It’s 1999, and the Internet stock boom is flooding Silicon Alley, New York City’s “new media” zone, with crazy money. Suddenly, 24-year-olds like Stephan Paternot and Todd Krizelman are worth more than $50 million apiece on paper since their company, Theglobe.com Inc., went public in November. Twenty-seven-year-old Bo Peabody made a similar paper fortune when he sold Tripod Inc. to Lycos Inc. in February ’98. A decade ago, they would have been “Masters of the Universe,” the high-flying rivals of Tom Wolfe’s Sherman McCoy. But in the bland jargon of the khaki-clad 1990′s cybereconomy, these young men have merely “monetized their value.”
I’m part of the “Class of ’95″–a collegial group of young New York liberal arts slackers who got in on the ground floor of the Web. Since last year, when the Net stock boom began, each week has brought news that more of our crowd are getting rich. At a restaurant, I ran into a friend. “Our stock went from 4 to 40 yesterday!” he beamed. “And I’m vested and registered!” The next day, the Web site founded by two of my female friends went public. The stock price had doubled the night before the initial public offering, and tripled within minutes of hitting the market. No more sample sales for them.
Well, great. Three cheers for “wealth creation.” But being around this kind of gargantuan “monetizing” day in, day out–it warps your mind. Paging through Details the other day, I came across an article about Seth McFarlane, who created the hit prime-time cartoon series, Family Guy . “Fox’s 25-Year-Old $2.5 Million Man,” the headline read. “What a loser,” I found myself thinking. “If he had any brains, he’d have started a Web company, and made some real money.”
Four years ago, there was no “new media” industry in New York to speak of. “Silicon Alley” was a made-up term intended to distinguish New York’s “digerati” from the fatcat computer geeks in Silicon Valley–and they made fun of us for using it. Most N.Y.C. netheads had no idea what an I.P.O. was.
Now we do. Now local Internet startups like Doubleclick Inc., 24/7 Media Inc., Theglobe.com, Earthweb Inc., iVillage Inc. and Miningco.com Inc. have gone public and watched their stocks run up to as much as 12 times their original offering price. Not one of those companies is much more than three years old, and all of them lose money.
Most analysts agree that by any rational analysis, these stock prices are freakishly high. Last month, on the financial site TheStreet.com–slated for an I.P.O. itself–Scott Bleier, chief investment strategist at the investment bank Prime Charter Ltd., said, “There is no reality with these stocks. Frankly, I am becoming more and more convinced this is the greatest speculative mania of all time.”
But while the huge market caps of Internet companies (four-year-old Yahoo Inc. is currently valued at $40 billion) may be based on wishful thinking, at least part of the money flowing in is real, and it’s having an Alice-in-Wonderland effect on the lives of New York’s Web workers. Just a few years ago, we were dance or literature majors, actors with day jobs. Most of us never expected to be working in business at all, let alone be catapulted into the ranks of the super-rich. Now we live in a strange world where it seems as if every 10th person has won the lottery.
As the stakes have increased, so have envy, inadequacy, guilt, greed and fear. So now, we have “monetization issues” that we need to work through.
Many of the people quoted in this article are not named, either because their companies are in the Securities and Exchange Commission’s mandated “quiet period” that precedes an I.P.O.–or because they didn’t want anyone to know what they’re thinking about their friends, colleagues or employers.
A virtual rap session from the bubble:
Fred Wilson, managing partner of one of Silicon Alley’s most prominent venture capital firms, Flatiron Partners:
It’s not normal to become a millionaire in two years. This is a magic time in a sense.
A 27-year-old production manager:
It was an ugly, ugly, ugly scene when Theglobe.com went public. It was essentially these guys who made money kinda like, behind glass doors high-fiving each other, and all excited, with like another 50 people on the other side, outside smoking and just ranting and raving and being pissed off.
I had missed the equity boat by like a few weeks. And it’s been a weird six months for me because two of my best friends made tons of money off the I.P.O.
The trading happened so violently that you couldn’t really see the first results for like an hour or so. So around 10 o’clock, my friend sees this thing coming in at 64. And he calls the broker and he’s like, “What’s going on!” Because he had a striking price of $8. He had 10,000 shares. And the broker’s like, “Well, it’s not necessarily accurate, so don’t do anything yet, we’ll know more in a few minutes.” He had thought, “I’ll be happy if I make $20,000 on this thing”–because everyone thought it wasn’t gonna happen. Then he made $2 million.
