Go to Brad DeLong's Home Page
Originally from Wired. Resent through the Red Rock Eater News Service (Phil Agre of UCSD).
Po Bronson's Web site is http://members.aol.com/pobronson/hardest.htm. He is the author of two very nice novels: Bombardiers and The First $20M Is the Hardest.
Resent-Date: Tue, 12 May 1998 15:14:56 -0700 (PDT)
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Date: Tue, 12 May 1998 15:02:22 -0700 (PDT)
From: Phil Agre <email@example.com>
Subject: Report from Ground Zero: Silicon Valley
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Date: Tue, 12 May 1998 17:02:09 EDT
From: Po Bronson <PoBronson@aol.com>
F E A T U R E | Wired Magazine, Issue 6.01 - January 1998
Is The Revolution Over?
Report from Ground Zero: Silicon Valley
By Po Bronson
Let me tell you what Silicon Valley is like: the mountain edges of the valley rise up like the lip of one great big copper-bottomed frying pan of overpriced RevereWare, and on the high heat of burning money everything and everyone in there melts into one boiling, spattering, frenetic stew. Boston is like a nicely arranged four-food-group meal on your Sunday china, and Seattle is a huge hunk of Microsoft barbecue with a few thawed peas rolling off the paper plate, but Silicon Valley, California, is not just a stew, it's a stew that never comes off the gas heat. The juices meld, and thehistories intertwine, and it's spiced up with high achievers from every nook of the world. Heat waffles off the ground, distorting it all into an earth-tone prism. Entangled superexpressways pass over industrial megaparks and shady 3BR/2BA ranch-style homes and provide occasional vistas of scorched tan acreage protected as natural habitat for scrappy, trash-can-scrounging coyotes. The tallest landmarks are power towers and phone poles. The real work is done in silence, sitting in cubicles, staring at screens. Everyone is attempting to make things that have not existed before. And though we could argue till dawn about the utility or significance of what they're creating, I believe that to create and risk failing is the essence of feeling alive - that in that moment of creation they shake off their anonymity and feel relevant to the sweep of the world.
Don't think for a second that this stew can be recreated by throwing together some engineers, VCs, headhunters, and electronics stores, then drowning it all in money. Silicon Valley is special. Yes, the universities are excellent. Yes, California's labor laws let employees jump to new firms almost at will. Yes, the weather attracts big brains from cold climates, though most people who come here for the weather work so hard they rarely get to see the sunshine.
What those oft-cited "Silicon Valley advantage" theories don't convey is how evolved this place has become, just from being on the high heat for 50 years. The competition has bred electronics stores the size of eight football fields, and electronics stores open all night, and electronics stores where you can do your laundry while shopping. There are VCs who invest only in video chips, and VCs who funnel only foreign money, and VCs who write books, and VCs who are professors of sociology. There are headhunters who handle only Cobol programmers from Singapore, and headhunters who specialize in luring toy-company executives, and, I've recently learned, a headhunting firm that helps other headhunting firms hunt for headhunters. It's bizarre here. Programmers are represented by agents, and manual writers have three-book backlogs, and one of the fastest-growing companies writes software that is being sold to other software firms to help them manage their tech support - let me repeat that in case you didn't get the full implication: there are so many software firms that just selling them software can make you one of the fastest-growing software firms. It seems impossible mathematically, but it's not, and the reason is that high tech companies are quick on the uptake with anything that makes them more efficient, which they'd better be, because this market is scary-competitive.
Meander with me into the Valley. Let us be passed around like a piece of gossip for a month and see who we meet. Let us risk the unreliability of what we're told in order to understand why people distrust us. Let's stick with it until we have a picture of what is really going on there now.
Be warned: if your imprint of Silicon Valley was soldered together in the '80s, it's time to upgrade.
"One word: Adrenaline!" is the entire copy of an advertisement in the Stanford Daily recruiting engineers to a firm in Silicon Valley.
At a party I meet a young guy with an urban lumberjack look going, most notably a week's growth of stubble. His employer, PowerAgent, burned up US$25 million in cash and shut its doors and laid off all 60 employees. He's been hanging around the house for "almost three weeks - well, 15 days" he clarifies, and he's starting to lose self-respect for being such a slob. This morning he went to the unemployment office at the Federal Building, which was so empty that only two out of the 15 teller windows were open - he got the picture and turned around. He figures he'll take a job next week. That's how he said it - not that he would start interviewing, and not that he would get an offer, but that he would take one - as if job offers were weeklies stuffed into news racks on street corners, and all you had to do was pick one up on the way to the cafe. It occurs to me that maybe he's already had job offers.
"Oh, sure," he confirms, chuckling a bit self-consciously, knowing darn well how lucky he is to be living here at this time. He's a business-school graduate with a whole six months' experience in marketing. That his experience was with a firm that burned $25 million in venture money and never made it to market hasn't seemed to hurt his marketability.
We get talking about how a firm shuts down, and a venture capitalist joins the conversation, and he tells me about the Cubicle Guy.
"Not cubicles," the Cubicle Guy insists, when I sit down in his office. "Panel systems."
The Cubicle Guy traffics in used partitions. He buys them dirt cheap from companies going under or moving and resells them to new companies, or growing ones. He profits from the churn. His business is booming. He wears a beeper because at any time he might be needed somewhere on the Peninsula to make a bid.
"I'm not the only guy reselling panel systems. It's like ambulance chasing; the first lawyer on the scene gets the business. I watch the newspaper for layoffs. I watch stock prices for drops - anyone who might soon downsize. I talk to Realtors." So there is not only one Cubicle Guy in Silicon Valley, there is tooth-and-nail competition among several. That's how evolved it's become.
