Seven Mile, Uncategorized

Hot Tub Time Machine

Friday nights are movie night at my place. Life in the Cayman Islands doesn’t offer that much cinema selection, so I built a really kick-ass theater in the house. Imagine feather stuffed sofas, suede paneled walls, muti-tiered wood ceiling, a monster-ass Capiz shell chandelier and the Panasonic 103. Tonight’s viewing selection consisted of “Hot Tub Time Machine”.

A bunch of guys go back to the 80’s after an electrical short circuit in a magic time-machine. Boy that flick cuts close to home on a few levels. From Clark Duke who my homies and I have run into socially – at Sak’s, buying pajamas bottoms for the Playboy midsummer party (that jacket’s vintage right Clark?), to John Cusack whose acting pretty much defined my youth and early adulthood; to the present economic funk which mirrors the early eighties malaise. I grew up in the 80’s, and my life has turned out so over-the-top, I never could have imagined my ride to the future (present). All time travel stories feature the Butterfly Effect. Don’t step on that frog! You could start World War 3!

Let’s flash back in recent time for a moment. Remember when people were so worried about the fate of Apple, back when Steve Jobs health took a turn for the worse? Most of those worrying were blissfully ignorant that some of Steve’s great thinking could have been spawned by the butterfly effect. I could imagine that weekend catch-up call with “the Woz” (friend of Jobs, now retired from Apple) which gave spark to a new user interface or chipset design and subsequent marching orders from Jobs to an army of hundreds, ultimately leading to the iPhone. None of those fretting over Jobs health ever considered what would happen if the Woz got taken out in an unfortunate segway polo accident, potentially muting the impetus for Steve’s brainchildren to come.

Consider our modern financial system in the context of the Butterfly Effect. The so-called “productivity miracle” which followed Sept 11, really turned out to be a gigantic levering-up, made possible by low interest steroids, facilitated by a frightened Alan Greenspan after the 2000 Nasdaq crash and 9/11. The “conundrum” which followed, manifested itself as a debt bubble and subsequent breakdown in the summer of 2007.

I still remember the day the system broke, stumbling onto this post on a real estate forum while vacationing in California. Rediscovering this thread reminds me of a prescient moment exactly two months prior, when I posted a warning on my blog. The doubting commentators on both posts, frozen in time, serving as a cautionary tale for us to learn from.

Butterfly effects cascading from that minor regional burp in California are still with us today. That the DOW and S&P are off their lows is hardly an indicator of an honest recovery. When your portfolio returns to the “dollar value” it had before the crash, what will you be able to buy with that money? If the DOW climbs back over 14000 when your health insurance is 50% more, taxes strip 20% more away, and everyone with a home is a millionaire, returning to 14000 will be a victory that reminds you more of the lyrics of a particular Linkin Park song, than an 80’s feel-good anthem.

While a trip down your favorite 80′s cruising strip can be a real buzzkill these days, the second-life version of that thoroughfare is doing much better in 2010, thanks to a pervasive growth trend which continues to fuel investment online. There are big opportunities ahead for those of us in the domain space who took the advice of an even earlier post of mine. For those of you who protected your personal treasury and squirreled away nuts for the long winter which is now upon us, I feel like good things lie ahead.

If you look up – way up, you can see a new butterfly flapping its wings, whose effects will be cascading toward us one day. While many of us are feeling 50% poorer these days, the latest Forbes 400 list shows that the rich have once again gotten richer. About 8% richer in 2010. This extra wealth sloshes around with the hot money at institutional banks/investment funds and needs to be placed. It’s no coincidence that I have been getting emails from investment banks recently, kicking the tires of my business again. While “Hot Tub Time Machine” may not have struck the social chord it did with me, “the Social Network” is certainly rekindling interest in web based investments. Why wouldn’t it? Returns on the Web are far greater than what can be achieved in other classes, and will be for years to come.

So it occurred to me 2 years ago that many rich folks in technology keep expanding the core businesses which made them rich in the first place. As they do, they begin colliding with one another. Apple made the iPhone and collided with Nokia, then Google’s Android OS collided with Apple. Now Facebook is going to collide with both by launching their own phone. I got time-travel like chills recently when I read this story that mirrors my long-held view:

“”blame, or thank, the Internet and Moore’s law for all this turf-encroaching. As more computers hook together at higher speeds, and the semiconductors in each gain density at an increasingly lower cost, the more complex software you can write, and it starts to do more.””

This gent has been reading my mind. As more software is prepackaged and made available to creative hackers the world-over, it will inspire utilities which fit together like lego and get built into wonderful killer-app like sculptures.

Remember young Feross Aboukhadijeh who read about Google Instant and recognizing this innovation as the coding parlor trick it is, had the good fortune to be first out of the gate to perform the seemingly obvious 5 hour copy-cat assembly on YOUTUBE.com. Feross made himself appear genius in the eyes of many, and his gumption landed him a job at YOUTUBE.

As more coders out there begin to assemble these obvious puzzle pieces into sculptures, getting those competing works of art in front of people to see them, will become more important than ever. That distribution part is getting harder as the billionaires who control the platforms, keep bumping into one another and putting up walls to deny traffic to perceived competitors. Only the disruptive power of domain names can create instant reach without judgment of the content, and that sets a floor on the value of our eyeballs.

Where else other than domain name portfolios can you BUY 10 or 20 million unique visits a month of immutable din-level traffic and point that traffic to whatever site you want? The audience comes at the same level regardless of content and has a return path for users in the form of the name they typed, to point their friends to! What is the value of being able to fill 200 Wembley stadiums each month and show those people the content you choose, without consequence to the traffic volume?

While I have been expecting this particular butterfly effect to come our way for several years now, I will never understand why Yahoo or Google or Facebook or Viacom or Fox (and countless other media entities) failed to lock down the most obvious traffic producing real estate on the Web. I can’t recall one major media co that has called me or my colleagues over the years, to discuss anything. While I’m ambivalent about that, I just don’t understand the logic.

Microsoft spent billions developing its search product and the most valuable asset it has to show for this spending spree is the Bing.com domain name and the hijacked error search stream which fuels it. Wouldn’t it have been better to form a team to get to know the rag-tag domain community? To send this team to the assorted domain conferences over the years and acquire tranches of generic names for 20 million here, 40mm there or 120mm over there? Rather than being back where they started, they would own a mammoth media property which can be developed name by name, or used to aggregate a more permanent, non-error based visitor stream?

For all the billions sloshing around in sovereign wealth funds, why have none of those funds reached into strategically valuable media assets like domain names? As a foreign nation, isn’t it more clever to exchange the present scrip they’re hoarding for media assets which have the ability to reach the hearts and minds of the people and governments they are trying to influence around the World?

Generic domain name networks which drive 30 million unique visitors per month of unstoppable traffic can be bought for $5-10 per visitor. As the years cascade onward, and new platforms funded by today’s richest techies keep coming, all of us who own the Internet’s Real Estate will be blessed. We have the traffic, we own the properties that people have been programmed to visit, and we’ll have the luxury of deciding how to sell them.

Whether it be the continued competition for traffic between social networks or the advent of super-wifi literally all news these days portends well for those who own websites and domain names. The broader economy will make the road between here and the destination I envision, very bumpy indeed, but it is a good time to be a debt free name owner.

So continue gathering your cash to weather the storm ahead of us folks, slip into the water with a 4 pack of your favorite wine coolers. The 80’s are back in more ways than one. There’s something about this hot tub and our collective position in it, that I like.