Founders - #23 The New New Thing: A Silicon Valley Story

Episode Date: April 7, 2018

What I learned from reading The New New Thing: A Silicon Valley Story by Michael Lewis---He grew up poor, dropped out of high school, and made himself 3 or 4 billion dollars (0:01), New Growth Theory (8:00), "Growth is just another word for change." (11:15), "The notion of what constituted useful work had broadened." (15:00), "If everyone was patient there'd be no new companies." (18:00), Turning his life around at 38 (21:00), Jim's idea to avoid the Innovator's Dilemma (30:00), The beginning of Netscape (33:00), The fast eat the slow (38:00), The people you don't want (40:00), The difference between a pig and a chicken /"They had wanted to be chickens; Clark forced them to be pigs" (43:00), All chips on 00 / Diversification is for idiots (48:00), Moving the goalposts / "Mama, I'm going to show Plainview." (56:00) ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

Why Jim Clark was so worthy of study was another matter, and I'll come to that soon enough. For now, I'll just say that the quirks in the man's character sent the most fantastic ripples through the world around him. Often starting with the best intentions, or no intentions at all, he turned people's lives upside down and subjected them to the most vicious force a human being can be subjected to. Change. Oddly enough, he was forever claiming that what he really wanted to do was put up his feet and relax. He could not do this for more than a minute. Once he'd put up his feet, his mind would spin and his face would redden and he'd be disturbed

all over again. He thought of something or someone in the world that needed to be changed. For all I knew, Clark would be remembered chiefly as the guy who created Netscape and triggered the internet boom, which in turn triggered one of the most astonishing grab fests in the history of capitalism. Maybe somewhere in the footnote, it would be mentioned that he came from nothing, grew up poor, dropped out of high school, and made himself three or four billion dollars. So that is from the first chapter of the book I want to talk to you about today, which is The New New Thing, A Silicon Valley Story. It's by, I would say, the best storyteller alive. My personal, probably favorite author, I would say, if not one of two of my favorite authors.

That's Michael Lewis, who most of you guys are probably familiar with. But part of the reason I love doing this podcast so much is because I get to read about just these really wild and eccentric personalities. And Jim Clark may be the most eccentric, one of the most definitely one of the most eccentrics of all the characters that we've covered on the podcast so far so uh i'm gonna i just want to read you this this section i highlighted from the introduction kind of um explains uh what michael lewis is doing with his entire book uh so we've read like there's been a lot of like biographies on on this podcast this is different this is we're going to learn a lot about jim clark's personality in life but life, but Michael Lewis is basically telling a story that unfolds over about a two to three year period. So let's go ahead and jump right into the book. Oddly enough, this character was at the center of one of history's great economic

booms, who in effect sits with a detonator between his legs, could not describe what he did for a living. When a person sets out to find the new idea or the new technology that will A, make him rich, B, throw entire industries into turmoil, and C, cause ordinary people to sit up and say, my god, something just changed. He isn't doing science. He isn't engaged in what any serious thinker would call thought. Unless he makes a lot of money, he isn't even treated as a businessman, at least not by serious businessmen. He might call himself an entrepreneur, but that word has been debased by overuse. Interesting enough that Michael Lewis is writing these words in early 2000s,

where you hear that same complaint even,'s say what 15 to 16 years later so he might call himself an entrepreneur but that word has been debased by overuse really there's no good word for what he does I first noticed this problem when I watched one of these people a man who had made himself a billion dollars try to fill in a simple questionnaire on the line that asked him to state his occupation he did not know what to write. There was no name for what he did. Searcher? He couldn't very well put that down. For that matter, there is no name for what he is looking for, which typically is a technology or an idea on the cusp of commercial viability. The new new thing. It's easier to say what the new, new thing is not

than to say what it is. It is not necessarily a new invention. It is not even necessarily a new idea. Most everything has been considered by someone at some point. The new, new thing is a notion that is poised to be taken seriously in the marketplace. It's the idea that is a tiny push away from general acceptance, and when it gets that push, will change the world. The searcher for the new new thing conforms to no well-established idea of what people should do for a living. He gropes. Finding the new new thing is as much a matter of timing as of technical and financial aptitude, though both of those qualities help. The sensation that defines the search is the sweet, painful feeling that you get when you can't think of a word that feels as if it's right on the tip of your tongue. For most people, the relief they experience upon

finding it is almost physical. They sink back in their chairs and try not to stumble upon any more difficult words. The person who makes his living searching for the new new thing is not like most people, however. He does not seriously want to slink back into any chair. He needs to keep on groping. He chooses to live perpetually with that sweet, tingling discomfort of not quite knowing what it is he wants to say. It's one of the little ironies of economic progress that, while it often results in greater levels of comfort, it depends on people who prefer not to get too comfortable. Progress, this is one of my favorite sentences in the entire book, progress does not march forward like an army on parade. It crawls on its belly like a gorilla. The important events in capitalism no longer occur mainly in oak-paneled

offices, if indeed they ever did. As it turned out, the main character of this story had a structure to his life. He might not care to acknowledge it, but it was there all the same. It was the structure of an old-fashioned adventure story. His mere presence on a scene inspired the question that propels every adventure story forward. What will happen next? I had no idea, and neither really did he. So that's just a small glimpse into why I love the way Michael Lewis communicates and tells his stories. So I'm going to be reading some sections that are that long, some a little longer, but there's a lot of just these little great sentences that Michael Lewis has.

