"a fish, a barrel, and a smoking gun"
for 24 May 1996. Updated every WEEKDAY.



[Windup Car]

It's high time we took a serious

look at the phenomenon of

Internet profits. As we gaze

into the universe of cyberspace,

onto those millions upon

trillions of nodes, it seems

completely natural to be taken

by a sentiment of wonder that

feels not unlike having skipped

lunch. We cannot help but ask:

Are they out there? And if so,

do they beat the Schwab 1000?



Nowhere has the skepticism been

louder than at that hotbed of

anti-capitalism, UC Berkeley.

Biophysicist Mark Wood paints an

unlikely picture of the

atmosphere it would take to

sustain any form of profit on

the Internet: 25% electrons, 30%

bits, 45% bucks. Taking a page

from Negroponte, Wood adds with

a smirk, the bucks are doubling

every three months, but the bits

are doubling every three weeks.

Chart this five years into the

future, and the line graph looks

suspiciously like a donkey.

Meanwhile, across campus, the

economics department conducted a

more empirical survey. So far,

Internet players break down into

two groups: the majority (57%),

who spend more than they take

in; and the minority (43%), who

take in less than they spend.

Another Berkeley professor, a

linguist from the cultural

studies department, offers this



Applications => Applets

Profits => Pits


Yet reports of Internet profits

continue to trickle in from far

away places. So many, in fact,

that the cries are beginning to

harmonize, and several times

have broken out in a rendition

of "On Top of Old Smokey." Is it

possible that the academics are

wrong? We decided to investigate

some of the rumors.



We responded to a classified

advertisement on the back of a

Chicago weekly. Ten dollars

covered the postage and handling

for a free catalog listing books

about making money on the

Internet. The books cost about

$20 each, a small investment to

embark on a new career. At the

bottom of every page is a

reminder that the catalog

compiler consults for only $80

an hour. We were beginning to

see where this was headed. It

seemed a confirmation of Max

Vegal's fateful prediction, made

at a MacWorld party in 1990,

when he wrote on a napkin:


For the next five years,

individuals will make money, but

businesses will have a harder

time of it.


Vegal theorized that this is

because businesses have to pay

for revenue acquisition costs,

more commonly known as lurch.

The napkin was slightly wet, and

it's possible he meant lunch. If

he did, he should be released

from the State Psychiatric

Hospital immediately.


In case we've lost any readers in

technical jargon, businesses are

things with employees. Under

Internal Revenue Service Rule

503(d)2, you're an employee if

somebody yells at you more than

once a month. Sometimes

businesses have products, but

that is not essential. It's

important to remember that

businesses are not quite the

same as corporations.

Technically, corporations are

legal fictions, which means they

get to make up their own laws

and aren't bound by the IRS.



As if these false leads were not

disheartening enough, the

writing of this article brought

the validity of the first

Internet shopping transaction

into doubt. The

generally-accepted first

transaction belonged to one Tom

Fleck of Bend, Oregon, a large

man who had trouble finding

padded athletic socks that fit

his size 15 feet. In 1991, he

came across the website Socks

Your Size, which specializes in

socks tailored to every size.

Using his credit card, he bought

one test pair for $4.99. But

just last month, IETF

investigators discovered that in

1988 Tom Fleck sent email to

Socks Your Size asking for size

16 socks. Had his feet shrunk?

They flew to Bend, dropped in on

Fleck's house unannounced, and

surprised his wife, who was

vacuuming. Nobody quite

remembers what she said, because

the vacuum was very loud, but

their next stop was Fleck's

place of business - you guessed

it - Socks Your Size, a thin

storefront in a strip mall next

to a shoe emporium. Fleck had no

customers. His hands were busy

with darning needles.

Investigators cordoned off the

area. "Don't tell my wife!" he

yelled. "She thinks I'm

successful!" He then attempted

to take his own life, pulling

several size 22 wool stockings

over his head. Luckily, he put

them on inside out, and his

attempt failed, though he did

contract athlete's foot on his

nose and has been unable to cure

it. Every urge to scratch is a

reminder of his guilt.



