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The Best and Worst New Economy Books

How to succeed in e-business without really crying? Become an author.

(originally published by Booz & Company)

It's a commonly observed irony that, so far, perhaps the most successful consumer enterprise to arise from the Internet is, a company that began its existence by peddling a 15th-century product — the book. Call it Gutenberg's revenge.

A less commonly perceived irony is the effect that the Internet has had not just on booksellers but on book publishers. Bookstores are overflowing with multiple tomes that promise to distill the secrets of the Internet Economy into a single volume. Libraries of the future will record that the turn of the millennium marked the flourishing of a new literary genre: the Net Business Book, or N.B.B.

It's a brilliant development, the latest example of the publishing industry's cynical exploitation of the masses' bottomless insecurity. The N.B.B. borrows from several well-tested publishing categories, all of which employ different manipulative fallacies. The appetite, for example, for Chicken Little books — the ones that predict an upcoming apocalyptic market crash (and reveal what you can do to survive it!) — has been around for decades, and continues unabated even in the face of what is now the longest bull market in the nation's history. That genre is the personal-finance version of the most consistently successful publishing category of our era: the self-help book. The staying power of self-help books — financial, managerial and psychological — is a wonderful impossibility: If the books actually worked and made people better, then we wouldn't need any more self-help books. Thankfully for publishers, they don't really work. Finally, the N.B.B. has also spun off Internet versions of the C.E.O.-as-Superman book, a winning business-book formula that assumes we can all learn vital lessons by reading the life stories of the captains of industry.

Some Internet investment self-help manuals, such as consultant Peter S. Cohan's Net Profit, take a sober, pragmatic tone, cloaking reasonable-sounding advice with the usual jargon - "the volatility of a Web stock increases with the extent of its private ownership," he advises in a no-nonsense tone. But to really savor the peculiar spice of the Chicken Little genre, check out The Internet Bubble. This book is written by Anthony B. Perkins and Michael C. Perkins, the editor-in-chief and founding editor, respectively, of Red Herring magazine. Red Herring is a San Francisco-based monthly that covers the Internet and technology industries. If you've picked up a copy recently, you may have noticed that the editors' staunch belief that Internet companies are overvalued has not stopped the magazine from absorbing big portions of those companies' advertising budgets. Just because you're a critic of the Internet Economy doesn't mean you're not benefiting from it.

The Internet Bubble is not a bad book: It is reasonably well written, and packed with charts and data that seem to support its arguments. Still, as a Chicken Little N.B.B., one of its fundamental purposes is to frighten readers. On the first page of the introduction, the authors declare, "It's our view that individuals who own stock in public Internet companies could experience a 50 percent-plus meltdown in the value of their stock holdings if they don't sell before the Internet Bubble bursts." That's pretty scary. It's also — to anyone who pays any attention to the stock market, which these days is a good chunk of the American public — incredibly obvious. Indeed, investors in any number of Internet companies — from giant America Online Inc. to pygmies like or — could, depending on when they bought and sold, already have experienced losses that large without the Internet Bubble having burst. It's a highly volatile sector, but so what?

Authors of fright books don't really have time for questions like that. The Perkinses don't need to address it, because their conclusion is stunningly simple: If you hold Internet stocks, sell them now. "If the Internet gala hasn't ended by the time this book hits the streets, it will probably end sometime soon thereafter. So it's time to get out." Those words, written in June 1999, at least reflect some honesty: The authors admit they can't say when the Bubble is going to burst. In the months between June and November 1999 (when this review was written) many of the stocks they criticize have done quite nicely indeed.

That stock performance doesn't negate the Perkinses' argument: By any conventional measure, virtually all Net stocks clearly are overvalued, and the Net I.P.O. deck is stacked in favor of a handful of venture capitalists. But the vaguely defined prescience of The Internet Bubble merely spotlights a central paradox of the N.B.B.: Try to establish your relevance through timeliness, and you will certainly be slain by obsolescence. At least at this stage, no important truth about the Internet Economy can be captured exclusively by any book, no matter how well researched or argued, because the ground shifts too quickly.

