The Rich Are Different Than You and I
Posted Thu Mar 15 01:07:34 2001 by steveg |
By Steve Gilliard
In the end, Silicon Summit II was amusing.
MSNBC's stage show for the Internet unaware was not as bad as it could be, but that was only due to having a mental rolodex about the various crimes of the guilty on stage.
Since it will be airing a few more times, including Thursday, 10 PM (ER is a repeat), I'd like to discuss the highlights and some points you should keep in mind while watching this:
1) American TV gives the impression of rigorous questioning without actually doing anything like that. There is a reason they let Tom Brokaw and not MSNBC's Chris Byron as the questions or even have him have any input whatsoever. Byron has been hyper critical of the Internet bubble and predicted the collapse three years ago.
A real show on the Internet would have included Byron, Walter Mossberg of the Wall Street Journal, author John Heilemann, Slashdot columnist Jon Katz and MSNBC Washington bureau chief Brock Meeks. The questions might not have been nearly as friendly, but your education on the subjects at hand would have been immense. Of course, no CEO would ever subject themselves to what would be a team closer to Telford Taylor's crew at Nuremberg than a panel of journalists.
2) Charm works. A CEO can sit there, lie to your face and unless you know you have just heard a lie, be totally believable. Steve Ballmer may look like your dad, but he is the real architect of Microsoft's rise as an economic power. Gates is, despite the bitter sniping from the Stallman crowd, a programmer by inclination. Ballmer is the businessman and an extremely good one.
Let's go down the list of participants:
Microsoft: facing legal trouble on two fronts, lawsuits over their business practices from the states and federal government. A racial discrimination suit which could harm the company far worse than a Supreme Court ordered split. Gates has worked for years to cultivate a good reputation among minorities, even their ads are multiethnic. If the suit's allegations are proven, the damage could be immense.
Digital Mafia Enterprises:Darien Dash is one of the prime examples of the Urban dotcom bust. A former record executive who started a dotcom with little technical experience he got VC investment and promptly failed to deliver on most of what he promised
SONY:Caught between a rock and a hard place. On one hand, its record companies are under heavy pressure from Napster (more on this later), while MP3 technology could give it new markets bringing in billions. A very tough choice. CEO Howard Stringer, Welsh-born and a Vietnam Vet (drafted while working at CBS) was almost tapped to run the BBC, but his American ties were a major issue at the Beeb. Shoved out of CBS, his longtime employer, in a power play.
AOLTime Warner: Between pedophiles and stiffing community leaders, AOL/TW is the company America loves to use and hate. The same people now bring you Tony Soprano as well as You've Got Mail. A lawsuit in Virginia could force the company to pay millions in back wages and taxes to community leaders who now work for free.
Yahoo:The Stanford Billionaires Boys Club. Jerry Yang and his boys are reputedly hardheaded bastards who have no clue as to how to run their company. Once thought to be the most stable of all dotcom companies, the stock's value has declined 90 percent in the last year.
Why does this matter? Because many, many people who avoided the more volatile tech stocks invested in the thought to be stable Yahoo. Investor anger at the company's management is far more critical than at any other dotcom. If there is a not fail company, it is Yahoo, which has been profitable.
Amazon: Oh, where to being. Mass layoffs, investigated for dumping stock after brutal report. A plan to be bought out by Wal-Mart crashed and burned amid limp denials. Repeated privacy issues. We have yet to write about Amazon in detail because it may take a while, but the betting line is :Bezos shoved out by midyear.
Gateway:Once renowned for making a good mid-range quality machine, their designs are now horrible, their components no better than low-end Koreatown stuff, yet their prices remain high. If there is any one PC maker which may meet next year as a memory, it is Gateway. Pony-tailed CEO Ted Wiatt came back as the company started to flounder in the hardware depression of 2001.
Allen Co: We back losers. Like the whole guilty bunch on Sand Hill Road, they're as contrite as bookkeepers who bet the payroll on black 17, Now they're sitting on their cash as many companies rethink the entire wisdom of getting VC cash because of the strings that come with. The clueless leading the blind.
