#23 The New New Thing: A Silicon Valley Story

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

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

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

• 0:44David Senra?

  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 grabfests in the history of capitalism. Maybe somewhere in the footnote, it would be mentioned that he came from nothing, grew up poor, dropped out of high school and made himself three or four billion dollars.

• 1:09David Senra?

  So that is from the first chapter of the book I want to talk to you about today, which is The New New Thing: A Silicon Valley Story. It's by, I would say, the best storyteller alive. My personal, probably favorite author, I would say, if not one of two of my favorite authors. That's Michael Lewis, who most of you guys are probably familiar with. But part of the reason I love doing this podcast so much is because I get to read about just these really wild and eccentric personalities. And Jim Clark may be the most eccentric, one of the most, definitely one of the most eccentric of all the characters that we've covered on the podcast so far. So I'm gonna, I just want to read you this, this section I highlighted from the introduction. Kind of explains what Michael Lewis is doing with his entire book.

• 1:55David Senra?

  So we've read, like, there's been a lot of like biographies on this podcast. This is different. This is, we're gonna learn a lot about Jim Clark's personality and life. But Michael Lewis is basically telling a story that, that unfolds over about a two to three year period. So let's go, let's go ahead and jump right into the book. Oddly enough, this character was at the center of one of history's great economic booms, who in effect, sits with a detonator between his legs, could not describe what he did for a living. When a person sets out to find the new idea or the new technology that will A) make him rich, B) throw entire industries into turmoil, and C) cause ordinary people to sit up and say, "My god, something just changed." He isn't doing science.

• 2:39David Senra?

  He isn't engaged in what any serious thinker would call "thought." Unless he makes a lot of money, he isn't even treated as a businessman. At least not by serious businessmen. He might call himself an entrepreneur, but that word has been debased by overuse. Interesting enough that Michael Lewis is writing these words in early 2000s. Where you hear that same complaint even, let's say, what, 15 to 16 years later. So he might call himself an entrepreneur, but that word has been debased by overuse. Really, there's no good word for what he does. I first noticed this problem when I watched one of these people, a man who had made himself a billion dollars, try to fill in a simple questionnaire.

• 3:21David Senra?

  On the line that asked him to state his occupation, he did not know what to write. There was no name for what he did. Searcher? He couldn't very well put that down. For that matter, there is no name for what he is looking for, which typically is a technology or an idea on the cusp of commercial viability. The new, new thing. It's easier to say what the new, new thing is not than to say what it is. It is not necessarily a new invention. It is not even necessarily a new idea. Most everything has been considered by someone at some point. The new, new thing is a notion that is poised to be taken seriously in the marketplace.

• 4:03David Senra?

  It's the idea that is a tiny push away from general acceptance, and when it gets that push, will change the world. The searcher for the new new thing conforms to no well-established idea of what people should do for a living. He gropes. Find the new new thing, find, excuse me, finding the new new thing is as much a matter of timing as of technical and financial aptitude, though both of those qualities help. The sensation that defines the search is the sweet painful feeling that you get when you can't think of a word that feels as if it's right on the tip of your tongue. For most people, the relief they experience upon finding it is almost physical.

• 4:48David Senra?

  They sink back in their chairs and try not to stumble upon any more difficult words. The person who makes his living searching for the new new thing is not like most people, however. He does not seriously want to slink back into any chair. He needs to keep on groping. He chooses to live perpetually with that sweet tingling discomfort of not quite knowing what it is he wants to say. It's one of the little iron, excuse me, it's one of the little ironies of economic progress that while it often results in greater levels of comfort, it depends on people who prefer not to get too comfortable.

• 5:29David Senra?

  Progress, this is one of my favorite sentences in the entire book. Progress does not march forward like an army on parade. It crawls on its belly like a gorilla. The important events in capitalism no longer occur mainly in oak-paneled offices, if indeed they ever did. As it turned out, the main character of this story had a structure to his life. He might not care to acknowledge it, but it was there all the same. It was the structure of an old-fashioned adventure story. His mere presence on a scene inspired the question that propels every adventure story forward. What will happen next?

• 6:13David Senra?

  I had no idea, and neither really did he. So that's just a small glimpse into why I love the way Michael Lewis communicates and tells his stories. And then, so I'm gonna be reading some sections that are that long, some a little longer, but there's a lot of just these little great sentences that Michael Lewis has. And here's one that I'm just gonna present with no context. And he's obviously talking about the main character of the book, Jim Clark. Jim Clark was the founder of Silicon Graphics, then the founder of Netscape, which at the time became the most successful IPO. Then he founded something they call like Healthyon, which eventually turned into WebMD.

• 6:58David Senra?

  So he was an extremely eccentric and successful character in the late 90s, early 2000s. And this is how Michael Lewis is describing him. "You didn't interact with him so much as hitch a ride on the back of his life."

• 7:15David Senra?

  Okay, so let's just go into this, well, this experience Michael Lewis is having with Jim Clark. "An hour after Clark phoned, he picked me up in one of his designer sports cars. He wore dark sunglasses and the pained expression of a man enduring the aftershocks of two bottles of fine burgundy. I lobbed into the haze a series of conversation starters before he took a swing at one of them, a book I had first mentioned a few weeks before, Thorstein Veblen's The Engineers and the Price System. Veblen was a social theorist with an unfortunate taste for the wives of his colleagues in the Stanford Economics Department. Between trysts, he coined many poignant phrases, among them leisure class

• 7:58David Senra?

  and conspicuous consumption. Back in 1921, Veblen had predicted that engineers would one day rule the US economy. He argued that since the economy was premised on technology and the engineers were the only ones who actually understood how the technology worked, they would inevitably use their superior knowledge to seize power from the financiers and captains of industry who wound up at the top at the end of the first round of the Industrial Revolution. After all, the engineers only needed to refuse to fix anything and modern industry would grind to a halt. Veblen rejoiced at this prospect. He didn't much care for financiers and captains. He thought they were parasites. When I told Clark

• 8:40David Senra?

  about Veblen, he did a good imitation of a man who was bored out of his skull. When he didn't want to seem too interested, he pretended he wasn't paying attention." Now, his head splitting, he was particularly keen on the idea of the engineer grabbing power from the financier. Just to give you a background, I think I might talk about it later on, but the book goes into greater detail. Clark drops out of high school, but then he winds up going to the Navy. He gets a degree, then he gets a PhD, and then another master's. So I think he has a PhD in computer science and a master's in physics. He's an extremely technical person, even though this story is like really lighthearted. That's just the way Michael Lewis writes, but he definitely thinks of himself, I would say, as like a, as an engineer more so than a businessman.

