Arrington writes this morning about times being so good that the Valley needs a reversal and Scoble follows by expressing his personal malaise because he's hit with so many company and software pitches and so few things that are exceptional.
While I agree with almost everything either of them have to say, I don't necessarily agree with their overall points. Perhaps because I've been playing in this Valley since 1979, I've grown accustomed to its cyclical nature. I've been involved with(Hell, Silicon Valley since 1979 and the patterns have not changed. The numbers have changed and the pace has changed and the swings are more dramatic, but the patterns remain the same.
Phase 1. Someone brilliant devises something that is unique. It is a bit primitive, but in some way it changes how people or business work, play, communicate, learn or stay healthy. Some investor with the cajones to take a risk backs the inventor with a surprisingly small sum. A short while later a thunderous boom is heard. The entrepreneur has hit it out of the park and into the clouds. The parent of this invention becomes a zillionaire. So do the investors. Traditional media makes them both into rock stars.
Phase 2. Others look at this new invention and enhance it by making it easier, adapting it to special markets, etc. others create companies that try to compete. Investors in the smaller cajones for risk come in, thinking for some reason that those who imitate and those who refine will some how be as valuable as the originals. This perception works neither in art nor in invention. Still there is success and people keep coming in. Investors, who do not feel comfortable in filling spaces in empty portfolio boxes, start joining nto large bands to invest more money. This works for a while, perhaps several years.
Phase 3. Suddenly there are too many companies who look too much like each other and too much money coming in from investors who think like bank branch managers. This is a phase that we are now in. It impacts Scoble and Arrington to a large degree because everyone--everyone--wants them to cover their story. These are two regular guys who love the brilliant little kernels that go from zero to great in the Valley. As those who think they have such kernels have become have multiplied as rapidly as they have crumbled into mediocrity, Scoble and Arrington become the key to success. The two of them achieved this higher plane by being first to discover and uncover great products and technology. This phase is marked by entrepreneurs that think that being discovered by these two guys--or maybe Om Malik-- is what it takes to succeed. Instead of great products and services being the goal, great coverage becomes the goal and these two guys start drowning in the rivers of their success.
Phase 4. There becomes too many companies receiving too much money. These companies are built on mediocrity and get aggressive in getting notice. This is the what caused the last bubble. I do not think the next bubble is that close. There are currently too many diamonds in the world of coal as Scoble and Arrington are describing it. They both should look back at the number of great companies they've written about in the last 30 days. I'll wager it's about the same as two years ago. The difference is that in between meetings with great new companies, these guys are forced to look at oceans of mediocrity. It gets depressing. It jades the messengers.
Phase 5. Go back and read Phase 1.
