Keith Watanabe * NET 2.0

I saw this article that was linked from another article I was reading on recognizing good programmers.  While I eventually would like to comment on the original article, the article below deserves more of my attention because I was apart of that whole myth of internet start ups and worked for both successes and failures simultaneously.  I don't want to go point-by-point on criticizing his view of the mistakes made by startups, but instead, I'd like to offer my points on why startups had failed during the dot-com boom:

Vulture Capitalists (i.e. venture capitalists):

There's really nothing wrong with borrowing money, but when you borrow money from these people, you better know why you're borrowing it and what they're going to do.  One of my companies, which I felt had good potential for long term success, died horribly as a result of our  venture capitalist's attempts at installing their own personnel to control the company.  My company had at one point taken out around $5 million and as part of the deal it was up to the president to grow the company up to 200 employees within a year.  However, when you looked at the sheets, everyone knew that the numbers did not match.  The upper management receiving at least over $100k/year, the peak having roughly 60+ employees, while we were taking in about $100/k month.  Anyone with any common sense would realize that there were no profits being made, so the young employees muttered about the sheer insanity of that kind of deal.

The thing about venture capitalists is that their business isn't necessarily in putting seed money for companies to succeed.  It's all a gamble for them so quite often that seed money blows up.  Obviously, people often hear about the big success stories like Sequoia Capital who would fund companies like AOL and Yahoo, but I'm certain that they have their rotten eggs as well.

What got me in that particular company wasn't that the company attempted install their own management (they initially ousted the original CEO).  The thing is that when the mood for the dot-coms began to sour, the venture capital group pulled their money out and essentially killed any hope that my company had for succeeding.  As a result, a huge number of layoffs occurred, they even made it to fuckedcompany.com where some rather "mature" people made "mature" comments about each other.

Bottom line: don't borrow money if you don't have to.  Borrowing money is the business equivalent of selling your soul to Satan.  And Satan wants his share of the pie in the most unscrupulous of manners.

Lack of Understanding of IT

The article linked below unfairly blamed a lot of "bad programmers" on the failure of the dot-coms.  It's not the first time I've heard that either.  I mean, during that period you had insanity going on such as a kid with some buzzword on his resume getting monstrous figures for only having 1 year's worth of experience (guilty!!!!!).  But I've worked or interviewed at startups where there were so-called "good" programmers and that these companies just never made it or blew up (etoys is a case-in-point, and yes, I did interview there). 

However, let me counter that quite often a lot of management have so-little experience on large software projects and don't really understand what it takes to create a successful software project.  The whole notion of a dot-com is a large scale software project.  You need a ton of solutions to make it succeed such as the shopping cart, shipping management, trouble ticketing, support, server maintenance, etc.  Fewer can estimate a project time line for such a monstrous entity and fewer can even project a budget.

The biggest thing for me is that I think few people really understand how software works when it comes to development and maintenance.  At my last company, we had a huge department for IT, around 300 people with more than half being vendors.  People believed (as the Man Mythical Month always shamefully advises against) that putting more people on a solution does not make the solution come closer to the deadline any faster.  It just overly complicates an issue.  I tried explaining that aspect to upper management but everyone refused to listen.  Naturally, our project got bloated with all the confusing layers of forced project management and useless meetings.  In the end, the project barely squeaked by, but it was so horribly done that I heard even after I left, it had a lot of problems just trying to make it through.  And here's a company with a lot of money.  Sure many of the developers on the project weren't good, but how can you really cite them for the projects near failure when it was the politics of upper management for signing off on all the decisions?

Then there was another company which failed miserably that was one of my first dot-com startups.  This company wanted to do some simple things: sell clothes, vitamins and perfume at discount prices.  We had a good ninja haxor programmer tucked away some place, so you couldn't fault that guy for not making the company fall apart.  What killed the company was that you had two guys who thought that they could apply their business knowledge to a large scale, money making IT project.  One guy's background was running a small Vietnamese supermarket, while the other guy was a consultant with Intel or IBM (he bragged about knowing the CEO or president from one of those companies; my reply?  What did he do?  Carry the CEO/president's golf clubs around on the course???).  They wanted to treat the whole process as close to an assembly line process as possible.  But they hired a bunch of college kids for cheap without even providing proper employment agreements.  This isn't an unheard of business because a lot of companies tend to optimize by skimping on the operations factor.  Then whenever a problem was brought up by myself (who knew some things about websites), these people would try to shut it down and do unprofessional things from a management point of view (like overworking us and nearly making me crazy!). 

