Читать книгу Leaving Reality Behind: Inside the Battle for the Soul of the Internet - Regula Bochsler - Страница 8

‘This emerging new economy … has its own distinct opportunities and its own new rules. Those who play by the new rules will prosper; those who ignore them will not.’

Kevin Kelly, ‘New Rules for the New Economy’,

WIRED, 1997

‘Computer hackers … their programs are like surrealist paintings.’

Nicholas Negroponte, Being Digital, 1995

When John Perry Barlow founded his Electronic Frontier Foundation in 1990, he was determined not only to fight for freedom of speech in cyberspace, but also to open the network to the free market. At that time, the Internet was an academic resource and commerce was restricted from it. For years the US Government’s National Science Foundation which subsidised the Internet had controlled access to it by making new users agree to an Acceptable Use Policy that precluded any profit-seeking activities.

But Barlow – along with various other campaigners – worked hard to repeal these restrictions. In his capacity as an advisor to Speaker of the House Newt Gingrich and Vice President Al Gore, Barlow took his belief in the economic potential of the utterly unregulated Internet to the very highest levels. (He even joked that his favourite mode of transport was Airforce Two – the Vice Presidential plane.) Key pieces of legislation were gradually put in place, allowing the National Science Foundation to foster economic growth and enabling commercial service-providers to hook up to the public network.

Hucksters soon got online, and those who failed to learn the strange language and customs of the early cyberspace pioneers were cruelly punished by a community that was sceptical of their free space being colonised by commerce. One key spat, a precursor to many that followed, began when husband-and-wife lawyers, Laurence Canter and Martha Siegel, sent an email advertising their services to every bulletin board on the Internet. This amounted to some five and a half thousand postings, ensuring that hundreds of thousands of users would see it, over and over again. This was considered to be ‘spamming’, and extremely bad-mannered. Many of the victims of this unwanted attention were already loosely organised as communities within email lists and online discussion-boards. They declared war on the lawyers, filling the firm’s inbox with thousands of useless emails – many containing threats and obscenities – and bunging up their fax machine. The story made it to the cover of Time magazine and was viewed as a warning to those who sought precipitous commercialisation of the not-for-profit cyberspace.

Despite such hostility from some sections of the old Internet community, the forces of commercialisation were too strong to resist and Barlow’s libertarian ideas came to dominate. As he took on a new role, as a corporate consultant and contributing writer to WIRED magazine – which promoted a business ethic wrapped in party-going clothes of Mondo 2000’s dayglo graphics – Barlow perfectly embodied the Internet’s transformation from hippy playground to new capitalist marketplace. One significant point of inflection on this journey happened in April 1995, when, after years of bureaucratic wrangling, the US National Science Foundation formally privatised the Internet. The key parts of the infrastructure – the hubs that routed traffic, and the transcontinental telecom links – were handed over to commercial organisations; as a consequence, the Acceptable Use Policy was repealed and the age of the commercial Internet truly began.

At about this time, thirty-six-year-old nebbish computer entrepreneur Bill Gross was away from his home in Pasadena, California, to attend a family wedding in New York. As ever, his mind was racing through new possibilities for his existing businesses, radical technical innovations and the possibilities of the Web as a new toy. Just before the wedding, he decided that he needed a haircut, so took a look through the New York Yellow Pages to find a barber. Hundreds were listed, but Gross had no idea where any of them were located or of how good they were. He was not about to wait for a recommendation. Instead, he hailed a cab and chose a barber at random. Arriving outside his selected shop, he immediately realised, just from the look of it, that it wasn’t the kind of place for a man who was already a multi-millionaire. But it was too late.

The experience led to a typical ‘eureka’ moment for the entrepreneur, who loved finding solutions to the world’s problems in the form of snazzy new business ideas. It made him wonder: if pictures of all the city’s barber shops were accessible on the Internet, surely he could have been saved the fruitless journey. In contrast to many of the virtual-reality concepts that were the currency of the moment, Gross’s plan was to use the Internet as a means to help real people in the real world. The trouble was that he didn’t have the time to focus on a new project himself, so he persuaded his old friend Charles Conn, a partner at the management consultancy McKinsey, to look at the idea. Conn didn’t care much for Gross’s initial and limited concept of a photographic directory, but he did think it could be the starting point of a much larger idea. And so, in the summer of 1995, Bill Gross managed to persuade his friend to start an online city-directory company, CitySearch. As Gross said: ‘What lured him there was the opportunity to direct his own drama, to own his own destiny.’

Gross may have been busy with other businesses, but he did help Conn by finding high-profile investors like Steven Spielberg and Michael Douglas for the venture. He also assisted in making the Web site easy to use. Conn remembers, Gross was ‘a sort of strange combination of geek, technologist and a huckster marketer all rolled into one.’ Gross’s other role was to entertain and cajole potential employees, persuading them to jump ship from their steady careers and join the risky world of a new company and a new frontier. At the time, nobody really imagined that the Internet was going to make them huge amounts of money, but it did seem to be exciting and to have the potential to change the way the world worked.

