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Fear and Loathing in the Media A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry. Something Ventured: Sep 28th, 2001 By Brent Holliday Greenstone Venture Partners "Got the bubbleheaded bleach blonde Comes on at five She can tell you 'bout the plane crash With a gleam in her eye It's interesting when people die Give us dirty laundry " - Don Henley, Dirty Laundry The only story in the business media these days is the fallout of the terrorist attacks. Don't fault the reporters. The editors want more fuel for the panic. All they want to see on the cover of the Financial Post or Report on Business is anything that says that the sky is indeed falling. Certainly some of the sky is falling. I won't argue that it isn't news that the loonie is near an all-time low or that the airlines are in big trouble. We are definitely on the front end of a recession. Unemployment will certainly grow. But, I'll get back to that in a minute. What I am not happy about is the prevalent use of the WTC and Pentagon attacks as an excuse or, even worse, as a sales tool in technology. This is where the media is at fault, in my humble opinion. Everything is being spun as a direct result of the fallout of September 11th. Here are some recent examples from the technology industry in the media that make my skin crawl: - YottaYotta in Calgary announced a $40M financing, which in this investment climate is a coup. But they added in a news article that the Post printed, "The tragic events of Sept. 11 have heightened interest for disaster recovery and backup systems". The original investor, Richard Prytula of Technocap in Montreal, shamelessly added, "You should be able to as a major corporation be functional at another location within seconds and that wasn't the case" in direct reference to the attacks. Interestingly, a news release from the company's web site one year ago does not mention "a geographically distributed storage resource of enormous capability" which is how the company now describes its core technology. Further adding to the shamelessness, the company's main web page features a condolence message. How touching. Seems to me that they are saying, "Gosh we're sorry you all died, but it's done wonders for our business." - The New York Times (and the Post) have published a "news" piece that claims that wireless phone companies in the US have increased their ad spending in the wake of the terrorist attacks because of "the prominent role they played during the World Trade Center disaster." The article goes on to describe that cell phones were used to call loved ones from the airliners being hijacked and the inside of the WTC as it was about to crumble. (This is crap, as most of the calls logged from the planes were from the Airphones in the seat backs, not cell phones) To their credit, the wireless companies don't even veil a reference to the disaster or even to safety in their ads. The news people are trying to come up with a reason for sudden ad spending by wireless carriers, which Telus Mobility said was typical cyclicality. The 4th quarter is the biggest quarter for sales, which in at any time would not even be news. But, the editors want the disaster angle... Almost any story about security technology, biometrics or military technologies is tinged with the fact that the terrorist attacks will mean increased sales and profits. Thankfully, some of these companies are resisting the urge to publicly be like YottaYotta. Kasten Chase is a security technology company on the TSE that sells its solutions to the military. On August 28th, an analyst said that the $4.20 stock was set for a decline because of the continuing economic times. On September 25th, another analyst said that the $5.25 stock (that's a 25% jump in the wake of the attacks) is underpriced because, drum roll please, "of the heightened interest in the wake of the attacks". The company will have none of that and has no mention of the attacks on their web site and has not changed the description of its technology to better fit the sentiment. Good for them. There is a certain folly to all of this sudden interest in videoconferencing firms and security vendors. In fact, I would go as far to say that we have a media fed, mini dot-com/tulip bulb run up in value of any company that might directly benefit from the horror of September 11th. In three months, none of this will be news. I want to see the sales in 6 months of many of the firms that people are speculating will rise dramatically. My guess is that there will be a blip. I am not saying that there have not been profound effects of the attacks on the US and world economies. There is definite pain. It has been the consumers, fed by fear and uncertainty, compounded by daily news reports of more fallout from the attacks, that have retracted and stopped buying. Consumer confidence is at its lowest since 1990, according to the U of Michigan index. That is bad for everyone, because the economy starts and ends at the consumer. However, I am not buying the airline and manufacturing sectors argument for layoffs completely. The economy was already in serious decline before September 11th. Air Canada had already prepared to layoff 4,000 people. The business traveler, to whom Air Canada's, United's, American's and Delta's success are directly tied, was already starting to decline the $3,300 economy ticket to Toronto. Before any of this happened, the airlines that rely on the no-Saturday stay, drop of a hat traveler were in serious trouble. Westjet and other charter or vacation airlines are not in nearly as much trouble and are not laying off staff (Air Transat being a notable exception, but their troubles are linked to causing terror to passengers all by themselves). No doubt that the traveling public is more nervous now. But these guys were already in for a world of hurt and needed to re-think their strategy. Air Canada can kiss my taxpaying butt for asking for a handout without cutting a single fare to get flyers back again. You don't attract nervous flyers back with continued gouging for less service. Give me a break! I am definitely ranting here. It just bugged me to no end to watch us all fall prey to our fears, to be continually fed more fallout