The New New Thing: A Silicon Valley Story by Michael Lewis, W.W. Norton & Company, $25.95, 268 pages.




The News & Observer


December 12, 1999

The Dow of fools


By Phillip Manning

More than a decade ago, I spotted a bright-red Lamborghini near Palo Alto, Calif., in the heart of Silicon Valley. The car's license plate holder spelled out a philosophy I never forgot: "He who dies with the most toys wins." Michael Lewis' recent book, "The New New Thing," proves that while much has changed in the Valley in the last 10 years, some people still subscribe to that old saw.

Fast-paced and insightful, Lewis' book explores how the rise of high technology and the Internet have transformed America and American business. He argues that the Wall Street money culture he so memorably described in "Liar's Poker" has been displaced by Silicon Valley as the center of American capitalism.

He does this by tracing the life and career of Jim Clark, the founder of Netscape, a company that transformed a lot hard-working, well-paid software geeks into a lot of hard-working millionaire Internet geeks. Lewis' thesis is that Clark's successful battles with the venture capitalists who helped finance Netscape shifted the balance of power from the venture capitalists to the techies.

He convincingly shows how the dot.com revolution has changed American business temporarily, making the promise of future success more attractive to investors than proven performance. But in his effort to find what's new and different, Lewis fails to recognize that his story is ultimately about the one unchanging fact of business: MONEY. And whoever controls the money will eventually control the business.

Most Americans have never heard of Jim Clark, but he embodies the American Dream. A poor boy from a troubled family in Plainview, Texas, he was expelled from high school for telling an English teacher "to go to hell." He joined the Navy in 1961, where he performed poorly until he took a math test and scored the highest grade in the class. Eight years later, the angry high-school dropout had a college degree, a master's in physics and a Ph.D. in computer science. But his life was anything but smooth. "All those years," he told Lewis, "you thought you were achieving something. And you achieved nothing. I was 38 years old. I'd just been fired. My second wife had just left me. I developed a maniacal passion for wanting to achieve something." After a period of depression, Clark reinvented himself in a way that is considered normal only in California: He decided to make $10 million. He would do this by coming up with the new new thing, which Lewis defines as "an idea that is poised to be taken seriously in the marketplace."

After three years of work, Clark developed a new computer chip, which he called the "Geometry Engine." It was the first chip designed to handle three-dimensional computer graphics, a breakthrough that allowed computer jocks to design cars and airplanes, toys and games. To manufacture a computer to use the chip, Clark started Silicon Graphics, and when that company went public, it made Jim Clark a multimillionaire.

But Clark was too wild, too angry to successfully run a company. He lost control of Silicon Graphics to Glenn Mueller, a venture capitalist. And Clark's millions were peanuts compared to the $400 million that Mueller made. Clark went home to sulk and rant. He also bought a few toys - a motorcycle, a sailboat and huge, expensive model helicopters - and started groping for the new new thing.

After a false start with the "Telecomputer," a too-expensive device that aimed to turn your television set into a computer, Clark saw an intriguing piece of software called Mosaic. Its author was Marc Andreessen, a 22-year-old software whiz just out of the University of Illinois. Mosaic enabled its user to travel around the Internet, although why anyone would want to do that was unclear to Clark. Nevertheless, in 1994, Clark called Andreessen to learn more. Andreessen mentioned to Clark that more than 25 million people were now using the Internet and that the number had been doubling every year. "I thought, Jesus, those are big numbers," Clark recalls. "Eventually you were talking about all the people on earth."

In a flash the inventor became an entrepreneur, the techie became a money man. Clark formed a company to develop and market Andreessen's product. He named it Netscape, and its eponymous product became the first commercially successful Internet browser. Clark invited a few venture capitalists to invest in his new company on onerous terms. This time, he was determined to keep the bulk of the stock for himself and his techies. Despite Glenn Mueller's pleas, Clark refused to allow him to invest. In the high-tech hotbed of Silicon Valley, young companies are forever eating the old, a violent truth that apparently convinced Mueller that Clark was trying to destroy his business by shutting him out of the deal. And on the day Netscape was incorporated, Glenn Mueller killed himself.

Six months later, Netscape was still unprofitable, but Clark took the company public. The stock was issued at $12 per share. Three months later, it reached $140, and Jim Clark became Silicon Valley's newest billionaire. More importantly, Netscape's startling success changed the way the stock market values high-tech companies. Nowadays, the financial pages carry the astronomical prices of countless Internet-related stocks, most of which, like Netscape, have never shown a profit. Market valuations of securities are near all-time highs, with price/earnings ratios in the stratosphere. Profits and products are ignored as investors rush to invest in the new new thing.

But this market is anything but a new new thing. In the 1960s, when a similar boom occurred in a few stocks (called the Nifty Fifty), the idea was that no matter how much you paid for a stock, someone else would pay more. It was called the Greater Fool Theory, and the worst bear market since the Great Depression soon followed.

Has Jim Clark led the world into a new era of securities pricing? Are initial public offerings of technology stocks always destined to double or triple or more? Clark doesn't care. He has started yet another new new thing. He also bought a Lear jet, a helicopter, a 35-bedroom mansion in Palm Beach and the world's largest single-masted sailboat. But Clark still isn't satisfied. Being a billionaire and collecting outlandishly expensive toys is not enough to prove that a poor boy from Texas has done well. Today, his original $10 million goal seems pitifully low to him, and his dreams about money are far more ambitious. "You know," he told Michael Lewis, "just for one moment, I would like to have the most."

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