I really enjoyed reading Fools Rush In, Nina Munk‘s research on the gargantuan AOL – Time Warner fiasco of the late 90’s and early 2000s. There is no better way, I think for a person to understand the Internet Bubble and dot com disaster of that era than reading a book that puts you right into the action of that crazy time, when the world was upside down and companies with little income can be valued more than a company that can honestly turn in profits, when companies that have taken decades to establish themselves can be upended by one that contains only promises.
I was starting out in my career at that time and followed these events and many others like a hawk. I remember clearly making a shift in my own career, deciding to learn everything I can about the Internet and consequently find a way to live off of it, rather than the more traditional alternatives, which was to work at say, Oracle or Microsoft (still in the same more or less industry but in way different directions).
But I remember very clearly how I couldn’t understand for the life of me, how businesses which did not issue a clear and straightforward way to make money (other than ads), could be valued so highly by the public, and ask for (and get) so many millions if not billions of venture capital funding and via public IPOs.
I was starting to make websites at the time and even I at that early stage couldn’t see how one would need so much money to start a simple website (and at the start, it really needs to be just simple), so I assumed that some of it went on to ‘brick and mortar’ details like courier services, warehousing or even manufacturing – hated words by the internet companies at the time due to their being ‘staid’ and ‘traditional’. But even then, millions? Billions, even? Didn’t it make more sense to go into an internet business slowly and with less promises instead, given the unproven, albeit bright and terribly hyped future of the technology?
As if to make things harder for me, inspite of what I thought was a more logical, careful approach, internet giants like Jerry Levin and Steve Case were heralded as geniuses and masters of the internet universe while pouring outrageous amounts of money into their own interests – causing many others (and this is a part of the book which wasn’t mentioned) to assume this was the right way, and do the same.
It is therefore relieving to me, even after all these years, to read about how much a fiasco the AOL – Time Warner deal was, and to learn about the characters and details of the many events that surrounded it and how the sad and disappointing tale turned out.
Mind you, I am relieved because it means that good business sense and a logical mind are still just as important (and might be proven even more so) even in these sophisticated times. I am not relieved however, to learn of the casualties of the time.
As the book relates, ‘since the heyday of early 2000 when they hugged and high – fived and announced their big deal, more than $200 billion of shareholder value had been wiped out..‘ Not only that, at some point up to $400 million was determined as misdeclared revenue. Thousands of people lost their jobs and pensions, shareholders hard – earned money put into their stock were completely erased. There was even at one point, a decades old Time museum (I forgot the details) that was closed down and its life-long employees suddenly fired out when AOL managers were trying to cut costs (and consequently, it turns out, list them down as profits) in every way.
While this is a two year old book (released Feb, 2005), I think it will always serve as important documentation and a way of cautioning people (as if they ever learn) of what happens when ‘gold’ is claimed to have been discovered and consequently, ‘fools rush in’. Although I do not particularly agree with Nina Munk’s style of writing, where she occasionally mixes in straight up reporting with a semi – opinionated, 1st person style, it is for the most part very good research and therefore, important reference for a scandal that pretty much rocked the world I live in.
As for me, I consider business on the Internet as fresh, new and exciting, but certainly not incredibly pioneering or even all that ground breaking. At the end of the day, I still have to do my accounting, I have to deal with couriers, suppliers and customers and maintain as good as possible relations with all of them – these are deeply rooted business ideals gained not from the Internet but from time honored, centuries old methods of doing business. At the end of the day, profit needs to dictate the future of your business be it selling fish balls on the street corner or taking in orders via an online shopping cart.
Reading this book will also help open up other people’s minds as to the ‘gold’ people keep claiming to have ‘discovered’ each day, and the fiasco involved in trying to get people to invest in it. The ‘Blogging Phenomenon’ to my mind, is nothing short of that – a fiasco. I believe people have hyped blogging way so more than it deserves to be. It is an exciting way of expression yes, and it certainly deserves notice. But to make money off of people who want to blog? That is ridiculous.
Express yourself, learn how to write, learn to create rich, exciting content for your well – targetted audience – does that sound new? Of course not. Those things have been around for centuries, ever since man learned to put down things on paper and mass produce it for all to read and see. It’s called publishing. It’s neither new nor ground breaking. Do you want to be a good blogger? Learn the ways of a publisher and succeed. Concentrate on living the hype of a ‘blogger’ and fall onto the self – manufactured hype and disaster that Case and Levin ended up being in.
And finally, while Fools Rush In is so appropriately named, I also had another word that kept popping up in my mind, and that is greed. Let’s face it, the common denominator in almost all of the parties involved, including the shareholders, analysts and anyone who ‘believed’ in the Kool-Aid Case and Levin were selling was greed. Nothing more than dollar signs going ‘ka-ching’ in people’s eyes. The prospect of earning ridiculous amounts of money made everyone blind to the truth, that there was nothing in the gold mine, and the moment they learned there was nothing, they had to keep trying to make it look like there was something, because they didn’t want to be left holding the (empty) bag.
Situations like AOL – Time Warner happen everyday, except the money involved in this was so staggering it can rock you to the core. I’m glad I read it, so I can put to rest all reservations I had wondering whether entering into an Internet business should be done in ways other than that of a cautious businessman taking educated risks. Books like this reminds me that phrases like ‘Work From Home, Easy Money’ and ‘Be a blogger and earn your way to millions’, is the work of snake – oil salesmen. Back in College a favorite Professor told me that if I work hard, work smart and work enthused, business will grow. Apparently this still holds true, regardless of what the hype and noise tell you – and we have AOL Time Warner as proof of that.