Date: November 24, 2000

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Red Herring Magazine's Third Annual "NDA" Conference was held
October 30-31, 2000, at The Four Seasons Aviara, Carlsbad, CA
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Dear Clients, Partners, Friends,
and Fellow Overworked Email Freaks:

Amidst the splendor of the rolling green hills North of San Diego, and the very blue waters of the Pacific beckoning out the many large hallway windows, a surge of anxious trend-addicts crowded back into the ballroom for the second day at the annual Halloween buzz-fest that is NDA--caffeine in hand and heads achin' from a blowout party the night before, at "Belly Up" in Solana Beach...

The choice of club was interesting: was the name a not-so-subtle tribute by Herring to the Year of the Dot-Bomb?? But the more interesting question is this: Why is it that the Herring people always seem to have the most fun at these things--do they all have an extra party gene? Or is it just that the work of putting on these mega-events causes an extreme need to go nuts at night? Perhaps it's the economy -- partyin' to forget the tech-meltdown misery of late....

Anyway, after an hour or so of sampling the buffets [and much good banter on my part with many friends, old and new] the house began groovin' to the Latin hip-hop brass sounds of a great band from LA. They sort of meandered in through the crowd single-file from the back, playing as they....samba-ed? Kicking off a rockin' show that lasted....well, longer than the band thought it would, I'm betting, as Tony Perkins himself jumped up on stage, playin' the congas or something, to call the band back out for more... which got the packed dance floor gyrating on with some of the hottest dancing I've seen in years...till, well, who knows? [Long after I'd climbed back onto the bus, I'm sure.]

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London 4-6 Dec
New York 19-21 Dec

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Which makes me think of one of the most interesting people I met at NDA--another guy on the official press list--and the whole topic of conferences as parties. He was an award-winning freelance journalist who writes for--get this--not technology media, but, like, GQ Magazine and food, wine, and travel pubs. His latest award was some Hemingway thing for a story called "Wasted Away: The Worldwide Party Guide." Now, you *know* Herring's party reputation is getting around when people like this show up. But I've been telling you guys this for years...I've lost so many brain cells now, I can't count. Not the cells, I mean I can't count. (Seriously, I do keep my wits about me at these things, to report to you, o faithful readers. Heck, I even *took notes* at this party! Do you believe that? I can't read 'em, but don't you go thinkin' this is all fun and games, no sirree...)

So, back to the topic of conferences as parties. I have a thesis about these events, finding them to be an interesting sociological phenomenon--in that they're sort of fleeting, highly dispersed gathering places for stressed-out, overly wired & wireless New Economy professionals who, because of 24/7 work, collectively seem to have an enormous hunger for real social contact. They rarely see the inside of a club. So, these evening conference-shindigs become such high-energy, concentrated fun/gab-fests because the clientele is not only very much of like mind, but of like need to, well, forget looking at their Blackberry for once, and cut loose a little bit, for krissakes. Really, it's wild--the scene can make frat parties of old look like ice-cream socials.

Morning Keynotes: A Dozer and a Doozer

So much for the party component--now back to the content. Actually, I used to like the original tagline Herring attached to this event: "Secrets by the Sea." But they likely had a hard time selling that one -- speakers probably balking at the thought that they had to cough up their company's *real* inside skinny. So they dropped it. This year's tagline was an innocuous "Business and Beyond." Yawn. The generic one of all time.

We rejoin the conference, now in session...wherein Hewlett-Packard is trying to tell us how our printers are now information appliances, among other...yaaawn...things that the presenter was *reading* to us while showing us pretty but *bor-ing* PowerPoint slides.

Yes, HP has a big plan for you. In a second-day morning keynote, Ann Livermore, president of HP's Business Customer Organization, a $35-billion division, told of how HP is moving from the Internet Economy to a "full-line digital renaissance." According to Livermore, HP's customers first asked for transactions, then to move existing transactions to the web, and now want to take any asset or product and deliver it as a service. "This changes the discussion to creating a new revenue stream," she said.

