physicals

Alternative term for actuals.

Idealab initially made only Internet companies because we felt this was an incredible new medium that had unbelievably high gross margins. If you could make a Web site, you could sell something online and you could make margins of 90 percent or higher. When we looked back at the ones that were most and least successful, we realized it had nothing to do with their margins. It had to do with how protectable the idea was. Was there a core intellectual property with which you could differentiate yourself and earn sustainable margins? Because you can make good margins online, but if you can't sustain them, it doesn't mean anything. So that led us to take another look at all businesses -- even companies that make physical products. We had shield away from making anything with atoms; we were all caught up in doing only things with bits. But you can make things with atoms and still have a huge amount of intellectual property in them, where you can earn good margins and protectable margins.