The Cubicle Guy is one of the quirkier parts of the institutionalized revolution, the support system that makes risk-taking feel so unrisky. In order to challenge the status quo, you don't have to be so headstrong anymore, you don't have to be a rebel. You just have to have an idea. But you'd better act on your idea fast, because the same trends that made your idea pop into your head are making that same idea pop into competitors' heads. So there's a whole network of services, like the Cubicle Guy, to get you up to speed quickly. If I could co-opt a heuristic for the ease of starting a company here, it's "plug-and-play."
"I know this lawyer," the Cubicle Guy says. "He's an associate at this firm. All they have to do to generate the legal documents for a start-up is run this single macro, which inserts the company name in all the appropriate places. Hit a button, out prints your company, sign on the dotted line." I've heard that story so many times it's become like an urban myth.
The Cubicle Guy takes me to his warehouse in Sunnyvale - 11,000 square feet, which isn't very big, considering the size of his merchandise. "It's no trouble to move product once you've got it," he explains. The cubicles are cleaned here, then moved out.
A lot of the cubicles come back with gouge marks, graffiti, and slits between the cloth covering and the wallboard where secrets were hidden. Flyers and memos are still stapled in. These artifacts are pinned to one wall of the Cubicle Guy's warehouse, a private museum of Silicon Valley microsabotage. There are photos of girlfriends, laminated Far Side cartoons, positive job evaluations, worthless stock-option contracts, a six-point reminder list of "Why I Work So Hard."
The phone on his hip rings, and the Cubicle Guy goes to work. "Are the panels 60 inches tall, or 72? Uh-huh. Brown as in oatmeal, or brown as in manila? OK, do me a favor. Look at one of the T-joints where three panels connect - is the connector piece more like a T, or are the three pegs equal in length? Uh-huh. That's probably Versys brand ... ." He puts his hand over the phone. I give him a nod, and let him go back to work.
It's the last morning of summer, a Sunday, at the first annual SandHill Challenge, a soapbox-derby competition being held to raise funds to combat teenage drunk driving. About 50 vehicles are waiting to race, two at a time, down the gentle quarter-mile grade. One vehicle is designed like a breadbox, another as a missile. Someone in a Super Dave Osborne racing getup, complete with motorcycle helmet, is going to roll down the course on a high-back, swivel-tilt office chair. It's Disney-movie fun. I'm half expecting to see a young Kurt Russell.
This event was dreamed up by Jamis MacNiven, the owner of Buck's restaurant in Woodside, which is the breakfast place for top-tier high tech insiders, so most of the contestants are from that clique - venture capitalists, law firms, banks, and a few of the companies they finance. The contest is a nice metaphor for the pseudo-accessibility of the IPO market: officially, it's open to absolutely anybody who is willing to raise $1,000 minimum, but you have to be the kind of moneybags with a house in Woodside who drinks his coffee at Buck's to even know the event was going on.
You could spend a year at business school and not encounter so much wheeling and dealing. There are two teams with very similar designs, built on supersized skateboards. One has four skateboard trucks underneath; the other rides on a series of Rollerblade wheels. The latter team is a spin-off of the former. Says one driver, "We had a fight over the design, and rather than resolving it, we went our own way."
A lawyer is going around at the last minute donating money to several teams whose vehicles look fast: a go-cart with bicycle wheels, an aerodynamic teardrop covered in fiberglass, et cetera. "I'm taking the Microsoft strategy today," he says, sliding his checkbook into his Dockers. "I want to be a part of the winning car. In order for that to be true, the first conclusion was straightforward: don't design my own car. Instead, buy my way in." He laughs with menace.
The race begins with a 50-foot running takeoff, like a bobsled launch. After that, it's just gravity power. Perhaps applying their business acumen rather than physics, everyone seems to agree that the fastest takeoff - the best early push - will determine the winner. At the last minute, two teams merge so that the go-cart with bicycle wheels can be launched by a very athletic VC who, I learn, was a competitive decathlete two years ago. Even when they're having fun on a Sunday morning, competition is in these guys' bones.
All the vehicles are required to have brakes, but nobody's using them. A sharkmobile goes by. A Mars Sojourner screeches halfway down the track, then stalls - one of the wheels locked up. Super Dave Osborne attempts to steer with ski poles, but at his first plant he thrusts himself into a spin and careens into the shrubbery. The event raises more than $100,000.
The lawyer who was writing checks says, "This is a very, very characteristic moment for Silicon Valley. We've taken a lot of flak for not being political enough, for not being benefactors to social causes. But you can trick us into donating money just by making it competitive. It's gotta be a challenge. I remember when Larry Ellison wanted to give some money, I can't remember to whom. He couldn't just give the money. He challenged a world-class triathlete to a bar-dipping contest, and Larry did something like 63 bar dips, which is almost inhuman, about like doing 500 push-ups."
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. "Will society be any worse off," they ask themselves, "if this CGI script goes unwritten?" "I predict that this event will be very, very big next year," another competitor suggests. "There'll be a couple hundred entries. It'll raise over a million dollars. I'm sure of it. It has all the right ingredients to motivate people." He ticks them off on his fingers. "Competition. Gadgetry. Fun. An uncontroversial, good cause. In that order."
Edgar threatened to change everything. Edgar demanded that everything be 100 percent computerized. To the employees of R. R. Donnelley Financial in Palo Alto, the imminent entree of Edgar was Major League Baseball realignment, NAFTA, and a Martian invasion all rolled into one. At the water cooler and over the urinals, Edgar was all anyone talked about.
