Silicon Valley is like a black box that's pumping out money. And the first thing I do when I see a black box is, I break it open. I  take it apart, and try to see how it works. Which is just dumb. Most people, if they saw a black box pumping out money, would fill up a few grocery bags first. But you get my point: I'm interested in different questions. I'm interested in the sociology of this place. There's tons of writers covering Superachieverland, all competing with each other. They try to gain an edge by being first to zoom in on the new idea, the newest wrinkle. In so doing, they zoom right past the questions that normal people are curious about. I try to zoom out, way out, and be driven by natural curiousity, not by competive instincts.

Why do I write about these people?    (top)

A writer’s job, in the romantic notion, is to document chaos, and to viscerally remind us that chaos exists—that the pretension of forward progress is a lie. That life is crazy and a struggle and haunted. A writer’s job, in the romantic sense, is to indulge one’s Dionysian energy, to let it dominate our Appollonian energy, and to have a keen nose for adventure. [Dionysius was the God of wine and revelry; Appollo drove the chariot that carried the sun across the sky with such regularity, such order.] But it’s also just so obvious that the phenomenon of Business has taken over the world, imposing its form of order. Appollo has been resurrected, and he’s wearing a suit and he’s got his money in Index Funds and he’s incredibly popular. As a writer, to ignore the sweeping transformation of what was culture into "the entertainment business," to ignore the obvious ways business has elected itself the new culture, would be to turn a blind eye at what most needs to be seen clearly.

In Silicon Valley I have found, for a few years, the vociferous expression of both those impulses. It is wildly chaotic here. It tears itself down continously. It teeters on the brink of self-destruction. But it is a chaos unlike any other chaos. It is a smoothly-working chaos. It is a chaos that generates endless growth. It is the chaos of hard effort, rather than the chaos of need gratification.

Are all the good ideas taken?   (top)

Can it keep going up? Can the Valley’s high-tech pick-up game keep growing forever? Isn’t there some natural limit, where the degree of chaos caused by the churn of startups and failures exceeds the degree of order established by standardized protocols, and it starts to tear itself down faster than it builds up? From the outside, that’s what everyone is thinking. From a distance, it seems unsustainable.

But here’s what I think. I think if we grew to this level despite the tectonic divide and scorn between the specialties—with so much lost in the translation every time, and so much bumbling ineptitude the result—now that the divide is gone, now that the bankers can chat about workstation operating systems and the programmers are trading puts and calls and over dinner people interrogate stupid business ideas, we may be on the verge of the biggest growth explosion yet. We survived the steep learning curve, survived all the embarassments of goofball concepts and ponzi scheme financing. We know better. If this industry is driven by ideas, the fundamentals have never been better. The next five years will be the Valley’s greatest boom of innovation to date.

Why are people who are so rich not very happy?  (top)

"You look around Silicon Valley, it's not too obvious that people are happy. They're incredibly stressed. Why is that? It's not because they work for me. They're stressed because they're naturally stressed. They're high achievers. The kind of mild dissatisfaction with what you have is a key prerequisite to success in this business. Yes, people complain. The constant friction is an occupational hazard to the job. But I would be unhappy if people weren't whining. I want them to want more. What is the right corporate culture? It has to be a good place to work, but not necessarily a nice place to work. A good place to work is where dreams get fulfilled and interesting things go on. 'Nice' can be a cover-up for a lack of passion." --Novell CEO Eric Schmidt

He just made $400 million. Is he great, or is he just lucky?  (top)

The big story of Silicon Valley is continuously being told and retold, skewed this way and that. It’s the story of rags to riches success, and Sabeer Bhatia’s story is one of its prime examples. The variable that gets skewed is whether the success is due to the individual or due to the environment--to greatness or to circumstance? I hear it all the time about Sabeer--with any Silicon Valley success, there’s a constant analysis community debating the verdict of history, a chattering class fuming with jealousy. It’s the Valley’s restatement of the Nature versus Nurture question. One side argues "hey, if the big thing he did is just get first-mover advantage on an idea that anyone could have, then he’s just a right-place/right-time lucky joe." The other side argues "hey, any big company could have copied his idea and spent millions on advertising and walloped him, but he made all the right moves to avoid that fate, and that takes great talent. It must be something innate."

So, is he great, or is he lucky?

There’s no doubt that Sabeer’s success has provoked furious jealousy. People here need to believe in the meritocracy, they need to believe success is possible for themselves, and so they will insist Sabeer is no better than anyone else around town—he’s ordinary—even though they’ve never met Sabeer, and don’t know his story. When the valley gradually learns how Sabeer stood up to his venture capitalists, and then stood up to Microsoft, the verdict of history will be kind.

