speech Bill Gross gave at a Jupiter conference back in 1999. He said that in the Internet Age, it was the idea behind a business that was golden. He wanted us all to think out of the box; come up with wild, crazy stuff; pitch him; and get money for it from idealab!

Well, “2000 zero zero party over, oops, out of time” — for idealab! (Or maybe we should change it to ideallab?) It pulled its IPO in October. Why wouldn’t it? Just look at this roster of “winners” it backed — eToys, GoTo.com, Ticketmaster Online-Citysearch, and NetZero.

Concerning the last link, here’s a clue. The name of your company is not supposed to include the value of its stock, but if the name also includes the reason for the stock’s lack of value, it’s a fair warning.

Personally, I don’t think the idea of new business models is any less valid than the idea of subsidizing service with ads or selling toys online. I think the real lesson is that change doesn’t really happen overnight, no matter what investors or promoters say.

We change our business habits slowly, not all at once. The key to making money is to earn a profit on every transaction and stay just a little ahead of the market’s growth curve — not a mile ahead. Every boom turns to bust, and real businesses are truly ready for bad times because they make money and put some of it away in good times.

That’s the old-time business religion, the kind I preached back in 1998 and 1999 and drew ridicule for doing so. But the whole thing does remind me of a joke the Smothers Brothers used to tell:

“If your friend jumped off a bridge, would you jump off?” asked Dick.

“Not again,” replied Tom.

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