Valley of Genius

by Adam Fisher

  Chris Caen: Oh God, the parties were fabulous; I mean parties every night!

  Jamis MacNiven: Draper Fisher Jurvetson once rented one of the biggest buildings in the world, Hangar One at Moffett Field—it was where the USS Macon zeppelin was—and filled it with amusement park rides. There must have been eleven thousand pounds of shrimp and it was raging. Barbara Ellison, Larry’s ex-wife, used to throw parties with zebras and elephants and giraffes. There was a party once that had army tanks driving around with naked women. One guy had a huge party and hired these four party girls, to just walk around completely naked, in Woodside, on a Sunday afternoon!

  Po Bronson: There was always this high-low tension that was always trying to make you feel like you hadn’t totally sold out—like you add some funk and you get rid of the guilt. Like everybody would wear a tuxedo with sneakers, or serve Kobe beef on a cheap ol’ napkin. It was some form of apology or some sort of a desperate cry to not be just about the money.

  Jamis MacNiven: It was all very interesting, and we were younger then, and we thought it would go on forever.

  John Battelle: There was this sort of reality distortion field around the entire internet, that was like, “Everything is changing, and I want a ticket to the change. Where do I buy a ticket to the change?” And so if you wanted to buy a ticket to the change in, say, retail, you would buy a share of Webvan. If you wanted a ticket to the change in travel, you would buy a ticket to Expedia or Priceline.

  Joey Anuff: Day trading on the internet with E-Trade is just a matter of clicking something to buy or sell, so it brought this twitch element to retail investing. And if you’re me, a fucking idiot who doesn’t know anything about the history of the market, for all you know you might as well be playing Dig Dug.

  Carl Steadman: So you have people investing in ideas, some of them good, some of them bad, and because what you get in a frenzied economy that is in search of IPOs are ideas like Pets.com. They were willing to ship you a forty-pound bag of dog food, for no shipping fee, at a tremendous discount. It made no sense, there was no underlying business plan. It was this tulip mania. It was the exuberance, irrational exuberance.

  Ev Williams: This company would IPO and that company would IPO. We were all swept up in it.

  Tiffany Shlain: There was so much talk about IPOs that we had an Initial Pumpkin Offering for Halloween. Everyone came out to South Park. I still have all the schwag from that; it was very funny. It was a ridiculous time.

  Carl Steadman: My marker for a long time was Paris, 1968. It was this time when students and workers and especially the farmers and, to some extent, city goers joined in this general strike, and if you read the accounts from the people at that time, they felt that anything was possible. And in the mid- to late nineties, there was also that sense there’s just this miracle happening and anyone with a sense of history understood that we were in a moment which was not sustainable.

  Ev Williams: It really felt like a moment.

  Joey Anuff: There was a point that you could buy a stock and the next day it would be up four times in value.

  Jim Clark: Silicon Graphics was never anything more than ten times earnings. In 2000 there were companies trading at one hundred times earnings!

  Jeff Rothschild: There were people who invested everything in these growth stocks, and they were buying companies at a hundred times earnings, waiting for it to go to two hundred times earnings, or in many cases, they were buying things at three hundred times earnings hoping it would eventually be five hundred…

  Max Kelly: These kids were going crazy, and trying to figure out how to leverage their shares and all this other stuff, and of course they all got fucked.

  Carl Steadman: At Suck we celebrated the craziness because we were living in a world that was not going to exist again. That was my take at the time, because it was not as though people were going to listen to reason.

  Max Kelly: All of them almost universally got fucked, as I recall.

  Patty Beron: We kept hearing, “Oh, the dot-com bust is coming” but we were like, “What does that mean?” We didn’t really know. Was everyone going to lose their job and be begging on the streets? We didn’t really have any idea.

  Scott Hassan: It was a superhot time in the Valley, things were really hopping, and there was so much money flowing in that I think the VCs were just very inundated by money, too, and they needed to actually get that invested, because they can’t take a carrying fee if it’s not invested, and so they have to invest it.