And here's one that I'm just going to present with no context. And he's obviously talking about the main character of the book, Jim Clark. Jim Clark was the founder of Silicon Graphics, then the founder of Netscape, which at the time became the most successful IPO. Then he founded something they call like Healthion, which eventually turned into WebMD. So he was an extremely eccentric and successful character in the late 90s, early 2000s. And this is how Michael Lewis is describing him. You didn't interact with him so much as hitch a ride on the back of his life. Okay, so let's just go into this experience Michael Lewis is having with Jim Clark.

An hour after Clark phoned, he picked me up in one of his designer sports cars. He wore dark sunglasses and the pained expression of a man enduring the aftershocks of two bottles of fine burgundy. I lobbed into the haze a series of conversation starters before he took a swing at one of them. A book I had first mentioned a few weeks before, Thorstein Veblen's The Engineers and the Price System. Veblen was a the engineers, and the price system. Veblen was a social theorist with an unfortunate taste for the wives of his colleagues in the Stanford Economics Department. Between trysts, he coined many poignant phrases, among them leisure class and conspicuous consumption. Back in 1921, 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 at the 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. Veblen rejoiced at this prospect. He didn't much care for financiers and captains. He thought they were parasites. When I told Clark about Veblen, he did a good imitation of a man who was bored out of his skull. When he didn't want to seem too interested, he pretended he wasn't paying attention. Now his head splitting, he was particularly keen on the idea of the engineer grabbing power from the financier.

Just to give you a background, I think I might talk about it later on, but the book goes into greater detail. Clark drops out of high school, but then he winds up going to the Navy. He gets a degree, then he gets a PhD, and then another master's. I think he has a PhD in computer science and a master's in physics. He's an extremely technical person, even though this story is really lighthearted. That's just the way Michael Lewis writes. But he definitely thinks of himself, I would say, as an engineer more so than a businessman. So going back to this, he was particularly keen on the idea of the engineer grabbing power from the financier. That's happening right now, he said, right here

in the Valley. The power is shifting to the engineers who can create the companies. That, Clark thought, was only as it should be. Engineers created the wealth, and during the 1990s, Silicon Valley had created a fantastic amount of new wealth. The venture capitalist John Doerr, Clark's friend and Valley co-conspirator, liked to describe the Valley as the greatest legal creation of wealth in the history of the planet. He may have been right about that, but such a great new event in economic history raised great new questions. For example, why had it happened? What caused this explosion? Why did it happen here? The old economic theories of wealth creation, that wealth comes from savings or investment or personal restitute or the planet earth or the proper level of government spending, failed to capture what

was happening out here in the engineering division of the American economy. The people who make a living trying to explain where wealth comes from were just starting to get their minds around this phenomenon. In the mid-1980s, this is the most interesting part of this section and why I'm reading it to you. In the mid-1980s, a young economist named Paul Romer had written a couple of papers that put across a theory, which he called New Growth Theory. Soon after Romer published his papers, Robert Lucas, the Nobel Prize-winning

economist for Chicago, delivered a series of lectures at Cambridge University on the subject. Inside of 10 years, New Growth Theory had become something like the conventional wisdom in the economics profession and the business world. New growth theory argued in abstruse mathematics that wealth came from the human imagination. Wealth wasn't chiefly having more of old things. It was having entirely new things. Growth is just another word for change, said Romer when he paused for breath between equations. The metaphor, let me say that part again.

I jumped over that. Didn't mean to read it so fast, but it is important. Growth is just another word for change. Okay. The metaphor that Romer used to describe the economy to non-economists was of a well-stocked kitchen waiting for a brilliant chef to exploit it. You guys will recognize this analogy, which we covered in the Elon Musk, the chef and the cook podcast. And it's also been, I feel like this theme is popping up in all kinds of these books that we're covering.

Okay, so he's using this to describe the metaphor. It's a well-stocked kitchen waiting for a brilliant chef to exploit it. Everyone in the kitchen starts with more or less the same ingredients, the metaphor ran, but not everyone produces good food. And only a very few people who wander into the kitchen find entirely new ways to combine old ingredients into delightfully tasty recipes. These people were the wealth creators. Their recipes were wealth. Electricity, the transistor, the microprocessor,

the personal computer, the internet. It followed from the theory that any society that wanted to become Richard would, richer, not Richard, that wanted to become Richard would encourage the traits, however bizarre, that led people to create would encourage the traits, however bizarre, that led people to create new recipes. So this is actually a really important part. So if a society wants to become richer, it needs to encourage people to take risks to create new

recipes. As much as I personally feel like entrepreneurship and people starting companies is becoming more and more popular, the data, at least in the United States, says the exact opposite. It's becoming less and less common, which I think is a really big problem. A certain tolerance for non-conformism, whatever that word is, is really critical to the process. As Romer put it, qualities that in 11th century France or even 1950s America might have been viewed as antisocial or even criminal would be rewarded, honored, and emulated simply because they led to more recipes. In short, the new theory conferred a stunning new status upon innovation and the people responsible for it. 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. Okay, skipping ahead a little bit, let's get some insights into his personality, and then Lewis is going to continue writing about this recipe metaphor. Unlike just about everyone else's age, 54, Clark had made the leap from part one to part two of the Silicon Valley story. Part one had been about engineers building machines cheaper, faster, and better. They built them so fast and so cheap that commercially speaking, they made themselves

uninteresting. Each new machine they built sooner or later would become a commodity. Other people, usually foreign people, eventually figured out how to build it more cheaply. The companies that made the machines, such as Hewlett-Packard, remained viable, but they were as dull and plodding and predictable as any other big American company. Part two of the Valley story was not at all plodding and predictable. At some point in the early 1990s, the engineers had figured out that they didn't need to build new computers to get rich. They just had to cook up new things for the computers to do. The thrill was in the concepts.

