The State of the
Valley, 1999
explained by some "terms of art"
(excerpted from The Nudist on the Late
Shift)
If I could say just one thing about Silicon Valley, this is it: every
generation to come before us has had to make a choice in life between pursuing a steady
career and pursuing wild adventures.
In Silicon Valley, that tradeoff has been recircuited.
By injecting mind-boggling amounts of risk into the once-stodgy domain
of gray-suited business, young people no longer have to choose. It’s a 2-for-1
deal: the career path has become an adventure into the vast unknown. More happens here, so
quickly, satisfying anybody’s craving for newness. In six months you might get a job,
get laid off, start a company, sell it, become a consultant, and then, who knows?
It is a mad, fertile time. Working has become nothing less than a sport,
here in superachieverland: people are motivated by the thrill of the competition and the
danger of losing, and every year the rules evolve to make it all happen quicker, on higher
margins, to reach more amazing sums. They are the new breed, Venture Trippers, who get off
on the dizzying adventure of bloodwork.
The Venture Trippers are taking the opposite approach from the
Slackers. Rather than choosing not to work hard at all, they’re saying, if I’m
going to have to make that tradeoff, then *hell, why the fuck not?--I’m young,
let’s raise the stakes.* Let’s up the bet. Let’s make it exciting.
Let’s put it all on black. Let ‘em roll.
When you meet a billionaire for the first time, you really want him to do something billionairish. You have no idea what being a billionaire might be like, but you can’t help be curious. What is it like? The billionaire is a little bit of a zoo animal for the public in this way. Particularly the instant billionaire. Because that’s the public fantasy. Nobody’s really all that fascinated anymore with 55-year-old stone-hearted moguls who made their billion crushing little people for 25 years. It’s so much more appealing to imagine being a billionaire when you’re young enough to really enjoy it and you haven’t had to be cruel to people to earn it. The sub-35 billionaire is really a new life form, an economic mutation that has emerged from this little pond of vigorous capitalist darwinism. It’s like dinosaurs had suddenly hatched again in the Alviso mudflats off San Jose. The sub-35 billionaire, this new species, captures the imagination not just like any zoo animal—he’s a brontosaurus.
The Cosmo "MBA" Makeover (top)
The business has changed, radically, in the last few years. The people are different. There’s not a programmer in the room. They’re all Business Development VPs for one web site or another, or Marketing Directors, or PR flaks, or CEOs—and they all have graduate degrees and come from good schools and used to work in management consulting. They’re not all blond and blue-eyed, but that’s the dominant strain. They all have firm handshakes and can look you in the eye and have big plans to go away on the weekend and aren’t absent-minded and know to offer a laugh when the conversational gambit is meant to provoke one. It’s like the Valley crowd was given an en masse Cosmo Makeover, given "that MBA look", gentrified just in time for the big Silicon Valley movie dramatizations and book deals.
The machinery of work is as tightly kept a secret as our society has any more. It’s guarded by a legal firewall. There’s just too much money at stake. And in the world of business, nowhere is there more money at stake than here. Everyone’s lips are sewn up with severance contracts, non-disclosure agreements, employment contracts, term sheets, shareholder lawsuits in process, settlement papers, hold harmless agreements, formal complaints, and ad infinitum. The recent past can’t be talked about, for potential libel or for violation of an NDA. The near future certainly can’t be discussed, under strict SEC laws forbidding forward-looking statements. When one company buys another, both parties are strictly forbidden from ever discussing the negotiations. Intellectual property and trade secrets are carefully guarded. Employees are briefed and debriefed.
As a result of the legal firewall, confidential information must be leaked
in circumlocuitous ways in order to get the message across, via a relay-link of stock
analysts and independent research firms, utilizing code phrases while piggy-backing the
credibility of the investment bank and the venture capitalists. Investors are brought
along to a state that one Goldman syndicate manager called, "They know but they
don’t know," which is to say that investors haven’t officially been told
anything outright (other than what’s in the prospectus), but through an ancient
ritual of winks, nudges, passive verbs, rhetorical questions, and comparisons have been
brought up to speed.
I have come to call this manner of communicating the great Hall of
Prisms.
Some journalists have what they call a bullshit detector. I have what I call The Goosebump Meter. If I didn’t get goosebumps hearing their story or experiencing it with them, then I threw my notes in the trash. I was interested in one thing: people in pursuit of unusual lives.
For most people who look at David Filo, and for most people who look at Silicon Valley, they can’t see past the dollar signs. It’s like how some people have this hypersensitivity to cilantro—put a little twig of cilantro in a salad and they can’t taste anything but the explosion of cilantro. It’s like that except having this hypersensitivity to a billion dollars is the norm, which is to say the few people who can see beyond the flashing neon dollar signs are the odd ones. It is normal to go weird around money, to be made uncomfortable by it, to get supremely excited by it. Money is exceptionally titillating. I am one of the odd ones. I have the accountant’s clinical calm around figures big and small. I don’t go weird around money, and people get less weird around money when I’m there. It’s like nightvision, but rather than seeing in the dark I can see past the nine zeroes. It’s the one thing that has made it easier for me to avoid snap judgments about what I’ve seen in Silicon Valley. I’m inexperienced as a journalist and I’m no good at asking tough questions, but I have greenvision.
Over by the bar I see Ben Chiu.
"You’re out making friends," I say.
He has a big happy grin on his lightly freckled face. It’s more
than that—a sparkle in his eye, a boldness in his posture. There’s more to this
than finally making friends.
"I can’t talk about it," he says, which is a term of art
used in the Hall of Prisms, non-disclosure agreement code for "I’m in
negotiations." In saying he can’t talk about it, he gives me the hint I need.
