SJeremy Philips, News Corp.'s Internet-savvy executive wunderkind, has been going around telling anyone who will listen, "Buy food and guns." Some people can't tell if Philips (shown here, right), is kidding; those who take him seriously interpret it as a wry shorthand for hunkering down and bracing for a long economic downturn. It's naive to think that the meltdown of the investment-banking sector won't have an effect on Silicon Valley. But not in the way most people think.Wall Street is currently in a bubble of panic. The Valley is currently in a bubble of denial. Neither zone approaches reality. Members of the National Bureau of Economic Research — the only official arbiter of such matters — can't even agree if we're in a recession yet. "It's really hard to say if we're in a recession, because different indicators point in different directions," said Jeffrey Frankel, a Harvard professor and a member of the NBER's recession-calling commitee. That technical measure of recession ignores the reality on the ground: Home prices continue to slump, gas prices are pinching consumers' pocketbook, and advertisers are aggressively cutting back budgets, even online. Layoffs are grabbing headlines. But does this really affect the Web startups which so enchant the blogosphere's imagination? Schadenfreude demands that these tiny companies shutter their doors — or if they don't have the decency to close up shop, they should act suitably chastened by the cold economic winds blowing. There's a lot of contradictory advice being handed out: Rely on angel investors! Don't rely on angel investors! My advice: Don't rely on journalists and bloggers for advice on how to run your business. One might think Valleywag, which eagerly chronicles the mishaps of misconceived startups, would cheer on the notion of a lot of startups starving to death because of an economic downturn. Far from it! Better that they choke on their own vomit — that excess and lack of self-discipline kill them, rather than factors outside their control. Serious entrepreneurs should be tightly controlling their spending. But that is as true now as it was a year ago, and a decade ago. Retaining pricey PR firms, throwing lavish parties, hiring executives from Fortune 500 companies at mid-six-figure salaries — that can wait until the company turns a profit. If your startup is dependent on a bubbly economic cycle, then it's not being run like a startup. By all means, those who were never meant to be entrepreneurs in the first place, who lack any real ideas of their own, or any interest in making money rather than spending someone else's, should take this occasion to make a graceful exit from the scene. Six months ago, closing your startup would have seemed cowardly if not insane; now, everyone will nod at your wisdom. That brings me to the opportunists — the likes of Marc Andreessen, who has been preaching the notion of a coming "nuclear winter" for some time, and Jason Calacanis, who recently wrote about a looming "startup depression." Were I more impressed with their current startups, I'd nod alongside. But Andreessen's Ning is an unimpressive social-network builder; Mahalo, a gussied-up replica of Yahoo's 1994-era Web directory. Frustratingly for some observers, they have raised enough money that neither company will run out of funds for at least a year. (No one sincerely believes Calacanis when he says he has enough money to run the company for four years, do they?) If their flimsy business models remain unchallenged, their survival is all the more likely. So when Andreessen and Calacanis talk doom and gloom, what I'm really hearing is: "Please don't raise money for a better idea than mine — I can't take the competition." What history tells us, actually, is that the best companies are started in times like this. The last wave of truly innovative Web 2.0 companies — Flickr, Del.icio.us, Last.fm, Facebook — started at a time when no one particularly believed in their potential. Many people would benefit from a climate of fear: Venture capitalists, who might get larger pieces of startups; employers, who might hire talent more cheaply; and corporate dealmakers, like Jeremy Philips of News Corp., who might acquire companies less expensively. But the biggest reason to ignore Philips' fearmongering, in particular? He's not taking his own advice. Rumor has it that, instead of food and guns, he is acquiring a piece of Manhattan real estate. And from what we hear, it is rather too glossy a place to serve as a warehouse for rations and ammo. (Photo by Gawker Media)
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