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Annotations Some Days in the Life - Daily
Downturns and Corrections
April 26, 2001


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April 25, 2001
April 24, 2001
Whenever the stock market goes down, we refer to it as a correction. I think this is because "loss" frightens people. This makes no real sense, as the stock market is essentially cyclical. There are bull markets and bear markets. We're in a bear market right now, because we had eight years of bull, creating conditions of artificially inflated stock prices and growth that wasn't based on anything but investment. Which isn't really growth, just so you know. It's like currency speculation -- when you're making money off the fluctuation between the relative (generally artificial) value between currencies, you're not really producing anything, you're riding the eddies and currents of economic backwash.

We're in this bear market because over the last ten years, everyone on Earth realized we'd developed a global network that was inexpensive and simple to use, and that same everyone on Earth decided, all at once, that there was money to be made with it. And so they all jumped online, and a substantial portion of those people started companies.

Some of the people who already were online, in the meantime, realized that if they signed up with a few services like Doubleclick or UGO and slapped a banner ad across the top of the site they were already doing for fun, they could make some money. And some of those people did make some money -- enough to let them give up their day jobs, and live off their sites.

Others, of course, built entirely new companies, trying to make money using the web in new and innovative ways. Selling books, stock, space on auction sites, groceries, and just about anything else you can possibly think of. And these new companies all built up infrastructure, especially in California. A whole new way of life seemed to be growing out of the Internet, and everyone was excited.

Well, almost everyone. There were some malcontents who'd been on the Internet before everyone else showed up. They didn't like the commercialization of what had been their private playground, predating the Web and certainly predating the dot com business model. But they were in the minority, and even they enjoyed the benefits of the unbelievable growth the Internet, the economy and the entire country was going through. It wasn't just the NASDAQ going up, but prosperity, low unemployment, and a feeling that we had figured it all out -- that the good times had come and would never go away.

When the stock market goes down, we call it a correction. When we have a misunderstanding and learn the real truth, we call that a correction too.

It started with the failures of the dot coms. Unsurprisingly, most dot coms never made any money at all. In fact, of all the dot coms that are still out there, with Amazon.com and eBay leading the way, the only ones who actually made money last year are those that actually played to the uniqueness of the Internet as a communication medium. eBay made money -- but its overhead is limited to the server space for other people to sell goods and services by auction. eBay doesn't have to actually do any of the selling. Or the warehousing. Or the shipping. They used the Internet to bring people together so those people could do business. Brilliant. And there's E-Trade and Schwab.com -- stock sales are much the same as eBay -- there's no shipping or warehousing, just pure communication. And that makes a difference.

Otherwise, we're learning that the Internet makes for an excellent addition to a brick and mortar business, but isn't necessarily the best solo means of doing business if you're trying to sell things. In other words, as exciting as this new world seemed, it was really just the old world with a new paint job, and now we're having those impressions corrected.

And the correction is more than the economic downturn. The energy crisis in California is a correction too -- the overdevelopment of power-hungry Internet businesses and communities to service the people who worked them... especially in a climate like Southern California, which needs tremendous power just to live in. This too is a correction.

But even as we correct so many artificial inflations, we find ourselves far ahead of where we were ten years ago. The Dow Jones Industrial Average is still around 10,000, when I can remember when it was under 2,000. Dot Com websites are dying away, but I can still find almost any information about any subject I want within twenty seconds of growing curious about it.

It's just that, after the last ten years, we now have commercials like the one that literally just came on the television. It featured the usual "we are pioneers, riding the wave of the future" imagery, leading to annoyed customers waiting for someone, anyone to pick up the phone. "Why not do your business... with a company that runs their business like a business," the tagline runs. And that's what people are looking for.

And that, in the end, means the whole country is going through a correction.

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