• 9:25David Senra?

  So going back to this, he was particularly keen on the idea of the engineer grabbing power from the financier. "That's happening right now," he said, "right here in the Valley. The power is shifting to the engineers who can create companies." That, Clark thought, was only as it should be. Engineers created the wealth, and during the 1990s, Silicon Valley had created a fantastic amount of new wealth. The venture capitalist John Doerr, Clark's friend and Valley co-conspirator, liked to describe the Valley as "the greatest legal creation of wealth in the history of the planet." He may have been right about that, but such a great new event in economic history raised great new questions. For example, why had it happened? What caused this explosion? Why had it happened here?

• 10:10David Senra?

  The old economic theories of wealth creation, that wealth comes from savings or investment or personal resitute, or the planet Earth, or the proper level of government spending, failed to capture what was happening out here in the engineering division of the American economy. The people who make a living trying to explain where wealth comes from were just starting to get their minds around this phenomenon. In the mid 1980s, this is the most interesting part of this section of why I'm reading it to you. In the mid 1980s, a young economist named Paul Romer had written a couple of papers that put across a theory, which he called "New Growth Theory." Soon after Romer's, soon after Romer published his papers...

• 10:53David Senra?

  Robert Lucas, the Nobel Prize winning economist from Chicago, delivered a series of lectures at Cambridge University on the subject. Inside of 10 years, new growth theory had become something like the conventional wisdom in the economics profession and the business world. New growth theory argued, in obtruse mathematics, that wealth came from the human imagination. Wealth wasn't chiefly having more of old things. It was having entirely new things. "Growth is just another word for change," said Romer, when he paused for breath between equations. The metaphor, let me say that part again, I jumped over that. Didn't mean to read it so fast, but it is important. "Growth is just another word for change."

• 11:37David Senra?

  Okay, the metaphor that Romer used to describe the economy to non-economists was of a well-stocked kitchen waiting for a brilliant chef to exploit it. You guys will recognize this analogy, which we covered in the Elon Musk, the chef and the cook podcast. And it's also been, I feel like this theme's popping up in all kinds of these books that we're covering. Okay, so he's using this to describe the metaphor. "It's a well-stocked kitchen waiting for a brilliant chef to exploit it." "Everyone in the kitchen starts with more or less the same ingredients," the metaphor ran, "but not everyone produces good food. And only a very few people who wander into the kitchen

• 12:16David Senra?

  find entirely new ways to combine old ingredients into delightfully tasty recipes." "These people were the wealth creators. Their recipes were wealth. Electricity, the transistor, the microprocessor, the personal computer, the internet." It followed from the theory that any society that wanted to become richer, would, richer, not Richard, that wanted to become richer, would encourage the traits, however bizarre, that led people to create new recipes. So this is actually a really important part. So if a society wants to become richer, it needs to encourage people to take risks to create new recipes.

• 12:58David Senra?

  As much as I personally feel like entrepreneurship and people starting companies is becoming more and more popular, the data in at least the United States says the exact opposite. It's becoming less and less common, which I think is a really big problem. A certain tolerance for non-conformism, whatever that word is, is really critical to the process. As Romer put it, qualities that in 11th century France or even 1950s America might have been viewed as antisocial or even criminal would be rewarded, honored, and emulated simply because they led to more recipes. In short, the new theory conferred a stunning new status upon innovation and the people responsible for it.

• 13:40David Senra?

  The prime mover of wealth was no longer a great industrialist who rode herd on thousands of corporate slaves, or the great politician who rode herd on a nation's finances, or the great Wall Street tycoon who bankrolled New Enterprise. He was the geek holed up in his basement all weekend discovering new things to do with his computer. He was Jim Clark.

• 14:06David Senra?

  Okay, skipping ahead a little bit, let's get some insights into his personality. And then Louis is going to continue writing about this recipe metaphor. Unlike just about everyone else's age, 54, Clark had made the leap from part one to part two of the Silicon Valley story. Part one had been about engineers building machines cheaper, faster, and better. They built them so fast and so cheap that commercially speaking, they made themselves uninteresting. Each new machine they built sooner or later would become a commodity. Other people, usually foreign people, eventually figured out how to build it more cheaply. The companies that made the machines, such as Hewlett-Packard, remained viable, but they were as dull and plodding and predictable as any other big American company.

• 14:48David Senra?

  Part two of the Valley story was not at all plodding and predictable. At some point in the early 1990s, the engineers had figured out that they didn't need to build new computers to get rich. They just had to cook up new things for the computers to do. The thrill was in the concepts. The concepts were the recipes. The notion of what constituted useful work had been broadened.

• 15:12David Senra?

  Let me, I added my own words there. Let me read that, because I love this sentence. "The notion of what constituted useful work had broadened. All across Silicon Valley, you found office buildings crammed with young techno geeks cooking up recipes that they hoped would turn the economy on its ear. The role model for this activity was Jim Clark. This was due not so much to Clark's success as to his talent for self-reinvention." This is an interesting part, too, because keep in mind, at the start of this paragraph, we learn that at the time of the writing, Jim Clark is already 54 years old, and he's still starting companies. "Most other 54-year-olds in Silicon Valley had long ago been torn down and replaced. Not Clark.