CitySearch’s emerging success placed Bill Gross at the vanguard of the Internet revolution, and demonstrated that he had a Midas touch in this new arena too. He was now beautifully poised to benefit from the coming boom with the absolute belief that he had seen the future. He enthused, ‘I’m unbelievably bullish on the Internet. I think the Internet is going to be in everybody’s home, on everybody’s watch, in everybody’s pocket, pretty much by the end of this century.’ Soon he had set up more than twenty different Internet businesses – among them a toy company. And in due course he would be catching private planes, being driven in limousines and chased by groupies, as well as being hailed as the most important entrepreneur since J. D. Rockefeller. Not bad for a man well into his thirties who gave the impression – perhaps because he was short, wore simple clothes and scurried around with his gaze fixed on the floor – that he could still be a teenager. Whatever, in the midst of a world of inexperienced entrepreneurs, Bill Gross’s unique asset was that he had a history.

Gross enjoyed telling journalists his perfect entrepreneurial-creation myth. The son of an orthodontist in Encino, California, he had become a candy salesman (a start like that of both Rockefeller and Thomas Edison) at the age of twelve, buying confectionery in bulk and undercutting the local drug store. By the time he reached high school, Gross had employed a few salesmen to work for him.

His next venture, at high school, saw him enter the world of engineering – selling, via adverts he placed in the back of Popular Electronics magazine, hundreds of kits of tin foil and cardboard along with instructions on how to make parabolic dishes for solar energy. This venture paid for his tuition at the California Institute of Technology, where he sold stereo loudspeakers to his classmates. Upon his graduation, in 1981, he started his own audio shop in Pasadena, vaingloriously called Gross National Products.

However, when it came to convincing potential investors and a hungry media that he was a substantial force in the Internet boom, Bill Gross’s real asset was the fact that he’d previously built two multi-million-dollar software businesses. And both had been exactly in sync with two fundamental shifts within the computer business over the precious decade.

The first of these shifts began in August 1981 with the launch of IBM’s personal computer, marketed as their ‘smallest, lowest-priced computer system, designed for business, school and home’. Until then, PCs had been thought of as hobby machines and were only properly used by esoteric academics; IBM’s endorsement jump-started the micro-computer market for business. The computer even became Time’s ‘Man of the Year’.

Bill Gross soon bought a PC for his audio shop. At first the small and not very powerful desktop computer sat unused in the basement – under a blanket, to protect it from the sawdust of the shop floor. ‘You couldn’t do anything with it,’ Bill Gross recalled. The PC was anaemically powered and also lacked a suite of software programs that would make it useful for everyday business. Back then, applications for it were often slow to run and cumbersome to use, having been designed for different kinds of machines and hastily translated to work on the IBM PC.

The lack of software programs was seen as an opportunity by Mitch Kapor (later he co-founded the Electronic Frontier Foundation with John Perry Barlow). A self-confessed dilettante, he was known for wearing Hawaiian shirts and had been both a DJ and a mental-health worker. Having made some money from a graphical software program he was as much a veteran as there was in the tiny software industry. More than anything else, though, he was a ‘hacker’ – not in the criminal sense but as defined by journalist Steven Levy: ‘adventurers, visionaries, risk-takers, artists … And the ones who most clearly saw why the computer was a truly revolutionary tool.’

Kapor’s idea was to make an existing computer program – Visicalc, the first spreadsheet software – work on the new IBM PC. Before Visicalc, budding entrepreneurs had planned their business on squared paper or huge blackboards, divided into matrices of rows and columns; each space was filled with scribbles, some cells related via complex calculations. Visicalc mimicked and automated this cumbersome process. Now, just by inputting a list of figures – the set of assumptions – one could easily speculate how to run one’s business by allowing the spreadsheet to calculate future profit or loss. The strange and bizarre ‘business models’ of the Internet revolution could only have come about with this capacity to imagine and balance the impossible.

Mitch Kapor set up a new company, which he called Lotus (because he was a follower of transcendental meditation), and created a spreadsheet program for the PC that was faster than any other and included an onscreen-help application. On 23 January 1983, Lotus 1–2–3 was launched on the back of an unprecedented marketing campaign that cost more than a million dollars. As a result, business adoption of the IBM PC went into overdrive and sales quadrupled in the first few months following the launch. Just one year later, Lotus had $157 million worth of annual sales, were employing 700 people and had become the largest software company in the world.

Bill Gross was on holiday when his brother and business partner Larry installed Lotus 1–2–3 on to their basement PC. When he returned, Bill began to use it to computerise the shop’s accounts. The brothers soon found that their customers were coming to them for advice about how to use 1–2–3; despite the benefits of the program, it was still difficult to use. A complex line of code was required to instruct the computer to perform even simple tasks. Printing out a section of grid, for example, necessitated the input of ‘/ppral..f17-om14-escagq’. One mistyped character and the command would fail to execute. So the brothers guided their customers in installing applications and computerising their businesses. As Bill recalled, ‘Everyone trusted us and wanted our advice on computers and software.’

