On February 19, 1996, the ten young engineers came to work; on February 20 they flew to Boston to meet with Blue Cross/Blue Shield. Most of them had never heard of Blue Cross/Blue Shield. Here’s how Shankar Srinivasan recalls his bizarre first brush with a tiny appendage of the U.S. health care industry: “The first day was for them to tell us what they did and what they needed. The second day was for us to tell them what we were going to build. In between the first day and the second day, we had to figure that out. We sat up all night reading all this literature about health care. We asked, ‘What is the problem we are going to solve here?’ All we had was Jim Clark’s concept.”
Pavan’s engineers had no experience and no knowledge. But they had arrogance, ambition, and a blissful ignorance of the magnitude of what they were aiming to achieve. They had something else too: the faith that they could impose technology on others. In short, they behaved as people always have at the cutting edge of capitalism, with the conviction that they could remake the world in their image. They worked mad hours—many of them sent their families back to India. One morning at eight Clark showed up on his motorcycle to have a look around. He noticed Panos, a Greek engineer, tucked behind his computer work station. He said, “You’re here early.” Panos looked up and said, “I never left,” and went back to work. “The passion, the fire was there,” says Kittu. “There was a feeling that we were about to change the world. And we all now knew that was how you made money, by changing the world.”
Theirs was a sunny aggression, propelled by Clark’s will, his money, and his expectations. Any hope Pavan harbored that he might be permitted to fail quietly was quickly dispelled by a rearguard action of Clark’s with the journalists who covered Silicon Valley. Although Pavan knew that Clark spent a surprising amount of his time on the phone with business journalists, he thought they had agreed that for the first six months, until they had something to show people, they wouldn’t talk to the press. A couple of days after that conversation Pavan sat on the company toilet skimming the Wall Street Journal or USA Today or some other newspaper and saw a short article that began, “Jim Clark, founder of Silicon Graphics and Netscape announced today that he plans to remake the U.S. health care industry…”
The more interesting truth was that ten engineers in a small office in Palo Alto intended to remake the U.S. health care industry, with a bit of guidance from a doctor who had agreed to be their CEO only because he wanted to make partner at Kleiner Perkins, and an older man who was interested mainly in writing the code to computerize a yacht. And most of the engineers were not even citizens of the United States.
Stuart Liroff was a short, bearded American man with big, clean-shaven manner. Stuart was open, relaxed, friendly, large-spirited—and eager to be a part of the new new thing. He had joined Silicon Graphics back in 1990, and gone to work building interactive television in April 1995, after the Orlando trials but before the technology was unveiled in Japan. Several times Pavan hinted to Stuart that he thought Stuart was a cut above the average member of his team. Like a lot of other people, Stuart had been converted to entrepreneurship by the Netscape IPO. “That was the defining moment in all of our lives—’Ah shit, why didn’t I do that?” he says. “Every one of us had it.” And so when Stuart saw a certain change come over Pavan, he asked Pavan if he had plans to leave Silicon Graphics and start a new company. Pavan became agitated and told Stuart, “I can’t approach you about it, but there is nothing to stop you from calling me. Do you understand what I am telling you?” Stuart said he understood. And he did. The day Pavan announced his resignation Stuart faxed over a letter to Pavan’s house. It sat in the stack along with the three hundred other faxes Pavan didn’t read.
A few days later Stuart called Pavan and asked to talk. Pavan told him to wait two weeks and call back. Stuart waited two weeks and called again. Pavan failed to return his call. Stuart waited some more and then became irritated. “I called every day and I couldn’t reach him,” he says. “I left message after message. Now I’m getting bitchy. Finally I just said, ‘I’m going down there.’
