Disrupted

by Dan Lyons

  “By the time you get to the IPO, I want to see people lined up around the block waiting to get into the theater on opening night. That’s what the first day of trading is like. It’s the opening weekend for the film. If you do things right, you put asses in the seats, and you cash out.” My friend has made a fortune for himself and his partners. He’s like a movie producer who keeps making the same movie again and again, and keeps raking in money at the box office.

  Venture capitalists will insist that they don’t engage in “pattern matching” and are not just looking for people who look like Mark Zuckerberg. But they are, and this makes perfect sense, because that’s what mom-and-pop investors want to buy. Investors in the public markets want to get in on the ground floor of the next Facebook. So that’s what venture capitalists in Silicon Valley try to make for them, selecting “college dropouts with insane ideas going after tiny markets with no idea how to monetize,” as venture capitalist Ben Horowitz of Andreessen Horowitz once put it.

  At one time, venture capitalists who invested in a tech start-up with a young founder would insist on bringing in “adult supervision,” meaning an experienced executive to help build the business. But today the conventional wisdom among venture capitalists is that it’s better to leave a young founder in charge and give him (and it’s almost always a him) free rein.

  Compounding the problem is the fact that Silicon Valley now attracts a different kind of person—young, male, amoral, perhaps not as evil as Patrick Bateman, the investment banker serial killer antihero of American Psycho, but cut from the same cloth. Guys who once would have gone to work on Wall Street hoping to get rich now move to San Francisco, where venture capitalists entrust them with millions of dollars and tell them to do their worst. “In all too many cases, what venture capitalists are investing in is assholes,” Sarah Lacy, editor of the tech blog Pando, wrote in a 2014 essay that was widely read and shared in Silicon Valley.

  Give millions of dollars to young entitled assholes, provide no adult supervision, and what happens next is predictable. You get Gurbaksh Chahal, the CEO of a start-up called RadiumOne, relieved of duty after being charged with domestic violence for allegedly beating up his girlfriend. (Chahal maintained his innocence and pled guilty to two misdemeanors.) Chahal previously appeared on the reality TV show Secret Millionaire and posed sitting on his bed, which had a headboard with gold trim and a gold crown over a golden initial G.

  You get Mahbod Moghadam, co-founder of Rap Genius, booted out of his own company after posting tasteless jokes about a murder spree on the UC Santa Barbara campus. You get Whitney Wolfe, the female co-founder of Tinder, suing the company for sexual harassment, claiming she endured months of harassment in a frat-house culture where she was subjected to racist, sexist, homophobic, misogynistic and insulting texts, including one calling Wolfe a “whore.” (The lawsuit was settled.)

  You end up with GitHub, a tiny start-up, raising $100 million and using the money to create a replica of the Oval Office, and Tom Preston-Werner, the president of GitHub, resigning after a female employee complains about sexual harassment and retaliation. You get Snapchat founder Evan Spiegel, age twenty-three, raising $850 million and needing to explain emails he sent in college urging his frat brothers to “have some girl put your large kappa sigma dick down her throat.”

  Along with personal misbehavior there have been allegations of misbehavior at the corporate level. Facebook was accused of invading people’s privacy and made a settlement (admitting no wrongdoing) with the FTC. Path was caught using people’s personal information without their permission, and apologized. Zynga forced some employees to give back stock options just before the IPO. Apple has been criticized for using complex accounting structures to avoid paying taxes in the United States, for exploiting underpaid workers in China, and for colluding with Google to prevent poaching employees; in the collusion case the two companies settled with workers who were suing for lost wages. An Uber executive reportedly threatened to spy on journalists. Groupon’s initial IPO paperwork used misleading financial metrics that the Wall Street Journal called “financial voodoo,” and which the SEC forced them to change. In 2012 Groupon had to restate its financial results after under-reporting its losses, attributing the mistake to “material weakness in its controls.” The two co-founders of Secret, a mobile app maker, raised a $25 million round of funding, put $6 million into their pockets, then nine months later shut down the company. “It’s like a bank heist,” one of their pissed-off investors said. (The investor later walked back that comment, saying it was a “poor choice of words.”)