Bill Gross loved tinkering with the software. He worked long hours, had fun, hacked code. As he told one journalist, ‘We do our best work after midnight, sitting around with pizzas and computers, being creative.’ Gross, like Mitch Kapor, was part of a new generation of businessmen who came from a culture of hacking. According to the Finnish academic Pekka Himanen, the ‘hacker ethic is a new work ethic that challenges the attitude toward work that has held us in its thrall for so long, the Protestant work ethic’. In this new mode of work, it was not money that was the motivating force; it was the desire to create something better and smarter than one’s peers. The ethic meant that work was characterised not as a drudgery, carried out within rigid hours set by employers, but as a joyful pursuit, eroding the distinction between work and play. The ever cool Mitch Kapor became one of the very first poster boys to this new generation of hackers, as well as being one of the first software millionaires. Eventually, Bill Gross would follow suit.

The Gross brothers soon began writing and selling their own programs. Their first attempt was something called CPA+, an easy-to-use accounting template using Lotus 1–2–3 as its foundation – as if an account book was laid over the program’s simple grid. Designed for use by small businesses, it included a rudimentary layout and some basic linking between various cells to allow customers to make profit-and-loss balance sheets like the ones the brothers had already created for their shop. Their next, more sophisticated idea was to simplify the tricky coded commands of Lotus 1–2–3 with easy-to-understand English. They worked hard to write a program that would allow the user to type in ‘print this’ instead of cumbersome commands.

Mitch Kapor discovered the Gross brothers’ language-based product and, as Bill Gross remembered, his reaction was ‘wow, wow, wow, incredible’. For the young Bill, still only twenty-six years old, this was truly a moment to remember. ‘It was like we achieved everything we could dream of with a compliment like that from Mitch.’ For Bill Gross, praise from one of the industry’s leading lights carried real import. In what was becoming a typical strategy of the fast-moving software industry, Lotus bought up their competition, paying $10 million for the Gross brothers’ software company. Henceforth Bill and Larry commuted between their offices in Pasadena and Lotus’s in Boston.

By this time, Lotus had more than a thousand employees and had become a huge bureaucracy. Shortly after buying out the Gross brothers, Mitch Kapor resigned from his post as Lotus’s Chief Executive, bored of the dull, operational command. Within Lotus, Bill Gross was intrigued by what he saw as the growing indolence of his new colleagues, and came to believe that they lacked inspiration and commitment purely because they had no stake in the business beyond their monthly salary. As a company man, he felt that his body was changing – the ‘new chemistry’ taking the edge off his ambition. No longer was he selling ‘his’ product; he was just a cog in a huge machine. As the ‘fun’ aspects of business began to fade, Gross resolved to remember the lessons he’d learned during this period as a salary man. He left Lotus in 1990, after five years, to become once again the master of his own destiny.

Not long afterwards, Bill Gross started the second of the businesses that later gave him credibility in the Internet boom. When discussing this period in the years to come, he would tell the press that his original intention had been to take a year off to pursue his creative yen. Now that work and play were no longer distinguishable, he had planned to pursue his leisure interests with the same determined diligence – not to mention hubristic grand ambition – as that with which he had coded software. To some, he mentioned that he had wanted to write a symphony; to others, that he had wanted to paint. He took up the hobby of copying Old Masters, brushstroke by brushstroke; his copy of Van Gogh’s Sunflowers hung above his desk for years. He explained, ‘There’s all kinds of violence in the brushstrokes. I love to see what it feels like being creative in different areas.’ But the power of the computer – a computer with the capacity to make art – was enough to divert him from his own artistic ambitions.

Late in 1989, the press began trumpeting a new type of computer and related method of communication: multimedia. The idea that a computer ought to be able to play music, display pictures and movies as well as running text programs had already been around for a while. However, until the middle of the 1980s, most micro-computers – besides game consoles or niche products like the Amiga – were text-based, because they were not powerful enough to accommodate the complex demands of graphics. Computer memory, though, had rapidly decreased in cost, while the speed of central processors had accelerated. And so, by the autumn of 1989, Apple and IBM were busy promoting ‘multimedia machines’, promising interactive son et lumières. Business Week hurrahed in a headline ‘It’s a PC, it’s a TV – It’s Multimedia’, and claimed it would ‘change the way people work, learn and play’. The rest of the press followed, and multimedia was soon a fully fledged business fashion.

Bill Gross’s first experience of this new technology came courtesy of Beethoven’s Symphony No. 9, one of the first multimedia CDs, on which users could not only listen to the entire work but also hear a full-length running commentary and read essays about the composer’s life and work. Gross bought a $5,500 Apple computer just so he could play it. He described his reaction as having ‘goosebumps all over my body about how great Beethoven was. It let me in on a non-academic way to discover beautiful things on my own … It opened me up to the beauty of music.’ The discovery coincided with the first day of school of his four-year-old son, David. Waving goodbye to him from the family car, Gross thought, ‘Oh my God, I’m handing him off to the educational system. Their software stinks, and teachers aren’t paid enough. I really should do something about that.’

For Gross, the solution to these problems was to begin hacking code again. He had leaped on the bandwagon of a rising trend once before, with Lotus 1–2–3. Now he was about to do it again, by taking the new power of multimedia computing to the world of education. If children could play with software programs as if they were games, he reasoned, they could discover knowledge along the way. To make this happen, he set up a company, Knowledge Adventure.