Stuart found out that Pavan had rented offices in downtown Palo Alto and drove over. “I walk in. And there are all these people I know. There’s Motasim! There’s Kittu! And Shankar!” Ten engineers were crammed into a bit less than two thousand square feet, beavering away on some mysterious new project. “I see Pavan,” Stuart recalls, “and he says he never even saw my letter, he had so many letters.” When Stuart asked Pavan what the hell he was up to, Pavan drew a picture of the Magic Diamond. All the engineers loved the Magic Diamond, which Stuart remembers as “a picture with Jim Clark at the center of 15 percent of the U.S. economy.” It was like one of those cave paintings at Altamira, used by the hunter to secure his prey in advance, simply by depicting it on the wall. The engineers were hexing their prey.
Anyway, once he caught the drift, Stuart was even more eager to be a part of the new company. He asked Pavan for a job. “And Pavan says, ‘I want to know what you’re going to do for me?’” At which point Stuart did a kind of double take: Pavan, it’s me, Stuart. “In the end I just sort of made something up.” Stuart knew that Pavan was an engineer’s engineer. The most gifted people wanted to work for Pavan because he didn’t waste time on the details. “He focuses on engineering the design of the product,” Stuart notes. “He says, ‘Screw the details…for the moment.’ It’s aggressive, but it’s not stupid.” Stuart realized Pavan wasn’t thinking about how to test the product, how to record the work. “He assumed other people would take care of that stuff. I said I was other people. And he said it sounded good.”
And then Pavan, busy trying to make himself an expert on the U.S. health care system, promptly forgot. “So two days later,” recalls Stuart, “I drove up there again and ambushed Pavan. We went over to a coffee shop and in a few minutes figured out my salary and stock options. That’s how I got my job at Healthscape.”
It wasn’t quite as simple as that. Pavan explained to Stuart that the usual American standards of diligence no longer applied. To work for Healthscape meant more or less abandoning his private life. Stuart took the job anyway. As he wrote to me later,
The potential for making a lot of money was always there, implicitly. But when Pavan and Jim negotiated my compensation the only explicit articulation of it was a 35% pay cut! The rest was funny money, in the way of stock options, and I had absolutely no frame of reference to base the value of these options. So my wife and I made the decision to quit SGI and join Healthscape based on my belief that P, J, and KP [Pavan Nigam, Jim Clark, and Kleiner Perkins] were going to do something great and I was just going to be a part of it. She asked me how much I could make and I remember saying something about “never having to work again.” I remember telling someone, rationalizing why I had just quit SGI, ‘“Never in my life will I find all of these stars lined up at the same time: P [Pavan], J [Clark], KP [Kleiner Perkins], the diamond with the H in the middle.”
Stuart Liroff was the eleventh person, and the tenth engineer, and the second native-born American, to come to work for the new company. He joined at the end of February 1996. He was given a desk in the canteen bordered by the refrigerator, the sink, and the fax machine. He worked one hundred and twenty hours a week—so many hours that the notion of “work” and “home” was absurd. Life was work—or at least being in the office. “Pavan in his inimitable wisdom grabbed a date out of the air and said, ‘We can deliver a product on October 1, 1996.” And no one had a clue what the product was. All we knew is that it had to be a really huge piece of software—so that it would look right in the middle of this huge diamond.”
In spite of the obvious stress that came with his new situation Stuart was delighted. “It was three am,” he recalls. “I’m sitting there drinking espresso, listening to music, and writing up some notes about the software and…I could never explain this to anyone…not even my wife…I was so happy. I just laughed to myself.”
That’s how they all felt that firs
t nine months, as they rushed to complete their first piece of software, for Blue Cross/Blue Shield. They felt they were doing something important. Blue Cross/Blue Shield was just the initial foray; soon they would sit in the middle of the Magic Diamond. Other engineers begged to join them! Journalists came from afar to interview them! Jim Clark rode into their lobby on his motorcycle! Before long Fortune magazine was ready to go to press with the first article on the company—before Healthscape was even really a company!
