April 1st, 2005
Surely You Jest
“And the world looks just the same,
And history ain't changed,
'Cause the banners, they are flown in the next war…
Then I'll get on my knees and pray,
We don't get fooled again,
No, no!” – The Who, Won’t Get Fooled Again
In seven years of writing here on T-Net, this is the first of my Friday deadlines that has landed on April 1st (you can look it up… the leap year in 2000 caused us to leap over Friday April 1st). Having thought about such a date for over a month now, I was considering a “Sidd Finch” type of story for this week’s column. For those of you that are not familiar with Sidd Finch, he was the young, unheralded, Buddhist master that could use his mind over body control to somehow throw a baseball 125 mph. His story hit Sports Illustrated in 1986 and it was full of pictures and quotes from the spring training session of the New York Mets, like he was the real deal. Of course, he wasn’t. E.M. Swift had made it all up because the cover date for that issue of Sports Illustrated was April 1st. But so many people got hooked by this “believable” character, including TV sports crews who sent reporters to interview Mr. Finch, that the legend of April Fools Day fiction grew immensely.
Alas, some of my Sidd Finch ideas for this week (Greenstone closes on $1 Billion VC fund, SFU professor invents solar powered cell phone, BC Government about to announce that they have lured Microsoft to re-locate to Richmond from Redmond) were a bit too “unbelievable” to fool any of my incredibly bright readership. If I didn’t think my fish story would get at least one reporter to call me and hopefully print a story on April 1st, well, then it just wasn’t worth the trouble. Maybe I’ll do it the next time my Friday deadline falls on April 1st (2011). You can wait, right?
Instead, I am taking this fateful occasion to do something a little different from the regular fare here at Something Ventured. I thought the theme should be, simply, fools. Without getting a libel suit thrown at me, I intend to discuss those in the history of the technology industry that have appeared utterly or hopelessly foolish over the years. I have some really foolish local stories that I won’t print because they would definitely end up in libel suits, so you’ll have to ask me in person about those…
OK, off to the dunce parade:
"So we went to Atari and said, 'Hey, we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.' And they said, 'No.' So then we went to Hewlett-Packard, and they said, 'Hey, we don't need you. You haven't got through college yet.'" -- Apple Computer Inc. founder Steve Jobs on attempts to get Atari and HP interested in his and Steve Wozniak's personal computer.
This is one of my favourite fool stories. How many fools turned down the idea of a personal computer (which, by the way, was a trademark of IBM when they finally entered the market five years after Apple was founded. No one called them personal computers when Apple started up). It took a VC named Arthur Rock to believe in the un-showered, un-shaven, banana eating maelstrom named Steve Jobs and his insanely great idea. This is right up there with the DEC CEO Ken Olsen’s famous quote in 1977 (about the time Jobs and Wozniak were pitching Atari and HP), “No one will ever want a computer in their home”. Uh-huh. Ken is still living that one down today and he is in his 80’s.
"Stocks have reached what looks like a permanently high plateau." -- Irving Fisher, Professor of Economics, Yale University, 1929
Poor Irving. He foolishly said this a few months before the crash, but given what he meant about permanent highs, he also missed the almost 10,000 point gain in the Dow Jones from 1929 – 2000. Oops. But this is a nice segue to the more contemporary fools in the great technology bull run of the late 1990’s. One of the biggest fools was Jack Grubman, uber analyst of telecom stocks for Salomon Smith Barney. In March 2001 he issued a 28-page report that proclaimed, "Over the next 12 to 18 months, investors will look back at current prices of the leading players (Worldcom, Global Crossing, XO Communications, among others) and wish that they had bought stock at these prices." Of the 10 companies he picked, five traded below $1 a share 18 months later and all had an average meltdown of 88% since he made the claim and 95% from their peak. Ouch. Good call Jack. Only a fool would have believed his claims and bought stock then, right? Ahem. Like, for instance, in Nortel…
Here is my favourite foolish dotcom prediction, extracted from a Canadian Business Magazine article in 2002: “Scott Paterson, former chairman and CEO of Yorkton Securities Inc.--who resigned after settling conflict-of-interest allegations filed by the Ontario Securities Commission and agreeing to make a $1- million payment last December--once predicted Book4golf's stock would surge beyond $100 per share (>$1B in market value).” Oh, I love that one. But I have punched this bag before.
Another sordid story I have regaled you with is the one involving a company called Pixelon and its founder/CEO who ended up arrested for wire fraud and embezzlement once his picture circulated on the Internet. Why? Because he told Pixelon investors and employees his name was Michael Fenne, when he was really Bob Stanley, a wanted fugitive. This is the company that raised US$35M and spent US$16M of it on one day in Las Vegas by having a concert that included Kiss and the Dixie Chicks to show off its streaming video technology. Only the servers crashed during the live show and no one saw it. Who is the fool? That’s easy: the venture capital investors in Pixelon. They did no homework on their camera shy founder and allowed the company to foolishly burn a 1/2 of its cash in one day. These VCs might be in the Dot Com Fool Hall of Fame, a very crowded museum to say the least. Of course, we’ll never know the identity of the one crowning person of the dot com era: The Greatest Fool (part of the greater fool theory of stock market momentum investing – there is always a greater fool than me). Who paid in for that last trade to make the NASDAQ hit 5048 on March 10th, 2000? Who created the top of the market and therefore was the Greatest Fool of them all?
"This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." -- Western Union internal memo, 1876.
About 125 years later, a similar foolish decree was made by the incumbent telephone giants… that the world was not ready for VoIP because it had too many technical shortcomings. Then along came Vonage and Skype and the incumbents are falling all over themselves trying to get in on the action or trying to use lawyers to stop market momentum. Telephone calls will not be free. The features and services you get along with a simple voice connection to another human being will be valuable enough to pay for. But this is not your mother and father’s world of telephony anymore and the incumbent carriers will adapt or die, just as the telegraph company of 1876 eventually had to. Now you get to use Western Union at Money Mart, so I think they missed the boat on the old telephone thingie.
I couldn’t go through a column on fools without a quote from my favourite deceased authour, Douglas Adams, who also, quote ironically as it turns out, said “I’m spending a year deceased for tax reasons”. This quote by Douglas needs to be posted over every design engineer and product development person’s desk as they build the next great thing: “A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.” Amen.
Finally, some fool wrote a letter to the editor of the Vancouver Sun in the spring of 1996 in response to a scaremongering front page story about the evils of the Internet (which polls at the time said about 25% of the population was even aware of). This dolt said that pornography, solicitation of children and security of information (credit cards, personal information) were teething signs of a new technology and that the greater good of the Internet as an information source and business communication tool would win in the end. “Don’t worry”, said this nincompoop, “these issues will go away very soon.” Yup, in print. You can look it up. Brent Holliday, prognosticator extraordinaire. The really foolish thing is that I didn’t recognize the business opportunity in protecting people on the Internet. Dang.
Thus endeth my April Fool’s Day attempt at levity. Stay tuned for my next one on Friday April 1st, 2011. Until then, remember the immortal words of Ice T, original gangster rapper, “But I got some news for you: a fool's a fool.”