Table of Contents
The New New thing is a brilliantly written story by Michael Lewis that describes the life of James Clark, founder of Silicon Graphics, Netscape, my CFO, and Healtheon. Clark was the antithesis to the corporation man. He despised suits, formalities, and investment bankers. He was a master salesman, and a Silicon Valley cowboy. He sued Microsoft and made successful bets on start-up companies early on. He was disorganized and jumped from one idea to the next but had the foresight (or luck) to avoid many of the disasters he very nearly got himself into.
Here are some of my favourite parts.
Chapter 2: The Accelerated Grimace
The new sheriff in town.
“He argued that since the economy was premised on technology and the engineers were the only ones who actually understood how the technology worked, they would inevitably use their superior knowledge to seize power from the financiers and captains of industry who wound up on top at the end of the first round of the Industrial Revolution.”
The era of the computer engineer.
“The Prime Mover of Wealth was no longer a great industrialist who rode herd on thousands of corporate slaves, or the great politician who rode herd on a nation’s finances, or the great Wall Street tycoon who bankrolled new enterprise. He was the geek holed up in his basement all weekend discovering new things to do with his computer. He was Jim Clark.”
Chapter 4: Disorganization Man
A computer engineered anarchy marked the death of the Organization Man.
“Somewhere along the line the Organization Man passed from the American scene. Whether he was murdered or died of natural causes is hard to say; obviously, he had a lot of bad luck between the late 1950s and the late 1990s. One piece of bad luck was rapid technical change, which was a weapon that oddball upstarts could use against the enormous gray corporations. Another was Jim Clark or, more generally, the engineer with a taste for anarchy, who lifted one big middle finger in the direction of the enormous gray corporation.”
The price of high technology is hyper-competition.
“Moore’s law came with a social corollary: high-tech could not remain high-tech for long. You might be the smartest engineer in the Valley, and you might have built the most sophisticated computer, but it was only a matter of time before some schlepp with a PC wrote a program that let him do everything you could do, at a fraction of the cost.”
To survive, you had to go through an endless series of deaths and rebirths.
“Clark thought that Silicon Graphics had to “cannibalize” itself. For a technology company to succeed, he argued, it needed always to be looking to destroy itself. If it didn’t, someone else would. “It’s the hardest thing in business to do,” he would say. “Even creating a lower-cost product runs against the grain, because the low-cost products undercut the high-cost, more profitable products.””
Chapter 5: Inventing Jim Clark
This conversation was the birthplace of the internet browser. Mosaic will become later known as Netscape.
“Next Clark talked about creating new applications for the telecomputer—there was a lot that could be done with the device, once a lot of people owned one. To do that he needed young software talent, and to that end he called a twenty-two-year-old not long out of the University of Illinois and new to the Valley named Marc Andreessen. Clark had seen a piece of software that Andreessen had helped write in college, called Mosaic. Mosaic enabled its user to travel around the Internet. Why anyone would wish to do so was at the time unclear.”
The rules of the game were changed.
“In the frenzy that followed, a lot of the old rules of capitalism were suspended. For instance, it had long been a rule of thumb with the Silicon Valley venture capitalists that they didn’t peddle a new technology company to the investing public until it had had at least four consecutive profitable quarters. Netscape had nothing to show investors but massive losses. But its fabulous stock market success created a precedent. No longer did you need to show profits; you needed to show rapid growth.”
Chapter 11: How Chickens Become Pork
How much skin in the game do you have?
“Clark liked to say that human beings, when they took risks, fell into one of two types, pigs or chickens. “The difference between these two kinds of people,” he’d say, “is the difference between the pig and the chicken in the ham-and-eggs breakfast. The chicken is interested, the pig is committed. If you are going to do anything worth doing, you need a lot of pigs.”
Chapter 13: Cheese Sandwiches for Breakfast
The start-up roadshow…
“New companies are sold to the public in much the same spirit as new books, new music, and new politicians. The sellers leap onto airplanes and fly to many cities, where they put on a show for the perfect strangers who they hope will buy their product. In the case of a new company, the strangers are money managers and the show is called “the road show.””