"We're entering a new era in the 'Net," Livermore said, "which demands tighter linkage between transformation of a business and its systems. System implementations are becoming inseparable from business strategy."

Livermore's comments on HP's printer business illustrated the company's e-services strategy. She said printers are now a $20 billion business, with a 70% market share. But HP is now beginning to position its printers as information appliances, Livermore said, which "can enable a whole set of e-services, in the always-on 'Net infrastructure" -- to the point at which it's now a $100 billion market opportunity, she said, five times its current size. "Part of a larger ecosystem," the HP exec intoned, pointing out that "all organizations need this kind of outlook today."

And if turning your printer into an information appliance isn't enough, how about this: Livermore said "a new e-services Swatch watch" is coming later this year. [So, why didn't we all get one, HP? This is a trend-setting group ya got here, for cryin' out loud! Some of whom likely broke their watches last night, falling down on the dance floor.]

"We've envisioned a whole new world as the consumer sees it." said Livermore. This "Digital Renaissance" era, as she termed it, is "about unlocking the individual's contributions."

Wake Up Time: Gilder Rips Into Herring's New Top-Ten Trends

"These Herring trends are pathetic!" bellowed George Gilder as he jumped up on stage for the morning's second (and much awaited) keynote. "Little wavelets is all they are, with virtually no significance going well into the future." [Huuuge laughs.]

So began this well known author and futurist's famous opposing viewpoint look at what Herring's editors were so proudly unveiling in their annual trends issue. [He's actually paid to do this, and it always works--the audience loves it.] A panel of Herring editors was scheduled to join Gilder next to defend their choices.

Gilder totally trashed Herring's trend on bandwidth, saying "There's a fundamental flaw in measuring supply and demand for bandwidth...and IDC's numbers, too, are meaningless. All these trends are!" He said people buy connectivity, not bandwidth. He also exclaimed "the local loop is mostly wasted--95% fallow."

For their number one trend, distributed computing (or peer-to-peer), Gilder wryly noted: "Oh yeah, like *that's* never happened!" And he really unleashed on Herring for its choice of a hot P2P company, InfraSearch (later to be the subject of an interview). That company's prediction that it will become another AT&T got this comment from George: "Yeah, sooner than they think!"

Gilder pointed out that the network is faster than the backplane of the computer, and that "has resulted in disaggregation of storage on the 'Net." Distributing heterogeneous files across the 'Net, said Gilder, is "not gonna work."

He said that distributed computing "has been around a long time. I've been writing about Grid Computing for 15 years!" But, he said, "it's not going to be Napster that sums it all up."

Another point Gilder made is that the density of storage has grown two times as fast as Moore's Law.

On Herring's trend that intellectual property (IP) will bifurcate into what a company can and cannot defend, Gilder simply had this to say: "Facile."

"Information doesn't become IP until it *is* defensible!" he shouted. "Just like land became defensible when barbed-wire was invented." Security will be important, Gilder assured us.

On Bluetooth, the wireless standard that Herring made the subject of another trend, Gilder had this to say: "Yes, it's a trend, but it's not going to change the world, because it's all in 2.4Ghz. That renders it not significant--even though it will be widespread." [You figure it out.] "A return to infrared may actually be desirable," Gilder said. "It has some point-to-point problems, but those can be solved."

On the next trend, the coming shakeout of VCs, Gilder commented: "Of course--this is all good for the economy!"

Gilder closed his talk with *his* overwhelming trend: "When you have a bandwidth glut, it's time to return to circuit switching."

He also said there's a new law at play now--Cao's Law (named for researcher Simon Cao). "Optics will be the major trend. This dwarfs all the other trivial trends of Herring's combined!"

The Panel Joins In to Debate the Trends (and Each Other)

As Herring editor Jason Pontin joined Gilder on stage with a a few of his fellow editors, Gilder asked him: "You did this?" Wow, you're putting out too many issues!" [Big laughs.]

