Founders - #274 Jim Clark (Silicon Graphics, Netscape)

Episode Date: October 27, 2022

What I learned from rereading The New New Thing: A Silicon Valley Story by Michael Lewis----Founders Notes gives you the superpower to learn from history's greatest entrepreneurs on demand. You can search all my notes and highlights from every book I've ever read for the podcast. Get access to Founders Notes here. ----[1:23] Maybe somewhere in a 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.[7:41] She explained that the shares in Netscape that Clark had given them had made them rich."And you have to understand," she said, “that when this happened, we were poor. I was ready to cook the cat."I assumed this was a joke, and laughed. I assumed wrong.[12:48] He was expelled from school and left town.  One time he came home talking about nothing but computers. No one in Plainview had even seen a computer except in the movies.[13:21] I remember him telling me when he came back from the Navy, ‘Mama, I’m going to show Plainview.’[14:42] In under eight years this person, considered unfit to graduate from high school, had earned himself a Ph.D. in Computer Science.[15:05] I grew up in black and white. I thought the whole world was shit, and I was sitting in the middle of it.[17:17] If you want to understand the entrepreneur, study the juvenile delinquent. The delinquent is saying with his actions, “This sucks. I’m going to do my own thing. — Yvon Chouinard[17:56] The most powerful paragraph in the book: One day I was sitting at home and, I remember having the thought ‘You can did 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 can reach these points in life when you say, ‘Fuck, I’ve reached some sort of dead-end here. And you descend into chaos. All those years you thought you were achieving something. And you achieved nothing. I was thirty-eight years old. I’d 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.[19:00] Two part series on Vannevar BushPieces of the Action by Vannevar Bush. (Founders #270) and Endless Frontier: Vannevar Bush, Engineer of the American Century by G. Pascal Zachary. (Founders #271) [21:38] New Growth Theory argued that wealth came from the human imagination. Wealth wasn’t chiefly having more of old things; it was having entirely new things.[22:54] On creating new wealth/companies: A certain tolerance for nonconformism is really critical to the process.[24:31] The internet has massively broadened the possible space of careers, and most people haven't figured this out yet. —The Almanack of Naval Ravikant: A Guide to Wealth and Happiness by Naval Ravikant and Eric Jorgenson. (Founders #191)[25:06] A master in the art of living draws no sharp distinction between his work and his play; his labor and his leisure; his mind and his body; his education and his recreation. He hardly knows which is which. He simply pursues his vision of excellence through whatever he is doing, and leaves others to determine whether he is working or playing. To himself, he always appears to be doing both.[27:36] George Lucas: A Life by Brian Jay Jones. (Founders #35) and Steven Spielberg: A Biography by Joseph McBride. (Founders #209)[33:10] The independence and the control is worth a lot more than the money.[33:32] These people could never build the machines of the future, but they could sell the machines of the present.[35:02] Clark on how to avoid being disrupted: 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.[40:41] The young were forever eating the old. In this drama technology played a very clear role. It was the murder weapon.[40:55] The art of storytelling is critically important. Most of the entrepreneurs who come to us can't tell a story. Learning to tell a story is incredibly important because that's how the money works. The money flows as a function of the stories. —Don Valentine[42:53] The Pmarca Blog Archive Ebook by Marc Andreessen (Founders #50)[45:48] What is the role I want to play in my company? I need to make sure to design my environment so I am always playing that role. Make sure you design the job you want. What is the point of being an entreprenuer if you don’t do that?[47:45] John Doerr had cleared $500 million in 18 months. 30 times his original investment.[49:13] You must find extraordinary people.I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1.Given that, you're well advised to go after the cream of the cream. That's what we've done.A small team of A+ players can run  circles around a giant team of B and C players.— In the Company of Giants: Candid Conversations With the Visionaries of the Digital World by Rama Dev Jager and Rafael Ortiz. (Founders #208)[52:03] 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 is the difference between the pig and the chicken in the ham-and-eggs breakfast. The chicken is interested, the pig is committed. If you are going to do anything worth doing, you need a lot of pigs.”[53:14] In our 10 days at sea the value of his holdings had nearly tripled. This is fantasy land he said.[53:54] There are vastly more conceivable possibilities than realized outcomes.----Founders Notes gives you the superpower to learn from history's greatest entrepreneurs on demand. You can search all my notes and highlights from every book I've ever read for the podcast. 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 ----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

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 did he. Why Jim Clark was so worthy of study was another matter. 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 put up his feet, his mind would spin and his face would turn red and he would 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 a 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. That is an excerpt from the book that I reread and the one I'm going to talk to you about today, which is The New New Thing, a Silicon Valley story and is written by Michael Lewis. I first read the book for episode 23, which came out four and a half years ago. And the reason I wanted to revisit this book is, one, it's a fantastic book. Michael Lewis is an amazing writer. But Jim Clark is also a very unusual character compared to the other people that you and I study. He is the first person in history to found three separate billion-dollar technology companies.

