Wednesday, November 23, 2011

Glorification of Internet Based Companies

Thanks to the candid, no frills reporting of PBS Newshour, I am privy to the absurd hubris of the modern business person.  The story begins with the statistic offered by the Kaufman Foundation, that start-ups create three million new jobs annually.  How long these start-up companies survive is not disclosed and perhaps not researched.  The reporting does explain how most start-ups fail, but these start- up accelerators are supposed to ensure the viability of businesses. It is an allegedly exclusive engagement, harder to get into than IV league schools. What are the genius ideas coming out of these angel investor incubators? The one that impressed me was called LENDFREND, the founder of which aims to garner a sizable portion of the estimated 75 billion dollars that friends lend to each other. Forgive my naive and unsophisticated method for evaluating the value of business, but if your product is meant to skim off the money that people lend to each other, your business might be apart of the problem, not the solution to the problem.  (The problem being a lack of money to spare, in case this is not as absurd to you as it is to me).  Each company is compared to Facebook and Google, two companies which would not be as lucrative as they are were it not for the hype and the funds that were pumped into these companies.  That is not to say that Google and Facebook are not valuable creations, but valuable is not always measured in dollar amounts and often the dollar amount does not do a thing justice, whether it is high or low. Another start-up concept that was featured is based upon restaurants and streamlining the experience, being able to jump ahead in line and order.  I am not sure how that would sell to restaurants and the novelty of such a system might be thrilling for a nano- second, but it sounds like another unnecessary use of technology.  It is not a sign of progress when we become slaves to the tools we create, but when we create tools that improve our lives. Is there a bubble? This should not be so difficult to assess.  While three million jobs are created by start-ups, what is the survival rate of these businesses? Where are these jobs created? What are the external costs of these businesses?  Internet start-ups and Silicon Valley receive lots of attention, likely because they are making money without doing the pesky work that is typically associated with how money is made.  The fact remains that the need for profitability is passed off to someone and in the end, Silicon Valley is not a booming arena, but an old farming community that is now littered with vacant office buildings.  There are not shortcuts to survival for everyone, just some people and those shortcuts, as we have seen with the financial meltdown, cost other people their jobs, their homes, and their communities. The glorification of allegedly new business models is an obvious hoax, as the value of any business is based upon a need and the service of that need.  Economics is premised upon the idea of people having unlimited wants in a world of limited resources.  Thus far our economic advancement can be summed up to the creation of many artificial wants and needs, so much so that we have neglected our fundamental and profound needs as human beings: widespread access to food, shelter, clothing and community.  Business can be good, but in moderation, just like everything else.

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