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The Almighty Buck

Greenspun On ArsDigita 104

Eponymous, Showered writes: "Following up on the depressing tale of ArsDigita and its takeover by nursery school miscreants, Philip Greenspun gives his take on the recent turn of events recently covered on Slashdot. He even provides a nice aD history in a nutshell for those of us who were vacationing on Uranus for the last several years."
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Greenspun On ArsDigita

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  • by Anonymous Coward
    At the very end of his little essay, he writes:

    The closing documents for our financing formed a stack about the size of a Manhattan Yellow Pages. Supposedly somewhere withint his stack it is said that the Board of Directors of ArsDigita won't amend the corporate by-laws without the consent of the venture capitalist members. Nowhere does it prohibit the shareholders from doing this, however.

    First of all, he's playing us for idiots by pretenting to not be aware that he was no longer free to change the bylaws after the funding round. That kind of restriction on what the company is free to do is completely standard in this kind of transaction. If he didn't know that, he's a a fool; I suspect that he's just pretending to be in the dark now that he's got a lawsuit filed against him.

    Second, if the shareholders want to change the bylaws, there are procedures to go through to make this happen. Specifically, it has to happen at an official shareholder meeting. There couldn't have been a legit shareholder meeting without all of the shareholders (including the VCs) have been notified. Ergo, it didn't happen that way either, dude.

    Idiot or author of a manipulative and incorrect essay. You choose.

  • by Anonymous Coward
    You are disingeneous and a fool. Unfortunately, that doesn't make your conclusion incorrect, jut how you got there.

    Philip STILL owns over 50% of the company (I believe he owns 60%). He is the key shareholder both in plurality and majority. The fact that he was not party to and disallowed at board meetings removed his ability to call a shareholder meeting, not the bylaws of an agreement.

    That is why your explanation is so wrong. Philip is founder, majority shareholder, and can and should have input into the company based on the agreement.

    But like I said, the conclusion you stumbled across may be correct. Here's why.

    Unfortunately, despite being rejected at board meetings by the VCs, the courts may find that he is still a member of the board in some way, and hence, despite being a majority shareholder, is restricted in changing the bylaws of the board.

    All is not lost though. As Philip notes, where an agreement is confusing, the ambiguity goes against the drafters. I think he may win on that merit alone. OTOH and positively (imo), the court may exercise its practical will on this case, seeing that the VCs had no good intentions in fulfulling the contractual agreement that had--because they never filled those 2 outsider spots on the board. That may be construed against their case by the courts.

  • Pretty balanced article, equal digs on both sides.

    Pity that they had to spoil it all with a closing quote from Bob Metcalfe that "Greylock is a first-rate firm. If they think he shouldn't be working there, they're probably right." Yeah, right, Bob: and all of your recent judgements [slashdot.org] have been right on the ball.
  • I put GE on the list mostly because it's a large arms manufacturer. 10 Worst Corp. of 1988 [getnewvisions.com] notes how GE is one of the biggest Nuclear Weapons manufacturer.

    There was a large boycott on the company in the early 90s. GE practiced censorship [fair.org] at NBC during this time in regards to the matter. I honestly can't remember all of what the boycott was about.

    They also show up on the 10 worst corporations of 1994 [ratical.org], and 1992, and 1991. I think they've fallen off since then because nuclear issues aren't a big deal now. I'd be more concerned about other weapons dealing, but I really don't know how GE markets their weapons, or what kind they make.

    Those 10-worst lists also note that GE has consistently practiced fraud and bribery in their dealings with the government. Considering military spending is currently up, while any need for a military is significantly down, I imagine fraud and bribery is more powerful than ever among military contractors. OTOH, bad as those things are, it's only money and greed, not like having people assassinated or anything (like Shell).

  • What I wonder about is why charities are taking this blood money in the first place.
    Geez, get some perspective. Bill Gates $'s are "blood money"?

    For all his flaws, Bill Gates has been relatively moral. Did he kill anyone to make his money? Did he impoverish anyone? Did he bust unions? Did he hire thugs? Did he employ children? Did he deliberately harm his customers?

    No, he did none of those things. Maybe he has been anti-competitive, and all the problems that come with that, but considering the evils of the world that doesn't rank so high.

    Money from GE, Nike, Shell, Big Tobacco -- now that's blood money. The heads of those companies are immoral bastards, and they make me wish I believed in Hell so I could imagine some final justice to it all. But Microsoft is rather tame. Anyone MS hurt was pretty damned privileged and wasn't caused any real harm, merely withheld potential benefits.

  • This is business, nothing personal.

    If our society ever has an epitaph, that may well be it.
  • It is fitting that from now on, Greylock and General Atlantic will be known as "Oh yeah, you're the venture capitalists that took Ars Digita, a successful, popular, profitable company and wrecked it in just one year!"

    You don't know what you're talking about. Greenspun et al made a lot of money taking cash from startups who were flush with venture capital. A rising tide floats all ships. Now, after the "bubble burst", that cash isn't around any more, Greenspun's getting out of the game and leaving his backers to carry the can. Look around the industry, even people like Scient who have a management team with an amazing track record, are suffering badly. Look at marchFIRST, who have just imploded.

    I've been a fan of Philip Greenspun since way back in '98 when I read his guide to web publishing

    He is undoubtedly a talented software engineer (altho' perhaps not as talented as he thinks he is) but he lacks business skills, which is why he went to VCs in the first place. This is business, nothing personal.

  • I've visited Scient, and I wonder why you think that Scient would be particularly crash-proof. They're not quite as "innovative" thinkers as ArsDigita are.