To which Pontin responded by kicking off the discussion: "Why are we off on distributed computing?"

Before Gilder could defend his position, two other panel members joined in with their comments. Steve Jurvetson, a partner at VC firm Draper Fisher Jurvetson, came to the defense of the trend, saying his firm has seen some 200 business plans so far this year relating to it. "It's not a computing trend so much as it's a communications trend," he said. "It's mainly about pushing out reliability to the edge." The promise of the trend, he said, is that "we'll finally see this emerging intelligence, this hive of individuals."

Ravi Suria, senior analyst from Lehman Brothers, chimed in with "How will it make money for shareholders? That's three or four years away."

Gilder continued firing comments in, including a new word he likes: "storewidth." He also said that "Akamai is blowing it -- they're putting information too close to the user!" And finally: "This whole trend is incoherency! InfraSearch is a fantasy."

"Ooh-kaay," said Jason Pontin, during an uncomfortable pause. "Shall we move on to Trend 2?"

(By the way, during a morning break, we were shown an interview taped the day before, of Herring editor Pontin being interviewed on CNNfn's "Digital Jam" show, in which he reviewed some of the trends he thought its viewers would be interested in-- distributed computing, intellectual property, and wireless.)

"Why is it that our IP bifurcation trend is not valid?" asked Kenneth Cukier, Herring's London Bureau Chief (referring to intellectual property). "It's an old trend," said Gilder, "and will be overcome by systems that allow microtransactions."

On Trend 3, the VC shakeout, Pontin turned to the only VC on the panel and asked if his ilk wasn't trying to take on too much, too many investments. To which Steve Jurvetson replied: "We still only invest in about 20 companies a year. So we aren't too different from what we've always been." However, he said he's heard of some VC partners serving on as many as 30 boards, imlying that was insanity.

"Venture capital is a long-wave cycle," Jurvetson said. "We won't see returns go negative in 2001. The top firms never have been."

On Herring's trend that worldwide, 24/7 "ECNs" will change the whole nature of securities trading, an interesting discussion ensued as Kenneth Cukier, Herring's London editor, asked "What happens when the concept of closing price goes away? Do we need it?" To which Ravi Suria of Lehman Brothers incredulously remarked: "Our whole accounting system is based on it!" [So much for that one kicking in real soon.]

On Trend 5, Bluetooth, Jason Pontin was quick to point out that 2001 will not be the year of massive adoption. "It's a niche market, first wave," he said. And he spoke of how it offers up a new breed of network: "Ad hod networks." Startups will get a lot of funding in this area, Pontin noted. But Steve Jurvetson said Bluetooth will not get ubiquity for years.

On Trend 6, the continuing glut of bandwidth, the most passionate comment of the whole panel discussion came from Ravi Suria, the Lehman analyst. "We'll see a substantial shrinkage of capital available for all this technology. The junk-bond market was $502 billion this past year-- half of it for telecom! We'll see substantial defaults and bankruptcies," he said. "They're running on negative cash flow. And, compounding the problem is 3G wireless--that will put tremendous pressure on capital, globally. It's a disaster waiting to happen!!" he shouted. [Huge applause.]

Wireless commerce in Japan comes to the U.S., Herring's Trend 7, was another one that got trashed soundly by George Gilder. "Hey, 80% of those iMode users have no other 'Net access or phone!" he said, pointing out the situation in the U.S. is totally different. And besides that, Gilder said, "their 3G is only partially as good as Qualcomm's 2.5." Basically, George says forget it -- "The Japan phenomenon won't translate here."

So, what of Trend 8 -- that the 'Net will fall under the regulation of international accords. "The Internet Economy is like a 'meta-country'," said VC Steve Jurvetson. "The relevance of governments will fade." [Take that, Al Gore!]

Poor Trends 9 and 10--energy and biotech--became the stepchildren, because we ran out of time. So, you'll have to read the mag for more on those two.

One of the audience questions following caused a lively exchange among the panelists: What will happen with telecom pricing?