Their first product was self-titled and hit the retailers’ shelves at the end of 1991, promising ‘The Most Exciting Journey of All’. Once the home user had installed the software on to their PC, an image would appear on screen: Neil Armstrong planting the American flag on the moon; hidden behind this were many further layers of information. The computer mouse – at the time a relatively new addition to the PC – allowed the user to manipulate an onscreen pointer and to click on various parts of a chosen image to reveal these further levels. For example, click on the flag on the first image and the program would deliver a section containing text and images about Betsy Ross sewing the first American flag in 1770. Click on Armstrong’s lunar-landing module and a photo of the space-shuttle Columbia’s maiden voyage in 1981 would appear. And so on. Each of these new images in turn could be explored further. What Knowledge Adventure lacked in coherent narrative it more than made up for with its barrage of pretty pictures and fascinating factoids.

Knowledge Adventure went on to release Bug Adventure, Body Adventure, Dinosaur Adventure and Space Adventure, all featuring similar journeys through their respective subjects. And as home-computer technology improved, Gross added more sophisticated features to his software – first sound and then video.

Knowledge Adventure was a very successful venture. Within a few years, the company was selling almost $20 million worth of products a year and became a media darling. In 1993, it was chosen as one of Fortune magazine’s ‘25 Cool Companies’. Gross had proved that not only could he write programs for the business sector, but also that he had the common touch with that most difficult of consumer targets: the children’s market. As a consequence he developed his glorious reputation as a serial entrepreneur, someone who could repeatedly hit the jackpot of turning ideas into profitable reality.

Nonetheless Gross stuck to his hacker lifestyle. He often worked from home, and held parties to help his employees dream up new ideas for products. One reporter wrote that Gross spent his time sitting in the dark in the study of his Pasadena home, listening to Mozart, reading history and directing the efforts of other programmers. Gross himself said, ‘I couldn’t have imagined a better life.’

As he became more successful, he dealt less with the dull, everyday details of running a business and was increasingly sought out by the media, investors and potential partners as a kind of visionary. Michael Wolff, who ran a publishing company at the time, recalls: ‘I was about to meet with Gross when someone I knew said, in a cautionary tone, “Remember he’s drunk the Kool-Aid.”’ This was a Silicon Valley phrase that became a widely adopted idiom to describe the irrational excitement and exuberance of the Internet goldrush years. The term was an allusion to cult leader Jim Jones who in 1978 forced his followers to live in the Guyanese jungle where, in his final show of strength, he gave them the softdrink Kool-Aid laced with cyanide; 638 adults and 276 children were killed. Bill Gross had ‘drunk the Kool-Aid’ insofar as he fervently cast technology, new media and the seismic transformation of life by the Internet in truly messianic terms. So Michael Wolff hit on a simple strategy to impress the evangelist, ‘He was a believer, therefore I should be a believer too.’

Having this kind of visionary talent made it difficult for Gross to concentrate on the more menial tasks involved in running a business. He described himself as ‘the most unfocused man on the planet’, and constantly flitted from one idea for a new company to another, squirrelling money away for special projects. At times, Knowledge Adventure was more of a buzzing chaos than an orderly bureaucracy.

This often led to conflict with his brother Larry, still his business partner, who wanted to focus on a smaller number of things in order to ensure that everything was executed with excellence. The two would shout at each other, but whatever the outcome Bill would still ‘lose interest in something when it started becoming mature’, remembers Rick Gibson, who worked with them at the time.

An unlikely encounter finally pushed Bill to radically rethink his working methods and question whether he should listen to his brother at all. The story goes that a money manager on behalf of a potential investor once visited Knowledge Adventure but Bill Gross had no time to speak to him. Instead, his son David, by this time aged eight, introduced the visitor to the products; the man was duly impressed. It was only afterwards that anyone discovered that the visitor had been representing Steven Spielberg.

Spielberg was then at the height of his success, and about to win a raft of Oscars for Schindler’s List. He used computers to create the sophisticated graphics that distinguished his films, but was sceptical of them for independent, cinema-like entertainment; he certainly saw no reason to abdicate the director’s storytelling responsibility to a brigade of mouse-clicking viewers. Nevertheless, he was intrigued by the educational potential computers offered and had heard that Knowledge Adventure were at the cutting edge.

So, one day in late 1993, Steven Spielberg himself travelled to Knowledge Adventure’s nondescript offices in the Los Angeles suburb La Crescenta. There, some seventy staff awaited him, nervous and on their best behaviour – Gross had carefully choreographed Spielberg’s visit, and had even excluded some of the most senior management from this audience with the king of entertainment. Gross’s bravura performance introduced Spielberg to the complete range of Knowledge Adventure’s products, and allowed his guest time to play on them for himself. Larry Gross remembered looking on at Spielberg’s enthusiasm. ‘He played every single module. It was pretty fun to see my brother … knocking the socks off Steven Spielberg.’

What was immediately remarkable was the way that Spielberg and Gross identified with each other – almost as if they were bright kids who had just happened to meet on a suburban street-corner and found shared interests. A reporter from WIRED described Gross as ‘genuinely unpretentious, projecting a sincere, childlike charm’; in fact, Gross seems to act like the heroes of Spielberg’s movies – who are often drawn to discovery, having their key shots at moments of wonderful revelation. Said Spielberg, ‘In many ways, we’re very similar.’

