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Depression, Shadenfreuder, and “Why didn’t I think of that.”: How youtube.com and Google Have Depressed a Generation of Entrepreneurs

I was on a phone a couple weeks back with another relatively young business owner.  Probably mid-thirties like me, doing well by almost any metric, starting a product company…early yet for him, but the market seems right for his company (big prospective clients are interested), he’s well funded (VC money), and very smart.  Hard worker…his parents are proud, his friends respectful (maybe a tad envious) of what he’s accomplished thus far.  His future is bright, he’ll make very large money one day.

 

I stepped outside of a party to make a call with him… I was in a Phoenix Arizona resort at a hoe-down, shin-dig, wild-west themed party thrown by Microsoft for its top partners in US State and Local Government (SLG).  Earlier in the day I’d gotten an award from the general manager of this Microsoft division (one of Microsoft’s largest) for outstanding work with top clients.  A partner-of-the-year “Innovation Award”  thing. Got called up to a big stage, was on large monitors getting the award…all that.  And earlier in the day I met with the Microsoft division heads talking about all the work we’d be doing together in the coming year in education, municipalities, even federal…pentagon, department of defense…other things.  Net net, a lot of work on the horizon for my 100+ consultants.

 

I should have been happy.  He should have been happy.  We had set a time to talk about how to partner, how I might be able to sell his product through my sales channels (that is, my existing clients). So I snuck off from the shin-dig, and camped out by a wagon wheel and dialed in while sitting on a bale of hay. “Cotton eyed Joe” played in the distance.

 

But something was off. Where we both would normally be very chirpy, excited by the potential, thrilled with what we were doing…it was just, off.  The conversation was perfunctory, no excitement.  At one point in the conversation we both lapsed into silence and, in one of those uncanny moments that hint of psychic phenomena, I had a strong sense of what was wrong.  I said:

 

“Are you, by any chance, thinking about Google buying youtube.com for 1.5 billion dollars?”

“Oh my god…yes.  How did you know that?” He laughed.

“I’m bummed about that too. Been thinking about it all day since I read the announcement this morning.” I said.

“S**t, I know!   I mean, Jesus Christ!   How can you read something like that an go off and function doing what you are doing?”

“I didn’t actually read the whole article.  I just didn’t want to find out that it is a twenty-something who did it for a year or something like that. I hope to God it is a bunch of rich old private equity guys that started this site.”

“Me too…but I have to know…hold on…” I heard him typing in the background, and then: “Mother F***er! The CEO is 29 years old and it says the site never made any money and is only a year old.”

 

And then he cursed.  It wasn’t cursing in jest all of a sudden…and it wasn’t very loud.  It sounded, sad, resigned and then angry…all in the space of like a second.  The guy was genuinely upset about this.   Then he said, almost sighingly:

 

“You know, you work your ass off for years, building a business, dealing with s**t, worried about someone else knocking you out before you get enough traction in a market…you cross 35 and start bumping up against ‘old guy’ territory, and you hope, you pray, at one point before you are too old to give a damn, that you’ll make some big money.  But you’d be giddy if you could pull 5 million out of an exit and then do this a couple of more times building on your success.  But then a kid lets people post videos on a website, and he’s…a f***ng…billionaire...Seriously, G*d damn it!”

 

I knew what he was saying.  I’d felt the same way.  For a fleeting moment as I read that news (on Google news of course) on my mobile phone that morning, I felt all my motivation and excitement about being where I was slip away.   I was in a top resort in Phoenix with waterfalls cascading into pools…but it suddenly appeared grey.  And then “the voice” piped in:

 

“What HAVE you accomplished, smart guy?   Oh, BIG DEAL you have over 100 people.  Give that man one white chip! There are thousands of companies doing what you do many, many times your size.   You know, the Forbes list of wealthiest Americans don’t even have millionaires on it anymore!  You have to be a billionaire to make it on that list!  So, you think you are doing well???  You aren’t even CLOSE!  Took you eight years to get here, but look what that kid did in two! Garden variety millionaires are the new middle-class at the very best, dude! ”

 

I don’t like “the voice”.  It likes to rob me of things.  I thought I was unusual in having a voice like that, but it turns out..I’m not.

 

Out of curiosity, I started asking other entrepreneurs I know to see if they felt Google-depression like I did.  They did!  And it was strikingly similar: everyone I spoke to was half-angry and half-sad.  One entrepreneur said he switched his default homepage from Google to ask.com, because, “I just can’t look at them anymore...Google is no longer officially cute. It is petty, small and meaningless, but at least I can do that much.”

 

Another friend who has an infrastructure consulting company said, “the mood of my whole company was depressed, I could sense it walking in.  It was really weird.   I guess because they all thought, ‘why not me? That could have been me but I’m doing this instead…’  And it got to me too because I work like 80 hours a week and travel so much every time I see my wife we have to remind each other who we are.   Then something like that youtube happens, and you question if you are really doing things the easiest and smartest way.   Instead of thinking about quality, building a business over years…the youtube thing kind of makes a mockery of that. So you start wondering about ways you might coral dummies and aggregate content on the internet, you think about the end goal, tons of money, and start trying to work backward into some kind of idea.  It is depressing.  I’m still getting over it.  And don’t even get me started on myspace and facebook…”

 

Another friend:

 

“Did you see how on the Google home page they added that diminutive little link, ‘Videos-new’ like it was just some little thing…you know, hey users, we’re nice little Google here, a little thing you might want to check out, awww-shucks!  Not like they went out and paid one-point-five BILLION dollars for thing!  You know, f**k them.  Seriously.  F***K them.” 

