Like many aspects of the new economy that we celebrate as revolutionary, Built to Flip has been around for a long time. For three decades, entrepreneurs have followed a Silicon Valley paradigm -- a set of assumptions about how to handle a startup. The model isn't all that complicated: Develop a good idea, raise venture capital, grow rapidly, and then go public or sell out -- but, above all, do it fast. Even 20 years ago, there was an ethic of impatience: A company that hadn't made it big within 7 to 10 years was deemed a failure. There was also an ethic of impermanence: The expectation that a company would be built to last was largely absent from Silicon Valley business culture. Remember Ashton-Tate? Osborne Computers? Businessland? Rolm? Today, none of those outfits exist as stand-alone great companies -- but each was a successful example of the Silicon Valley paradigm.
My first encounter with the Silicon Valley built-to-flip mentality came in 1982. While completing my graduate studies, I did a research project on entrepreneurship in the Valley. My target of study was a workstation startup called Fortune Systems. As I explored the internal workings of the company, what struck me wasn't its technology, its business model, or its culture. No, what struck me was what I perceived to be its founders' utter lack of interest in building a great company. Fortune Systems was built to flip from the get-go. Workstations were hot, capital was plentiful, and the stock market was starting to look good for IPOs. I remember asking a member of the management team about plans for building the company after the IPO, and he just looked at me: Clearly, I didn't get it. The point of it all, I concluded, was simply to go public as fast as possible. Even the company's name -- Fortune Systems -- was a none-too-subtle tip-off to its underlying purpose.
That was almost 20 years ago. Today, we've arrived at a whole new level of flippability. In the old Silicon Valley paradigm, "fast" meant flipping a company within 7 to 10 years. By today's standards, that time frame seems preposterously glacial. Fortune Systems aside, most people operating within the old Silicon Valley paradigm at least gave lip service to the idea of creating a great company -- of inventing products that make a significant contribution and then building a sustainable economic engine around those products. People are now proselytizing the bizarre notion that it's better not to have profits: Today's upside-down logic says that a company will get a better valuation if it has nothing but upside potential -- because the casino players care about nothing else. In a recent column in the "New York Times," technology writer Denise Caruso described the phenomenon: "The desire to cash out big is not a new motivating force in the technology industry. But what is striking about today's Internet economy is how much of that money lust is focused on selling business plans for their own sake, rather than planning viable businesses."
The great irony of all this is that we now enjoy the best opportunity in 100 years to build great companies that fundamentally change the world in which we live. Somewhere out there, a small group of people are laying the foundation for the great, enduring companies of the 21st century. They will be for us what Henry Ford, George Merck, and Gordon Moore were for our predecessors. They will fashion organizations that will dominate the economic landscape and the business conversation for the next 50 years. And 50 years from now, most of today's built-to-flip companies and their founders will be as relevant to the world as the gold diggers who flocked to California 150 years ago. That doesn't mean that those who build to flip won't get rich. Many will -- perhaps more people than at any time in modern history. In fact, amassing unlimited personal wealth may well be the defining goal of our era. At no time in history has it been easier to reallocate capital without creating lasting value. Of course, in doing so, we run the risk of missing the best opportunity in decades to create something great.
But so what? What's wrong with Built to Flip run rampant?
If Built to Flip were to become the dominant entrepreneurial model of the new economy, one almost-inevitable outgrowth would be a rise in social instability. At the heart of the American commitment to democratic capitalism is a shared ideal: From the Industrial Revolution to the Information Revolution, Americans at all levels of society, in all walks of life, and in all occupations have bought into the proposition that the United States offers economic opportunity for all. What we've already seen, even in this relatively early phase of Built to Flip, is a growing socioeconomic disparity -- and, perhaps most troubling, a perceived decoupling of wealth from contribution. Not only is there an increasing sense that the social fabric is fraying, as the nation's wealth engine operates for a favored few; there is also a gnawing concern that those who are reaping more and more of today's newly created wealth are doing less and less to "earn" it.
Email
Digg
StumbleUpon
Facebook
Buzz Up!
LinkedIn
