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Be careful with this pervasive productivity argument. It isn't 100%
accurate. Yes, office supplies can be ordered more efficiently using
the net and theoretically, B2B auctions should help clear out overstock
faster. But the productivity that AG refers to is really just people
working longer hours using the same old processes. Up until a month
ago, I worked in a high tech company in Silicon Valley for about 1 1/2
years. During that time the company went public and doubled in size in
terms of people. The stock is about 3 times the initial offering price
with a P/E around 80. During the time I was there, the only change that
MIGHT have increased productivity was moving to MS Office97/Outlook and
migrating some people to Win98. OH, and we redesigned our web page.
There weren't any other company wide initiatives or process changes.
The typical person worked 50 hour weeks with some working longer. We
increased sales significantly via an acquisition, greatly increasing
software pricing across the board each year (even though there was
relatively little new functionality added) and by selling multi-year
license agreements for which the customer typically paid for the next
3-5 years in one up-front payment. The latter point is important
because it means that the company will not get any additional revenue
from these customers over the life of their multi-year agreement unless
they grow faster than what was contracted for.
To the outside observer, it looks like productivity has increased since
revenues have increased nicely. But it ain't true. Having more people
work longer hours isn't my definition of increased productivity. In
fact, from a personal viewpoint, you are actually making less money if
you divide out your compensation by the number of hours worked.
And sadly, this type of operation and effects are the same at a lot of
other companies. One day, the truth will be recognized. We'll find out
that productivity as such hasn't increased as much as supposed and
inflation has actually been higher than reported. Then watch out below.
JW
-----Original Message-----
From: listmanager@xxxxxxxxxxxxxxx [mailto:listmanager@xxxxxxxxxxxxxxx]On
Behalf Of Earl Adamy
Sent: Sunday, February 27, 2000 4:25 PM
To: realtraders@xxxxxxxxxxxxxxx
Cc: realtraders@xxxxxxxxxxxxxxx
Subject: [RT] Re: [Fwd: Nasdaq Bubble... Something to consider]
I buy some of the new economy arguments and see huge productivity
opportunities which will continue to drive down costs, however the new
economy has also opened some very dangerous pits which could swallow the
whole thing. Chief among them is debt, debt, debt as far as the economy
can see. Another is the conversion from manufacturing economy to service
economy which will not serve us well in a major down turn.
Earl
----- Original Message -----
From: "Daniel Goncharoff" <Daniel.Goncharoff@xxxxxxxxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Cc: <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, February 27, 2000 4:20 PM
Subject: [RT] Re: [Fwd: Nasdaq Bubble... Something to consider]
> Sorry, I just don't buy the 'new economy' argument yet. The marginal
> pricing issue has little relevance to an entertainment product that
> derives its revenue from advertising, like YHOO. It is an issue of
fads,
> combined with the difficulty of evaluating the value of net
advertising.
> More people on EBAY is only to my advantage if there are more sellers,
> and I am a buyer. More buyers means more people competing against me,
> and that's bad. And the success of Windows had little to do with the
> ability to swap files- - it had to do with the economic benefit to
> business buyers of the 'Wintel' system, where box makers were
competing
> with each other to provide the most cost effective box, over the
> exclusivity of Apple, where you had to buy an expensive box to get the
> OS.
>
> It is far from clear that the advertising/data mining based business
> model can make any money in the long term. If it can't, a lot of stock
> market value vanishes. EBAY's intermediation model has a reasonable
shot
> of succeeding if it can maintain a good balance between buyers and
> sellers.
>
> JMHO
> DanG
>
>
>
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