That's why the broader self-help N.B.B.'s are especially hard to take. This genre includes Wired magazine co-founder Kevin Kelly's well-worn New Rules for the New Economy, as well as Net Worth by John Hagel and Marc Singer. (Net Worth should not be confused with Net Profit, although a reader might well conclude that N.B.B. titles, like N.B.B. content, fall into a select number of categories revolving around Net puns, the word "New," and the addition of ".com" to an otherwise familiar term.)

Lately, a particularly popular self-help N.B.B. is Patricia B. Seybold's The appeal is easy to understand: the book is written in the first person, and is downright chatty. Each chapter has lots of subheads like "Patty's Rx for American Airlines," followed by an easy-to-read five-point plan. "Do a Better Job With Incoming E-Mails," Ms. Seybold, a consultant, instructs American Airlines, and "Let Customers Book Hotels, Cars, and Restaurants."

The advice is good, but are we really to believe that it works? The title promises a "profitable business strategy," but almost none of the pure Net businesses mentioned in this book have ever been profitable. Indeed, given the unfortunate realities of the wired consumer marketplace — fragmented audiences, low barriers to entry, etc. — one could just as plausibly argue that in order to survive as, say, an Internet retailer, you must spend vast amounts of advertising and marketing dollars, and that those expenses are far too great ever to allow for profit in all but a handful of businesses. The only way to get the kind of money necessary to pursue a "profitable business strategy" is to cut a deal with the dreaded venture capitalists, which brings us back to the realm of the fright book. And even if Ms. Seybold's case-study subjects do turn out eventually to be profitable, that will be several years from now, and this book will be hopelessly out of date. (In a publisher's view, of course, that simply means issuing a sequel.)

By default, then, the most "successful" of the N.B.B.'s so far have been the C.E.O.-as-Superman book. That species was by no means invented by the Internet (remember Lee Iacocca?). Indeed, success is a relative term; the Internet has yet to produce a best-selling C.E.O.-as-Superman volume. (Bill Gates's The Road Ahead does not count, since it is not primarily about the Internet, and was published at a time when comparatively little of Microsoft's business was Internet-based. His next book, Business @ The Speed of Thought, has sold far fewer copies. Both works, in any event, borrow less from contemporary publishing strategy than from the tactics of the modern magazine business: Put Bill Gates' name on the cover, and the rubes will buy it.)

We might attribute the lack of C.E.O.-as-Superman N.B.B.'s to the fact that the Net hasn't produced enough household names on which to hang the mantle. Although a few Net C.E.O.'s have been granted their own books — Steve Case is biographied in Wall Street Journal reporter Kara Swisher's, and the founder of Oracle gets his due in The Difference Between God and Larry Ellison by St. Petersburg Times feature writer Mike Wilson — these works are less profiles in courage than profiles in dysfunction. The more stable characters just don't seem to have the market traction to attract the notice of Publishers Row; there's been little national clamor for Karen Southwick's High Noon: The Inside Story of Scott McNealy and Sun Microsystems. (Yes, it's a real book. No, don't bother.)

It's remarkable, then, that Netscape veteran Jim Clark this year has been profiled in two such N.B.B.'s: his autobiography, Netscape Time, and Michael Lewis's The New New Thing. One might ask why the world needs two N.B.B.'s that reveal in painstaking detail every business move that Mr. Clark has made over the last decade or so. There are two answers to that question: One is that it doesn't; the other is that Michael Lewis, author of the best-selling bond-market romp Liar's Poker, is a far better writer than Jim Clark (even with the assistance of co-author Owen Edwards) will ever be.