And so I actually want to start at the end of the book, which is an overview of Jim Clark's early life. And I think knowing this up front will make it easier for you to understand who Jim Clark was and why he made the decisions he made. And so it says, On the rare occasions Clark visits Plainview, Texas, he lands at the airfield on the outskirts of town, has lunch with his mother,

and then flies off to someplace else as quickly as he can. He seldom drives into town and never visits home. He has never seen the house his mother bought with the stock options that he gave her. And so the author Michael Lewis is driving into Plainview, Texas, and he's interviewing Jim's mom, Hazel, and his sister, Sue. So his mom said that most of what she knows about her son's illustrious career she knew from having read it in magazines she has difficulty squaring the boy she raised with the man she read about remember it started the podcast with hey he dropped out of high school and he winds up making himself three or four billion dollars so says she has difficulty squaring the boy she raised with the man she read about she has no advanced theory to why clark became who he became. In the

middle of this conversation they're having, the phone rings and his sister picks it up and she goes, no, we're not investing right now. No, no, I said we're not investing. And then she hangs up the phone and Michael's like, what's going on? And she returns and she says, she explained that the shares in Netscape that Clark had given them, meaning the family, his sister and his mom, right, had made them rich. And I'm going to pause right there because I want to tell you the note I left myself before I read the rest of this paragraph to you. I go, it is worth remembering that your drive, that fire in the belly that you have benefits other people as well. So why would I say that at this point? Because she just said,

hey, we get a bunch of calls now. People know that we're rich because of the stock options that Clark gave us. Right. And she said, you have to understand, she said, that when this happened, meaning that when we got the stock options, we were poor. I was ready to cook the cat. I assume this is now Michael speaking. I assume this was a joke and I laughed. I assumed wrong. She had in fact been ready to cook the cat. The Netscape IPO had saved at least one life. So then Jim's mom is telling Michael her life story. I'm just going to pull out a couple parts and it has to do with the fact that Jim's dad was a giant piece of shit who beat up his mom. And so it says the most chilling of the story concerned

Clark's father who apparently drank all day and beat Hazel up all night. Hazel put up with the routine for years until she finally divorced him. She divorced him when Jim was 14. So you think, okay, this guy's horrible. He's a drunk. He's a loser. He's beating up on this woman. At least, you know, he, she divorced him. She got away from him. No, the guy would hang out and follow her around and then he would sabotage her car. And this happened multiple times. And think about this crazy story I'm about to tell you. He's putting his baby, he's got a baby daughter in the car that he's sabotaging he's putting her life at risk so he had opened he had put in steel shavings into a transmission so the man at the auto shop helped her clean them out thinking they'd fix the problem

hazel set out with her baby daughter sue to visit friends on the road the car broke down he had put sand in the oil fixing this cost hazel's two month two months of pay. She's not making a lot of money. And then Jim does something about this. That night, she told her son what had happened. Clark had just turned 16. Jim got up and left the house, his mother said, and went to find his father. When he came back, he was crying. I never knew what happened, his mom said. But I tell you what, his sister said. After that, my father never bothered my mother again. These are the parts of the story where I get induced into a state of rage. If you're an adult and you want to destroy your life because you want to be an alcoholic, then go do it.

Don't mess with kids. I hate that people do this. Okay, so now we get into the next part it's really an illustration of just how dire their circumstances were and that just that's like the behavior his father makes it even worse so michael brings up to his mom it's like when i visited uh jim's house in in california like he's not a nostalgic guy, but he had like a tuba. Why is this tuba here? And so he says, I turned to Hazel and I mentioned that she also remembered the tuba. The instrument was propped up in the corner of Clark's guest bedroom and had struck me as odd. It was the only artifact of his past that he thought was worthy of display. And it says the tuba had come as a surprise to Hazel as well. One day Jim came home from school with it, she said. So why did he select a tuba, right?

Hazel supported a family of four on $225 a month that she took home from the hospital where she worked as a doctor's assistant. After she had paid the bills, she had $5 a month to spend on groceries clark was obviously well aware of their situation from an early age and this part kills me but you really he's you understand his insane amount of drive he has a part where i'm going to get to it's probably the most powerful paragraph in the book he's 38 years old he is drinking he feels he's a self-described loser. He's a college professor. So I don't think many people on the outside would describe him as a loser, but he just snaps and he just has this maniacal drive to accomplish something. It's I'll get to it. It's one of my favorite parts of any book that I've ever read. But you go back and you think about

it's like you have five dollars a month to spend on groceries. You're embarrassed by your family's poverty. Due to complete bad luck, your father, you're the son, your father's a loser. And it says he had chosen to play the tuba because the tuba was the one instrument supplied to the pupil by the school free of charge. If you wanted to play a flute, a trumpet, a trombone, you had to buy your own instrument. He had to play the tuba because that's the only one that was free. Not long after he'd come home in tears from what he turned from what turned out to be the final meeting with his father, right? That happened when he's 16, Clark quit playing the tuba. Soon after, he was expelled from school and left town. He would turn up every now and again, and one time, not long after he'd left, he came home talking about nothing but computers. No one in plain view had even seen

a computer except in the movies, said his mom. Another time, he came home with financial ambition. When Jim came home from the Navy, his mom said he told his uncle that someday he was going to make $50,000 a year. His sister hooted and clapped. He's done a bit better than that. His mother continued. I remember him telling me when he came back from the Navy, mama, I'm going to show Plainview. And this is just one of the things that makes this story so fascinating. How do you go from high school dropout, being expelled from school, which I'm going to get into right now, to being the first person in history to found three separate billion dollar companies?