  Jamis MacNiven: Just before the crash, John Mumford at Crosspoint Ventures, who had raised a billion-dollar fund, said, “You know, I can’t responsibly invest, so I am not going to do my fund, I am going to give my investors their money back.” And all these other VCs are going, “No! No! You can’t give the money back! That wrecks the whole game!” That’s when the money dried up and the ideas stopped and everything ground to a halt.

  Chris Caen: Also, people started realizing that it was kind of a circular economy. That it was the VCs funding companies that invested in other companies that were bought by other companies…

  Jeff Rothschild: I was skeptical about the valuation of these companies, because, you know, I thought about it and said, “Well, the only way that they could continue to be this valuable is if other people were acquiring them, and that can’t go on forever, you eventually don’t have any more bigger fish.” Companies were getting such big valuations that nobody could acquire them.

  Chris Caen: It was a circle jerk. It was all the companies in Silicon Valley giving each other the same dollar and having it go around the room. And so once the tap turned off for one company, and you multiply that across the whole ecosystem, the disaster was almost preordained.

  Jeff Skoll: In January 2000 was the merger between AOL and Time Warner. So I remember Pierre and I sitting in the little conference room when we hear that news, and Pierre—who is superwise—said, “It’s probably going to be the crash of the internet.” And I was like, “Why?” And he said, “Well, this is the first time you are having Yankee dollars buying Confederate assets, right? And up to now those Confederate assets have been priced at whatever they’ve been priced at because of a dream and a prayer, but now you have real hard assets being placed against those numbers and it’s going to crash the NASDAQ and all that.” And he was right.

  Ev Williams: The stock market crashed in March. But it wasn’t immediately obvious that everything was over. There was a suspension of disbelief. It was like Wile E. Coyote running off a cliff—he’s still running for a while. In fact we raised the first money into Blogger in April of 2000.

  Biz Stone: I was like, Damn it! Why didn’t I do that! I was so blown away by Blogger. I was like, Blogging is going to be amazing. I just got the shivers thinking about all the people who weren’t coders who would now be able to have a voice on the internet.

  Ev Williams: We raised $500,000 and hired seven people. We assumed we could raise more later in the year, and then as that money started running out and it got to be the end of the year, we realized, Oh, there’s no more money!

  Brad Handler: Then in March of 2001, everything just started to implode, companies were failing.

  Brad Handler: Webvan came and went. Pets.com—whoever thought that was a good idea?—went. The Globe had the highest run-up and then a year later was bankrupt.

  John Markoff: Pets.com and Webvan—nobody believed in those. They had the air of excess right from the start.

  Andy Grignon: We were doing stupid stuff: Pets.com and Webvan and Excite@Home. It was the early development of the service economy.

  Jack Boulware: It was crazy. All this money that was pouring into the Bay Area—ridiculous schemes like Beenz.com, WebVan, Kozmo—and everybody would profit from it. Limo drivers were accumulating fleets of like ten or twenty cars. The strippers were all buying houses. Then— boom—all of a sudden it was gone. People were left looking at one other: “Did we just get played? What happened?”

  Po Bronson: I
was having fun roasting this place, then I met Ben Chiu—I can’t even remember what he was doing—but I saw all that money and I’m like, Maybe it’s somewhat for real? And I lost my critical mind in there.

  Brad Stone: A conventional wisdom formed right after the crash that these companies were bad or ridiculous or excessive, and I think that’s unfair. Because we’ve seen all these businesses play out, by and large. The dream of Pets.com seemed ridiculous when the company went bankrupt, but it certainly doesn’t now. Chewy.com was just sold to Petsmart. It was the biggest e-commerce sale in history!

  John Markoff: So was Webvan ahead of its time? Well, there’s this experiment called Instacart which seems to be working.

  Brad Stone: They weren’t bad ideas. The ideas were sound. Ultimately the market liked those ideas. It was the wrong time. It was too early.