"It's going down faster than what investment returns were based on," said Lehman analyst Suria. "Too much money was invested. Too many competitors are commoditizing the services."

Ever the telecom tech-expert, George Gilder had the relevant spec right at the tip of his tongue: "With wave division multiplexing, the cost per bit is dropping 10x or so every year!" But as "communication becomes more visual, in many ways," he said, "it requires much more bandwidth."

Which led Herring's Pontin to start asking the panelists what their biggest trend was. Lehman's Suria: "The dinosaurs will win." "No, no!" said Jurvetson. "Every company that's dying looks more and more profitable as they die, then they just fall off a cliff. They do that by things like cutting people. But they still have antiquated technology."

"Steve, your biggest trend?" asked Jason Pontin of Jurvetson. "Communication is more important than computing," he quickly offered up.

Asking the same thing of Lehman's Ravi Suria, he had this to say: "After Y2K, traditional companies are now focusing on how they can improve their businesses, with things like online exchanges. As the old-economy dinosaurs start moving this way, they will continue to make money."

Herring Puts Hot P2P Startup InfraSearch On Stage

Another part of this Tuesday afternoon session was a short segment by Rafe Needleman, editor of Herring Online, doing one of his "Catch of the Day" interviews--named after his popular email newsletter, which event host Lise Buyer said now has more than 700,000 readers every day. So, when a startup gets on Rafe's radar, they are lucky indeed.

Turns out this particular guy's luck was pre-destined, however, as Rafe admitted he'd learned of the outfit from longtime Herring friend and board member, Ron Conway--also of Silicon Valley Band of Angels fame. Joining Rafe on stage was Gene Kan, a young Gnutella developer, who had recently launched InfraSearch, which is based in the Valley (and which, you guessed it, Ron Conway was one of the first to fund).

The company had also been featured on the cover of Herring's latest "Trends" issue, first distributed at the NDA conference-- the subject of a story illustrating the number one trend, Distributed Computing. This was also the same company George Gilder had trashed so badly in his morning session (see above), as being "total fantasy."

Rafe began by noting that the company had actually changed its web site several weeks prior to "GoneSilent.com," in an attempt to go into stealth mode (a common practice by startups whose backers believe them to be bonafide first-moving breakthroughs).

"Why are you hiding InfraSearch?" Rafe asked. Kan said it was because that they were just getting too much attention, being "asked questions we weren't prepared to answer"--as just a team of three young techheads. "So, we had to stop the barrage."

"What in a nutshell do you do?" Rafe asked. "What is P2P?"

"Well, if a provider is at the edge, that's P2P," said Kan. [There's that word again, friends. Gettin' edgy yet?] "We enable cross-platform information searching on the web," the very boyish-looking entrepreneur said.

He went on to remind us that, when we search on the web, there are "two worlds of information--what's on the sites themselves, and what's in the search engines." Only some 50-60% of all web pages are captured by even the best of search engines. Also, there's an increasing need to be able to search for much more than text--rather, many other media types as well.

InfraSearch, we were led to believe, would solve these problems. Content providers, Kan said, typically spend a ton developing their sites, then only a pittance to get their content into the search engines.

"We believe they'll spend more than that to improve their search results," he said. "What we enable is no more waiting for the crawler to find you -- in a word, 'instant-on searching'."

Kan wrapped up by declaring, "We want to enable intercommunication between computers" -- spoken like the Gnutella expert he is.

Rafe Needleman gave this final assessment: "I see what they're doing as making search more efficient for content providers -- I know it's an unbelievably important part of our site." [Watch then, friends--you may get a chance to try InfraSearch yourself on Herring.com, since they frequently showcase promising early technologies on their own site...well, maybe in return for some equity, anyway. Don't forget--money-making they know.]

