Burn Rate

by Michael Wolff

  6. AOL. If you were going to be in the Internet business, a portion of your life—a greater portion than you wanted and likely a greater portion than you could stand—would be spent dealing with AOL. That seemed to me a certain order of hell.

  7. The money. The need for ever more capital meant that the entrepreneurial impulse—the impulse to own your own business and direct your own fate—would soon be exhausted. Your share would be reduced to a minimal ownership of the whole. Your future then would be to make the transformation from entrepreneur to professional manager. That is, I think, the goal for some entrepreneurs. For others, it is not.

  8. Starting over. For some people, even some entrepreneurs, this is terrifying. But to me, in fact, the most interesting time is the time before you’ve convinced anybody that what you’re doing is smart. I could go back to the beginning.

  9. Profit taking. I had not made the $15 million Bob Machinist said I’d need to be free from ever having to work again. Perhaps I was not, by both temperament and destiny, meant to be a rich man. But the Internet had been a profitable experience for me. For a writer (which, however hard I tried not to be, I seemed to remain) it had been a wonderful payday. What’s more, I was due a check. For the better part of a year, I had floated my own salary to ease the cash flow pains. It was due to me now and could finance, well, for instance, the writing of a book.

  10. It was spring. There was a wonderful sculpture show at the Guggenheim. Jasper Johns was at the Modern. And there was a new Chinese wing opening at the Met.

  But in the end it came down to money.

  Jon Rubin continued to assume that I was negotiating. No matter how sincerely and earnestly I said to him, “I’m really trying to figure out what I want to do; it doesn’t make sense for me to try to run this company if I’m just too burnt out” (even though this was true, I was aware, saying it, that I could really squeeze him if I wanted, that I had, wholly inadvertently, turned the tables), he continued to come with new enticements for me to do the deal with Little One and Big One.

  At one point, he even offered to return the company to me. To entirely relinquish his position, to hand it back. Good riddance. But then Jesse said that what Jon was really offering was a new structure turning equity into debt which seemed to mean that the Rubin family would not only own my business but my apartment as well. So I passed on this opportunity.

  Where we got to then was to no more Mr. Nice Guy.

  Negotiations turned from carrot to stick.

  “You understand that there is no possibility that you will fuck me. I would never allow that to happen,” Rubin said, meaning, certainly, to be menacing.

  He was menacing, too—sort of.

  It unfolded, with some degree, no doubt, of predictability, that on the day I was expecting the check for my back salary—my freedom pay—no check was forthcoming.

  “Jon wants to speak to you first,” was the message.

  We had, then, a choreographed conversation in which Jesse was Balanchine and Jon the dancer. In the State of New York an employer (in this instance, Rubin, as the controlling shareholder), cannot withhold, or threaten to withhold, an employee’s (which was me) accrued salary. He can, however, make it clear that you’ll have to go through fire to get it.

  Except, of course, if I did the deal with Little One and Big One. Then I could have my money.

  Nausea held me. This wasn’t money that I thought I had a good chance of getting. This was money I had banked. This was savings account money, by another name. This money was my escape from Jon Rubin and from the Internet.

  My own stupidity turned my stomach. I had had this conversation with Alison a hundred times. “Don’t worry about it,” I had said. “I have an understanding with Jon. The money’s not at risk.”

  Oh yeah.

  The two lawyers Alison produced to pick at the problem seemed almost amused that I would, in fact, have let my money ride like this. “Some businessman he is,” they were gently saying.

  “How many signatures does a payroll check require?” one of them asked.

  “One.”

  “Just Rubin?”

  “No. Either I sign the payroll checks or the CFO does.”

  “Not both?”

  “No. Either or.”

  “Really?” said one.

  “Mr. Rubin,” said the other, “doesn’t have a great deal of interest, apparently, in the details.”

  “You can say that again,” I laughed.

  The lawyers looked at each other.

  “Would there be a problem with that?” one asked the other, cryptically.

  “Not legally,” said the other, the employee specialist.

  “Well, then,” said the first lawyer, “just write yourself a check.”

  “Just write myself a check?” I was taken aback.

  “It’s a payroll obligation. You’re the paymaster.”

  “Can I do that?”

  “Sure,” shrugged one.

  “Not if you want to preserve a relationship with Mr. Rubin,” said the other. “But if you want to say fuck you, you most certainly can.”

  At that moment, they became the two most beautiful words in the English language.

  Books continued to fly out of our office. We were recycling our $30 high-end computer books in $6.95 mass market editions. In three years’ time, the Internet had gone from a purely tech interest with big, expensive tome-like books to books on drugstore racks. Our new electronic product, NetClock, a list of the Web’s daily real-time events, a true TV Guide for the Net, was featured on Infoseek’s opening page. That is, we had achieved meaningful distribution. We could look forward to millions of impressions a day—and God knows the traffic we could expect when (and if) there was something on the Net worth tuning in to. We had recently spawned a mini-industry with a novelty book we’d published called NetSpy: “How to Find Out Anything You Ever Wanted to Know About Anybody Online” (largely a list of telephone, e-mail, and business directories on the Internet). As NetSpy became one of the hottest-selling books in the country, it started to suggest some of the ways in which the Net would capture or titillate the imagination of the ordinary consumer: we would use the Net to invade each other’s privacy—and we would love it. I began to think about turning NetSpy into an electronic product—that was a Ginsu knife if I ever saw one.