stories, when what we really need is to get back to work (or find work), keep spending money and put the brakes on this economy. If we wallow in a kind of terrorism as an excuse, or worse, terrorism as a sales tool, we will not focus on what we need to do to get the economy chugging again. This is different than the 1987-1993 doldrums. The most significant difference is that interest rates are 4.5% in 2001, when they were 14.5% in 1991. Unlike 1991, you can re-finance your debt and spend money because interest rates are so low. You can lease a car for an effective interest rate of 3% these days. You can't sock it under your pillow because bonds pay you nothing. The stock market is horribly volatile, but it is at or near the bottom. The deals are out there. Get out and spend!!!! If we can keep unemployment from skyrocketing, then we have a chance of making this pain short. Here's my advice: As long as the news editors want us to read the Chicken Little crap about the terrorist attacks, give them the finger and stop reading their bad news. We already know it's tough out there, but we actually can make it better by letting go of the fear to spend money. Letters From Last Time: Only 48 hours after the attacks, I wrote my last column and felt that the sky was indeed falling. My about face today is not related to the overall impact of the terrorist attack and the fear and uncertainty that it created, but more to the use of it as a continued excuse for everything bad. The letters are some of the many that poured in to help me get back to my optimistic views of the world: Hi Brent, I personally believe that the people of the U.S. (and I believe that this might even be the one time in their history that other countries of the world will actually provide some physical/financial help to them) will make it a priority to have their businesses flourish - and not only quickly, but obviously. If they don't, these madmen have won. And that is something that cannot even be perceived to have happened. It is as vital to the U.S. to be 'up and running' in spite of what's happened as it is to stop the lunatics who attacked the last remaining super power on this earth. When the mayor of New York told people to "go out and spend their money" - he wasn't just trying to find something for people to do while they waited to see if there were any survivors. I personally believe there will be an enormous injection of personal and corporate wealth pumped into the arteries of this great nation. My love and prayers to all! Caroline Nagy Well Caroline, you will see that my sentiment and Rudy Guliani's are now aligned. Yours was the first letter that caused me to look at this whole tragedy differently and I appreciate it. The slap in the face was needed. Hi Brent, Just read your latest column today. "It seems so trite to even discuss business at a time like this," you said. I can't agree more. For a few days straight I had trouble concentrating. Thinking about what to do with my career seems so trite compared to explaining to some school children that their parents will never come pick them up... Fortunately, in the midst of darkness we see light, as manifested by the bravery of the rescue workers, the generosity of volunteers and donors, the unity among strangers to help each other... a couple of my friends would have been hurt/killed if the strangers on the streets didn't give them a hand at just the right time. Alan Chiu This was even closer to you, it sounds like, with the brush with death of some of your friends. Two weeks later, the time to wallow is definitely over and for most of us, time to move forward. For those closer, they will never fully recover and a piece of their lives will remain incomplete. The memories of their loved ones must be maintained… and it will. For you, my friend, a plug. Alan is a brilliant combination of engineer and marketer. He would be a good addition to any team in software or software services. E-mail me and I will connect you to him. Well done! Thank-you for not leading with anger and identifying with the victims, so many victims. These events touch/affect everything in our world [especially business] and I want to see/read/feel that it has touched everything. thanks! Leanne Janzen Ummm... the anger spilled out today, sorry. But I am angry only at the stupidity of prolonging the fear. Thanks for the support. I wanted to thank you for your eloquent column. We are indeed in "a new world". I used to work for Redback...before the meltdown. Tuesday found me calling my American friends to ensure they had not been working in silicon alley. Thankfully, all are safe...saved by such ironic luck as "had my meeting last week" and "training was postponed till October". I am very sad.....even 1 week after. But you know...it will be BC techology that will help the world adjust to its new reality. It will be the Ballards, the videoconference companies, the data companies, etc. that will reinvent how business is conducted around the globe. Sharon Kelvin I agree with you wholeheartedly, Sharon. It might appear that I picked on the videoconferencing companies this week, but I am angry only at the inane promotion in the media. Videoconferencing business will increase, but only slightly. People will still need to travel to close deals, attend trade shows and visit subsidiaries. I'm glad your friends were OK. Hello Brent: Well, perhaps there are a few optimistic crumbs coming out of the horrific events of last week. -crumb 1: people are pulling together I subscribe to a project management mail list and there have been postings from all over the world expressing their grief and sorrow. Managers from Turkey, Taiwan, Norway, South Africa and of course Canada (just to name a few countries). We all have had a major "reset" as to what is REALLY important. (And it's not the value of the stock but the contributions we can make to our societies and communities.) -crumb 2: information systems are going to be even more important Perhaps this is a little cynical but, hey, you gotta keep track of the bad guys some how -- no? Also, with air travel a much less viable option (probably for the long term) video conferencing, streaming video via the web and similar technologies are going to become more important to