  Andy Grignon: Those ideas became successful later on—Amazon ultimately birthed out of that thinking—but we did a lot of stupid things. We spent a lot of money on making things that weren’t ever going to be profitable.

  Fred Davis: There were a lot of bad companies that needed to go. My joke company is eggsbymail.com—it just isn’t a good idea to start with. So, shaking them out would be good, if it was a correction. But it wasn’t. It was a complete turning off of the monetary faucet.

  Marc Andreessen: In the dot-com crash, all the dot-coms go out of business. Then all of a sudden all the big companies were like, “Oh, this internet thing? We don’t have to worry about it after all. If the dot-coms are going away, we were right. This internet thing wasn’t going to be a big deal, and so we can put all these projects on hold or slow them way down.” Our market just cratered.

  Chris Caen: The speed with which it happened was the shocking thing, and it happened when Atari collapsed, too. That’s the one thing about Silicon Valley: Damn! When that bomb goes off it all happens in a hurry. Everyone talks about how fast Silicon Valley grows, this whole a-rising-tide-lifts-all-boats thing, but people forget the opposite is equally true: When the tide goes down, everybody goes down.

  Brad Handler: Seeing a company like Exodus go to zero… that was a little sobering.

  Ray Sidney: Exodus is the data center where Google had its first server farm. It was also hosting machines from Inktomi, which was another early search company, and from Yahoo—all the big names.

  Chris Caen: It’s “Oh my God! The bubble’s burst! Silicon Valley is ending!” Everyone forgets that 2000 is the second time that the bomb went off in Silicon Valley. The first time was ’83–’84.

  Marc Andreessen: Then 9/11 happened, which was obviously tragic, and in addition to being tragic, had the effect of shutting down any business that was hanging on in our industry. Basically, 9/11 was it. Business just shut down.

  Mike Slade: So 9/11 happens on a Tuesday morning, right, and the world’s on fire, right? I went to Apple, and we were all sitting around and Steve looked at me and he goes, “There’s going to be a war.” People were like, “Should we even bother with this meeting?” People weren’t really sure that we would function as a business. I’m serious! What the hell, right? It was weird.

  Fred Davis: So, after 9/11, the market opened and every freaking man, woman, on the street dumped all their tech stocks. I had to go into the office and fire thirty people the next day because everything was gone.

  Yves Béhar: Life was easy and beautiful and happening, and recent college graduates from the Midwest and East Coast had gotten hired at great salaries, and then suddenly there was no work in San Francisco. People’s dreams were shattered.

  Patty Beron: When the towers fell, my boyfriend—who’s now my husband—and I were in Europe for a month, traveling around. I was like, “Let’s go on a trip and when we come back we’ll get new jobs, and we’ll just keep making money and doing whatever.” But when we came back he could not get a job to save his life.

  John Markoff: It was like a neutron bomb went off. It all happened incredibly quickly. One day the sky was the limit, and then the sky wasn’t the limit, and it just came crashing down so very quickly.

  Jamie Zawinski: That’s all nonsense. It’s all blown out of proportion. There were a bunch of people who counted their chickens before they were hatched, who found out that they didn’t make as much money as the lying liars told them they would. I knew a few people who bought their expensive condo and filled it with ridiculous furniture by leveraging money that didn’t show up. Then the tax bill comes due, and they’re fucked.

  Fred Davis: I needed a couple more million bucks to lend my company because the bubble burst in 2000. And I had a huge number of AskJeeves shares, so I go to my broker and he says, “Don’t sell the shares, just borrow on margin and lend it to the company. It’s a small amount.” And he said, “You’re totally protected because Jeeves was trading around $14. It has $7 of cash in the bank, so it’ll never go below $7.” Okay, great! But after 9/11 Jeeves went to eighty cents because people were panicking. Two years later, it sold to Barry Diller for $35 a share. But because I had such a large position in it, I couldn’t last until the buyout happened.