  While I was sorry that the Internet might not immediately elevate mankind, it was still hard for me not to get wrapped up in a business that somehow, amazingly, puts its finger on America’s pulse.

  I could, certainly, have matched my ten reasons to leave with ten compelling reasons to stay. But I wasn’t arguing anymore. Whether wisely or not, I knew what I was going to do.

  Business, at least if you are not precisely a businessman, is about romance. And you know when a romance is done.

  I wrote myself a check.

  I wrote a press release.

  I wrote a letter of resignation.

  I began to clear out my desk.

  Rubin, it turned out, had slipped off for a few days of skiing in the Alps, so I was deprived of the moment, of even imagining the moment, when he was handed my fax. In fact, there was, I could sense, an hour or so of confusion about who was in charge and who would take what steps.

  But then the locksmiths arrived; all the doors were secured against me. A guard took up duty to inspect my belongings.

  And my last phone call was put through: “Jesse Meer for you,” Ann said.

  “Jesse,” I said, surprised to find my heart beating suddenly very fast.

  He spoke low. “I just want to give you some prior notice about what’s going to happen to you. I really don’t think you have any idea who you are dealing with. Well, you’re going to find out now. Because now,” he said, his voice starting quickly to rise, “you’re going to reap the whirlwind.”

  “Jesse, as I said in my letter, I’ve resigned. It’s no longer appropriate for you to be speaking with me.”

  “You’re telling me what’s ap
propriate, you little fuck? You’re telling me? We’re going to bury you in litigation. We’re going to be all over you until you cry for mercy. You and your family will never know what hit you. You’re dead. You’re fucking dead. You little shit! You little fucking shit! I’m going to get you! I’ll get you!”

  “I’m going to terminate this conversation now, Jesse.”

  “YOU LISTEN TO ME . . .”

  My laptop was spirited out through the women’s room under the eye of Jesse’s guard.

  Chapter Ten

  Past as Prologue

  I briefly waited for summons and complaint to arrive and a life of litigation to begin.

  “Deep pockets don’t sue shallow ones,” Alison kept saying, which seemed like something important to understand about late-twentieth-century life and business.

  I stewed a little and decided that we should clearly go after them, that I owed it to myself, that I had been robbed of my business and fortune.

  We took ourselves and the kids to Italy on my back salary instead. Lavender bushes bloomed beside the house we rented in Tuscany and down along the path through the olive trees to the pool.

  By increments, we began to lay the business to rest.

  “Just the expectations . . .” Alison would look up and say, and we would shake our heads.

  “What were they thinking?”

  “Everybody is such a bullshitter.”

  “The VC mind-set is all short term.”

  “They were bastards.”

  “If you give a preference, you’ll always be fucked.”

  “People go into the technology business without knowing anything about technology.”

  “I never even wanted to be in the technology business.”

  Under the olive trees by the pool on the plain where Hannibal slaughtered an army of Romans, I began to fit the details of my experience into the larger picture. Several years before all this started, Louis Rossetto had said to me that not much changes over a year or two but everything changes over ten years, a notion I’ve recently heard Bill Gates propound and take credit for. Partly what Louis meant, as I considered it now, was that the present, the workaday present, is necessarily concerned with the fear of failure, the challenge of surviving, the balance of setbacks and moves forward, the temperature of the burn rate—the only things on my mind during my entrepreneurial sojourn. But out of those concerns assumptions change, sensibilities are altered, dearly held beliefs are discarded, paradigms shift, and power is taken. In other words, life is what happens when you’re making plans, as my old friend Weird Stan was fond of pronouncing, dyspeptically. Which is not at all to justify the failure to take a longer view or a susceptibility to the temptations of get-rich-quick schemes or my believing in ridiculous promises but to accept all those things as part of a larger process of transformation.

  Then I started to brood about whether or not this was true. Because mightn’t it be that the future you get when you build it on pure opportunism and shortsightedness and the promise of immediate gratification and the age-old tricks of a pyramid scheme is a future that’s going to make a lot of trouble for you? Do we have to look further than television to make that case?

  The browser creators, Java programmers, and push inventors seem happy with what they have wrought, however transitional their accomplishments will come to be in the long run. On the other hand, I don’t know any “content” creators who aren’t wrestling with what to do with the Internet, who aren’t embarrassed with what they’ve so far been able to offer. I don’t know anybody seriously thinking about this thing as a content medium or publishing system or entertainment platform who won’t admit that contentwise it’s 99 percent dross.

  In the early 1960s, Newton Minow, the chairman of the FCC, threw up his hands and memorably pronounced television a “vast wasteland.”

  Were we already in the 1960s of the Internet?

  Surely we were headed there.

