In: Columns > DigiSect
Published on January 3, 2002
took a bit of a field trip recently to a town in Colorado called Leadville. Founded in the mid-19th Century, it was a booming mining town for many years. People came from all over the United States to Leadville to try to strike it rich with Colorado gold. During this boom Leadville was Colorado’s largest town and administrative capital. The future looked bright.
Many people spent their life’s savings to get to this place, and spent beyond their means once they did get there in order to acquire the necessary tools to begin mining the rich hills of the Rocky Mountains for the gold that could be found beneath them.
As Leadville grew, its notoriety grew, and more people came.
As more people came, there was less gold available.
But the market for gold was never exhausted, never tapped fully. Millionaires (though really it was the accumulation of thousands of dollars, not millions, that made millionaires in that day) were made overnight, and broken the next day when prices fell, or yields were light.
There was more there than just people trying to find gold. In its ingenuity, homo sapiens is notorious for finding a void and then filling it…
I am reminded of a Dilbert cartoon of a man selling “nose puppies” from a cart on the street. When asked what a nose puppy was, he replied that they were “small, ceramic puppies that fit in the nose. Find a need and fill it, that’s my motto.”
Thus the ones making money weren’t miners alone; there were also people raking in money selling mining equipment (sometimes for exorbitant prices) to the awestruck gold-seeker who walked into town trying to make a quick buck. Leadville’s powers that be were interested in keeping taxes high so that the cogs of the local government could live well, too. Through all of this, people came… and people left.
More people came than left, for a long time. And this caused the downfall of Leadville. Many people lived and died in Leadville without seeing a single vein of rich mountain ore. But the hope was enough to keep people coming, keep people spending, and keep the economy bursting at the seams.
Where it is Today
s I strolled through the streets of Leadville, I was reminded of the thousands of people who once roamed its barren avenues. On Main Street, I passed several buildings, most of which still proudly display the hundred year-old signs of the previous occupant, no longer there but as a manifestation from the underworld. People still live in Leadville (though the Tourism Board employs most), and people still move to Leadville (though the homes are in the upper ranges of most people’s income).
So what happened to the booming frontier town of Leadville?
A quick buck was offered, and a quick failure was its return on investment. It’s the oldest story in the book, and a lasting effect of highly successful marketing mumbo-jumbo. It is the hope of immense wealth that often drives people to jumping the stable ship they ride on and try, oftentimes in vain to build a new ship on a shoe-string budget.
Don’t get me wrong, history has proven to us all that the “American Dream,” of making it rich quickly and moving to the suburban home with the white picket fence and 2 (+/- 1) children is still possible, though it rarely happens.
Microsoft serves as a pointed example of who can do it, and how. No one can doubt that Bill Gates had several wondrous ideas, making personal computing a large part of what it is today. He had a vision, and he courted peril in his attempt to take his dreams to market. He set out to realize those dreams, and succeeded – you may argue about his ethics, but his success is undeniable.
Where Does Business Go When it Dies?
he story of the Web of today has a great deal in common with the story of Leadville. The growing pains that the Web has experienced are not unlike those of that mountain town. I wish I could say that the histories of the two are not so tightly intertwined that they both will end to the same whitewash, but I would be innocently foolish to say so…
And I’m a realist to the core.
The Web, like Leadville, is overflowing with empty storefronts. I won’t go into the fine details, because we all know what I am talking about. There are a vast number of websites that haven’t been updated since early 1999, and likely to remain so. We’ve got storefronts across the world that no longer sell products, but entice people to come to their gates.
We have dead businesses competing with the few business that still exist, or are newly in existence, and want to succeed.
Possibly one of the greatest assets of the Web is also its Achilles’ heel: Ease of use.
Since the booms of the past, businesses have popped on and off of the Web with high aims and bursting pocketbooks. We helped them to get on the Web, because we were excited about new ventures and new challenges. We were thrilled to work on new designs, under new constraints, with new people, with new technologies. We explored the Web to its fullest extent, and we all learned a lot about what was required of us in the online world.
And then we put up storefronts. Hundreds. Thousands. Millions of meaningless storefronts. Storefronts that gave us a paycheck and a pat on the back then sent us on our way when their company could not make money.
We all know why, too.
We all know why Leadville fell, too, but we didn’t do anything about that, either.
Now the clients that we do earn end up spending less and less on what they want to get, because they no longer trust us to make informed decisions about what their company really needs for an online presence. We deserve that, to an extent, I suppose. But client after client feels that they are informed about what we do just because some of it happened to be on 60 Minutes at some point in early 2000. Clients are hesitant to subscribe to the idea of moving onto the net because of fear of failure—and rightly so. The Web has achieved a reputation for being a black hole of capital.
And it makes sense, really.
What Worked in the Past Will Work Today
think the most obvious flaw in the booms of the past is that they completely forgot what they were drawing power from – business past. The booms moved through the economy with the speed of our resolve, and bashed to millions of fragments the history of business as it was understood before.