• 15:57David Senra?

  Other people grew old. He stayed new. His psyche was a magic show, and this was its favorite trick. No matter how long he'd been around, he could behave as if he'd just arrived. Clark's ubiquity was reflected in the landscape beneath us. Every significant landmark below bordered on his life." They're currently in a helicopter, because Jim Clark's learning how to fly a helicopter. So he takes Michael Lewis up, and Michael Lewis is having these thoughts and writing about the experience. So that's the context for this. So they're hovering over Silicon Valley. "Every significant landmark below," they're literally above it, is, let's talk about Stanford University. "He taught computer science there and was now paying to create a new department within

• 16:42David Senra?

  the engineering school, which he wanted to call biocomputing. Xerox PARC, birthplace of the personal computer, Clark had built his geometry engine there, and the geometry engine had changed computing. The great sprawling campuses of the old workstation companies, Silicon Graphics and Sun Microsystems. Clark had created the former; some friends of his had created the latter. The dozens of tiny ski chateaus on Sand Hill Road for which venture capitalists now paid $90 a square foot. They paid that money so they could be near Clark and people like Clark when they announced their new, new thing." The companies born on the internet Yahoo, Excite, At Home, eBay, and so on.

• 17:26David Senra?

  They derived, one way or another, from Netscape, which Clark had founded after he left Silicon Graphics. The internet surfaces companies now layering themselves onto the old internet software companies. Clark had created the most outlandishly ambitious, HealthTheon, I think that's how it's pronounced, with which he hoped essentially to seize control of the $1.5 trillion a year US healthcare industry. It was an extraordinary performance, and it wasn't over yet. So let's skip ahead a little bit. Here's an interesting insight into his personality, and probably why there's so many crazy adventures in this book. "Clark's inability to live without motion and change had gotten him to where he was.

• 18:10David Senra?

  In his world, change and motion begat money, which begat even more change and more motion, and so on. Change was another word for wealth, and wealth was another word for money, and money was what he was after, or said he was after. My own view was that he needed change even more than he needed the money that came from change. Different people have different words for this need for constant motion and change. Despair is one of them. Impatience is another. Impatience might be a social vice, but to Clark, it was a commercial virtue. If everyone was patient, he'd say, there'd be no new companies. The impatient man kept his own life in such a constant state of upheaval that neither

• 18:51David Senra?

  his experience nor his immediate surroundings ended up meaning very much to him. He was keen on things only as they happened. After they had happened, he'd lost interest in them altogether. As a practical matter, Clark had no past, only a future. That's when he really came alive, when you got him on the subject of what was going to happen next. Then he was full of ideas, and they would change from one moment to the next. This process bore no relation to the cliched version of it offered up by more ordinary businesspeople. Clark never used the words and phrases that we have come to expect from the technology types who pretend to see the future.

• 19:35David Senra?

  Vision, the challenge of the next century, the new millennium, the road ahead. That sort of grand talk struck him as perfect bullshit."

• 19:45David Senra?

  In all, in all the time I spent with him, I never once heard him refer to his ability to see the future. He couldn't see it. That's why he had to grope for it.

• 20:00David Senra?

  So, a few pages later, he continues to explore this, how Clark interacts with time. "The few times I asked him directly how he got from there to here, which was becoming clear, was the same as asking how the modern world had gotten from there to here. He would offer, he would offer some perfunctory reply and wave me away. 'That's boring,' he'd say. When I pressed, he might say, 'That's the past. I really don't give a shit about the past.'"

• 20:29David Senra?

  Continuing this, but I'm gonna skip some parts here, it just makes, so hopefully it still makes sense to you. Michael Lewis is realizing that, uh, there's, like, Clark's not sentimental, he has like no, there's nothing in his house that, that gives you any insight into like, his past. One day, he finds a, a box that Clark's old secretary had sent to him but never looked through, and it was like, all the stuff that, over like thirty years of working with Jim Clark, that she had, um, collected. And so, Michael's going through it. And so, this, this part is really interesting, because it's a preview into his early life, and, um, kinda understands like, what's motivating him for constant change, and to keep pushing himself even after, you know, he was a billionaire.

• 21:10David Senra?

  Okay, so, "In the box, there was a yellow clipping from the local newspaper in Plainview, Texas, where Clark grew up. The paper wanted to let the townspeople know that one of their own had gone to California and created a big company called Silicon Graphics. It played it as a straightforward, 'local boy makes good' story, and made light of Clark's boyhood failure. It mentioned that he'd been expelled from the local public high school in his junior year. He'd been an indifferent student and a cut-up. One of those great bad examples to youth, to prove that if you really want to be a success in American life, you have to start by offending your elders. The offense that got Clark tossed out for good was telling an English teacher to go to hell.

• 21:54David Senra?

  Before that, he, he had exploded a small bomb on a school bus, smuggled a skunk..."

• 22:01David Senra?

  And set off a string of firecrackers inside another student's locker, among other tricks. Once he left school, or school left him, he fled town. The next clue folded neatly inside the cordbar boxes was a photograph of Clark circa 1970, having just received his master's degree in physics from the University of New Orleans on his way to a PhD program at the University of Utah. He wore thick, dark-rimmed glasses, a crew cut, and an expression that approached, but did not quite achieve, innocence. In under eight years, this person, considered unfit to graduate from public high school in Plainview, Texas, had earned himself a PhD in computer science.

• 22:46David Senra?

