Leaving Reality Behind: Inside the Battle for the Soul of the Internet

idealab! was to forge a radical, speedy, cheap and multiplex way of manufacturing corporations, very different from the slow and prudent methods of the old economy. As one early headline about the venture happily proclaimed, ‘To be an online company, first throw out old rules.’

Gross’s intention was to create an environment that was perfect for frenzied entrepreneurs like himself. Most importantly, idealab! would take responsibility for the dull procedural elements of Internet-company set-up – such as providing office space, recruiting senior managers and legally incorporating the companies. Gross considered that the economy of scale would allow his managers to singlemindedly focus on the problems unique to their individual businesses and so come up with creative solutions. The key to successful business, he was convinced, was the ‘maximization of time and efficiency: having everybody spend every minute of every day doing precisely what maximizes the organization’s prospects.’ The Netscape IPO had demonstrated that the speed at which ideas were executed was the essential ingredient of Internet success. Indeed this was so fast that Silicon Valley types began talking ‘Netscape Time’. As Fast Company magazine headlined in November 1995: ‘Are you fast enough? Are you hungry enough? Are you tough enough? To work, live, compete in Netscape time?’ Bill Gross thought that the idealab! companies would benefit from shared knowledge across the various start-ups, proudly declaring that idealab! would ‘do in four and a half months what would take another Internet start-up nine months to do.’

Gross also wanted to capitalise on the uniquely low cost of creating an online business. ‘It used to be that the main thing you needed was money to start a company, but you don’t need that anymore,’ he said. At only marginal expense, it was possible to have a window on the world. This meant that idealab! could create a shoal of tiny companies, some of which would barely see the light of day while others would stumble towards independence. Those that made it to the starting gate were given $250,000 and told to find their way in the world.

Despite his enthusiasm for his own ideas and his ability to create companies, Gross was faced with an enormous obstacle: he lacked people to run the various businesses. There was no cohort of bright, experienced managers wanting to take a chance on a risky new venture – why would there be, when they could happily earn fat salaries in stable blue-chip corporations or management consultancies?

To solve this tricky problem he recalled an insight gleaned during his time at Lotus: that a stake in the company is the greatest of motivations. So he came up with a remarkable new form of corporate ideology, which he called the New Math of Ownership. Whereas traditionally companies would own the majority of their subsidiaries, Gross would re-calculate the balance and give his top managers substantial chunks of their businesses – normally about ten per cent. Gross would keep about fifty per cent, the remainder being divided between other founding staff. He said he had ‘decided to put this arithmetic – this notion of relinquishing ownership and of letting go – at the very heart of a new venture.’ This striking break from the norm allowed him to recruit a group of managers from blue-chip corporations such as Disney and Lotus.

During the first year of idealab!, Bill Gross became a weather vane for the fashions of Internet-business models, creating companies that seemed to mimic almost every possible fad. The first of these to appear was PeopleLink, which created software for servicing online chat rooms, instant messaging and message boards. It was a brave move that PeopleLink should set out to commercialise these not-for-profit online forums where people discussed their common interests. These had existed for years but had not been used for commerce.

It was hoped that following the influx of new users, PeopleLink would create new and profitable Web communities. Similar ideas concerning radical shifts in the meaning and purpose of Internet communities had been expounded by John Hagel and Arthur Armstrong in their book net.gain, which Bill Gross once recommended to the readers of WIRED. Online message boards and email lists were no longer to be about nurturing kinship but about reaping a profit. net.gain contained the promise that those who nurtured, listened and empowered these communities would leap ahead of their online rivals; now, Internet users were not individuals who had logged on but customers to be sold to. Gross was enthusiastic, saying, ‘It is a business model we’ve adopted.’

The book also warned that corporations that failed to acknowledge the power of online communities or that tried to control them would themselves fail. The authors went so far as to say that ‘virtual communities have the power to re-order greatly the relationship between companies and their customers.’ In the years to come this early fear was not taken to heart by all of Gross’s chief executives, and the lessons were not always learned or implemented.