Edgar was the Securities and Exchange Commission's Electronic Data Gathering, Analysis, and Retrieval filing system, which went online two years ago. Before that time, Silicon Valley lawyers and underwriters and issuers met at the plush offices of R. R. Donnelley, where they could make last-minute changes in their S1s and 10Qs before they were printed out and bound up in black tape and thrown on the red-eye flight to New York for a filing the next morning at the offices of the SEC. With Edgar up and running, anyone with a computer could file. The issuers had no reason to keep coming to the R. R. Donnelley office.
But they kept coming anyway.
"They needed neutral turf for their negotiations," explains Reggie Ammons, the man who holds their hands through the process. A decade in California hasn't softened any of the accent Reggie developed growing up in Onley, Texas, 135 miles northwest of Dallas. His accent is three parts chaw-chewing, shit-kicking old boy, one part grandfather-in-the-rocker storyteller, and two parts "yeaus masstuh" obligingness. This oral cocktail connotes authenticity and history; just filling out SEC forms with him, you feel like you're doing something grand. He's an upwardly mobile, supereducated bassackward swamp fella with manners so thick they stick to your teeth just talking to him. He's Bill Clinton in all the good ways, 20 years younger and plopped right down here in Silicon Valley.
As Reg tells it, the lawyers want the prospectus to be a very conservative document to avoid unfulfilled expectations, while the underwriters want the prospectus to market the shares. With the liability for a mistake enormous, their arguments over the precise language gets quite intense. Neither side wants to meet at the other's offices - that would give the host an upper hand (this is probably something they've read in The Art of War). So every day they fill the drafting rooms and telephone rooms in this single-story, mock-Spanish building on California Avenue, where Reg takes care of them. They pace the hallways, chewing the ends of pens. There is a billiards table and a big-screen television and showers, and for those too weak or too frazzled to pull the customary all-nighter in what is normally a two-day process, there is a foldout bed.
At around 12:30 every afternoon, these people get nervous. They've got to get their 10K or their S4 or their 13G into the SEC before 5:30 East Coast time, which is in less than two hours, so Reg Ammons gives a polite rap on the conference room door and says, "That's it, boys, you're done or you'll miss the deadline." The deadline's crucial, because there are very specific windows of opportunity in which underwriters want to make their offerings - you can't do an IPO in the week the employment figure comes out, or a day the Fed is meeting, or before the end of a quarter - and so sometimes if you miss the deadline you have to postpone the deal until another week or another month, and then anything could happen.
Edgar was supposed to make all this obsolete, but in fact the opposite has occurred, because no law firm or underwriter wants to take the transmittal risk of making sure the filing is coded exactly the way the SEC wants it. So a very crazy thing happens around two o'clock every day, as all these fire-breathing lawyers and these steam-snorting venture capitalists gather around the computers where the email is going out, and they cross their fingers and sweat and try to make jokes, hoping that the damn electronic file gets properly pinged across the country. They watch that monitor like it's a 49ers game in overtime.
The lesson here is an ironic one: physical proximity is more important than ever, even in the very industry that is inventing the communications technologies that are supposed to make physical proximity irrelevant.
You can't offer 75 percent of your company for 25 percent of ours when our company's been around for six years and you haven't even incorporated yours yet! That's not the way it's done!" - overheard dialog at an Indian buffet in Mountain View
I went for a drive around Mountain View with one of the city planners who has been responsible, over the last five years, for meeting the needs of the economic boom, fueled by the hardware and software firms headquartered here: Sun Microsystems, U.S. Robotics, Silicon Graphics, and Netscape.
Barney Burke is a cuddly, devoted guy who gets a proud, patriotic flush across his face every time we turn the corner and come across another dirt-and-girder development he's had a hand in. City planners take their cue from the local industry - they're not afraid to take risks, as they did in turning the hog farms and junkyards and dump sites in the North Bayshore area, east of Highway 101, into 3 million square feet of premium office park. Another thing they have in common with the software business is last-minute, down-to-the-wire construction - invitations are already printed and mailed for the new library gala opening, which is 10 days away, but as we drive by the building, workers are still pouring cement over the rebar.
As we get on an expressway, Barney spots a small vineyard he hasn't noticed before. "That won't last long," he says, salivating. When Barney gets back to the office, he'll look up the owners and make sure they aren't in the dark about how valuable their land has become.
Barney shows me one of the last working farms in Mountain View. Remarkably, this farm is located directly behind the Netscape headquarters, which has scarfed up every available office space it can buy or build. Barney points his finger at some of the tilt-up buildings nearby, tsk-tsking their single-story density. "That one won't last. That one, sure to go. This one too."
According to Barney, Silicon Valley is the epicenter of the new economy, and the epicenter of Silicon Valley - the place where it is all really happening - is here, the Land of Netscape.
It wasn't very impressive, this epicenter of the epicenter. It's not like being on Broadway in Manhattan, looking up at the Trinitron. I could be outside any office park in the country. It's so anonymous it hurts.
Some Japanese tourists are taking each other's picture in front of Netscape's sign, trying to get a fountain in the background.
Barry and I get to talking about the expensive costs of doing business here versus the benefit, primarily the proximity to smart people. I mention to Barney that I have an appointment to interview Eric Schmidt, the recently named CEO of network giant Novell, because I had heard he spends four days a week in Silicon Valley even though his company is headquartered in Utah, which not too long ago was prophesied to have more hard-working talent than here. Rather than picking up the train of discussion, Barney goes, "Oh yeah, Eric Schmidt. Me and Eric and some other friends went to college together at Cal." Barney tells me a story of how the old friends flew in from the Midwest for a party Schmidt held last year, and how Schmidt had graciously sent a limo to the airport to bring them straight to the party. "He's that kind of guy, will go out of his way for an old friend."
