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The problem with likening the dot-com boom to the 17th-century Dutch tulip insanity is that, now that the bust has come, many companies think they can go back to sleep. To them, the threat is over: Dot-coms did not generate a New Economy, they did not rewrite the rules of business, life as we know it did not end. The fear that any evanescent new idea would destroy the current mode of operating is past. Wrong. The challenge is not gone. It is just beginning. Take some obvious examples: ADVERTISING: The Internet was not an utterly new market for advertising, nor doom for the industry. But...the industry has to reinvent itself anyway. Consider the new types of VCRs: TiVo and Replay. In my house, where we only recently bought a TiVo, we have a new term: “TiVo-izing.” We TiVo-ize a live program by deliberately pausing it until we are far enough behind real time that we can catch up by skipping commercials. We do this both to watch a 22-minute program in 22 minutes and to blow by the constant interruptions in the Olympics or Super Bowl. How long will it be before everyone does that? Sure, there are only 300,000 TiVos and Replays out there, but do you think the threat will evaporate? That’s what the networks wished when cable started to take hold in the 1970s. They dreamt of the day when every cable running down every street in America turned to ash and the only way to get television was through their transmitters. But it didn’t happen. The clock did not rewind. It took 20 years for the networks to be crippled, but it was not a matter of direction for them; it was simply a matter of time. Will it take 20 years this time before everyone has a TiVo capability in their set? I doubt it. The cost is marginally higher than for a normal satellite tuner. The issue is not whether but when. TELEPHONY: The old game is over. Time to move on to the next thing. We will never pay any appreciable amount for phone calls again. If you doubt this, despite all the recent carnage at phone companies, look at the inventions that are going to destroy the notion of cell towers as critical nodes and wirelines as the necessary last mile to the home. One example: high-speed, wireless “Wi-Fi” technology, which is based on hubs so inexpensive that they are being installed by individuals and which is spreading like kudzu across the landscape. Salvation does not lie in small steps to distinguish one phone company’s network from another. It lies in long-term, futuristic ideas and new businesses. We are entering an era characterized by communications among distributed machines and dispersed people, rather than being mostly about a connection between two individuals or between an individual and a machine. The old approach to telephony was about “connections to”; the next wave is about “connections among.” Napster, instant messaging, short message systems, and BlackBerries are examples. This next wave will create new uses. There will, for instance, be lots of “phones” without microphones, so your bus can send you a short message saying when it will likely arrive at your station or so a parking meter can let you know that its space is empty. The difference is that no one will have a monopoly on how these “connections among” are established, so competition will be fertile, and companies will have to be smart if they are to make money. MEDIA DISTRIBUTION: Another lost cause. In the case of books, one might argue that their beauty on the shelf is valuable or that people’s natural hoarding instinct makes books treasured artifacts. Were this completely false, libraries would have killed book sales 100 years ago. But in the case of music or movies, the original is a burden. The first thing you do with a new CD is move the contents to a more portable medium such as an MP3 player or PC or car radio. The CD has negative utility. In this environment, the first sale is also the last. Once the bits are out, they will move to the next listener or movie viewer like brushfire. No law can stop it. Laws function only when society tacitly agrees on their worth. If you doubt that, try driving 55 mph on the interstate. Sure, we can arrest people, but going after every album listener is even harder on the psyche than busting every speeder. It just won’t happen. You can’t declare every computer to be burglars’ tools and every computer science class in cryptography sedition. Media distribution needs to be rebuilt from scratch—and not as the music industry is currently attempting, through restrictions that try to force customers into contortions. The list goes on. Sure, I might still want to go to Brooks Brothers for my suits, but retailing underwear in physical stores will not outlast the decade. It just doesn’t make sense. Sure, I might think that supermarkets are impregnable because Internet warehouses failed. Sure, I might think there is a place for savings accounts because PayPal’s stock price didn’t triple on opening day. Sure, I might think that fixed retail prices mean something because eBay Inc. (www.ebay.com) hasn’t replaced all retailing. But don’t count on any of these thoughts holding true for long just because the tulips are not trading at $1,000 a bulb anymore. How do you get out of this bind? First, recognize that the Web is not the Internet. The Web is only an innovation built on top of the Internet, proving that we could make computers as accessible to 79-year-old grandmothers as to 23-year-old knowledge workers. The Internet itself is just beginning. It is only now reaching 60% of the American population. The Web is the first innovation, not the last. Most important, look past the short-term patches to your business. They are analogous to becoming more efficient. The patches, like efficiency, are just the ante. Without them, you are not in the game, but the ante doesn’t win the pot. You have to make a bet with some really long-term ideas and innovations, based on research that tries to see around corners, rather than based on product development that proceeds in a straight line. In music, for instance, instead of trying to just move the current business model online, why not try to take advantage of the fact that people want to redistribute songs and reward them, a la Amway Corp. (www.amway.com)? That would be better public relations than a search warrant. The good news is that the age of invention isn’t over. It’s just beginning. The Internet is not a one-shot idea. It is a new playing field, and only the first game is over. We have quite a ways to go before we reach the playoffs.
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