  Start-ups seem to believe it is okay for them to bend rules. Some, like Uber and Airbnb, have built their businesses by defying regulations. Then again, if laws are stupid, why follow them? In the World According to Start-ups, when tech companies cut corners it is for the greater good. These start-up founders are not like Gordon Gekko or Bernie Madoff, driven by greed and avarice; they are Rosa Parks and Martin Luther King Jr., engaging in civil disobedience. There’s also a sense among start-ups that it’s okay for them to break the rules because they’re underdogs competing against huge opponents; they’re David, firing his slingshot at Goliath. Another argument is that the big guys break just as many rules as the little guys. Everybody cheats, and only suckers drive inside the lines.

  Presumably the venture capitalists in Silicon Valley know what will happen when they invest in young, inexperienced founders, and they simply don’t care. Sexual harassment scandals are easy enough to fix: Fine the founder, fire the founder, issue an apology, settle the lawsuits. From the perspective of the investors, this still works out best. If you just want to build something quickly and cash out, this probably all makes sense.

  What’s great for VCs may not be so great for the rest of us, however, especially as these companies make their way into the public markets. The last dotcom bubble led to a crash that wiped out the entire stock market. This time the amounts are even bigger. When AOL paid $10 billion for Netscape at the very peak of the dotcom mania, it seemed that the world had lost its mind. Yet Uber has raised more than $8 billion in private funding and is valued at more than $60 billion. By the end of 2015, Facebook’s market value stands at $300 billion, more than Walmart, Johnson & Johnson, and Wells Fargo, and about the same as General Electric. Twitter, which has yet to report an annual profit, is nonetheless valued at $16 billion, about the same as Fiat Chrysler, which makes an actual profit by selling actual cars, and more than stalwarts like Alcoa and Whirlpool.

  Just like last time, lots of smart people in Silicon Valley keep insisting that this all makes perfect sense and there’s nothing to worry about. This time it’s different. This time these are real companies with real businesses.

  Sixteen

  Ritual Humiliation as Rehabilitation

  Two weeks after my Facebook fiasco, in which I blasted Halligan for saying that gray hair and experience are overrated, it’s time to face the music. It’s the middle of December, a week before Christmas. Trotsky sets a meeting with me, in a conference room on the fourth floor. I assume this is the end. Cranium never likes to fire anyone himself. It would be his style to wait for Trotsky to come on board and then have Trotsky do it. But Trotsky assures me this is not the case and that I’m not being fired. I find this hard to believe.

  “I’m sure they want me to leave,” I say. “Maybe they can’t fire me, but my guess is they want you to have a talk with me and start paving the way for me to get out of here. The sad thing is, I really wanted to make a go of it here. And I was looking forward to working with you. Anyway, it’s my own fault. I should have just kept my mouth shut about the Halligan thing.”

  “Why do you keep talking in the past tense?” Trotsky says. “You’re talking like your time here is over.”

  I’ve been reading Going Clear, Lawrence Wright’s book about Scientology. The first rule in a cult is that you don’t criticize the cult. You can screw up again and again, and make one mistake after another. You can
churn out terrible parody videos and invent things like the Blog Topic Generator, and none of that matters, as long as you’re (a) enthusiastic and (b) loyal.

  If you’re disloyal, no amount of talent or ability matters, and what’s more, I don’t have any special talent for this work anyway. I’m never going to be content marketer of the year. I can’t write for Marketing Mary, or for Ollie the Owner, or for Enterprise Erin.

  Trotsky doesn’t want to hear it. As a matter of fact he has a big project for me. He wants to create a special series of e-books built around my “personal brand,” where I can write for a high-level audience. Also, he is going to move me out of the boiler room and set me up with a desk in the newly renovated space on the fourth floor, in a quiet room with lots of sunlight.