We get out of the car and walk 100 yards south. A noisy Caterpillar backhoe is digging up a train track that crosses the road east-west. To the west is the main railway running up the Peninsula. To the east is Moffett Field. Eighteen-foot links of the railway are being lifted on forklifts into the bed of a dump truck. Dust is flying.
"This used to go by the nickname 'the missile track.' When the Navy wanted to get something into Moffett Field that was too big to fit on a truck - say, a missile - they would load it onto this rail line and scoot it into Moffett. We're digging it up to make room for development. It's really the last vestige of the defense-budget economy, which used to dominate Mountain View."
As we walk along the track, Barney explains how when he first started work for the city, 10 years ago, he would go into Printer's Ink bookstore, and the graffiti on the bathroom walls said, "Bombs Away - Give me Star Wars pay!" Moffett Field was to Mountain View as Stanford University was to Palo Alto - the big institution that drove everything. Mountain View was traditionally the dorm for all the single aerospace engineers who worked at Lockheed.
I think a lot of what has reshaped Silicon Valley during the past five years has been the end of the Cold War. The defense cuts of the early '90s led to a recession in counties, such as this one, which were dependent on defense money. Barney Burke on those bad years: "Oh yeah, we got a little nervous around here. We felt it. There were even layoffs in the city planning office." As high tech weaned off the military gravy train, there were quite a few indus-try layoffs five years ago, and those layoffs killed the last vestiges of the ideal that employees should have a loyalty to their company. Now, workers are careful about looking out for themselves, wary of revolutionary language being just a management ploy to squeeze more work hours out of employees.
But 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 willalways be other companies to hire you.
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.
That said, money doesn't impress. It's too ubiquitous to dazzle. And there are too many ways here to make a lucky bundle and never have really deserved it. Driving a Ferrari doesn't impress anybody but the heavy-on-the-eye-shadow secretaries perched on the barstools at the Friday evening Black Angus happy hour.
The way to stand out is to make something that has a big impact on the course of technology. That's the dream. But there aren't that many slots available in the Hall of Fame, so the ordinary, everyday superachiever - a guy who's stood out his whole life, at least until he got here - often festers with confusion about his purpose.
There's a lot of money, sure. In the last few years, every mom and pop has woken up to the fact that a broad market index fund averaging a 12 percent return since 1961 is a better place to sock away their savings than in a money market account paying 3 percent, so institutional investors - who earn their keep by outdoing the stock market - are throwing money into higher-risk/higher-return scenarios, such as venture funds earmarked for Silicon Valley start-ups.
This leads to more money being tastelessly spent than at any other time in history. But the tastelessness is not an indicator of poor taste - it's an indicator of how little the money really matters to the spender. If you didn't care a lick who wins the Sunday football games, but there's an office pool and you get a free betting card and you just willy-nilly check off the teams with cool mascots, does that indicate you have poor judgment? It just says you don't care.
Common, then, was this barbecue the other day at this Italian marbled manor - the owner had finally gotten around to hosting an open house for his friends. The meat served was some superpremium shanks from a cow fed only corn and raised poolside, an elite cow that summered on the Cape and wintered in Vail. But the slabs of this delicious cow princess were served on flimsy paper plates, with 49-cents-per-100-count plastic knives and weensy cake forks. When I had wrangled down my fill of meat, I went for a walk around the compound with a friend, and it was hard not to notice that the only furniture downstairs was a single black leather couch and a 17-inch TV propped up on a milk crate. The owner had moved in two years ago, and the decor of his home just wasn't as interesting to him as creating the next generation of animation tools. He was going to spend his money on what he found tasteful, or not spend it at all.
I sat down on the couch beside this woman who had a look on her face like she was ready to go home. I admired her watch, a two-tone silver-and-gold Tag Heuer wristwatch I'd seen advertised in financial magazines. I believe that they cost around $2,000. When she turned to me, I realized she'd had a few drinks.
"Oh, screw this watch," she slurred. "I saved my company's butt last year. I should have been given a bonus of at least twenty, thirty thousand dollars. Instead, I got a small raise and they tried to placate me with this watch." Her firm hoped she would wear the watch with pride. Instead, she wears it to remind her to never trust her firm.
So there's the Rogaine thing: Does she want the money, or does she want the respect?
"If it weren't for the weather here," she says, "I'd go back to Michigan."
Under all our desks are two boxes. One for colored paper, one for white paper. I was here late last night, and the janitor came through with one huge tub on wheels. He threw both my boxes into the same tub. When I asked him why, he said the paper goes out to a sorter, to whom it's no use to presort. He figured we are given two boxes because we need to think we're doing the right thing, whether it's useful or not." - email from a friend at Microsoft
SOUTH OF MARKET
The full force of the Microsoft PR hurricane had begun. Full-page spreads in the Examiner's Sunday pink pages. Half-minute radio spots on Live 105. Billboards on the sides of Muni buses. Everywhere I went, advertisements beckoned me to put some gusto in my weekend by taking a suggestion off Microsoft's entertainment-listing Web site, Sidewalk. These were no ordinary advertisements; they were the carefully polished result of Microsoft spending $700 a day on copywriters and $1,200 a day on art directors and $2,000 a day on test-marketing concepts until the socially awkward behemoth from Redmond looked truly cool. Enigmatic and nuanced and deep. They were good, these ads. Very good.