The biggest thing was that the president was taking too long to launch the site because he wanted some perfect thing.  Part of that was to just show/appease his investors that they had this professional looking site.  I never was a guru for websites but I tried making the thing look half way decent.  Yet, arguments persisted and eventually I left for stress and their unprofessional conduct.  That person below might argue, "Hey, you hired a bad HTML person!  So you failed!"  Well....not quite in my estimate.  I see it as that you had two guys who knew nothing about websites.  Why apply this Vietnamese, save-me-money type of typical mentality to a poorly conceived idea and think it's going to succeed?  The operations manager would often spout off how their competitor bluefly.com was making tons of money off their IPO (yes, let's collectively laugh at this one in hindsight); it was blatantly obvious that he was blind to his own ambition rather than being focused on trying to get the thing to work.

Not long after the company folded after only raising around $400k.  They probably lasted a total of a year or so.  They tried starting up various times, even with a company that supposedly created them garbage.  But again, can you fault the people who built their site or the fact that these people, these "leaders" really just didn't know what to do in the first place?

The thing is that a lot of people like to put the blame on the little programmer just trying to get by.  We Asoks/Dilberts are meant to take blame when upper management fails in admitting their own mistakes and swallowing their pride.  It's inherent in the nature of the work of engineering since most companies just don't appreciate nor really understand engineering for what it is.  But you cannot fault a guy just for doing his job.  It's an unfair criticism made over and over again for deeper issues, just like how Homeland Security and the TSA try to make their own jobs easier and the lives of citizens worse by implementing shitty rules like the recent limits on batteries.

Unknown Expectations

There's a saying in IT about the ideal of a software developer should be to always "under-promise and over-deliver."  However, how can one make good on a promise and delivery when expectations are not defined?  There's an infamous cartoon showing the different expectations on delivery between marketing, sales, the customer, IT people, project management, etc.  If you worked on any project, you'd probably get the joke immediately.  But the point of humor is important because it describes a common problem: lack of understanding of expectations.

I think this was an enormous and fatal flaw, if not one of the biggest, during the dot-com period.  The best description for this is a story from when I went to an English cafe in Ebisu here and met a guy who ranted about how the internet never delivered.  Well, the first question that comes to mind is, delivered on what?  What do you want?  I really think that a lot of the hype surrounding the internet was more geared towards young people and techies like me who grew up on decrepit systems.  But what wasn't realized at the time was that you had a huge group of people that never probably touched a computer in their life.  Then, kinda like how a Japanese girl thinks that Disneyland and Santa are real, these people felt that movies like the Matrix, novels like Gibson, etc. were what the internet was supposed to be.

I got on a computer network the first time my senior year in high school around 1993.  I got to post email messages via a modem and thought, "Hey, this is the coolest thing!"  So when we go to the web and were able to do something more meaningful like seeing your favorite pictures of hot actresses, buying items off of ebay, or even getting a job through a recruitment site, naturally I felt that humanity made real progress for once in my life.  But I think my experience was not the same as these "norms" who simply believe that a computer is a blackbox. 

These days when I look at the success of Apple I can attribute a lot of that to the high level thinking of Steve Jobs.  He spouts a lot of philosophy that just simply makes sense.  The focus on 80% over 100% in terms of features.  The criticality of design and user interface/experience.  While Windows has the majority users, Apple has religion, culture, and loyalists.  I'm not much of a Mac person myself but just look at things like the iPhone or iPod.  Perhaps because of the design, these things became closer to what people actually expected. 

