Pedro PinheiroTMN

October 19th, 2001

INSTITUTO SUPERIOR TÉCNICOM. Sc in Engineering and Management of Technology

A PERSPECTIVE ABOUT THE NEW ECONOMY

New Economy

Increase productivity, make lives easier, minimize inefficiencies

New business models made possible by the Internet: Priceline.com, eBay.com, Napster, dialpad.com, eComplains.com, eSteel.com, mySimon.com, etc)

Global reach

Speed (shorter cycles, short time planning, faster decision making processes)

What was happening then...

Attract and retain the best people/ compete for talent

Lack of enough high-tech workers/ H1B visa quota

Frequent job changes

High salaries/ stock options/ bonus

Fun working environment/make people feel well at work (casual, informal, frequent parties, pool tables, fully stuffed kitchens, child care facilities, etc)

Investment in training and education (pay for graduate studies; attract students; educate employees in new technologies)

Almost no unemployment

People want quality of life

What was happening then...

Stock market

Subject of general interest and frequent conversation topic (about 50% of Americans invested in the stock market)

Lots of first time investors (never experienced a down cycle)

Stocks options became the new currency (salaries, office rent)

Day traders

Tulipmania.com (very high valuations; everybody was expecting the bubble to pop but everybody wanted to get a piece of the pie)

What was happening then...

The wealth effect (general feeling of wealth)

Lots of new “Dellionaires” (retire at 35)

Virtual wealth/ paper millionaires (cars, houses, boats bought based on future earnings expectations, retirement savings)

High consumer spending and consumer confidence

High-Tech was the business

Lots of new magazines/ TV shows/ seminars

Lots of collateral jobs/business (gardening, construction, consulting, etc)

Young investment bankers, VCs, entrepreneurs become the new stars

What was happening then...

Back to fundamentals

Make money is still the goal

Cash flow matters (very high acquisition costs: advertising)

Web traffic is not enough; business models based on advertising will not survive

Your value proposition must be worth something (the automotive industry doesn’t give cars away in exchange for advertising space on the car doors)

Everybody is in the same boat

Tech is seen as an industry; goes up and down as a whole

Both good and bad ventures have a hard time raising money

... and what is happening now

People don’t change their habits from night to day

Not everything will be bought on the Web

The Net is just a channel and not necessarily a business model

Traditional brick-and-mortar companies have more chances to make it

Consumers have better ways to spend their money; corporations are the ones with real savings to make and are less price sensitive

Some lessons

Yes, but it is an economy based on old fundamentals, where corporations are still made to make money, where technology can help achieve higher productivity rates, reduce inefficiencies and exploit other business opportunities.

Was there ever a new economy?