STANFORD GRADUATE SCHOOL OF BUSINESS—Dot-coms aren't dead and the real growth in e-commerce is only beginning, Intel Corp. chairman and founder Andy Grove told an audience at the Graduate School of Business. "We are only 10 percent there," Grove said, estimating that while 25 percent of the needed investment had been made, only 5 percent of the benefits had been reaped. "Which is part of the problem," he said.

Grove made his remarks during a May 10 question-and-answer session with journalist John Heilemann at a presentation, "The Long View: Understanding High-Tech's Problems and Promise," sponsored by the Business School's Center for Entrepreneurial Studies, Wired magazine, and the School's Futurist Club. Nattily attired in a black leather jacket, Grove answered a series of questions, mostly about the future of the Internet economy, with his trademark quick wit, keeping Heilemann on his toes and the standing-room-only audience in fits of laughter.

Bucking conventional wisdom, Grove said that Amazon.com's customer service model would one day become the norm for businesses in the way that it personalizes services. "Amazon really brings back the customer awareness or familiarity of the general stores of the past," Grove said. "Computers bring information that owners of the corner store used to have." He also praised Amazon for its success in establishing global brand recognition in just a couple of years. He did say, however, that if he were running Amazon, he'd get out of the barbeque grill business.

Besides changing the way companies deal with customers, Grove said the Internet has the potential to transform supply chain management, but, unlike Amazon's efforts with customer service, no company has truly exploited the Internet's potential to dramatically cut costs by reducing the need for inventory. "Inventories are basically a cover for inefficiencies of supply-chain management," Grove said.

Grove also noted a positive effect of the huge, now often ridiculed, investments made during the dot-com boom. The enthusiasm of investors meant that there was enough money funneled into the Internet to create the infrastructure needed to make e-commerce work. "What bank would lend money in an ordinary time to a business model like Amazon's?" Grove asked.

Grove dismissed concerns about the long-term effects of the dot-com bust on the Silicon Valley economy or the effects on the quick rich/quick poor generation of young Internet entrepreneurs. "These things come and go pretty fast," he said. Instead, Grove said the worst fall-out from the dot-com boom and bust has been the effect on Bay Area housing prices and the adverse effect it has had on recruitment in sectors outside of high technology, which Grove called "horrendous." Grove specifically focused on the problems of recruiting good medical researchers-a concern near and dear to Grove's heart since his bout with prostate cancer.

While Grove expressed optimism about the Internet's business potential, he admitted to being fallible. He said he had invested personally in both Amazon.com and Webvan, both of whose business models he still praises, despite the fact that Webvan has been teetering on the edge of bankruptcy and delisting on the NASDAQ. "My investment in Webvan, I'll sell you for 25 cents a share," Grove joked.

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