Always the Skeptic, Herring Hoists "Anti-Trend" for 2001

In what seems to be the topic that just won't go away, Herring closed the NDA event not with their usual VC panel (curiously absent this year), but with a panel discussing their anti-trend: "Convergence of Computing & Entertainment in the Home Fails Again in 2001." Yawn--one more time on this one. We've heard it so many times before. [I'd observed it in spades at the Herring on Hollywood event I covered in August--plus a recent Red Herring issue blared "The Sorry State of Digital Hollywood" on its cover.]

But the fact that this wasn't the most high-interest of topics didn't much matter, since the audience had now dwindled by more than half--down to only us hard core--as many of the Californians in the crowd had bolted in the afternoon to get back home to the kids for Halloween. Luckily, Tony Perkins, in his inimitable moderator way, kept it interesting. A rundown follows:

"We just don't think this this trend is even close to the level of hype, the barrage of news releases that hits our doorstep every day," said Rob LaFranco, Herring's LA bureau chief.

"I'll say this," said Andrew Lev, president of MetaTV. "Interactive TV won't get great consumer acceptance if a separate settop box is required."

"So what do WebTV's customers want to do with your service?" Tony asked that company's CEO.

"We have one million subscribers, and we're introducing our 'Ultimate TV' service in December," he said, to compete with the already announced AOL TV.

Of the cable industry, Herring's LaFranco said, "They take too long to get new settop boxes deployed, and they aren't interactive yet, either--really."

Yahoo!Finance's Eric Scholl cited an interesting stat: "Some 77% of broadband users visit Yahoo, so we have a large percentage of people who access us from work. We test and try lots of things."

"So, would you invest in a content play optimized for the web?" Tony asked the panel's lone VC, Ravin Agrawal of LA's EastWest Venture Partners. [Quick, can you guess the answer?]

"Content is not a VC investment," he said, like a recorded announcement. [Press 8, bozo, if you're a content play...and for God's sake, don't call us--we'll call you.]

"Rob, you pooped all over Digital Hollywood in that last issue-- what's the story on that?" asked Tony of his LA editor.

"Well, a bright spot is that a lot of people left the big studios and went to content dot-coms, learned the technology, and now they're going back to the studios," he said, implying there's one lone bright spot out there for the dinosaurs.

"Is Yahoo going into the content creation business?" Tony asked.

"No, we're aggregators and facilitators," said Yahoo!Finance's Scholl.

For some reason, this panel drew the most active audience questioners of the whole damn conference, which got the panelists going even more. The first question: "Do consumers really want interactive?"

"We did a study, and over half said no!" said Herring's LaFranco.

WebTV's president fired back with, "They may say that, but most people still watch Jeopardy and yell at the TV! Let's just not call it 'Interactive TV', please."

"You have to provide *intuitive* extensions to your content," said MetaTV's Lev.

A second audience question: "Don't we already have too much information coming into the home?"

"It's only overload if you aren't managing it right," said the WebTV panelist.

"But until it's simplified, who needs all the complexity?" said Herring's LaFranco. "The home isn't supposed to be a place of stress."

Yahoo's Scholl added: "The number-one mistake in the content business today is throwing up everything you got."

"Yeah," said Tony Perkins. "Can't the CNN stock ticker just show *my* stocks? Wouldn't that help the individual manage overload?"

"A lot of people first did online purchases at work," said EastWest Venture Partners' Agrawal. "So, some of this new interactive stuff may get adopted that way."

And yet another audience question: "What about pure entertainment, not just data-retrieval applications?"

"HBO is creating *web* episodes for 'The Sopranos'," said MetaTV's Lev, "which they'll run after the broadcast."

Changing the subject, Tony Perkins threw this one at the panel: "Yahoo's founders won the argument with the VCs *not* to charge subscriptions, ushering in the whole era of free. Will the subscription model become more viable?"

Depends on the content type, said both WebTV and MetaTV. A small amount monthly for unlimited may work, said the Booz Allen panelist. And the EastWest VC threw water on the whole thing: "We're entertained pretty well already--do we need more?"