Another of Gross’s ventures sprung from his frustration about not being able to share his knowledge and experience with the world. ‘Every time I sit on the beach in Hawaii and have an idea, I get incredibly frustrated that I can’t put it in the hands of the people who can use it.’ So began Ideamarket, a market for ‘intellectual property’, which promised to become a stock exchange linking buyers with sellers of everything from recipes to business plans.

Gross quickly managed to snap up two of the top names in computer journalism to run this business, Jim Seymour, editor of PC Week, and Peter Lewis of The New York Times. One of the first intellectual properties for sales was Gross’s own opus, ‘Raising Money Successfully: Secrets of an Entrepreneur’. This 3,200-word article cost $19.95 and pledged to ‘increase your chances of success by using tips and lessons that [Gross] learned over the past 15 years.’ Gross was confident about Ideamarket, declaring one of his favourite ideas and boasting that it would quickly become a billion-dollar corporation. Six months after its launch, it was in Fortune’s list of ‘25 Cool Companies’; one week later, it collapsed and all but one of its staff abandoned the project. Despite Gross’s enthusiasm, Internet users had not bothered to use the service.

Throughout the first year of idealab!, Gross had an incredible promiscuity of ideas – some of which had barely one outing in the press. When he wanted to watch old episodes of Seinfeld on the Web, he set up Bandwidth+ to speed up the Internet. He also came up with I-Map, a means of visualising large amounts of information; Datamining, which could find gems in swamps of information; Visual Search, designed to search the world of virtual reality on the Web; and Recomentor, a service that made collaborative recommendations about anything, from movies to music.

The atmosphere at idealab! was driven and feverish, with meetings often carrying on late into the night. Gross would sometimes organise meetings of all the employees of all the companies, in the hope of coming up with yet more ideas. As he recalled, he would ‘run around like a hummingbird, plugging my ideas into multiple, highly focused companies.’

One early investor remembers this period. ‘I used to go and see him in Pasadena, and he would have seven hundred messages on his computer, and he was talking to you doing emails at the same time. He had this glass office, and he was talking to people from five different companies. I thought, “Oh my God, this man is a genius.”’ The CEO of another company remembers a time when Gross would only book in meetings that were five minutes long, while Hollywood movie stars waited in the idealab! reception area to spend a moment with him.

By autumn 1996, idealab! had already created eighteen enterprises. Though none of them had as yet been successful, Gross was insistent that only one ‘hit’ was needed in order for idealab! to be funded for ever. He seemed utterly confident that this would happen, and told one radio host, ‘We’ve extracted the Internet genetic code for success, and then we try to inject that code into each start-up that we create to guarantee its success and give it the advantage of the shared knowledge of all the companies in this incubation lab.’

Gross was later raised into the pantheon of great entrepreneurs. Just as Henry Ford’s car lines in Detroit had profoundly affected the creation of products through mass manufacture, so Bill Gross was praised as a huge influence on how corporations were created. He became a star of the Internet, indulging in the cars and private planes of the trappings of wealth. Remembers an investor, ‘I went to a conference with him and there were women, you know, there were groupies. He had ugly tech groupies running after him, it was incredible.’ He received the ultimate seal of approval when the pre-eminent American entrepreneur Jack Welch, CEO of General Electric since 1981, joined the Board of idealab!.

Back in late 1996, though, Gross was still looking for his first blockbuster idea. One of the people he brought into assess business plans had just left Disney’s Strategic Planning department. This was a ferociously clever man called Toby Lenk.

4 ‘This is a Digital Hijack’ (#ulink_b06742cc-6bea-5303-9845-5c4415a2ab51)

‘I saw myself as an electronic joy rider; I was like James Bond behind the computer; I was just having a blast.’

Kevin Mitnick, convicted computer criminal

In October 1995, etoy convened a meeting in a room they’d booked at Zürich’s official youth centre, Dynamo, a seventies concrete block located beneath a flyover. The email sent out prior to the event stated, ‘Project etoy: How to proceed? What concept will enable us to reach our instinctive goals?’ Morning and afternoon meetings were rigorously timetabled to discuss their Web site, music projects, decision making and how to find ‘freelancers’. Everyone was asked to bring ‘your laptops and your inspiration’ and to ‘be as punctual as etoy is able’.