    Mainly because Robert Howe pretty much built IBM Global Services into what it is today, a consulting and software behemoth. He has plenty of experience, and perhaps thought that Scient could take on as much risk as they had with impunity. They're hurting badly, and they might not survive at all - and they will have lost forever the culture that was their main selling point, and their tool for rapid expansion. They aspired to be the next McKinsey, a company that has endured and prospered for the better part of a century. But you can't do that if "long term" means "next financial quarter" as it does to newly-public companies.

  • It irks me to see "market conditions" come up as the reason for the decline/failure of a company. The market always has been and always will be volatile.

    It is the responsibility of management to bring profits to a company through all market conditions! A failure of a company to prevail over poor market conditions is a failure in management.

    This wasn't a sudden storm that appeared out of nowhere and caught everyone in a downpour. Some of these 'businesses' didn't even own an umbrella fer pete's sake.
  • I admire the honesty and courage of a guy that would basically discuss his whole case before it's been litegated.

    Such a person could be honest and courageous, maybe. Trustworthy? Hell no.
    --

  • Hmm... I thought photo.net was using another box for the RDBMS. Shows you what I know...
    "Beware by whom you are called sane."

  • It's a good thing you're not running the Java version of the ACS! :)

    (Actually, I'm kidding a bit -- I have no idea about the performace difference between the Java and Tcl versions of the ACS. All I know is if worst came to worst, I could teach an "HTML programmer" Tcl a lot faster than Java, and thus I prefer the Tcl ACS)

    But to call the E450 a squirrell-powered box is a little misleading. When I was working at WorldCom, we used E450s to serve the Intranet. Dunno if it's still that way or not, but the E450 is a workhorse of a machine. Heck, I remember when photo.net was being run off a pizza box Sun with wimpy 180mhz procs.
    "Beware by whom you are called sane."

  • by fireproof ( 6438 )
    Try www.photo.net
  • ... would be to call the $20 mil. a low price for pushing aD out of business. Just hire the right VC firm(s) to do it for you... :-/

    My best wishes to Mr. Greenspun - I'm sure he'll build a successful new business with his experience.

  • From his resume (online somewhere) which points out that he has started several companies, I think it's unlikely that Greenspun is/was naive. It sounds more like he was willfully deceived.
  • I'm confused, didn't you get a very cool and expensive HP box donated for photo.net? I would have thought a Slashdotting would be no problem at all.

    D

    ----
  • I admire anyone who is willing to dedicate ANYTHING to the betterment of others. Those doubting will say "Yeah, but it makes him look better too!"

    But if making yourself look better requires you to do nearly as much as Greenspun, lazy and selfish people would not do it. I especially like the photo gallery thing, as that is a truly unselfish thing.

    Does anyone have the URL for his photo gallery (if it is still online)?

  • >First, there were supposed to be 7 people on the
    > board, but the VCs blocked appointments for the
    > last 2 seats. That enabled them to get a
    > majority when voting as a bloc.

    So? Can Phil count? If so, maybe he should have considered that before he signed the contract.

    > Second, the VCs stopped holding board meetings, and instead
    > started holding "investor's meetings", which excluded
    > Greenspun, which made board-level decisions.

    Frankly, I simply don't believe this. It sounds like utter and complete bullshit. Assuming that meetings of the board are required by the corporate bylaws (hint: they almost certainly are), then failure to have those meetings would make the board liable to a suit. From the shareholders. Namely, Phil.

    So in other words, I view the fact that Phil hasn't sued them for this as evidence that the claim isn't true.

    > Third, they used company money to finance litigation in
    > an attempt to subvert the shareholders' legitimate interests
    > in the financial welfare of the company.

    I'm going to say this as gently as I can: That is the stupidest thing I have ever heard said by anyone since the beginning of time, ever.

    Let's play a game. It's called "Pretend."

    Pretend you are a board member of a company. You hear that a stockholder calls a fake meeting of the shareholders (fake because he fails to inform all shareholders that the meeting is taking place) where the stockholder arguably violates an agreement and declares that the officers you appointed aren't in charge any more, he is, nanny-nanny-boo-boo!

    What do you do? Do you:

    A) Say "Well, I guess that's it" and give up and go home.
    B) Defend the corporation with personal funds.
    C) Defend the corporation with corporate funds.

    Hint: if you do (A) you have violated your fiduciary duty as a board member, and if you do (B) you are piercing the corporate veil by mixing personal assets with corporate ones.

    When corporations get into disputes, they pay lawyers. The idea that somehow they should have just rolled over and died is moronic. Get over it.

  • by peterb ( 13831 ) on Wednesday April 25, 2001 @07:18AM (#267037) Homepage Journal
    I am about to rant. If you are in my way, please step the fuck down.

    I have read with interest the fawning adulation and tea-and-biscuit sympathy the slashdot community has for PhilG on this issue. Oh, wait, did I say "interest"? I meant "disgust." What the fuck is wrong with you people? I'd suggest that your mothers dropped you on your heads as children, but it looks more like she thwacked you with a sledgehammer. Twice.

    There are two assertions that people seem to be making:

    • Look, isn't it terrible how the evil venture capitalists gave Ars Digita lots of money and then took control of the company?
    • If only PhilG had been left in charge, Ars Digita would have been as large as Microsoft, except it would have given us all free ice cream. And Aeron chairs.
    Both of these statements are pathetically false.

    First off, I don't know PhilG personally. Maybe he's a nice guy. Maybe he spends all his spare time saving kittens and helping nuns cross the street. Maybe he is god's gift to the Internet, computer science, photography, and women. But none of that has anything to do with whether he has been wronged here. Fundamentally, Philip signed a contract. For him to now claim that it is unfair for the VCs to exercise the rights Philip gave them when he signed the contract is irritating at best and utterly disingenuous and deceptive at worst.

    Phil had a very easy way to keep control of aD: don't take the fucking money. He took the money. He made his bed. Now he sleeps in it.