Barry Diller:The newly-married Diller, who's allegedly gay sex life was gossip fodder throughout the 90's, once was a very powerful man. Now, he is moderately powerful, owner of USA Networks, who's most successful products are lowbrow but make money hand over fist. What are they? Home Shopping Network and the Jerry Springer Show. Why he was there is a mystery to me, but he was.
ETrade: You lost money, don't blame us. One of the pioneers of online trading, it has moved into banking as a way to get into a successful online Internet sector as well as escaping the problems of online trading. Most people who invested on their own didn't exactly make money. What seemed like a good idea in 1999 turns out to have been a very bad idea in the winter of 2000-1.
3) What me, worry?
Being a CEO is like high command in two respects: you have to make hard decisions and are well rewarded for such. If Jeff Bezos actually gave 30 seconds thought to the effects of his mismanagement, he would run screaming from the room, waving his resignation in his hands. But Bezos is as clueless about the world as a 14 year old girl proclaiming she can do what she wants. This is a man as divorced from the reality of his actions as Rudy Giuliani is from normal morals and standards. It would be nice to live in his world, but the reality is that he's not going to live there much longer.
Christos Christakos of ETrade was especially cold blooded about the problems investors faced. To understand his issues, you have to understand two things: one, the number of investors in the market has exploded over the last decade. As traditional pension plans have been replaced by 401K's and the shift from banking to mutual funds, the stock market is used by most Americans as their primary investment after home ownership. The fact that his company facilitated brokerless trading, which seemed like a good idea at the time, now clearly isn't. The kind of financial advice most people got came from CNBC, and most of it was bad.The only debate was whether it was criminal.
The second problem is that financial trading isn't trading. Your order goes to a broker and the time lag between your order and his purchase can be hundreds of dollars, if not more. And it's not a store, you buy it, you keep it and you owe the money.
These two things put a real hurt on many new investors. While he was blase about the losses of others, many investors weren't just screwed, they were napalmed. Even savvy investors have lost a fair amount of their wealth.
AOL/TW's Pittman knows his is not a happy lot. He's got a nasty lawsuit in the air, Napster making a charge and the merger of the always prickly fiefdoms of Time Warner. But at the end of the day, his company will survive.
Ballmer, who is probably a great guy to have a beer with, said nothing new.
He's got the DOJ taking notes at every public appearance.
What is remarkable is that the two companies which are clearly in the most trouble, Gateway and Amazon, got off lightly because Brokaw didn't ask the right questions. Gateway is laying people off and is saddled with higher than average prices for machines of dubious quality. They tried to introduce forward looking designs, but unlike SONY, they didn't have the marketing to back them up. Plus the designs blew. The odds are very likely that Gateway will not last the year. As Walt Mossberg says, there is no need to buy a machine faster than 600Mhz. Combine that with the idea that the Pentium 4 is widely regarded as a dog, as well as the flood of machines in the secondary market, someone is going to join Quantex in the great ex-PC companies in the sky. In this market, everyone else has a niche.
Gateway took a very expensive strategy in moving into brick and mortar stores instead of joining the retail lineup at Staples and Office Max. That required them to rent retail space as well as hire staff. This is the kind of decisions which eat up the bottom line. Gateway Country stores are rarely crowded.
Amazon has two kinds of problems: management and strategic. The company needs to drop all non-entertainment items to make a profit. No one orders rakes online. But Bezos is so clueless as to his deficiencies as a manager, he doesn't see the unionization moves as a clear sign of dissatisfaction with his leadership. Wal-Mart clearly backed out of a deal to buy, "strategic alliance" , Amazon. Why should they take on the billion of debt. Why not just buy the name and resources after the company collapses? Scavenger hunting makes far more sense than spending real money on a failing, debt ridden company.
Jay Walker of Priceline was seated in the audience and brought on stage to be bitchslapped by Brokaw. He was asked about the collapse of his company and not about the major lawsuits facing the company.
But the question of the night was a simple one.
4) Napster
While everyone was prattling on about how there was a new economy, it turns out that we are really living in the age of Napster. A teenager got up and asked Stringer the most important question of the night, not so much because he asked it, but because of the answer.
The kid said he'd spent a good 300 on a new Sony product which hooked into his computer and then allowed him to take MP3 files everywhere he went. He then asked Stringer, and the panel, if they had ever used Napster.