Just then the engineers were told that some enterprising person, on the heels of Netscape, had bought the rights to all sorts of names ending with “-scape,’ including “Healthscape,” and wanted a fortune for its use. The engineers already had their logo, a big blue sign with “Health” in the middle. So they sat around thinking up names starting with Health. Health Now. Health-O. Health-a-Thon. In the end Healthscape became Healtheon. And they were on their way.
In short, Clark’s latest little act of nerve triggered such a violent wave of talent and money to come washing his way that within a few months a lot of serious people were saying things like “Health care’s the biggest market, but Jim Clark already controls that.” But by then Clark was fully aware that all he had to do was announce to a few journalists that he intended to insert himself in the middle of the world’s largest industry, and all sorts of serious people were off and running down his long, dark tunnel.
That’s where his job ended, so far as Clark was concerned. After he’d drawn his little diagram of the world’s largest market with himself in the middle, he was finished. Other people could take care of the messy details of turning Healtheon into a giant corporation. That’s what he always said just after he had disgorged the new new thing, and the new new thing became, simply, the new thing. He was not finished, however. The one hard rule in Jim Clark’s life was that he must always pursue the new new thing. Three multibillion-dollar companies was not enough for one lifetime. Once when I’d asked him how he planned to convert his wealth to leisure, he said, “You’ve got to figure out something that is out of the path of Microsoft. You can forget building a big software business. If it is going to be big and it is software, then it will be controlled by Microsoft.” Another morning he went off on an old-fashioned tear the point of which was that Healtheon would prove that he had nothing more to prove. “They can say that Silicon Graphics and Netscape was just luck, but when I do it again, and Healtheon will do it, they can’t say it was just luck,” he said. “I don’t have to do it again.” Not long after that he said, “But it would be something to do a fourth, wouldn’t it?”
Well before Healtheon became a success, he was groping. He programmed his boat and he groped. Each time was harder than the time before because each new idea had to be bigger than the one before. Netscape had been bigger than Silicon Graphics; Healtheon he felt sure would be even bigger than Netscape. What was bigger than Healtheon? “I could always make fifty million dollars,” he explained to me once. “But who needs that?” He didn’t have time to create companies that were worth only fifty million dollars. Fifty million dollars didn’t count. Hell, his boat had cost fifty million dollars, when you added in the tax bill. When he groped, he groped big. He was a multibillion-dollar corporation perpetually waiting to happen.
He was also a rare case of a man with the Chinese curse: he had gotten what he wished for. He was treated better, and paid more, than anyone else in the Valley. He owned three times more shares in anything he dreamed up than anyone else, and other people did most of the work. And now—this was the curse—he couldn’t stop. Even if he wanted to, which, occasionally, he claimed he did, he couldn’t stop trying to force the hand of the future. He was doomed to be forever searching for the new new thing. If nothing else, he now had an audience to play to. It was as if he had sold ten thousand tickets to a one-man show and now found himself standing on a stage, wondering how to keep the people in their seats. Venture capitalists lingered at his feet like Labrador retrievers watching their masters dine. Bright young people streamed out of Netscape and Silicon Graphics and a lot of other companies, begging for Clark’s help. Clark’s enthusiasm for his calling was almost viral. Young people didn’t need his money—they could get money from venture capitalists. They needed his imprimatur on their new ideas. Some of them didn’t even have an idea, just an idea that they might like to have an idea. All of these budding entrepreneurs wanted to be around Clark in the same way normal people wanted to be around at sunrise, just to see where the light came from. They wanted to see Clark stand up and say, “Behold, the new new thing.”
The whole situation was preposterous, or would have been at any other time and any other place. But, as Clark himself realized, a number of things had changed that made his approach to business, and to life, viable.
The first and most obvious change was the miracle in the U.S. stock market. From the launching of Netscape to the launching of Hyperion the Dow Jones industrial average ran up more than 5,000 points. More to the point, the Nasdaq stock exchange, which listed most new technology companies, quadrupled. The market paid people a great deal of money for technology companies that made only losses. The American public decided that it was willing to take a flying leap into the future, which is to say it was willing to take a flying leap on whatever Jim Clark, and entrepreneurs like him, were willing to take a flying leap on, at ten times the price.