  Actually, the story was more remarkable than that. His father had abandoned the family when Clark was a small child. His mother should have taken welfare, but it never occurred to her. The home Clark went back to after a day of turning his school on its head was situated somewhere below the poverty line. When I asked him about the article on the Plainview paper, all he said was, "I grew up in black and white. I thought the whole world was shit, and I was sitting in the middle of it." At the minimum age of seventeen and a half, Clark asked his mother to sign the piece of paper that permitted him to join the Navy. In September 1961, when the rest of his high school class returned for its senior

• 23:28David Senra?

  year, he left Plainview for basic training just outside of New Orleans. His career in the Navy started as badly as his career in high school ended. When he arrived at training camp, he was given, along with every other recruit, a multiple-choice aptitude test. He had never seen a multiple-choice test, and he didn't know how to take one. To most of the questions, several different answers struck him as at least partially correct. Instead of picking one that seemed the most correct, he just circled them all. The Navy assumed that he knew that circling more than one answer fooled the computer that graded the tests. They charged him with cheating, took him off the ordinary slow track for enlisted

• 24:11David Senra?

  men, and put him on the even slower one for juvenile delinquents.

• 24:17David Senra?

  Thus, the first time Jim Clark ever heard of computers was when he was accused of trying to fool one into thinking he was smarter than he was. And I love this, uh, let me just interject before I continue. This, this reference to now he's on the path for juvenile delinquents. It's always amazing how books are the original hyperlinks and these ideas that we read in one place, we keep seeing pop up in another one. You recognize the, if you want to, uh, that quote, if you want to study the entrepreneur, study the juvenile delinquent, or if you want to understand the entrepreneur, study the juvenile delinquent, which is from Yvon Chouinard, the founder of Patagonia. And in his book, Let My People Go Surfing. And now we see that a lot of these guys are, a lot of these people are, um,

• 25:03David Senra?

  they're, you know, misfits. They get, a lot of times they're getting in trouble. They don't fit in. They're doing something that society's telling them they shouldn't do. So let this, uh, let me continue the story because it's actually interesting. Okay. So the first time Jim Clark ever heard of computers was when he was accused of trying to fool one into thinking he was smarter than he was. The other recruits who took the multiple choice test went into a classroom and obtained their high school equivalency diplomas. Clark alone found himself shipped out to sea. There he spent the next nine months performing the most disgusting chores chores that need doing on a ship. Those nine months at sea have filled a lot of Clark's memory. He recalls officers telling him that he was stupid and bullies tossing plates of food,

• 25:46David Senra?

  full of food on the floor, just so that he would have to clean them up. He returned to the Navy's classroom convinced that Plainview, Texas just might not be the world's capital of shit. He took his first math test and scored the highest grade in the class. He was unaware that he had any particular aptitude for math and didn't quite believe the result. Neither did anyone else. The Navy gave him another test. Same result. Six weeks later, Clark was assigned to teach basic algebra to incoming recruits. A few weeks after that, one of the instructors told him that, that it had been a long time since he'd seen someone so naturally gifted in mathematics.

• 26:27David Senra?

  He suggested that Clark enroll in night classes at Tulane University with a view to getting a college degree after he finished his tour of duty. Within eight years, Clark had his college degree plus a master's in physics, plus a PhD in computer science. In the Navy, this is, I think the- The important part in the summary of this entire section. "In the Navy," Clark said, "he learned that his desire for revenge could lead to success. He was propelled in the classroom by his anger about the humiliation he'd suffered at sea. He suffered at sea. Thus, success for him became a form of revenge."

• 27:10David Senra?

  Okay, so skipping ahead.

• 27:14David Senra?

  I want to jump to this part. I just left the note I left myself is this, "turning his life around at 38."

• 27:24David Senra?

  The reason I usually include stuff like this in this podcast is because there's no, uh, I don't see any really correlation between like success in building companies and age. A lot of people think it's like a young person's thing and then to some degree it is, but example, for example, hugely successful people doing it extremely late in life. And Jim Clark doesn't really get started trying to build wealth and build a company until he's 38 years old.

• 27:51David Senra?

  Okay, so let's get right into this. "He tried to explain this extraordinary leap in his career from 38-year-old unsuccessful college professor with a warning label on his forehead to a founder of a multi-billion-dollar corporation. It was one of those times when the whole world went fucking berserk. He said, "After my wife left, I went into this spiral, six months of counseling. Then I said, 'Fuck counseling. It wasn't helping anything.'" "There was all this self-actualization stuff around, and I thought, 'I don't need some guru to tell me how to find my way out.'" "So it was simple as that?" He laughed. "No, for a year and a half, I was in this kind of downbeat funk, dark, dark, dark." I said, he still hadn't answered the original question. "It's funny," he said.

• 28:37David Senra?

  "One day, I was sitting at home, and I remember having the conscious thought, 'You can dig this hole as deep as you want to dig it.'" "I remember thinking, 'My God, I'm going to spend the rest of my life in this fucking hole.'" "You reach these points in life where you say, 'Fuck.'" "I've reached some sort of dead end here. What was the point of getting here?" And you descend into this chaos. "All those years, you thought you were achieving something, and you achieved nothing. I was 38 years old. I had just been fired. My second wife had just left me. I had somehow fucked up." I developed this maniacal passion for wanting to achieve something.

• 29:23David Senra?

  He paused. I guess it was a little bit of self-imposed psychology. In something like an instant, the man had changed his life. He reinvented his relationship to the world around him in a way that is considered normal only in California. No one who had been in this life to that point would be, excuse me, no one who had been in his life to that point would be in it 10 years later. His wife, his friends, his colleagues, even his casual acquaintances, they'd all be new. The result of this self-imposed psychology surprised even Clark. He insists that the transformation occurred overnight and that he can't really explain it.

• 30:07David Senra?

  So it just sounds like to me that he just was disgusted with himself. He said, that's it, it's gonna end today. And then he starts plotting, and he uses different numbers throughout the entire book. Like, I think his first goal was like, I just wanna make a million, or 10 million dollars, then I wanna make 100 million dollars. And it goes on, and then I wanna make a billion, then I wanna make a billion after taxes. And then he keeps pushing the goal post out and out, but he didn't start having those thoughts till, like you said, till he was almost 40 years old. Um, so... There's some just random stuff.