 

So, where does this leave us?

 

Well, “the voice” I have is afraid of one and only one thing.  It fears my wife.

 

After 8 years of marriage, I pretty much can run a lot of my wife’s algorithms without her even present to determine what she’ll say in a given context, but sometimes you need the face to face.  Before I tell you what she said, you must understand that my wife’s mother, Onriet, survived the holocaust.  When the Nazi’s invaded France she fled (she was three but remembers it she remembers, particularly, that she was not allowed to bring her doll)…they got as far as, I believe, Spain, she won’t talk about exactly what happened, but they were captured and put in prison there.  Then Onriet and her mother got separated.  Fortunately, the European war ended, and Onriet ended up in a Red Cross orphanage in Morocco where her mother eventually found her after searching for several months. Then they came to America.   And, to this day, Onriet’s house….filled with dolls.  I never understood that until my wife explained it to me…”my mother, she couldn’t bring her dolls when that night.”

 

I tell you this because my wife and what’s left of her family are pretty happy just to be alive.  They are not typically impressed by anyone.  Only the quality of the person matters to them and none of them could pick out a single celebrity or know who anyone in hollywood is.  They believe money, like life, countries, and even people you love are transitory, temporary.  The very worst in the world can and does happen.  And after it happens, you move, start over, and maybe you build a business for thirty years and make yourself rich.  And, at the same time, be humble because, in Onriet’s words (and you have to imagine a heavy French accent here as she smokes a cigarette) :“Money, my dear, is a state, and a temporary one at that…it is not an attribute of a person, as so many people seem to believe.”

 

So, when I whine to my wife about my own success inferiority complex, she is as likely as not to point to the wall of one hallway, on which is a typed document with the seal of the Nazi party.  It is an official typed  list of what her grandmother and her toddler daughter was allowed to take with her on one of the relocation trains which, fortunately, she did not take.  And then my wife might point to pictures my vivacious daughter and smiling infant son.

 

Ok, I get it.  I do have it all.  And I know… there is Darfur, 9/11, Rhawanda…no one has a right to complain about anything.  I should be happy…I KNOW that…I wish I was a better person.  But it still bothers me…

 

And then, sometimes, she’ll say something like this:

 

“Greg…that youtube thing is in the news because it is fantastically rare, unusual, unnatural…in other words, it IS news.   That kind of thing happens to one person in 6 billion.  You don’t get upset what some dope wins the 200 million dollar lottery Powerball, but youtube upsets you?  So this kid posted videos.  Maybe it was even a good idea. But the lottery winner bought a ticket with his Ring Dings, a good move on his part also.  If you want to, go, go and do that…join the hundred-million wannabees who believe in the overnight and never make it…like your idiot-friend Jim [I will blog about Jim one day] who produces gorgeous brochures and raises endless money for idiotic ideas that he, himself, doesn’t even believe in in the hopes that one will ‘hit it’.   Forget about what you read, how many people do YOU know, you know personally, that are doing better than you?   Aside from the more outrageous things you want to do like flying privately, what is there that you truly want that you don’t already have?   Listen: maybe there is a way to make money quickly, a super-duper idea that transmogrifies you into a billionaire and doesn’t take a lot of work…I know you like the VC stuff and have your friends in that world and they all talk about the big scores….if there is a knack for that, I don’t have it.  But I do know how to build a sustainable business on sound principals…I know from my family how to take advantage of good years and ride out the bad ones, and how to build significant wealth over years.  You bring in the sales, chart the direction, and I’ll make sure we hold onto it and the firm has the internal processes and access to capital to sustain that growth.    You may never make the paper, and maybe that all seems quite dull to you…but real power is quiet, and real wealth is built over time.”

 

My wife has a point…and it reminds me of something I read that Warren Buffet (whom I am not married to) had said about “super stars”…something that might be applicable in this context.  A billionaire himself many times over, he did it over many years and by investing in “unsexy” businesses, usually non-technological..for example, Dairy Queen was a business Buffet invested in.  In Warren’s own words:

 

"I would like you to imagine a national coin-flipping contest." Let's imagine all 268 million people in the United States are asked to wager one dollar on their ability to call the flip of a coin. "If they call correctly, they win a dollar from those who called wrong." After each flip the losers drop out, and on the subsequent flip the stakes multiply. Each person has a 50-50 chance of calling each flip and approximately half of the people will lose and drop out each round. After ten flips there would be approximately 260,000 people that had successfully called ten consecutive coin flips. After 20 flips, based purely on chance, there would be approximately 250 people that had called 20 consecutive coin flips - a seemingly miraculous feat.