  “There’s just one thing I need you to do,” he says. He pauses. He closes his laptop and looks at me. “I need you to apologize to Spinner.”

  Ever since the Facebook incident, Spinner has been giving me the silent treatment. If I walk past her desk and say hello, she will look away and not respond. If someone sets a meeting and I’m on the list, Spinner refuses to attend.

  “You have to make things right with her,” Trotsky says. He tells me he can broker a deal where I will send Spinner a meeting request via Google Calendar, and she will accept my request, as long as she knows that the purpose of the meeting is for me to apologize.

  “I don’t have any problem with Spinner,” I say.

  “Great,” he says. “So just apologize to her.”

  “Apologize for what? I never said anything about her. I could understand if Halligan wanted an apology, but why Spinner?”

  Oddly enough, Halligan does not seem angry at me. I’ve run into him in the hallway, and we traded hellos as if nothing happened.

  Trotsky says I need to learn how PR people see the world. “Spinner just got her boss profiled in the New York Times. That’s a big deal for a company like this. It’s probably the biggest story that Spinner has ever worked on. Then you ruined it. You came in and peed all over her shoes.”

  In the world I come from, there’s no way that someone in editorial would grovel before someone from PR. Apologizing to the PR person who set up the interview is like apologizing to Halligan’s administrative assistant. Is Halligan’s admin angry, too? Does she need an apology?

  “How about the Uber driver who picked up Halligan at LaGuardia and drove him to the Times building? Is he disappointed? He drove all the way out there, and all the way back, and then I ruined everything. Should I call him up and apologize to him too?”

  Trotsky sighs. “Look,” he says. “I get it. But trust me. You should apologize. It’s the smart thing to do.”

  Fair enough. Trotsky is my new boss. I want to make him happy. I want to show that I’m a team player. If he tells me to do this, I’ll do it. If he thinks this is the smart move for me, then I’ll trust his judgment. He’s spent years working in companies like this. He knows more about office politics than I ever will.

  “Fine,” I say. “I’ll get on her calendar.”

  If groveling has to be done, I will at least put some effort into it. As soon as everyone gets back from the holiday break, in January, I go online, order a dozen gourmet brownies, and have them delivered to Spinner, with a note that says, “Can we be friends again please? If you want to yell at me for a while first, I understand. I’m married, and used to it.”

  She loves it. The whole team sees her get the gift box and open the brownies, and then everyone wants to know who sent the brownies and why, which means Spinner gets to tell everyone that I’m apologizing to her for being such a jerk. She puts the brownies out on a table so that everyone can share and so that everyone walking by will see them.

  When the two of us sit down for our meeting, I start by saying that I’m really sorry, but that before I say anything I want to just listen and hear her out. We’re in a tiny little meeting room, just big enough for two people, with a glass wall, so that everyone walking by can see us in there.

  She talks. Words come out of her mouth. I have no idea what they are. The parenting books that I’ve read suggest that to help a kid work through a tantrum you should start by listening empathically. So that’s what I do. When she’s done, I fall on my sword. I tell her that I respect her and admire her, and that she is an amazing PR person and a remarkable human being. My biggest regret is that this dumb thing that I have done might come between us, because gosh, if nothing else, Spinner is someone I hope will be my friend for the rest of my life. Our friendship really matters to me, I tell her.

  She nods as I speak, and says, “Agreed. Totally. Absolutely. Likewise. Absolutely. Totally,” in her vocal fry voice.

  The whole thing takes only a few minutes. The content of our conversation is not what matters. This was all about the gesture. This was about Spinner making me apologize to her, and having Cranium and Trotsky take her side.

  Now that she has gotten her way, we can move on. That is what I believe, anyway. I leave the meeting thinking that this bit of kabuki theater has made things right between us. As I will learn, Spinner still has a knife out for me.

  Seventeen

  A Disturbance in the Farce

  My stand-off with Spinner isn’t the only trouble that winter. Trotsky’s hiring has thrown a lot of people off balance, including Wingman. Half of Wingman’s job involves overseeing the content team. But now Trotsky will be doing that. Suddenly, Wingman has lost half of his direct reports and half of his responsibilities.

