Burn Rate

Michael Wolff depicts two essential new economy insights throughout his book, Burn Rate. First, Mr. Wolff describes the tremendous pace at which the Internet industry functions as well as how transitional both the business models and technologies employed are. Throughout the entire narrative it is evident of how quickly companies transition from strategy to strategy in order to be on the forefront of the next big hit. The second insight Mr. Wolff shares is the importance of having enough capital to achieve current corporate goals and to be able to transition entire strategies in different directions as needed.

By chronicling the Internet’s early years Mr. Wolff shows how amazingly fast the Internet world has evolved and will continue to do so. His illustration shows how the new technology was not completely understood and how companies were striving to make heads or tails of what its potential really was. This was evident in how Mr. Wolff explained the early online services such as Prodigy and CompuServe were tremendous successes prior to the Web being completely understood. The economic model for online services was clear; people would pay for access to information being provided. What these online services did not comprehend was that the Web would allow anyone to access any information for free. As the Web evolved, online services were left behind because consumers were no longer willing to pay for what was being offered. Tremendous amounts of capital had been invested on closed online services but since the Internet evolved into something else, these investments were sunk. With the rise of the Web a new economic model had to be created. So, people transitioned to the advertising bandwagon. Companies that had large user bases would be able to charge advertising fees and develop sound economic models using this new paradigm shift. The problem was that companies did not completely understand this at first. This is evident by Netscape’s blunder to not recognize the fact that they essentially controlled consumers by developing the most widely used web browser. Nearly everyone that ventured on to the Internet used Netscape’s browser and thus were forced to initially go through what every location Netscape wanted. Since Netscape did not capitalize on this they never obtained their full potential. The entire book is made up of examples where the Internet and new technologies were simply transitional since the industry evolved so quickly. By reading this book it is clear that anyone involved in this industry must stay on top of new trends and be willing and able to advance into uncharted territory if they want to survive.

Another insight brought to light within the book is the importance of capital. The entire book revolves around Mr. Wolff’s search for capital to fund Wolff New Media’s growth and evolution. It was fascinating hearing how Mr. Wolff’s company was on the verge of tremendous wealth while at the same time being on the brink of bankruptcy. This common characteristic of Internet companies was largely due to the fact that people did not know how to value the economic models of an industry not completely understood. The book also has numerous examples of individuals and companies continually stating that they are willing to invest in new ideas but never actually making the investment. This constant cat and mouse game is a tremendous burden on companies when there are so many other aspects to succeeding in such an environment. This book was a clear lesson on how important the financing choices made are and how important it is to have raised the capital needed to achieve ones goals.