People were suddenly seeing the Web as Main Street was seen in Leadville. To have a storefront in the forefront was the drive of every entrepreneur.
It is this powerful compulsion that gave the Net a roiling wake in which the corpses of its dead float.
I’m hardly the expert when it comes to the options for a desecrated throne of capitalism, but I believe I have a few ideas that just might help so many people in the slumps of today. I do not believe that we are headed towards some Second Great Depression, but I do believe that there are hard times ahead – perhaps more difficult than people are willing to concede.
First and foremost, we have this War on Terrorism that has struck America’s commerce in the pocket. We’ve got an unemployment rate of more than five percent here in the United States. Perhaps that doesn’t mean much to you, but take a moment to do the math anyway, and figure the sheer volume of people looking for work: one percent of the United States’ population is almost 3 million people. Five percent makes 14 million people.
Imagine an entire city the size of Los Angeles (with all of its suburbs) made up of nothing but unemployed people; that’s what we’ve got here in the United States.
[Editor’s Note: the most recent statistics (applicable to November 2001) released by the U.S. Department of Labor give an unemployment rate of 5.7%, yielding 8.16 million total unemployed of which 419,000 became unemployed during preceding month. This change is coupled with a 0.6% increase in the average exempt salary, suggesting that the newly unemployed are in large measure those who were holding lower-paying, salaried jobs.]
The percentages were bigger (though I doubt the numbers were) in the Great Depression. And we got out of that. Does anyone in the audience know how it was done?
It wasn’t by merely cutting interest rates another fraction of a percent rate, or cutting off funding to projects that needed to be done.
It was from spending more. Much more. More than you were spending before. We all, hopefully, have money saved up for a rainy day, don’t we? Well, the rain is coming down in torrents today.
Of course, I could be completely wrong on this all. I could just be a cynic. But never bet on an optimist.
[Editor’s Note: the all-time peak level of United States unemployment was recorded in the first quarter of 1933 when 25.2% of the work force, or approximately 12.25 million people, were unemployed. It is widely accepted that the economic stimulus provided by the Second World War is what brought the Great Depression to its ultimate end. However, it is more instructive to note its cause: a massive evaporation of capital in the form of equities, most commonly referred to as stocks or stakes.]
There’s no Money!
hen the economy goes sour, the time for entrepreneurship is golden. The opportunities exist. At the close of the Great Depression, some megaliths of commerce came out with their flags waving and factories running. And that is what must happen today. Now is the time to run with that idea you’ve been holding on to for so long.
Naturally, the endeavor of starting your own company requires you to accept consequences and responsibilities. We must use the mistakes of the late 1990’s as the springboard for today’s opportunities, and learn from them: launching companies without products, going public before selling a single widget, are not roads to real success.
This bodes ill for those who would like to rely on the Web as a medium for commerce.
That fact is perhaps more important than any other. To this day, there are scarce few companies that can live completely on the Web. One of few that can is Amazon – and they’re holding on with their fingernails.
Most companies that are making any money off the Web are doing so as an adjunct to their Real World business: they’re using the web as you would use Main Street in Leadville, but they make sure that you have another store somewhere else.
Do you plan on starting up a web development firm? I know how that feels. I’ve been holding myself back from starting one for some time because I thought the work wasn’t there to substantiate starting a new shop for people to ignore.
And then I looked at the multitudes of RFPs that passed me by because I was afraid. I watched as larger companies took the smaller projects because they needed to execute them in order to survive. I watched silently as friends were laid off, and as coworkers became freelancers.
Perhaps another important thing to note is that we, as web designers and developers, can no longer charge such exorbitant fees for our services. I sat, helpless, as small, static websites were passed to me with the price tag of $150/hr, and I realized that I was going to end up billing this poor person $5,000 for a static site.
I watched further as poor business practices lead smaller companies to buying services that, if consulted properly, would have cost $/files/includes/10.css,000 but were billed up to a gross of expenditure of $30,000. The evidence is there, in your own company’s books, for how much these things have cost to make.
Yet you know how much they should’ve cost.
I think we, as web developers, need to begin to realize that we are not quite as indispensable as we once thought we were. If you own or have sway in a web development firm, be one of the naysayers, and impart lower prices onto your work. You’ll win more business, and you’ll end up making more than if you had kept your prices sky-high. It may tough to stomach the lost margin, but with effort that sacrifice can be turned into far more revenue and profit… which will also employ quite a few more people.
And so long as potential clients think that web development is an extremely expensive venture, we’ll never quite make it out of this slump – because they won’t be spending any money… and the few who will spend, will also cut every corner they find.
Which is, of course, what I’m asking you not to do. Spend money well. Buy a sweater. Eat out once more often than you normally do. Do a free site for a non-profit organization, because it’s no secret how ugly they normally are. Buy a Ronco Food Dehydrator.
By doing that, we’ll make it out of this slump together. If instead you hold onto your money, you will not be encouraging others to spend theirs.
Stephen Van Doren is a software developer and graphic designer from Denver, Colorado.