No one said no. Not Bezos, not Wiatt. Amazingly both Stringer and Barry Diller of all people admitted using it. At that moment, you could see the wheels spinning in his head. SONY's hardware business is so vast and entrenched that his Japanese bosses see MP3 as the revival of their moribund business. New hardware to play a new format is an exciting thing. On the other hand, his American record companies want to kill the baby, drain the bath water and crush the tub. A trial could be an amusing thing, with Stringer's admission on national television that he, with 59,999,999 million other people joined the Napster bandwagon. Springer-san is thinking hard on who to listen to. I wouldn't bet on the record companies.
Some pissy little clown asked about the copyright thing and how SONY could protect him, and anyone that stupid, looking to SONY, of all companies, for salvation, deserves the beating they deserve. Napster has won. End of story. You can play whack a mole with the servers, you can sue people, but when ten very rich people admit they use Napster, two of whom's companies are suing Napster, the whole thing is going to crash down. A house divided against itself cannot stand. When the guardians of the copyright they are cherishing in court admit to violating it at home, well, that's not a good thing. No scheme they invent will ever stand up in that environment.
Time to get real about digital downloads, folks.
5) The computer thing
A kid was profiled and dragged out to the stage where people were amazed to hear that she didn't have a computer at home. Usually, this is a gimmie moment. Everyone offers the kids a machine and everyone smiles. Not this time. In a low moment, only refurb salesman Darien Dash offered a machine. No Gateway, no Vaio, even though this was minutes after Stringer bragged about how good and expensive they were.
Michael Bloomberg, who is going to run for mayor and lose in a landslide to Mark Green, suggested that she didn't really need a computer. Bloomberg, who some folks think may be Rudy Giuliani's heir, not only blew that question, but with his tone, showed he needed a ton of work. Let me put it simply: anyone seeking to be Rudy's heir is going to lose badly. All they have to do is put his picture next to Rudy and distribute it in Central Brooklyn, South Queens and between 96th Street and the City Line. You will think you have been transported back in time to the first free elections in South Africa. Rudy Giuliani is a fundamentally evil man and anyone who has his taint will suffer his curse. If that is what Bloomberg wants, he is welcome to it.
The thing is that computers do not solve the world's problems but having access to them is important. Especially for kids, especially now and here.
6) The evil index
The loss of stock value is not a good thing, but so many of these stocks were valued so unrealistically that the witching hour had to arrive one day. But as I sat there, a Greek Orthodox priest asked Yang and Pittman about porn on the Internet.
I'm going to write about my adventures in Yahoo's pron underground, but at that moment, Steve Baldwin turned to me and said "AOL is built on child sex and slave labor." My reply was "what the hell is he running, the Japanese Empire? He doesn't look like Hirohito".
It was really hard to decide who had caused the most harm on that stage. Dash is a small time player with connections and glib tongue. Stringer runs SONY. You can argue about Ballmer and MS all day long. Barry Diller was there for reasons unclear to anyone.
But AOL and Yahoo dwarf Amazon on the evil index for two reasons. Yahoo's incompetent management ran the stock down 90 percent from their high. How this happened was simple: they relied upon income from ads for failed dotcoms. Even their healthy sex ad business didn't help them. Yahoo was supposed to be the can't miss stock of the new economy. With the sea of resignations from their top ranks, it is clear that they now realize that they are clearly over their heads. Too bad that they took investors, mutual funds and pension funds on that downward ride.
A lot of people who would have avoided the obviously volatile Amazon were seduced into investing to what was thought to be a far more stable Yahoo. Well, stability is an elusive thing.
AOL is child porn central. Despite Pittman's weak denials, any pedophile with brains can pick his targets. Boys, girls, pre-teens, 13-14, 15-17, doesn't matter, Scooping them up for a spot of perversion is as easy as a chat group. Every major online child molestation cases started at AOL. It is clearly the most dangerous environment for a child online and no one says this in the media.
Then there is the little matter of them not paying community leaders in contravention of federal and state law.
Maybe it's time for Bob Pittman to take a little visit to the Yakazuni Shrine in Tokyo, where Japan's war dead are commemorated. Hirohito used to pay a little visit there once in a while and if you're to emulate the master.....