The second thing pushing Clark on was the nature of the software business. Netscape and the companies that followed it were in important ways different from Silicon Graphics. The most important difference, at least from the financial point of view of those who dreamed up the companies, was that they cost almost nothing to start. All you needed was an idea, some excellent engineering talent, and a pair of big brass balls to execute that idea. You didn’t need to raise millions to build your product and in the process whittle your stake down to almost nothing. You found the concept, you wrote the software to exploit the concept, you sold the company to the public.
All of this caused, and was in turn caused by, a subtle but important shift in the Silicon Valley value system. And that was the last reason Jim Clark was the man of this particular moment. “Silicon Valley has more in common with Hollywood than it does with Detroit,” says Vern Anderson, the first CEO of Silicon Graphics and thus the first captain of the first ship built by Jim Clark. “The venture capitalists are the studios. The managers are the directors. The ordinary engineers are the writers. And the entrepreneurs are the stars.” What happened in Silicon Valley is a lot like what happened in Hollywood once the studios lost their clout. The stars seized power. And once they’d seized power they raised their price and demanded the right to direct their own pictures. And very great stars like Jim Clark cut deals worthy of Marlon Brando. They showed up on the set for a few days then strolled away with half the budget.
And so, even after he’d drawn the Magic Diamond, Clark groped on. For a couple of months during the summer of 1998, there was a fellow named Greg Kovacs, whom Clark had somehow gotten to know at the Center for Integrated Systems at Stanford University. Clark had walked into Kovacs’s lab, peered into a microscope, and found himself staring at what appeared to be an ordinary computer chip. The chip began to pulse, as if it had a heartbeat. Kovacs had grafted the cells from the heart of a chicken onto a chip. The egg cartons were piled up behind Kovacs’s door, as if to prove it. The electrical impulses of the cell “spoke” to the chip. The chip was alive!
For maybe eight weeks the idea of a living computer chip had Clark’s mind racing down its long, dark tunnel. Kovacs already had a deal with the Defense Department, which thought the chip might come in handy in biological wars. Clark thought about other applications. Actually, he thought back to his graduate work at the University of Utah, where he had become fascinated with the idea of recording the electrical impulses in the brain and creating a kind of library of thoughts and sensations. If you could graft a cell onto a chip you could graft a chip onto a cell. “I’m sure in some w
ay the neurosystem will one day be integrated with the computer,” said Clark. “Wouldn’t it be great if you could neurally integrate, say, the number 500342?” Chips could be planted inside the human body. Clark went to his friend John Hennessey, the dean of electrical engineering at Stanford, and offered to pay for a new field of study, which he wanted to call biocomputing.
Then one day Greg Kovacs disappeared, and Clark never mentioned him again. In place of Kovacs came a steady stream of young people, toting their inventions and ideas. There was FM and AM radio on the Web. There was local news on the Web. There were the countless fruits of the Human Genome Project. It wasn’t uncommon to find Jim Clark talking to someone with a glass of wine in one hand and a petri dish in the other. They came to his house. They came to his office. But if they were smart they came to the boat. The boat was where all serious gestation occurred. The boat was where he kept his mind alive to the possibilities.
Hyperion was not merely a technologist’s utopia or a budding new new thing. It was both of those things. It was also a place where Clark could remain apart from the environment he was continually reinventing. 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 outsiderliness was what gave him his unusual view of the world. His talent for groping the future was generally viewed as a supernatural gift, but it was a matter as much of his limitations as of his strengths. He could see human society in ways that most businessmen could not, because he was not very much a part of it. And consciously or not, by retiring to his floating island, he preserved this precious limitation.
The New New Thing: A Silicon Valley Story Page 14
