by Michael Warshaw
Do you know the german term schadenfreude? What a great word. It means the joy we take in the misfortune of others. I saw a lot of it last year when the dot-com bubble burst. CEOs I know who had long struggled to build actual businesses — you know, built to last and make profits — resented the seeming fortunes being made by upstart tech businesses with more cash than sense. They took great pleasure in watching the silly money dry up and the dot-coms struggle.
But now, we’re all struggling, it seems. Makes the schadenfreude seem not so joyful. And because times have been so good, the period we’re in now feels pretty bad. But is it really so bleak?
Not according to Steven Weissman, CEO of the Mass.-based Kinetic Information, which he describes as a business intelligence agency. Translation: a business consultancy that specializes in tech issues. What got my attention was a report he did that makes an awful lot of sense to me. He says the dot-com die-off of 2001 is normal stuff. It’s the regular economy getting tired of holding its breath. It’s just what happens to start-ups all the time.
“Businesses fail,” Weissman says. “A lot of them. I found a few studies that all say basically the same thing: 50 to 80 percent of new businesses fail in the first five years.”
So, dot-coms or pizza parlors, the rate of failure is well within the ballpark. The only difference is that the dot-coms attracted an absurd amount of money, and so got an awful lot of attention.
Of course, tell that to the markets. Maybe they should listen to Weissman’s advice. “Don’t freak out,” he says. “It’s not rocket science. The businesses that fail are the ones that are somehow, fundamentally, flawed. A lot of the dot-coms were and that’s why they disappeared. The ones that aren’t will make it.”
I believe that sooner rather than later, we’ll all realize that the economy is fundamentally stronger than it sometimes looks. The tech revolution may have hit a bump, but it has left us with a tremendous legacy. The five-year party may be over, but those of us who build sound businesses, who invest them with passion and effort, can and will succeed.
Common sense returns slowly, but it is returning. It says that it is always a risk to start a business, but no more so now than it has ever been. And maybe even less.