  Jeff Rothschild: So, you know, a lot of people got greedy, and maybe they can blame their brokers, but a lot of people did stupid things. They would exercise their stock options, and then hold before they would sell—because they were counting on a higher price. So they might exercise a stock option for $100 a share, at which point they owe $50 a share in taxes—but if the stock price falls to $10 a share when the tax bill of $50 a share comes due… you sell your house, you sell everything you’ve ever owned, and you will still be working for the IRS for the next ten years. This happened to a lot of people I know.

  Fred Davis: I saw tens of millions of dollars disappear in one day.

  Jamie Zawinski: Okay, well, some very bad money decisions there. But I’m sorry, there was no “collapse.” There were inflated promises that didn’t come true. It’s not like property prices have ever gone down in San Francisco, ever once. Maybe for a minute after the last earthquake.

  Yves Béhar: Maybe they were stupid dreams: stock options that looked like they were worth millions; recent college graduates thinking that they had made it—and it was real easy!

  Patty Beron: We ended up leaving because my husband got a job in Utah. We were like, “Oh God, we don’t want to go to Utah, that sounds horrible!” But you’re going to go to where you’re going to get a job. And that was kind of our exit from San Francisco.

  Yves Béhar: People had to go home. One hundred thousand people left the Bay Area at that time.

  John Markoff: It really cleared out.

  Patty Beron: The world was a changed place. The mood was totally different. It was very somber, very quiet: no e-mailing, no people calling. I did keep SFgirl.com going until we left, but the site was basically about parties, and the mood was not the mood to be throwing parties of any kind. It had run its cycle.

  John Markoff: The best thing about the collapse was all of a sudden you could drive on 101 and 280.

  Yves Béhar: Traffic went from being absolutely completely impossible to being a breeze. It suddenly was a pleasure to be on the freeway between San Francisco to Silicon Valley.

  Aaron Sittig: You’d go to dinner at a restaurant and you’d get amazing service, and so you’d strike up a conversation with the server and find out that they were like an unemployed physics PhD who had just gotten a degree from Stanford. It was really rough. Everyone was just scraping by.

  Sean Parker: It went from being the center of the universe and all these bright-eyed, bushy-tailed people showing up from all over the country and reading Wired magazine cover stories about all of the young people who were emigrating to Silicon Valley to seek their fortune—to nuclear winter. Only the cockroaches survive, and you’re one of the cockroaches.

  Mark Pincus: San Francisco was a shell of a city, and all these people had come in and they left and all these companies had collapsed. It was very drastic.

  Po Bronson: All this money was
gone and then there were investor lawsuits and then there wasn’t even the money to fund the investor lawsuits; it just all kind of became barren.

  Sean Parker: And then after the dot-com bust, there was a feeling everything that there was to be done with the internet had already been done, that there were no new ideas, that nothing new could ever come out of the consumer internet.

  Mark Pincus: I’m sure it was only in my head, but I felt that there were about six people that I knew who were interested in doing anything in the consumer internet, and we all kind of went to the same two coffee shops in the Mission.

  Sean Parker: So you’re just sort of like hanging out with the other cockroaches and it’s terrible. There’s no sense of enthusiasm, it’s the most unglamorous, unsexy, miserable thing you could be doing. No one understands why you’re doing it; certainly investors didn’t, nobody my own age did.

  Mark Pincus: No one in San Francisco had any interest or even understood what you were talking about. If anything, they might be a little annoyed.

  Ev Williams: The thing that people missed was that it was the financial bubble that burst, not the internet. This whole time usage of the internet continued to climb dramatically.

  Aaron Sittig: Everyone who had come to pursue a quick fortune left, and the only people still around were people who believed in the real promise of what the internet could provide, what technology was capable of doing for people. A lot of the cynicism that happens during flush times went away, and the attitude changed. There was a lot of mutual support and looking out for each other, hoping that someone would find a way to break through and succeed.

  Sean Parker: So you have this really narrow population of people who believed. The only people who got through that period were the ones who were truly passionate or the ones who had incredible capability.