Why do people come here?  (top)

They come for the tremendous opportunity, believing that in no other place in the world right now can one person accomplish so much with talent, initiative, and a good idea. It’s a region where who-you-know and how-much-money-you-have have never been less relevant to success. They come because it does not matter that they are young, or left college without a degree, or have dark skin or speak with an accent. They come even if it is illegal to come. They come because they feel that they will forever regret it the rest of their lives if they do not at least give it a try. They come to be a part of history, to build the technology that will reshape how people will live and work five or ten years from now. They come for the excitement, just to be a part of it. They come because they are competitive by instinct and can’t stand to see others succeed more than them. They come to make enough money so they will never have to think about money again.

Do You Have to Know People to Succeed?  (top)

If it’s true that you need Rolodex Power in the valley to pull strings and to cut deals fast, then how do we reconcile that with Sabeer’s notion that any 27-year-old kid with a good idea can make it big here? The answer is, any kid with a good idea *can* make it big--as long as he networks like hell. The only kind of people the network discriminates against is those who turn their nose up at networking. So it’s a meritocracy, but a perverted one, based more on the merit of how well you knock on doors than the merit of your Java code.

What do People Want?   (top)

Two years ago, it was enough for workers just to be in the game, to be a part of it, to hold some options and take your chances. The thinking was, "hey, if the business got funding, it *must* be worthwhile." Many of those startups went public or accepted a buyout but never produced anything but vapor, and the experience gave its workers no lasting pride. If just greed was motivating Silicon Valley, workers would be perfectly happy to repeat the lucrative churn.

But that’s not enough any more. According to the headhunters whose job it is to ask people what they want, what people want more than anything is a business proposition that can succeed.

Isn’t it an illusion that you can just move here and make millions?  (top)

No.

With money so easy to raise, why are startups still so legendarily frugal?  (top)

So why, when they could raise a million dollars in a few weeks based on their track record alone, doesn’t the Big Network just put out for nice office in North Beach and hire a dozen full-time programmers? Why run a bone-dry operation out of a non-profit incubator in which they have to beg for space every month?

The average gung-ho, headstrong entrepreneur has got himself convinced that his little startup is always on the verge of being bought out for ten or twenty or thirty million. I call this mindset the Bubblegum Bubble Complex. You know how when you blow a bubblegum bubble, it takes a heck of a lot of chewing and manipulating and tongue work to get the bubble started, but once it gets to be an inch in diameter it takes only the slightest effort, the merest discharge of air, for the bubble to suddenly be as big as your face? That’s where the entrepreneur lives, he’s always thinking his little bubble is on the verge of this sudden expansion. Having this belief is essential—it’s the only way an entrepreneur would otherwise put up with the living hell of radical uncertainty that is startup life. And it’s not an unreasonable belief; internet companies do grow that fast.

Startups raise money by trading equity. Oh, that precious equity! To an investor, that little nibble of bubble gum is ten grand. But to the entrepreneur, that same nibble is on the verge of being the Arctic Ice Cap of his grand bubble! What’s another three grand for a test server? Well that’s the Indian Ocean! What’s five grand to employ professional testers? That’s Africa! Every dollar of cash raised in the beginning will cost the entrepreneur ten times that when he succeeds. What’s $75 an hour for a top-grade programmer? That’s $750 an hour to the entrepreneur caught in the Bubblegum Bubble Complex. It’s simple: the greater risk you take by being cheap, the greater the payoff.

How do entrepreneurs keep going in the face of so much uncertainty?  (top)

Before they arrive, I confront Steve Sellers: "You’ve got a buggy product, no contract, 30 days of cash in the bank, programmers with no stake in the outcome, and you’re getting kicked out of your office in two weeks—how do you possibly sleep at night? How do you possibly stare that situation down? How do you keep going into the living hell of radical uncertainty?"

Steve has a smile on his face, and it’s not a nervous smile—he looks like he’s enjoying himself. He laughs at my summarization of his plight and he says, "Actually, I kind of think we’re in a very good position."

But he admits the risk level would probably seem absurd to most people. "Eventually, it becomes a lifestyle. There is a saying which I think is true, ‘What doesn’t kill me makes me stronger.’"

Do those futurists really believe what they predict?  (top)

That does seem to be the question with George Gilder and the new rap-masters of futurism: do they really believe these wild assertions? Or is it just showmanship--is it just hollow daring to grab attention, the equivalent of rock-n-roll stars trashing hotel rooms and ordering bodyguards to whup journalists? Is it image, or is it real?

Hell yes, George Gilder believes. Really. When he looks hard enough, and when he looks long enough, he finds a place where his affinity for hyperbole and his passion for the nuts and bolts of engineering are not a contradiction - they are in line. The dream and the reality are one. And when he gets there, when he finds that unique place, he is finally ready to write.

Is it all about money?  (top)

It's very hard to discern the extent to which people care about money. These are high achievers; they want to succeed, they want to win. For the highest achievers, money is an incidental by-product, a side effect - they get it whether they're motivated by it or not. It's as if Rogaine hair-growing cream, once it got into your system, also made your dick bigger. Who could tell why guys would be rubbing it in?

