Survival of the losers

Even Charles Darwin couldn't have predicted who would emerge from the Web's evolutionary shakeout.

Topics: Evolution, Charles Darwin,

The revolution is over. Or so it might appear to anyone reviewing the wreckage wreaked in the past month in the digital music industry. As chronicled in Salon, the purchases of MP3.com by Vivendi Universal and Myplay.com by Bertelsmann were only the latest in a series of sad stories about Scour, Launch Media, Liquid Audio, Emusic, CDnow, Listen.com, Aimster, Gnutella and even Napster. The revolution has choked on litigation, drifted toward bankruptcy and sold out to the establishment at rock-bottom prices.

It wasn’t so long ago that things looked very different. Stewart Alsop, general partner at venture capital firm New Enterprise Associates and Silicon Valley pundit, went so far as to say, “The music business as we know it is hosed.” Fortune and BusinessWeek put Napster’s teenage founder on their covers. The record industry was accused, again and again, of failing to “get it.” Of the new technology’s impact, said Hal Varian, professor at Berkeley’s Haas School of Business, “the business model for music distribution is unlikely to survive.”

It was supposed to be the same story all across the Fortune 500. The Internet would let tiny upstarts oust mammoth multinationals, in the music industry as surely as in television or retail. MP3.com, Yahoo and Amazon would replace Virgin Records, NBC and Wal-Mart. According to Michael Robertson, CEO of MP3.com, the old economy didn’t stand a chance — the majors were in for an “Internet enema.”

What made him so sure?

Easy. Evolution was on the Internet’s side. Times were changing, technology was in overdrive and Net start-ups were fast, savvy, agile and aggressive in all the ways that General Motors, NBC, AT&T and their consultants were not. They were blessed by Charles Darwin. While dinosaurs lumbered to adjust to the new climes, these warmblooded techno-mammals were out to inherit the earth.

Evolution offered a metaphor that a day trader could love. Simple, intuitive, rich with serious science, a vaguely Darwinian theory became the reigning myth behind dozens of bizarre business models. The market demanded a theory of radical change that explained the upheavals with rational argument. Darwinism was it; due diligence could wait for later. Or so it seemed. A closer look at Darwinist theory should have inspired more caution. Nature doesn’t always pave the way for the survival of the fittest.



Before the doom and gloom of the post-NASDAQ fall, Net visionaries in the late 1990s found an irresistible appeal in the story from the late 1800s about a certain mutant variety of British moth. This species, called the peppered moth, liked to perch in sun-speckled forests. A good choice, since their white wings camouflaged them against the dappled sunlight, protecting them from predator birds. A few dark-winged mutants turned up in every generation, and an unlucky lot they were: Their dark coloring made these fellows especially susceptible to predators.

As the Industrial Revolution got underway and coal-burning smokestacks went up with the English textile mills, the world started changing. By the end of the century, smog was everywhere. The bark on the trees was increasingly covered in soot. Birds had a field day with the peppered moth. The normal light-colored moths began to stand out sharply against tree bark.

But for the mutants, life suddenly improved. Now hidden better, they survived longer and reproduced more, leaving offspring that were more likely to survive and reproduce. In a famous calculation, evolutionary biologist George Hamilton showed that just a 1 percent advantage in fitness could take a mutant variety from tiny minority to dominant majority in a few hundred generations. Moth generations are brief, and by the 1950s “industrial melanism” had turned moth populations throughout southern and eastern England entirely dark. The peppered moth became the most famous case of empirically confirmed Darwinian evolution in all of biology.

Connections between the luck of the peppered moth and the new phenomenon of fast-moving companies from Silicon Valley struck the new-economy pundits as well worth mentioning. The Bionomics Institute, which had been pushing the slogan “economy as ecosystem” for years, suddenly started getting attention in the mid-1990s. Big-shot technology venture capitalists and CEOs turned up on the institute’s board of directors and at its conferences. The institute’s founder, Michael Rothschild, issued predictions on how only Darwinism could help us understand the dramatic changes forced by technological innovation. “The last time the earth witnessed a comparably compressed surge of evolutionary invention was 543 million years ago — at the start of biology’s Cambrian Explosion. Indeed,” he continued, “insights into nature’s first evolutionary tsunami may help explain the economy’s latest.”

