From the Publisher Dot.Com Fever Meets the Greater Fool Theory

THE OTHER DAY I RECEIVED A PRESS RELEASE from a “pre-IPO Internet company” in Southlake. What is a pre-IPO Internet company? To answer thai question, I clicked on the company’s web site, coolcitiesusa.com. As far as I can tell from looking at the site, a pre-IPO Internet company is an Internet company that exists for no other reason than to have an IPO.

A few days later, a friend called to ask me about an idea he and some other investors were interested in backing to the lune of $15 million. (Only one of many similar calls in the last two months.) The idea behind the proposed site-which I’ve agreed not to disclose-isn’t terrible. But neither is it very good. And it certainly won’t produce any revenue. I explained this to my friend, who thanked me for my opinion while indicating-politely-that I was all wet. The point of this investment, he said, was to get the thing up and running and go public as soon as possible. I had figured that was the point because of who the investors are. They know nothing about computers, technology, communications, or the Internet. But they do have one thing in common: They were all involved in Dallas real estate in the 1980s.

Let me share with you Allison’s inviolate rule of momentum investing: When the real estate guys start moving in, it’s time to start moving out.

The sudden upsurge in entrepreneurs is another signal. Would-be entrepreneurs are crawling out of the woodwork with web sites America never knew it needed. Every encyclopedia salesman and Mary Kay consultant-not to mention banker, lawyer, and accountant-is suddenly leading an Internet start-up. Has there has been a gigantic infusion of risk-tolerant genetic material into the bloodstream of America? Internet companies are. I remind you, companies: Rent must he paid, payrolls met, paperclips bought, employees hired, suppliers selected, and customers wooed. Rare is the talent thai can juggle all of these balls. Rule No. 2: Most people, no matter how bright, are incapable of starting anything more complex than breakfast. And thai rule applies no matter how magnificent and impressive a title the person carried in corporate America. In fact, a corollary to the rule is this: Great corporate managers make terrible entrepreneurs, and vice versa. In the case of a start-up- any start-up-the more ?old-studded the resume, the greater the probability of disaster.

At its root, the Internet is a medium of communication-like television, radio, magazines, or newspapers-and thai presents another problem. Whether the business is selling gel-well cards to consumers or auctioning spare auto parts for manufacturers or writing term papers for desperate college students, the firs! requirement is the ability to communicate, If the e-mails I get even day are any indication, most of the people jumping into the Internet are incapable of forming a sentence, much less communicating in a persuasive and literate manner. This only confirms my long-standing Rule No. 3: Most business people couldn’t write a ransom note. Now we”re supposed to believe they can run media companies?

The Internet Revolution is underway, and no doubt its effects will be permanent and pervasive. But we who lived in a century’ of bloody revolutions-courtesy of Lenin. Hitler, and Mao-may find in them lessons that politics can teach to business. The first lesson is to be very, very careful. The second lesson is that the laws ol’ economics are not easily suspended. The third lesson is that in revolutions, unlike in evolution, even the strong don’t necessarily survive.

Rule No. 4: When the seed of a business is greed, not need, you can bet it won’t succeed.

PUBNOTES



BUILDING A BETTER MAGAZINE



Wow! What a month! We’ve recruited a bunch of realty smart publishing peopleto join the D team.



JENNIFER CHININIS

first joined us as an editorial assistant when she was 21. She returns to D’s hallowed halls this month as managing editor-at the ripe old age of 24.



GEORGE GRETSER

enjoys a homecoming to Dallas as our new associate publisher after a stint at Chicago magazine. (Since he’s my age, I’m not publishing it)



JEFF BOWDEN, 40, makes his debut as a new senior editor on p, 56. Jeff is a Baylor graduate who earned a master’s degree from the University of Dallas.



■ JENNIFER DODO, 25, a proud alum of The College of William A Mary (“the alma mater of a nation”), is our new copy editor and comes to us from the publishing division of The Salvation Army.

■ ASHLEY RAY, 28, left Dallas after SMU, but we’ve got her back as our new marketing director.