The New Economy Backlash Checklist

Depending on your professional relationship to the New Economy, you might think we’ve been in a backlash phase for months, or that the backlash has only lately gotten underway in earnest, or that it’s still to come. There’s some truth in each of these guesses. On the one hand, no one refers to, say, day trading as evidence of the “democratization of finance” with a straight face anymore. Venture capitalists have already taken lumps, the hulking New Economy magazines are now thin and dogged by skepticism about their survival, and dot-com “death pools” like  have ridden the wave of Schadenfreude to surprisingly widespread popularity.

Still, my guess is that the backlash is not over. Much depends on whether the overall economy, and the stock market, limp through the next 12 months or build some sort of rebound. But many aspects of the boom were hyped so relentlessly that the conventional wisdom is now obliged to counterhype them. That is, it’s not enough to simply admit that something like the cubicle does not represent a quantum leap in the improvement of the human condition; instead it must be demonized. So what’s next for a good backlashing? The possibilities are nearly endless—and I’m certainly open to suggestions—but let’s consider a few previously applauded manifestations of the boom culture.

Stock options: Somebody once observed that the apparently limitless upside of options made cash compensation passé—it just seemed “too final.” My friend Marisa used to say that options, and the life-changing possibilities they embodied, were the LSD of the 1990s, but at this point I imagine there are plenty of people who wish they’d just said no. The next step would be widespread complaints that companies have handed out options willy-nilly, that they are not the free lunch they seem to be, re-pricing them can drag on the bottom line, they don’t do nearly as much to engender loyalty as you’d think, they make possible some fairly questionable accounting tricks—and they are not nearly final enough.

Business plans on napkins: Perhaps the ultimate example here is recounted in Michael Lewis’ The New New Thing. Jim Clark, fed up with the forms required on regular visits to the hospital, drew a simple diagram on a sheet of paper, illustrating his idea for a company that would use the Internet to eliminate all waste from health-care bureaucracies. “We want to empower the doctors and the patients and get all the other assholes out of the way,” he explained, adding with a laugh, “Except for us. One asshole in the middle.” Particular care was made to marvel that Clark knew nothing—nothing!—about the U.S. health care system; only such an outsider could have the vision and guts to change it. The subsequent history of Clark’s Healtheon, and of WebMD, the company that bought it, suggests that once a plan has been drawn on a piece of paper, there are few advantages to knowing nothing at all about the thing you’re trying to revolutionize. And anyone who bought HLTH when it was trading above 90 (it’s below 10 now) might have some thoughts about who the assholes in this saga really are. (None of which, I feel obliged to ad, is meant as a knock on The New, New Thing, which remains an extremely impressive book.) 

Pie in the sky valuation paradigms: Remember that whole Dow 36,000 thing? It’s fun to ignore market history and dream up new ways of valuing stocks, and last February it might even have been fun to believe that the 30 stocks Super-Bull Jim Glassman was touting on his Web site really were great buys, despite their apparent priciness. It’s less fun to find out that Mr. Market isn’t interested in learning new tricks: Nearly a year after its inception, the Glassman Technology Top 30 has fallen around 40 percent, several percentage points worse than the broader Nasdaq. Although many of these stocks are obviously way more tempting at current prices, the proper backlash response would be to denigrate them all. Until they start rising again, of course.

E-dudism: The vogue for twentysomething CEOs really only lasted about 20 minutes before “seasoned” corporate grownups decided that heading a New Economy startup was the new equivalent of a trophy wife. Along the way, the grown-ups invariably transformed themselves into e-dudes (to borrow another friend’s term) and chucked their suits in favor of black turtlenecks and chinos in an absurdly transparent attempt at seeming more “in tune” with the nose-ringers writing all the code. Expect more executives to Do The Joe Galli  and go back where they came from. Probably in a suit.

Money columnists in general interest opinion magazines: Let’s not dwell on this one.

Visionary extrapolation: This is closely related to the business plan on a napkin. Basically, if you spot a growing trend, all you have to do is extrapolate, then declare yourself visionary and everyone else myopic and in denial about the inevitable future dominance of whatever it is you’re talking about. For bonus points, cite Moore’s Law. An entire New Economy prognostication industry grew up around this idea, but obviously this sort of extrapolation isn’t hard—it’s easy. Anyone can do it. I’m already running long here, so I’ll return to Moore’s Law and the extrapolation surplus in another column in the near future. But for today, one more potential backlash victim.

Foosball. The New Economy workplace may have required long hours, but this was tempered by a homier atmosphere, tolerant of Nerf-gun fights and flexible hours. In a tighter economy, our old friend the citizen shareholder is likely to conclude that employees can play foosball on their own time and pay their own gym fees. And stop wasting time surfing the dot-com death pools! Your stock options depend on it!