Market Jitters

I really liked a description of one of the CEOs in Po Bronson's book "The Nudist on the Late Shift." Bronson was describing the CEO, and the people around that CEO were explaining what made him special. And it was something like, "It's one thing to decide, it's another to decide to decide." That's a quality I look for in CEOs. The speed of technology, the speed of a competitive environment, changes the relative value of making a decision versus always making the right decision.

If we were in the utility business, and I asked you, "Should we build this new power plant, and can you tell me by 4 o'clock this afternoon?" -- that would make no sense. This is a decision you're going to live with for 30 or 40 years. But if you're at Amazon.com, you have to be willing to make a decision knowing that your odds of being wrong are reasonably high. You live with that, and move on.

We've been talking about topics that are top-of-mind with lots of people. When it comes to Wall Street and the Internet sector, what aren't people thinking about that they should be thinking about?

Two points. One is how we do our jobs, the other is how we may want to think about the markets. There's a huge problem with talent here. Everybody talks about a talent shortage in Silicon Valley. Well, we've got one on Wall Street too. This market is massively undersourced in terms of experienced people who can explain to investors what's happening. It's oversourced in terms of people who don't feel comfortable with technology, but who make decisions about it. It's a fast world, and we in the financial community are scrambling to catch up. Tech-company executives are often surprised by questions they get from us: not by how tough the questions are, but by how little sophistication we have, relative to what those executives live and breathe.

It's a daunting job, really. We watch 1,200 companies, and we divide them into 13 sectors. Each of those sectors has, on average, five or six legitimate subsectors. So we're talking about 60 different mini-industries that we track. That requires a massive collection of smart people. It's challenging, especially when lots of smart people are being stolen by the dotcom world itself. These two worlds are colliding. No wonder everyone on Wall Street is dressing down!

My second point is about the times that we live in. People have to understand that we are living through two huge stories. One is, "The Internet -- the Social Revolution," and the other is, "The Internet -- the Stocks." The impact of the Internet is going to be absolutely pervasive. But that doesn't mean my only job is to worry about Internet stocks, or that the only story all of us have to worry about is how the Internet sector does. I recently heard someone say, "Four or five years from now we won't even use the word 'Internet,' because it will be as pervasive as the air we breathe." That makes total sense to me. My guess is that 95% of the companies that I look at are being assisted in dramatic ways because of the takeoff of the Internet.

Now, will a lot of those companies go out of business? Yes. Will a lot of investors be disappointed? Yes. Will there be some witch-hunts in five years -- some people asking questions like, "How could you have told me to put my money there?" Absolutely. But I'm in the camp that is thankful that all of this investment has been happening. It simply had to happen on a large scale for the Internet to have the impact that it's having. Sure, there are going to be losers. But there are going to be some dramatic winners too.

The real question for us as a civilization is whether we will continue to fuel the kinds of mechanisms that allow for social change.

In other words, if we hadn't crafted this massive VC undertaking for Internet stocks in the public-equity market, we wouldn't be moving as fast as we are. There's a "billboard effect" from picking up the newspaper and seeing that eBay rose by 20% in a day, or that a new IPO is up 400% on its first day.

The effect isn't just that people are more willing to invest in such companies -- it's that brighter people are being pushed to become part of this world. Maybe they become venture capitalists. Maybe they start their own companies. Maybe they come to work for us. But as more people get the courage to become a part of this, as more people understand how valuable their brain is, or that they can have an impact on society -- and maybe even become wealthy based on the power of their ideas -- the changes will continue moving forward.

The biggest winner is going to be civilization itself. When people all around the world forget about their nationalities and just talk, the social impact will be enormous. We now have analysts in something like 25 countries doing tech. When we exchange email, there isn't the slightest thought about the political relationships between our countries. It's just two people communicating. It's almost invisible -- but it's amazingly powerful.