The concepts were the recipes. The notion of what constituted useful work had been broadened. Let me, I added my own words there. Let me read that because I love this sentence. The notion of what constituted useful work had broadened. All across Silicon Valley, you found office buildings crammed with young techno geeks cooking up recipes that they hoped would turn the economy on its ear. The role model for this activity was Jim Clark. This was due not so much to Clark's success as to his talent for self-reinvention. This is an interesting part, too, because keep in mind, at the start of this paragraph, we learned that at the

time of the writing, Jim Clark is already 54 years old, and he's still starting companies. Most other 54-year-olds in Silicon Valley had long ago been torn down and replaced. Not Clark. Other people grew old. He stayed new. His psyche was a magic show, and this was its favorite trick. No matter how long he'd been around, he could behave as if he'd just arrived. Clark's ubiquity was reflected in the landscape beneath us. Every significant landmark below bordered on his life. They're currently in a helicopter because Jim Clark's learning how to fly a helicopter, so he takes Michael Lewis up, and Michael Lewis is having these thoughts and writing about the experience. So that's the context for this.

So they're hovering over Silicon Valley. So every significant landmark below, they're literally above it, is Stanford University. He taught computer science there and was now paying to create a new department within the engineering school, which he wanted to call biocomputing. Xerox PARC, birthplace of the personal computer. Clark had built his geometry engine there, and the geometry engine had changed computing. The great, sprawling campuses of the old workstation companies, Silicon Graphics and Sun Microsystems.

Clark had created the former. Some friends of his had created the latter. The dozens of tiny ski chalets on Sand Hill Road for which venture capitalists now paid $90 a square foot. They paid that money so they could be near Clark and people like Clark when they announced their new new thing. The companies born on the internet, Yahoo, Excite, At Home, eBay, and so on, they derived, one way or another, from Netscape, which Clark had founded after he left Silicon Graphics.

The internet services companies now layering themselves onto the old internet software companies. Clark had created the most outlandishly ambitious, Healthion, with which he hoped essentially to seize control of the 1.5 trillion dollar a year u.s health care industry it was an extraordinary performance and it wasn't over yet so let's skip ahead a little bit here's an interesting insight into his personality um and probably why there's so many crazy adventures in this book. Clark's inability to live without motion and change had gotten him to where he was. In his world, change and motion begat money, which begat even more change and more motion and so on. Change was another word for wealth, and wealth was another word for money, and money was what he was after, or said he was after. My own view was that he needed change even

more than he needed the money that came from change. Different people have different words for this need for constant motion and change. Despair is one of them. Impatience is another. Impatience might be a social vice, but to Clark, it was a commercial virtue. If everyone was patient, he'd say, there'd be no new companies. The impatient man kept his own life in such a constant state of upheaval that neither his experience nor his immediate surroundings ended up meaning very much to him. He was keen on things only as they happened. After they had happened, he'd lost interest in them altogether.

As a practical matter, Clark had no past, only a future. That's when he really came alive, when you got him on the subject of what was going to happen next. Then he was full of ideas, and they would change from one moment to the next. This process bore no relation to the cliched version of it offered up by more ordinary business people. Clark never used the words and phrases that we have come to expect from the technology types who pretend to see the future. Vision, the challenge of the next century, the new millennium, the road ahead. That sort of grand talk struck him as perfect bullshit.

In all the time I spent with him, I never once heard him refer to his ability to see the future. He couldn't see it. That's why he had to grope for it. So a few pages later, he continues to explore this, how Clark interacts with time. The few times I asked him directly how he got from there to here, which was becoming clearer, was the same as asking how the modern world had gotten from there to here. He would offer some perfunctory reply and wave me away. That's boring, he'd say. When I pressed, he might say, that's the past. I really don't give a shit about the past uh continuing this uh but i'm going to skip some parts here just makes so

hopefully it still makes sense to you uh michael lewis is realizing that uh there's like clark's not sentimental he has like no there's nothing in his house that that gives you any insight into like his past one day he finds a uh a box that clark's old secretary sent to him but never looked through and it was like all the stuff that over like 30 years of working with jim clark that she had um collected and so michael's going through it and so this this part is really interesting because it's a preview in his early life and um kind of understands like what's motivating him for constant change and to keep pushing himself even after you know he was a billionaire okay so in the box there was

a yellow clipping clipping from the local newspaper in plain view texas where clark grew up the paper wanted to let the townspeople know that one of their own had gone to california and created a big company called Silicon Graphics. It played it as a straightforward local boy makes good story and made light of Clark's boyhood failure. It mentioned that he'd been expelled from the local public high school in his junior year. He'd been an indifferent student and a cut up. One of those great bad examples to youth to prove that if you really want to be a success in American life, you have to start by offending your elders. The offense that got Clark tossed