Spielberg liked Gross and his company. He invested millions in Knowledge Adventure and also offered to add his creative wisdom to the project. As Bill Gross remembered, ‘He took one look at Body Adventure and said, “That human body should walk on, look down, and notice he has no clothes on.” We would never have thought of that.’

In the months after their first meeting, the two spent time together. On one occasion, Gross hitched a ride in a golf cart with Spielberg as he was driven from meeting to meeting around Universal Studios. He watched as the great film-director made suggestions about TV scripts or the shooting of movies, constantly adding his creative thoughts and energy. Previously, Gross had been burdened by the thought that rather than dreaming up new ideas he should be singlemindedly dealing with business, prosaically managing employees and the minutiae of profit-and-loss statements. Being creative, Gross had thought, was only a tiny part of an entrepreneur’s overall value. Seeing Spielberg in action, he realised it might be possible to do things the way that came naturally to him.

Gross hatched a plan: to create an environment in which he could run around, and think, without the distractions of mundane paperwork and management politics. He recalled: ‘I knew that’s what I wanted to do next – create a playroom where I could work with ideas.’

It was a good moment to be thinking along these lines. Preeminent management guru Tom Peters wrote at the time: ‘Welcome to the world where imagination is the source of value in the economy.’ The current management and economic theory was prophesying the death of the old economy, in which manufacturers produced goods from raw materials and manual labour. In its place was rising the New Economy, in which corporations traded information, brands and patents, and their employees were called ‘knowledge workers’. More than ever before, ideas were now the most valuable commodity – and nowhere more so than on the Internet, where there was no history and no set way to make money.

In the summer of 1995, Gross began to prepare himself for the emerging opportunities of online business as the Internet had been privatised and around the world millions of new consumers were eagerly logging on. But these changes were nothing compared to the explosion of Internet commerce that began on 9 August that year. This was the day that Netscape, the world’s leading Web-browser company, sold shares on the stock exchange for the first time. The amazing success of the venture led to a huge change in perception of what constituted ‘appropriate’ business and how money could be made on the capital markets.

Netscape was the bastard child of the Mosaic Web browser developed by Marc Andreessen’s team at the National Center for Super-Computing Applications (NCSA) in Illinois.

When Andreessen graduated at the end of 1993, he left Illinois and went to Silicon Valley, the strip of land between San Francisco and San Jose that had become the heartland of American technological innovation. Soon after arriving in California, Andreessen met Jim Clark, the visionary founder of Silicon Graphics, a company that made powerful computers for the animation and defence industries. Clark was more than anything an impresario; feverishly he dreamed up new projects, searching for the ‘new, new thing’, as writer Michael Lewis noted. Like Gross, he was a serial entrepreneur, interested in the realisation of his ideas rather than the operating of corporations.

In 1994, Clark and Andreessen hired the team that had built Mosaic at the NCSA, and set about building a company to make a better, faster and easier-to-use browser. That company was Netscape. Like many other business people at the time, Clark was asking himself how anyone could actually make money on the Internet: ‘I didn’t have a specific answer to that yet, but I figured that with the Web- and Mosaic-enabled Internet already growing exponentially how could you not make money? It was just the law of large numbers at work – even a small amount of money per user would yield a big business.’

By the spring of 1995, more than six million copies of the browser Netscape Navigator had been given away for free. But Netscape was still a tiny company, barely a year old; its only real money was made through selling server software that enabled Web sites to take payments via secure credit-card transactions. Netscape’s revenue in its first quarter was less than $5 million, while its outgoings amounted to more than $7 million – the difference being paid by Clark and with some venture capital.

Despite the modest size of the company, in the summer of 1995 Netscape’s Chairman Jim Clark, its Chief Technology Officer Andreessen and the Board had much faith and vision. Although the Internet was not in general use and was, in some parts of the media, still being criticised as a faddish, soon to be out-of-date craze, they made an extraordinary decision. They agreed to sell a stake in the privately owned company, taking it on to the public-capital market: the stock exchange. This was a very brave move – even the Morgan Stanley bankers in charge of the deal had no email addresses on their business cards.

Before the heady days of the Internet goldrush, most Initial Public Offerings (IPOs) were the culmination of the long and arduous journey of company formation, and occurred only once a company was properly established and its management’s ability had been demonstrated. Most importantly, they usually took place when a company had already made a profit. Wal-Mart’s shares weren’t sold until the company was eight years old; Microsoft’s were presented eleven years after Bill Gates and Paul Allen first decided to create a computer application, by which time it had annual revenues of almost $200 million and more than a thousand employees.

Netscape was going to be different. In early June 1995, the Morgan Stanley bankers decided that Netscape could sell 3.5 million shares at $13 each, which would have set the company’s value at almost half a billion dollars – more than twenty times its annual revenue. However, on the evening before the IPO following a rush of interest in the stock, they decided to sell the shares at $28 each. Jim Clark would later call the day of the IPO ‘D-Day, with me trying to have a normal day while knowing that my life would never be the same again’.

