OT Glen Petersen posted this link to a Chicago Sun Times story on Divine Interventures (DVIN). "Flip" Filipowski is attempting to create a Chicago based "Internet Zaibatsu" (his description). The IPO was originally scheduled for late March, then April, and now later this year. Flips comments are interesting and related to the Internet vision. Flip is no Son, but then, who is?
suntimes.com
Terry Savage talks money with `Flip' Filipowski
April 30, 2000
BY TERRY SAVAGE SUN-TIMES COLUMNIST
`The shorter the useful life of the information, the more valuable it is. So a tip on a stock is worth more than the history of the world.''
Right away you can see that the graying, pony-tailed guy with the leather jacket is willing to turn conventional wisdom upside down.
FILIPOWSKI AT A GLANCE
Andrew J. ``Flip'' Filipowski, 49, grew up on Chicago's North Side, reared by his Polish-born parents.
He graduated from St. John's military academy in Delafield, Wis., in 1968, and went on to the University of Illinois at Chicago. He changed jobs several times in his early career, starting as a computer operator at Time Inc., then Motorola Inc., A.B. Dick & Co. and finally moving to software pioneer Cullinet in 1973.
Success came when he started Platinum Technologies in 1987, and he sold out last summer for $3.5 billion--at the time, a record price for a software company.
He became an angel investor with the creation of Platinum Venture Partners in 1992, and funded Internet and technology startups, including Whittman-Hart, StarMedia and Yesmail. That interest developed into divine interVentures, a grander plan to fund and develop new technology companies.
The next step is a public offering planned for later this year. SEC registration and legal requirements, along with changes in the company's plans, have delayed the initial public offering of shares in divine to later this year.
Terry Savage talked to Filipowski earlier this year, and reviewed events following recent unprecedented market volatility among high-tech stocks.
And it immediately starts to make sense, in a new-economy sort of way.
``After all,'' he continues. ``The history of the world is available online on the Internet, and you can get access to it at any time. What's really valuable is information only a few people have.''
Flip Filipowski is a surprisingly open and accessible tycoon. He speaks frequently at Chicago high-tech gatherings, both inspiring and proselytizing for the role of high tech.
This commitment to the future comes at a time when many are saying the ``new economy'' is just a lot of hot air ... and hot money. Is the Internet changing our lives that much?
On the Internet
``The Internet is not a technology. The real change is a cultural change. Do you think this city would exist without automobiles? But it wasn't the car that was the big change. It was the highway system, because that allowed people to commute to work, that's what built cities. Telephones made things different--but not the telephone itself. The network that created communications changed the way we did business, and the pace of business.
``Today, we're connected by the Internet, and it's like we're all part of the same brain no matter whether we live in America or Morocco or Australia. You or I know everything that everybody else knows, because we can get it from the Internet.''
I suggest that not everyone's ready for this interconnectedness of the Internet. Must everyone participate?
On change ``At first, any change is scary--whether technology or the way you're expected to live your life. What we in this generation have had to do is change more often than most generations before us.
``Technology has created a cycle of inflection points that come at a more frequent rate. Now, we can expect one or two of these major inflection points to occur in our lifetime.
``For example, a generation or two ago, our parents or grandparents would expect to join a work force and retire with the same job. It was job security, the normal way to raise a family. Today that's a foreign concept for most grads.
``Gene therapy and the human genome research together make an inflection point. The result is that we may live to be 150 years old, or at least live long enough to see several major cycles in a lifetime.''
The value of information ``Information is only valuable in its forecasting context. No one [cares] what a company performed like today or yesterday. All they want is the information that will predict what the company will perform like tomorrow.
``The only way to stay ahead of the curve is to get information on which company will be the dominant player in three years. And because of the velocity of change, that three-year period, or five or 10 years, is enough to be an entire life cycle for a corporation.''
I think about the blue-chip companies that have built shareholder value over decades, and I wonder about Flip's short-term time horizon. Is this just a characteristic of the tech-savvy society?
On life cycles
``Look, the fact is companies die. They die like human beings do. And they're supposed to die to make room for the next generation.
``When you talk to a person who's 100 years old, you don't say, `How come you're stupid?' You admire them. But when [old-economy investors] look at Sears they say, `What's wrong with you? You're still supposed to be 12 or 21.' In fact, Sears is a mature, dying company--and it should die--and there's no way to rejuvenate it unless you want to make it look stupid, like a 12-year-old.