• 30:42David Senra?

  Okay, so skipping ahead, this is Jim's idea to avoid the innovator's dilemma. Clark saw only one solution. Silicon Graphics had to build a cheap computer to compete with the personal computer. Cheap machines meant mass markets, and mass markets meant great sums of money. Jim was probably two or three years ahead of the rest of us in seeing what was coming. He could see problems down the road, and the problems became emotionally important to him. Now this is a quote from Jim. "I was saying, 'God damn, we're out of our minds,' says Clark. 'I was so worried about the PC. I was adamant that we had to build a low-end product, and that it had to be something that sold for under five grand.'" So at the time Silicon Graphics was just building these huge workstations.

• 31:27David Senra?

  And he sees what's going to come next. Clark, and this paragraph is why I included this section. I think this is smart. "Clark thought that Silicon Graphics had to cannibalize itself. For a technology company to succeed, he argued, it needed always to be looking to destroy itself. If it didn't, someone else would. It's the hardest thing in business to do, he would say. Even creating a lower-cost product runs against the grain, because the low-cost products undercut the high-cost, more profitable products. Everyone in a successful company, from the CEO on down, has a stake in whatever the company is currently selling.

• 32:09David Senra?

  It does not naturally occur to anyone to find a way to undermine that product. Clark thought he knew how to become the agent of his own creative destruction, and he was prepared to do the deed. He wanted Silicon Graphics to operate in the same self-corrosive spirit." So he winds up leaving SGI, Silicon Graphics Incorporated. I'm going to actually skip over that part. And we'll jump right to probably, I would say, what he's most famous for. And that's creating Netscape. So let's go ahead and go to this part about the beginning of Netscape.

• 32:51David Senra?

  Just to give you some background, he's left Silicon Graphics. He's looking for the next thing. He's meeting with a bunch of other engineers. And he is linking up with a young Mark Andreessen, who is a computer science student.

• 33:07David Senra?

  I think he's 22 at the time the book's written. And now, obviously, he's went on to be a successful founder and venture capitalist, so on, so forth. Really interesting Twitter follow as well. So let's go right to the beginning of the essay. "Then one day, as Andreessen and Clark sat at Clark's kitchen table, Clark announced that he had changed his mind. This wasn't unusual. Clark was always changing his mind. Now he said that his computer, his telecomputer was ahead of its time. It was too expensive to build. 'We could always build a Mosaic killer,' said Andreessen. 'What do you mean?' said Clark. Andreessen said that the software he'd written had been appropriated by the University of Illinois, but that he felt sure the university would bungle any subsequent attempts to commercialize it.

• 33:52David Senra?

  He mentioned again that 25 million people were now using the Internet and that their numbers had been doubling every year for a long time. Clark recalls, 'I thought, Jesus, those are big numbers. I've never been in a business with those kind of big numbers. Eventually, you were talking about all the people on Earth.' The whole time he'd been stewing with Andreessen about what to do, the solution was right in front of him: the Internet. 'All of the sudden, it was clear to me, when I looked at the Internet, that I was looking at the personal computer in 1985,' Clark says. 'It was this slow, clunky technology, but people were using it, and it would get faster. I realized that this was the thing I'd been groping for.' He and Andreessen hired Andreessen's college buddies, who had written the code for Mosaic,

• 34:37David Senra?

  which permitted a user to browse the Internet, and Clark had yet another team of young engineers to lead into battle. He called the company Mosaic Communications, then changed the name to Netscape. This time, Jim Clark was right. He was off and running down the dark tunnel with no end. Within 18 months, the world's biggest technology companies realized that they had been trumped."

• 35:02David Senra?

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

• 35:44David Senra?

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

• 36:25David Senra?

  You have to sit down and think for a bit to realize what that means, not just for Clark, but for anyone with the slightest interest in how economies and societies are nudged from one place to another. This is actually a really good point Lewis is making here. A company dreamed up by a technical man and a lot of big shots thought was slightly unhinged, with a 22-year-old who didn't want to do it in the first place, and another 22-year-old assigned to sleep under his bed, did not become merely a success. It torpedoed investments of hundreds of... They're talking about Netscape, obviously, there. It might not be obvious because I skipped over a part. Might have needed that context. It torpedoed investments of hundreds of millions by the world's biggest corporations

• 37:09David Senra?

  and smartest minds. SGI, TW, Microsoft, Sun, Oracle, AT&T. Thousands of people had more or less wasted billions of dollars and whether they knew it or not, had been following his lead. He was the one that came up with the idea and pitched it to begin with. Then, just as they all ran as a herd in one direction, he took off in another. And within six months, he made them all look like fools. It was one of the great unintentional head fakes in the history of technology.

• 37:42David Senra?

  Skipping ahead a little bit, I left a note for myself. It says, "The fast eat the slow." And let's jump into these few paragraphs real quick. "Another old rule that changed was the rule that financiers who backed the company and perhaps the CEO who steered it to its success, made the most money and accumulated the most power. Anyone who bothered to read Netscape's prospectus discovered a curious fact. The venture capitalists on Sand Hill Road and the new CEO, Jim Barksdale, owned a few million shares each. In the end, they made hundreds of millions of dollars from Netscape and so had no reason to complain. But the young engineers whom Clark had pulled together to create the company also became rich.

• 38:23David Senra?

  An engineer who joined Netscape in July 1995 was, by November, worth $10 million." Clark made certain that Mark Andreessen, the young inventor, did not suffer the same fate at the hands of the venture capitalists as he himself had 12 years before. What they're talking about there is, he comes up with the idea for Silicon Graphics, develops technologies, becomes successful, and he didn't know anything about venture capital or basically, he winds up with a tiny share of his own company. And he really pissed them off. And that's when he, like, he decided he had to leave Silicon Graphics because he didn't, he wasn't going to make enough money. So going back to that, Clark made certain that Mark and Dreeson, the young inventor,

• 39:06David Senra?