The event made stock-market history. As is traditional with IPOs, the shares were sold only to the banks’ big customers – the pension funds and money-management firms – who eventually placed them on the public market. When trading of the shares first began, such was the demand that the first price they went for was $71 – two and a half times the starting price. The market capitalisation of Netscape at that moment was an extraordinary $2.7 billion, more than a hundred times its annual revenue. Netscape’s was one of the most stunning debuts ever seen on Wall Street; a tiny, loss-making company had been lifted to the heavens by the frenzy of an excitable market desperate to pour money into cyberspace.

The valuation of Netscape divided investors. As Professor Burton Malkiel of Princeton University in his A Random Walk Down Wall Street stated, there have always been roughly two schools in the valuing of companies. Those in the first use a method that Malkiel calls the ‘firm foundation’, which tries to anchor a share price in the intrinsic value of the corporation. In a manufacturing industry, this is roughly calculated by considering the assets of the company, the possible market, the cost of the machinery, the land, and the investment in patented processes combined with the size of the revenue and the profits that can be returned to investors.

To those belonging to this school, the Netscape corporate valuation was almost incomprehensible. Throughout the years of the Internet boom, Warren Buffett – arguably the greatest American investor of his generation – diligently followed the ‘firm foundation’ approach, only buying into companies such as furniture retailers and utility businesses, ventures that he could understand and that could reasonably be expected to make a profit. As the market ballooned, Buffett was derided for not being clever enough to second-guess the exploding share prices of the fashionable Internet businesses.

The second method of calculating value is what Malkiel calls the ‘castles in the air’ theory, which does away with any analysis of a company’s intrinsic worth. Instead, investors consider how the hordes in the marketplace are likely to react in the future. The successful investor calculates what situations are likely to lead to rising share prices, then buys before the crowd and sells before the fickle market has got bored. No less an investor than the twentieth century’s pre-eminent economist John Maynard Keynes advocated this approach, and became a millionaire as a result. He wrote that most people are ‘largely concerned not with making superior long-term forecasts of the probable yield of an investment over its whole life, but with foreseeing changes in the conventional basis of valuation a short time ahead of the general public.’ He stressed that investors should concentrate on the behaviour of the market above the insular world of the company.

Some investors and commentators tried to argue that the value of Netscape and of the other Internet companies that soon followed suit were in fact based on a firm foundation. In the New Economy there were to be New Rules which would benefit a different sort of corporation. By giving away their product, Netscape had come to dominate the browser market – surely this would prove to be incredibly valuable in the future. In addition, Netscape had a thriving corporate culture, the loyalty and satisfaction of its customers and the power of a brand; enduring market-dominance and profit would surely follow. But Netscape’s firm foundation was built in virtual reality, and its Initial Public Offering was mostly a triumph for the castles-in-the-air method of valuation.

Jim Clark said that his Initial Public Offering proved that the market saw the future through his eyes. ‘People started drinking my Kool-Aid. Netscape obviously didn’t create the Internet. But if Netscape had not forced the issue on the Internet, it would have just burbled in the background. It would have remained a counter-intuitive kind of thing. The criticism of it was that it was anarchy. What the IPO did was give anarchy credibility.’ From 9 August 1995, the capital markets were pitched into chaos, uncertainly gyrating as belief in the Internet wavered. The Netscape IPO was the Internet’s breakthrough as a commercial medium. What had been a playground for researchers and idealistic online communities became a dreamscape for entrepreneurs.

The IPO had profound consequences for the coming years. The capital markets were now ready for a new kind of business, one that hadn’t yet made a profit but had loudly staked its claim and would presumably make a mint in the years to come. From then on the investment community was happy to rely on the unfamiliar rules of Net economy and leave reality behind. ‘There was an unbelievable frenzy,’ one important investor remembers. ‘You [might get] these four kids who didn’t even finish college, [and] they would say, “We know how to sell insurance on the Internet” or “We can sell pet food, or toys”, and me and Kleiner Perkins and Soros, we were rushing to sign huge cheques to these kids. And everybody said, “They won’t make money for twenty years, but you have to get the space”. It was incredible.’

The Netscape Initial Public Offering took place on Bill Gross’s thirty-seventh birthday, and only added to his general excitement about the possibilities offered by the New Economy. His own online venture CitySearch was about to be launched, and elsewhere the first of the online merchants were embryonic. In the middle of July 1995, amazon.com had been launched in Seattle by thirty-year-old entrepreneur Jeff Bezos, who touted it as ‘Earth’s Biggest Bookstore’. Legend has it that Bezos wrote the business plan on a laptop while being driven west from New York by his wife; he chose the book industry because it was large, fragmented and had an already well-established distribution system. The company’s debut came with no great hullabaloo and no anxious editorialising about this being the future of business. Yet in its first week amazon.com took more than $12,000 worth of orders; within only a couple of years it was worth hundreds of millions of dollars, and later billions. More importantly, it spawned a series of copycat businesses, in various areas of retail, from groceries to toys.

Gross was well aware of the new companies springing up across the Internet, and was keen to jump on the bandwagon. Soon he sold Knowledge Adventure, which by then was valued at $100 million and his stake in that at a little less than $20 million. Free and with money in the bank, Gross was now able to concentrate full time on his new baby, the Spielberg-inspired ‘idea factory’, which he christened Bill Gross’s idealab!.

