Monday, June 04, 2007
Great in champagne.
Are they equally good in business?
Edward Teach, articles editor of CFO Magazine, wrote a piece in the May 2007 issue entitled "The Bright Side of Bubbles" www.cfo.com/insight.
In his article he cites a book by Daniel Gross, Pop!: Why Bubbles Are Great for the Economy. According to the article, Mr. Gross cites the 1929 stock market crash, the telegraph, the railway system and the internet as examples of bubbles that have produced long-lasting advantages for our country.
The 1929 crash resulted in stronger securities laws and the FDIC which provided greater confidence in both the stock market and the banking system. The telegraph and railway systems removed geographic boundaries to information and product distribution. The internet affords us instantaneous access to information anywhere in the world.
I doubt that any of us would disagree that something good can be found in the worst of situations. That's part of the resilience we human beings possess - the ability to make the best of a bad situation. The question is "Can we make generate the gains bubbles produce without the pain?"
I think we can if we tie new concepts to proven business models. To me, it appears that the mistake we make over and over again is to assume that new technology, whether it's a new financial instrument, communication tool or product distribution system, means that old business models aren't relevant.
The internet bubble was created by people who believed that profit generation was no longer needed to build value in a company and the masses who believed that tripe. Would we have experienced the explosive growth in the internet without these mistakes? We'll never know. What we do know is that, after the explosive growth with its attendant high costs, we still have to go through the more natural evolution of a proven business model.
It may be counter-intuitive, but I believe that we can avoid some of the high cost of bubbles without sacrificing the gains they produce by incorporating proven business strategies into the development plan.
Are there bubbles on your horizon? If so, let me know what they are and I'll discuss them in future postings. Just email me at dale@furtwengler.com.
P.S. My wife and I had a great time during our two week vacation. It's great to be back and I look forward to sharing some counter-intuitive thinking from our trip. Be well, my friends.
Are they equally good in business?
Edward Teach, articles editor of CFO Magazine, wrote a piece in the May 2007 issue entitled "The Bright Side of Bubbles" www.cfo.com/insight.
In his article he cites a book by Daniel Gross, Pop!: Why Bubbles Are Great for the Economy. According to the article, Mr. Gross cites the 1929 stock market crash, the telegraph, the railway system and the internet as examples of bubbles that have produced long-lasting advantages for our country.
The 1929 crash resulted in stronger securities laws and the FDIC which provided greater confidence in both the stock market and the banking system. The telegraph and railway systems removed geographic boundaries to information and product distribution. The internet affords us instantaneous access to information anywhere in the world.
I doubt that any of us would disagree that something good can be found in the worst of situations. That's part of the resilience we human beings possess - the ability to make the best of a bad situation. The question is "Can we make generate the gains bubbles produce without the pain?"
I think we can if we tie new concepts to proven business models. To me, it appears that the mistake we make over and over again is to assume that new technology, whether it's a new financial instrument, communication tool or product distribution system, means that old business models aren't relevant.
The internet bubble was created by people who believed that profit generation was no longer needed to build value in a company and the masses who believed that tripe. Would we have experienced the explosive growth in the internet without these mistakes? We'll never know. What we do know is that, after the explosive growth with its attendant high costs, we still have to go through the more natural evolution of a proven business model.
It may be counter-intuitive, but I believe that we can avoid some of the high cost of bubbles without sacrificing the gains they produce by incorporating proven business strategies into the development plan.
Are there bubbles on your horizon? If so, let me know what they are and I'll discuss them in future postings. Just email me at dale@furtwengler.com.
P.S. My wife and I had a great time during our two week vacation. It's great to be back and I look forward to sharing some counter-intuitive thinking from our trip. Be well, my friends.