 

The surviving callers would have over one million dollars each at that point. Press coverage and inquiries about their coin calling ability would increase with each successive flip. Several callers might even attempt to profit from their good fortune by writing books on coin calling, setting up 900 phone lines, or by sending mass mailings or spam Email solicitations offering to share their secrets with intrigued members of the public.

 

As with winners of the lottery, it’s obvious that those remaining would have been blessed with good luck. But what if a large percentage of remaining coin flippers had a common characteristic or trait. What if a disproportionate number had came from one town or had been educated by one "patriarch." Would this signify that more than luck was involved in calling coin flips?”

 

The Buffet comments are true of dotcom things as well.  The dollars in the youtube case are to dollars of the stock owners of Google who capitalized that company so fantastically, that it can now go out and buy that 1.5 billion dollar web site that made it where, no doubt, thousands of similar sites did not reach that critical mass.  


So, do I feel any better for all of this?  I dunno.  But I am, at least, comforted that I am not alone.  And while I fear the resurgence of the dotcom mentality, of people spending ridiculously, of instant millionaires and billionaires and renewed sense of I-should-be-able-to-retire-by-thirty entitlement in the twenty-somethings…my wife reminds me of one other thing…

 

This crazy spending, this excitement of tech and the internet…all this stuff…a hot tech sector is good for our business.   We can probably raise our rates J

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

posted on October 19, 2006 1:10 AM by Greg

# re: Depression, Shadenfreuder, and “Why didn’t I think of that.”: How youtube.com and Google Have Depressed a Generation of Entrepreneurs @ October 30, 2006 7:03 PM

It would be interesting to contrast the two different models - The Crowd-sourcing vs. BigBiz-Focussed Consultancy. Consider the number of end-users, number of direct and indirect employees (e.g. content creators).

In 2006, Youtube has about 100,000,000 video views a day. With Google, let's say they can monetize that traffic for $0.08 a view.

Let's just assume that over the next 5 years, traffic increases 15%. And that Google can increase that 8 cents revenue by 25% year over year.

2006:
Videos/day: 100,000,000
Revenue/visit: $0.08
Annual Revenue: $96,000,000.00
2010:
Videos/day: 174,900,625
Revenue/visit: $0.22 (consider pay-for video, new content types, etc).
Annual Revenue: $461,737,650.00

Total Revenue over 5 years: $1,212,306,150.00

Play with the numbers as you will -but with nearly neglible expenses (what's 50 employees or so), the Youtube acquisition could pay for itself in 6 years.

Crowdsourcing can be incredible profitable if you can convince enough people to indirectly drive your business.
http://www.wired.com/wired/archive/14.06/crowds.html

Now a consultancy has longer sales cycles, requires expensive development of relationships, but delivers many times more the average revenue/transaction.

Higher transaction cost, higher risk, much lower number of clients. The business is not "real-time".

By making your business transaction small enough and these firms can achieve incredible breadth.

N.B: Google has been leveraging crowd-sourced web content from day one!

Cheers!
SRW

SeanRW

# re: Depression, Shadenfreuder, and “Why didn’t I think of that.”: How youtube.com and Google Have Depressed a Generation of Entrepreneurs @ November 7, 2006 1:10 AM

Excellent points to the last poster.

A business like youtube certainly makes sense to the acquirer.

For me it is mostly an emotional matter, not really rationally based. It seems dotcom and "new economy" to me....I mean, at some point in this business you come down to an indivisible axiom, like .08 per click...there is no intrinsic value ultimately, it is kind of a shared faith that that is what the click is "worth". But hey, there are people with models that say it is worth that.

It just seems hard to believe that an enterprise <2 years old, with no revenues, has that kind of value. I mean, to be fair, that site has the eyes of the world on it and that is significant certainly...but I remember the dotcom era of billion dollar capitalizations...of bluemountain greetings and etoys and all that...huge numbers of "eyeballs" and really bold projects of ways to monetize that.

So, we are at that dotcom argument again. I guess that is what I have trouble with.

Greg

# re: Depression, Shadenfreuder, and “Why didn’t I think of that.”: How youtube.com and Google Have Depressed a Generation of Entrepreneurs @ December 19, 2006 1:10 PM

I agree we're at the dot-com argument again. The question to ask is, "Where is the greatest value in being a dot-com and doing business over the internet?"

The most value is in models that don't compete with other ways of transacting, akin to the Polaroid camera when it first came out...new demand out of thin air. That is what Google is doing, creating value in spaces that don't compete with other models.

That is the largest untapped value of the internet. The 80% of daily desires that go unrecognized, because the 1000 people in the country that have this need for a product or service had no way of finding it.

For me, YouTube represents a marketing win more than anything else. People associate brands with a simple idea. The Google brand is already tied to search, it's a verb. However, Google the company is one if not the only way to monitize content. YouTube may be THE brand for videos. However, there are many other types of content without a world recognized brand...just take a look at Google Labs for a list.

As for valuations, who knows, maybe we should all ask for Google to be made into the first world utility. Please keep your conspiracy theories to a minimum.

Rahul

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