I got the call the next day. It was a PR person. The counterattack had begun. She begged me to come visit the offices of an authentic, locally grown, by-the-bootstraps entertainment guide to San Francisco. A couple dozen employees in an earthquake-retrofitted warehouse with all five fingers on the real vibe of this buzzing city - employees still hung over from their voyages into last night's clubs, employees still hoarse from speaking up at their neighborhood political club. Who doesn't want to root for the little guy? Oh, this PR woman hooked me, hooked me good, because the question of whether Microsoft can do culture is a topic that never tires me.
I hear gossip from Redmond about how Michael Kinsley is awkwardly out of place there - how, when he walks around campus, he doesn't know what to do with his hands - slip them in his pockets, let them swing at his sides, what? She gave me a time slot and an address and at three that afternoon I went to take a look.
Here's what I found at CitySearch, this so-called little guy: Its investors include Goldman Sachs, AT&T, Compaq, and various newspaper conglomerates. They have strategic partnerships with Silicon Graphics, Borland, and Informix. They have offices (and accompanying sites) in more than 20 metropolitan areas.
Getting rooted in the community used to be like making fine wine: it took a certain period of fermentation, followed by years of aging. But CitySearch has formulated this process down to a few fast months, in what they describe as a SWAT-team approach. They aggressively hire local people to ring the doorbells of local merchants, convincing them to pay for a Web site in CitySearch's megalopolis. They can manufacture a grassroots presence according to well-honed timetables and sales quotas. When the site in Salt Lake City had success testing out radio spots featuring satisfied merchants, that type of advertising went national. This office's general manager, Scott Garell, spent his last four years learning brand marketing at Clorox, and he's applied every bit of his smarts here. I don't want to give a cynical impression of what they do - they aren't faking a "community" pose in the slightest, it's just that they've amazingly applied McDonald's franchise science to the high tech garage start-up. When I asked Garell what worries him so much that it keeps him up at night, he responded, "Funny you should ask that, because for a national sales meeting next week in Pasadena, I'm supposed to be moderating a panel on the topic of 'What Keeps You Up at Night?'"
Even motivational strategies for "fostering a passionate office culture" are tested in each city, and summary reports are written and sent up the chain of command, and then the most successful methods are implemented on a national basis. Thus, each office's democratically voted "overachiever of the month" is awarded with extra stock options, because that seemed to work better than an "employee of the month" getting a ski weekend. If a skull-and-crossbones flag tested well, every office would be flying one.
That scene in Barton Fink keeps coming to mind, where Jack Lipnick, the studio boss, chastises Fink, "You think you're the only writer who can give me that Barton Fink feeling? I got 20 writers under contract that I can ask for a Fink-type thing from."
So that's Silicon Valley today. We don't need no stinking revolutionaries - we've got hordes of Generation-Xers hooked on options churning out a revolution-type thing. We don't need you to stay up at night worrying about your business. We've convened a panel of expert worriers to handle that for you.
"Best Buy Furniture" - decoy sign on Industrial Light & Magic's building in San Rafael. The sign keeps job seekers away.
On January 11, 1996, Dave Samuel had the idea. Putting music up on the Net was a natural idea for him - in junior high he had started spinning records at parties, and by high school he had three guys working parties for him. There was a lot of good music that people had forgotten about, music the Net could bring back. He talked about it with Steve Levis, a housemate who had come to Oracle with him from MIT, where they'd been fraternity brothers. They'd been at Oracle less than a year, and already felt stagnated. Four days later they decided to do it.
His stepbrother in Illinois, Bryant Levin, got on a plane that very weekend and moved in to their house atop the hill in San Carlos. Six people already lived there, but the basement was available for work space. With $50,000 these three young dreamers had saved, by June they released TheDJPlayer, an application built on the RealAudio engine. No sooner had they posted the application on their site than they got press in Billboard and the Los Angeles Times. Their company, TheDJ.com, hadn't made a dime in revenue, and their site had only about 100 listeners at any one time, but that was enough for the software industry to come calling.
In July, the first call came. Sitting in the basement of the dorm on the hill, Dave picked up the phone. The man introduced himself, from a company we would all recognize. We're excited about your project. We'd like to invite you to fly up to our headquarters and meet with us. We'd like to discuss a 'relationship.' The pulse starts racing when you hear that, and the brain goes kind of fuzzy. "Relationship" - what does that mean?
Dave and Bryant flew up for the day. They sat down in a room with several people. Two men peppered them with questions, seeing who they were, making sure they were for real. Dave describes this moment with clarity: "Then one of the executives nodded to the other, and then they turned to the associates in the room and said, 'You all are going to have to get out of here.' When they'd left, the two men shut the door and brought out a nondisclosure agreement." We're interested in acquiring your company. There was no talk of price yet, but they agreed to continue conversations. Dave and Bryant flew home.
That night, their house on the hill rocked. Friends came over and the party went deep into the night. They shook their heads in amazement and laughed. Not that long ago, Dave and Steve had been seniors at MIT, and Dave, who had grown up in Maine, was interested in Oracle's recruiting junket to the Bay Area mostly because he wanted an all-expenses-paid weekend in the sunshine. The sun hooked him, the whole Valley hooked him, so he told himself he would put in a year developing support apps for Oracle while he looked for a chance to do his own thing. It's the sort of thing every kid coming out of college tells himself - I am not just a peon in a cubicle for some corporate machine, I am me, I am somebody. You tell yourself that, but who really knows?
Before they could relax, the next call came. I'd like to come by and meet with you. At the meeting which ensued, We'd like to fly you down for the day.