This was just what the doctor ordered. The digerati, their investment bankers and tech investors needed a theory that grounded the stock market’s astronomical valuations in eminently sane, serious laws of nature. The Dow 30′s incumbency meant nothing, and this was the reason. The Web was “like a deep-sea volcano bursting to the surface,” creating whole new landscapes. Only those who could adapt to the new environment would prosper, just as evolutionary history shows. Change or join the dinosaurs. Evan Schwartz, with his 1999 book “Digital Darwinism,” put evolutionary vocabulary into the mix. Darwinism had attained buzzword status.

Since the 1996 Bionomics conference, NASDAQ has been to 5,000 and all the way back. Now we realize, as we close the books on several years of hysteria, that there were errors of ideology in reporting the facts of this exuberantly Darwinian story.

True enough, the Cambrian was “the big bang of animal evolution,” probably driven by a fortuitous advance in the way genes combined. The developments of the Cambrian are responsible for radical changes like the first appearance of multicellular organisms. So Rothschild’s enthusiasm was understandable: If IBM and Microsoft were the primordial bacteria, just imagine what was yet to come.

But then the bottom fell out. Global temperatures increased a few degrees and the Cambrian’s spell was broken. Extinctions commenced in droves. So vast was the carnage that even now, 500 million years later, we have never again achieved comparable levels of biodiversity. Of history’s great extinctions, this was the whopper. Recall the saying about “what goes up.”

And so it has been with us these past 18 months. Take any sample of once-blessed names. CMGI, Kozmo, Idealab, Boo, Infoseek, Netscape, DoubleClick, Free-PC, Ariba, Amazon, you name it: If not dead outright, then they are shadows of their former selves. Even AT&T, Oracle and Cisco are hobbling.

But the sinking fortunes of the dot-com herds have not led to a similar fate for Darwinist approaches to markets. Amazon’s Jeff Bezos himself has spent much time invoking the Cambrian Explosion, telling BusinessWeek that “what people don’t think about is that [the Cambrian] was also the period of greatest extinctions ever.” Although “this is a great time to be experimenting,” he also warned, “it’s silly to think they’re all going to be successful.” That much has proved true. His underlying suggestion was, though, that while many will fail, the survivors will benefit enormously.

But is that how ecosystems really work? We all know that Mother Nature lacks foresight, so a rainy season can cause antelope herds to reproduce too eagerly. When next year’s rainfall is back to normal, the relative water shortage kills them in scores — but this paring back is not reliably therapeutic, as in the optimistic reading of “survival of the fittest.” These swells and dips are destabilizing. The young or pregnant die first, casting ripples for the future fate of the population. Similarly, the equity market’s present aridity is particularly harmful for early-stage companies, even very promising ones, while gigantic bunglers like Lucent have the resources and assets to survive. The mammals are starving while the dinosaurs lumber on.

And some good ideas may not come around again for a while. Take Vindigo, a Palm Pilot-based restaurant and night life guide that has been all the rage since it launched early last year. Expecting more venture capital, the company built out its platform extensively. If funding is temporarily unavailable while the revenue model matures, say your goodbyes. That’s what happened to Kozmo, a business that actually made economic sense in Manhattan, but got rushed to suicidal expansion by expectations of plentiful financing, growing demand and a long boom. Even Darwinism cannot guarantee that bad things won’t happen to good ideas — the conditions have to be just right. Bezos may find that bad luck can outrun even earth’s biggest bookstore.

Though Darwinist pundits come and go, the grand theory of struggle and survival remains. As irrational exuberance has faded completely, faith in evolutionary destiny may be slacking a bit. One lasting result, however, has been the upswing of interest in science’s most successful theory of change in complex, interacting systems: Darwinism. The next step is to leave the hype and sound bites for a deep, systematic analysis. There is much we can learn about new-economy companies from what biologists know about the humble peppered moth. Now that the world is back to normal, we have time to ask.

Amol Sarva is a graduate student inphilosophy at Stanford.

More Related Stories

Featured Slide Shows

  • Share on Twitter
  • Share on Facebook
  • 1 of 22
  • Close
  • Fullscreen
  • Thumbnails

    Once upon a time on the Bowery

    Talking Heads, 1977
    This was their first weekend as a foursome at CBGB’s, after adding Jerry Harrison, before they started recording the LP “Talking Heads: 77.”

    Once upon a time on the Bowery

    Patti Smith, Bowery 1976
    Patti lit up by the Bowery streetlights. I tapped her on the shoulder, asked if I could do a picture, took two shots and everyone went back to what they were doing. 1/4 second at f/5.6 no tripod.