    Furthermore, there seems to be a fundamental misunderstanding about why companies seek venture capital financing. Here's a hint: it ain't just for the money. Finding money, if you have a good idea and aren't a schmuck, isn't all that hard. Running a successful business: now that's hard -- a lot harder that building a few tools used to create web sites. Founders of companies (or at least, smart founders of companies) seek VC not just because of the money but to gain access to a pool of talented people that know how to do something they don't: grow a small company into a larger one.

    That Philip doesn't seem to understand this is sad.

    I suspect the people who will win out, in the long term, are the people working at Ars Digita, who now have the benefit of professional management without the interference of an amateur (why do I say amateur? If you sign a contract for millions of dollars that you don't seem to have read, you're an amateur) that, from what I've heard, wasn't able to effectively manage any group larger than about 5 people.

    I wish Ars Digita success, I wish Philip well, too. I hope all of you that think that the VCs are somehow wrong for trying to do their job are injured in fiery auto accidents with large-breasted German women.

    Good day.

  • I posted this question on Phil's site, but I'd be interested to see what the response is here...

    Assuming our heros lose their shareholder suit, doesn't the fact that their product is open source give them a hedge? That is, can anyone think of a reason they can't just grab the willing talent from ArsDigita, take their product, domain knowledge, and contacts, and create ArsDigita2, sans VCs?



    --
  • All shareholders are not required; only a majority, and as Phillip & Friends DID have by far the majority shares, it doesn't *matter* what the VC's wanted to do. Eve had the voted 'nay' at a meeting, it could not change the outcome.

    I choose 'Manipulative VC's', as obviously there was some vast misunderstanding about who would control what.
  • It is fitting that from now on, Greylock and General Atlantic will be known as "Oh yeah, you're the venture capitalists that took Ars Digita, a successful, popular, profitable company and wrecked it in just one year!"

    What a way to get a reputation.

    I've been a fan of Philip Greenspun since way back in '98 when I read his guide to web publishing. That convinced me I had better learn server-side web programming, and I'm so glad I did, although I've never used the ACS system.

    Torrey Hoffman (Azog)
  • You had this feeble excuse last time your box got thrashed by /. Once is excusable, give the nature, but this time around? Come on! Didn't you throw a few bucks at Sun after the last round of humiliation?
  • Although it really is one side of the story...

    I admire the honesty and courage of a guy that would basically discuss his whole case before it's been litegated.

    And it just prove's something that i've always thought true. Successful companies are founded by people with thourough knowledge of the business they are forming, and by hard working employees.

    Whithout these, any company is DOOM(c)ed.

  • Because discussing your whole case, publicably, would be providing evidence for them... agains't you.
  • Although Greenspun holds a number of opinions I don't fully agree with, I have to say his heart is in the right place and he has some very altruistic goals which we all would do well to follow.

    I too have tried to live by his ideas of software professionalism. Those are the kinds of things that bring the biggest boost to your carreer and respect others have for you, as well as boosting all those around you.

    I have no real point to make, other than offering support for your post.
  • I wonder how tux would do...
  • They have an in-kernel webserver that'll do
    12k connections/sec too? :-)

    also, I wonder how solaris with the sun in-kernel apache speedups (nca) performs...
  • I think its great he donates pc's and software to underfunded libraries and schools, can Linus say that or any other OS developer?


    Quite frankly, yes.

    It's surprising that that you know Linus' name, yet are completely oblivious to the fact that he gave Linux away, not just to a couple of places as a marketing effort, but to everybody, regardless of who they were or whether he could send out a press release or not.

    Has Linux promoted the giving away of hardware to the underfunded? Again, yes. Older computers are revitalised and used instead of thrown out because they were useless with Windows. Computers are also cheaper when you don't have to pay for an OS.

    Next, remember that this is from a community of people who are not billionaires, or even millionaires.
  • It's been sad to read about the ArsDigita meltdown. I've been somewhat of a fan of Greenspun's for a while--I've spent a fair amount of time lurking on photo.net, I own dead-trees copies of both of his books, and I've found his writing generally amusing. I've contemplated, but never followed through with, learning Web Publishing the Greenspun Way, going through all his problem sets and setting up a Linux/Oracle/AOLServer/ACS system to play with.


    But now he's using words like "rubric." Twice. No wonder they're in such a mess.

  • If you read Philip's book, that is sort of like what he wanted to do (it was his friend's idea). The company would be composed of teams, located where ever, of about 5 people. They would do client projects, keep half the money to split between themselves, and give the other half to the company to support product development. When a developer got experienced enough, he could start his own team and the process would continue.

    Obviously, they decided not to go that route. I'm be interested to hear of any companies that did. It sounds like a decent revenue model that allows for autonomy with growth.
  • "It's also worth noting that a great deal of his charitable donations have taken the form of free licenses to Microsoft software. Net cost to BG, zero; net gain from faking out morons like you, incalculable."

    Actually he does not actually give money away. he gives away stock. Now he didn't really pay for that stock so the only cost to him is that that's some money he didn't make but could have at some point in the future.

    In fact it's all a drop in the bucket anyway. When you are billionaire you can give away 90% of your money and still live like a god. An ordinary person making the average 30-40K per year will hurt seriously if they give away 5% of their money. Bill Gates giving a billion dollars is like me giving a quarter to the bum on the street. It means nothing and I don't notice the loss.

    What I wonder about is why charities are taking this blood money in the first place. I guess it all spends the same but to be used as PR props for anethically challaeed individual has got to be humiliating.
  • Once again I will reiterate the following.

    He did not give away money only stock which he got for nothing.

    The amounts you mention are a miniscule percentage of his wealth I would not praise him for giving a 100 million just like I don't expect praise for giving a beggar a dollar. Neither amount seriously effects our lifestyle and although it does do some good its hardly something extraordinary.

