by Rob Reid
The next afternoon found Jepson and Conrad at MoMo’s—a vast, soulless restaurant that had optimistically colonized the new baseball stadium’s hinterland. This was deep within the ugly grid of wide, noisy roads south of Market Street. SoMa’s grit, stench, and converging coils of freeways had long made it feel like the city’s lower intestine. But then in the midnineties, the neighborhood’s fortunes began to shift. Bold digital pioneers like Wired magazine started setting up shop amidst the junkies, warehouses, and sweatshops. Ground zero for all this was South Park—the isolated oval of grass and narrow byways where Jepson later planted ePetStore’s flag. The area’s future seemed all but assured! And then the NASDAQ tanked. Now reverting rapidly, SoMa was creepier than ever at dusk. And even the local digerati thought of potty-mouthed cartoon kids rather than an online renaissance upon hearing the words “South Park.”
A small lunchtime crowd was scattered about MoMo’s yawning dining area like golf balls in a boxcar. Alone at a bar as long as a Jersey Shore shuffleboard court, Jepson and Conrad had ample privacy as they tucked into the burgers and gin martinis they’d ordered in celebration of Kielholz’s astounding exit. J-Dog and Conrad’s junior associate were not summoned for this powwow. But given their negligible autonomy in ePetStore-related matters, it was a de facto extension of yesterday’s board meeting.
“So what’s next for our glorious startup?” Conrad eventually asked.
“You saw the PowerPoint,” Jepson said, upvoting the bartender’s cleavage with a sly gape. “We’re goin’ for the gusto. Steppin’ on the gas! We’s goin’ big.” He hoisted his Plymouth martini (up, with a twist). “Or goin’ home.” He finished its dregs in a gulp. “Of course, if you’re not visionary enough to come along for the ride…”
“You could always buy me out, like everyone else.”
Jepson nodded.
“Thing is, your offer keeps droppin.”
“For you?” Jepson offered in a zany Arab accent. “Special brice.” Then, “I’m serious.”
Conrad nodded skeptically. “How much you got left in the bank after buying out Kielholz?”
“Maybe eighteen million?”
“Which is a lot more’n you expected. Because there’s no way you coulda known Kielholz’d sell so cheap.”
Jepson shrugged neutrally.
“So. Eighteen million in the bank. But come June, it’s all gone. Unless we stomp the brakes.”
“ePetStore has no brakes, Conrad. This is the Internet.” Jepson paused, then whispered, “New rules.”
“Right, right. I read all about that in Business 2.0. Profits’re for pussies, and so forth. And suppose I try to use my vast influence as a board member to impose some antique principles about solvency and sanity?”
Jepson feigned careful consideration in a way that was more playful than cunning. “Gosh, I think we’d kind of deadlock in a board vote, Conrad. J-Dog is just as modern in his thinking about these things as I am.”
“Oh right. J-Dog, the digital wunderkind. Boy speaks Java in his sleep, I’m sure.”
Jepson shook his head. “Python, Conrad. J-Dog is that modern.” Conrad allowed this a sly grin, which was good. The conversation was likely to go faster if it wasn’t contentious. And the faster it went, the less likely Conrad was to remember the patent. The patent! Jepson wanted zero focus on that thing until everyone remotely connected to ePetStore went the way of Kielholz, leaving him as its sole employee and proprietor. And so, “Why don’t we switch topics for a moment. I know what you want for my business. But tell me what you want for your business. What drives you, Conrad?”
“Oh, I just do what I do ’cause I love startups, and coachin entrepreneurs.” This sort of pious drivel is peddled tirelessly both by VCs and the industry rags that fawn over them (at least a couple of which are coincidentally financed by venture firms).
“Right. And I started ePetStore out of a burning desire to help feral cats.” Jepson didn’t say this nastily but in the playful tone of a friendly huckster talking shop with a peer. “So seriously. Tell me what you really want to do next.”
“To raise another fund,” Conrad confessed. “Obviously.”