For engineers, we have to take a step back and examine what we are doing and our relationship with our customers/users.  I think most engineers build things for themselves and forget that other people exist.  I know I'm guilty of this compulsion.  More importantly, we have to think in terms of expectations and try to get into the minds of people outside of ourselves.  When Jeff Bezos talks about "thinking outside of the box," I feel that we should replace the word "box" with the words "our own mind."  Many engineers (good ones at that too) that I know tend to be egotistical and worse yet egocentric.  That means, they honestly don't give a crap about other people nor what other people think, despite any rhetoric they may spout off about being virtueistic as a result of being an engineer.  When you get into this mindset, it's dangerous because you forget what you're trying to accomplish in the end.

But let's go back to how this all relate to the notion of failure during the dot-com bubble.

This scenario to me illustrates the problem that the internet was just precocious at the time and that we had a simple episode of Social Darwinism.  There weren't enough people onboard at the time and everyone was racing to be first.  But people weren't really thinking about what they were attempting to fulfill and it cost a lot of people jobs, pride, lives, etc.

On the other hand, look at things now.  In about 10 years, we're seeing some magnificent things going on again.  We have things like youtube redefining Big Media, social news slowing triumphing over traditional news, the closing of brick-n-mortar stores like CompUSA and Levitz while online websites like ebay and Amazon prosper massively.  Online was an eventual move that we needed to make.  But I think people weren't ready at that time.  As younger, hip kids grow into these things, it'll simply strengthen the fortifications made originally by pioneers at that time.

Exploitations By Consulting and Computer Companies

While I don't blame individual (bad) engineers for the failure of the dot-coms, I do site large companies who DID understand IT quite well as being a tremendous pain-in-the-ass and the detriment for many of us who did have engineering jobs.  I'm talking about companies like Sun, BEA, Oracle, etc.  Cost is a funny thing because cost is what makes people quite often do irrational things.  During the dot-com period, you had companies like BEA come in with their sales representatives, targeting upper management and convincing to sign agreements after these unproven charts of ROI or other buzzwords that made it seem that their software/product would give the company more bang for their proverbial buck.  Management, being management and not engineers, unquestioningly agreed to these exploits without understanding their consequences.

Truthfully though, when you work with WebLogic, EJBs, or Oracle, do these platforms really improve your delivery speed?  Why is it that so many companies now are moving towards Open Source as opposed to closed source products?  Particularly, why are people going towards software like Ruby on Rails?  Did these companies truly provide solutions that gave back on ROI?

In my experience in software, the success of a project has honestly little to do with the implemented technology quite often.  The success of a project has, on the other hand, everything to do with the people involved.  So we again can latently start focusing on developers as the ultimate target because they have to do build it, and yes a lot of software development involves the skill level of the engineers.  However, as with any company, there are sign offs and decision making processes that equally experienced management should understand.  So if you had a solid IT director/CTO/CIO in charge, he would or should have enough experience to hire the right staff in order to support the company's vision.  If that guy has has connections with a great group of Java or perl developers, then he should hire them and focus on the technologies that those people understand.  No matter what though, you need to start from the top in order to make the correct decisions in technology.

Going back to Sun, etc. I've always had a personal grudge against their viral sales methods.  Remember the whole "we're the dot in com?"  Or something stupid like that?  Well, people moved to Linux and Intel hardware because it's cheaper.  Cost factor.  Java wasn't the second coming of Jesus nor was J2EE.  But a lot of people like myself had a horrible time trying to get back into the market because good platforms like mod_perl, etc. were given a bad name by Sun.  Not to mention all those jobs simply got offshored to China and India, since they supposedly had a proliferation of engineers who excelled in these areas (but in reality it was just a large number of people who could work for cheap on a particular type of technology; these people, in my experience, necessarily weren't the best I've seen).

To this day, I can never forgive Sun (especially) or some of these other companies for doing these things.  While I don't think they were totally responsible for the death of a lot of companies, at least they weren't responsible for the success at the same time.  Not to mention their stuff was overly expensive.

Exploitations By Recruiters

There's a great Dilbert cartoon episode where Wally interviews with a company that practically would give him everything he'd want just because he was an engineer.  Obviously, this particular cartoon was a mock of the insanity surrounding the dot-com period for companies doing anything to attract good engineers.  However, the mild point that seemed to be overlooked in the show was the recruiter who phoned into Wally.