    Some of what he gives away he gets back because the recepients are obligated by license to buy his software.

    He did not give away one cent until the trial began and people started calling him evil. This pattern is not from the heart but an effort to rehabilitate his image. Maybe it's cheaper then hiring a PR firm it certainly costs less then superbowl commercials. I suspect that as soon as the trial os over he will stop giving away his money. We ought to raise our voices even higher in calling him out and pointing out his evil deeds if it's going to prod him into helping out the less fortunate. Certainly he is in a position no other human being on the planet is.
  • Perhaps I should have referred to Asimov's science writing instead. (But no doubt that would get me shot down for something I didn't know about Asimov.)

    Yeah, don't you know about his great work on the "Endochronic Properties of Resublimated Thiotimoline"?

    (j/k - but there's a great story, if you haven't read it already, about how this short story got published with his name on it a few days before he defended his PhD in Chemistry. And one of his committee members actually read it - but he knew his defence was okay when he got asked, "So, how about those endochronic properties of Thiotimoline, Dr. Asimov?")

    Oh well. Sagan bashing is one of my peeves ever since I read Chris McKeay's exteremely negative biography of him. No offence.

  • But he's no more a thought-leader in that than Carl Sagan was in astronomy--he's just the person who can pull together existing best processes and write them down.

    It is quite beyond me why Sagan-bashing is so fashionable, but as an astronomer, I can assure you that Sagan's science was impeccable. ADS archives 307 articles by him, including 184 peer-reviewed journal articles: this link [harvard.edu] should work (unless lameness filter intervenes) -- or just go to adswww.harvard.edu and search for yourself.

    Specifically note papers like this one in Nature [harvard.edu]: "Cometary Organics but no Evidence for Bacteria". That was him, claiming that the evidence was not there for one of his pet theories. In science, at least, being able to say that you have disproved your own pet theory counts as good work.

    As to the appropriateness of the analogy with PhilG, I have no comment one way or the other. It just gets me pissed off that people are so willing to take the mutterings of pissed-off journalists and smear Sagan's work without even knowing what he did!

  • > It's also worth noting that a great deal of his
    > charitable donations have taken the form of free
    > licenses to Microsoft software. Net cost to BG,
    > zero; net gain from faking out morons like you,
    > incalculable.

    This is actually a brilliant strategy. It achieves several things:

    -- Since the marginal cost of the software is nearly zero, Microsoft can set the number of units donated to some arbitrary number, creating an arbitrary-sized tax deduction out of the charitable donations. Yum.

    -- Microsoft is currently keeping its earnings growth up by increasing the price of their software. Normally this would create a danger of lower-cost competitors taking over where customers couldn't or wouldn't afford to pay Microsoft prices. But charitable software giveaways take care of this danger by locking up large chunks of the bottom end of the market. Better still, it's perfect market segmentation; there's no way for high-end customers to take advantage of the low-end price.

    -- While achieving all these business goals, it still makes great PR.

    -- It does all these things at practically no expense.
  • Not as well as the flying, multicoloured, rectangular hole in the wall. ;-)
    ------
  • Not as well as the flying, multicoloured, rectangular hole-in-the-wall. ;-)
    ------
  • I would encourage everyone to go read Charles Ferguson's _High Stakes, No Prisoners_. Ferguson had the interesting idea a year or two before everybody else of making a visual html editor and his company's product--Vermeer--is now FrontPage.

    From his book and all other accounts, Ferguson is extremely smart, lacks social graces, and can be a paranoid egomaniacal a****** of a magnitude far exceeding what anyone has alleged of Phil Greenspun. (Ferguson accuses his VCs and hired managers not just of being incompetent, but of being all but thieves as well.)

    The key difference between Ferguson and Greenspun, however, appears to be that Ferguson was *paranoid*, and because he was paranoid he was able to protect his people and his vision of the company in a way that naive, trusting Philip Greenspun was not. Andy Grove was not kidding when he called his book _Only the Paranoid Survive_
  • >There is a great deal of Philip worship on ./ >and I can understand this: I used to think like
    >you. However I have met the guy and have
    >used the ACS extensively and worked with
    >many people who know Philip better than
    >myself, and it is painfully apparent that
    >although he has a great web presence and
    >writes convincingly, he's nothing more than a >self important, arrogant prick...

    Why "./" rather than "/."? Is this some RPN convention of which I am unaware?

    I am having some problems with the "Phil Greenspun is an egotistical egomaniac-loser" line of argument: namely, what does that make the VCs who invested in his company?

    When you invest in a company with a "mercurial" founder--and when your company's public reputation and mindshare is based on that mercurial founder's successful self-promotion and his resultant cult--then management job #1 is to keep said mercurial founder happy.

    For "professional" managers to so singularly fail at this task--invalidating your company chairman's key card, for God's sake!--would seem to me solid evidence that Greylock doesn't know what it is doing, and is putting people who cannot handle the job into CEO slots...
  • The truly horrible thing is that my personal server runs from the same physical box as photo.net. This is a squirrel-powered Sun E450 (4 400 MHz processors) serving something like 4 million hits/day all of those hits resulting in script execution and many requiring Oracle queries. So you guys have shut down philip.greenspun.com and also photo.net. Load average was up to 26! Now it is down to 20....
  • Yes, well photo.net was formerly run off smaller machines. But we didn't have 100,000 registered users. Or the photo critique forum. Or "hot or not". You can't serve the entire world with 4 CPUs that have a combined power roughly equivalent to a 10-year-old's brand-new Quake-playing machine. I think you'll find very few sites on the Internet that are as popular as photo.net (700,000 unique visitors per month) served with just 1600 MHz of total crunching power for RDBMS + scripts + HTTP server. This is just barely adequate on a normal day. But on a Slashdot day, it is hopeless. I think we could handle the load if we had another 4 CPUs dedicated to scripts + HTTP service and left the E450 to do just Oracle.
  • Now, after the "bubble burst", that cash isn't around any more, Greenspun's getting out of the game and leaving his backers to carry the can

    Actually, you're completely wrong. Phillip isn't leaving anyone to carry the can but himself. If you actually read the story, you'd see that his actions were to remove the VCs from power and have nobody but himself and his founding team to "carry the can".

