At 02:12 PM 6/17/2008, Joe Landman wrote:
Jim Lux wrote:
At 12:59 PM 6/17/2008, Karen Shaeffer wrote:
On Tue, Jun 17, 2008 at 11:41:34AM -0700, Jim Lux wrote:
>
> Well.. to be fair, there were (and still are) businesses out there
> (particularly a few years ago) that didn't fully understand the
> concept of needing net profit. (ah yes, the glory days of startups
> "buying market share" in the dot-com bubble) And, some folks made a
> fine living in the mean time. (But, then, those folks weren't the
> owners, were they, or if they were, in a limited sense, they now have
> some decorative wallpaper..)
>
Hi Jim,
I think you have the common view about this. The reality is many of
those same companies would be making money today. They were just
ahead of their time -- which is very common here in Silicon Valley.
Hmmm.. I don't know about that.. having a solution with no problem
that needs to be solved isn't a valid business model. You could equally well
[hmmm.... how do we get Jim to lecture to VC's about funding the
next social wannabe linky-linky site? ]
Ahh... those sites have advertising, which is their business
model. The links are just there to get you to see the ads and are
more socially acceptable and allow a narrower tailoring to specific
target markets allowing higher ad rates, than something of broad
appeal (mentos & coke or porn).
Well, there were secondary affects. Cisco having a $0.5T valuation
was one of those. At SGI, one of the "oh feces" moments we had was
when TJ, who wasn't throwing up in a hotel pool somewhere, noted
that some SGI gear made for great web servers in 1995 or so. Then
we (while I was there) managed to completely miss that
market. Coulda rode the bubble up ... <sigh>
More seriously, getting the business model right is hard. Making it
work is hard. Getting investments from groups that understand these
things is hard. There was too much speculation, not enough focus
upon the model. I would argue there is lots of that today with the
social bits. How many social websites are there? What are they
really worth? What is their revenue model? How will they make
money (apart from being sold to larger companies)? Why are VCs funding them?
The VCs funding them do so because it's a high risk gamble that can
potentially pay off big. Not everyone wants to invest in CDs or
mutual funds. You could, for instance, invest in something that has
a probability of paying off of 0.01, but has a return of 1500% and
come out ahead, in an expected value sense.
There's also all manner of money to be made in the process of doing
the investing (i.e. fees). As they say in the horse racing business,
the guys shoveling the manure always make money, even the horse
owners lose money overall.
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