geographically dispersed companies. Perhaps there are investment opportunities here (maybe even jobs for a few of the newly unemployed). I am grateful for what I have and I'm asking myself ... what can I give back? Heather Regher As I mentioned today Heather, you can start by being a consumer and not being fearful. A strong economy is needed to lift all boats and give us the ability to reach out to those less fortunate, be they in Afghanistan or Hastings St. East. As I mentioned above, you are right about videoconferencing. Don't feel as though your sentiment about information systems is different than mine. Once again, I am shooting the messenger in my rant above, not the message. I really related to your recent article - www.bctechnology.com/statics/bh-sept1401.html I personally was remaining optimistic and hoping for a quick turn around in not only the high tech market, but the whole economy. In light of this new "reality" that things aren't going to turn around tomorrow, or anytime in the immediate future. I'm afraid for my business which has taken the life blood of may partner and I to build over the last 3 years. I'm afraid for our staff and their families who depend on steady work from us. I'm also afraid for everyone's safety in both Canada and the US, which is something that didn't seem possible here until a few days ago. It is safe to say North America has lived in a bubble for the last 40 years, and that bubble has just burst. For individuals of my generation the worst events of war we have seen encompassed smart bombs and SCUD missiles that were being fired thousands of miles away during Desert Storm. This is different. It's in our back yards. It is an attack on our way of life and an attack on our security as civilians. The targets are symbols of freedom and economic power and the enemy doesn't even have the guts to claim responsibility for their actions. Worse than my fear of another surprise attack is my fear of President Bush's undiplomatic and rather bullying tone on the world stage. This isn't a western cowboy movie and Bush's threats to bring people in "Dead or Alive" are as uncalculated as the chants of Muslim Fundamentalists in the Middle East calling for "Jihad" against America. Clearly there is a much bigger underlying problem where we, in our bubble of North America, fail to recognize how we are portrayed by the millions of people in the Middle East who don't see us as people of freedom and democracy, but see us as greedy capitalists who are trying to protect our own interests (mainly oil) at all costs. I think people need to look at little harder at what we're fighting. The US needs to change the way much of the world views them and they need to find new ways to reverse the propaganda that self serving leaders in other nations feed to their people. These people don't tune into CNN or surf the net for information. They get told that the capitalists are "attacking Islam" and they all take up arms to protect their faith. What we need to do is show them that we are not making a martyr of them and that we are peaceful. The problem is having the President of the US going on national TV daily, swearing to hunt down and kill terrorists is suggesting to these people that we are ruthless. I agree that we need to do something about these terrorists, but I think it could be done with some humility and grace. Diplomacy is the only way to succeed in this kind of a situation. This is something Mr. Bush needs to work on. As for everyday life in Canada, everyone is speculating: "Will we go to war?" "Will there be a lot of casualties?" "What will this mean to us?" "How will it affect our lives?" Issues like this make last year's market correction look like peanuts. Yet we still need to get up and go to work everyday and just hope that those few people we elected to represent us on the world stage are capable of guiding us through these frightful times. I don't think Canada would be a likely target for the type of terrorism that we have seen recently, but I do agree that we may well be affected in the event of a nuclear or biological strike. Given our global reputation as the "Nice Guys" I hope that Canada remains true to it's roots and tries to encourage more unification and acceptance of all ethnicity's on a global level. In business life we will still continue to pursue more business in the US and abroad and we need to fight to ensure that the few madmen in the world don't drive us into our own isolation. That is what they want, and we shouldn't let our borders cease up because of them. My advice for all of us out there trying to get ahead in this struggling market is to keep pushing the limits on our technology, keep it advancing and we will all realize the benefits that are there to be gained. We've all preached about how our technology can change the world, and now we have to prove it can change it for the better. Times like this need to make us even more appreciative for what we have. You simply can't sit back and let someone else decide when the markets ready for business again. Like said, good column. Thomas Stringham There were a few comments as to the whole situation like Thomas' here. This was the most eloquent and least provocative (other share different views on what response should the US have, etc.). What I noted was the mention of fear. I felt the same way in the days immediately after. I do fear the ramifications and the response of more terrorists. I fear the crop duster spreading anthrax and get very angry thinking about the madness of people that would consider such atrocities. But our way of life is not under attack unless WE deem it to be. They cannot keep us from returning to work. Fear needs to move aside and work needs to continue. Thanks for the great thought Thomas. What Do You Think? Talk Back To Brent Holliday   Something Ventured is a bi-weekly column designed to supplement the T-Net British Columbia web site with some timely, relevant and possibly irreverent insight into the industry. I hope to share some of the perspective and trends that I see in my role as a VC. The column is always followed by feedback (if its positive or constructive. I'll keep the flames to myself, thanks). Something Ventured Archive Online Venture Capital Guide Printable edition