A Dot-Com Pantomime
Michael S. Malone, Forbes.com, 11.16.00, 12:01 AM ET
NEW YORK - It was the day the dog died.
The best known--and perhaps the only--enduring image of the
e-commerce boom was the Pets.com sock puppet, the frenzied star
of numerous television commercials. So indelible was the puppet that
it was reportedly Pets.com's best-selling product.
Of course, that should have been a warning. When your commercial
mascot outsells your company's actual products, you may need to
rethink your business plan.
And so, following the hundreds of other recently demised dot-coms,
Pets.com (nasdaq: IPET) announced it was shutting down operations
last week, firing 255 of its 320 employees and selling its assets,
including the rights to the sock puppet.
It seems that the company had been searching for a buyer since
summer, but found only a few tire-kickers, much less suitors.
Smart young entrepreneurs should put their orders in right now for
sock puppets, and display them on their desks for the next twenty
years.
It's an idea with a notable pedigree. For two decades, Intel (nasdaq:
INTC) co-founder Gordon Moore, the wise man of Silicon Valley,
wore an ancient Microma LED digital watch on his wrist. He called it
his "$30 million watch," which was how much Intel burned in 1975,
chasing the elusive world of retail goods.
He wore it, he said, to remind himself never to be dumb enough to
ever take Intel into consumer products again.
A fading, dusty sock puppet on one's desk in 2020 would offer a
similar service. Already, as thousands of former dot-commies in San
Francisco, Manhattan and L.A. are stumbling back to the old
economy, the memory of the boom of 1999 is beginning to fade. But it
should remain crystal clear.
We need to regularly look at the sock puppet and ask: What the hell
were we thinking? That someone could sell dog food online and create
a billion-dollar company? That this business idea was so great it
deserved $110 million in venture capital investment?
But that's exactly what the founders of Pets.com believed. That's what
the venture capitalists who gave them a king's ransom believed. And
that's what all of us shareholders--if not in Pets.com, then in the entire
wacky stock market--believed.
Now it's the morning after, and we all have terrible hangovers. We
don't remember much of what happened last night...and what we do
recall we don't want to talk about.
But here's what I do remember: I remember visiting venture capitalists
(VCs) with a startup company and realizing that nobody in the
room--neither the entrepreneurs, nor the VCs--knew anything about
the industry, the potential or even how to run a business. I also
remember one of my friends coming back from visiting one of
Pet.com's many competitors and saying to me, with a shake of his
head, "Those people just told me that they lose money on every sale
of dog food they make, and dog food was their biggest selling product!
It's like the old joke, 'We'll make it up in volume.'"
We laughed. But then we shrugged. Maybe they know what they're
doing, we told each other, in spite of everything, the market loves
them. And that was enough to make us put aside our doubts. After
all, we told each other, it's a new new economy.
I also remember several meetings with a startup team that had an
idea so incredible it made my heart pound in my chest. This wasn't a
billion-dollar idea--this was a one hundred-billion-dollar idea. Some of
the world's biggest credit card companies and VCs were anxious to
work with them. All they had to do was put together a presentation.
However, they never did. Instead they went to a conference and when
they returned, they raved about all the great new contacts they'd
made. They were happy. And they never met with the venture
capitalists.
That was when it hit me. These people were not a company, but a
simulation of one. It was all play-acting, designed to make them feel
important and valuable. They wanted the dream of tycoonship and not
the harsh reality of actually having to get there. The last I saw of
them, they were out of money and huddled in a subleased corner of
the office floor they'd rented, a few months before. They still met every
day and talked in excited and hushed tones about their dream.
Looking back, in this cruel Autumn of dying companies and rising
unemployment, I realize now that it was all about the sock puppet.
The whole dot-com bubble was a performance--a pantomime--clever
and illusory, but once you got past the appealing surface, there was
nothing but grasping fingers inside.
If we don't mourn all of these lost companies, it's because we sense
they never really were companies at all. Real companies don't buy
Super Bowl ads before they have profits. Real companies don't go
public before they have revenues.
It was all just play-acting by children, young and old, pretending they
were grown-ups at real jobs, just like Mom and Dad. The only thing
that wasn't funny was the money.
Now the playground is closing. The swing sets are beginning to rust.
And even the puppeteer in the playhouse has gone home. Only the
puppets themselves remain--probably a warehouse full of them. Get
'em while you can. |