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

• 39:49David Senra?

  Another great random Michael Lewis quote that I like to highlight and just remind myself, "Most people don't enjoy making huge gambles on the future. They would just as soon have someone else tell them what to do."

• 40:03David Senra?

  So let's skip ahead.

• 40:11David Senra?

  This is "The People You Don't Want." "The moment of conception was, to Clark's way of thinking, the critical moment of any new enterprise. At that moment, it was important not merely to hire the people bent on changing the world, but to avoid hiring the people bent only on changing jobs. There are all sorts of guys who will show up because they can't think of anything else to do," he said. "Those are exactly the people you don't want. I have a strategy for dealing with these people. When they come by to apply for the job, I tell them, 'We're all confused here. We don't know what we're going to do yet. But when you find someone you want, but when you find someone you want, I tell them, 'Here's exactly what we are going to do, and it's

• 40:56David Senra?

  going to be huge, and you are going to get very, very rich.'"

• 41:02David Senra?

  So now I'm jumping over, obviously, huge swaths of the book. The book is only 300 in paperback. I got the paperback version. It's like 350 pages. You could probably read it in like a two or three days if you have a few hours to kill. It's obviously, you know, reads like a story, so it's easy. But if you, I'm saying this because obviously, I'm not going to cover the whole thing. There's tons of stuff I'm leaving out. Arguably, the main point of the book I'm leaving out. But if you're interested and you like these highlights, then I would recommend, obviously, buying the book. That's the entire point of me doing the podcast. To encourage you to, to encourage people, not just you, but to encourage people to read. Uh, let's see. If you find interesting stuff like this, here's another insight into his personality.

• 41:46David Senra?

  And then, um, he's just got, so now I'm just going to share a bunch of just these interesting little tidbits, shorter, shorter parts coming. "He could never become one of those ordinary people. A venture capitalist, or a chief executive, or a member of a museum board, or anything else that required him to behave in the way important businessmen are meant to behave. Circumstance had made him an insider, but temperament kept him forever an outsider. He was like the man who threw the world's biggest bash and failed to show up for it. This outsider-ness was what gave him his unusual view of the world. His talent for groping the future was genuinely viewed as a supernatural gift, but it was a matter as much of his limitations as of his strengths.

• 42:31David Senra?

  He could see human society in ways that most businessmen could not, because he was not very much a part of it."

• 42:39David Senra?

  Um, I like this short paragraph, this idea that companies are self-contained worlds. Direct quote from Jim. "There is nothing more satisfying to me than to create a complete self-contained world when a computer is controlling it. It took a while before anyone saw the full implications of that statement, especially for the less technical people who lived in that self-contained world."

• 43:06David Senra?

  Oh, this is interesting. Let's skip ahead.

• 43:12David Senra?

  So, the difference between a pig and a chicken. Clark liked to say that human beings, when they took risks, fell into one of two types: Pigs or chickens. The difference between these two kinds of people, he'd say, is the difference between the pig and the chicken in the ham and eggs breakfast. The chicken is interested. The pig is committed. If you're going to do anything worth doing, you need a lot of pigs.

• 43:41David Senra?

  So, chicken is interested, pig is committed. Grab the committed people.

• 43:48David Senra?

  So, I want to skip ahead. There's this, uh... I'm trying to give you a little bit of context here, because this actually goes on this unfold over several pages, but, um... There, there's a market downturn. He's now, um... He's now on his third company, which is a Healthion company. And, uh, they're running out of money and investors are kinda, you know... They're just not willing to put more money in. So, uh, we've seen this also before in the Elon Musk book, and there was another book. And if, now it escapes me who the other person is that did this, but, um... Let, well, let me read it and then you'll understand. Uh, Clark called, the exception was Clark.

• 44:30David Senra?

  Okay, hold on one second. So, Healthion is trying to raise money. People are saying, you know, they're scared, they're not willing to invest. And he says, "Of course, if they had thought Healthion had a future, they would have kept it to themselves." Meaning, other investors are trying to sell, like, trying to get other investors... Previous investors that have already invested in the company are trying to get new outside investors to bring in more capital. And so, he's like, "Well, this is obviously them saying that they don't think Healthion has a future, because if they were confident, they'd keep it for themselves." Since they did not, they went looking elsewhere for capital. That's his thing. He goes, "The exception was Clark. Clark called Long, Long is the one running the company, a few days after the board meeting, and told him that he had thought about it and had decided that Healthion was simply too good an opportunity to let others in on.

• 45:12David Senra?

  He said he would personally provide Long with as much money as he needed. If Long needed $20 million, Clark would cut him a check for $20 million that day." Of course, this meant that Clark would acquire an even larger stake in the company. But since the venture capitalists, so see what he's doing here? He's basically calling a bluff. "But since the venture capitalists had valued the company at zero, he did not imagine they would object. Long called the venture capitalists with Clark's proposal. Their sense that Healthion was worth very little worried with their fear that Jim Clark knew something they did not." Just so you know, what I left on the note for myself, on the post-it note on this page, is, "Humans are deeply memetic."

• 45:56David Senra?

  And we're going to see that here now. "Somewhere deep down, they realized how bad they would look if Healthion, by some miracle, became an enormous success and Clark made off with it all. Almost before they knew what they had done, they threw their money on the table. $8 million. Clark supplied the other 12 million." So even though they valued the company at zero, which obviously, they didn't feel that strongly about it, they're now spending $8 million of their money on a company they think is worthless. He's now, and here's some more explanation. "He now sat on a billion dollars of Netscape shares and could do whatever the hell he pleased with them. And what pleased him was to put it at great risk.

• 46:39David Senra?