I'll say this: money has less nuance in Silicon Valley than elsewhere. Everyone feels they deserve it every bit as much as the next guy. They all want to hit a walloping home run into the upper deck and then never have to think about money again, which is to say that the desired state is to not care about money, but to get there may require some caring.

Why aren't these superrich young people more philanthropic?  (top)

On the whole, philanthropy seems sort of redundant - they're already giving 70-hour weeks to the creation of new technology meant to empower the world. That's not enough? That said, one's job is still put to the old-fashioned halo test - you've got to be bettering society, or what's the point? But not everyone can be designing the Mac and liberating electrons. So a few tricks to passing the test have evolved over time. The first is the libertarian view: you believe that the vigorous pursuit of self-interest leads to the most efficient allocation of resources, which ensures continued development. The second is related but far more twisted. It's the workaholic value system: nothing good comes easy, so if it's a terrific challenge, it must be good. By this self-referential logic, any project that is totally consuming is worthwhile. The corollary to this is, if you're not sure your work contributes, then work harder at it and soon it will. It follows that perhaps one of the reasons people are working so hard here is that they're not really sure how their little piece of the jigsaw puzzle fits in to the big picture of a better society.

How do supermillionaires diversify their portfolio without paying taxes?  (top)

What happens when 20 or so newly-minted supermillionaires get together, and each of them brings at least five million dollars of their company stock to the party?

It’s called an Exchange Fund, and it’s a way for those who’ve recently gone public to diversify their risk without yet paying the taxes due on their gains. Think of a potluck, but rather than bringing melon ball salad, you bring five mil of Inktomi. These potluck contributions are wrapped up as one diversified security, and each contributor now gets 1/20^th of the proceeds. Voila—diversification without taxation.

In the old days, a supermillionaire could party alone, using a sleight of hand called the "short against the box." If you owned $5 million of Yahoo, you could put it on deposit with your broker (putting it in his "box"). Once your broker had it in his box and felt safe that he could take it from you at any time, there was all sorts of maneuvers he was willing to let you do: borrow against the collateral at low interest, short the full amount of the stock, or sell call options with strike prices right at the money—any of which gave you $5 million to reinvest in a diversified portfolio. But since you hadn’t actually sold the stock to the broker (just put it in his box), you didn’t have any capital gains to report. Sadly, Congress felt no sympathy for the supermillionaire and did away with the short against the box in 1997. And this congressional carpet bomb was extremely effective for all of about 0.8 seconds.

Is loyalty stupid?  (top)

There's still a loyalty. I believe that Silicon Valley workers have a muscular faith in their industry, a deep optimism that they will be able to continue to find work for many more years. They have a loyalty to the whole process. Their need to see the altruism in their efforts is supplied by implicit deduction rather than explicit hype: The industry is good; I work in the industry; therefore, I am good. This halo-by-association, or the Big Umbrella method, reinforces industry loyalty. So your company may burn its cash, or it may get beat to market, or it may even lay you off with only a week's severance because the CFO discovers that some goof in the accounting department booked returnable-wholesale shipments as fully sold, but you don't worry, because there are other companies to hire you. There will always be other companies to hire you.

Is the way of life in Silicon Valley the way of the future for the rest of the country?   (top)

As the rest of the world adopts the technology being created in the Valley, will the rest of the world also adopt the Valley's work habits and campus parks and organizing principles? Is the start-up and the IPO and the "total-dedication model" not just a way to foster new technology faster, but a blueprint for redesigning all our industrial-paradigm institutions - schools, cities, nation-states? And is it possible, just possible, that if I get any more high-minded than I already am in this paragraph, my brain will explode?

Make no mistake: Silicon Valley is what it is because of its smallness. The fact that everybody knows everybody is essential. This can't be reproduced nationwide.

What Does an Entrepreneur Hate Most?  (top)

Entrepreneurs are incredibly hands-on managers, they like to understand just about everything in their purview. Suddenly, when the entrepreneur goes public, he’s letting these new investors who’ve only just met his company, who only collectively own about 20% of his firm, decide the valuation and direction of his company. And more often than not, the valuation has nothing to do with him and everything to do with the crazy events driving the broad market up and down--riots in Indonesia, the collapse of the Russian exchanges, nuclear tests in Pakistan, and Prime Minister elections in Japan.

But that’s exactly what the emotional market will do to the rational-minded entrepreneur--it will demand that he bow down to its unknowingness, it will humiliate his attempts to rationalize. It will make him accept its complete fallibility and unpredictableness. And the market seems intent on proving this lesson to every young company who goes public. It is sort of the price of being made so suddenly wealthy--before the market makes him so big, it will make him confront his utter puniness.