Odd Lots - This Is What It Was Actually Like To Live Through The Tech Bubble

Episode Date: January 8, 2018

We talk a lot about bubbles on this podcast. Often we talk about them from the perspective of a trader or speculator. But what about the people whose lives get caught up directly in the craziness? On this week's episode of the Odd Lots podcast, we speak to Bloomberg's own Dash Bennett, who worked for an internet company right during the peak of the mania in early 2000. Dash describes the incredible signs of excesses that he saw at the beginning and the bleak way it all ended when everyone lost their jobs and had all their perks taken away.See omnystudio.com/listener for privacy information.

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Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg Television, Radio, and wherever you get your podcasts. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal. And I'm Tracy Allaway. Tracy, it's great to have you back. Thank you. Thank you.

I've come back refreshed and reinvigorated for another year of Oddlott's podcast. I am extremely excited about another year of doing the show with you. I was very sad to not have you for the last two episodes. So, yeah, I'm very excited that we're back at it in the new year. Oh, thank you. You know, the flip side of not doing the Oblots podcast with you is that I get to listen to them on my own time, which is something I don't do when I record them with you, obviously. Good point.

So that'll be my excuse when I take off a few weeks at some point. I'll just say, oh, it's because I really just wanted to give them a fresh listen and not hear them biased by my own participation. I'm sure that will be the case. So, you know, obviously we talk a lot about bubble. on the show last year, we had a whole series about various bubbles throughout history. And then we had a bunch of episodes, I think, about bubbles that weren't even part of the series. I'm sure we'll have many more, which is one of our recurring themes for obvious reasons.

Yeah, bubbles remain, I think, personally, probably the most interesting phenomenon that we observe in markets, because there's all this collective behavior and sort of psychology involved in every single one. Right. I think it's like when psychology takes hold to such a dominant degree and the underlying reality of what's going on seems to exert just such a minimum force in the underlying market. I think that's a good way of describing it. The other interesting thing about it is, of course, you never know when a bubble is going to pop, right? Because a bubble that doesn't pop is also known as a really good bull market, right? It's one of these things where we only can definitively say something it's a bubble in the aftermath. Yes, all bubbles are retrospective in nature. Well put. So, you know, the thing is we talk a lot about these from a sort of like, you know, market perspective.

Like what are the signs that something is in a bubble and what are price movements that suggest something is in a bubble? And, you know, that is certainly one way to examine it. But what we haven't done as much is talk about like what it's like to actually. live your life through a bubble, the perspective of a person who is just sort of right in the middle of it, someone right on the inside as opposed to a speculator. Right. I really like this idea because it gets, again, to that behavioral aspect of bubbles. How do people actually behave and live when they are going through this kind of episode? So today, I'm very excited, we're going to be talking with our colleague Dash Bennett. He works with us.

He was Bloomberg. He's an editor. He does social media for us. He does a bunch of other stuff. We've both worked with him for many years. And what's interesting and why I'm excited about talking to Dash is that he lived through the dot-com bubble. So all this stuff that we talk about, people are trading it and the stocks. He was actually working for one of these companies whose stock went completely insane and then totally imploded. Right. And the way this podcast is coming about is we were having a sort of casual. conversation on our internal messaging system. And Dash started saying some really interesting and slightly outrageous things about what his whole experience was like. And we thought we need to dig into the details of this, right? Exactly. So without further ado, Dash Bennett, thank you very much for joining us. Oh, thank you. Good to be here. So let's get started with your history. Tell us where you were in 1999. So we already said that up. You were working for one of the companies that was sort of most emblematic of the dot-com era.

What was the company? How did you join them? And what were you doing for them? Yeah, it's kind of became a legendary story of the dot-com bubble bursting. So at the end of 1999, beginning of 2000, I was actually living in New York. And I had not been out of college long. I was like trying to become a writer and it wasn't going very well. And then a friend of mine from high school who was, he went to the same high school as me, but he was a few years older,

emailed me out of the blue and said, hey, we're looking for writers. I worked for this company Excited Home, which I had never heard of. I sort of knew what Excite was because that was the big web portal, like a big rival to Yahoo. Right, it was like a second tier Yahoo.

Yeah. So about a year earlier, at the beginning of 99, it merged with At Home, which was a broadband ISP, basically, and where they sold internet connections through cable companies, and they had separate deals

with the cable companies. Now it's all run by the cable companies. Back then, at home was its own thing. So they merged, and that was a huge thing at the beginning of 99. And their stock went through the roof. So they had all this money. And so they started creating content teams to create web content for their portal that would be exclusive to at home. And so my friend had been working there for a few months, and he was like, I'm writing about sports.