  The VCs did not care to make these sort of colossal bets on the future. They sprinkled their money around a lot, they sprinkled their money around a lot of different companies and counted on the law of averages to take care of the rest. Clark took a different approach. He said with some conviction, 'I know how to make a lot of money in the future. And since I know how to make a lot of money in the future, I'm going to put all my money on it.'" It was a difference of temperament as much as anything else. Clark had walked up to the roulette wheel surrounded by more or less reasonable men and laid all his chips on double zero. And it scared the hell out of the others at the table. The VCs could tolerate companies going bust.

• 47:21David Senra?

  They had so many of them, but they could not tolerate missing out on the new, new thing. And so they poured their money in. They threw good money after bad into an enterprise he suspected would fail. They had wanted to be chickens. Clark forced them to be pigs.

• 47:43David Senra?

  So a few pages later, they go into his, uh, this is probably my favorite story in the book. Um, and we'll share part of it because it's again, it's too many pages to read. But it's, uh, at the very beginning, Michael Lewis talks about how it's so weird that you don't even have a name for the jobs of what people like Clark does. He got that because of the story that, uh, we're going to go to where, um, Michael tags along with Jim Clark. He goes downtown San Francisco to open a Swiss bank account. And it's not for the reasons one would expect. It's actually, there's a couch and a larger story about this guy that owns Jim money and Jim's making him, trying to like force him into doing the honorable thing to pay him back.

• 48:26David Senra?

  But anyways, it's, it's interesting story, but the, the part I found most interesting is, uh,

• 48:34David Senra?

  how people like allocate, like, how do they choose where to put their money? Right? So standard, uh, financial advice, I'm personally, you know, not too big of a fan for a lot of it. I think it gives you like a, a pathway to mediocrity. Um, and so, but that's on one hand, and on the other hand is Jim Clark with his all chips on double zero strategy. So I, I find this stuff interesting and no one ever talks about this. I guess it's considered not polite.

• 49:04David Senra?

  Which is kinda weird, but, because it's such an important, I dunno, it's interesting to me and it's really important. It's weird how it's not really talked about. So, uh, the note I left myself is "All Chips on Double Zero and Diversification is for Idiots." That's not my quote, it's just, uh, if you're curious, type into YouTube "Diversification is for Idiots," Mark Cuban. And he kinda lays out in that video, uh, how he thinks about like, risk and asset allocation and, and... It's just basically answering the question, "What are you gonna do with all your money?" Um, and so I wanna read this part because it's fascinating, uh, just the risk tolerance, the risk profile that Jim Clark has. So, set the scene, they're in, um, they're in the Swiss baker's office, Michael Lewis is with them,

• 49:49David Senra?

  and they're trying to get him to like, to fill out an investment questionnaire, try to get him to understand, it's like an investment profile. And Clark's just like completely dumbfounded, because he just doesn't fit into this normal rubric, so check this out. "As Clark studied the document, his face acquired the pain expression of a well-meaning child who's trying his best to answer a difficult question.

• 50:11David Senra?

  He was often this way when faced with new situations or with people he did not know. He wanted badly to do what was expected of him. It was only after he determined that this was somehow impossible, that he went ahead and did whatever he wanted. Now he was doing his best to please Bank Julius Baer." I guess that's the name of the bank. Uh, "Yet he could not fathom how the bank's questions applied to him. He arrived at the first category, marked 'Risk/Reward.' A simple-minded graph with an arrow pointing up and to the right illustrated the principle, 'The more risk you take with your money, the more you stand to gain or lose.' In the past 10 months, Clark had lost $600 million simply by holding on to his shares in Netscape. 'If they only knew,' he said."

• 50:57David Senra?

  The Swiss banker chuckled unhappily. Clark remained straight-faced. His eyes drifted farther down the page, to a category marked 'Return Objectives and Risk Tolerance.' I just hate the, uh, the jargon of like, business and finance, even though I find the subjects fascinating. I don't like the, the jargon's annoying. Uh, it's just, it's, no one talks like this. Like, they're just, you don't, you're never running into anybody in your own life that, "What are your return objectives and risk tolerance?" And it's just so fake.

• 51:32David Senra?

  Sorry, this is random tangent. This was a summary of the typical Swiss banker's idea of the range of possible attitudes towards financial risk. It read, "Conservative: I seek to minimize investment volatility. Moderate growth: I want to take some risk while also preserving capital. High growth, high capital growth: I have a minimum time horizon of five years with which to pursue my objectives." See, this is what I mean, like those, that's three sentences. Do you have any idea what any of that means? It's so, it's, I just think it's created just, whatever. It's marketing and to confuse you, but it's just, you're, you're saying, you're talking and you're not saying anything. Or in this case, you're writing and not saying anything. Next to each risk profile was a little square box.

• 52:16David Senra?

  Clark passed quickly over the first two and paused for a moment at the third, wondering, probably, where they put the box for people who sought to turn $10 million into $1 billion in a few months. Finally, he looked up with the most perplexed expression. "I think this is for a different, uh, person," he said. And then, at that moment, something inside him gave. There was, there he was, the maker of the fastest money ever made legally. He was the spiritual leader of a new financial movement that believed in putting all of its chips on double zero. Now, we're getting to his personal philosophy. He had not the faintest desire to manage, quote unquote, "that money," or to, quote

• 52:58David Senra?

  unquote, "diversify his holdings," or to employ any of those gentle verbs that emanate from bankers and inspire people who are not bankers to hand their money over to them. At that moment, Clark's investment portfolio, such as it was, looked like this. Healthy on: $9.5 million shares. Estimated market value: zero. Netscape: $15.5 million shares, 15.5 shares, five million shares. Estimated market value: $550 million.

• 53:37David Senra?