Jepson nodded. It was just a rhetorical question. In his view, Nature herself drove VCs to relentlessly raise ever-more funds, much as she required sharks to devour surfers. It’s said that growing unchecked, a single E. coli cell’s progeny would exceed the Earth’s mass in a day, and he figured an unchecked VC firm would subsume the world economy in half that time. Why? “Because 2 percent of more money is more money still, right?”
“Didja do that math in yer head?” Conrad leavened this with a sly grin.
Jepson grinned back and shrugged. They were referencing the fees venture capitalists charge investors. Calculated against the total sum an investor commits to a VC firm, that 2 percent (or more) is paid annually for a full decade to cover “expenses”—which consist wholly of take-home pay for the VCs themselves, once the most basic support infrastructure is covered. And as if that’s not enough (because of course, it isn’t), most committed capital is invested over just a couple of years. This lets VCs collect on half-forgotten funds perennially, even as they raise ever-more capital—all of it coming with its own decade of fees. “It’s clearly the right move,” said Jepson, who was never one to judge another man’s brilliant racket. “Trouble is, you’ve almost finished putting your first fund to work. And you’ve only got one big win to show for it.”
“MeetingsNow.com.” Conrad nodded. “You done your homework, young man.” MeetingsNow made a bug-ridden collaboration tool that they absurdly called a TeamGroupServer. Conrad’s fund was the company’s first and biggest investor, and somehow got the dunderheads at Lycos to shell out $150 million for it.
“But beyond that, you’ve just had lousy timing.” This was an understatement, and Jepson sympathized. Conrad had invested the bulk of his capital just as the bubble was bursting, and most of the startups he backed were long dead or crippled. “And that’s nobody’s fault. Certainly not yours! But gosh…it’s tough to raise a follow-on fund when your first fund’s a one-hit wonder.”
“That’s a lot better than a no-hit wonder.”
“But not half as good as a two-hit wonder.” This mathematically suspect statement was in fact correct. Lightning rarely strikes twice. So, scoring two wins during this ghastly era would look smart to Conrad’s investors, whereas MeetingsNow on its own stank of dumb luck.
A pause. Then, “I’m listenin,” Conrad said.
“I’m thinking a 2X return will look great for you.”
A longer pause. “Still listenin.”
“You’ve put a total of four million dollars into ePetStore over our three rounds of funding. So, I say I buy you out for eight. Now, don’t go all rug merchant on me. This is my best and final. I just gave Kielholz a dime on the dollar, and this is twenty times better than that. Literally! Not a huge win in absolute dollars. But you’ll be the only VC out of dozens to make money from a freakin’ online pet store.”
“Of all things.”
“In 2002.”
“Of all years.”
“Spin it the right way, and you’ll look like the smartest guy on Sand Hill Road. And I know you can spin this.”
“And once again, my alternative…?”
“Is watching me and Juan Ramirez spend eighteen million bucks building the eighth- or ninth-best pet site the Internet has ever seen.” This was a perfectly credible threat. With the board deadlocked at two votes apiece, the company’s path of least resistance was the status quo.
“But if you buy me out, you’n Juan’ll be down to just ten million,” Conrad said, grinning slyly.
“Which may not be quiiiiite enough to deliver on ePetStore’s maximum promise,” Jepson conceded, grinning slyer.
“Alas. So at that point, the responsible thing might be to shut down after all. And distribute the remainin cash. To your remainin shareholders. Which’ll basically be you.”
“G
osh I—I suppose.” Jepson did a madcap impression of someone discovering a wholly unexpected fact, and Conrad gamely feigned amusement. Then, in a serious tone, “But the severance and shutdown costs could easily clean me out.”
“Oh, come on. Shuttin down’ll cost a couple million tops!”
“Yeah. Only you’ve forgotten the landlord. Over the full term of the lease, the company’ll technically owe him more than the total cash we’ll have left after buying you out.” This was no exaggeration—which Conrad should know because the board approved that damned lease.
“Oh, right.”