out for good was telling an English teacher to go to hell. Before that, he had exploded a small bomb on a school bus, smuggled a skunk, and set off a string of firecrackers inside another student's locker, among other tricks. Once he left school, or school left him, he fled town. The next clue folded neatly inside the cardboard boxes was a photograph of Clark circa 1970, having just received his master's degree in physics from the University of New Orleans on his way to a Ph.D. program at the University of New Orleans on his way to a PhD program at the University of Utah. He wore thick, dark-rimmed glasses, a crew cut, and an expression that approached, but did not quite achieve, innocence. In under eight years, this person, considered unfit to graduate from

public high school in Plainview, Texas, had earned herself a PhD in computer science. Actually, the story was more remarkable than that. His father had abandoned the family when Clark was a small child. His mother should have taken welfare, but it never occurred to her. The home Clark went back to after a day of turning his school on its head was situated somewhere below the poverty line. When I asked him about the article on the Plainview paper, all he said was, I grew up in black and white. I thought the whole world was shit and I was sitting in the middle of it. At the minimum age of 17 and a half, Clark asked his mother to sign the piece of paper

that permitted him to join the Navy. In September 1961, when the rest of his high school class returned for its senior year, he left Plainview for basic training just outside of New Orleans. His career in the Navy started as badly as his career in high school ended. When he arrived at training camp, he was given along with every other new recruit a multiple choice aptitude test. He had never seen a multiple choice test and he didn't know how to take one. To most of the questions, several different answers struck him as at least partially correct. Instead of picking one that seemed the most correct, he just circled them all.

The Navy assumed that he knew that circling more than one answer fooled the computer that graded the tests. They charged him with cheating, took him off the ordinary slow track for enlisted men, and put him on the even slower one for juvenile delinquents. Thus, the first time Jim Clark ever heard of computers was when he was accused of trying to fool one into thinking he was smarter than he was. And I love this. Let me just interject before I continue. This reference to now he's on the path for juvenile delinquents. It's always amazing how books are the original hyperlinks and these ideas that we read in one place we keep seeing pop up in another one. You recognize recognize the, if you want to, that quote, if you want to study the entrepreneur,

study the juvenile delinquent, or if you want to understand the entrepreneur, study the juvenile delinquent, which is from Yvonne Chouinard, the founder of Patagonia. And in his book, Let My People Go Surfing. And now we see that a lot of these guys,

a lot of these people are, they're, you know, misfits. A lot of times they're getting in trouble. They don't fit in. They're doing something that society is telling them they shouldn't do. So let me continue the story because it's actually interesting. Okay, so the first time Jim Clark ever heard of computers was when he was accused of trying to fool one into thinking he was smarter than he was.

The other recruits who took the multiple choice test went into a classroom and obtained their high school equivalency diplomas. Clark alone found himself shipped out to sea. There he spent the next nine months performing the most disgusting chores that need doing on a ship. Those nine months at sea have filled a lot of Clark's memory. He recalls officers telling him that he was stupid, and bullies tossing plates of food on the floor just so that he would have to clean them up. He returned to the Navy's classroom convinced that Plainview, Texas just might not be the world's capital of shit. He took his first math test and scored the highest grade in the class. He was unaware that he had any

particular aptitude for math and didn't quite believe the result. Neither did anyone else. The Navy gave him another test. Same result. Six weeks later, Clark was assigned to teach basic algebra to incoming recruits. A few weeks after that, one of the instructors told him that it had been a long time since he'd seen someone so naturally gifted in mathematics. He suggested that Clark enroll in night classes at Tulane University with a view to getting a college degree after he finished his tour of duty. Within eight years, Clark had his college degree, plus a master's in physics, plus a PhD in computer science. In the Navy, this is, I think, the important part in the summary of this entire section.

In the Navy, Clark said, he learned that his desire for revenge could lead to success. He was propelled in the classroom by his anger about the humiliation he'd suffered at sea. He suffered at sea. Thus, success for him became a form of revenge. Okay, so skipping ahead, I want to jump to this part. The note I left myself is this, turning his life around at 38.

The reason I usually include stuff like this in this podcast is because there's no – I don't see any really correlation between success in building companies and age. A lot of people think it's like a young person's thing, and to some degree it is. But example after example of hugely successful people doing it extremely late in life. And Jim Clark doesn't really get started trying to build wealth and build a company until he's 38 years old. Okay, so let's get right into this. He tried to explain this extraordinary leap in his career from 38-year-old unsuccessful college professor with a warning label on his forehead to a founder of a multi-billion dollar corporation.

It was one of those times when the whole world went fucking berserk. He said, after my wife left, I went into this spiral, six months of counseling. Then I said, fuck counseling. It wasn't helping anything. There was all this self-actualization stuff around, and I thought, I don't need some guru to tell me how to find my way out. So it was simple as that? He laughed. No, for a year and a half, I was in this kind of downbeat funk. Dark, dark, dark. I said he still hadn't answered the original question. It's funny, he said. One day, I was sitting at home, and I remember having the conscious thought, you can dig this hole as deep as you want to dig it. I remember thinking, my god, I'm going to spend the rest of my life in this fucking hole. You reach these points in life

where you say, fuck. I've reached some sort of dead end here. What was the point of getting here? And you descend into this chaos. All those years you thought you were achieving something, and you achieved nothing. I was 38 years old. I had just been fired. My second wife had just left me. I had somehow fucked up. I developed this maniacal passion for wanting to achieve something. He paused. I guess it was a little bit of self-imposed psychology.

