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February 12, 2001

The Wilder Side:
Success: Opiate Of Dot-Com Elite

Change doesn't just mean newness--as dot-commerce learned painfully.

By Clinton Wilder (cwilder@cmp.com)

Clinton Wilder ou can deal with failure. Sure it's tough, but you just work hard and try to get going again. But success--success is an opiate. A lot of people can't handle it. I know I couldn't.

--Bandleader Artie Shaw, speaking in Ken Burns' documentary Jazz

It's inevitable in times like these that story pitches will arrive urging the media to do more "upbeat" stories.

"Dot-coms' dying gets rid of the junk sites and makes it easier for consumers to find the quality sites," writes one lamenter, who works for a Bay-area software company. She even has a silver lining for the rolling electricity blackouts that have impinged on the California lifestyle: "You get to take a break from your busy day � have a brainstorming meeting � or simply enjoy the quiet."

It's just human nature to believe extraordinarily good times will last forever and then to blame the messenger when they don't. But it strikes me that Internet and E-business industry practitioners have been nipping on Artie Shaw's opiate of success too long. The hand-wringing dot-commers yearning for the boom times seem to have forgotten the most important value their Internet Revolution was supposed to be about: change.

Blinded by the speed of the Web gold rush that swept through northern California and beyond, many people misinterpreted the lesson of change. They embraced change, drove it, and scoffed at stodgy old business behemoths that didn't "get it." Then they started to believe the world would conform to their vision of change.

But change is neither an overnight nor a linear phenomenon. Revolutions can change the world, but they've never been anything but messy. The architects of the American Revolution said all men are created equal, but their slavery system continued for nearly a century. The French Revolution indirectly replaced a king with an emperor named Napoleon; the Russians overthrew a czar to end up with Stalin.

The Internet Revolution didn't cause blood in the streets, but there are lots of "For Lease" signs scattered around Silicon Valley and Alley. Cruise around the Web and you'll find plenty of sites with messages like this: "Thank you for your patronage. Jazz.com is in the process of selling off its company assets, including the domain name jazz.com. In addition, the following domain names are also available: jazzdotcom.com, jazzkid.com, kidjazz.com, jazz-kids .com, jazzlifestyles.com, jazzmerchandise.com," etc., etc. Fire sales are never pretty.

Meanwhile, B-to-C now stands for back-to-consulting and B-to-B for back-to-banking--or maybe back-to-B school. After declines of 10% to 25% in applicants from 1998 to 2000, business schools at Stanford, Cal-Berkeley, the University of Pennsylvania, and the University of Virginia report that admission applications are on the rise. Maybe all those ex-dot-commers will bring to the classroom some valuable lessons on how not to run a business.

During the heady Web days of the late 1990s, I heard more than one E-commerce CEO righteously proclaim, "There will only be two kinds of companies left--those that will make history and those that will be history." Well, I respectfully disagree. High-profile failures such as Pets .com and Boo.com certainly made history, at least in the prodigious amounts of venture funding they attracted.

But while the dot-coms peddle their assets and lament good times gone bad, a different kind of history is being made, albeit more quietly. In a cover story last month, InformationWeek combed the year-end financial results of corporate America and found some very interesting data. GE Plastics did 20% of its $7.78 billion in sales for 2000 online. Delta and Northwest did 5% of airline ticket sales direct to travelers on the Web. Enron handled $336 billion in wholesale energy contracts online. And FTD.com--with Web orders outnumbering phone orders four to one--earned $2.3 million in fourth-quarter profit. That's right, profit.

That, my friends, is change. The kind of fundamental change predicted by the Web startups. So where did so many go so wrong? They confused change with "newness," and their early stock-market success caused the very dangerous belief that they had it all figured out.

Yes, success is a very powerful opiate indeed.

Clinton Wilder is InformationWeek's editor at large, covering E-business. You can reach him at cwilder@cmp.com.