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Strange things are happening out in the Hamptons -- that tony weekend and summer village on the east end of Long Island. Wretched excess is in full bloom, of course, with giant houses popping up like mushrooms on every possible inch of old potato field. Where no raw inches are left, tear-downs are the rage. Buy a million dollar house that's perfectly O.K. -- and tear it down so your very own architect can shape it to your very own personal tastes, as long as it's longer, larger, or showier.
The big construction money in the Hamptons this year is Silicon Alley dot-com dough, elbowing aside the celebs and even the Wall Street investment types. This makes for interesting demographics. The dot-com millionaires are much younger than the stars and Masters of the Universe -- many in their 20s. Some look like they're in their very early 20s.
But beneath this new wave of new money, something is wrong. There has been a change of tone recently. I rode out all winter and spring to the cottage my wife and I have in the Hamptons on the new double-decker trains with the growing army of dot-com'ers (who were then hollering at real estate agents to find them a rental for the summer). They were cocky and loud the months before the Nasdaq's March crash. Arrogance and condescension just poured from them. They were the future. Their dot-com companies played by different business rules that most people didn't understand. And they were really, really rich. Their options were worth millions -- many more millions than what a mere investment banker or lawyer takes home.
PARTY LINE.
Not anymore. That hubris is gone, deflated along with the stock prices for practically all Silicon Alley dot-coms. Options are under water and -- this is what's interesting -- dot-comers are defensive for the first time. The chatter on the train has switched from, "We are the future," to "My company will show real profits in three to five years." The swagger is gone.
I sat next to one 25-year-old from DoubleClick recently and asked him how his company was doing (he was carrying a DoubleClick backpack). He just unloaded the party line -- "serious company, right business model, profits, profits, profits." Not a word about technology. Whoa! I didn't have the heart to tell him that I had written an editorial excoriating DoubleClick and other dot-coms for their privacy policies -- using "cookies" and other methods to collect data on consumers without their explicit O.K. This guy was so defensive, almost sheepish.
I almost missed the old swagger. Almost. Truth is, the markets have acted quite rationally in recent months in knocking the high-flying dot-coms down a few pegs. In a period of fast technological change, no one knows what really works. The U.S. has great venture-capital financing capability, and VCs poured billions into new business models that were basically experiments.
THAT'S LIFE.
A lucky few cashed out of these dot-coms early and now believe they were geniuses, rich geniuses. The truth is much harsher -- most business-to-consumer dot-coms won't generate any profits in any foreseeable future, and they've been hammered. Business models based on content got hammered. Salon.com just laid off people, and TheStreet.com's stock is a paltry shadow of its former self -- and it specializes in financial data!
A whole slew of businesses were launched, the stock market soared. Then it turned out that some had revenues based on accounting gimmicks, or their business models were built on trading on people's privacy, on promises and hype, or on even less. So their stocks fell. Many see irrational exuberance in all this. I don't. It's market rationality of the clearest nature.
Which is why the tone in the Hamptons has changed so dramatically. In the early, dreamy stage of new technology, anything is possible. If you're quick, you might even profit from the dream. But as Frank Sinatra put it in another era last century, "that's life, flying high in April, shot down in May." Options soar, then crash. Investors rush to dot-oms. Then flame out.
Just a few months ago, everyone on the train was talking about two or three friends who jumped over to new dot-com ventures and were already rich on paper. Recently, the chat is about friends who were fired -- a concept so alien, so it-could-never-happen-to-me just a winter ago. It's almost like the '80s, when many of their parents were laid off. That was back in the Old Economy, not the New One.
Nussbaum is chief editorial writer for Business Week
EDITED BY DOUGLAS HARBRECHT
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