So I'm going to go to this conversation that Michael Lewis and Jim Clark are having at his house about his early life. And so it says, from the local public high school. The offense that got Clark tossed out of school was for telling the English teacher to go to hell. Before that, he had exploded a small bomb on a school bus, smuggled a skunk inside a horn case into the school dance, and set off a string of firecrackers inside another student's locker. So Michael's trying to piece all this together. He pulls something out of the box that he's going through. He says the next clue was a photograph of Clark in 1970, having just received his master's degree in physics on his way to a PhD program. And this is just a fantastic, this is great writing. And it really makes the story really, really curious, right? In under eight years, this person who was considered unfit to graduate from public high school in Plainview, Texas,

had earned himself a PhD in computer science. So how does this happen? The story was more remarkable than that. His father abandoned the family. His mother should have taken welfare, but it never occurred to her. When I asked him about the article in 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. So once he gets kicked out of school, his only option, he's like, okay, I'll just go to the Navy. At the age of 17, Clark asked his mother to sign a piece of paper that permitted him to join the Navy. And this is a hilarious story of the first time Jim Clark ever heard of a computer. When he gets into the Navy, he's going through like the, all these tests they make you take. And it says he had never seen a multiple choice test before, and he didn't know how to take one. To most of the questions, several different answers struck him at least partially correct. Instead of picking the 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. Thus, this is, this is an example of why Michael Lewis is such a great writer. Thus, the first time Jim Clark had ever heard of computers was when he was accused of trying to fool one into thinking he was smarter than he was. So then he has to take a math test, and this is where he realizes, oh, I'm actually gifted in math. I didn't even know that. 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. And what the instructor does here changes his life. The instructor 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 of 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. And this is the first time they mentioned what I feel is a main theme if you read the book and I highly recommend you do because not only is Jim Clark an interesting character but it is a period piece of what was it like to be in Silicon Valley in the late 90s and early 2000s. And the main theme is success as a form of revenge. He learned that his desire for revenge could lead to success. He was propelled in the classroom by his anger about the humiliation that he had suffered. Thus, success for him became a form of revenge.

So he's accomplished a ton in eight years, but he's still a turbulent personality. When I think of Jim Clark, I think of what the founder of Patagonia said, Yvon Chouinard. He says, if you want to understand the entrepreneur, study the juvenile delinquent. The delinquent is saying with his actions, this sucks. I'm going to do my own thing. Jim had a turbulent early career. Between 1970 and 1978. He had been married at least twice, moved back and forth across the country at least three times, and held at least

four different jobs. He was fired for insubordination, at which point a wife, and not his first, left him. He tried to explain this extraordinary leap in his career from 38-year-old unsuccessful college professor to founder of a multi-billion dollar corporation. And this is the most powerful paragraph in the entire book. 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. And you descend into 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. The result of this self-imposed psychology surprised even Clark. He insists that the transformation occurred overnight and that he cannot really explain it. Okay, so let's go into Jim's philosophy. This is going to remind you, I just did this two-part series on Vannevar Bush. If you haven't listened to those episodes, they're extremely important to

listen to. Jim's, I don't know if they're the exact same, but Jim's whole thing or Vannevar's whole thing is like, hey, engineers are the engine of capitalism and they should be rewarded as such. Jim would agree with that statement. We're going to get into this idea. It's like a variation of this thing called new growth theory. But the way Michael tells the story is absolutely fantastic. He says, I couldn't have been more than a few hours after the last guest stumbled out of his front gate that Clark called me and made this suggestion. I'm going up in the helicopter, he said.

Do you want to come? His voice was deep and thick and unsteady. Apparently, he hadn't slept. It was just before eight in the morning on the 5th of July. He had spent the last three hours writing code and the seven hours before that drinking with 70 of his favorite engineers who worked for the companies he created and then more or less abandoned. And then before they get into this discussion of new growth theory, they go into just what a crazy economic time this was. And here's an example of that. He says he didn't need to show how much money he had. The number was in the newspaper every day. It was public knowledge that Jim Clark owned 16 million shares in Netscape and that Netscape at

this at the time they're meeting on July 5th, 1998, was trading at $25 a share. That was $400 million. And that was $650 million less than Clark had been worth two years ago. And for that matter, $3 billion less than he would be worth nine months from now. The number was always changing. So think about $400 million on this specific day. Two years earlier, it had been a billion, nine months from where we are in the story, he's going to be worth $3 billion.

So then they start talking about this book that came out in 1929, written by this guy named Veblen, is his last name, it's called The Engineers and the Price System. And this is what I mean about why I think Jim Clark and Bush and Vannevar Bush have similar thoughts, like similar philosophies on this. So it says back in 1929 or 1921, this author 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, that they would inevitably use their superior knowledge to seize power from the financiers and the captains of industry. Jim was particularly keen on the idea of the engineer grabbing power from the financier. That is happening right now, he said, right here in the valley. The power is shifting to the engineers who create the companies. Clark thought that was as it

should be. Engineers are the ones that created the wealth. That's a theory from the 1920s they're discussing. Then they're talking about this theory that came about from an economist in the 1980s. This is New Growth Theory. New Growth Theory argued that wealth came from the human imagination. Wealth was having entirely new things. Growth is just another word for change. The metaphor that Romer, this is the guy that wrote New Growth Theory,

the metaphor that Romer used was that of a well-stocked kitchen waiting for a brilliant chef to exploit it. So I'm going to read this entire paragraph to you. Just keep in mind, I'll tell you what Lewis is doing here. He's essentially saying, hey, the chefs that create wealth, Jim Clark is one of those. So it says, the metaphor that Romer used was that of a well-stocked kitchen waiting for a brilliant chef to exploit it. Everyone in the kitchen starts with more or less the same ingredients, 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 new 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. The reason I'm reading this to you, I know it's a little bit long, is because this is, he's telling us how Jim thinks about these things. I think that's really important. It followed from the theory that any society that wanted to become richer would encourage the traits, however bizarre, that led people to create new recipes. A certain tolerance for non-conformism is really critical to the process.

