Pipeline Books

The N E W N E W Thing
] A Silicon Valley Story [
by Michael Lewis

This book is an excellent overview of "wealth creation" in Silicon Valley in the late 1990s. Any investor contemplating the "new paradigm" of dot.com business should read and reflect on this book before exposing too much capital to this new financial fashion. Michael Lewis, author of Liar's Poker, details Jim Clark's transition from fallen star at Silicon Graphics to stock promoter extraordinaire.

Jim Clark, with his Netscape new issue, single-handedly changed the dynamics of venture capital. Traditional venture capital looked for huge potential cashflows that could be exploited. Jim Clark took to promoting new ideas and concepts that could be turned into huge riches through the financial alchemy of the hot new issue market of the late 1990s. .

The book traces Clark's foray with Healtheon, which was essentially his quick drawing of a diamond that portrayed how he would fix the United States health system. After a motorcycle accident, Clark had the idea that the internet would solve the health care system by tying it all together efficiently. It didn't matter that he had little insight into how the system actually worked or that he had little personal involvement in the actual project. He promoted the idea to the venture capitalists and won their confidence. It helped very much that he had made people wealthy beyond imagination with his Netscape new issue.

Michael Lewis, the author, combines the progress of the Healtheon venture with the deteriorating business condition of Netscape and Clark's obsession with building an automated sailboat (the biggest in the world of course). That the Netscape new issue occurred to pay for a sailboat at a time when Clark was having obvious worries about the sustainability of Netscape in the face of the Microsoft onslaught is breathtaking. That Netscape's business prospects had absolutely nothing to do with the huge wealth created by the new issue is instructive.

The wealth created by the Netscape issue unleashed a torrent of greed. There is nothing like having missed a lucrative deal to make financial hangers-on convinced of the need to participate in the next one.

Jim Clark is a stock promoter. He turns nothing into something by virtue of his fertile mind and willing capital markets. He is a good promoter, however, one that shares the wealth of his creations with those around him and those who are willing to believe in his ideas. After Netscape, venture capitalists, programmers and engineers followed Clark and begged to be let into his latest creations. A company that was a very rudimentary idea could get money and pay staff on the basis of Clark's reputation for making people rich. The operations had to exist but not necessarily make any particular business sense. That would come later, once the new issue occurred and the company had huge financial capacity.

In the huge stock speculation of the 1920s, there was a similar period when the sophisticated and financially astute pooled their money and speculated on the stock market under the leadership of promoters like Wil Durant. Remember that this was a time of huge technological change with the introduction of the automobile, airplane and commercial radio. If you want to understand the "new economy" and those it rewards, this book is essential to your financial education.

Review by: John Carswell, President, Canso Investment Counsel Ltd.

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THE NEW NEW THING ] A SILICON VALLEY STORY [ by Michael Lewis

THE NEW NEW THING ] A SILICON VALLEY STORY [

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