The range of expectations and emotions he went though like covered everything. You know, from, “God, I just wasted two years of my life!” to, “Oh, this might make something,” to, “Oh my God. I’m rich!” He was saying that he was going to sell at 30. And the first figure that even got in was 64. And the broker was like, “No, no, no. Just wait.” And then it hit 87 and they’re like, “Do it! Sell! Oh! Now!”
Recently, he went snowboarding in Switzerland. I was invited on that trip. I didn’t have $3,000 to drop. I would’ve loved to have gone. But I couldn’t go with my best friend snowboarding. I find myself being around these people in a social environment and almost, like, not being able to be friends with them at certain points. They’re not gonna wanna, like, sit at home and rent movies or, like, go to happy hour where it’s two for one, or whatever, after a while.
I still get to hear about it all the time when I’m out with them. People won’t shut up about it. Every time, I’m just, like, “Arrgghh!” My friend and I were at one of those little, crappy import video game stores in Chinatown. The guy was talking to us about computers and stuff like that, and we’re like, “Yeah, we do this kind of stuff,” and he said, “Oh? What do you guys do?” My friend’s like, “I work at a company called Theglobe.com?” And–mind you–this is someone like fresh off the boat, O.K.? And the guy was like [adopts Chinese accent], “Oh, you work at Theglobe.com!” He goes, “Does very well in market!”
Now, I’ll go to sleep at night sweating over money. I never did that before. Being so close to it has really screwed up my perception of what a lot of money is. Three years ago, when I was in graduate school, all I wanted was to, like, be a teacher and make $30,000 a year. To me, that was the life. And now, I’m like, “No! I want a million dollars! I want seven fuckin’ figures!”
Clay Shirky , professor of new media, Hunter College; former chief technology officer, Site Specific (now CKS Site Specific):
It is a really weird and kind of painful landscape. Having been in the water since ’95, it sometimes seems like just carelessness that I’m not a millionaire–”Hey! I forgot to make a million dollars!”
In February of last year, I was thinking of starting my own company. But it would’ve meant hiring a bunch of people, raising money, 80-hour weeks and going around to a lot of ad trade shows and hyping my product.
And I remember being on the phone–this was sort of a crucial moment with my new girlfriend–and kind of having a meltdown. Me saying, “I want to have a million dollars, I want to do this,” and she said, “What part of your financial goals would a million dollars serve?” And I said, “Financial goals? I don’t have any financial goals! I wanna have a million dollars!” (laughs) And I was really kind of–I mean, I make light of it now, but I was really upset. And she was really kind and mature about it. And when she got me to calm down, I realized that what I was trying to do was have a million dollars to prove that I was one of the people who could earn a million dollars. And many of my friends are, and I am not. And I recognize now the difference between those people and me.
So I decided not to start the company, because the goal of the company was so much the exit strategy. It was entirely the pursuit of the money. The money was the signifier that I was a person who had a Million-Dollar Idea. And the pursuit of that was literally making me sick. I mean, I was having digestion problems. I couldn’t eat.
A 31-year-old Web company chief executive:
Promise that you’re not gonna, like, judge me on all this stuff. I’ll be as open as I can as long as I know that you’re not gonna be, like, “Oh, that is really obnoxious.”
There’s definitely parts of it which are completely surreal. When, you know, you go to the A.T.M. machine, and I know this sounds sick, so please forgive me, O.K.? The first time I went to the A.T.M. machine and got the receipt and the number was too big to fit on the receipt. They didn’t have seven digits. When it goes over a million dollars, they couldn’t print it out. I cracked up when I saw that.
I will probably never, ever, ever forget being at the Nerve [Web 'zine] party last fall, and I was talking to K. and–somebody else walked up, and K. goes, “Oh, here comes another millionaire!” And then someone else walked up, and she goes, “Oh shit, I’m surrounded by ‘em!” and I was like, “Come on, chill out!”
My girlfriend and I had a lot of problems with the money at first. In terms of what was I paying for and what wasn’t I paying for. It was like, “O.K., I’ll fly you to London for the weekend, but when we go shopping for clothes, you’re picking the clothes up.” Or other days I would be like, “Well, if you think you can afford it and you want it, you should get it!” I just didn’t have the language for saying, “Today, I’m gonna pay for everything,” or “Today, I’m not paying for everything,” because I had never been in that situation before.