The prime mover of wealth was the geek holed up in his basement all weekend discovering new things to do with his computer. He was Jim Clark. And then it goes into a little bit about the history of Silicon Valley, which is really interesting. I've done, you know, dozens of podcasts on that. But what was fascinating is how the point that the author's making here is that Jim was one of the very few people that jumped from part one of Silicon Valley history into part two. And so it says, unlike just about everyone else's age, 54 at the time this book is being written, 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. Part two

of the Silicon Valley story was when 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. So Silicon Graphics made actual physical hardware. Their first product was 3D graphic computer workstations. Jim's new company, the one he's working on at this point in the story, his co-founder is actually Mark Andreessen, is software. It's Netscape. And so that's the point that Michael Lewis is making here. It's like, hey, part two, it's the engineers 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 notion of what this

this is so important because it was true back then is even more true today and i double underline this one sentence the notion of what constituted useful work had broadened one of my favorite lines i think about over and over again it comes from the almanac of Naval Ravikant, that book that I covered back on episode 191. And Naval says, the internet has massively broadened the possible space of careers, and most people haven't figured this out yet. That is a book that came out and a statement that was said, you know, in the last few years, this book that I'm holding in my hand is over 20 years old. It says 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 hope would turn the economy on its ear. The role model for this activity was Jim Clark.

And then the book goes into how Jim actually approaches his work in his life. And so it made me think of this fantastic quote that says a master in the art of living draws no sharp distinction between his work and his play, his labor and his leisure, his mind and his body, his education and his recreation. He hardly knows which is which. He simply pursues his vision of excellence through whatever he's doing and leaves others to determine whether he is working or playing. To himself, he always appears to be doing both. That's a fantastic quote. And it says, he left himself open to accident if nothing surprising or interesting was happening to him he moved on until the situation corrected itself this was as true for his work as his leisure indeed it was hard to say whether the work where the

work stopped and the leisure began they formed a seamless disturbing pattern of motion and change impatience might be a social vice, but to Clark, it was a commercial virtue. That's fantastic writing again. Impatience might be a social vice, but to Clark, it was a commercial virtue. Why? He said, if everyone was patient, there'd be no new companies. And they describe this process in which Clark gets his ideas multiple times throughout the book as groping. Clark never used the words and phrases that we have come to expect from the technology types who pretend to see the future. 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, and that's why he had to grope for it. He would be seized by some overwhelming enthusiasm, and he would be off and running down some long, dark tunnel leading God knew where. With him, enthusiasm was a physical event. So I want to skip ahead to this idea where he snaps. He's 30 years old. He's like, I've got to accomplish something.

We already know he's very gifted with computers, very gifted at math. There's a line in the book. I don't know if it's true or not, but they said Jim invented 3D. He definitely invented this thing called a geometry engine. And what this did, it allowed computers to process three dimensional graphics. He said this was just obvious because he says Jim's logic was that the world was three dimensional and so the computer world would have to be too. So Clark's bid for power and money began at Silicon Graphics, the company he founded with several of his Stanford graduate students. And at the very beginning, no one thought it was valuable. A lot of people who should have seen the

importance of Clark's geometry engine thought it was a useless toy. So they go and try to sell it to people, to like large corporations, to people that are designing cars or airplanes. And it was funny that I'm skipping over a bunch of that part. I just want to point out who were the first people to get it. I've done podcasts on both of these people. George Lucas, founders number 35 and Steven Spielberg, founders number 209. The Hollywood people were shrewder about the possibilities. And it wasn't long before Steven Spielberg and George Lucas were banging on Clark's door and asking to be his first customers. The Silicon Graphics workstation made possible a lot of new special effects.

And so everything that's happening is happening before the conversation that Michael Lewis and Jim Clark are having about, hey, engineers are creating the wealth. They should be the ones that make all the money. And the reason for that is Silicon Graphics, a lot of people say, and I'm about to read this paragraph, that, hey, they had a large collection of talent. They also had the smallest number of millionaires created from a public company because all the money went to the financiers. And that's why that's a main theme of the book. Jim is constantly trying to find ways to eliminate anybody that's not doing the actual work. Before long, Jim Clark's new company exerted a gravitational force on the technical mind.

When you ask people who dealt with Silicon Graphics or who work for Silicon Graphics or who brought who are purchased machines for Silicon Graphics or who simply observe Silicon Graphics from afar, they all say the same thing about it. It was the smartest groups of group of engineers I've ever seen in one place. And so then it goes into how he saw these, the fact that he was giving up equity, that he was creating the fewest millionaires, that he saw these as all problems that he would fix with future companies. And so this is, everything I'm reading to, this is spread out over multiple pages. This is a main theme of the book, the fact that Clark thought there was this deep injustice and that engineers should be the ones that get rich. So it says Clark had invented the technology,

but his career on it, and he had been right. He had attracted the most talented engineers, and they in turn created the most talented computers. But as a group, Clark began to complain they had precious little to show for it. The lion's share of the equity and the power had been taken by others, financiers and managers who owned huge chunks of Silicon Graphics. It did not take long for Clark to become deeply irritated by the rules of American capitalism. In his opinion, the game was rigged so that the people who really mattered got the shaft. He believed in his bones that the people who mattered were the brilliant engineers, the chefs who cooked up the new recipes.

