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Comments by YACCS
Sunday, July 16, 2006

About the dotcoms

Last man standing

This was posted up in another thread and I think it's worthy of a wider discussion

Oh, and Steve:

What you don't understand about Silicon Valley is that had been there and flourishing for four decades already before anybody ever heard of dotcoms.

Along the way, tens of thousands of people made more money there than Kos can imagine in his wildest dreams. And many of them still have it.

The East Coast has a real myopia where the Valley is concerned. Easterners never got our culture; when they came west to either cover it, finance it, or see what the researchers had come up with, they always failed to understand what was going on, why it was important, and who was making it happen.

So they typically killed the most promising projects (IBM and XeroxPARC were both notorious for this), bankrolled the wrong people (the ones we all knew better than to trust with our houseplants, let alone our money), or went home with media stories that made us sound just ridiculous.

At the same time, fron the 50s through the 90s, those ridiculous people were generating the biggest economic engine the world had ever seen. This, in particular, upset the New York money people, who had carefully arranged the world so that nobody anywhere would make money unless they had a piece of it. They didn't have very big pieces of our magic, which only made them more eager to see it torn down and shipped offshore. I think they mostly laughed at us because otherwise, they'd scream. We were something that was never supposed to happen.

This tremendous east/west culture gap finally reached its zenith with the dotcoms-- which were largely financed by Easterners who didn't grok anything about the Valley, actively derided the people and the culture that made it go, and somehow still thought they were going to make money off us anyway. They were blinded by greed, and they deserved everything they had coming to them.

But they had nothing to do with the deeper history of the Valley, nor everything of real value it has created for the world over the past 50 years.

If you think dotcoms were the beginning and the end, or that there were no rules, you're hardly the first -- but you are no less wrong.
Mrs. Robinson

No, what you don't understand, and I won't be patronizing about it is this: there was and is a massive gap between HP of that first generation, a company which listened to it's employees, Apple of the next generation, which valued innovation, and the dotcoms. Lumping them all in is unfair to the people at HP, who actually cared about their products and ran an ethical shop until Fiorina walked in the door. Shame to see your legacy pissed away like that.

Sure people made a LOT of money, too bad much of it was stolen from investors. Those options vested for the insiders and a lot of other people got screwed. It's nice to wax lyrical about the Valley and blame evil easterners, but that's not exactly the truth.

Oh, please. Sure, you can write Jeff Bezos off, but Howard Rheingold and John Perry Barlow are all yours. We understood your culture, because it dominated everything. We read all the insane nonsense they pumped out, the fawing profiles of John Doerr and the rest of the crew on Sand Hill Road. How they would call in people for pitches. What? Doerr was an easterner? He didn't understand the culture? Please.

And please, please don't insult my intelligence with some nonsense about New York money people. They came in starting with the Netscape IPO, but the seeds for dotcom failure were set before then. Why? The early money came from the same people who backed Salon, Wired and the early dotcoms. Once Netscape was viable, it was off to the races. Of course, the smart money didn't touch any of this crap. They laughed at these valueless companies or sold quickly to take their profits.

IBM and Xerox literally had no ability to take their best ideas to market. People marvel at XexoxParc, but they don't ask how an established company like Xerox was going to enter into a new and risky business. IBM could never emulate Microsoft's drive and DOS 7 rocked. But they were never going to have the drive Gates had.

That wasn't just eastern money, that was the market.

I don't remember people rejecting IPO offers from the IBanks because it was too much money. Instead, you had people begging to get into the Red Hat IPO, because they loved Linux so much. Begging to get into other IPO's. People investing the 401K money in these companies.

The Valley culture I remember was a brutally exploitative one, and yes, the Wall Street boys were less tolerant of the CEO's who were buddies at Stanford, yet had no clue on how to run their underwear in the wash, much less a company. But if they were white men with an Ivy degree, they got their funding. And Wall Street joined in. Remember And that's who they hired. Their friends. And Sand Hill Road was up to their neck in it. Not some guy in Manhattan.

Dotcoms aren't some minor footnote, the Valley pushed those companies hard and made money from them. It was the investors who took a bath. A trillion dollar bath, so I understand the temptation to rewrite history.