I had a huge fight with her about this $4,000 watch. It was gross. It was like, I finally found something that I was really excited about. That I could go and reward myself–the first thing that I was actually going to spend maybe a little bit of ridiculous money on. But for her, she’s staving off student loans and is scraping together money to pay rent, and I’m talking about going and buying a watch for $4,000. And she’s like, “I can’t even talk to you about this.”
And you know, I broke up with her a year ago, and I still can’t buy that fucking watch. It’s like, “Fuck you, man, I worked really hard for this. And I deserve it. I put my ass on the line. I put everything I had–every dollar I had–and every minute I had–into this company for a couple of years!”
A 34-year-old investment banker:
You take someone like Henry Kravis. Here’s a guy who spent 40 years in New York, the grueling, big New York power banker thing, how pissed off must he be when these young guys and gals are doing I.P.O.’s and walking away with hundreds of millions of dollars–eclipsing his own wealth–and they’re like in their 20′s!
The people who have money in our economy now, and the power, is information technology people. They don’t write books about people like Henry Kravis, they wrote those books 10 years ago. Right? All those people in Barbarians at the Gate , the whole Wall Street thing of the late 80′s and 90′s, which New York City was all about. I think that there’s a lot of the people who are part of the old-money power establishment–the old, hierarchical, drink-your-martini, wear-your-red-tie-and-white-shirt, homophobic, frat-boy, baronial types–they want to get their fingers in this new business. They’re dabbling in investing in new media companies.
A 31-year-old Web company executive:
These frat-boy type M.B.A.’s at the Web companies–it’s such little-boy corporate culture. You know, like all the S-1′s [prospectuses] are available on the Web now. All these guys at my Web company have their “My Yahoo” [a personalized news Web page] set up. They read these S-1′s as soon as they come on line, and they compare them with a very critical eye, you know, making fun of whatever they think is stupid. A bunch of our guys were reading Razorfish’s S-1, comparing what ours would be like. It’s all like, “Well we’re going to be worth more money than them.” They definitely analyze, like, with Razorfish, well, “What do the principals make? What does Jeff Dachis make? Jeff Dachis only makes $100,000 a year.” It’s very catty. Womanlike.
Howard Greenstein, technical evangelist in the New York district office of Microsoft Corporation:
I’ve turned down jobs at half the companies that’ve gone public in this town. But I don’t care. Because I’d rather have my beautiful baby than an I.P.O.
A 30-year-old Web producer:
My girlfriend works at CitySearch.com. When they went public, all of the people who had a few shares of friends-and-family stock [offered at the I.P.O price] were able to sell their shares that day. I would call my girlfriend during the day and be like, “How’s it going?” and she’d be like, “I can’t stay on the phone because if the stock starts to drop, I’ve got to be able to call and sell!”
And later that night we spoke, and she said, well, at like 4 o’clock everyone was watching the market, and we decided, O.K., it’s on the way down, so everyone dumped their stock at, like, 4 o’clock. And she said basically everyone put their heads down and rested for half an hour because it was so stressful. They just, like, had to have a good, old-fashioned T.O., time out. Like in grade school. Checking the stock market every three seconds for an entire day just knocked everyone out.
A 28-year-old Web copywriter:
Most people have a tendency to gripe about money, and talk about how, “Oh, I’m broke.” And with this friend of mine, who has a high-up job at Agency.com [which is rumored to be considering an I.P.O.], that kind of conversation doesn’t happen anymore. There’s kind of, like, a silence.
There’s this kind of aura about him ever since his promotion to this big position. He’s Mr. Calm now. You see this patient waiting, just knowing that something big is gonna come. It’s kind of like my roommate who became a born-again Christian–it’s as if he had a secret that’s forbidden to outsiders.
The idea of becoming a multimillionaire, it’s part of the American Dream. That’s a fantasy that almost everyone has and very few people really get to realize. Knowing that that’s real for you must be a mind-blowing kind of knowledge. It must fry certain circuits. Maybe it just takes you to a different level and you feel like you’re floating slightly above–not in an arrogant or superior way, necessarily, but like you feel like maybe you’ve gone to another level from the people that you’re with, that haven’t gotten that.