net revenues overstated?

John Gulick jlgulick at
Wed Mar 29 13:19:46 PST 2000

Doug forwarded the following:

>Industry Standard - March 27, 2000
>Are Net Ad Firms Overstating Revenues?

I reply:

In today's SF Chron PaineWebber printed a huge full-page ad gently warning investors with significant "equity positions" in "new new economy stocks" to quickly seek the prudent advice of PaineWebber consultants. The ad implicitly debunked the myths that 1) no stock price/earnings ratios are too high and that 2) poor cash flows and debt don't matter since start-ups are financed by VC and new stock issues. Basically, the ad was a slightly less blunt rerun of the Barron's article Doug posted the other day. PaineWebber was trying to not be too alarmist, however -- it implied that plummeting stock values and insolvencies in a few dot-coms will not plunge the economy into a recession or stem the ultimate triumph of informational capitalism -- as long as investors are keen enough to revamp their portfolios and let a few over-hyped dot-coms be sacrificed on the altar of market discipline.

So, the worse the news gets, the harder they party in SF's South Beach, as the impending apocaplypse looms. A professor friend of mine likened the Bay Area's economy to the "dual economy" in dollarized tourist zones of Mexico and Cuba -- if you work for a dot-com, own landed property whose value has been inflated by a dot-com, or have dot-com stocks (and are wisely beginning to bail out), then you're golden. In this environment bald social class differences tend to mean less than whether you're tied into/excluded from the cutting-edge/ speculatively driven sectors of the economy. A clerical at a Santa Clara county, say, HMO, makes 15-20 grand a year and in a non-rent control environment her rent has doubled or tripled (if she's not staying in a homeless shelter). The secretaries at Cisco Systems w/stock options are millionaires and are buying sprawling homes in gated communities in Portola Valley and Los Altos hills. For the creative & skilled twenty-and-thirty somethings who can hop aboard the gravy train if they want to, politics degenerates into moral positioning -- do you sell out and join the ethically bankrupt world of speculative dot-coms, or do you hold fast to your principles and refuse to individually reproduce the collective mania (I am doing ny level best to remain content as a 1 grand-a-month lecturer at San Jose State University). What if jumping on board with a start-up means you'll be able to retire in five years (if you don't blow wads of cash on yuppie meals and condos) and travel in Tibet and Bali, and finally opt out of the rat race you fundamentally detest ?

People who don't even work for the dot-coms crash the free bacchanalian fests sponspored by marketing-conscious dot-com firms -- reminds me of a degraded version of the merchant princes of rival Italian city-states legitimating their hoards of wealth by feting the masses (see Henri Lefebvre on this).

The situation here gets stranger and more twisted by the day.

John Gulick Santa Cruz, CA

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