I know you know about sports. We need people. Why don't you come out here? So since I was looking for work, so they flew me out there and put me up for two weeks as a test, as like an interview, which was crazy. So that's already crazy, the fact that they flew out there and put you over two weeks for an interview. Yeah, me, a person who had at that time had no bylines, had no experience as a paid professional writer. So, yeah, they flew me out there.

They gave me like a two-week tryout, basically, hired me as a contractor. It went really well. So then they hired me full-time. So again, this just give you more sense of like how much money is flying around. First of all, they were paying me a salary that I never thought I would make at that stage in my life. But then they flew me out to their office was in Redwood City, California, which is just south of San Francisco. They put me up for 30 days in temporary housing.

They got me a rental car for 30 days. They hired a broker to help me find an apartment. They paid for all of that. So that was just sort of the first sign that this company has a lot of money and they're spending it very quickly. And the team I was on was growing. They were adding people all the time. There was about, at its peak, it was about 30 people of writers, web designers, artists,

all working to just create this sort of like little mini newsroom inside this technology company. So two things on that. When you heard about this company and you heard about the position, were you thinking at all that this was a sort of risky venture? And was there any sense that you were working for a technology or a dot-com company? Or did you just think this is a sort of run-of-the-mill content provider? No, it very much had the like all the stereotypical traits of like a dot-com phenomenon thing where we had a slide. in our office. One of those like, it went from the second floor down to the first floor. You know, when I showed up at the office,

it was very clear that it had all those like things you always hear about. There was foosball table and ping pong tables and there was free food everywhere. When I first started, there was, you know, they brought in lunch once a week. Every Wednesday we got a free lunch. Everyone on our team got a free lunch. And there were vending machines all over the offices, but they were all free. So all the sodas and snacks. And we had bagels every morning.

And so it didn't feel like a real company. But it also didn't feel like. This was a thing. We were just trying to get as much as we could before it all fell apart. At the time when I started, it was very much like, this is the future of the internet. This is the future of the world. That's my memory of it too. I mean, I wasn't working for any dot com at the time.

I wasn't, I didn't even have a job. But I remember like at the time, it didn't feel like, oh, this is crazy. It's about to end. It felt more like, this is the future. Like everyone believed, like, this is the new economy. We were in a new era of prosperity. businesses of the future are going to have this sort of free wheeling vibe. So in retrospect, you look at the slide and you say, oh, well, that is obvious excess.

But in that moment, it's like, no, the office of the future will be this fun place to play around. Yeah, it was, there were no cubicles. It was very much open off. And a lot of those things you still see today as like the hallmark of a young, exciting company. It's all the same things they were doing 20 years ago. We have an open office here at Bloomberg and we have a great snack bar. And sadly, we do not have a slide from the other. That would be nice.

Right. That's our one area of restraint. But this gets to one of the big lessons that we learned from our bubble series, which is that every bubble comes with a convincing story that you have to believe in. So, Dash, I know you mentioned it already, but could you maybe just expound a little bit on what the story was for excite? Like what exactly the promise was way back in 1999, early 2000s? I've been thinking about a lot knowing I was going to come on here trying to remember back to the days of what was going on there. And what I keep coming back to is that so many of these companies, and ours especially, they were trying to create a model for like how you would provide Internet to people. And that model still exists today.

And it's actually the dominant model. But they were, I don't know if it was because they were too early or, you know, they couldn't expand too much or, you know, or people were expecting too much too soon because of all the hype. but basically at home was a broadband provider. They hooked people, you know, you paid $40 a month, they gave you a modem, they hooked you up to the internet. And they decided that, well, much like AOL where you were in this, when you dialed up to AOL, you were in this, like, their environment in their browser and all that. They were trying to do the same thing, but for broadband, which was still, broadband was still relatively new then. Not a lot of people had. Most people were still dial up cable internet was very expensive.

And most places you simply couldn't get it. That is a good point. It's like in a way they were just way too early because if you think about even the media, what we're seeing in media today where you have an entity like Comcast, this huge infrastructure provider, but also which makes incredible content investments at the same time, it does sound like the excited home model. That's what they were. That was the idea was they bought Excite, which was the port.

Because at the time, that's how people got on the internet was portals. Right. It was AOL, Yahoo. Those were our big competitors. So they were like, we'll buy our own portal. We'll stick them together. Now we have everyone in this contained universe. So they come to our site.

They do all their shopping. They do all their web browsing. We can serve them ads. We can also sell them things. And then we're also on top of that. We're making the $40 to $50 a month that they pay to get on the owner. Real quickly, before I forget to ask, what month did you start? Because, you know, thinking about the timeline of all this.