    He's trying to save his company because he cares about it, not run away from it like a coward as you imply.

    Whether he or his VCs are better able to perform this task is up for debate. Philg obviously argues that he's correct, and the VCs obviously argue (or, rather, sue) that they're correct.

    nlh

  • ARSDigita is just another company so whats the big hooplah about. So they have ties with software, web resources, etc.

    Yahoo is the same shit, yet when they were shitted on, no one posted about the possible demise of Yahoo. Whats the big difference its just another corporation, and they haven't done anything to improve the Internet as a whole anyFsckingway, so who gives a damn?

    What?!! What have they done? They haven't done anything to improve the Internet as a whole? What are you talking about? Clearly you don't know anything about ArsDigita and Greenspun.

    Philip has written a great book on designing and deploying web services [arsdigita.com] and made it available online as well as in print. He also makes all the source code for the toolkit that his company uses available free of charge and licensed under the GPL. He, and other people in his company, have written numerous articles at the ArsDigita Systems Journal [arsdigita.com] including his book, a tutorial on SQL [arsdigita.com], and a tutorial on TCL [arsdigita.com]. He gives you every resource that they use to compete with them, including the ability to educate yourself on their tools and methodology [arsdigita.com].

    ArsDigita also helps to fund ArsDigita University [aduni.org] which is starting to make lectures and information on classes available online. Just because you can't physically attend doesn't mean you can't learn what they are teaching. They even sponsor getting kids into development and give away a $10,000US prize [arsdigita.com] in a yearly competition they hold. In their words ArsDigita "recognizes achievement by young people who have built and maintained web services. Web programmers 18 and younger are rewarded for creating non-commercial sites that are useful, educational, and collaborative."

    Philip and ArsDigita also give free two-week long boot camps [arsdigita.com] on how to use their software, as well as online web seminars and free one day lectures [arsdigita.com] around the world. Philip was recently here in the San Francisco area and I had a chance to attend one of his seminars.

    In short, Philip and ArsDigita have done a lot more than just try to make a lot of money. Unlike Yahoo who just uses free software, Philip and aD actually create it and then go a step further -- They train you on how to use it and make a slew of resources about it and related technologies available on their dime and no cost to you. That's a lot more than most companies can say.

  • In the article it says:

    I related my response to a member of the Harvard faculty who asked me what it was like to watch venture capitalists and professional managers run ArsDigita (I replied "like watching a group of nursery school children who've stolen a Boeing 747 and are now flipping all the switches trying to get it to take off").


    Of course this is true! All professional managers and VCs are like this. You need someone up top who has some expretise to say "Don't flip that switch".

    And like preschoolers they'll blame everyone else
    but themselves when things go wrong!

    The icing on the cake is that its Arsdigita money thats financing the lawyers to sue the shareholders.
  • You don't know what you're talking about. Greenspun et al made a lot of money taking cash from startups who were flush with venture capital. A rising tide floats all ships.

    This is absolutley untrue. Let's look at who they were earning their money from: Hewlett-Packard, Oracle, Levi-Strauss, Siemens, The Environmental Defense Fund, Cyrano.

    Not a single .com or startup in the bunch with the exception of the successful sites like Away.com, Site59.com, and WineAccess.com. Looks like those .com companies spent their capital wisely on a workable web solution.

  • Within a few weeks of Allen's arrival, I found people telling me that I had no power at all, pointing out that Allen and the two VCs could vote as a bloc on the Board. We had not yet filled the two outsider positions so this point was tough to argue. 3 out of 5 = absolute power. Period.

    Doh. I guess PG could have used a mba/business type, which he derides, on his side before he made the deal, couldn't he?
  • P&A isn't a technical how-to (Oracle and Tcl ? - not my idea of fun), but it describes an attitude to web design that's very important and rather different to many other views -- such as the accursed "Creating Killer Web Sites".

    You don't have to re-read it or refer to it, but everyone should have read it once.

  • [...] Then he could start over again, probably hiring a number of his old engineers, and if he played it right, maybe even steal some old clients back. [...]

    I'm just out of a seminar on online communities, where I bewailed the fact that Slashdot's previously useful AC feature was now just a source of F1r5tTr0ll!!! posts. Thanks for reminding me that a few ACs still have useful points to make.

    Does anyone know why aD took the poisoned chalice anyway ? Did they really need the money, want to expand hugely, or just get greedy ?

  • PhilG can't be any worse of a Git than I am. Nearly all of the best geeks I've ever worked with have been prone to varying flavours of Gittishness. As another poster said, "his good understanding of what happened results in his inability to prevent his description from looking very one-sided: maybe he's not jumping to conclusions, just getting there very fast!". Smart geeks have always found it hard work to deal with people who can't think that fast (and we're supposed to apologise for thinking too fast ?)

    One of my smartest cow-orkers is Mr Pedantic. I thought I was Mr Pedantic Git, but this guy is streets ahead of where I'll ever be. As he's also chair of a W3 group, then it's a damned good job he's so pedantic, or we'd get a crap spec at the end. I also know that if I can convince him that something is right, then it's damn right. Fortunately we're both in an industry where this sort of skill is vital and (occasionally) appreciated.

