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Optimism, the Channel's Secret Ingredient

By Scott Karren - Written December 16th, 2003

People are beginning to feel optimistic again.

Forbes columnist, Rich Karlgaard, commented in the December 22nd, 2003, issue that optimism is back in Silicon Valley. He went on to talk about two kinds of optimism:

  1. The good kind - product development optimism.
  2. The bad kind - IPO boom optimism.

After 3 years in a morose, inward-looking economy, businesses are starting to dream again.

I see signs of this optimism not only in Silicon Valley, but almost everywhere I look. The Dow Jones average is above 10,0000, corporate profits are up, the malls are crowded with record Christmas sales, stretch sales goals are being accepted, inventories are low, contract manufacturing in Asia is booming, and channel providers in mature markets are returning to profitability.

All I can say is that it's about time! I for one miss the dot com era. I miss the new ideas, I miss the fat budgets, I miss the cool advertisements. But what I miss most about the dotcom boom is the optimism. I am not as picky as Rich Karlgaard about the kinds of optimism. Either kind will do. In fact, I think the belief is more important than the reality. So what that startups in Silicon Valley naively hope for an unrealistic IPO boom? What's wrong with a little naïveté?

Almost every entrepreneur's story ends with the comment "If we had known what we were up against, we would not have started it."

Greenspan was irresponsible in trashing optimism (he called it irrational exuberance) in the late 90s. Similar to panicking depositors into a run on the bank, he created a run on the economy. That is not what we need from the chief financial officer of the government. Yes there were excesses. Yes, there was outright fraud. Yes, some of the businesses had no solid foundation. Yes, huge sums of money were wasted. However, a responsible fiduciary would have busted Enron without killing the spirit of optimism.

With Greenspan as the most visible party pooper, the web party ended with Napster's demise. With its CEO stripped of his glory and its web site shut down, the Napster generation learned that the business world was governed by established business, not by irreverent, Gen-X whippersnappers. The rest of us lost out too as trillions in market equity was vaporized. Even worse, the economy overcorrected and destroyed not just immature web businesses but millions of real jobs.

Even my 7 year old son knew something had changed when he asked me one morning "Remember when we were rich, Dad?" My son has no real concept of money or my net worth, but he could tell that things had changed. We postponed purchases of big ticket items, eliminated discretionary expenses and hunkered down for a long, cold winter. He could sense that our attitude was no longer open and forward looking but closed and cautious. It no longer felt okay to go spend money. Like the business world, our family, rather than investing in new ventures became more interested in preserving our remaining assets.

My brother, Tom Karren, started his web services business, Wingate Web, in the teeth of the dot com crash. Despite a bad economy, a tech stock crash and no obvious exit strategy, he has managed to create products and a growing business. He did not need people to tell him it was impossible, the market was doing a fine job of that if he had cared to listen. His optimism was stronger than all of the negativity.

I had a business professor who frequently said, "Every business needs a realist, but only one."

Leaders like FDR, JFK, Reagan, Giuliani and Clinton see opportunities in what others overlook. In a speech at the Microsoft Office System Launch in October 2003, Bill Gates said the following:

"...our optimism about the rest of this decade, productivity growth and economic results, comes because we think that people are now underestimating these advances. In the '90s, there was a lot of hype, people in some ways over-estimated how quickly information technology could drive the economy forward. Today, we see the opposite of that."

You cannot protect your way to new markets and you cannot cut your way to growth. I used to tell my employees at MSI Consulting Group that we had an imaginary company and that as soon as we stopped believing, the company would disappear. Within a year of my departure, the company was dead. I value optimism in the face of overwhelming odds and channel people are some of the most optimistic people I have met. We have to be, otherwise we would have chosen a different business.

Scott Karren is the CEO of Channel Ventures, a specialized consulting firm that works with vendors and partners to build profitable channels. Mr. Karren has led his companies to successfully complete over 1,000 channel projects impacting over $150B of channel revenue.

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