In something like an instant, the man had changed his life. He had reinvented his relationship to the world around him in a way that is considered normal only in California. No one who had been in his life to that point would be in it 10 years later. His wife, his friends, his colleagues, even his casual acquaintances, they'd all be new. The result of this self-imposed psychology surprised even Clark. He insists that the transformation occurred overnight and that he can't really explain it so it just sounds like to me that he just was disgusted with himself he said that's it it's gonna end today and then he starts plotting uh and he uses different numbers throughout the entire

book like i think his first goal was like i just want to make a million or ten million dollars then i want to make a hundred million dollars and you go it goes on and i want to make a billion then i want to make a billion after taxes and then he keeps pushing the goal point uh post out and out but he didn't start having those thoughts till like he said so he was in almost 40 years old um so there's some just random stuff okay so skipping ahead this is jim's idea to avoid the innovator's dilemma. Clark saw only one solution. Silicon graphics had to build a cheap computer to compete with the personal computer. Cheap machines meant mass markets, and mass markets meant great sums of money.

Jim was probably two or three years ahead of the rest of us in seeing what was coming. He could see problems down the road and the problems became emotionally important to him. Now this is a quote from Jim. I was saying, God damn, we're out of our minds, says Clark. I was so worried about the PC. I was adamant that we had to build a low-end product and that it had to be something that sold for under five grand. at the time silicon graphics just building these huge workstations and there he sees that what's going to come next clark and this is the uh this paragraph is why i included this section i think this is uh smart 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. Everyone in a successful company, from the CEO on down, has a stake in whatever the company is currently selling. It does not naturally occur to anyone to find a way to undermine that product. Clark thought he knew how to become the agent

of his own creative destruction, and he was prepared to do the deed. He wanted Silicon Graphics to operate in the same self-corrosive spirit. So he winds up leaving SGI, Silicon Graphics Incorporated. I'm going to actually skip over that part. And we'll jump right to probably I would say what he's most famous for. And that's creating Netscape.

So let's go ahead and go to this part about the beginning creating Netscape. So let's go ahead and go to this part about the beginning of Netscape. Just to give you some background, he's left Silicon Graphics, he's looking for the next thing, he's meeting with a bunch of other engineers and he is linking up with a young Marc Andreessen who is a computer science student. I think he's 22 at the time that the book's written. And now obviously he's went on to be a successful founder and venture capitalist, so on and so forth. Really interesting Twitter follow as well. So let's go right to the beginning of Nescape. Then one day as Andreessen and Clark sat at Clark's kitchen table,

Clark announced that he had changed his mind. This wasn't unusual. Clark was always changing his mind. Now he said that his telecomputer was ahead of its time. It was too expensive to build. We could always build a mosaic killer, said Andreessen. What do you mean, said Clark. Andreessen said that the software he'd written had been appropriated by the University of Illinois, but that he felt sure the university would bungle any subsequent attempts to commercialize it.

He mentioned again that 25 million people were now using the internet and that their numbers had been doubling every year for a long time. Clark recalls, I thought, Jesus, those are big numbers. I've never been in a business with those kind of big numbers. Eventually, you were talking about all the people on earth. The whole time he'd been stewing with Andreessen about what to do, the solution was right in front of him, the internet. All of a sudden, it was clear to me when I looked at the internet that I was looking at the personal computer in 1985, Clark says. It was this slow,

clunky technology, but people were using it, and it would get faster. I realized that this was the thing I'd been groping for. He and Andreessen hired Andreessen's college buddies, who had written the code for Mosaic, which permitted a user to browse the internet, and Clark had yet another team of young engineers to lead into battle. He called the company Mosaic Communications, then changed the name to Netscape. This time, Jim Clark was right. He was off and running down the dark tunnel with no end. Within 18 months, the world's biggest technology companies realized that they had been trumped. Bill Gates sent a memo to his employees saying that the internet now

posed the greatest threat to Microsoft's control of the computer industry. The 1,000 Microsoft employees dedicated to building a telecomputer were reassigned to compete with Jim Clark's startup. The telecomputer is another idea Jim Clark had, and it's actually put into production, and companies wound up spending hundreds of millions of dollars in its development. I don't think they ever sold one. And it's just basically the premise is that people aren't going to buy computers that uh they're going to interact the the your tv and your cable box specifically is going to be the new computer like that's going to be the new hub uh obviously that it's not right so that's the reference uh right now microsoft has 1 000 people working on the telecomputer

they're taking them off and they're they're going to compete with Netscape. Thousands of others at Oracle and Sun, and even Time Warner, were similarly redirected. Jim put the whole of ITV out of business. Everyone at once realized that the next big thing was not the television set, but the personal computer hooked up to the internet. If you page through his talk on the telecomputer, you can see just how chance favors the prepared mind. The presentation Clark made to his board back in 1992 is a fair blueprint for the internet boom. All of the ideas, e-commerce, email, and some of the technology he dreamed up

for his beloved telecomputer were grafted onto the internet. You have to sit down and think for a bit to realize what that means, not just for Clark, but for anyone with the slightest interest in how economies and societies are nudged from one place to another. This is actually a really good point Lewis is making here. A company dreamed up by a technical man and a lot of big shots thought that a lot of big shots thought was slightly unhinged with a 22-year-old who didn't want to do it in the first place and another 22-year-old assigned to sleep under his bed