    I work where I work because it's the only place I've been where people don't want to kill me after a week (about 3 months - thanks for asking 8-) ) -- and I haven't had to quietly bury a dullard in a suit for ages now.

    A while ago I was in a design review at MIT. A bloke I'd never before met sat quietly at the table until MySQL was mentioned, then went off on one. A big one. Said his piece, got up, left. That was MySQL dealt with, and off the agenda. I was impressed - I agreed with everything he'd said, but never had same eloquence. It was a knee-jerk reaction, but then so was Bruce Lee - and it takes a similar degree of training to have reactions so quick, accurate and powerful.
    BTW - It turned out to be Hal Abelson !

    We're geeks. We're gits. It goes with the territory - if you're lucky. If a bunch of VCs can't deal with this, then just because they're playing with someone else's pension fund doesn't mean that we suddenly have to start talking down to their level. Smart is good. Loud, Confident and Right is good.

    If you can't think at this level, get back to Wall St. where a simple diff equation is still regarded as some scary juju. The geeks shall inherit the Earth, and watch you don't spill burger grease on your nice suit when you're serving me.

  • Been There, Done That. 8-)

    Couldn't bear all the meetings we used to have working for Lucent. I'm still a big Carly fan though.

  • I work in The Smartest Place In The Universe (HP's research labs) because if there was anywhere else smarter, I'd be hammering on the door to be let in. If you cruise people's bookshelves round here, there's the usual smattering of O'Reillys, and MythicalMMs but nearly everyone also has their own personal copy of Phil & Alex. That's just about the best recommendation I can think of.

    Without PhilG, ArsDigita are just another M$oft wannabee, and there's plenty of those already. I don't doubt the comments by some of his past cow-orkers that he's not the code-god he's sometimes worshipped as, and he's probably useless at managing a large staff of average geeks, but without their previous attitude, ArsDigita have lost everything that distinguished them from the rest of the herd.

  • Wouldn't being anti-competitive be deliberately harming consumers?
    =\=\=\=\=\=\=\=\=\=\=\=\=\=\=\=\=\=\=\ =\=\=\=\=\=\
  • that's the best whoring post i've seen in a while. Links and everything!
  • I haven't read the article yet, but I expect it to be very insightful and informative. I have a lot of respect for Greenspan; there's a reason why he got where he is today -- in a position where his very words are analyzed for hours on end. He can control the fate of the IT industry that so many of us are a part of, by simply dropping a few words in a speech or article such as this! That man is building the future of America, and very possibly, the world.

    What? Greenspun? Oh, my bad...

    --

  • You are welcome, citizen! Thanks for your post!

    --

  • Forbes ASAP devoted an issue a few years ago to the differences between the East coast and West coast ways of doing business. The best explanation is probably Tom Wolfe's (rather famous) 1983 article about Bob Noyce. Sorry no link, but it can be found in his recent book
    • Hooking Up
    .
  • by BinxBolling ( 121740 ) on Tuesday April 24, 2001 @06:59PM (#267076)
    Okay, you take a successful company with 80 employees. You bring in VC money, you bring in a change in CEO, and with that, a change in direction. The first quarter, instead of the great growth you've been having, you start to slump. Then the next quarter after that you're even lower. I think at that point he should have stepped in a said "Hey listen, you guys might be great in your own respective fields, but you don't know what you're doing in this one. Step away from the console...."

    Except that it's not at all clear that the new management team doesn't know what they're doing. It's absurd to talk about the declines in AD's profitability without considering it in the context of what the industry as a whole is seeing. Plenty of companies are seeing losses and having to lay people off. Plenty are just folding up and dying completely.

    Look at what's been happening to software service companies recently and tell me honestly that the management team that replaced Philip is solely responsible for the decline in AD's fortunes. You can't. Despite the the big-name clients Philip likes to cite, a hell of a lot of AD's revenues were coming from little dot coms flush with VC cash of their own. Now that the gold rush has died down, it's no surprise they are suffering -- just like nearly every other software company that depends significantly on service revenue, and many that don't.

    Giving Philip all the credit for past profits and the current management all the blame for present losses requires that you willfully blind yourself to changes in market conditions.

  • Okay, you take a successful company with 80 employees. You bring in VC money, you bring in a change in CEO, and with that, a change in direction. The first quarter, instead of the great growth you've been having, you start to slump. Then the next quarter after that you're even lower. I think at that point he should have stepped in a said "Hey listen, you guys might be great in your own respective fields, but you don't know what you're doing in this one. Step away from the console...."

    Its a good example of knowledge separated from experience compared to knowledge embeded in experience - These VCs have great theoretical knowledge of running a business, but they don't necessarily know the ins and outs of fields they try to get into. VCs need to realise that specialised markets require specialised leadership.
  • Reading philg's piece [quickly] it seems one reason that aD's hand was forced to take VC money is because they were experiencing 1000% growth -- which presented some serious organizational issues. (There's also the need for a pile of money, but let's play with this one)

    I'm curious if this constraint could have been relaxed: could aD have "spun off" aD1, aD2, etc.. and kept the informal management style which made them as effective.
  • He gives some clues in the story:
    A company with $20 million in revenue really needs to have about $10 million in the bank in case a customer doesn't pay, the economy turns soft, an important project is late, etc. Because we'd been growing 1000 percent per year we never had more than a couple of million dollars in the bank.
    Now we have a soft economy. They wouldn't have had cash. Ergo, problems.
  • I'm quite sure the little red daemon would do better... ;-)
  • Maybe that's exactly why aD failed.
    No, they failed because they got greedy. From everything I've ever heard or seen, taking VC money is a nearly sure-fire way to flush your company down the toilet. The odd of having it pay off in a big way are on a similar order of magnitude to winning the lottery; the odds of getting your ass reamed are reciprocal.