    Once upon a time on the Bowery

    Blondie, 1977
    This was taken at the Punk Magazine Benefit show. According to Chris Stein (seated, on slide guitar), they were playing “Little Red Rooster.”

    Once upon a time on the Bowery

    No Wave Punks, Bowery Summer 1978
    They were sitting just like this when I walked out of CBGB's. Me: “Don’t move” They didn’t. L to R: Harold Paris, Kristian Hoffman, Diego Cortez, Anya Phillips, Lydia Lunch, James Chance, Jim Sclavunos, Bradley Field, Liz Seidman.

    Once upon a time on the Bowery

    Richard Hell + Bob Quine, 1978
    Richard Hell and the Voidoids, playing CBGB's in 1978, with Richard’s peerless guitar player Robert Quine. Sorely missed, Quine died in 2004.

    Once upon a time on the Bowery

    Bathroom, 1977
    This photograph of mine was used to create the “replica” CBGB's bathroom in the Punk Couture show last summer at the Metropolitan Museum of Art. So I got into the Met with a bathroom photo.

    Once upon a time on the Bowery

    Stiv Bators + Divine, 1978
    Stiv Bators, Divine and the Dead Boys at the Blitz Benefit show for injured Dead Boys drummer Johnny Blitz.

    Once upon a time on the Bowery

    Ramones, 1977
    “The kids are all hopped up and ready to go…” View from the unique "side stage" at CBGB's that you had to walk past to get to the basement bathrooms.

    Once upon a time on the Bowery

    Klaus Nomi, Christopher Parker, Jim Jarmusch – Bowery 1978
    Jarmusch was still in film school, Parker was starring in Jim’s first film "Permanent Vacation" and Klaus just appeared out of nowhere.

    Once upon a time on the Bowery

    Hilly Kristal, Bowery 1977
    When I used to show people this picture of owner Hilly Kristal, they would ask me “Why did you photograph that guy? He’s not a punk!” Now they know why. None of these pictures would have existed without Hilly Kristal.

    Once upon a time on the Bowery

    Dictators, Bowery 1976
    Handsome Dick Manitoba of the Dictators with his girlfriend Jody. I took this shot as a thank you for him returning the wallet I’d lost the night before at CBGB's. He doesn’t like that I tell people he returned it with everything in it.

    Once upon a time on the Bowery

    Alex Chilton, Bowery 1977
    We were on the median strip on the Bowery shooting what became a 45 single sleeve for Alex’s “Bangkok.” A drop of rain landed on the camera lens by accident. Definitely a lucky night!

    Once upon a time on the Bowery

    Bowery view, 1977
    The view from across the Bowery in the summer of 1977.

    Once upon a time on the Bowery

    Ramones, 1977 – never before printed
    I loved shooting The Ramones. They would play two sets a night, four nights a week at CBGB's, and I’d be there for all of them. This shot is notable for Johnny playing a Strat, rather than his usual Mosrite. Maybe he’d just broken a string. Love that hair.

    Once upon a time on the Bowery

    Richard Hell, Bowery 1977 – never before printed
    Richard exiting CBGB's with his guitar at 4am, about to step into a Bowery rainstorm. I’ve always printed the shots of him in the rain, but this one is a real standout to me now.

    Once upon a time on the Bowery

    Patti Smith + Ronnie Spector, 1979
    May 24th – Bob Dylan Birthday show – Patti “invited” everyone at that night’s Palladium show on 14th Street down to CBGB's to celebrate Bob Dylan’s birthday. Here, Patti and Ronnie are doing “Be My Baby.”

    Once upon a time on the Bowery

    Legs McNeil, 1977
    Legs, ready for his close-up, near the front door of CBGB's.

    Once upon a time on the Bowery

    Suicide, 1977
    Rev and Alan Vega – I thought Alan was going to hit me with that chain. This was the Punk Magazine Benefit show.

    Once upon a time on the Bowery

    Ian Hunter and Fans, outside bathroom
    I always think of “All the Young Dudes” when I look at this shot. These fans had caught Ian Hunter in the CBGB's basement outside the bathrooms, and I just stepped in to record the moment.

    Once upon a time on the Bowery

    Tommy Ramone, 1977
    Only at CBGB's could I have gotten this shot of Tommy Ramone seen through Johnny Ramones legs.

    Once upon a time on the Bowery

    Bowery 4am, 1977
    End of the night garbage run. Time to go home.

  • Recent Slide Shows

Comments

0 Comments

Comment Preview

Your name will appear as username ( settings | log out )

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>