The third and the fourth offerers got on a plane themselves. By the minor variable of who flies to see who, TheDJ.com was moving up in status, fast. One bid was an exchange of stock with a public company. Another was an exchange of stock for a private company. The third was a souped-up, option-laden employment agreement. It was hard to tell what each deal was worth, but by any measure it seemed a heck of a lot for what had been four months of hard work.
They knew that at some point their listening software had to converge with operating-system software or browsers - at some point, they have to sell the company. But they started to have doubts that now was the time. They really hadn't proved what they wanted to prove. "We hadn't stood up" is how Samuel puts it. Modem speeds were too slow for quality sound, and the programming was improving with listener feedback. If they'd achieved this much in half a year, how much more might they achieve in another year? And then there was the principle to fight for: telecommunications reform had just made it legal for radio station conglomerates to own several stations in the same market, which was going to mean less variety on the radio. What they were doing was important; they were building an audience for music that didn't have a chance against Mariah Carey.
So they did what is increasingly difficult to do these days - they turned down the offers.
An angel stepped forward. He was a board member on one of the bidding companies. He bought them six months and an office, and in that time Samuel shopped for a second round. It wasn't as easy as it should have been. Even though TheDJ.com had entertained acquisition offers, venture capitalists were nervous of Web-content sites whose main revenue was advertising.
On a warm Friday night in October, TheDJ.com's crew celebrated the closing of their second round of financing with a small party at their office, which I attended. They rolled out their new logo and slogan: Revolutionizing Radio on the Internet. I asked Jim Van Huysse, who is responsible for picking all 60 channels of music, whether their slogan should be read with the meaning, "revolutionizing radio, using the Internet" or "revolutionizing Internet radio" - the latter implies a much smaller target. "It's meant to be taken however you want to take it," he said earnestly, suggesting that the slogan is a hedge. They'd like to revolutionize the whole shebang, but they've got to stay focused on finding the next 10,000 listeners.
I loved their idealism; I don't hear it much anymore. The crucial difference between them and the other start-ups I follow is youth - they haven't been here five years. They say they want to see their idea to its end, but I'm curious how long they can hold out.
By the Ping-Pong table I met Chris Anderson, the fearless president of Imagine Publishing, which puts out MacAddict magazine and PC Gamer. Anderson gave TheDJ.com its second round. "As a publisher of magazines, I live on advertising-generated profits," he said, taking a swipe at VCs.
By the keg I met a venture capitalist who turned these guys down but wants to stay friendly. I asked him what he's funded instead. He told me about an Internet start-up that has designed software that extracts resume data from the monstrous resume Web sites. That seems to me the definitive start-up for these times: it's a very good solution to a very specific problem that didn't even exist a year ago. It's inordinately peculiar - can you really make money just extracting data off resume sites? Sure you can. Who would have thought the Cubicle Guy would be doing so well?
I asked Dave Samuel what keeps him up at night. He said it's hiring employee Number Five. "It's been four of us, roommates, for the last year. Now we're using a headhunter and interviewing strangers. The chemistry's crucial. It's got to be the right person."
Less than a week later, they not only found the right person, but they acquired his company. Josh Felser had been working on Internet radio as well, with some features Dave liked. TheDJ.com bought Josh's company, RadioCo, and the two men now share an office. "I learned a little from the companies that had been trying to buy us," Dave Samuel said. This 25-year-old CEO has already got wise to how it works. "Buy them before they've really stood up."
So there you go. Eat or be eaten. Even the little guys, the very little guys who are doing something very cool and important the four-guys-in-a-garage start-ups - are playing the acquisition game.
B., a 34-year-old somewhat restless project leader at a company he doesn't want me to name, has been thinking about his plan now for three months. He's been waking up in the middle of the night, his mind playing through scenarios. During meetings at work, listening to executives drone on, he finds himself doodling out diagrams on Post-its. Driving home, he lists the pros and cons of whether to put the plan into action.
B. is not thinking of another start-up. B. has been planning to murder one of the asshole programmers on his team.
"It'll look like an accident. Every year, five people in the Bay Area die on train tracks. He'll just be another statistic. I can't stand working with him anymore."
He takes me to the Holly Street Caltrain depot in San Carlos, where the act would take place. The area's under construction, without a boarding platform, but there's no fence or guardrail. "I take him out for Mexican food across the street. He has a few Dos Equis, his blood alcohol will make it look like an accident. The sun goes down at 7:45 - right over those mountains, and the glare blocks the view of the passengers. We'll be standing at the north end of the depot. The southbound train comes in here at about 25 miles an hour. When it's halfway past us, a little push, he goes down ..." B. still can't quite figure out how best to push a guy and reliably make him budge. The programmer weighs 180 pounds. To me, B.'s fighting weight appears to be about 155.
"One hundred sixty," he says. When my eyebrows go up he adds, "After a burrito, with a belly full of beer."
I think this situation needs a little deconstruction. First, B. will never, ever touch his programmer. It's just fun for him to think about; the planning relieves some of his tension.
In college B. was an avowed communist and wrote his honors thesis on how teamwork was the ideal expression of man's nature. His hero was Ernest Borgnine, and to this day B. will recite scenes from movies where Borgnine sacrificed his life for the team - the throw-yourself-on-the-grenade signature plot device. So precious does B. hold team dynamics that when his stubborn programmer refuses to even attempt the work B. gives him, B.'s fuse blows. However, being a good manager, he can't vent at the office. Thus, the murder plot as a psychological release.
The other thing to consider here is that just a year ago, the company he doesn't want me to name bought B.'s Internet game-tool start-up, earning him a couple million and making him a manager. That ain't an upper-deck home run, but for a mere game tool, that's is as good as it gets. So B. is accustomed to the free-wheeling environment of a start-up, and he's such a high achiever that ordinary office politics are intolerable.
