The New New Thing

Key Takeaways

Michael Lewis on Jim Clark — Silicon Graphics, Netscape, Healtheon — as a study in restlessness as a business model:

• The offer. “All Jim Clark ever guaranteed anyone was the chance to adapt.”
• Impatience as the engine of new companies. “If everyone was patient, there’d be no new companies.”
• Self-cannibalisation. Clark’s argument that a technology company “had to ‘cannibalize’ itself” — the same discipline Netflixed shows Hastings applying.
• The elegance trap. “It’s a good rule of the technology business that the more intellectually appealing a machine, the less likely anyone will pay for it.”
• The conception moment. “The moment of conception was, to Clark’s way of thinking, the critical moment of any new enterprise” — where the ownership and terms get set, which is why the grudge over being “exploited” by a VC early on shaped everything after: “He’d never do that again.”
• Hiring for adaptability. He “often preferred young, inexperienced people over older, more experienced ones.”
• Veblen’s prediction, from 1921, that engineers would come to run the economy.
• The closing question, which is the one Kyle marked as the real subject: “Why do people perpetually create for themselves the condition for their own dissatisfaction?” Success “was his chosen form of revenge.”

Connections

Books: The Undoing Project · The Big Short · Moneyball — same author. The Everything Store and Netflixed on cannibalisation. VC: An American History for the founder-vs-VC dynamic Clark never forgave.

Concepts: Technological Innovation · Company Building · Founder-Investor Dynamics.

People: Michael Lewis · Jim Clark.

• The Big Short — both by Michael Lewis; his serial biography of characters who bet against or built around institutional blind spots.
• The Power Law: Venture Capital & the Making of the New Future — Lewis’s account of Jim Clark (Silicon Graphics → Netscape → Healtheon) as serial founder is the 1990s parallel to the venture ecosystem Mallaby documents; Netscape’s 1995 IPO is the founding gun of the dot-com era that Power Law’s arc begins from.

Highlights

• “All Jim Clark ever guaranteed anyone was the chance to adapt.”
• “Back in 1921, [Thorstein Veblen] had predicted that engineers would one day rule the U.S. economy. 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. After all, the engineers only needed to refuse to fix anything, and modern industry would grind to a halt.”
• “If everyone was patient, there’d be no new companies.”
• “Clark had trusted him. He’d never do that again with a venture capitalist. And he never forgave Mueller for exploiting his ignorance.”
• “Clark thought that Silicon Graphics had to ‘cannibalize’ itself. For a technology company to succeed, he argued, it needed always be looking to destroy itself. If it didn’t, someone else would.” — sounds like he’s been reading ‘The Innovator’s Dilemma.’
• “It’s a good rule of the technology business that the more intellectually appealing a machine, the less likely anyone will pay for it.”
• “Success was his chosen form of revenge.”
• “Clark often preferred young, inexperienced people over older, more experienced ones. Even if they didn’t quite know what they were doing, at least they hadn’t learned the wrong things. They hadn’t lost their passion; they hadn’t become Business Bores.”
• “The moment of conception was, to Clark’s way of thinking, the critical moment of any new enterprise. At that moment it was important not merely to hire the people bent on changing the world but to avoid hiring the people bent only on changing jobs. ‘There are all sorts of guys who will show up because they can’t think of anything else to do,’ he said. ‘Those are exactly the people you don’t want. I have a strategy for dealing with these people. When they come by to apply for a job I tell them, ‘We’re all confused here. We don’t know what we’re going to do yet.’ But when you find someone you want, I tell them, ‘Here’s exactly what we’re going to do and it is going to be huge and you are going to get very, very rich.”
• “Why do people perpetually create for themselves the condition for their own dissatisfaction? Listening to Clark talk about how much money he needed to make was like watching the racing dog who had the wit to grab hold of the remote device that controls the mechanical rabbit. Rather than slow it down, however, he speeds it up. Clark played these little tricks on himself so that he would have an excuse, however flimsy, to keep running as fast as he could. It was the same way with his resentments. He treated those who had done him wrong in much the same way he treated those he did not like who had more money than he did. They were all motives. He needed people or places to doubt him so that he could prove them wrong. Obviously, Clark couldn’t stop using technology to change the world, and so he needed an excuse not to stop. The reasons he couldn’t stop were ultimately unknowable; but I assumed that the best and most lasting motive for wanting to change the way things are is to be unhappy with the way things are. People who are unhappy with the way things are tend to remain unhappy even after they have changed them. The nature of their unhappiness is such that change does not slake it. The difference with Clark is that he continued to believe in the endless possibilities of change, even after he experienced its limitations. He was the least happy optimist there ever was. No matter how well Jim Clark did for himself, it was always two in the morning in his hear, and he was lying awake.”