RE: UKNM: the absurd economics of the net

[Sean Phelan]

At 6:50 pm +0000 3/2/99, Sajid Mohammed wrote:


>I haven't read The Economist as such, ......

>

>All economics are absurd anyway - anyone who's ever read Robert Anton

>Wilson's views on money will know what I'm talking about.


I find that reading New Media Age and Revolution helps me build a better

understanding of the new media revolution that we seem to be involved in.


Having subscribed to The Economist for twenty years or so, I find it helps

me understand the complexity and extraordinary importance of economics, and

some of the terrible mistakes that have been made around the world through

not taking it seriously.


As I talk to venture capitalists, bankers and lawyers in London, NY, Boston

and on the west coast, I get the impression that almost everybody is trying

desperately hard to make sense of the internet equity price bubble.  The

Economist articles last week were very helpful in this regard, and coming

right after Alan Greenspan's speech (which I have not read; is there a

transcript online?) I think it is going to be taken very seriously.


We all know that the internet/new media/blah blah blah/etc. is creating

enormous opportunities and upsetting the commercial status quo in a number

of areas.  High risk and volatility always point to potentially very large

rewards, but also to a lot of ventures that will crash and burn.  This tends

to be one of the few things that everybody can agree on, whether they are

MBAs from Harvard, LBS or Theseus, bar-room experts down at the Dog and Duck,

or party-goers at Madame JoJos.


I think the huge problem right now is that we all know a market adjustment

is coming, and (according to The Economist) the US market is currently being

driven by investors who are not all well-informed and not able to make good

trade-offs between risk and reward, and between short term vs. long term

returns.


This makes it quite difficult for investors to price new ventures; should

one assume a short-term correction, and look for long-term investments, or

should one rush to fund ventures, and maybe even get to an IPO, before

the bubble bursts?


There are a LOT of large venture funds in the US, and also in the UK and

continental Europe, that appear to be agonising over these questions

right now.  Quite a few very large funds have been raised in the last

year or so, and they have a lot of money looking for ventures (the funds

that were looking to make 2 or 3 million pound investments in early 1998

now aren't interested in doing less then 10m).


I don't think there is anything absurd about all this; after all, we have

better information now than we had at any time in the past; the financial

and economic underpinnings of decision-making are way, way more solid

now than there were, even as recently as the mid-eighties.


It is, however, all very very difficult.  Many mistakes will be made, and

remember that it is your pension fund and mine that are putting money

into all those new VC funds; if your employer is not venture-backed then

you can be pretty sure your major customers and suppliers are.


Oh well... enough rambling... at this rate I won't get around to checking

out today's contribution from the one true source of insight into the new

economy: Dilbert.


Cheers

Sean

=============================================================

Sean Phelan

seanmultimap [dot] com

     http://www.multimap.com

phone (within UK): 0171 433 0460      fax (UK): 0171 209 5194

phone (Int'l):  +44 171 433 0460      fax:   +44 171 209 5194


********************

UKNM is sponsored by Excite UK, visit us at http://www.excite.co.uk.

Email Khalil Ibrahimi

khalilexcitecorp [dot] com (mailto:khalilexcitecorp [dot] com)

 to advertise on Excite.

********************

Change your UKNM subscription use http://www.chinwag.com/uknm.html