Recruiters equally are reprehensible and responsible for a lot of companies' failures.  Why?  They simply grabbed talent and created instabilities in the market.  Also, if bad engineers were at fault for the problems of the dot-coms, the recruiters, MORESO, should be blamed for the burn-and-churn methods of gouging companies for their most valuable assets.  Even to this day, I've worked with so many bad recruiters and many of them simply don't understand an industry or the individual.  They monitor keywords on a person's resume having a solid feeling for whether or not a candidate is right for a job.

So is it wrong to blame a lot of young people being employed at the time for jumping?  Or is it simply common/business sense for them to take better offers when presented the chance?

To me, it wasn't bad engineers at work.  It was a market place created by recruiters exploiting the insanity.  Engineers like the recruiters, simply took advantage of a good environment.  If a company was stupid enough to hire a kid with 6 months of mod_perl experience at $45/hour, is it the kid's fault for taking the job or the company's fault for not having enough sense or know how to screen the kid?

Let me provide another anecdote.  I worked at a company as a consultant for 4 months. This company was quite good and paid me the $45/hour even though I had less than a year's work of perl.  My previous company had moved me up from a jr level developer to a senior programmer because I had done well and I guess they wanted to retain and reward me with a title after the other senior developer left.  So during this time I had a lot of phone calls and ended up at the aforementioned company.  I passed the screening which wasn't hard at all.

My coworker was a kid in school with a year or two worth of experience under his belt.  He was actually paid at a higher rate than me because his father helped him setup his own business.  That would allow him to avoid going through an intermediate company and receive a higher rate at the end.  During the entire time, my coworker coded his own sites, came in late, and lied on his timesheet.  Ultimately, the company did not renew his contract. 

While that company is still around, obviously, he had stung the company somewhat with his exploitation of a situation.  Yet, why didn't the recruiter perform proper due diligence against this guy?  Here we were a company that specialized in doing due diligence and a kid with enough street smarts knew how to get around the system.  An experienced, good recruiter would've suspected something based on the resume but obviously he was making his bones just getting the kid.

Then on my side, I was doing some key things with my last company.  The recruiter simply appealed to my sense of business when it came to the dollar figure.  But obviously that hurt my previous company because there was no way they could make the amount.  Still though, the recruiter told me some things that only now I realize were ways to manipulate me.  He said that once I had doubts about working with a company, you could never go back, loyalty or no.  Because I had moved, I made a little extra money, but at the same time, I lost credibility in the long term because I had been exploited.  I don't think I would go back in time and change any of those decisions, but the mentality given to me had hurt my long term prospects.  Fortunately, I'm good enough, focused enough and weary enough to know how to work with the system, but it still hurt my career.

First To Market/Get It Out ASAP

Being first to market really has little to no meaning for me.  I've seen too many projects, companies, products, etc. that attempt to push out things so fast that when it comes out, it doesn't meet expectations (going back to my previous lesson).  Being first to market I think is an insidious method for management to force people to work harder.  Obviously, you need to eventually deliver, but trying to beat the competition for the bragging rights sake to me isn't the best business plan around.

What I problematize with the notion of First To Market business strategies is the potential for burning out employees.  I worked at three companies that wanted to do a type of First To Market type of product/project, but all ended up failing.  One company wanted to do a multilingual domain name sales deal.  I understood the fundamental business ideas behind this, which was to simply sale a greater variety of domains.  However, I don't think a lot of people really cared in the end for multilingual domains as it was technically difficult and most people simply weren't interested.  Supposedly, some simple projections convinced the CEO otherwise, but I was utterly convinced of his lack of knowledge of culture in other countries that he was mislead in this fatal form of thinking.  We did a lot of work on this project, even some people coming in on weekends.  I didn't want to at that time because I was far and was quite burnt out by that point.  Eventually, I got laid off since apparently, I wasn't learning enough.

Right now, the company practically is in a state of hibernation and no one from the original group are there now.  They had this idea, which wasn't great, and it floundered.  But they wanted to do it before anyone else.  And I feel that the type of work did not benefit just trying to get it out before anyone else.