  What’s worse, Wingman is a director, while Trotsky has been hired in as a vice president and thus outranks him. Why should Wingman have a lower title than the new guy? Sure, the new guy is a decade older than Wingman, has more experience, and was a vice president at his last two jobs. But Wingman has more experience here. He’s been at HubSpot for more than three years! He is Cranium’s trusty sidekick!

  Cranium has a simple solution: He promotes Wingman to vice president, too. In a memo to the department, Cranium explains that Wingman earned the promotion by being a “yes man,” then adds that he’s not saying Wingman is a sycophant. What he means is that whenever he asks Wingman if something is possible, Wingman says yes. Can we double the number of leads we generate every month? Could HubSpot build a rocket and be the first marketing automation company to establish a base on the moon? Is HubSpot the greatest company ever? Yes, yes, and more yes!

  Cranium says Wingman’s willingness to give up half of his job in order to make room for a new guy shows that he’s putting the company first, ahead of himself. Wingman reminds me of Chauncey Gardiner, the simpleton hero played by Peter Sellers in Being There, who rises to become an advisor to the president of the United States, and at the end of the movie appears headed for the Oval Office himself. Wingman isn’t a simpleton, but he’s not overly burdened with intelligence, either. He was in the right place at the right time. Now he is a vice president at a company that soon will be publicly traded, and for what? Just for being there.

  Zack, however, will not be as lucky. His entire job involves running the content group. But now Trotsky is doing that. Zack literally has nothing to do. Nevertheless, we get a memo saying that Zack is safe, that he is not leaving the company, that he will be assuming a new role and remains a valuable member of the team.

  But that’s bullshit.

  “He’s dead,” Trotsky tells me, in one of our first meetings. “He’s gotta go.”

  Trotsky explains that there is no way he can join a new company, take away a guy’s job, and then let that guy hang around. It’s not personal, but Zack has to go.

  “How are you going to get rid of him?” I ask. I find this stuff intriguing. I know nothing about office politics.

  Trotsky leans back on his beanbag chair. “I’m going to help Zack understand that he would be happier somewhere else,” he says.

  He smiles. He loves this shit, and I get the sense that he’s good at it. Sure enough, two months later, in March, we get an email from Craniu
m informing us that Zack is “graduating” in order to look for his next adventure. The whole thing is handled with a smile and a hug. Trotsky’s fingerprints are nowhere to be seen.

  Trotsky’s appointment also spells trouble for Marcia and Jan, the two women who run the blog. For years they have operated their own little fiefdom, pushing people around, ignoring orders, and playing favorites. They bullied Wingman and dismissed Zack. Trotsky makes it clear that he’s going to change the way they do things, and that, unlike Zack, he has real authority and is not afraid of them. One change has to do with e-books. The blog writers are supposed to coordinate their efforts with the e-book writers. If the e-book team creates a book about, say, how to use Snapchat to sell pet food, the blog should generate articles about Snapchat and pet food, and use those posts to promote the e-book.

  Instead, Marcia and Jan do whatever they want. They might write articles about Snapchat and pet food, or they might not. Some of it comes down to whether they like the person who wrote the e-book. Some of it hinges on whether they feel the e-book people were polite enough to them or gave them sufficient notice. If Marcia and Jan refuse to promote the e-book, the e-book just dies, because nobody finds it unless it gets mentioned on the blog. Over and over, the e-book writers crank out books only to see them die on a virtual shelf, because Marcia and Jan refuse to play ball.

  That bullshit is over, Trotsky says. The blog women might not like his decisions, but Cranium has brought him in to break up the logjam and dysfunction, something that Wingman has been unable to do. Trotsky doesn’t shy away from conflict. He actually likes it. The blog women immediately start pushing back on everything he suggests, pointing out reasons why such-and-such won’t work. They sit in meetings with sourpuss expressions on their face.