In the end, we left angry because we had been hustled. Not by MSNBC but by the lies the American media routinely repeat without question. They lied, Brokaw asked what he could, and they escaped to live another day, leaving the wreckage of lives and fortunes behind them. Be sure of one thing. In America, the rich tend to stay rich.
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Name: bill
Email: bill@netslaves.com
Date: Sat Mar 17 22:25:59 2001
Comment: Tom,
We're in the process of writing another book. No, it's not a follow-up to NetSlaves, but something in the vein of what you've suggested.
Thanks for your article. And for participating on this forum.
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Name: Tom Croft
Email: t.w.croft@att.net
Date: Sat Mar 17 10:44:16 2001
Comment: This is a good article, and is the seed for a great book (and there are others who will try to write it and get it very wrong). I haven't read all of the archives on netslaves, being new to site, but I strongly urge you guys to put together a "pop" piece which can be rushed to print, either in a magazine, or somehow, and follow up with a well documented book.
If you follow the logic my group made in "Working Capital", mentioned earlier in the Perfect Storm piece, there seems to be a case building, from your observations about fraud, misrepresentation, and undemocratic corporate practices, that the tech heavy losses in the stock market, now almost 5 trillion, amount to "collateral damage". It would be interesting to know the amount of all savings, mutual funds, 401 ks, public pension funds, etc., invested blindly in unsound dot-coms and other foolish high tech stocks (and I understand the argument about why we should be investing in safe, long-term growth techs). With the mob-blind investments in the asia tiger collapse, 7-8 trillion has vanished in the last 4 years from global markets.
Besides what our Heartland group has been saying about the need for domestic, long-term, productive investment strategies for "workers' capital", parallel with the need to decriminalize pension activism (that is, collective shareholder and proxy actions against corrupt and stupid and anti-worker, anti-community corporate management) perhaps we should be thinking about criminalizing collateral damage investment practices.
The labor movement has launched a campaign to train and educate some 8,000 union trustees as to how to properly manage their pension funds. International corporate pension proxy campaigns have been waged and won against corrupt, mobbed up mining companies that exploit and murder workers in the third world, and pollute rural communities to death.
The environmental movement and social responsibility movement has also made amazing strides in similar actions against polluters, child labor, companies that exploit third world labor.
All of these forces came together, as I'm sure you followed, in Seattle, as the blue-green alliance. There were micro-serfs from microsoft marching with the others to shut down the WTO, the enforcer of bad corporate decisions to rape and pollute the planet. My friends helped lead the charge. I participated in the DC demos against the IMF/World Bank. After several other major activities around the world, the WTO will hold it next meeting in Quatar. Ask yourself, were the fuck is Quatar, and why would a world economic rules meeting, with world's top leaders, be held in a foreign emirate that outlaws public assemby, freedom of speech, freedom of association (ie labor organization)?
And the next stage is Quebec City, for the fight against the Free Trade of the Americas Act (FTAA), the next phase of NAFTA. Corporations will be able to build maquiladoras in the Amazon. Your computer components will be even cheaper, and, by god, made in the americas. More undemocratic practices by high tech firms, this time foisted on peasants. You can follow this in any of the very good web sites on the global trade coalitions.
What I'm suggesting in this rambling diversion is an idea from Robin Blackburn from London, with a book coming out on Verso Books, a "blue-greed-grey" alliance. In other words, supporting good corporate citizen practices with workers' capital.
The Canadians have created the Labour-Sponsored Investment Funds, an idea you can look at in www.heartlandnetwork.org, where they have mobilized half of all venture capital in the nation. They pooled it through tax-credit enhanced supplemental savings funds, and invest it within the provinces they live. It pulls a decent roi--12-22% depending on the province--from a combination of the direct investment in mostly traditional, non-tech venture cap investments, and the tax credit. They re-invest in small-mid businesses that have suffered capital gaps, as the banks and finance markets moved out of the market to finance transactional, short-term, myopic areas (such as derivatives and dot coms). Workers in investee firms are trained in open book management practices, economic literacy and regional economic development in some of the provinces. The best of the funds focus on sustainable, green, worker participation types of investment targets, and they do invest in regionally strategic tech investments. But the tech stuff doesn't overwhelm. These funds are only 5 billion so far, but growing quickly.