And so before this, Clark had no experience starting a company, and he felt one of the venture capitalists took advantage of his inexperience. He wound up selling 40% of Silicon Graphics for $800,000 to this guy named Glenn Mueller. So Mueller was running this thing called the Mayfield Fund. They wind up, it says the Mayfield Fund wind up, ended up making $400 million on its investment in Silicon Graphics. And so it says Clark had trusted him, meaning Mueller. He would never do that again with venture capitalists and he never forgave Mueller for exploiting his ignorance. There is a crazy story that happens later in the book where Clark and Mueller on the phone, Mueller wants to invest in Clark's new

company. Clark obviously tells him to go to hell and Mueller shoots himself in the head. So the book goes into all kinds of detail about the conflict within this organization. Jim is a misfit, a troublemaker. He is not, they call him the disorganization man, meaning he's not going to act like business, like what people at the time thought businessmen should act like. So there's this huge fight between Clark and the rest of the board. They're like, we're going to bring in a professional CEO. They bring in this guy named McCracken. And I'll get into the environment that McCracken creates in which Jim cannot and will not participate in. So he winds up just leaving the company. And his solution every time or almost every time is, all right, the solution is we need to start another company. But before I get there,

I just want to point out what was the company like before professional, quote unquote, quote unquote, professional management came in. And it's this quote that came that I read one time about Steve Jobs. And it says he remade or he made and remade Apple in his own image. Apple is Steve Jobs with 10,000 lives. This is something that appears over and over again. The leader, the founder of the company, the leader of the company, they imbibe, they put into the company, the personality. It says one way of viewing Silicon graphics in the mid 1980s is if an extraordinary willful human being with great technical aptitude is permitted to create a large business organization,

how will that organization behave? By 1984, everyone understood that it would behave like Jim Clark, which is to say that it would behave as no big successful American company had ever behaved. It would be a loose collection of argumentative, brilliant, bullheaded engineers who might or might not make money, but almost certainly would build something wonderful. I want to read that part one more time because I think this is very interesting. It's a collection of loose argument, argumentative, brilliant, bullheaded engineers who might or might not make money, but most certainly would build something wonderful. And so from the board of directors to people that own the equity in the company, you can see their perspective.

They're like, hey, we got great technology. We're not making any money. We're going to keep the great technology. We don't necessarily have to improve the great technology. We're going to put this layer of people that actually know how to run a business. And the result is they wind up making a lot of money for a short amount of time until they get disrupted. But the point of this is like you see both sides. If you're the founder, you're not going to want to work in this environment.

You made a drastic mistake in the sense that you gave up way too much equity and you gave up way too much control. And then you're surprised that people with the money and the equity and the control get to tell you what to do. This is why you and I, I feel, talk about this a lot, where I really do believe that a lot of people think entrepreneurs are in it for the money. And I think if you ask them, the control, the independence and the control is worth a lot more than the money and the kind of usually ego that are associated with founders and entrepreneurs, they're probably think, hey, if I have independence and the control, I'll get the money anyways. So it says McCracken brought in layer upon layer of people more like him, indirect, managerial, diplomatic, politically minded.

These people could never build the machines of the future, but they could sell the machines of the present. That is a great line. So Jim and his crew, they're building the machines of the future. These quote unquote professional managers can sell the machines of the present. And they did this very well for the next six years. Silicon Graphics was perhaps the most successful company in Silicon Valley. The annual revenue swelled from a few million to billions. At the same time, McCracken dealt Clark out of his own business. And so this is when Jim is looking for

something new. He realizes, hey, we have these expensive workstations. They're fantastic, but there's this parallel revolution happening in personal computing. And I think the important point here is not to give you like a history of Silicon Graphics, but what's behind Jim's idea? Because that could be applicable and useful today. And so he knew he's like he might not be calling it in the innovators dilemma, but he knew that it happens. And so he has the idea and the willingness to avoid the innovator's dilemma. And so it says, Moore's law came with a social corollary. High tech could not remain high tech for long.

Right now, they are high tech. That's why. And they're making the transition, right, to the personal computing revolution. You might be the smartest engineer in the valley, and you might have built the most sophisticated computer, but it was only a matter of time before some schlep with a pc wrote a program that let him do everything you could do at a fraction of the cost and so then he gets into this idea of like how do we avoid being disrupted clark thought that silicon 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 somebody else would it is the hardest thing to do in business, Jim would say. Even creating a low-cost product runs against the grain because low-cost products undercut the high-cost, most profitable products. He's just describing human nature, right? This is why this occurs over and over again, or one of the reasons it occurs over and over again. Everyone in a successful company from the CEO on down has a stake in whatever the company is currently selling. He's describing what's taking place in his career, right? 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 silicon graphics to operate in the same self-corrosive spirit and you can imagine what happens if you try to go and you look at it from mccracken the guy running the company right it's like i'm not going to listen to jim like you guys had made this great invention but you weren't making any money i come in here i take you from millions to billions and now you're telling me i have to undercut all these profits that i'm making because of these cheaper, inexpensive computers. So McCracken obviously doesn't agree. Jim winds up just essentially like retiring on the job, which I'm going to get to right now. But there

is I don't think I have the highlight, but I remember reading it. They go over the revenue. So sure. Yeah, he jumps in, brings it up, but then it gets to a peak and then it just drops off just like Jim said it was going to. so what I found interesting was that the fact that Jim wasn't happy with his company caused him to search for a distraction this happened in the life of Walt Disney in between the problems with his animation studio and him finding a new outlet for his creative output which is winds up being Disneyland and his obsession with amusement parks. He would stay at home and he built like this giant train that he would actually get on and ride. And it was in his backyard. And people would come over and they're like, this is the world's greatest innovator in animation.

