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David D. Kirkpatrick and Jamie Heller

the breakfast table
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from: David Kirkpatrick

From Envy to Schadenfreude

Posted Wednesday, May 24, 2000, at 12:03 PM ET

Jamie,

The New York magazine take on the markets? Our view is this: "Sick of all your sensible solid swimsuits? There has never been a better season to buy something itsy-bitsy, colorful--and preferably in two pieces!" (Shyama Patel, Page 58 of the current issue.)

Well, that's not entirely accurate. In truth, our take on the markets bears a close resemblance to that of the TheStreet.com's founder, Jim Cramer, who doubles as our financial columnist.

But as for the rise and fall of the dot-com craze--frankly, we ink-stained wretches can talk of little else. Our feeling is mostly Schadenfreude. We missed the bus to Woodstock, as your and my old friend Rob Walker aptly put it in the New York Times Magazine. We missed out on our generation's defining event.

It may amuse you to know that, as I have been telling it over and over these last few years, you would have been my ride. Early in 1996, when you were joining the still unnamed TheStreet.com and I was rewriting press releases in the newsroom of the Wall Street Journal, you took me to lunch by the harbor in Battery Park City and encouraged me to apply for a job at your new start-up. "What, leave the Daily Diary of the American Dream for a Web site?" I thought to myself. Back then, I'd barely ever used the Web, which seemed to attract an unsavory video-gamer crowd. Of course, when I heard about my former Journal colleague Dave Kansas making millions, I joked about my stupidity and wondered whether I'd made a real mistake.

The smart and cynical thing to say about all the Internet "wealth creation" always seemed to be that, whatever their merits, these companies were better at selling stock than anything else. So really it was more of a wealth transfer than creation. At places like the Columbia Business School, it wasn't hard to pick up the smell of bad faith in the air. Every student had reserved a domain name or two and drawn up a business plan--not because they hoped to succeed but because they hoped to get bought out by eBay, Healtheon, or somebody else. "We're not really the natural owner for an online bond trading service," one friend told me. "But if we get it up fast enough we can get bought out by someone who is." "I don't really think there is a market for a stand-alone online auction in used car parts," another said, "but if we can build a brand fast enough among dealers, then eBay or somebody else will buy us out." Tonight, I'm going to a cocktail party for a friend's new Web site, Fox Collectibles, which traffics in toy soldiers and the like.

But seasons change, and so much for all that. The smart and cynical thing to say seemed to be that solid online businesses will be just that. TheStreet.com turns out to be a fine publication you can be proud to work for, although it may not make you rich enough to put your descendents through college for generations to come.

I'm dying to know what you think--you're in there, after all.

David

the breakfast table
entries
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from: David Kirkpatrick

From Envy to Schadenfreude

Posted Wednesday, May 24, 2000, at 12:03 PM ET
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David D. Kirkpatrick is a contributing editor at New York magazine who writes frequently about business and finance. Jamie Heller is editor for strategic ventures at TheStreet.com, where she's worked since its 1996 founding.
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Reader Response from The Fray--to be read after the most recent entry:


I still don't understand how the stock market can be efficient in the long term and not the short run. And I'm not relying merely on Keynes' famous sentiments about the long run; my point is even simpler: when is the long run? Was Microsoft's long run value from 1990 to early 2000 or to today? Short run volatility must have consequences for people who claim long run efficiency. To my mind, and for many other reasons, believing in efficient markets is like believing in Santa Claus--there are correlations between expected results and reality, but people really ought to grow up and accept that no-one on Wall Street knows anything.

--Jeff

(To reply, click here.)

(5/22)

To Jeff: Various natural processes are long-term efficient without being short-term efficient, for example the downhill flow of water or the process of natural selection (aka evolution). Complex human processes seem to have similar behavior. Perhaps efficient is being confused with "optimal". The problem with most strategies that attempt to be optimal is that they often have truly horrendous failure cases, which wipe out all their interim or theoretical gains. Democracy has been called "the worst form of government, except for all the rest." It is hardly optimal, and in many cases very inefficient. A dictator could get the graffiti cleaned up and the trains running on time; democracy seems to have a hard time doing such things. But what about the failure case of a less-than-benign dictator or a dictator whose benign intentions diverge from many or most of the desires of the population? An example of short-term efficiency vs. long-term, in terms of human happiness.

That's not to say short-term efficiency is bad, or that we can't improve on raw systems. But it is possible for a strategy to be the best long-term one without exhibiting short-term efficiency.

--Paul Canniff

(To reply, click here.)

(5/23)

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