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Dack quotes from an article

Dack quotes from an article in the LA Times: “money raised by Internet-related companies may represent the greatest misallocation of capital in history.”

I’m going to disagree with that statement…at least a little. There’s no question that, like a plate full of cupcakes in the immediate vicinity of Oprah, most of the VC and IPO money heading into .com companies is never going to be seen again. It’s gone. Let’s examine where it’s going. Most of the cash is being spent on Aeron chairs, CEOs, advertising, banner ads, company retreats, “strategic” “partnerships”, and employee massages. However, a small portion of the cash (which, if you consider the 10s of billions of dollars being spent, is a huge amount) is going toward development…development that would not be happening on this grand of a scale without this money. This is a Good Thing™ because:

- Development is done by developers. They are getting paid to learn all this new technology and ways of doing things. All that education is going to pay off down the road, both for them personally and for society as a whole.

- This development is pushing boundaries and opening up new avenues for exploration. For people like me who think that sort of thing is beneficial, that’s pretty exciting.

- People aren’t coming out of college and having their talents wasted by non-demanding retail jobs. Instead, they are being put to work and allowed to learn and grow at an alarming pace, if they so wish.

- The demand by .coms for services is creating new industries and infrastructures. One good example is the worldwide network infrastructure being built by AT&T, Sprint, & others to keep up with the companies doing business over the Internet.

Put all this together and the VC/IPO-financed .com goldrush looks like the largest R&D effort the world has seen since World War II. While we may not see it this way then the whole thing comes collapsing down like a house of cards, I think we’ll be better off because of it in the long run.