And I can't get him to come to the studio. All he wants to do is play with a train all day long. Jim's doing the same thing with toy helicopters. In the middle of a weekday, when the neighbors were all at work, Jim would take out his helicopter kit and fly. Soon enough, Clark had become obsessed with his little choppers. He would put them together in the garage, then take them out and fly them around the neighborhood. His wife would come out of the garage and see this 47-year-old man bent over the ground, piecing together a toy

designed for a small boy he would stand out there for hours in the middle of the day in the middle of the week executing takeoffs and landings of these giant toy helicopters so eventually he makes his departure from silicon graphics formal this is again i just think there's like a handful of themes throughout this entire book that are just you see it in different points of his life. And it's this idea that he really does use revenge as motivation, which I think he's not alone in, by the way. But he's going to say, okay, my solution is I'm going to make myself very rich. I'm going to get out of this company. I'm going to start a new company. I'm not going to make the same mistakes I did with the last company. So it says Jim Clark was gone. He'd up and left the company he created and said he was going to

start another. Publicly, he said he was leaving on the best terms. Privately, he told friends that he was going to show fucking Ed McCracken, that it was he and not McCracken who had been responsible for the success of Silicon Graphics. He told the engineers who had helped him create Silicon Graphics that he was going to get rich. I'm going to make $100 million, he said. If I do this next thing and I do not make $100 million, it'll be a failure. I will be a failure. So as he's searching what to do, he's introduced to a 22-year-old Mark Andreessen. And something that Mark tells Jim makes Jim realize, okay, this is the opportunity I was looking for. Mark had mentioned again that 25 million people were now using the Internet

and that their numbers had been doubling every year, 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. All of a sudden, it was clear to me. When I looked at the Internet, I was looking at the personal computer in 1985, Clark says. It was a slow, clunky technology, but people were using it, and it would get faster. I realized that this was the thing I had been groping, there's that word

again, I had been groping for. And so this is the beginning of Netscape. This is also the beginning of this crazy economic time in American history. Again, Jim's a fascinating character. There's two reasons to pick up this book to get to know Jim I think he's just going to change the way it just he's got his own very unique way of doing life let's just put it that way and then also for this it is like a time piece it's like what was happening in this in this one sector of the economy at this point in American history and it's just fascinating. And one of the fascinating things is that Netscape goes, I think it's 18 months after it was created. It becomes public.

I need to get there first. This is what I mentioned earlier, how great this story is just so wild. So it says throughout March, 1994, Mueller had called Clark repeatedly and pleaded with him to be let in on Netscape. He apologized for the way he had treated Clark at Silicon Graphics. Obviously, Clark is not going to let him do this. On April 1st, Clark told Mueller for the last time that he would not be permitted to invest in Netscape. He pleaded with Clark one last time and Clark rebuffed him. Three days later, the day Netscape was incorporated, Mueller picked up a gun and shot himself through the head. And before the book goes into Netscape going public in record time, this is just fantastic writing. The genealogy chart of Silicon Valley companies that decorated the walls of every office was a cheery face on a violent truth.

The new companies often put the old ones out of business. The young were forever eating the old. In this drama, technology played a very clear role. It was the murder weapon. There's a famous quote from Don Valentine, who's the founder of Sequoia, and he says, the art of storytelling is critically important. Most of the entrepreneurs who come to us cannot tell a story. Learning to tell a story is critically important because that's how the money works. The money flows as a function of the stories. I feel Jim was a fantastic storyteller. Six months after he found a Netscape,

Clark agitated for the company to go public. Jim was pressing for us to go public way before anyone else, recalls Mark Andreessen. 18 months after Netscape was created, Netscape sold shares of itself to the public. Those shares rose from $12 apiece on the first day of trading. Those shares rose from $12 apiece on the first day of trading.

Those shares rose from $12 apiece to $48. Three months later, it was $140 a share. There was only one explanation for its success. This is how I'm trying to tie all this together. This is what Clark said. People started drinking my Kool-Aid. Another way to think about that is what Steve Jobs said. The storyteller is the most powerful person in the world. This is the difference. This time, Jim Clark had the power and he kept the power. And you see that in who got rich off this IPO. Anyone who bothered to read the prospectus discovered a curious fact. The venture capitalists and the new CEO, this guy named Jim Barksdale, own a few million shares each. In the end, they made hundreds of millions of dollars from Netscape, and they had no reason to complain. But the young engineers whom Clark had pulled together to create

the company also became rich. Clark made certain that Mark Andreessen did not suffer the same fate at the hands of the venture capitalists as he himself had 12 years before. After the IPO, Andreessen was 24 and worth $80 million. Clark also made sure that by far the biggest stake in the company belonged to himself. Clark became the Valley's newest billionaire. Jim Clark was 51 years old. So I want to pause there because as I'm reading this, it made me think. I read Mark and Dreesen used to be a prolific blogger. You can go to his site for free or if you just go to the show notes on episode 50, you can download a 200 page blog archive of Mark's great, some of his best posts. I did a podcast on that years ago.

