Recovering From the New Economy Hangover

One recent morning this holiday season, it occurred to Sean that his splitting headache and nausea reminded him of something -- the web economy. Take a healing journey with him through the seven stages of the new economy hangover.

Ahh! Back to work. Yes, after all the holiday fixin’s, the Christmas cheer, the dire gloom-and-doom predictions, the crazy market fluctuations, and the disappointing holiday numbers, it’s time to get back to work… at least for a few days until New Year’s. Then it’ll really be time to roll up our sleeves and dive in.

Getting the “new” new economy back on track is a tough job, but we’ve all got to do it. After all, it is what we do, isn’t it? But after waking up the day after my company’s Christmas party (and more than my fair share of cheer) feeling like a herd of yak had run through my head overnight, I started thinking. (OK, not immediately, but I’m compressing time to make a point here, so bear with me.)

What, I pondered, does this splitting headache and nausea feel like? The answer was right there, throbbing at the periphery of my mind…

Then it came to me: the web economy, that’s what!

Let me explain. For the past few years, we’ve been living through the greatest economic party in history. Wild ideas — ideas that may have looked just plain crazy at any other time in history — garnered loads of cash. Valuations shot through the roof. Optimism ran rampant. (Remember Charles Kadlec’s book “Dow 100,000: Fact or Fiction“? Remember Wired’s “Long Boom” cover story?) Anything you could dream you could do as we rewrote the old rules.

Now in the light of day of the new year, things aren’t looking so rosy. Holiday shopping numbers didn’t exactly hit their projections. The market’s looking sick, and the Fed hasn’t stepped in to bail it out yet. Many folks who once felt that the Net was their guaranteed golden ticket to big riches are finding out that life ain’t so easy. (Go check out the message boards of FuckedCompany if you want a window into some of the bitterness and remorse out there.)

What looked like a sure thing when we were all a bit tipsy on success is looking like it’s going to take a little work to get going again.

So when I woke up a little under the weather the other morning and got ready to go back into the office, I couldn’t help but think that the feelings I was going through really paralleled what’s going on in the new economy.

And realizing this gave me hope: Like everything else, a hangover has a discrete series of stages and, like most unpleasant experiences, does end eventually, given time. I firmly believe things will get better for us in the web biz… as long as we recognize and deal with the seven stages of the new economy hangover.

  1. Pain. You wake up. You’re in hell. All the good times you had last night are a distant memory. Your mouth feels like a toxic waste dump in the Sahara. There seems to be a Metallica concert in your brain. Your stomach… Well, let’s just say that you’re hoping nobody repeals the laws of gravity.

    In the web world, this is where many of us are right now. Sales are down. The business model isn’t working. The VCs are screaming at us over the phone. That second round looks like it isn’t going to happen. The business is going under.

  2. Remorse. What did you do last night? Why did you have to indulge so much? You’ll never do it again!

    This is where many in the media are right now with the web economy. “Who could have let this happen?” they ask. “Didn’t anyone see the crash coming? How did half of these ideas ever get funding?” The morning after, there are lots of regret.

  3. Anger/blame. Somebody must have put something in those drinks. There’s no way that you could have done this to yourself!

    If those damn VCs hadn’t replaced your board with their own cronies, if those damn consumers would just quit whining about service, if the damn media hadn’t scared everybody off with stories about privacy things would be OK, right? There’s no way this is your fault, right? Unfortunately, a lot of dot-coms are at this stage right now.

  4. Medication. OK. You’ll be fine. All you need to do is get some Alka-Seltzer in you, and you’ll be able to face the day.

    First, let’s get the Fed to step in and lower interest rates. In the meantime, we need to get lean, mean, and efficient. Reduce staff. Tighten the market budget. Focus the business plan. Sell off those unprofitable side projects. Let’s get this business in shape. As reality steps in, many companies are realizing that they only have themselves to blame. The result is tough medicine: layoffs, selloffs, mergers, and severe restructuring.

  5. Realization. Your stomach settles. The pounding stops. Your brain starts moving again. You’re feeling better.

    Hmmm… things are looking better. Maybe you really didn’t need to blow everything on TV now that your email program is working. You’ve tightened your product line, improved your customer service, and made some adjustments to the model. Things are looking up. Maybe we did get a little crazy. Maybe we should have listened to our instincts. Maybe we all grew a little too fast and didn’t pay enough attention to the fundamentals. As things start to settle down in the beginning of 2001, a lot of tough lessons are going to take root.

  6. Resolution. You’re never going to do that again!

    Looking into the new year, we begin by looking back at what went wrong in the past one and resolving to fix the problems. Listen to your customers. Scrutinize those business plans. Pay attention to the fundamentals of business, and know your markets. Vet new technologies before foisting them off on your customers. Pay more attention to fulfillment and less to gimmicks. Don’t assume that the old rules don’t apply. As we look back on 2000, we’ll need to resolve to pay attention to profit and measurement first.

  7. Temptation. That wasn’t so bad! Maybe you should go out again Friday night…

    As we look forward with the new wisdom born of experience, we’re going to have to be darn careful not to repeat the same mistakes again. Regardless of some of the gloom that might be out there, we can’t forget that the Internet has fundamentally changed the way we do business. There’s no going back.

But as the hangover fades (as it will over the next year) and things start looking good again, we can’t give into the temptation to repeat the mistakes of the past. Though it’s painful now, I think that the dot-com shakeout is probably the best thing that could have happened to the economy — as long as we learned from our past excesses.

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