did not become merely a success. It torpedoed investments of hundreds of, they're talking about Netscape obviously there. It might not be obvious because they skipped over a part. Might've needed that context. It torpedoed investments of hundreds of millions by the world's biggest corporations and smartest minds sgi tw microsoft sun oracle at&t thousands of people had more or less wasted billions of dollars and whether they knew it or not had been following his lead he was the one that came up with the idea and pitched it to begin with then just as they all ran as i heard in one direction he took off in another

and within six months he made them all look like fools it was one of the great unintentional head fakes in the history of technology skipping ahead a little bit um i i left a note for myself. It says, the fast eat the slow. And let's jump into these few paragraphs real quick. Another old rule that changed was the rule that financiers who backed the company and perhaps the CEO who steered it to success made the most money and accumulated the most power. Anyone who bothered to read Netscape's prospectus discovered a curious fact. The venture capitalist

on Sand Hill Road and the new CEO, Jim Barksdale, owned a few million shares each. In the end, they made hundreds of millions of dollars from Netscape and so had no reason to complain. But the young engineers whom Clark had pulled together to create the company also became rich. An engineer who joined Netscape in July 1995 was, by November, worth $10 million. Clark made certain that Marc Andreessen, the young inventor, did not suffer the same fate at the hands of the venture capitalists as he himself had 12 years before. What they're talking about there is he comes up with the idea for silicon graphics develops technologies the uh uh becomes successful and he didn't know anything about venture capital or basically he wind up with with a tiny share of his own company and he really pissed him off and that's when he uh like he decided he had to leave silicon graphics because he didn't he wasn't

gonna make enough money um so going back to that cl Clark made certain that Mark Andreessen, the young inventor, did not suffer the same fate at the hands of the venture capitalists as he himself had 12 years before. After the IPO, Andreessen, by then 24 years old, was worth $80 million. Clark also made certain that by far the biggest stake in the company, nearly one quarter of the whole whole belonged to Jim Clark personally. Clark became the Valley's newest billionaire. The speed with which Clark had made himself and a lot of other engineers rich created new forces of greed and fear in Silicon Valley. Microsoft was 12 years old before people started talking about Microsoft millionaires.

Netscape was one and a half. Another great random Michael Lewis quote that I like to highlight and just remind myself, most people don't enjoy making huge gambles on the future. They would just as soon have someone else tell them what to do. So let's skip ahead. This is the people you don't want. 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 the 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, but when I, when you, but when I find someone, but when you find someone you want, I tell them, here's exactly what we are going to do. And it's going to be huge. And you are going to get very, very rich. So now I'm jumping over, obviously huge swaths of the book the book is only 300 and paperback i got the paperback version it's like 350 pages you could probably read it in like a two or three days if you have a few hours to kill um it's obviously you know reads like a story so it's easy but if i'm saying this because obviously uh i'm not going to cover the whole thing there's tons of stuff i'm

i'm leaving out arguably the main point of the book i'm leaving out but if you're interested and you and you like these highlights and then i would recommend obviously buying the book that's the entire point of me doing the podcast to encourage you to to encourage people not just you but to encourage people to read uh let's see because you find interesting stuff like this here's another insight into his personality and then um he's just got so now i'm just going to share a bunch of just these interesting little tidbits shorter shorter parts coming he could never become one of those ordinary people a venture capitalist or a chief executive or a member of a museum board or anything else that required him to behave in the way important businessmen are meant to behave. Circumstance had made him

an insider, but temperament kept him forever an outsider. He was like the man who threw the world's biggest bash and failed to show up for it. This outsider-ness was what gave him his unusual view of the world. His talent for groping the future was genuinely viewed as a supernatural gift but it was a matter as much of his limit limitations as of his strengths he could see human society in ways that most businessmen could not because he was not very much a part of it i like this short paragraph this idea that companies are self-contained worlds direct quote from Jim. There is nothing more satisfying to me than to create a complete self-contained world when a computer is controlling it.

It took a while before anyone saw the full implications of that statement, especially for the less technical people who lived in that self-contained world. Oh, this is interesting. Let's skip ahead. So the difference between a pig and a chicken. 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're going to do anything worth doing, you need a lot of pigs. So chicken is interested, pig is committed. Grab the committed people.

So I want to skip ahead. There's this, I'm trying to give you a little bit of context here because this actually goes on, this unfolds over several pages. But there's a market downturn. He's now on his third company, which is a healthy on company and uh they're running out of money and investors are kind of you know they're just not willing to put more money in so uh we've seen this also before in the elon musk book and there was another book and if now it escapes me who the other person is that did this but um

let well let me read it and then you'll understand. Clark called, the exception was Clark. Okay, hold on one second. So, Healthion is trying to raise money. People are saying, you know, they're scared, they're not willing to invest. And he says, of course, if they had thought Healthion had a future, they would have kept it to themselves, meaning other investors are trying to sell, like trying to get other investors, previous investors that have already invested in the company are trying to get new outside investors to bring in more capital. And so he's like, well, this is obviously them saying that they don't think Healthion is future because if they were confident, they'd keep it for themselves. Since they did not, they went looking elsewhere for

