Not that nobody in the Valley admits the possibility that the nouveau Web boom has become a bubble. Actually, many do. But the attitude out there is one of sangfroid mixed with Alfred E. Neuman–esque nonchalance. And thus we come to the attitudinal chasm between the coasts. “Is it a bubble? Is it a bubble? It’s a bubble! It’s a bubble!” is the way that people here in the East tend to approach the situation. Out West, by contrast, the prevailing sentiment is, “Okay, okay, it may be a bubble—and your point is?”
“In the technology industry,” blogs Netscape founder Marc Andreessen, who now runs a company called Ning, “lots of start-ups being funded with some succeeding and many failing does not equal a bubble. It equals status quo. The whole structure of how the technology industry gets funded—by venture capitalists, angel investors, and Wall Street—is predicated on the baseball model. Out of ten swings at the bat, you get maybe seven strikeouts, two base hits, and, if you are lucky, one home run. The base hits and the home runs pay for all the strikeouts. If you’re going to call a bubble on the basis of lots of bad start-ups getting funded and failing, then you have to conclude that the industry is in a perpetual bubble, and has been for 40 years. Which may be fun, but isn’t very useful.”
Andreessen would, and does, admit that the dot-com boom evolved into a bona fide bubble. But for him and others in the Valley, that’s not the end of the story. At the depths of the crash, when I was living in San Francisco, I remember talking to Intel’s legendary chairman, Andy Grove. Grove had been one of the loudest naysayers about the dot-com brouhaha, but now he argued that the bubble, for all its excesses, had been a healthy thing. “What this incredible valuation craze did was draw untold sums of billions of dollars into building the Internet infrastructure,” he said. “It is probably true that the infrastructure would have gotten built anyway. But instead of it happening over fifteen years, it happened over five.”
You’d be mighty hard-pressed to find many New Yorkers who’d proffer such an argument. In their eyes, the bubble was bad, bad, bad—just ask Governor Spitzer. And, no doubt, the downside of bubbles is considerably more pernicious when the broad American investing public starts putting their retirement savings into the likes of eToys and Pets.com. Yet even in the absence of an IPO frenzy today—when the victims of any current irrational exuberance will mostly be venture capitalists and their investors—the tut-tutting around these parts is getting pretty loud. In part, no doubt, this owes to the tendency among New Yorkers to call a spade a spade. To our healthy sense of skepticism and somewhat less healthy constitutional dyspepsia. But it also owes, I think, to a money culture where screwing the pooch is seen as shameful and is duly stigmatized, where failure merits a scarlet F, as opposed to being a badge of honor, as it is (largely) in the Valley.
It’s a culture also riven with envy, to be sure, the direct result of Gotham’s collective inferiority simplex when it comes to matters Webby. “People in New York feel a chip on their shoulder because they’re not in the center of this thing,” says Seth Goldstein, a longtime Silicon Alley player now decamped to Marin County. “The question is, why didn’t Netscape start in New York? Why didn’t Google start in New York? Why didn’t Yahoo start in New York? It’s that things are able to percolate here, not because of idealism but because of a willing suspension of disbelief.”
Disbelief will never be something that New York suspends willingly. No doubt some of Goldstein’s old pals in the city are scoffing at what he’s doing now: running a start-up building what he calls “craplets” for Facebook. But Goldstein reckons that, with any luck, he’ll be able to sell his little company for $100 million or so by the middle of next year. Another sign of bubbliciousness? Or a minor miracle? The great thing about the Valley’s point of view is, the answer can be both.