A final audience question drew big reaction: "What about Enron and Blockbuster's deal to deliver video-on-demand to the home?"

"A fantasy--a waste of time!" shot back WebTV. "Agreed," said Herring's LaFranco. "Twenty years out maybe?"

WebTV's rationale was this: "A lot of movies can be stored locally now, and the collection can be refreshed or added to easily by 'trickle casting' overnight via satellite. The only communication needed then is to get authorization, which doesn't take much time or bandwidth at all."

And so ends Herring's third NDA. Another year, another notebook full. (God, I love this job.) After the requisite closing reception, it's time to jump into the red Mustang and hit the 5 back north to Altadena. San Diego County (and NDA), I love ya -- be back soon.

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Selected Other Quotes from NDA...

Kevin Nealon, in his Monday-morning opening 'Herring NDA News Update'...
"I asked Tony Perkins about the stock market last night after the whiskey tasting--all he said was 'The Nasdaq's goin' up and down like Charlie Sheen's ass in a whore house!' "

Richard Danzig, Secretary of the Navy:
"We have $6.9 billion to be spent over the next 5 to 8 years. We can be a customer for many of you." [And lead contractor EDS has promised 40% of their part of the budget to small business, he said.]

"Very few organizations have totally transformed themselves like this. The Navy has existed for 250 years. The problem is how to get people to buy into change."

"Pentagon procurement being the way it is, two-thirds of the next decade's fleet is here today. So the key to modernizing it is software."

How does the Navy, the biggest organization in the world, with a $90 billion budget and 900,000 employees, attract and retain good people?
"We recruit 1000 high school grads per week--56,000 are taken in annually, with 90% of them high school grads. The average age on one of our aircraft carrier decks is only 19. For captains, it's 30."

Michael Capellas, CEO, Compaq Computer, on what he sees as trends:
"The 'Net becomes invisible. Wireless will proliferate. Content will lead commerce. There will be billions and billions of 'Net devices, and we'll be in all these markets."

Why is the Herring trend that the 'Net will be regulated by 2001 not something you agree with?
"The need may be there, but government is ill prepared. The average government takes four years to put a piece of legislation into action, to last 10-15 years. So it's about not just theory, but execution. Is government incapable of doing it? Yes, they can't possibly move fast enough."

Jason Pontin, Editor, Red Herring Magazine:
"We believe biotech will have at least as much impact on society as the Internet."

Michael Capellas, CEO of Compaq on the future of the Pocket PC:
"When we started, we thought we'd sell about 7,000 units a month. We're now up to 100,000, and they're going for as much as $1100 on eBay. It's been phenominally successful."

"People want rich content, great sound, integrated to applications. Whether it's the PC or the TV becomes moot. I'm not sure what 'PC' means anymore. We need to find some new definitions."

Bill Miller, Cofounder & CTO, StorageNetworks:
"The value models in P2P will be in companies who can deal with the incoherency date in a collaborative way, and deal with the latency issue."

Kemer Thomson, Sun Microsystems:
"You're not going to wire every house. But when we reach wireless maturity, home networking will happen."

George Gilder, Founder, Gilder Technology Group:
"The real sign that a property system is breaking down is when honest people steal."

George Gilder on the SEC considering new rules about access to information:
"Open up inside information to all!"

Rob LaFranco, LA Bureau Chief, Red Herring:
"The cable industry has 70 million subscribers. No one will succeed in interactive TV without them."

"The studios are basically banks. They'll eventually win -- *if* they can leverage across channels."

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That's it for now, but look for more conference reports soon.

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Check out our home page for past conference coverage, and also
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Watch for more of our conference coverage soon, including
The Industry Standard's "i_dentity" event at The Palace Hotel
in SF Nov 30, and--in December--"Online Exchanges 2000" in
Chicago, followed quickly by Jupiter's "Ground Zero 4" in LA,
and "Line56!Live" in NYC in Dec 19-21, and more we probably
haven't even heard of yet....

If you have suggestions about other events I should be covering,
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