It is the boldest tactic in a campaign that began with improving lighting, moving phones away from problem areas, then disabling phones so they cannot receive incoming calls. About a quarter of Nynex's 8,400 street phones do not take incoming calls. Now the company is taking rotary pay phones, which are no longer made in the United States, out of storage.
"The rotary dial is a step backward technologically, but it prevents a drug dealer from paging a customer or runner," said Steven Marcus, a Nynex spokesman, who said the change was made as "an absolute last resort," since the phones cannot take advantage of many new services, like voice mail, that rely on push-button phones.
Phone company officials acknowledge that the rotary-phone tactic is not foolproof: callers can use a device called a tone dialer, which is sold for about $15 at electronics stores, to send tone signals over a phone with a rotary dial. But they say the devices do not appear to have caught on. [...]
"Sleazeballs congregated there, and they're not the kind of people you want hanging out on your corner," said Jay Devlin, an actor and a writer who, as president of the 45th Street Block Association, led the fight to persuade Nynex to bring rotary phones back to his corner in the Times Square district several months ago.
- I start a company to sell e-widgets over the internet.
- I produce e-widgets and sell them for $10.
- I pay my buddy $10 million to buy a million e-widgets from me.
- My buddy pays me $10 million for a million e-widgets. We do it again next month, but for $20 million and 2 million e-widgets.
- I go to investors and say "look I have gone from nothing to $20 million of revenue per month; at 8 times annual revenue that justifies a valuation of $2 billion."
- I sell 5 percent of the company to investors for $100 million and spend it on yachts.
- E-widget sales dry up (once I stop paying my buddy to buy them), the company shuts down, the investors lose all their money, and we all shrug and say "what can you do, most startups fail." [...]
In fact, markets are now kind of used to the idea of investing large sums of money into companies based on multiples of active users -- not even revenue -- meaning that you can run this fraud by paying your buddy money just to look at your website a lot. [...]
Perhaps it is wrong, and the venture capitalists are confused, seduced by a few examples of success but underestimating the difficulties. Or perhaps it is a charitable redistribution of wealth in which rich venture capitalists effectively donate their money to the middle class in the form of underpriced Uber rides or free movie tickets.
But perhaps the analysis is even simpler: Pay someone a dollar in customer-acquisition costs, have him pay you back a dollar in revenue, sell that dollar of revenue to investors for $8, and you're rich.