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How to Survive the Social Crash

Posted on by Randy Botti

This is how I feel, I’ve been trimming my contacts down to those that really matter.
RB 

http://inoveryourhead.net)" style="color: #888; font-size: 22px; font-family: Arial, Helvetica, sans-serif; font-weight: normal; text-decoration: none;">How to Survive the Social Crash


How to Survive the Social Crash

Posted: 23 Feb 2011 08:18 AM PST

I have to leave the house right now so I’m going to publish this post early. It is not polished, but I think the ideas are strong. If that means it gets ignored, whatever.

I am not a real investor– just a writer who wants to survive from one bubble to the next.

But today, I am pretty confident a social crash is coming. Whether you agree or not, it’s important that you read this.

We think all of this social stuff is building value for us– building wealth for some and just well-being for others. This is somewhat true– but I suspect we are overvaluing what it can do for us– most of us anyway.

It is true that there is a massive population going social online, but this growth might just be building value for established companies like Facebook. A few of us are making money off of it, but many people are at the bottom of this pyramid and will be left without anything to show for it at the end.

Because most people are not financially invested in this space, the bubble will not leave people broke. But it will leave people thinking they’ve wasted a few years of their lives.

If you’re like most people, you did not start here early, which means you’re closer to the bottom of the pyramid than the top. So it’s possible you’re being had.

But I want you to avoid this, and I will endeavour here to show you how.

But first, why.

“Friends” are valueless. Well, maybe. I’ve written before that audience is an asset, but is it really? Most of your “friends” on Facebook, if you’re a typical social media douche, will never do anything for you except social proof your popularity, an effect which is blunted over time anyway as more people realize the reality of the situation.

I view the hyperinflation of friends the same way I see the valuation and false growth of companies based on inflated/purchased ComScore traffic stats. They convince those with money to spend, or those not savvy enough to tell the difference. But eventually valuations become so unreasonably high that they are unbelievable to even the uneducated.

This collective “A-ha!” moment is when the bubble bursts. It’s when we all call bullshit on online friends, comments, and connections as a reason to know someone– online, that is.

Most startups have no business model. I worked for a startup in the late 90′s with a great idea but no business model or revenue (it was an early Google Maps type thing). It was very interesting but the decline was evident. The model was clearly to get bought.

I had a discussion with an angel/VC type the other day who is very smart. I asked him why people do this instead of, say, real estate. One of his answers was “ego.”

I think another may be that people now feel that anyone can do it. This collective sentiment is based on watching regular guys be able to develop massive followings, but it’s common to all bubbles to find an “anyone can do it” mentality. Think housing, dot-com, and many others.

Everyone is looking for the “next” Facebook or Twitter. This is probably the question I get the most often from conference attendees, as many of you probably know. Possibly many of you are looking for it or are trying to build it. God bless you and I hope you do well.

But it’s likely that the “next” anything will not be social at all.

What’s really interesting is that Facebook, Twitter, etc actually benefit from this inflation. Their valuations are not public and therefore don’t impact the public at large, but those of us inside here will definitely feel it, especially if we work in the space.

Now to the next question. How do you avoid a crash?

You must exit. This means convert to cash.

Your assets must be diversified. You cannot sit there with your Twitter expertise– you, and your company, must do more.

Your assets must be real. They must be outside this space– or if they’re in it, they must provide actual profit.

If you do not have the ability to do any of these things, your personal stock may plunge– soon.

There are those who know how to really turn networks into an income stream, by the way. They are called SALESPEOPLE.

Do you consider yourself a salesperson? This is not most of us. Most people are anxious about turning weak ties into money, but for some, it may be necessary.

So your options are to step out, or to learn to create value from what you have built by stretching your social contract to include selling to them.

Final note. During the dot-com bubble, some very interesting people emerged. I think of Frank Schilling, who is quoted as saying that, after the dot-com crash, everyone just went back to using the internet every single day. And this is where Frank picked up over 300,000 dropped, and valuable, domain names– while everyone thought they were valueless.

Now, he lives in the Cayman Islands earning… well, let’s just say a lot.

There will always be people who survive crashes, or who grab undervalued assets and use them effectively to make a killing, one way or another.

But there are many more people who think “everything will be fine” and who walk along with people all the way off the cliff.

The choice as to which kind you will be, of course, is yours.


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