``It's like children when they're growing up and think they're invincible. They drive at 160 miles an hour, something a 50-year-old wouldn't do. And when a 50-year-old does what a 16-year-old does, it looks pretty stupid. That's what happens to old companies. Their procedures are risk-avoidance processes, and that's what kills them. It means they have no ability to innovate, because all their processes and procedures are designed to avoid risk.
``I'm not complaining. I accept that. The very things that made a company great are the things that kill it. Listening to customers, for example, is one of the dumbest things a company can do if it wants to live forever, because customers only want you to do what the company is currently doing, but they want you to do it better at a reduced price. They don't want you to expand with new stuff and do new things. That's for brand-new companies.''
Corporate value
``Today you have to act quickly. You can't sit with an investment in a dot-com business or a communications or biotech company. If it's gonna happen, it will happen in the next four to five years, because in 20 years, it's gonna be gone anyway.
``So the idea of saying a company has generated profits for how many quarters in a row is immaterial. That just means a company is mature, and only worth about one times revenue, because it's a known, boring thing. And earnings per share are no longer a relevant measure of a company's success. I've been saying that for a decade.''
The tech-stock bubble
I ask whether today's tech stock valuations have any rational basis, or are they a bubble, waiting to burst? Flip acknowledges the bubble description, and moves on, unwilling to be provoked.
``The bubble moves from one cycle to the next. In past bubbles, there was big change, and jobs were lost. The gaslighters and the buggy-whip guys lost their jobs, but new ones were created. Yes, the old stocks collapsed. But new companies started. Anyone who thinks the dot-coms will be popular for 1,000 years has got to be crazy.''
But I point out that he's buying equity stakes in those companies, and I ask him whether he will be someplace else when the bubble bursts?
On the bursting bubble ``The bubble moves, and you gotta move with it. That's why the valuable information becomes how accurate you are in predicting that movement.
``It's not just the Internet. The real difference today is that the opportunities of business have changed so investment philosophies have changed. And they'll never go back. There are a lot of folks that will never accept that, and they'll go to their deaths assuming that it's temporary.''
I asked if the recent volatility in tech stocks--much of it to the downside--changed his market viewpoint. The response was surprising:
Flip's philosophy ``I've never been particularly good at outguessing the market. I don't think anyone is. And a historical perspective doesn't do much good when predicting the future.
``I usually invest in a few names, and I protect my investments with collars [puts and calls that limit risk on both the upside and the downside], a very conservative game.''
Wait a minute! These options collars are only available on the largest companies, not the tiny dot-coms. Flip acknowledges he sticks with the best-known tech names in his stock market investment portfolio, even while he is risking so much in his venture capital investments with his own money.
So, on to the subject of risk ... we'd like some advice.
Advice to grandma
``If you're going to invest in tech, you have to be willing to play venture capitalist, because the change and velocity of the market are incredible and more like venture capital than anything else. That means you have to be ready to see five or six investments fail, in exchange for making money on one or two.
``I'm not a typical conservative 50, but if I were half my age, I'd be a lot more risk-oriented than I am now.''
Career advice
Perhaps keeping in mind that Flip didn't graduate from college, he hesitates to offer advice. When pressed, he notes: ``I always encourage students to develop communications and leadership skills. If you have those things, then regardless of where the economy goes or the inflection points, those are the things that will always be at the center of career opportunities.''
Where should they look for jobs?
``Nobody graduating from b-school today is stupid enough to take a job in a partnership where the deal is for seven years, and you become an indentured servant, and then you get to abuse the next generation of indentured servants. Today's grads know they can become a billionaire in two or three years.''
A new world
Filipowski's older children, ages 23 and 28, are actively involved in Internet businesses. But he says the younger generation will really live their lives differently because of the Internet. He also has a 7-year-old daughter, and notes that: ``Her mind is wired differently. The older kids learned from television, a passive experience. But she already is proficient on the computer and on the Internet, and she expects an immediate reaction and response.''
Final thought
``Let's not forget that all new things are hybrids. There's nothing totally new. All things look new for a while, but end up being a hybrid--like a new rose. The old doesn't disappear; it's just transformed. The new economy will prevail.''
Terry Savage is a registered investment adviser for stocks and commodities and is on the board of directors of McDonald's Corp. and Pennzoil-Quaker State Co. Send questions via e-mail at savage@suntimes.com. Her third book, The Savage Truth on Money, recently was published by John Wiley & Sons Inc.
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