you only got to drive the Ferrari for as long as you worked at the company. I
figured, “Well, programmers only stay in the job 4 years, 5 years tops. It takes
them 3 or 4 years to recruit their ten friends, they’d drive the car for a year or
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two, and then they’d want to go back to grad school or go work somewhere else;
they’ll quit and then the Ferrari would go back in the pool.” I had set it up so
it looked extravagant, but didn’t actually cost anything. But the VCs and
employees thought of me as someone whose spending was out of control.
It doesn’t look extravagant to hire a bunch of salespeople and client service
people and a vice president of marketing. However, if you hire all these people
in suits that don’t do anything productive, that is extravagant. They went
through $40 million in cash. But it doesn’t appear extravagant. Nobody will
fault you as a businessperson for hiring a salesperson and paying him $100,000
a year even if he is not selling. They won’t fault you for hiring a $200,000-a-year
VP of marketing who used to work at Oracle even if he’s useless, because the
guy wears a suit and shows up to work every day for 5 hours.
The Ferrari, which costs less than any of these things and sits in the parking
lot, looks extravagant. But it inspired the programmers; it got us all this press; it
made customers think that we were a profitable, successful business. It had all
these benefits. At the end of the day, the Ferrari was the only thing that the VCs
made a profit on. When they sold the Ferrari, they sold it for more than I paid
for it.
Partly they killed themselves through replacing profit-and-loss responsibility
pushed down to the lowest levels with a functional management structure,
where you only had to report to your boss. There was a programming department,
the sales department, the client services department (whatever it was),
and there’s the project management department, and the only person responsible
for overall profit and loss is the CEO. That was really a bad problem for
them.
The second thing that killed them was a common phenomenon in programming
called “second-system syndrome.” This is identified by Fred Brooks in
The Mythical Man-Month, which was about the IBM OS/360 project, the operating
system for their mainframe in the 1960s. We had the first system that was
running photo.net, ArsDigita.com, and all of our clients. It was a set of data
models in SQL and page scripts that talked to those data models to provide an