Dismayed by our search, we

remembered something our older

brother once said to his

sixth-grade math teacher: "I

gave the right answer. You just

asked the wrong question." It

occurred to us that maybe we

were asking the wrong question;

perhaps profits today are

irrelevant, particularly in the

software trade. Take the

following perceptive maxim:

"There's too much profit in the

future to worry about profits

today." This is inscribed on the

tombstone of Kip Pelly Jr., an

applets entrepreneur who died

from exhaustion at age 34,

debt-ridden or bankrupt,

whichever it was that came

first. Disciples of Kelly

survive, however, and his Real

Estate Theory is still popular.

Practitioners of this model

stake as much cyberspace terrain

as possible. The value will go

up exponentially as soon as

terrain becomes scarce. Though,

at this point, it seems hard to

imagine when cyberspace will

have a limit, keep in mind that

early American pioneers never

thought we would run out of

land. Just a century ago, land

was so infinite that the French

sold us most of Louisiana,

Texas, and New Mexico for rights

to all the accent marks over our

vowels. That's why English no

longer has the acute accent,

grave accent, circumflex accent,

or umlaut mark. [Editor's note:

In 1912, to prevent a cheese

shortage, the French sold the

tilde to the Spanish for two tons

of manchego and the umlaut to the

Germans for some limburger.]



Another model that's being tested

is the Loss Leader. The original

loss leader, of course, was the

witch who let Hansel and Gretel

eat parts of her gingerbread

house in order to lure the kids

into her roasting oven. Perhaps

this explains why Oracle

designed a Network Computer even

though they aren't going to

build it or sell it. According

to Oracle P.R. staffers, the NC

will directly stimulate demand

for Oracle's server software.

Let's take a closer look at what

they mean by "directly":


1. Oracle spends millions to

design the NC.


2. Oracle gives away the design

to major Japanese and Korean

stereo manufacturers.


3. Japanese manufacturers price

their NCs below cost in order to

gain market share over Korean



4. So many people use the NCs

that more servers are purchased

for the Internet backbone.


5. Some of those new servers run

Oracle server software at $2,500

per copy.


6. Netscape and Microsoft lower

the cost of their server

software to $1000 per copy.


7. Oracle offers free backrub

with every copy of $9.95 server



You can see why industry insiders

are worried. At these times,

it's helpful to remember that in

the early days of the auto

industry, artificially cheap

gasoline spurred demand for

cars. Gas was so cheap that some

drivers, skeptical that their

cars might not start again in

the morning, just left the car

idling in neutral overnight.

This was the origin of the

phrase, "the cat's pajamas,"

since many cats, forced out of

garages by carbon monoxide, had

to sleep in the rose garden.

Sears began selling overstocked

baby garments as cat pajamas to

soft-hearted housewives.



So what does the future hold?

Everybody has an opinion, but

Matthew Little, a researcher at

Sun Labs, has built an organic

Darwinian model that acts out

the future. Companies are

represented by bots programmed

to imitate various Internet

strategies. The consumer market

is represented by the hard

drive. The bots are fed into a

SPARCstation and let loose.

Immediately, they fight to

dominate the hard drive.


[Needy Programmer]

Little's model projects that

eventually computer hardware

will get as cheap as toys, and

few will be made in America. The

software business will become

more like the book business,

where a few applet writers are

the John Grishams and Michael

Crichtons of software, while

ordinary programmers take jobs

as waiters to support their

craft. Semi-successful applet

programmers pad their incomes by

teaching workshops at UC

Berkeley Extension.


Teacher: Okay, lets talk about

how this program made us feel.


Student: I was insulted by the

way the search engine was

written so sketchily.


Teacher: Okay, maybe we should

ask Ted what he was after.


Yikes! Perhaps Little should

apply for a professorship at


courtesy of Orno Pboson