His radical innovation was to create something like a movie studio but which turned out new businesses rather than films. Some of them might fail; but if a few were ‘blockbusters’ and could be sold to the ravenous capital markets, then he would be made. His challenge was to bring a touch of brilliance to new corporations – just as Spielberg did to films. ‘I don’t compare myself to Steven Spielberg,’ he said. ‘But in the same way he has this expertise about what things should ultimately look like onscreen, I have a very good vision for pure business concepts.’

The new project Gross described as an ‘incubator’, like those that had been around for years, particularly on university campuses, as the ‘nursery slopes’ of company formation – providing office space and a little advice to aspiring entrepreneurs. One particular role model for Gross was George Hatsopoulos, founder of the Thermo Electric conglomerate, who had created and then taken public nineteen companies, keeping an interest in each. Gross’s insight was that a slow-moving and conservative institution could be re-focused as a speedy engine for the creation of Internet companies. He said, ‘I felt if someone else could make this work with the physical processes, it would work way better on the Internet.’

Bill Gross’s core skill, and the one he most prized, was creativity. A great brainstorming session, he once said, was ‘a little bit like having sex’. Characterising himself as the everyman fixer, he wandered around the world spotting problems and trying to fix them. He has described how, in order to properly contemplate problems, he meditates to the sounds of Yosemite’s Merced River or listening to classical music. As Steven Spielberg said, ‘He’s kind of like a mad genius. His brain works like a roundhouse in a train station, spinning off ideas in seven directions at once, yet not losing its focus on any one of them.’

Having formulated the idealab! business plan, Gross approached and seduced a number of investors and asked each to put up at least $500,000. As one of them remembers, ‘[Gross] talked to us about the Internet; I didn’t know what the Internet was, zero, but he got money from me.’ Oscar-winning actor and producer Michael Douglas was among those to put money in, as was Jean Pigozzi, the heir of the Simca car-manufacturing fortune. Steven Spielberg also came along for the party, having said about Gross, ‘If he’s involved with it I want to invest in it.’ And Ben Rosen, the founding investor in Lotus and Compaq computers, invested too. Rosen’s reasoning was that ‘Bill has a chance of having a dozen hits. I think in five years’ time Bill Gross will be as much of a household name as any household name in technology, even though today he’s barely known outside of a very small circle.’

With these people’s investment and what Gross described as his ‘50,000 nuggets of business experience’, idealab! was officially incorporated in March 1996. For the first eighteen months, it squatted the offices of Knowledge Adventure and CitySearch while Gross, with the help of a theme-park designer, planned a new office space. In this, his desk would be enclosed in glass at the middle of one wall, like a command centre. He would face out towards the empire of hatching companies, which would be arranged in segments, divided by low walls, radiating out from his desk. Between them and Gross’s desk would be a sort of no man’s land where eager managers would loiter, hoping to catch his fickle attention.

idealab! was to forge a radical, speedy, cheap and multiplex way of manufacturing corporations, very different from the slow and prudent methods of the old economy. As one early headline about the venture happily proclaimed, ‘To be an online company, first throw out old rules.’

Gross’s intention was to create an environment that was perfect for frenzied entrepreneurs like himself. Most importantly, idealab! would take responsibility for the dull procedural elements of Internet-company set-up – such as providing office space, recruiting senior managers and legally incorporating the companies. Gross considered that the economy of scale would allow his managers to singlemindedly focus on the problems unique to their individual businesses and so come up with creative solutions. The key to successful business, he was convinced, was the ‘maximization of time and efficiency: having everybody spend every minute of every day doing precisely what maximizes the organization’s prospects.’ The Netscape IPO had demonstrated that the speed at which ideas were executed was the essential ingredient of Internet success. Indeed this was so fast that Silicon Valley types began talking ‘Netscape Time’. As Fast Company magazine headlined in November 1995: ‘Are you fast enough? Are you hungry enough? Are you tough enough? To work, live, compete in Netscape time?’ Bill Gross thought that the idealab! companies would benefit from shared knowledge across the various start-ups, proudly declaring that idealab! would ‘do in four and a half months what would take another Internet start-up nine months to do.’

Gross also wanted to capitalise on the uniquely low cost of creating an online business. ‘It used to be that the main thing you needed was money to start a company, but you don’t need that anymore,’ he said. At only marginal expense, it was possible to have a window on the world. This meant that idealab! could create a shoal of tiny companies, some of which would barely see the light of day while others would stumble towards independence. Those that made it to the starting gate were given $250,000 and told to find their way in the world.

Despite his enthusiasm for his own ideas and his ability to create companies, Gross was faced with an enormous obstacle: he lacked people to run the various businesses. There was no cohort of bright, experienced managers wanting to take a chance on a risky new venture – why would there be, when they could happily earn fat salaries in stable blue-chip corporations or management consultancies?