capital. That's his thing. He goes, the exception was Clark. Clark called Long, Long is the one running the company, a few days after the board meeting and told him that he had thought about it and had decided that Healthion was simply too good an opportunity to let others in on. He said he would personally provide Long with as much money as he needed. If Long needed $20 million, Clark would cut him a check for $20 million that day. Of course, this meant that Clark would acquire an even larger stake in the company. But since the venture capitalists, so see what he's doing here, he's basically calling a bluff. But since the venture capitalists had valued the company at zero,

he did not imagine they would object. Long called the venture capitalists with Clark's proposal. Their sense that Healthion was worth very little warred with their fear that Jim Clark knew something they did not. Just so you know, what I left on the note for myself on the post-it note on this page is humans are deeply memetic, and we're going to see that here now. Somewhere deep down, they realized how bad they would look if Healthion, by some miracle, became an enormous success and Clark made off with with it all almost before they knew what they had done they threw their money on the table eight million dollars clark supplied the other 12 million so they even though they valued the company at zero which obviously they didn't feel that strongly about it they're now spending eight

million dollars of of their money on a company they think is worthless. He's now, and then here's some more explanation. He now sat on a billion dollars of Netscape shares and could do whatever the hell he pleased with them. And what pleased him was to put it at great risk. The VCs did not care to make these sort of colossal bets on the future. They sprinkled their money around a lot. They sprinkled their money around a lot of different companies and counted on the law of averages to take care of the rest. Clark took a different approach. He said with some conviction, I know how to make a lot of money in the future. And since I know how to make a lot of money in the future, I'm going to put all my money on it. It was a difference of temperament as much as anything else. Clark had walked up to the roulette wheel

surrounded by more or less reasonable men and laid all his chips on double zero. And it scared the hell out of the others at the table. The VCs could tolerate companies going bust. They had so many of them, but they could not tolerate missing out on the new new thing. And so they poured their money So a few pages later, they go into his, this is probably my favorite story in the book um i'm gonna share part of it because it's again it's too many pages to read but it's uh at the very beginning michael lewis talks about how it's so weird that you don't even have a name for the jobs of what people like clark does he got that because of the story that we're going to go to where Michael tags along with Jim Clark. He goes downtown San Francisco to open a Swiss bank account. And it's not for the reasons one would expect. It's actually, there's a couch and a larger story

about this guy that owns Jim money and Jim's making him trying to like force him into doing the honorable thing to pay him back. But anyways, it's, it's interesting story. But the part I found most interesting is, uh, how people like allocate, like how do they choose where to put their money? Right. So standard, uh, financial advice, I'm personally, you know, not too big of a fan for a lot of it i think it gives you like a a pathway to mediocrity um and so but that's on one hand and on the other hand is jim clark with his all chips on double zero strategy so i i find this stuff interesting and no one ever talks about this i guess it's considered not polite um which is kind

of weird but because it's such an important i don't know it's interesting. I guess it's considered not polite, which is kind of weird because it's such an important. I don't know. It's interesting to me, and it's really important. It's weird how it's not really talked about. So the No I Left Myself is all chips on 00, and diversification is for idiots. That's not my quote. It's just if you're curious, type into YouTube, diversification is for idiots, Mark Cuban. And he, and he kind of lays out in that video, uh, how he thinks about like risk and asset allocation. And, and it's just basically answering the question, what are you going to do with all

your money? Um, and so I want to read this part because it's fascinating, uh, just the risk tolerance, the risk profile that Jim Clark has. so set the scene they're in um they're in the swiss baker's office michael lewis is with them and they're trying to get him to like to fill out an investment questionnaire try to get him to understand it's like an investment profile and clark's just like completely dumbfounded because he just doesn't fit into to this normal rubric so check this out as clark studied the document, his face acquired the pain expression of a well-meaning child who's trying his best to answer a difficult question. He was often this way when faced with new situations or with people he did not know. He wanted badly to do what was expected of him. It was only after he determined that this was

somehow impossible that he went ahead and did whatever he wanted. Now he was doing his best to please Bank Julius Baer, I guess that's the name of the bank, yet he could not fathom how the bank's questions applied to him. He arrived at the first category marked risk slash reward. A simple-minded graph with an arrow pointing up and to the right illustrated illustrated the principle that the more risk you take with your money, the more you stand to gain or lose. In the past 10 months, Clark had lost $600 million simply by holding onto his shares in Netscape. If they only knew, he said. The Swiss banker chuckled unhappily. Clark remained straight-faced. His eyes drifted farther down the page to a category marked return objectives and risk tolerance. I just hate the jargon of business and finance, even though I find the subjects fascinating.

I don't like the jargons annoying. No one talks like this. You're never running into anybody in your own life life that what are your return objectives and risk tolerance? And it's just so fake. Sorry, this is random tangent. This was a summary of the typical Swiss banker's idea of the range of possible attitudes towards financial risk. It read conservative. I seek to minimize investment volatility.

