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Dot Con: How Infospace Took Investors For A Ride
Jeff writes "On the subject of the dot com crash, the Seattle Times recently ran an outstanding three day series on the corruption at Infospace, with a follow up today on the company's continued relations with its founder, Naveen Jain. Sunday's cover photo of Jain's new office shows a birthday photo of himself and another self-portrait in the background. Only the reflecting pool is missing."
The real reason there isn't the incredible outcry over conmen like Bernie Ebbers, Ken Lay, and the man linked is because people don't realize that they, too, are part of the "investor class." Many people think that Enron's failure resulted in nothing more than a few robber barons transplanted from the 19th century having to switch their Cuban cigars to Dominican; they don't realize that they are being hit in the pocketbook, and that people who invested large amounts their life's savings were taken for a ride.
As for investors not doing enough research, that's simply not true. If you will remember, it was a fairly large scandal a few months ago that stock analysts - people who are hired by brokerages to deliver an unbiased analysis - were rating stocks highly, but privately commenting that those stocks weren't worth the paper their certificates were printed on. The end result was that investors who did everything "right" and read all the research available were actually more likely to get ripped off than someone who simply picked stocks because they had a cool-sounding name.
That's it. I'm no longer part of Team Sanity.
You don't trust Bush and the current administration. You think you are (and you very well might be) smarter than them. Yet you trust them with your money more than you trust yourself.
Nice disconnect there.
Basically quite true, but frankly, the dot-com era died mostly because of the belief put in the flawed idea that it made good business sense to grow market share at all costs (worrying about the quality of the product or service offered secondarily, if at all).
There were plenty of "rich idiots" around - but I don't think it's fair to act "holier than thou" about it, claiming to have known all along it was all just a bunch of idiots giving money to other idiots. If this were true, you'd have to ask why eBay is still useful and successful today, or Amazon.com for that matter.
Some of these dot-coms had viable concepts that "made it" - but they were the minority. Probably, a number of them were even really good business ideas that *should* have made it, but got drug down with the rest of the startups as stockholders decided they were pretty much all a ripoff. In other cases, they just didn't know how to make the good idea succeed in the long term. Better management might have saved them.
(For example, I still think those "we deliver groceries to your door" ideas like peapod, webvan, etc. were viable. People just didn't quite figure out a profitable way to pull them off. I could see a large food service corp. launching one of these on a nationwide scale (say Pepsi Co. or Frito-Lay or somebody?), and maybe even subcontracting deliveries out to local courier services?)
Oh, honey, we can't even get rid of the dumb ones. How long did the HP board take to ditch Carly? Three years after the Compaq merger, and well after she screwed up everything else at HP too? Another example: I worked for a guy at [ConsumerProductCompany] who insisted we stick to the the original memory spec even though Moore's law told us we could count on twice the memory by release. Recoding to fit the tight space delayed ship long enough the original RAM was obsoleted, forcing us to redesign the memory controller, and all of which pushed the release late enough that Sony stomped us like a steamroller crushing baby chicks. That guy's now a CTO at another outfit. Hell, Apple alone endured a number of inept CEOs, including a guy who'd crawl under his desk when the going got rough.
And remember, the VCs funded all the dot-bombs five or six years ago and told them to spend like mad to get "first-mover advantage", so we're not necessarily talking the brightest bulbs on the tree here.
Long story short, if even the dumb CEOs get multiyear grace periods and chances to screw up again repeatedly, how do you expect to catch the sharks smart enough to cover up their schemes? Especially, I should note, when luminaries such as Gates and Ellison have both prospered and made their venture investors prosper while being accused of sharp trading. That'll tend to discourage scrutiny so long as the numbers remain rosy.
Long story short, whoever in the blogosphere wrote that fatuous thing you paraphrased is talking out his ass.