To solve this tricky problem he recalled an insight gleaned during his time at Lotus: that a stake in the company is the greatest of motivations. So he came up with a remarkable new form of corporate ideology, which he called the New Math of Ownership. Whereas traditionally companies would own the majority of their subsidiaries, Gross would re-calculate the balance and give his top managers substantial chunks of their businesses – normally about ten per cent. Gross would keep about fifty per cent, the remainder being divided between other founding staff. He said he had ‘decided to put this arithmetic – this notion of relinquishing ownership and of letting go – at the very heart of a new venture.’ This striking break from the norm allowed him to recruit a group of managers from blue-chip corporations such as Disney and Lotus.

During the first year of idealab!, Bill Gross became a weather vane for the fashions of Internet-business models, creating companies that seemed to mimic almost every possible fad. The first of these to appear was PeopleLink, which created software for servicing online chat rooms, instant messaging and message boards. It was a brave move that PeopleLink should set out to commercialise these not-for-profit online forums where people discussed their common interests. These had existed for years but had not been used for commerce.

It was hoped that following the influx of new users, PeopleLink would create new and profitable Web communities. Similar ideas concerning radical shifts in the meaning and purpose of Internet communities had been expounded by John Hagel and Arthur Armstrong in their book net.gain, which Bill Gross once recommended to the readers of WIRED. Online message boards and email lists were no longer to be about nurturing kinship but about reaping a profit. net.gain contained the promise that those who nurtured, listened and empowered these communities would leap ahead of their online rivals; now, Internet users were not individuals who had logged on but customers to be sold to. Gross was enthusiastic, saying, ‘It is a business model we’ve adopted.’

The book also warned that corporations that failed to acknowledge the power of online communities or that tried to control them would themselves fail. The authors went so far as to say that ‘virtual communities have the power to re-order greatly the relationship between companies and their customers.’ In the years to come this early fear was not taken to heart by all of Gross’s chief executives, and the lessons were not always learned or implemented.

Another of Gross’s ventures sprung from his frustration about not being able to share his knowledge and experience with the world. ‘Every time I sit on the beach in Hawaii and have an idea, I get incredibly frustrated that I can’t put it in the hands of the people who can use it.’ So began Ideamarket, a market for ‘intellectual property’, which promised to become a stock exchange linking buyers with sellers of everything from recipes to business plans.

Gross quickly managed to snap up two of the top names in computer journalism to run this business, Jim Seymour, editor of PC Week, and Peter Lewis of The New York Times. One of the first intellectual properties for sales was Gross’s own opus, ‘Raising Money Successfully: Secrets of an Entrepreneur’. This 3,200-word article cost $19.95 and pledged to ‘increase your chances of success by using tips and lessons that [Gross] learned over the past 15 years.’ Gross was confident about Ideamarket, declaring one of his favourite ideas and boasting that it would quickly become a billion-dollar corporation. Six months after its launch, it was in Fortune’s list of ‘25 Cool Companies’; one week later, it collapsed and all but one of its staff abandoned the project. Despite Gross’s enthusiasm, Internet users had not bothered to use the service.

Throughout the first year of idealab!, Gross had an incredible promiscuity of ideas – some of which had barely one outing in the press. When he wanted to watch old episodes of Seinfeld on the Web, he set up Bandwidth+ to speed up the Internet. He also came up with I-Map, a means of visualising large amounts of information; Datamining, which could find gems in swamps of information; Visual Search, designed to search the world of virtual reality on the Web; and Recomentor, a service that made collaborative recommendations about anything, from movies to music.

The atmosphere at idealab! was driven and feverish, with meetings often carrying on late into the night. Gross would sometimes organise meetings of all the employees of all the companies, in the hope of coming up with yet more ideas. As he recalled, he would ‘run around like a hummingbird, plugging my ideas into multiple, highly focused companies.’

One early investor remembers this period. ‘I used to go and see him in Pasadena, and he would have seven hundred messages on his computer, and he was talking to you doing emails at the same time. He had this glass office, and he was talking to people from five different companies. I thought, “Oh my God, this man is a genius.”’ The CEO of another company remembers a time when Gross would only book in meetings that were five minutes long, while Hollywood movie stars waited in the idealab! reception area to spend a moment with him.

By autumn 1996, idealab! had already created eighteen enterprises. Though none of them had as yet been successful, Gross was insistent that only one ‘hit’ was needed in order for idealab! to be funded for ever. He seemed utterly confident that this would happen, and told one radio host, ‘We’ve extracted the Internet genetic code for success, and then we try to inject that code into each start-up that we create to guarantee its success and give it the advantage of the shared knowledge of all the companies in this incubation lab.’

Gross was later raised into the pantheon of great entrepreneurs. Just as Henry Ford’s car lines in Detroit had profoundly affected the creation of products through mass manufacture, so Bill Gross was praised as a huge influence on how corporations were created. He became a star of the Internet, indulging in the cars and private planes of the trappings of wealth. Remembers an investor, ‘I went to a conference with him and there were women, you know, there were groupies. He had ugly tech groupies running after him, it was incredible.’ He received the ultimate seal of approval when the pre-eminent American entrepreneur Jack Welch, CEO of General Electric since 1981, joined the Board of idealab!.

Back in late 1996, though, Gross was still looking for his first blockbuster idea. One of the people he brought into assess business plans had just left Disney’s Strategic Planning department. This was a ferociously clever man called Toby Lenk.