The idea here is that:
1. There is an alternative to the money machines which have sucked wealth from american families and cannibalized it. It is different from the atomized, "knowledge" advantaged, individual investor cowboy model we have now. It addresses the need for collective investment direction in a sustainable economy, one that can still make money (and by the way, in the national labor capital funds that we are now mobilizing in the US, some 2 billion new investments from taft-hartley pension funds in last year or so, there will have to be a risk-adjusted market rate of return. We hope, though, to invest in firms that value workers and the environment--not exclusively union firms--where there is a commitment to "high performance" work practices and corporate management. Okay, it's not 60% compounded, but it might be at least sustainable.
2. The crimimals need to be exposed. After the shakedown, these same new millennium micro-mobsters will just re-appear in numerous other scam corporations, with the next new bright idea, ready to become richer on another round of wealth transfer from middle class fools who think that, because they can understand a few basics of investment lingo and watch the talking heads (and Abby Cohen predicted at the beginning of the week, before the dow lost 800 points, that the market would re-bound to 13,000 this year, I believe)fancy symbols on MSNBC, etc., can become millionaires overnight. By the way, a very wise leader I know has a saying, things that sometimes look like accidents are not.
I am interested, Steve, in your comments about reparations to community leaders in your article. Not sure what this is about.
Anyway, that's my spiel, and I welcome opposition.
Tom Croft
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Name: Paul Rako
Email: winopaul@yahoo.com
Date: Fri Mar 16 18:24:56 2001
Comment: Oh yeah, and let's get one thing clear-- the sole purpose of the United States govenment is to keep the rich and powerful rich and powerful. Gore and Bush might have slightly different gangs of rich and powerful special interests, but they both agree that the working people will get fucked. Forever and always.
Still recitin' "Kill the Landlord" after all these years. (:^o)-
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Name: Paul Rako
Email: winopaul@yahoo.com
Date: Fri Mar 16 18:16:25 2001
Comment: I do so love this article and will have to email it to 5 or 10 friends so thay can savor it to. I like the New York intelligensia run down of all the high and mighty. I do have two minor quibbles.
1) Bill Gates is not a nerdy misunderstood programmer. The last honest thing he worked on was the basic interpreter in PC DOS 1.0. Bill Gates is a velociraptor turned brontosaurous. I have two friends who know two different people at Web TV. They both tell the story of Bill Gate's screaming (I mean screaming) "What's that going to do to make me money? How's that going to make me money?" at a video conference meeting. Bill Gates is just as clueless and evil as Bezos, only his path dependency allowed him to succeed rather than crash and burn. Like Linus said: "There is nothing I can tell Bill Gates about business. There is nothing he can tell me about technology." Amen.
2) If you're a writer I'm sure 600 MHz is the top speed needed for a computer. I do CAD (Computer Aided Design) and my 1.1 GHz Athalon with a 1200 dollar Fire GL2 video card is great but I need more. So do the gamers. So do people with large computational problems. As well as all the people doing multitrack audio and vidio editing on a PC. Sure, this isn't as big a market but it's there. If Mr. ponytail wanted to recover Gateway he needs only look to xi computers, that specializes in making ultra fast machines for CAD. I'll forgive Mossberg's narrow focus because he hipped me out to Susan Greenberg the Jewish angst folksinger.
The only bad thing about Napster is that Bezos will blame it for ruining Amazon, instead of admitting his own mismanagement. God this was a great article. I hope Jeff reads it. He is fairly smart-- he needs to get savvy. Some ethics wouldn't hurt either.
Still glib after all these years. (:^)-
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Name: Jon
Email: oneawesomeperson@yahoo.com
Date: Fri Mar 16 15:35:20 2001
Comment: Bravo! The best article I have read in Netslaves ever.
Thank you for getting the rest of the world in the loop.
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Name: bob
Email: pale_13@usa.net
Date: Fri Mar 16 09:41:24 2001
Comment: Finally caught the show on MSNBC.com last night, so I've decided I can now toss in my comments.
You guys need to realize that this was pretty much a setup from the word go. Bezos and most of the others would not have been there if the questions weren't known. Browkaw himself provided comic relief instead of pressing the issues. It was not a forum where the real hard questions could be asked. If it was, you'd never get most of these guys there, with the possible exception of the Sony guy. I liked him.