We know the bubble peaked in March 2000. But when did you start it? I think I started in March 2000. It was either February, March of 2000. And it was right after, yeah. 2000 or 99? 2000. Oh, got it. Oh, so you started right then. Yeah, I was like, right at the peak of the of the bubble. But about a year earlier was when the merger happened. Right. I see. The stock was,

the stock was up somewhere around 100. And there were already starting to be problems under the surface because when I started a year later, it was down to like 30. Ah, interesting. 30 or 40. So you mentioned the merger just then. I think this was part of the thing that went wrong for the company, right? They just spent a ton of money on mergers and there was this frenzy at the time. Everyone wanted to grab market share. Walk us through what that was like living it from a corporate perspective. Yeah, so the merger obviously brought in a ton of new cash to the company is my understanding of it. And they kind of did go on as huge spending spree, not just hiring more employees of their own, but also sometime in 99 shortly after the merger, it became kind of

legendary thing. They bought a company called Blue Mountain Arts. Oh, did they like some billion dollar greeting card company? Yeah, it was an online greeting card company to basically just email little animations to your friends of like happy birthday. I want to say my dad uses Blue Mountain greeting card system to this day and he uses it as a replacement for email. So all his email messages to me basically come in the form of electronic cards. I hate this company, Dash. Yeah, they still exist. but Excite paid, I looked it up. It was like $850 million deal and like $350 million in cash.

I have to say, like I remember that deal. And I know we're like, oh, at the time it all seemed normal. But I do remember distinctly thinking like even amidst all this euphoria thinking that it's like, this seems a little weird. Yeah, that was like the first sort of red flag. Yeah, even at the time people were like, really you're going to pay that much money for a Greek company? And they're like corny, like animated. Yeah, yeah. Yeah, they were the, because, you know, again, not a lot of people had broadband internet,

so you couldn't send, like, huge gifts or videos through the email. So it was a very weird thing. And then they set up there. So they brought them in. They set them up in our offices. And then two years later, when it was the company fell apart, they sold the whole thing for $35 million, which is like nothing. So you got there, it was like right around the overall market peak, but a little bit, but after they had peaked. So you must have been working with.

a lot of people who at one point were worth millions of dollars on paper and day after day watching their paper wealth sort of literally vanish. So I'm curious like, what's that like? There were a couple people there who were actually had been employees before the IPO. And they got stock options, which was again a standard thing even back then. So yeah, on paper they were millionaires and they had sold some of their stock when the stock was sky high and made a lot of money but we're still continuing to work there. Nobody at my level. was able to like cash out and retire. Although they might have been able to if they timed it perfectly, but they obviously

no one did. And you could see the frustration for them especially as all their wealth is tied up in this company. And again, they were sold this idea that this is a company that's going to last for a long time. Right. This is the future of the internet. And as the company started to slowly fall apart and people began to sense that this

was not going well and it didn't look like it was going to get better, obviously, yeah, they were very frustrated and it was hard to come to work. every day knowing that. Like I said, I was one of the last ones in, so I sort of knew all along that my stock options were not going to become anything, or it was a real long shot that my stock options were going to become something. But like you said, yeah, you're right, these people on paper, their wealth was, they had a lot of wealth into this company, and then the company was falling apart around them. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris.

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developments. Get the reporting and the context from Bloomberg's 3,000 journalists and analysts we're all over the world. Listen to the latest from Bloomberg News Now on Apple, Spotify, or anywhere you listen. Were there any warning signs at the time? Because it's easy for us, of course, to look back on it 17 years in the future. And we can sit here and say, oh, well, obviously they paid way too much money for an electronic greeting card company. And obviously they were paying people too much. And there was all the success. But at the time, was there any indication that the whole thing was going to come collapsing?

I hate to say that, like, there were signs that was like, oh, obvious this is about to burst. But when it did start to fall apart, it was a very slow motion at first and then all at once. And there were little signs that things were not going well. And the thing for someone at my level, the most obvious one is those perks. Like I was talking about when I was first hired with all the bagels and the free soda and all that. So after a few months, suddenly they take away the lunches. There's no free lunches anymore. And then a couple more weeks go by.

And now there's no more bag. The bagels are only on Friday instead of every day of the week. Oh, man. That's right. Yeah. And then all the, but the big one for me when I was like, okay, something is definitely going on here. It's like shortly before the first round of layoffs, they started charging 25 cents for the sodas and the vending. machines, which used to be free.