I have no idea. You can never predict like how people react to things. I get messages every week about people discovering that podcast now and listening to it and seem to really like it. It makes me think I should reread it and do another podcast on it. But something that Mark said in that blog post was it was talking about, like, it's obviously positioning for founders. And he's like, listen, recruiting is one of the most important things you have to do to ensure the success of your company. But it's also one of the most difficult. And he talks about even Jim Clark had a problem with this because once Netscape goes public, there is other engineers that that were offered the job by Jim Clark, but said no. And they wind up taking they're in the book as well. They wind up taking more risks later on after this happened because they're like, hey, we were the A team.

We all said, no, Jim built this company with a B team. We are making $80,000 a year. These guys are making millions. How did this happen? And, you know, who knows who's A or B? Like, these are just personal opinions. But the point being, why I'm telling you this is because you tie this back to just how difficult it is to recruit truly great talent. And so Mark is writing in his blog, and he says, As a founder of a startup trying to hire a team, you'll run into this again and again. When Jim Clark decided to start a new company in 1994,

I was one of about a dozen people at various Silicon Valley companies he was talking to about joining him in what became Netscape. I was the only one who went all the way to saying yes. So think about that. He's talking to at least a dozen people. He's recruiting. I'm the only one. One out of 12. 11 people said, no, no, no, I'm not going to do this, right? So it says, I was the only one who went all the way to saying yes, largely because I was 22 and had no reason not to do it.

The rest flinched and didn't do it. And this was Jim Clark, a legend in the industry who was coming off of the most successful company in Silicon Valley, Silicon Graphics Incorporated. How easy do you think it's going to be for you? So I'm skipping way ahead. If you buy the book and read the book, I would say like maybe 30, 40% of the book is this idea, probably 30% of the book is this transatlantic sailing expedition that Michael Lewis and Jim Clark are on together. Main part of the book is this transatlantic sailing expedition that michael lewis and jim clark are on together main part of the book is the fact that jim did a lot some of the some of the stuff he did

was to get public fast so he could buy this giant sailboat and then he wants to make it's like one of the world's largest sailboats but also he wanted to make it like completely automated and computerized and so michael's on this crazy trip across the Atlantic with them, which is interesting, but a lot of that's omitted because it's kind of outside the scope of discussions that you and I usually have, right? But I just want to point in, or put in rather, just as, again, it goes back to the same theme that there is really no distinction between work and play for Jim Clark. And then he figured, okay, what's the role that I want to play and maybe make sure I design my environment. So I'm always playing that role. To the casual observer,

no casual observer could say when Clark was working, when he was playing. This was because to Clark's way of thinking, the big distinction wasn't between work and play, but between creating new technology for money and creating new technology for pleasure. In part, it was because there was no distinction at all. So he's going to leave Netscape. Now he's going to go found his third billion dollar technology company, but it's really about the role and making sure you're designing the job that you want. What's the point of being an entrepreneur if you don't do that? Now he's finished with Netscape, having learned from Silicon Graphics that he did not really belong inside a large organization. He designed all

future large organizations without a place for himself inside of it. He kept the title of chairman and sat on the board and held on to most of his shares. But really, he didn't do much but attend a few meetings and trouble the company's new chief executive with his various premonitions about what was going to happen next. So after Netscape, he has this idea where he's going to work in there. He's going to use the internet to revolutionize, use the internet software, I should say, to revolutionize the healthcare industry. He's going to start this company called Healthion. I think at one point in the public market, it's crazy. There's a story in the book where they try to take it to IPO. No one wants to do it. Five months later, it comes out an insane number. And I think

goes all the way up to like 15 or $16 billion in market cap and had i think nothing but losses and that's another reason i think the book is interesting to read because you have all these economic data points that just seem unusual i guess is the way to put that this is one example of this because because so many people jim clark being one of them just make an unbelievable amount of money in a rapid time. This is an example of that. Before Netscape went public, a lot of venture capitalists had thought that John Doerr and his firm Kleiner Perkins had been mad to agree to Clark's terms. Clark had charged him three times the going rate for startup capital.

And in the end, that didn't make a difference at all. John had cleared $500 million in 18 months, or 30 times his original investment. So on this next company, one of the co-founders, I think he's a co-founder, I'm pretty sure he's a co-founder of Healthion, is this engineer named Pavan. He makes, or Pavan maybe, he makes the point, I'm just going to read what he said, because what's fascinating is if you read about Steve Jobs, he says this at the beginning of his career, the middle of his career, and the end of the career. And he talks about the fact that they're in the technology industry. And I think there's a lot of other things like this, I would argue, maybe literature, like authors are definitely like this movies, I would argue that podcasts are the same thing. But that for most things in life,

the range between this is Steve talking for the most things in life, the range between the best and the average is 30% or so. The best airplane flight, the best meal, they may be 30% better than your average one. What I saw with Wozniak was somebody who was 50 times better than the average engineer. In fact, yesterday, let me pull it up. I was rereading my highlights from that book in the Company of Giants. It's Founders Episode 208. If you haven't listened to it yet, I highly recommend you listen to it after this one.

