The technology is irrelevant

Net Insider

It has long been a truism that the quality of technology too often has little to do with marketplace success. VHS vs. Betamax is the most commonly cited example. But now we are seeing an old factor – greed – starting to have a bigger impact on technology selection than just marketing and patent licensing departments.

I’m writing this column on the day that WorldCom Inc. announced it had found about US$4 billion worth of expenses that had not been dealt with “according to generally accepted accounting principles,” as The Wall Street Journal quaintly put it. The Associated Press headline was not quite so quaint, referring to it as “the biggest case of corporate fraud in U.S. history.” That headline approximates the headlines over the past few months regarding cable operator Adelphia Communications Corp. and, of course, Enron Corp. It also echoes many smaller headlines announcing the demise of one company or another because of questionable business practices.

Each headline traumatizes the investment community and causes them to back away even further from startups working on new technology. Each time a big company goes bust, the news hits the potential market for new ideas hard. Throwing away a few hundred billion dollars of investors’ money tends to cause them to retreat and get that deer-in-the-headlights look. Not exactly a good market for startups to get new or continuing funding.

We had the Internet bubble, then the Internet bust, but we thought that the bubble was just stupidity or, more politely put, “irrational exuberance.” And I saw a bunch of breathtakingly dumb ideas get funding during the period when it seemed that venture capitalists were funding anyone who knew how to run PowerPoint. At one level, the quality of technology did not seem to matter much during those “good old days.” When the inevitable bust came, I figured that we, in the Net world, were just victims of our own inability to think seriously about ideas. I figured our thinking was somewhat muddled by all the money flowing around. Lots of good ideas died for lack of continuing funding, along with many ideas that just might have been dead to begin with.

But it now turns out that some of this was irrational greed instead. When criminal behaviour is involved, it’s harder to stomach what is happening to the startups that were leading the way on the paths of innovation that are key to our technological future.

Because we cannot depend on established companies, or now on venture capitalists, to fund the longer-term research and development startups they once did, we have to look to other sources of funding or be willing to stagnate. In the time before the boom, federal research money was a key innovation driver, maybe not as adventuresome as it could have been, but key nevertheless. It looks like it’s time for the feds to open the purse strings even more.

Bradner is a consultant with Harvard University’s University Information Systems. He can be reached at [email protected]

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