“So if he ends up playing hardball…” Jepson shrugged. “You’ll be long gone, and that’ll be my problem.” What he didn’t mention was that the landlord was even dumber than Kielholz. Being ignorant of that detail, Conrad should calculate that Jepson was offering him more than half of the net booty. Something this generous should be a no-brainer after Kielholz’s calamity! Which was the whole point. Because the less Conrad used his brain, the less likely he was to remember that patent. It was mentioned just once in a board meeting, almost a year ago, right after they bought it almost by accident. Jepson prayed that Conrad had long since forgotten about it.
“What about other shareholders? Any small fry? Any likely holdouts?”
“It’s mostly employees with options. They’ll all sell. And if not, they’ll be my problem. Just like the landlord.”
Conrad considered all this. And then, thank God, grinned and raised his glass. “You got yerself a deal.”
A must-have reference for anyone coveting a piece of Haiti’s rocket-ship economy. The authors do an admirable job of scouring the nation for less obvious opportunities rather than lazily listing the countless “sure-thing” blue chips in ever-booming Port Au Prince. I originally bought this guide on something of a lark, specifically as a gift for our family’s trustee. By way of background, the trust department of a doddering Boston bank has been abetting the decline of the Higgensworth fortune for almost a century. Each generation, a new trustee is granted absolute dominion over our assets (think of it as a serial dictatorship along the lines of North Korea, with the sole oppressee being our finances).
During the Eisenhower era they poured millions of Higgensworth dollars (yes, there were millions then) into Wham-O! Corporation stock, just as the Frisbee and Hula Hoop crazes were collapsing. Under Carter, they bought a stake in an Iranian Chiclets factory, which did fine until Khomeini converted it into an interrogation center for unveiled women. Then during Diet Roosevelt’s presidency, they stodgily stuck to treasuries and municipal bonds until March of 2000—when they couldn’t take it anymore, and at last bet heavily on the Internet. When I came across this book, I couldn’t help but send it to our designated Mandarin in the trust department with a peevish note suggesting that he comb it for investment ideas. He missed the irony; or he detected it, resented it, and decided to exact revenge; because scarcely a month later I learnt that we are now one-seventeenth owners of a chicken-processing plant in Haiti’s Artibonite province. Haitian poultry processors are said to enjoy tremendous efficiencies, as grisly local rituals create high demand for internal organs that most societies discard with a shudder. For this reason, I am hopeful that this investment might astound one and all by turning out well.
Several hours later and thousands of miles east, one of the truly pivotal dinners in human history was about to start. None of its participants suspected this. Two of the three were high school kids, after all.
Riding shotgun en route to it, Mitchell Prentice was fired up! Why? Well! There was football (state champs this year)! Baseball (go Wreckers)! Medal of Honor: Allied Assault! Linkin Park! The Rangers and the Islanders (he iconoclastically backed both)! Don’t forget The Startup! And don’t ever forget (because Mitchell sure couldn’t) GIRLS and SCREWING (an aspiration, not a verb, in Mitchell’s life thus far). Pre-Falkenberg’s, Mitchell was constantly fired up! When he wasn’t incredibly bummed (rare, but it also happened)! Or, unbelievably pissed off (rarer still, but also happened)! His psyche was all binge and no purge—hammering either the gas or the brakes at all times!!!
Mitchell was his school’s smartest jock. But as that bar was on the low side, no MacArthur grants loomed on his horizon. Nor did scouts from the ACC, the Big 10, or even the so-so and local-ish UConn teams. Mitchell was just nicely above average on both ends of the brain/brawn spectrum. This made him unusual but hardly unique. The real outlier was at the wheel.
“Exit 18, right?” Kuba asked, yawning cavernously while signaling and changing lanes. Mitchell nodded. Kuba must’ve slept two hours max last night and wasn’t wearing it well. His problem wasn’t insomnia. It was raw smarts. Though the public schools in Westport, Connecticut, were excellent, they’d never really challenged him. So after rocketing through his homework each night, he’d slink off to sharpen his mind in some dark, brainy, online byway ’til the wee hours.