I crunch on recent news and put it together. Last month there was a
buying spree for ecommerce software companies. This month there is a buying spree for the
next piece of the portal puzzle, comparison-shopping engines, such as Ben Chiu’s
KillerApp.com.
In L.A., everyone has a screenplay. It’s on their desk at home, or in
turnaround, or at their agent’s, or in a drawer, or in the back of their minds, on
the back burner, or just in them waiting to come out, as in "I’ve got a
screenplay in me." You can be a nobody but as long as you’ve got the screenplay
idea fermenting, then you’re always this close to being a somebody.
In Silicon Valley, everyone has a business idea. Or a business
proposition. Or a "value proposition." It’s their little secret.
"Something with intelligent agents," is about all they’ll say, which
usually means they haven’t thought it through, or they have the idea but don’t
know how to make money off it and don’t need you to scoff at them. Or they’ll be
cryptic: "It’s WebTV meets RealNetworks."
And they’re always this close to a twenty million payday.
I’ve heard that in Silicon Valley, what a best friend does when
you tell him your idea is to return, "that’s the stupidest idea I’ve ever
heard." He doesn’t pat you on the back or offer encouragement. He’ll play
the devil’s advocate, and he won’t hold back. The logic goes, if you can’t
get an idea past your own friends, you will never be able to get it past the market.
"Grandma Friendly" Ideas (top)
For two decades, the science of technology had grown exponentially more sophisticated, and the cutting edge of technology was being shaped by those with Ph.D.s from MIT and a dozen patents in their name, the kind of deep brainiacs that fundamentally scare the media elite into thinking that the future will be dominated by Birkenstock-wearing coders with poor taste. High-tech was becoming harder to understand for the casual observer, it was all about 32-bit versus 64-bit chipsets and about low-earth-orbit satellite routing and 3-D vector-based graphics. What Sabeer Bhatia had done, as had been done by Jerry Yang and David Filo of Yahoo, or Jeff Bezos at Amazon, was return the cutting edge of ideas to the reasonably intelligent, superacheiving everyman. What was Yahoo to start, but a yellow pages? What was Amazon, but a bookstore? These were grandma-friendly ideas, ideas that even our grandmothers could understand. Hotmail was an idea that had been lurking under the nose of every budding entrepreneur in the world. Any disgruntled employee who had ever worried about an employer reading his email could have had the idea before Jack and Sabeer. Anyone could have had the idea. You could have had the idea. I could have had the idea.
The Bubble-gum Bubble Complex (top)
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.
The Living Hell of Radical 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.’"
Parallel Entrepreneurism (top)
Today, though, there’s a new evolution in the game. Forget non-linear (selling a product that isn’t even out of beta), we’re talking parallel entrepreneurism. If venture capitalists guarantee themselves at least one whopping success by spreading their risk over a half dozen companies, why can’t an entrepreneur do the same?
Let’s call this dilemna that good programmers face The ABCDEFG Problem. I call it that because all good programmers have tons of choices to work on, A thru G. Some choices seem cooler and some seem dumber, some possible and some improbable, but as to the payday lurking behind the door, they all look alike. They’re just A thru G, take your pick. Choice A may be 3DO, and choice G may be two million dollars of Microsoft stock, and Choice C may be a quarterback with four Super Bowl rings, but you just don’t know. It’s sort of like choosing one million units of foreign currency by which country’s paper bills have the splashiest colors, or making a million-dollar bet on the NCAA basketball tournament by whichever team has the sexiest cheerleaders. The variables that programmers have to go on (A-G) are not the variables that determine the outcome (X, Y, and Z).
Bulk-Ups, or
"Amazon Juniors" (top)
Over the past decade practically every venture firm has struggled with the dilemma of
their own success. At a typical VC firm, money under active management has gone up 40X;
the number of partners to manage that money has gone up only 4X. It's now common to raise
$350 to $500 million every couple years.
But where is all the incoming money to go? One reaction has been to
ratchet up the size of investments in startups with a high likelihood of growing not just
big but gargantuan, with billions of dollars in annual sales: the Amazon of pharmacies,
the Amazon of insurance, and the Amazon of auto parts — consumer markets so big that
even a small slice of them would guarantee a rocket IPO. They're not really start-ups,
they're bulk-ups. They put on weight fast and flex their muscles and try to scare
competitors off the beach.
Something was forgotten in the process. Sure, it's cool to make so much
money. And sure, it's cool to be able to buy hair dye and condoms from the privacy of
home. But what keeps Amazon's cultural currency afloat is selling books. Books inspire
passion. The online superstores aren't creating new markets, and though they might evolve
the technology of ecommerce, they're not revolutionizing it. They’re just big web
sites. Where's the adventure in that kind of venture?
I saw this with my friends at places like Yahoo in the spring. One week they think they’ve got the greatest job in the world, defining the new medium, being the future’s arbiter of which web sites are deemed important and which are deemed crap, and what more could a young person want than to be the very cutting edge? And then on Friday the stock market suffers a ten percent correction, and by Monday everyone’s hangdog, suffering a wild mood swing: they’re encountering the painful reality that 20,000 options under water is no compensation for the mere 35 grand salary draw they’re getting, particularly when their job is the lowest of the low—to review stupid little unknown web sites and try to pretend they’re not. They might as well be writing classified ads for the suburban weekly. They’re thinking, "I went to business school, for this!?"
What is the "office-park" but an oxymoronic euphemism that blurs the distinction between indoors and outdoors, between building and forest, between work and rest—but always seems to result in more work and less rest? Silicon Valley is this concept taken to the level of a whole region—it’s one big office park. In its uninspiring, placid texture, the Valley offers its workers a sustained level of non-distraction, ensuring that work remains the most interesting and compelling activity in one’s viewframe of enticements.