A burning issue

Last night, Ranjan was discussing the business-speak that will be required of the class and in particular he mentioned "burn rate" as part of the lexicon to be acquired. His remark triggered a thought, a concept of two very different burn rates.

It's July 1969 and humankind for the first time has extended a slender thread to another planet. Neil Armstrong and Buzz Aldrin, cocooned inside a paper-thin, foil-covered polyhedron known as the Lunar Excursion Module, are using a computer with less processing power than an iPod to land at the Sea of Tranquility. When Armstrong looked down on final descent, he saw that they were about to crash into a boulder-strewn field. Taking manual control, and with Buzz Aldrin calling out altitude and velocity numbers to monitor the burn rate, Armstrong piloted the LEM over the rocks and touched down safely with 25 seconds of fuel left.

Fast forward to the year 2000. A group of Internet entrepreneurs have secured $260 million in venture funding based on a business plan that offered to deliver practically anything ordered over the Internet by bicycle messenger. Kozmo.com was a revolutionary concept, one that promised to change the way that people have engaged in consumer transactions since the formation of money. Arrogant and idealistic, the founders, both investment bankers, were salivating at the prospect of an IPO. They were calculating their net worth, even when the company was losing 10 times its revenue. Regardless of the massive burn rate, they spent substantial sums on company parties, treating their 4,000 employees to lavish extravagance. Their dreams of a house in the Hamptons died on April 14, 2000, the day the Internet bubble officially collapsed. When the company folded, they returned a mere $15 million to their creditors and equity holders, leaving them smashed on the crags of business failure. As to the founders, Joseph Park and Yong Kang, they landed safely. Park founded another web site, Askville, which was bought by Amazon.com and Kang has returned to his roots as an investment banker.

While dramatic nonetheless, this view of "burn rate" pales in comparison to that airless day 40 years ago.