Oh, man. And like really, literally nickel and dimming. Yeah, that was the thing. Yeah, it was like, you used to give us these for nothing and now you want 25 cents. The fact that it was 25 cents, it almost made it worse than if they just charge full price. Right. It's like, you know this is all they're going to get.

This is the beginning of the end and it's going to start to go down. And in terms of like morale, I mean, obviously I imagine the worst thing that happened is people losing their millions. But all these little things, how does this sort of just general. vibe of working it? Does it feel less fun every day? So there were little things like that. And then after I'd been there about a year, so somewhere around the beginning of 2001, there was our first round of layoffs, which was not a huge number in retrospect, but it was, it wasn't like a big wake-up call to everyone in the company that like things are not going well. Something is wrong. And we're

not sure if we're going to be able to get out of this now. So the content people were the ones who were getting ax the most because in addition to the stock dropping, we began to see the online advertising market started a crater. And that was a huge chunk of our revenue at that time. So as that got worse and then they laid people off and then the revenue got worse and then they laid more people off. So that whole year of 2001 was like a steady drip, drip, drip of there was this first round of layoffs and then like we all knew that there was going to be another round.

We just didn't know when. We didn't know where it was going to be. and another thing around the same time, for most of 99 and 2000, they were building a new building for us as it could do headquarters right on the 101. Also one of those classic signs in retro, the new headquarter curse.

Yeah, yeah. It's like a whole, there's a whole name for that. And it was open maybe, you know, so once that opened, it was this big gleaming building. It was very nice.

It was a cafeteria. And so at that time we had, we were taking up space in four buildings. It wasn't even still big enough to handle all the employees. But then suddenly two of the buildings were combined into one building. And then a few months later, we're all combined.

And the company just kept shrinking both in size and, you know, stature. And every little, like I said, every little drip, drip, drip. It was not only signs that the things were going bad for the company, but it was just brutal to morale. And people, you know, that whole year of 2001, the whole summer, everyone just could sort of see that like, you know, we need some kind of rescue here because this is not going well. And am I going to be the next person to get laid off? What am I going to do if I get laid off? because the same thing was happening at every other company in the Bay Area all the same time. So if you got laid off, there was nowhere else for you to go to find another job.

Right. So I'm curious. This is sort of a weird question. But as the money dried up and morale took a hit, did you observe the people around you clinging more firmly to the idea of the company's mission? Like, did people start saying, well, oh, it's not as fun as it used to be, but we're doing something really important here. we're creating the future of the internet. And the reason I ask is because, of course, when we talk about bubbles nowadays, a lot of people start thinking about Bitcoin.

And with Bitcoin, the story is so strong there. And there's this whole sort of belief system built up around it that people start to seize upon whenever the price goes down. There was probably some of that at the top of the executives who were really invested in making this company work. And, you know, at my level, kind of the bottom wrong of the company. I think people were just trying to stay above water and survive. And we talked about this also that part of the thing with Bitcoin is that people can see a future,

even if the bubble collapses and the price collapses, people can still see a future where Bitcoin exists or some other cryptocurrency exists. And I think a big thing with these companies in that first dot-com boom was the mission is going to go on even if the company doesn't. So it was more about like winners and losers is that somebody was going to do what we were doing. Somebody was going to take somebody that turned out to be right. Yeah. That was the correct. Because as you say, the model survived. Yeah, it wasn't that there was anything wrong with the idea of broadband internet or online content.

It was just that this company was not making it work. And so if we failed, one of our competitors would pick up the slack and keep going. But as time went on, it was like it became clear that we were going to be the loser in this fight and somebody else was going to win. There was a lot of that going on, I think, all over that dot-com boom, that whatever your niche was, whatever business you were in, you had five competitors and you couldn't all survive. Somebody was going to win, but there was no scenario which everything would just fall apart and there would be no internet. But it was a question of who's going to be the winner and who was going to be the loser. On that grim note, how did it finally end? Were you laid off?

Like, how did it finish for you? So there was a, my team, which was about 30 people, by the summer of 2001, it was down to three. and yeah it was seem so you were a survivor yeah i mean it's already pretty impressive we're talking to someone who is like in the top 10 percent that was it so that i hung on for as long as i did well done on that day yeah it was the opposite of the last in first out i was the last one in which also meant i was the made the least amount of money so that's why i was able to keep hanging on but so at the last few months it was like really grim people were just disappearing every day either quitting or getting laid off and you wouldn't even know one day i came in before i was laid off and my

had been stolen from my desk. And it turned out that the guy who sat across the aisle from me had been laid off. And when he got laid off, he just took my computer and walked out the front door. And no one stopped him. And I called security and they did not care. So, yeah, it was so weird. It was getting slower and slower. We moved to a new desk.