  Daily, I crept off from the pleasures of the Tuscan sun to read the reports that flowed in over the Internet to my laptop, which was propped up on an Etruscan (perhaps) wall. The industry, from my rarefied view, seemed headed into a perilous state. Virtually all of the primary traffic sites—AOL, Yahoo, Excite, Lycos, Infoseek—had put their real estate up for sale. Not just discreet avails either, but every single square inch of space. If you were an advertiser or a Ginsu knife dealer or a content creator, you could buy a position in front of this traffic. You could stage your own news, you could offer your own search engine, you could, actually, do anything you wanted, without even having to make clear who was doing it.

  Was this so shocking?

  Yes. It was shocking. The ordinary conventions of context—that is, this is an ad, this is news, this is produced by us, this is produced by a third party whom we cannot vouch for—the reliability of provenance, the one generally constant point of pride in the media world, were being sacked. The inherent problem of the Internet, that it lacked clear authorship and responsibility, was being compounded instead of solved.

  I resolved that I was going back to the reliable and trustworthy media world. I had a magazine concept I wanted to develop, a possible PBS series to explore, this book to write. I had things to say, after all. Messages to send. That was the business I was in.

  We are back in New York by Labor Day, in time for the children to start school.

  “How’s the Internet?” ask the investment bankers who are the parents of my children’s classmates.

  “Chugging right along,” I reply, waving.

  I survey the landscape.

  Faces have changed.

  Louis has agreed to step down as Wired’s CEO. Jane has stepped down as president. TV projects at Wired have been canceled. The book division is all but defunct. Two new magazine start-ups have been tabled. The focus of the online group has been narrowed. A search has started for new management (the scuttlebutt is that the search isn’t going very well). The new CEO will have to deal with the Louis issue. Kill the king. Then prepare the company for sale. Louis and Jane, however, have had a son.

  Bruce Judson has left Time and Pathfinder. He went to CellularVision, a wireless cable company that’s figured out how to use wireless satellite technology to provide consumers with inexpensive high-speed connections to the Internet, where he dazzled me with a demo. It is very fast. “Speed is the killer app!” he announced. But shortly thereafter he left CellularVision to form the Judson Group and to write a book.

  CMP has gone public. But not before getting rid of its Internet businesses. After spending $25 million or so, CMP closed NetGuide magazine. I felt a pang of something.

  Infoseek and Robin Johnson have parted company. I send him e-mail at his Infoseek address, but it is unceremoniously bounced. The reports are that all the faces are different out at Infoseek and that Johnson and his family have headed to Europe.

  Seth Goldstein, my former assistant turned cyber ad agency CEO, confessed to the Wall Street Journal that he had spent 20 percent of his investor’s money on ergonomically correct chairs. This, he confides to me, might not have helped him in his efforts to raise a second round of financing. For months we had followed each other in and out of VC meetings. With weeks to go before his burn rate consumed him, he did a fire-sale deal with a West Coast firm, getting paid in stock. Unexpectedly, the stock rose and Seth was suddenly worth a couple of million dollars—not the pot of gold but nice work when you’re twenty-six. But then, in a sudden correction, the stock lost 65 percent of its value in a day.

  David Hayden no longer speaks to Christine Maxwell and is divorcing his wife, Isabel Maxwell. He has started a new company, CriticalPath, an e-mail back-end company. If you’re an ISP, CriticalPath will wholesale you e-mail services.

  Pat Spain, at Hoover’s, completed another $4 million of financing and is preparing to take his company public—with the help of the people at Patricof (on my introduction).

  Jon Rubin’s company, First Virtual, which went public at $9 per share, has
sunk to $.75 per share.

  Our EVP is now the EVP at Starwave, perhaps the most successful Internet content company

  Our AOL Exec is still going strong.

  A headhunter calls to see if I might be interested in Wired’s CEO job. I say, restraining my laughter, that I would not, but I suggest Bruce Judson, Robin Johnson, Seth Goldstein, David Hayden, Pat Spain, the EVP, and our AOL Exec.

  I am back having lunch in Manhattan. Reporting projects. Publishing projects. Movies. Television. This is where I want to be. I say to Alison, “This is where I want to be.” I call up everybody I know and say, “This is where I want to be.” Except that I cannot get over the certainty that all this—this well-heeled, self-satisfied, tried-and-true way of putting together sentences and sentiments and of sending messages out to an impatient public—is doomed. Possibly, we will be lesser for it, too. The world, however, is as it is. It infuriates me that the people I’m having lunch with don’t get it, don’t care about it, don’t see a personal interest in the end of what we do. “If you eat lunch you are lunch,” feels like an extraordinarily powerful analysis of the time we live in when you’re sitting in a midtown Manhattan restaurant.

  “Do you have any plans to be out here?” inquires someone in San Francisco whom I know from the “early days” of the Internet. We’ve been exchanging e-mail. We’ve been tossing around a few ideas. Speculating about what might be next.

  “I’m thinking I should do a trip. There’re a few people I’d like to see. I’m curious about a couple of things.”

  “Well, we should keep talking.”

  “No harm in talking.”

  I am, I realize, restless in New York, discomfited by the sense of missing something.

  I would not say necessarily that I am thinking of doing it again, but I would not say that I would not do it again either.

  “Why would you ever want to do this again?” Alison asks.