Moderate growth. I want to take some risk while also preserving capital. High growth, high capital growth. I have a minimum time horizon of five years with which to pursue my objectives. See, this is what I mean. That's three sentences. Do you have any idea what any of that means? I just think it's created just whatever. It's so, it's, I just think it's created just, whatever. It's marketing and to confuse you, but it's just, you're talking and you're not saying anything. Or in this case, you're writing and not saying anything. Next to each risk profile was a little square box. Clark passed quickly over the first two and paused for a moment at the third,

wondering, probably, where they put the box for people who sought to turn $10 million into $1 billion in a few months. Finally, he looked up with the most perplexed expression. I think this is for a different person, he said. And then, at that moment, something inside him gave. There he was, the maker of the fastest money ever made legally. He was the spiritual leader of a new financial movement that believed in putting all of its chips on double zero. Now we're getting to his personal philosophy. He had not the faintest desire to manage, quote unquote, that money or to, quote unquote, diversify his holdings or to employ any of those gentle verbs that emanate from bankers and inspire people who are not bankers to hand their money over to them. At that moment, Clark's investment portfolio,

such as it was, looked like this. Healthion, $9.5 million shares. Estimated market value, zero. Netscape, $15.5 million shares, estimated market value, $550 million. Microsoft was gobbling up Netscape's market share and thus Netscape's share price and thus Clark's wealth. And yet Clark hadn't a thought in the world of quote-unquote preserving that wealth. He had no interest in preservation of any sort. His life was dedicated to the fine art of tearing down and building anew. He didn't buy U.S. Treasury bonds or stock in companies outside of Silicon Valley or for that matter, stock in anything outside of the outrageously volatile internet sector. A year or so before, he had bought and

sold a million shares in at-home and made a quick $45 million. Other than that, he sank his wealth in his newest company and left it all there until the new new thing came into view. This gorgeous financial myopia was common in the valley and one of the chief sources of its success. The technologist's tendency to commit all of his resources to new technology by financing ever more new technology had generated one of the great economic miracles in human history. Now this paunchy Swiss banker in his This is the most important, or my favorite sentence. Skipping ahead, before we close this out, I have two more sections I want to talk to you about. There's just another random sentence I highlighted.

It's Lewis describing Clark again. He was not one of those people who can be sustained for long by other people's fictions. He required his own. And, uh, second to last section here. One evening, as we sat in his kitchen, I reminded Clark that he said that once he became a real after-tax billionaire, he'd retire. This has already happened.

This is towards the end of the book. He makes a ton of money off taking Healthy on Public again, and now he's an after-tax billionaire, which was what he told Clark when he would stop. So he said, I reminded him that he said that once he became a real after-tax billionaire, he'd retire. He said, without missing a beat, I just want to make more money than Larry Ellison. Then I'll stop. This was news. I pointed out that he had never before mentioned this ambition. I just want to have more money than Larry Ellison. He said again, I don't know why, but once I have more money than Larry Ellison, I'll be satisfied. Well, what happens after you have more money than Larry Ellison? Would you want to have more money than, say, Bill Gates? Oh no, Clark said, waving my question to the side of the room where the ridiculous ideas gather to

commiserate with each other. That'll never happen. A few minutes later, after the conversation had turned to other matters, he came clean. You know, he said, just for one moment, I would kind of like to have the most. Just for one tiny moment. It was one of those tiny moments when it was good to have a record of our conversations. Just a few months before, when he was worth a mere 600 million,

Clark had said, I just want to have a billion dollars after taxes, then I'll be satisfied. Back further, before he started Netscape, he had told one of the young engineers who'd helped him create Silicon Graphics something similar. This guy's name is Mark Grossman who's telling him this. Grossman recalled, Jim came into my office just before he left to start Netscape and said, SGI is okay, but I'd really like to have him $100 million. Back even further, before he started Silicon Graphics, he had told Tom Davis that what he really wanted was to have $10 million.

The numbers, they keep moving. Why do people perpetually create for themselves to condition for their own dissatisfaction? 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. Plainview, the Navy, Glenn Mueller, Ed McCracken, these are all guys in this past, various venture capitalists. 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 assume 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 all the endless possibilities of change even after he'd 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 heart, and he was lying awake. And then let's close it out here, which I think is a great, kind of ties us all together with why he's still running even after this amount of time.

And right before this, there's something that happens where his dad beats his mom, and so he goes and confronts his dad. Now he comes home and he's crying. He's a kid in Plainview,as at the time or a teenager rather so he goes not long after he'd come home in tears from what turned out to be his final meeting with his father clark quit playing his tuba soon after that he was expelled from school and left town once he left he became a stranger to his family he'd turn up every now and again, and the family now recalled something about each visit. One time, not long after he'd left, for instance, he came home talking about nothing but computers.

No one in Plainview had even seen a computer except in the movie, said his mom. Another time, he came home with financial ambition. When Jim came home from the Navy, his mom recalled, he told his uncle that someday he was going to make $50,000 a year. His sister hooted and clapped, he'd done a bit better than that. His mom continued, I remember him telling me when he came back from the Navy,

Mama, I'm going to show Plainview. That is where I'm going to leave this story or this book. If you want the full story, I encourage you, I recommend you buy it. All the books I cover, I only cover books I really enjoy, but I mean, I can't recommend enough reading Michael Lewis. I'd buy this book. I'd buy them all because he's just a fantastic, fantastic writer. The Big Short is one of my favorite books I've ever read in my life. It probably fundamentally changed my outlook on a lot of things too. So if you want to support the podcast and you want to get yourself a great book with tons of interesting information inside that may help you in whatever you're doing, If you look in the show notes on your podcast, whatever app you're using to listen to this podcast now, I leave an Amazon link for this book and every other single book that I've done a podcast on so far.

Those links are Amazon affiliate links, which means that if you click on that link and you buy the book, Amazon sends founders a small percentage of the sale at no additional cost to you. It's like sending me a virtual, like a tip over the internet, if you will. And you get something that's fantastic. So it's a great way to support, if you like and value the work I'm doing here

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