  Microsoft was gobbling up Netscape's market share and thus Netscape's share price, and thus Clark's wealth. And yet Clark hadn't a thought, hadn't a thought in the world of quote-unquote "preserving" that wealth. He had no interest in preservation of any sort. His life was dedicated to the fine art of tearing down and building anew. He didn't buy US Treasury bonds, or stock in companies outside of Silicon Valley, or for that matter, stock in anything outside of the outrageously volatile internet sector. A year or so before, he had bought and sold a million shares in At Home and made a quick $45 million. Other than that, he sank his wealth in his newest company and left it all there until

• 54:20David Senra?

  the new, new thing came into view. This gorgeous financial myopia was common in the Valley and one of the chief sources of its success. The technologist's tendency to commit all of his resources to new technology by financing even ever more new technology, had generated one of the great economic miracles in human history. Now this paunchy Swiss banker in his humid gray suit was offering up his Swiss recipe for handling money. And, this is the most important, or my favorite sentence. "In Clark's mind, it was a recipe only for mediocrity and stability, which came to the same thing."

• 55:02David Senra?

  Skipping ahead, before we close this out, I have two more sections I want to talk to you about. There's just another random sentence I highlighted, and it's Lewis describing Clark again. "He was not one of those people who can be sustained for a lo- for long by other people's fictions. He required his own."

• 55:36David Senra?

  And

• 55:40David Senra?

  second to last section here. "One evening, as we sat in his kitchen, I reminded Clark that he said that once he became a real after-tax billionaire, he'd retire." This had already happened. This is towards the end of the book. He makes a ton of money off taking healthy on public again, and now he's an after-tax billionaire. Which was what he told Clark when he would stop. So he said, reminded him that, he said that, "Once he became a real after-tax billionaire, he'd retire." "He said without missing a beat, 'I just want to make more money than Larry Ellison. Then I'll stop.'" This was news. I pointed out that he had never before mentioned this ambition. "I just want to have more money than Larry Ellison," he said again. "I don't know why, but once I have more money than Larry Ellison, I'll be satisfied."

• 56:23David Senra?

  "Well, what happens after you have more money than Larry Ellison? Would you want to have more money than, say, Bill Gates?" "Oh, no," Clark said, waving my question to the side of the room where the ridiculous ideas gather to commiserate with each other. "That'll never happen." A few minutes later, after the conversation had turned to other matters, he came clean. "You know," he said, "just for one moment, I would kind of like to have the most. Just for one tiny moment." It was one of those tiny moments when it was good to have a record of our conversations. Just a few months before, when he was worth a mere 600 million, Clark had said, "I just want to have a billion dollars after taxes. Then I'll be satisfied." Back further, before he started Netscape, he had told one of the young engineers who'd helped him create Silicon Graphics, something similar.

• 57:08David Senra?

  Gross, this guy's name's Mark Grossman, who's telling him this. Grossman recalled, "Jim came into my office just before he left to start Netscape and said, 'SGI is okay, but I'd really like to have him $100 million.'" Back even further, before he started Silicon Graphics, he had told Tom Davis that what he really wanted was to have $10 million. The numbers, they keep moving. Why do people perpetually create for themselves to condition for their own dissatisfaction?

• 57:36David Senra?

  Clark played these little tricks on himself so that he would have an excuse however flimsy to keep running as fast as he could. It was the same way with his resentments. He treated those who had done him wrong in much the same way he treated those he did not like who had more money than he did. They were all motives. Plainview, the Navy, Glenn Mueller, Ed McCracken, these are all guys in this past, various venture capitalists. He needed people or places to doubt him so that he could prove them wrong. Obviously, Clark couldn't stop using technology to change the world and so he needed an excuse not to stop. The reasons he couldn't stop were ultimately unknowable, but I assume that the best and

• 58:17David Senra?

  most lasting motive for wanting to change the way things are is to be unhappy with the way things are. People are unhappy with the way things are tend to remain unhappy even after they have changed them. The nature of their unhappiness is such that change does not slake it. The difference with Clark is that he continued to believe in all the endless possibilities of change even after he'd experienced its limitations. He was the least happy optimist there ever was. No matter how well Jim Clark did for himself, it was always 2:00 in the morning in his heart and he was lying awake.

• 58:56David Senra?

  And then let's close it out here which I think is a great, um, kind of ties this all together with why he's still running even after this amount of time. And, uh, right before this is something that happens where his dad beats the, beats his mom and so he goes and confronts his dad, now he comes home and he's crying. He's a kid in Plainview, Texas at the time, or teenager rather. So he goes, "Not long after he'd come home in tears from what turned out to be his final meeting with his father, Clark quit playing his tuba. Soon after that, he was expelled from school and left town."

• 59:40David Senra?

  Once he left, he became a stranger to his family. He'd turn up every now and again, and the family now recalled something about each visit. One time, not long after he left, for instance, he came home talking about nothing but computers. "No one in Plainview had even seen a computer, except in the movie," said his mom. Another time, he came home with financial ambition. When Jim came home from the Navy, his mom recalled, he told his uncle that someday he was gonna make fifty thousand dollars a year. His sister hooted and clapped. "He done a bit better than that," his mom continued. "I remember him telling me when he came back from the Navy, Mama, I'm gonna show Plainview."

• 1:00:25David Senra?

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

• 1:01:10David Senra?

  I leave an Amazon link for this book and every other single book that I've done a podcast on so far. Those links are Amazon affiliate links, which means that if you click on that link and you buy the book, um, Amazon sends founders a small percentage of the sale at no additional cost to you. It's like sending me a virtual, like a tip over the internet, if you will. And you get something that's fantastic. So, it's a great way to, uh, support, if you like and value the work I'm doing here, and you like these stories, which if you've listened this far, you probably do, uh, use those links, uh, when you buy the books. It really helps out the podcast. And if, for whatever reason, your podcast player app's not working there, you can go to founderspodcast.com, and all the links are always there as well. Thank you very much, I hope you have a great week, and I'll talk to you soon.