    I've worked at two startup software companies now. Both were fantastic places to work - casual environment, friendly atmosphere, fun work, and decent positive cash flow -- not enough to get insanely rich, but enough to be very comfortable. Then they decided to "get serious" and go public. VC's were brought in, "professional" managers were hired, ties were donned. Sure, more money rolled in the doors - but even more rolled out, paying for useless business consultants, pointless reorganizations, stupid accqusitions & mergers, the whole gamut of Dilbertisms. Morale went to zero, the atmosphere became oppressive, and the work stopped being fun.

    Now, I hold Philip and aD in the highest regard -- they were able to Do The Right Thing (technically and ethically), and make a pretty decent living at it. In other words, they were the perfect example of what an Open Source business should be, and proved that you CAN give your flagship product away and still make a decent living. Unfortunately, the business world is unforgiving - one slip-up and you get eaten by lions. Unfortunately, Philip and aD became lion chow. Lessons like this are painful and expensive; Phil's a smart guy so I'm sure he learned from his mistake.

    Selling out to the establishment is a Bad Thing, both from an ethical and financial point of view. When geeks try to beat suits at their own game, the geeks are going to get smeared. Suits are sort of like big vicious dogs: you might need a couple of them to protect yourself, but you've got to keep them on a short leash so they don't turn on you.

    I guess I'll never be a billionaire, but that's fine with me. I don't want to be rich and famous - I just want enough to live a comfortable, modest lifestyle without having to worry . If I built up a company to the point where it was worth a couple million, I'd sell it off so that I could spend my time doing things that are fun but not necessarily profitable: teach, learn, travel, hack. To quote Thorin's dying words in The Hobbit, "If more of us valued food and cheer and song above hoarded gold, it would be a merrier world."

  • It's absurd to talk about the declines in AD's profitability without considering it in the context of what the industry as a whole is seeing. Plenty of companies are seeing losses and having to lay people off. Plenty are just folding up and dying completely.

    Yeah, but =) If you look at what is happening Industry-wide, co.'s are biting the big one for betting big on things they really could not bank on. Phillip's philosophy on running aD was to take smaller risks, and create the illusion of living large.

    Sure, the loss of clientbase "flush with cash", as you put it, would have meant some growing pains for aD. Still, it is possible for smaller software companies to weather the storm by focusing on service and providing _real_ value. I worked for one suche company in the late 80s that's still in business today.

    What's happening in the industry now is not a big downturn. It is the end of the cycle. We are just "shakin' the spot". In essence, getting rid of the proverbial riffRaff, those who know only of greed, not of technology. In about a year or so, we'll kiss them all goodbye (most of them anyway). Let's face it, if you're not providing real value in this industry now, your days are numbered. As the next cycle begins, we'll get down to some serious business for a few years. Later in the cycle, the next "big" thing will be upon us, followed shortly by a new glut of riffRaff. You can count on that as sure as the sun rises every morning.

  • While I agree with you that blaming the new management entirely for the financial downturn is not fair in this economic environment, I disagree with you that Philip and his co-founders were not entirely responsible for the past profits. aD is a service business and any service business is built on the quality of the people.

    Philip, Jin, Eve, et. al. built this company and to say that they were lucky because there happened to be a dot-com boom at the time is ridiculous and ignores the fact that this company was profitable from the moment they opened the doors. Their revenue stream came from customers, not wild-eyed, delirious investors. That hardly compares to the other "dot-commers".

    Despite my reluctance to assign full blame for the current financial troubles to the VCs, I believe the company would still be profitable (if less so) in spite of the "dot-com bust" if not for their incredible incompetence. An agressive, hungry, $20 million/year startup should not have any executive making over $200,000 in salary, much less a couple dozen of them. It seems Philip knew this. The VCs management apparently doesn't. Perhaps they are motivated by something other than the company's future?

    Turning down an offer from Microsoft to be the first enterprise solution available on .NET also won't go into the "Brilliant Moves" Hall of Fame. And don't get me started on their original intention (that they appear, for now, to be backing away from) to close the source and license the software. That strategy led to a half-cooked product that is not only failing to grow market share, it's causing loss of market share and alienating developers. Each of these mistakes they made over Philip's objections.

    Most amazing, though, is the hubris of these sharks essentially hi-jacking a company of which they only own 30% and then suing the shareholders that own the other 70%, naming the corporation as a plaintiff and squandering $250,000 of the defendants' money to do it! How can a majority owner be sued by his own company?

    I had the privilege last Friday (the day after /. ran the original story on this lawsuit) to attend Philip's One Day Internet Applications Seminar and chat with him. In response to questions about this situation he said, "I don't care about control of the company but I'm a shareholder and I have to protect my investment. The company has been losing money ever since the current management took over." Unlike some characterizations of him that I have read, that doesn't sound to me like a guy with an ego problem. It seems very practical to me.

    Just 2 cents from a Philip Greenspun admirer. (I have doubled my income in the last 2 years in part as a result of things I learned from Philip.)
  • Shit Phil! I remember reading you site a couple of years ago and seeing you claim how awesome and bulletproof your site (photo.net) was. Oh, but then again, narcissists [greenspun.com] aren't always right about themselves (or their work).

    Good luck with your troubles.

  • I've been planning for quite a while to write my own site engine in ANSI CL. I don't like CL-HTTP for a number of reasons:

    • It seemed overly complex, from the quick overview I gave it.
    • It has a (to my mind) truly vile license agreement.
    • I want to do it myself. I feel that taking preexisting software projects will only get you so far, and if you have a specific goal in mind, it can often be better to start from scratch, so you have a firm understanding of your project's foundation.

    Anyway, I haven't gotten beyond writing a few really silly socket demos for myself, but I keep planning to start RSN. My general idea is to have a core functionality of receiving HTTP requests and handing them off to various hooks. I'd probably write a simple reference server that serves up static files and such.