In another instance,  one company was a small company doing online ads.  Now, honestly, it wasn't so much of a First To Market but a huge push to churn out something asap.  Eventually, one of the founders left, which meant paycuts.  I said, "Fuck this" and took off without notice.  Prior to that point, I had been working roughly 80 hours/week.  I'd go in around 11 and leave at 3 am.  My coworker and I would mutter on the side how dubious of a place that office was.  At that point, I had been so upset with the company because of the slave-like labor and unreasonable management that I stopped caring, even though I still had debt.  I didn't even think about how an operation like that would impact my future.  But I was really burnt out.  At any rate, not soon after the company eventually folded and changed names. 

The thing here is that just pushing something out asap means nothing.  Look at Friendster and how it compares now with Facebook or Myspace.  Or take a look at the success of the iPod.  It certainly wasn't the first.  Or look at the game Warcraft.  One of Blizzard's center points of pride is simply to get it done right the first time.  A successful product, website, or company is not something that occurs first or that you bribe people to make it successful.  A success story involves having a good idea, a good product, great people working with each other and A LOT OF LUCK.  I'll summarize this at the end.

Greed

If there's one thing most of us will agree upon during that period, it's that without question greed  was a huge deciding factor in the overall failure of many of these companies.  In each of my own experiences, what I saw at the core of a problem (outside of bad ideas, horrible management, lack of IT perception, etc.) was that people simply were too greedy.  People wanted their cake and eat it, but no one could figure out how to make something simple work day-by-day.  You hear about legendary stories like the companies which would have these crazy parties with The Who, or CEOs driving their limos, or even IT workers buying houses on stock.  The greed was epidemic. 

But it's kinda sad in some way because to me the worst part was that the dot-com failure simultaneously demonstrated the fallacy of the American Dream.  Wanting more and having a dream environment are not sinful notions.  Everyone simply wants a higher quality of life.  I don't see what's wrong with being able to go to work in shorts, driving a nice car, having a nice home for your family, eating free good food once in a while. 

When the plug was pulled on many of us, it was a horrible wake up call.  For myself, I thought that the damage done by the dot-com bubble was irrevocable.  You had the employees calling the shots during the dot-com bubble.  Afterwards, you had the reverse relationship again.  It's a real tragedy because as I see it, it's completely un-American for something like this to fail.  It's un-American in that there's no democracy in the corporate environment.  Employees should call the shots, not the board members, shareholders, venture capitalists nor a select few pulling the strings of the many.  It's also very un-American in that America did not truly attempt to respond as a country to this crisis, instead allowing companies to fail without much hope of a bailout.

I've always said that part of this was a conspiracy by the larger brick-and-mortar type of companies who feared for their existence by all these new upstarts, threatening to change the way these companies did business.  I mean, look at how in the current finance crisis with the subprime loan problem, you're seeing the government and other businesses attempt to intervene in pulling companies like Countrywide out of the outhouse.  The failed companies I worked for never had such luck.  Maybe some assets were bought out but pretty much the employees were left for dead.

Summary

Any of us who worked in this period for one of these companies have varying opinions on why the dot-coms failed.  I think it's harsh blaming engineers as a huge cause.  I've seen a few bad apples, but I couldn't say that they were the sole cause of this.  I think that argument has been made mostly by incompetent management or haughty engineers who found it difficult to find good work during the bad years.

What I am offering are my own anecdotes, where I'm certain other people were involved in similar situations.  If I were to name the biggest problem, it's simply the sin of greed.  It affects everyone.  Obviously, the subprime loan crisis going on now is another symptom of this while the online advertisement fever that is building will eventually feel similar consequences in a few years.  Then we have to look at the new buzz of industries like green technologies, nanotech, biotech, etc.  I don't think it's easy for any layman to get into those industries compared with building a simple web application.  But those industries are bound to see booms and failures as well, yet not as a result of bad engineers.

The issues of large scale failures are harder to pinpoint on individuals, but I do see trends emerging like buzz, bubbles, greed, bad ideas, bad management, unknown expectations, lack of vision, bad luck, etc.  These are more symptomatic of industrial failure compared with one poor Asok.