We Were Right – Just a Decade Early

This is a line my friend Jerry Colonna uses when something like the AT&T – Time Warner deal occurs. As time passes, the line has shifted to “We were right – just fifteen years early.”

Jerry was Fred Wilson‘s partner at Flatiron Partners. We were all investing in Internet-related stuff at the end of the 1990s. Jerry and Fred had one of the most successful VC funds during this time period until the Internet bubble burst and blew us all up for a while. We made plenty of investments together and I sat on a number of boards with Jerry – we had some big winners and a handful of craters in the ground.

At the peak, AOL bought Time Warner for $162 billion. We only know that was the peak in hindsight – at the time it looked like it validated a lot of what we were doing by investing in the Internet.

“This merger will launch the next Internet revolution,” said Steve Case, America Online’s chairman and chief executive, told a news conference Monday. “We’re still just scratching the surface.”

The market responded according to plan.

“Analysts expect competing Internet and entertainment companies to seek similar deals in hopes of keeping pace with AOL and Time Warner, and some of those stocks also got a lift Monday. Disney jumped $4.81 1/4 to $35.93 3/4 and News Corp. rose $7.31 1/4 to 45.06 1/4 on the NYSE. Lycos leaped $9 to $79.75 and Yahoo! climbed $28.81 1/4 to $436.06 1/4 on the Nasdaq Stock Market.”

Yup – you saw that correctly, Yahoo was at $436 / share. I think it split 2:1 twice, which would have made it priced at $109 / share. It’s currently at $42 / share so if I got the splits right, after its collapse in 2001 to a low of around $5 / share it took it 15 years to claw its way back to $42 / share (a 10x from the low, 40% of its high at the peak.)

Ponder Gartner’s Hype Cycle for a moment. You can apply this to pretty much anything in tech.

Gartner Hype Cycle

2000 was the Peak of Inflated Expectations. 2002 was the Trough of Disillusionment.

Now, choose any new and exciting technology now. Apply Gartner’s Hype Cycle to it. Ponder where you end up.

Steve Case wrote a book earlier this year called The Third Wave: An Entrepreneur’s Vision of the Future. In addition to looking forward to the future, Steve uses his lessons from the past to explore how things play out. It spans the time frame from 1985 – 2015 which you can just lay down on the Gartner Hype Cycle.

  • 1985 – 1994 was the initial entrepreneurial Grind
  • 1995 – 2000 was the climb up to the Peak
  • 2001 – 2002 was the collapse to the Trough
  • 2003 – 2012 was the climb to Enlightenment
  • 2013 forward has been the plateau of Productivity

In the context of this, the AT&T – Time Warner deal seems extremely well timed and relevant. Now it’s all about execution.

Consider any of Apple / Google / GM / Ford buying Tesla. Where does that fall on Gartner’s Curve? How about the auto industry. Or drones. Or what people are currently calling AI. Or – well – keep going.

One of the biggest challenges in tech is not being right. It’s being ten or fifteen years too early.

Also published on Medium.

  • Salvatore D’Agostino

    It really is about timing in many ways Brad, really good points, as someone working in the robotics and machine learning fields for 30 years it becomes easy to understand why timing needs to be taken to heart. And for that matter having just launched a platform for configuration management of IoT and particular networked cameras and surveillance systems it does become possible to get better at this over time. Hope all is well in CO.

  • I know it’s beside the core point of the post, but the title makes it hard not to think of Howard Marks’s fantastic quote:
    “Being too far ahead of your time is indistinguishable from being wrong.”

    • Yup – that one is also deeply embedded in my brain. Everyone should read Marks’ The Most Important Thing …

      • Although timing IS the critical timing, you can be relatively more wrong on timing if you are more right on impact.

        Some things are ahead of their time but they are so obvious (to some) that early adopters, at a minimum get it right away.

        It is the effect of timing on disruption which makes true this famous statement, “there is nothing more powerful than an idea whose time has come.”

    • likethesky

      This is what Steve Jobs knew very well, and by extension, how Apple still tries to execute–to be right, at the right time. To their credit, I have always found that Microsoft {ducks projectiles} did/does this well, mainly by sticking to their guns. Once they see a trend or make a bet, they stick with it (in BillG’s case: saw a trend, made a bet, stuck w/it).

      That’s one thing that getting past the trough of disillusionment allows you: with enough capital and revenue (AMZN, AAPL, MSFT) you can be wrong for a long time, until you’re right! I think AAPL has been more efficient lately in this regard, though for a long time in the 80s & 90s (hw + sw) wasn’t.

      • James Mitchell

        Yes, that is a great aspect of Microsoft.

        Lotus Development had several great products, some that were 10 years ahead of their time, such as Agenda, Manuscript and Improv. But because 1-2-3 was making so much money, they abandoned these great products

  • Sort of like betting on the Cubs to win the World Series. All about timing….

  • James Mitchell

    John Maynard Keynes said, “The market can remain irrational longer than you can remain solvent.”

    • A corollary of this is that a contrarian is successful or not based upon timing first and rationale only second.

  • The tech adoption cycle is extremely helpful in understanding tech highs and lows over time.

    However, of course, we live in a world of multiple overlapping cycles at the same time. The end of one cycle is also the beginning and/or end of another.

    A key I believe is to understand not only where we are in a particular cycle but the importance of that cycle relative to others. We may be in an advantageous part of one cycle, but if that cycle itself is less important or diminishing in importance, the attention that we should give it should be less than would otherwise be so.

  • “Or what people are currently calling AI.” Having some reservations, aren’t we?” Ha ha!

    So based on the Gartner Hype Cycle, Bitcoin will be worth $700-$850 a piece, then; a far cry from a projected $200k.

  • jerrycolonna

    I hate being right 15 years early.
    If only I can be right in the moment, I’d have made a lot more money. 😉

    • panterosa,

      I have begun thinking that if you are 15 years too early, that 30 too years early is more timely than 15 years later(today).

  • And yet, when the smoke clears on the AT&T-Time Warner deal, my Internet service will still be slow, intermittent, and just plain lousy. And I’ll still be on hold.

  • Sebastien Latapie

    Just finished Steve’s book. It was a great read. I think something to keep in mind is the reach of these changes – the internet impacted literally every industry so when it went through the cycle, it impacted so many things. I don’t know if the same can be said about just drones.

    The one analogy I found the most interesting in the book on the third wave was that in the near future, everything will be internet enabled just as so many things are powered by electricity today – we just won’t even think about it. Looking forward to what will be built on top of that.

  • Prem Kalevar

    @bfeld:disqus Care to explain your posit about the buying of Tesla in today’s blog post?

    Is that specific hypothetical interesting today because of all the hype around self-driving cars?

    • Yup – just a hypothetical.

  • The thought about timing is spot on, but when AOL bought TW it was about digitizing the TW content and bringing digital ads to that legacy media. As AT&T is touting to get this through the Feds, AT&T doesn’t compete with TW. All they are hoping to bring is distribution, and commditized, nightly competitive.

    The only way this merger makes sense is when compared with Comcast/NBC, AT&T’s vertically integrated competition. This merger is strategic, to keep up with the Joneses, not to add anything of value for customers or content.

    Sure seems we’d be better off with the FTC saying “no” and breaking up Comcast too vs. what is likely an editable “OK” with a breakup in 20-30 years when conglomerates go back out of fashion.