Scale vs. no scale. That may be the ultimate prism of this market. The venture capitalists speak it, the analysts understand it, and even the mutual funds are beginning to figure it out.
So let's talk about it.
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Message Boards. Tons of people have ideas. Many of them are great ideas. The ones that scale the fastest and the biggest, meaning the ones that can grow at the speed of light and have tremendous heft, are the winners in the world of capitalism.
The ones that are niche or small-time or mom-and-pop are failures in this prism, no matter how quality-oriented they are.
Anything that stands in the way of viral growth is sinful in this new world. Anything that abets it --
is the purest example -- is a godsend.
Right now, we are beginning to see a split between the dot-com and dot-com abettors that are scaling well and those that are not scaling fast enough. It is imperative that those that can't scale fast enough re-examine their business models and figure out what is holding them back. If they can be tweaked or changed, they must be, no matter what protestations are made to the contrary, and no matter how much ego is involved.
But what if there is a part of the equation that can't be altered and it hurts scale? That's when the stock may be in trouble. Exhibit A in this nonscale model is
, or lack thereof. When I read through the
excellent story on
today, I was thinking, holy cow, these guys are in the analogous situation to the
store that used to deliver my food to me in Brooklyn Heights. That store never had enough delivery people to meet demand. Never. How can Webvan?
Or take a
, both of which I think are great companies. How many people can they get to design and craft Web strategies before they have to bid up talent to absurd heights? How well does a pay-by-the-hour business really scale?
Increasingly you will hear about companies that have reached their scalable limits because of labor as all of the dot-coms use up the available talent pool. When it becomes obvious, the stocks that can no longer scale will get hammered unless they can change their models fast.
If they can't, the hammering will be relentless.
seems to have legs in Europe where similarly situated companies are all rallying. Do we have another one-day selloff where we have to get right back in? I will tell you this: My mailbox was immediately flooded with people predicting doom and telling me I was much too
blithe about the selloff. To which I say, fine, bet against me. I always welcome the sport of it. ... Another excellent, comforting
Gary B. Smith
about the B2B world this morning. If you aren't reading these, you are missing one of the true joys of
These charts rock.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Oracle and Akamai. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at