Keeping it real
11 February 2002
25 October 1994
23 March 2011
7 April 1995
5 March 2013
18 June 2007
Chances are that if you are reading this, that you have some level of interest in technology and the technology market. At the very least, you probably have a desktop PC which you can generally locate first time round and switch on by yourself, practically unaided, and it would not be going too far to say that with just a bit of warning, you could also have a reasonable stab at explaining the key differences between software and, let's say, most types of footwear - all without using up more than one or two lifelines on any single occasion. Which means, of course, that you know very well what happened on 25 October 2001. Right?
To tell the truth, I had forgotten that this was a seminal date in technology history, too.
But if you were helpfully reminded that it was on that Thursday that the world witnessed a product launch marked by at least 112 events (62 in the US, 50 worldwide - the press releases said so), celebrations hosted by three of the company's most senior executives in as many different continents, donations to the needy in multiple locations and a live concert by one of the world's most talented popular musicians, which was simultaneously webcast around the globe, then you would have to remember which product I am referring to. Indeed, to reduce the risk of someone missing the launch, or just not realising how important the new product was, the company was helpfully unambiguous in its descriptions of its new money-spinner, aka "worldwide phenomenon" and "huge milestone for the industry and PC users everywhere" (check the press releases).
To eradicate any lingering doubts we may have had, the company's chairman and chief software architect confidently informed us that, with the launch of the company's new product, he, Rudy Giuliani (also at the party) and all of us, together were entering "an exciting new era of personal computing".
What? The, um, precise name of the, er ? You're still not quite sure? Alright then: the pop artist was Sting, the company chairman Bill Gates, and the product? Microsoft's self-proclaimed most secure operating system ever, Windows XP.
Stop there. Do not move on just yet, because this article is not about the merits or demerits of XP, or for that matter any other technology product. Nor is it about taking easy pot-shots at Microsoft, or the use of slick product marketing (whether or not the available budget is roughly equal to the combined GDPs of several self-respecting nations).
The XP experience (apologies to digerati for the unintended pun) is just an example. Or, more specifically, the hype surrounding XP, the resources invested in creating that hype and the spectacularly embarrassing security flaws which were detected by a 21-year-old former hacker within five weeks of the launch, are just examples of a more general and much more serious set of problems in and surrounding the industry. To give Microsoft its due, a security patch was quickly made available and, for all I know, XP may turn out to be the operating system that everyone, apparently, has been waiting for (I have certainly been using it quite happily at home for a number of weeks, without problems).
For every XP, though, there are plenty of examples of technology products and companies, whole industry sectors even, that were indisputably overhyped, both in terms of the benefits which they could ever hope to deliver and the timeframe within which investors could expect to see commercial returns. Mobile satellite companies went bust before and after they managed to put satellites in the sky (although not before they had spent billions in the process); WAP briefly became the mobile data protocol du jour; the prospects for short to medium-term returns from 3G were as wildly over-inflated as the prices that the 'successful' bidders paid and borrowed for their licences (some have put the costs to Western Europe's capital markets at over $250bn (£176.3bn)); and, well, we all witnessed the mess of the dotcom implosion.
Most worrying of all, though, is that even in the aftermath of the technology and general economic downturn, and the 11 September atrocities, we do not seem to have learned very much from our experiences. Granted, no one talks any more about 'the new paradigm' and expects to be taken seriously, but there is very little evidence to suggest that companies, investors, advisers or commentators have understood the fundamental need to be much more realistic about what their technologies can do and the time frames they can do it in. Even if people have stopped making wildly euphoric predictions about technology generally, pretty much every analyst, investor or commentator is out there looking for the 'next big thing' or 'killer app', and pretty much every company is busy trying to convince the market that they have just found it.
If you do not believe me, go to your favourite search engine and search against, say, 'u-commerce' ("where the traditional barriers of time, geography, currency and access will erode and eventually cease to exist" - Visa), 'Wireless' ("the long-promised revolution in wireless is finally underway, and it will transform daily life for you and your family at home, at work and wherever you go" - Newsweek), or 'nanotech' ("this 21st century industrial revolution will get underway next year" - Red Herring).
The inevitable boom and bust that results from persistent overselling does long-term damage to the industry, irrespective of the particular sector involved.
At a recent US nanotechnology conference, R Stanley Williams, the director of Hewlett-Packard's quantum science research and the company's labs fellow, identified inexperienced entrepreneurs and deal-hungry venture capitalists as major challenges for the fledgling industry. "When you have ignorance and greed meeting in the marketplace, that's a recipe for disaster," he says. "My greatest fear about all of this nanotechnology going forward is that expectations will be raised too high too fast, and the consequence will be that the field will lose credibility, and we'll lose a lot of the momentum that we've been trying to get together for a long time."
The human, technological and financial costs of ignoring lessons such as this have been huge, and all of the players in the market must shoulder some of the blame for the sector's pains themselves. And, as advisers involved in the technology, media and telecoms (TMT) industries, we have an important role to play in helping companies and investors steer a path between the equal dangers of wild euphoria and intense pessimism. So here is a call to everyone to help make sure that the next 'big thing' does not become the next dead thing. If we can achieve a sense of perspective, the TMT sectors will have a better chance of realising their real potential and delivering some lasting and positive benefits to companies, investors, shareholders and stakeholders alike.
David Naylor is a partner at Morrison & Foerster