For the critics: Ever been on camera before? It isn't as easy as it looks, and a skillful cameraman and director can make you look any way they want. You are literally at their mercy, and if they decide to shoot certain angles and lighting combos, you are toast.
I thought you might have done a little better with body language, but having been on camera more than once myself, you made hummingbirds out of horseshit the best you could.
Steve, were you the Gorton's Fisherman sitting in the audience? :)
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Name: steve gilliard
Email: sgilliard@netslaves.com
Date: Thu Mar 15 16:51:22 2001
Comment: Jimmy,
Uh, that wasn't me, first of all. Second, that was the question the producers wanted asked. I would have asked Bezos why are so many people frustrated working at Amazon, the inability to be promoted, the witless management, where the retaliers were on his board.
But they didn't ask me to ask a question. :-)
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Name: Jimmy
Email:
Date: Thu Mar 15 16:27:11 2001
Comment: I agree with all of your points. But to be fair, it should be noted your appearance on that show was embarrassing. You looked like a little, whiney, middle-aged, out-of-work, balding, fat white guy with a major grudge and you overstayed your welcome. Next time, stand up, announce your presence, do the damage, and sit the fuck down. Anyone watching that who didn't know you or NetSlaves probably though you were a complete idiot.
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Name: Merry Meeker
Email:
Date: Thu Mar 15 15:31:00 2001
Comment: Bezos is a god. Worship him or you will die.
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Name: MasterPo
Email:
Date: Thu Mar 15 14:50:24 2001
Comment:
I C your point.
Sounds like you're getting into the idea of a "licensed investor." That's been floated too what with all the rookies using online broker systems and loosing the rent money.
Still, I don't think you can stop someone from being a fool and would hurt more people than it would save. Some of life's best lessons come with failure. And the more it hurts the more you learn.
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Name: steve gilliard
Email: sgilliard@netslaves.com
Date: Thu Mar 15 12:27:03 2001
Comment: I'm no fan of brokers, either. But here's where people got fucked: they didn't have the basics to know what they're doing.
Having a broker for the kind of people who really got soaked matters. I wouldn't trust a broker for my dealings, but I would want some decent advice on how to structure my entire portfolio. The problem with online trading is that there is no real advice on how to build a portfolio.
It's like how they feed athletes. There is a lot of food at a banquet table, but each person picks the food they want. With a nutritionist, they make far better decisions. Most people need to understand how their stocks fit into their overall investment plans and they don't.
Some people do not need a full service broker, but a lot more do than we thought. Just access to common sense things like a limit order and being able to buy a stock at the market price would have saved a lot of people a lot of money.
But I'm writing about the markets for tomorrow anyway. So my thoughts on the subject will be expanded.
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Name: MasterPo
Email:
Date: Thu Mar 15 11:14:43 2001
Comment:
Steve, I disagree about brokerless trading being a bad idea. I see online trading as the logical extension of discount brokerage. Rather than having to call someone I just can type it in myself. I for one don't need a broker or the super high commissions. I can make my own investment decisions. And no, I didn't get blasted in this drop either.
Most full-sevice/full-commission brokers don't know a stock from toilet paper! If you're counting on a broker to advise you you might as well just mail them your wallet. For most brokers the only financial training the get is their studies for the Series 7 (which is NOT what the Series 7 is supposed to do - train brokers). I don't want to go into all the dirt (I've been on the inside) but enough to say online investing is much more a help than a hurt.
It's like 20 minute guaranteed pizza. Most people like it but I sure some poor sod eats it all the time and is now fat and has a 500+ cholesterol count. Is it Domino's fault or his own fault?
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Name: travis
Email: besotted@beer.com
Date: Thu Mar 15 02:11:56 2001
Comment: whoa,steve i like your stuff mainly,
and i agree with you.
like a pit bull on meth you are
sickem
the whole show was an ego driven hallucination,
like they all thought it was a bump in the road.
also...
The way they looked at each other it was hard to tell whether they were wondering who got the next
TIME cover or who went to jail first
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Read the Book
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High-Bandwidth Bit Rot!
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