InformationWeek

The Secret CIO: Smelling The Tulips

Feeling overwhelmed by the Internet craze? Take a lesson from history.

By Herbert W. Lovelace
Issue column appeared: July 22, 1996

Our fascination with the Internet seems to be increasing exponentially. People at work who have never shown an interest in a computer (or in me) smile and sit down next to me in the cafeteria at lunch, then ask which Internet stocks I like.

It's impossible to pick up a magazine or turn on the television without being reminded that the Internet is either a new industrial revolution, a haven f or pornographers, the liberator of the masses, or a threat to national security. In truth, I don't think anyone knows where it's all going.

Alliances are being made and broken with amazing speed. One day America Online is committed to Netscape's browser, the next day to Microsoft's. Digital cash is imminent, according to folks like Nicholas Negroponte, the MIT sage; others think hackers will scare away the public. Fidelity Investments rushes to install an Internet-based investment-tracking service to exploit what it sees as new opportunities. Klaus Besier, who guided SAP America to record growth, leaves to head a new company, OneWave, that sells tools that hook applications into the Internet.

Regardless of the outcome, the amount of money that's floating around to fund all this action is amazing. Netscape made about $60,000 profit last year--less than a single product line in one of our smaller business units--yet its market valuation is more than $1 billion.

The Internet is a great tool, but ther e has been so much hype about its power to do everything at minimum cost that it makes me think of the great tulip bulb mania. I read about this in Encyclopedia Britannica when I was a kid. In early 17th-century Holland, everyone knew tulips would be the wave of the future. People couldn't get enough of tulips. By 1637, one variety sold for more than $5,000 a bulb. Then the market collapsed, and people went bankrupt left and right. I doubt there were any tall buildings in Holland for financiers to jump from, but I'm sure they improvised a way to end it all.

I suppose the experts back then said those with vision would have to get with tulips or be left behind. Today, Thornton May, VP of education and research at Cambridge Technology Partners, has said that most CIOs are befuddled, that maybe we're too exhausted from the client-server wars to exploit the opportunities of electronic commerce. I also seem to remember that many of us got worn out trying to exploit client-server opportunities that took much lon ger to provide far fewer benefits than originally forecast.

A New Gold Rush
The way I see it, there will be winners and losers on the Internet--but that's all that is certain right now. What to do? Concern yourself with network security and aim for flexibility. Be ready to jump when you feel the time is right, not when the consultants or airline magazines say so.

I have a suspicion that if the Dutch tulip craze is not the correct analogy, then the 1849 California gold rush will be. Back then, it was Levi Strauss who figured that while some of the miners would hit pay dirt and some would wind up with nothing, all of them would buy work pants.

I think of that example each time I see another Internet conference advertised, or get another mailing from a consultant promising to help me find my way to fame and riches on the Net.

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