No,no, no. The Valley set the tone, which I called Grateful Dead capitalism, they would smile in your face until they fired you. Everyone was a friend until the money got involved. It wasn't just amateurs inventing these companies, it was execs at your vaunted old line Valley companies joining in as well.

But here's what I meant about my line about Kos. His company has been profitable from day one. Why? Low overhead, and well, he's not a crook. I used to look at 10k's as a feature at NetSlaves. Loudcloud comes to mind. To this day, I don't know what the fuck that company did.

You know well what Kos does, his advertisers know what he does, he has more readers than Salon with less of a staff. All of the verities praised by the boys on Sand Hill Road were money draining losers. The Valley culture was far from healthy and its worst dysfunctions, the insularity, the arrogance were transfered to the dotcoms without any of its good features, like loyalty to the workforce and financial stability. Blogs did what dotcoms never could: get an audience and make a profit. Without pissing away billions and screwing investors.

The dotcoms were the angry, bastard children of Valley culture, full of pride and greed and little social concern.

My favorite story about the Valley is about the 22 Bus, which went through Palo Alto. The poor would have to ride this bus at all hours, passing new million dollar homes. The old owners, the teachers, nurses, were selling out and moving to Vegas. Why? They could take their pensions and bank the million they made. And the new owners tore it down and built a McManison. Robin Miller, who ran Slashdot, said something to me I still remember: You don't buy a 30 year home with a three year job.

But the workers, often without unions or decent wages, were forced on this long bus ride to clean the offices of the newly rich. They would make $10 an hour or so in the midst of options and parking lots of BMW's and no one cared.

It wasn't that people didn't get the Valley culture. They got it. The reality was that the hype which had sold it didn't last. The ethics which were the hallmark of HP were lost in the greed. And you can pretend it was just those evil easterners and their IPO's, but that's a pretense.

Update: When I said Apple didn't make a PDA, I didn't count the Newton, and it wasn't what I was referring to. In the late 1990's, Apple was expected to make a branded PalmOS PDA, mockups in iMac colors were even floating around online.

Certainly, the Newton was not a modern PDA and can be seen as a failure. But Apple was specifically expected to jump on the Palm bandwagon and obviously didn't. Microsoft, otoh, did.

Jen here.

Okay, I have a lot to say on this--unfortunatley, I didn't get in till WAY late last night, and I'm scrambling against the sunset to get things done today. There's a lot to be said on this, but here's a few points to get you started while I brush my teeth, highlight my hair, and figure out where the fuck my plastic drip-dry hangers went so I can do my dripdry laundry:

  • WTF is all this talk about the DotBomb bust being a Greedy East Coast Money thing? The last time I checked, WiReD Magazine (and its meltdown), LoudCloud, and a million other bullshit companies were out on the left coast. If you forgot, just go dig through your old back issues of WiReD, Red Herring, Business 2.0, and so on. C'mon, I know, it's okay, we all have a secret stash, right next to our porn collections...Go read the two NetSlaves books for a refresher if you forgot. Or is the meltdown of the housing market in San Francisco only my imagination or some East Coast conspiracy?
  • The trade shows of the late 90's were full of redundant crap being produced just about everywhere--Silicon Prarie, Silicon Tundra, Silicon Bog, where the fuck ever--crazy stuff that nobody wanted like "rich content" email (yeah, we all want dancing adverts in our personal email that we send to others), 8 million "like RealPlayer only better" dedicated, exclusionary technologies, avatar chat rooms (The Palace, anyone?), and "opt-in advertising systems" that pretty much just tricked people into getting spam. And ENTIRE SHOWS on both coasts were dedicated to this crap.
  • There was also this pervasive myth that all kinds of laws--IP, user privacy, etc--that dotcoms just wanted to ignore--somehow "didn't apply to them." There was no single body of "internet law" when I first got online in 1995, and was still a single-book subject when I graduated law school in 1993. However, when companies started to loose money and get sued, it grew up fast. There is no "lawless" part of the Net in 2006. Even Kazaa and other companaies that don't adhere to US copyright law or that are based outside of its reach will eventually be punished in the economic forum for non-compliance. The most obvious example is Chinese piracy of just about all IP items, not just software. More international efforts will follow. Yes, darknets and fileswapping will always go on, but everyone knows that they're illegal and are not pretending that there's some kind of "right" to do it. BTW, I think that eventually all-you-can-eat legit licensing will be affordable, and a lot of stuff will be released into the public domain, but that's another thread.
  • In the same way that a lot of dotcoms flouted IP laws, you better believe they also flouted labor laws. I have never seen such abuses of hours, employee trust, financial responsibility, and gender/age discrimination. Oh, yeah, you could bring your dog to work, smoke herb, and drink beer on the job, fuck your boss/direct reports, but you never got to LEAVE. Also, most of these places looked like an episode of Logan's Run--everyone under 30 and pretty, not a grown-up in sight. Sometimes they would have one Token Old Guy, and one Token Fat Person. The age and weight of these two individuals would often be enough to make a visible dent in the average; ie the Token Old Guy would be some investor who was pushing 60 or 70, and the Token Fat Person would be a guy/gal who was well over 350 lb. Oddly enough, this formula held for every dotcom I ever worked at, and still seems to hold true for ones I still come into contact with.
  • Internal politics regarding ANY dotcom initiative at ANY nontech company became a toybox/pork barrell in the late 90's. It became a place to settle scores, promote friends, repay favors, and so on. I saw this in everyplace from financial services firms to publishing companies to food distributors. Nowadays, the actual business of making and maintaing websites is usually outsourced from a parent company or done by specialists; it's something that most big corporations don't do from start to finish in-house. I have specific stories about this, but I need to run for now.
  • There is a world of difference between what was going on at the companies that made actual hardware--brown goods, stuff, things, whatever you call them--and the software that ran on said things.
  • Most notably: The biggest fucking snake-oil salesmen that I know in the industry ALL fled to LA from NYC after the bust. They knew they shat the bed here, and the fact that they found receptive audiences over there speaks volumes.

That's enough for now. Gotta go find my hangers.

UPDATE: Okay, my scalp is burned enough; time to hit the showers. Two more points:

  • Does anyone else remember the whole "ad swapping" clusterfuck non-capital-raising deals that lots of companies got looped into? To illustrate, a story from the Mishna: Once upon a time in a little village somewhere, Hymie and Shlomo somehow got enough money together between themselves to buy a keg of good Scotch whiskey. They decided to sell it in Kiev on a festival week. So, on the appointed day, they loaded up their donkey cart with the keg and set off for the big city. Along the way, Hymie says to Shlomo: "You know, my back hurts from loading that cart. Let's say I buy a shot of whiskey from you off of your half of the keg for five zlotys." "Sure," says Shlomo, who takes the five-zloty piece and gives Hymie his shot. Seeing how much Hymie was improved by the shot, he gives the five-zloty piece back to Hymie and says: "Here's five zlotys for a shot for ME from YOUR half of the keg." To make a long story short, they spent the trip passing back that 5-zloty piece between them and getting quite merry. Alas, when they hit the fair at Kiev, the keg was empty! "Damn it," said Hymie, "and we were making such a nice living off that 5-zloty piece!!" This is EXACTLY what happened near the end of the DotBomb meltdown. Everyone was swapping EVERYTHING except cash--services, ad space, you name it--but no money was coming INTO the system. And landlords and HMO's don't need ad space or data conversion.
  • Gilly got me a copy of "The Essential Leonard Cohen" off of my Amazon Wish List. I ask you all: Is "A Thousand Kisses Deep" the most fucking amazing, sexy song ever written? I think someone's going to throw a rock through my screen if I play it again. Yeah, it's OT, but I can't get it out of my head now.

Comment away!

UPDATE #2 Something else that's come out in some of the comments and offlist emails--a lot of folks seem to be seeing some kind of "formal degree/no degree" conflict in the whole DotBomb thing. Now, in all honesty, I've seen and worked with folks from the full spectrum and had good and bad experiences therewith. However, I think I can say two things on this with relative safety:

#1--High school dropouts will not be promoted to upper management in any company bigger than 10 people, regardless of ability and

#2 --I've heard a lot of "I don't need no stinking degree" here. However, I don't know a single soul who ever said "Damn...I sure did waste my time going to Harvard for an MBA/Yale for a JD/etc.

posted by Steve @ 2:39:00 PM

2:39:00 PM

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