Kuba kind of came with the neighborhood when Mitchell first moved to town. Outgoing and athletic, he felt a sense of noblesse oblige toward the gray and gangly kid four doors down who was also brand-new—not just to Westport, but to America. As all new kids struggle to fit in (above all in snooty middle schools), it was no small thing for Mitchell to present himself to the local cliques as a package deal with this very shy, very foreign nerd. But becoming “the man” in his tiny family at age eight had touched certain evolutionary triggers, which had caused his natural shepherding instincts to burgeon (and sorry if that scenario isn’t postgender enough—but this was New England in the nineties). He and Kuba also had plenty of common interests to build a true friendship upon. Videogames, music, and ice hockey for starters. Plus a shared fascination with the emerging Internet, which was just starting to go mainstream, as well as a certain class solidarity. Families that lacked wealth but prized great public schools could (just) make a go of it in Westport’s scant rental properties, and both the Prentice and Stanislaw clans rented. Finally (and above all), there was Mom’s throwaway comment early in seventh grade. “I know it’s tough being the new kid in town,” she’d said, driving Mitchell to hockey practice one night. “But the problem with your old gang was that you were always the smart kid. Whereas here, every time Kuba comes over, I can practically see your brain grow!” So, yup—that was the start of the whole “dumbest guy in the room” thing. And snicker if you must, but it’s served Mitchell very well ever since.
“Some Bulgarian hackers have agreed to help,” Kuba said mysteriously, exiting the freeway. He had a tricky habit of resuming conversations that had petered out days, weeks, or even months before, without the slightest preamble.
Mitchell took a stab at resolving the non sequitur. “You mean that…exam you were telling me about?”
“Test,” Kuba says. “The Turing Test. And it’s not an exam sort of test. It’s more like a…challenge. The inventor of modern computing first proposed it. The goal is to write a program that seems human. Or rather, human enough. Enough that someone interacting with it can’t distinguish it from a person. Via text-based chat, of course. Not face-to-face. That would be stupid.”
“They had chat rooms back then?”
“No, it was strictly hypothetical. And it still is. Because no program will pass it for at least a decade, and probably more. We don’t yet know anywhere near enough about replicating natural language. Informal semantics. Parsing colloquialisms, that sort of thing. So for now it’s impossible.”
“Then why pull all-nighters working on it? Instead of, you know…sleeping?” Sometimes Mitchell worried about the guy.
“Someone needs to start working on problems when they’re impossible. That’s what gradually makes them tractable. Flight, for instance. Or telecommunications.”
“Or rubber cement?” Mitchell teased.
Pulling into the restaurant’s parking lot, Kuba smiled indulgently. Being famous for a rubber cement fixation called for occasional ribbing, after all. Not long before he immigrated to the US, Poland boot
ed the Soviets, embraced free markets, and elected the closest thing Europe had seen to a Republican president. The economy modernized quickly. But odd gaps and shortages persisted for years, including a complete rubber cement famine. Coming to Westport from a land that was still MacGyvering through a legacy of shit commie products, Kuba was awed by this strange goo in Crafts class, which was great at nothing, but OK-ish at so many things! He still found almost daily uses for the stuff (some of them quite ingenious).
“So, the idea’s what?” Mitchell asked, straining to recall their first conversation about this Turing thing. “Artificial consciousness? Like in Terminator?”
“No, actual consciousness is a completely different matter,” Kuba said, parking the car. “The Turing Test is about simulating consciousness. Kind of like magic. Sleight of hand, you know? It’s giving the impression you’re interacting with a real person. Just the impression. And the Bulgarians believe a chatbot will seem more human if it has a distinctive style. Of communicating, of writing. Not just canned responses, you see? So I think you could help. Because you can write. English, I mean. Much better than I can. And you said you can work on whatever you want in your creative writing class. So maybe you make this your project? Learning how to give a chatbot a distinctive writing style.”
“Um, hello?” Mitchell retorted as they strode across the parking lot. “We’re all about CentroStat—remember?” This was their startup! Because the time when boys started bands was over. These days, every kid with a brain at Staples High dreamt of launching a company, the Internet bubble’s implosion be damned! Kuba ran engineering and Mitchell was CEO at CentroStat (population: 2). And until recently, that was as far as they’d gotten. Then a few days back, Kuba came up with a truly electrifying website idea, and he’d already started coding it up.