So this is what you get in the Valley: incredibly successful people, complaining all the way to the bank. Honeymoons are short.
Noah Ames (not his real name) is another one. He's CEO of a telephony software firm near here with 35 employees. By his own description, what he's been through deserves a movie, or at least a book - "I'm a seasoned veteran of the software wars. Boy, could I tell you some stories from the trenches." He's exhausted, though, and needs to get out. In another year, he figures, his company will be worth $6 million, but he can't wait another year - he's been at this too long - "I've spent too much of my damn life tethered to my company." He'd take any offer over a million dollars and walk.
Here's the kicker: Noah Ames, old man, is 28. He founded the company in late 1995 - so long ago it's hard to remember.
The big-picture future - the postrevolutionary future - isn't much on people's minds. Everyone's got a filing due next week, or a development milestone, or quarter-end sales quotas to worry about. There's a great sense that now is the time they will tell their grandchildren about, that today's fever may be the opportunity of a lifetime. Just about everyone's working on Internet hardware or software, with very little attention to what else might be worth inventing. Most people have a blueprint for what they'll be doing a year from now - they can read it to me off their business plans - but nobody has any idea what they'll be doing five years from now.
Noah Ames's telephony software might revolutionize the phone call, but having a revolutionary mind-set about it just seems sort of silly. "The phone call will be revolutionized whether I'm a part of it or not," he explains. "There are dozens of Internet telephony firms. Nobody's the lone soldier anymore. I've got a friend who's 24, and he's at his fourth start-up. How many revolutions can you join? It's like Monty Python's Life of Brian: you can't keep straight the People's Front of Judea from the Judean People's Front."
They're slimy, but I like to feel part of the deal flow," said a friend, when I asked her why she lets headhunters take her to breakfast, though she's not looking for a job.
Eric Schmidt, the recently hired CEO of Novell, speaks eloquently, passionately, persuasively. When I don't pick up his train of thought fast enough, he asks aloud the next relevant question himself, then answers it, which leads to another self-asked question, and so on. His parenthetical remarks can last a minute, and there are parenthetical remarks inside parenthetical remarks, but he never fails to come back to the open parentheses and close them off. In this sense, speaking with him is calming - like when you pull a travel bag out of your closet and find an old favorite sweater you thought was lost. His voice has the smooth assuredness of a wee-early morning BBC broadcaster. This seasoned technology officer from Sun Microsystems frequently calls himself a "freshman CEO," and he will mention how he asks lots of people for advice, but to the extent that one of the first orders of CEO is to be the front man for your company to the press, he doesn't need any schooling.
Network technology is clearly where a lot of the most important innovations will come from in the next five years, and Novell is the company that invented corporate networking. But Novell, based in Provo, Utah, got distracted from its core business by acquiring Borland and WordPerfect, deals that led to large writedowns.
When Schmidt took the job, he made it clear that he would not leave the Valley. Though he feels he gets the best of both worlds by having staff both in Utah and here, as CEO he needs to be here. It's where the deals are cut. It's where the trade press is. It's where the conflict occurs - and he needs to expose himself to the conflict, to not get isolated. Toward that end, he has broken ground on a new Novell headquarters in San Jose, which will consolidate 1,000 employees currently scattered around the Valley. It's another echo of that proximity thing - physical proximity for people is important, even in the company that invented corporate networks.
Eric Schmidt has got them back on track. Part of his method has been to give the stable, dedicated corporate culture in Provo, a fresh breath of Silicon Valley's aggressive, risk-taking style.
"At one of my first meetings at Novell, the topic was future operating-system technology, and a key engineering executive stood up to ask, 'Do I have permission to be passionate?' I thought he was joking - I honestly laughed. I thought he was being funny. They need to know it's OK."
He moved on to the next thought - "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. At Novell, people are almost too polite.
"I have to give everyone a reason to believe. Why is Novell relevant? When people feel that they are relevant, that their work matters, they will do amazing things."
Schmidt is adamant that the revolutionary mind-set is still very much present in Silicon Valley. "Why do I work for this industry? It's because I believe that a small number of people can change the world through technology. That belief is incredibly seductive.
"Why do people who have more personal and business and financial success than is even conceivable keep working so hard? Any rational analysis would say it's time to retire, give your money away. It's because they're driven to change the world. That shared belief is what drives our passion. It's what drives me. On any given day, I feel I have failed if I haven't made progress along one of those initiatives."
"I've been around long enough now to give advice, and the advice I give is: Find a way to make a difference, and the rest will follow - personal success, promotions, financial gain."
I told him some of the stories that I'd been hearing, stories of disappointment and frustration, stories of people seemingly unable to enjoy their success, stories of people who didn't seem to be on the change-the-world bandwagon. What did he make of those?
He had a very interesting answer, one that suggested as CEO he would harness discontent as yet another motivation to make good things happen. "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. 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."
He believes the beauty of this industry is the paradigm changes that sweep through it every five years, giving people a whole new reason to get excited. It happened to him. "I had been at Sun for 10 years. I was bored. It had got stagnant. Then I got interested in Mosaic technology, the Internet happened, and I got all excited again, so much so that I almost jumped to any number of start-ups. In other industries, that doesn't happen. In other industries, you get one sweeping change a lifetime."
Schmidt's analysis of the ideal corporate culture seems to fit Silicon Valley just fine: it's a good place to work, but not a nice place to work.
"The Valley has a model," Schmidt says. "It's the total-dedication model. You can't go halfway. It's binary."