Chapter 14: Could Go Either Way
The corporations versus the anarchists.
“Clark said that Netscape “made anarchy respectable.” Late at night, when no one else was around, he must have wondered how long the odd sentiment could survive in corporate America. Institutions loathe disorder. They seek to socialize forces of anarchy. It’s one of the many internal contradictions that have failed to collapse capitalism: wealth generation is suppressed by those who are supposedly most interested in wealth…. While promoting change, big established companies also wish for change to occur slowly enough that it does not overwhelm them.”
Microsoft established an early monopoly with personal computers that included everything with them.
“…the personal computer had a single point of entry—the first window that popped up on the computer screen after a user had logged on. To get to any software inside the computer the user had to pass through that window. Since Microsoft controlled that window, it controlled everything on the other side of it, too. This sort of power was not unique to the computer industry—the railroad industry had some of the same monopolistic tendencies. But in the computer industry the power was much harder for outsiders to discern, and thus to fight.
Chapter 18: The New New Thing
Some described James Clark as a genius who had a sixth sense for business ventures, but others were less impressed. They believed he was just lucky. Here’s Michael Lewis’ wonderful description of what was really going on.
“Each time one of Clark’s ventures got rolling, some people, even a few people in Silicon Valley, said he was just lucky. Lucky to have popularized the third dimension in computer space at just the right moment, lucky to have met Marc Andreessen and seen his Internet browser, lucky to have triggered the Internet boom, lucky to have sought control of health care, the world’s biggest market, just when it was ready to yield itself up. “Luck” is one of those unfortunate words that are required to do more than their fair share of the work. What happened to Clark in Silicon Valley was far more interesting than luck. It was the interplay of a character who had a deep feel for technology, and a taste for anarchy, with an environment that rewarded both traits. Silicon Valley in the late 1990s was the closest that business has ever come to resembling a child’s chemistry experiment. Some tiny invisible hand poured one chemical after another into a test tube in the irresponsible hope of making it go Boom! Clark—and people like him—turned out to be the active ingredient.”
The internet revolution forced traditional American businessmen to acknowledge its importance.
“In March 1999 Jack Welch, the chairman of General Electric, one of those people who created conventional business wisdom every time he opened his mouth, said that the Internet was “the single most important event in the U.S. economy since the Industrial Revolution.”
But growth was not good news for most people. Change meant that you were about to lose your job. It was dangerous, and for people who were benefitting from the status quo, the internet was a nightmare. In fact, the term “internet anxiety was invented to describe the worrying sense that you were likely to lose your business to people who “operated in the spirit of Jim Clark.” The internet made it possible for visionaries, troublemakers, and outsiders to disrupt entire industries – the way Jeff Bezos disrupted the book business. “
As much as they tried to stand their ground businesses had no choice but to embrace the change that had come.
“In 1998 the manager of Merrill Lynch’s fifteen thousand stock brokers, John Steffans, had called the Internet trading firms “a serious threat to America’s financial lives,” and assured his employees that Merrill Lynch would never do such a thing. The next year Merrill Lynch created an Internet trading department.”
Evaluation
- Durability (I Will Read This Again): 8/10
- Originality (This Taught Me Something New): 9/10
- Experience (This Was Enjoyable to Read): 8/10
- Efficiency (This Was Concise): 7/10
- Shareability (I Will Recommend This Book to My Friends): 8/10
UW Score: 80/100
For anyone interested in knowing how this whole internet thing started (a great story involving Marc Andreesen), and how the business game was forever changed by a few number of individuals (including James Clark), they should read The New New Thing. But that’s not all, Lewis offers great insights into the psychology of the disruptive technology entrepreneur, and lessons on starting an internet business, and an interesting perspective on the mindsets of different types of investors.
Read The New New Thing
If you’re an entrepreneur and you want a quick guide to know what to think about before launching you business, check out The Myth of Entrepreneurship.