When done well, the C.E.O.-as-Superman book has one sterling virtue: Namely, it is content to tell a good story well. The authors above both do some grandstanding about the Big Picture implications of Mr. Clark's escapades, but primarily the stories are meant to stand on their own. Mr. Lewis's version of Clark-as-Superman has at least two advantages over Mr. Clark's own account. One is that Mr. Lewis doesn't have to be nice. Mr. Clark's book treads relatively carefully around characters like veteran venture capitalist John Doerr of Kleiner Perkins Caulfield & Byers. You can tell at times that Mr. Clark loathes the guy, but knows he might have to work with him again, so the passages that deal with Mr. Doerr are maddeningly diplomatic. About the worst Mr. Clark will say is that he "didn't entirely trust" Mr. Doerr, and that's right after saying: "Phone booth or not, sometimes the S on Doerr's chest seemed to glow through his wash-and-wear shirt." By contrast, Mr. Lewis says at one point that as mad as Mr. Clark was with one V.C., "he was now even more irritated with John Doerr. Whenever Doerr's name came up, Clark's mouth went into full-pucker mode."

The second advantage is that Mr. Lewis understands the power of a literary frame: He uses Mr. Clark's yachting passion to organize the man's sense of a quest. For the same reason, Mr. Lewis's book is superior to another literary attempt to capture Silicon Valley, Po Bronson's The Nudist on the Late Shift, which takes some potentially intriguing profiles and scatters them carelessly. At the same time, Mr. Lewis takes the biographer's virtue of sympathy and stretches it into lionization. My colleagues discuss books like these all the time, with a mixture of wonder, envy and skepticism. There's value, of course, in serving up a snapshot of where the Internet industry was circa 1998 and 1999. But the N.B.B. almost always fails when it overreaches, and tries to carve the names of today's winners and losers into history. The Internet Economy is barely in the toddler phase; the chances are that when its first true history is written, it will no longer take the form of a mere book.

The Internet Library

Books mentioned in this review

  • Po Bronson, The Nudist on the Late Shift (Random House, 1999), 248 pages, $25.00.

  • Jim Clark with Owen Edwards, Netscape Time: The Making of the Billion-Dollar Start-Up That Took on Microsoft (St. Martin's Press, 1999), 304 pages, $24.95.

  • Peter S. Cohan, Net Profit: How to Invest and Compete in the Real World of Internet Business (Jossey-Bass Publishers, 1999), 224 pages, $28.00.

  • Bill Gates with Collins Hemingway, Business @ The Speed of Thought: Using a Digital Nervous System (Time-Warner, 1999), 470 pages, $30.00.

  • John Hagel and Marc Singer, Net Worth: Shaping Markets When Customers Make the Rules (Harvard Business School Press, 1999), 313 pages, $24.95.

  • Kevin Kelly, New Rules for the New Economy: 10 Radical Strategies for a Connected World (Viking Penguin, 1998), 179 pages, $19.95.

  • Michael Lewis, The New New Thing: A Silicon Valley Story (W.W. Norton & Company, 1999), 256 pages, $25.95.

  • Anthony B. Perkins and Michael C. Perkins, The Internet Bubble: Inside the Overvalued World of High-Tech Stock — And What You Need to Know to Avoid the Coming Shakeout (HarperBusiness, 1999), 283 pages, $27.00.

  • Patricia B. Seybold with Ronni T. Marshak, How to Create a Profitable Business Strategy for the Internet and Beyond (Random House, 1998), 360 pages, $27.50.

  • Karen Southwick, High Noon: The Inside Story of Scott McNealy and the Rise of Sun Microsystems (John Wiley & Sons, 1999), 242 pages, $24.95.

  • Kara Swisher, How Steve Case Beat Bill Gates, Nailed the Netheads, and Made Millions in the War for the Web (Random House, 1998), 333 pages, $24.50.

  • Mike Wilson, The Difference Between God and Larry Ellison: Inside Oracle Corporation (William Morrow & Co, 1997), 358 pages, $25.00.

James Ledbetter is New York bureau chief of The Industry Standard, a newsweekly covering the Internet Economy. He is a columnist for the Columbia Journalism Review, and author of Made Possible By...:The Death of Public Broadcasting in the United States (Verso Books, 1997).
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