And there's something in this book that I thought was interesting because that book is it's published in 1997. It's two Stanford MBA students who are interviewing 16 technology company founders, Bill Gates, Steve jobs, all these people on there. And Steve says something in that book that is very similar again to what the other quote I just read to you and what I'm about to read to you in this book. And he says, you must find extraordinary people. In the field that I was interested in, I noticed that this Steve talking, I noticed the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to one. Given that you are well advised to go after the cream of the cream.

That is what we have done. You can then build a team that pursues A-plus players. And he says, why? Why is this important? One of the greatest quotes he ever said, a small team of A-plus players can run circles around a giant team of B and C players. And so Jim's co-founder says the same thing. Pavin, or maybe Pavin, often said the difference between a great software guy and an okay software guy is huge. A great software guy is worth 10 times an okay software guy. Software was not like hardware. Software was more like art. And so this is what I was referencing earlier. There you have this huge, like there's a huge, obviously,

bubble, right before it pops, there's some, there's like a pause that happens. And so this is where they try, they're like, hey, we had, we took Netscape from zero to 18, to a public company in 18 months. Let's try to do the same thing with Healthion. The market says, no, no, no, no, chill out. Five months later, it's a very successful IPO. But in between those two events, Jim did something extraordinary where he's like, OK, the IPO is canceled. The company needs 40 million dollars to keep going. And so he has this idea where you he has this metaphor of pigs and chickens, which I'm going to describe to you in a minute. And so because at this point, no one wants to put up the money. He's like, OK, fine, I'll take i'm gonna get do the entire 40 million myself get out of the way and then when he does that all of a sudden they're like oh wait what does he know that we don't okay we're gonna get in on it so he says the only thing i could do is

stardom his role in the valley was suddenly clear he was the author of the story he was the man with the nerve to invent the tale in which all the characters uh agreed to play the role assigned to them and if he was going to retain his privilege of telling stories, he had to make sure that the stories had happy endings. If that meant supplying $40 million more to Healthion, then so be it. Clark's willingness to take risks others shunned was the source of his financial power. Clark's faith in his new enterprise was actually faith in his own imagination, as the new enterprise was merely an extension of that imagination.

The power of that faith was transforming. One moment the financiers were wondering aloud where the $40 million was going to come from. The next moment they were trying to prevent Clark from supplying the full amount and acquiring for himself an even larger stake in the company. In the end, the bankers and the venture capitalists agreed to let Clark give 20 of the 40 million dollars and they supplied the rest. And so what he did is he turned chickens into pigs. And this is what he said. Clark, this is one of my favorite things. I remember this from four and a half years ago when I read the book the first time. 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. The pig gave his life. Chicken just laid an egg, right? The chicken is interested. The pig is committed. If you're going to do anything worth doing, right? The chicken is interested. The pig is committed. If you're going to do anything worth doing, you need a lot of pigs. Just one more example of the crazy swings in wealth that was occurring at this time.

Clark reached for a calculator. AOL, American Online, had agreed to acquire Netscape. AOL had agreed to swap 0.45 of its own shares for each outstanding share of Netscape. Clark owned 14.2 million shares of Netscape. He punched 0.45 times 14.2 million into the calculator, which means that he owned 6.3 million AOL shares. He multiplied 6.3 million by $174.50. $1.1 billion dollars was the result they find this out the day they come back from that transatlantic ship expedition they were doing in our 10 days at sea the value of his holdings had nearly tripled and his response here was fantastic this is fantasy land he said putting his calculator away. And just two paragraphs for you real quick.

Again, this idea that the internet has massively broadened the possible space of careers, and most people haven't figured this out yet, and the fact that there's always new opportunities. The internet created many opportunities for people like Clark, outsiders, troublemakers, to think thoughts that would turn entire industries on their heads. And this is the part about there always being new opportunities. Once we admit that there is room for newness, that there are vastly more conceivable possibilities than realized outcomes. That's fantastic. More possibilities than realized outcomes. Vastly more conceivable possibilities than realized outcomes. We must confront the fact that there is no special logic behind the world we inhabit, no particular justification for why things are the way they are.

And I want to close on this. I'm going to read my note first. Let's get this idea deep into our mind. It will never be enough. And this is what I mean by that. One evening as we sat in his kitchen I reminded Clark that he had 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. I pointed out that he had never before mentioned this ambition. I don't know why, he said, but once I have more money than Larry Ellison I'll be satisfied. So then I asked him, what happens after you have more than Larry Ellison? Would you want to have more money than, say, Bill Gates?

Oh no, Clark said, that'll never happen. A few minutes later, 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 and then I'll be satisfied. Back further, before he started Netscape, he had told Mark Grossman, one of the young engineers

who had helped him create Silicon Graphics, something similar. Jim came into my office just before he left to start Netscape and said, I'd really like to have $100 million. Back even further, before he started Silicon Graphics, he 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 the conditions for their own dissatisfaction? Clark played these little tricks on himself so that he would have an excuse 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. 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. And that is where I'll leave it for the full story. Highly recommend

buying the book. It's a fantastic read. If you buy the book using the link that's in the show notes in the podcast player, you'll be supporting the podcast at the same time. If you want to use the same app that I use to store and remind myself of past highlights, I use this app called ReadWise. ReadWise has been reminding and recommending highlights from this book for me for years. You could try it for free for 60 days. It's readwise.io forward slash founders. That is 274 books down, 1,000 to go.

And I'll talk to you again soon.