And then actually September 11th, 2001 happened. And then two weeks later, the company fell for bankruptcy. And that was when I was laid off. And they gave me two weeks. They gave me the option of just leaving, walking out the door. with my severance or I could stay two weeks and get a little bit more to sunset my product, I guess, which didn't even really serve any purpose. But a lot of people were offered a deal. I remember where initially when the bankruptcy was filed, it was pitched as, well, this is the

classic. We're going to reorganize and we're going to come out on the other side and we're going to have a stable company again and we'll get some new funding for me. AT&T was a big investor in us and we were trying to negotiate something where they could save us. And so a lot of people were sold on the idea that like you can walk out right now with like a couple weeks severance. package or if you stay and we get through this, then you're going to be rewarded on the other side. So a lot of people took that deal and then a few months went by and then at the end of December, that was it. They liquidated and it was like, we're done as a company and those people ended up with nothing. And again, and I heard stories of the last days of when it was clear that like,

not only are we not going to make it like it's shutting down. We're selling all our assets. That people were just taking server racks out of the, and just like dumping them in their trunk and driving away. Yeah, it was just picking the place apart. People taking furniture and computers again and everything. And so, you know, in September there was this pitch that like, oh, the company will survive and keep going. And then two months later, it was just, it was over. And then even though I was laid off, I still lived there for a couple more months. And the thing that struck me as this is over is so when I first moved to the Bay Area, I lived in Redwood City, which is where the office for excited home was. And it's about 25 miles from San Francisco. It's not that far. But if you tried to drive

there during rush hour in 1999 or 2000, it was take at least an hour, sometimes two or three hours with the traffic because they're just everywhere, just people everywhere, everything's bustling. And then by the time I ended up leaving California, it would take 15 minutes. Wow. Because there was never anyone, like, no matter what time of day, there was never anyone in the highway, and you would drive down the highway and you'd see all these buildings for all these.com companies, and they were empty, and all the restaurants were empty because so many people who came there to make their fortune and then their company collapsed.

And as soon as their company collapsed, they didn't stay. They went back to wherever they came from. That is a great, perfect anecdotal way to sum up the end of the bubble. Dash Bennett, that was fascinating conversation. I love this perspective on the bubble. Thank you very much to Glenn. Thank you. Tracy, I love that perspective on the bubble.

I mean, that's kind of, I guess that's kind of obvious. I know from many conversations with you, Joe, that you love talking about the dot-com bubble. I mean, you know, like I didn't live it like Dash did to an extent, but I remember it pretty vividly and, you know, we've talked about it before. But that whole angle, that detail about people at the end, essentially looting the office, stealing servers from the server room. I love that so much. Yeah. And the idea that maybe there were some warning signs when the free lunches ended, that's the sort of classic economics tenant, isn't it? No free lunches.

Literally no free lunch. But no, it is easy. and to, you know, and I think the whole thing with the slides, it's like it's easy to look at the excesses of the past and to assume that it must have been obvious at the time that everyone knew that they were ridiculous. But I think that, you know, and it goes to this theme that we keep hitting on, the power of the story. Right. Is it in a bubble so compelling that you're just not sure. It's like, yeah, maybe the slides are ridiculous, but maybe this is what the office of the future is going to be like.

And it's really hard to know in that moment. moment, which way it's going to go. Right. And sometimes the story is actually correct because, as Dash pointed out, this business model did become the dominant model. It was just that this particular company, excite at home, wasn't the one dominating it, right? So this gets back to the idea that he was talking about the winners and losers during a bubble. Like, not everything is going to necessarily disappear, but a huge chunk of it might. Even if the story turns out to be, be exactly right on. And of course, the excited home model, not that different from the AOL-Time Warner model, which is not that different from the sort of Comcast model of today. So even if the founder's

vision is sort of perfect, you know, and it's easy to forget Amazon in late 2000, early 2001, I think there were probably a lot of people who wondered whether Amazon would hang on. So even if your vision is perfect, it could still all go bust. Right. So further proof, I think that bubbles and markets remain the most interesting phenomenon that we can observe in the space. Let's do more bubble episodes this year. Another bubble series. Definitely. All right.

All right. On that note, this has been another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. You can follow me on Twitter at Tracy Alloway. You can follow me on Twitter at the stalwart, and you can follow Dash on Twitter at Dashbot. And a shout-out to our producer, Topher Forges, and the head of podcast at Bloomberg, Francesca Levy. Thanks for listening.

On April 4, 23, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, The Killing of Bob Lee, beginning April 16.