I play soccer with a Peruvian I'll call Luis. He's just your basic office computer guy. He programs in C++, he does tech support. He's never invented anything in particular, but the work has been steady. The last two years he has been providing 24-hour, on-call tech support for an HMO corporate sales force.
Six weeks ago, Luis made an offer above the asking price on a two-flat neotraditional near Stafford Park. Price: around $550,000, and he'll have to make a monthly mortgage payment of $3,845. His sister, brother, and parents will live upstairs, but the elders are on SSI, his sister assembles burritos at a taqueria, and his younger brother - who arrived only three months ago - hauls office furniture. Their combined incomes won't cover the property tax payments. When Luis told me what he'd done, I was amazed - it seemed such a vote of confidence in this economy, in these high times, and from such an unlikely person. Peru is a dysfunctional country, crippled by corruption, and I would think Luis would know too well how easy it is for things to spiral the wrong way.
I helped the family move in. The brother ordered a pizza, and with Luis as interpreter I learned the story of his father, an adorable old potato of a guy. It turned out that he was a lawyer who handled some money for the rebel communist Shining Path - 18 years ago. Without quite realizing the enormity of what he had done, his father suddenly was one of the most wanted men in Peru, and he hid in the Amazon jungle for a year with the Shining Path.
I turned to Luis. "That's just amazing. In one generation, from your father, a communist revolutionary, to you joining the computer revolution."
Luis's moon-pie face wrinkled up, and his eyebrows pinched. "What is this computer revolution?"
"You know, the way computers are changing the world."
I explained how there used to be this ethos through Silicon Valley that everyone was on a mission to transform our society, not just with personal computers - the ultimate populist tool - but by creating decentralized models for the workplace and new religions based on self-enlightenment rather than church scriptures. We wanted to shake up the world. Ten, 15 years ago people felt this call to arms. I told him about the skull-and-crossbones flag flown over Apple during the development of the Macintosh.
This provoked a burst of laughter from Luis, and then he just had to translate for his father and brother, and they laughed too, and then Luis ran out to tell his wife and mother, who didn't laugh so hard, until Luis made me repeat what I'd said, which he interpreted for the women, who stood there politely with their hands behind their backs, in matching rooster-print aprons. And then they laughed on cue, knowing what was expected of them.
A week later, after one of our soccer games, Luis shocked me with his latest news. "I quit my job. I'm going freelance."
"But you just bought your house!"
He nodded his head with full agreement, relishing the delicious improbability of it. "I know, I know, it sounds crazy."
"Why! You don't have any cash reserves. You just used them all on your down payment!"
"I'll find work."
I really couldn't believe it. I pressed him again. "Why?"
He shrugged. "If I don't use the extra bedroom in our flat as an office, my cousin will move in. My wife and I need our own flat. So it was quit my job or have a baby."
I thought about this, and couldn't help laughing. "But how will you find work?" He'd been insulated inside the HMO for two years, his contacts were few. "How will people know to hire you?"
"Oh, the word will get out," he said with complete confidence, his head bobbing like a jack-in-the-box, and that was that.
When I hunt for an anecdote about how good it's gotten in Silicon Valley lately, Luis stands out more than any story about absurd wealth ("my other car is a plane"), because absurd wealth has already happened - you went public, you made your $20 million, now what? Also, I think it's pretty easy to have faith in the far-off future, pretty easy to work at some research lab and believe that in 2010 cars will fly and computers will be wearable, because the research scientist has got a steady paycheck coming in each month. What's hardest is to have faith in the near future, to believe in the next 18 months, or, in Luis's case, the next 30 days.
As a soccer player, Luis is a midfielder. He isn't particularly athletic and doesn't hustle. But he has vision. When the ball comes to him, he has the ability to glance up at the field and instantly know what is about to happen - how the seemingly random 22-player array will look in a moment's time. He will kick the ball to a spot behind the defense, or into an open channel, where a teammate runs onto it. Luis can read the near future.
If it was a testimony to economic faith that Luis was willing to buy the house, how much more of a testimony was it that he was willing to entrust his mortgage payment to the vague notion that the people network would take care of him, that "the word will get out"? But that's how business is found these days, in the smoothly working chaos of Silicon Valley: it's still important who you know, but the right person to know is never more than a few phone calls away. It's three degrees of separation. Everybody knows somebody who knows somebody, and, indeed, "the word gets out."
The question remains, when I look at the Valley to the south: am I looking at another "steel city" Pittsburgh, the ground zero of an industry that is supplying a valuable technology to the whole world? Or am I looking at the future of the world itself - 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. Sure, more people are coming here all the time, but those who've been here for awhile have bigger Rolodexes. They have the advantage.
I had a Realtor down in Santa Clara show me a three-bedroom ranch home "priced to move" at half a million.
"Who can afford to buy a house now?" I exclaimed.
Then she told me how housing prices were going up $1,000 a week this past year, with no end in sight.
She said, "At that rate, who can afford not to buy a house now?"
That's a pretty good embodiment of Silicon Valley overall. It's evolved so much in the last five years that it seems pretty damn intimidating to get in this late in the game. But at the rapid rate it's evolving, can you afford not to get in?
Po Bronson (email@example.com) wrote The First $20 Million Is Always the Hardest: A Silicon Valley Novel, excerpted in Wired 5.03.
Copyright 1993-98 Wired Magazine Group Inc. All rights reserved.
Compilation Copyright 1994-98 Wired Digital Inc. All rights reserved.
Professor of Economics J. Bradford
DeLong, 601 Evans
University of California at Berkeley; Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
This document: http://www.j-bradford-delong.net/TCEH/Bronson_Silicon_Valley.html