Subject: Re: street performer protocol
From: "Stephen J. Turnbull" <>
Date: Mon, 22 May 2000 16:00:43 +0900 (JST)

At 07:26 PM 5/20/00 +0000, Crispin Cowan wrote:

    >> > Now reverse the situation: if capital for Linux startups
    >> > dries up and blows away, who will survive?  The companies
    >> > with the biggest revenue streams.

And Michael Olson:

    >> Wow, that answer took me by surprise! ... The size of your
    >> revenue stream only matters when you compare it to your
    >> expenses.

>>>>> "shap" == Jonathan S Shapiro <> writes:

    shap> I agree with the point, but it's not always correct.

    shap> If you can construct a reliable float on your revenue stream
    shap> of 30 to 90 days, you can actually lose quite a lot of money
    shap> on operations and still do just fine. This is how insurance
    shap> companies make money.

It's worth pointing out that this is exactly how insurance companies
get themselves in big trouble, too.  As they do every 10-15 years; the
"insurance cycle" is a well-known phenomenon (any of the major
business magazines will drag it up as the insurance companies get into
trouble _again_...).

"Reliable float" is nearly an oxymoron.  Especially in the scenario
Crispin referred to.  If the float (or any form of surplus) goes away
for any length of time (6-12 months, say), a large revenue stream will
probably (as Crispin points out) guarantee survival---in the short
run.  But bringing cost back into line may require cannibalizing your
future, because contractual commitments to lenders, employees, and
customers exceed revenue (Crispin also pointed this out, but doesn't
seem to infer the consequence)---leaving product development as the
easiest place to cut cost.

The resulting disruption may be very hard to recover from, even when
your "float" recovers.

My feeling is that Michael's point probably applies _more_ to the
software industry than to many others, precisely because a drop in
revenue does not involve much drop in cost (since marginal costs are
so low).

University of Tsukuba                Tennodai 1-1-1 Tsukuba 305-8573 JAPAN
Institute of Policy and Planning Sciences       Tel/fax: +81 (298) 53-5091
_________________  _________________  _________________  _________________
What are those straight lines for?  "XEmacs rules."