    From there, I'd build a second layer of actual site functionality. My goal is to move quadium.net [quadium.net] over to this server once its basic implementation is working correctly. I want to have everything accessible as content chunks, not HTML files, and I have some neat ideas on organization, linking, historical context, and a format-independent front-end (for generating WML (ugh) or PDFs or whatever from the site automatically).

    One other goal I have is to avoid a database backend, keeping everything as native Lisp data structures. I don't know how feasible or wise this is, but some decent prototyping should allow me to get a general idea.

    Wow. I'm very annoyed that I haven't worked on this more. I think I'll play around tonight.

    --

  • Wow. I have to take a look at this when I have a chance tomorrow. Greenspun is one of my personal heroes, due entirely and only to this statement: "Any sufficiently complicated C or Fortran program contains an ad-hoc, informally-specified bug-ridden slow implementation of half of Common Lisp [cmu.edu]."

    Over time I've found this to be ridiculously true, and am deeply saddened by the lack of, well, not mainstream acceptance of Lisp, because mainstream acceptance always destroys anything good, but a willingness to let me, as a professional, select a language which:

    Sigh. Anyone have any Lisp jobs for an enthusiast and advocate with about a year's informal experience and a love of the language?

    --

  • I have worked with PG (well, worked at the same company as he) at the late, little-lamented Lisp Machine maker Symbolics, and had some interaction with him concerining another company or two he's been at after Symbolics.

    From my experience I can say the following: There seems to be a record of Phil winding up in litigation with companies he's been involved with. He has a certain arrogance, but you need that to survive the MIT environment; so did many of my Symbolics colleagues, it's a selection thing.

    I read the following conclusions from this tale:

    1. Never allow the VCs in without stacking the board in your favor FIRST. Make sure it's up to the insiders' initiative to do so, and get it done.

    2. If you want somebody with the same corporate culture (e.g., in this case, not 9-to-5 unless they're the ones at night), make damn well sure they've been working in it and have that value system before you engage him.

    3. Don't whine about the thickness of the contracts; read and understand them and think hard about their implications. It is your Arse (Digita) that will be hosed by them.

    4. If you lie down with the suits you will get up with the lint. The suits will protect each other; don't ever doubt that for a minute. If they think you're attacking them, they'll use all the resources at their disposal to protect each other, BECAUSE THEY UNDERSTAND EACH OTHER AND NOT YOU. If the VCs don't seem to connect with your model for the business, find other ones and/or carry on as before.

    5. Either this court case will work for you or not. If it does, fine, pick up the pieces and continue. If not, PUT IT THE HELL BEHIND YOU AND MOVE ON.

    The diatribe has (been) spoken.

    Weav
    Just another damned employee

  • Did you read Greenspun's article before you decided to rant?

    First, there were supposed to be 7 people on the board, but the VCs blocked appointments for the last 2 seats. That enabled them to get a majority when voting as a bloc.

    Second, the VCs stopped holding board meetings, and instead started holding "investor's meetings", which excluded Greenspun, which made board-level decisions.

    Third, they used company money to finance litigation in an attempt to subvert the shareholders' legitimate interests in the financial welfare of the company.

    In conclusion, it does not sound to me like Greenspun surrendered control of the company, stepped back and just hoped for the best. It sounds more like an internal takeover by a gang of people who want to bleed the shareholders dry.

    BH

  • As far as I can tell, the VCs were holders of preferred stock, not common (ie -- they get $38m before anyone else). Thus, they own an economic claim on the company, but no share in the company itself. Therefore there could have been a legitimate meeting of the controlling shareholders which did not invite them. Their only protection would have been to make Greenspun sign a contract not to hold one, which they claim that he did, he claims he didn't and a court will decide. HTH.
  • Given that clients were suing Scient for delivering crap, and all the engineers I know laughed at Scient's pathetic salary offers, and the employees were obsessed with The Process rather than actually shipping things;

    I wonder how such a company might have a future?

  • The Boston Globe had an article on the lawsuit yesterday on the front page of the business section, Web entrepreneur, financiers battle [boston.com]. Pretty balanced article, equal digs on both sides.

    As an aduni student, it's pretty damn funny to have your prof in the news every other day... of course that means that your prof of the month is Philip...

  • From the article:
    declined Microsoft's offer (summer 2000) to be the first enterprise software company with a .NET product (a Microsoft employee came back from a follow-up meeting with Allen and said "He reminds me of a lot of CEOs of companies that we've worked with... that have gone bankrupt.")
    Did anyone else get a chill up their spine when they read this?

    Mr. Greenspun's cautionary tale is extremely interesting, not only as a case example of how the dot-coms became dot-bombs, but also how the end of the era also affected more established and successful companies. It's also significant to read beteen the lines and see some of the corporate politics that are going on.

    If you read the article, by all means, read it with a grain of salt. But keep in mind also that Greenspun's take on the situation, while bitter, and in some places mostly subjective, has some very good objective points which any startup or even small, established company should make note of.

    In fact, I have one vendor we work with right now which I'd like to send this article to as a cautionary tale....

    ---
    Chief Technician, Helpdesk at the End of the World

  • It is quite beyond me why Sagan-bashing is so fashionable, but as an astronomer, I can assure you that Sagan's science was impeccable.

    Whoa! I did not intend to bash Sagan (or Philip) with that statement. I just meant to say that they were not the originators of many of the concepts they popularized.

    Perhaps I should have referred to Asimov's science writing instead. (But no doubt that would get me shot down for something I didn't know about Asimov.)

  • Certainly I'm looking at this with the benefit of my hindsite--having lost control of my own consulting company several years ago. But I think Philip should have a been a little bit less naive about some of these things. I also feel that there's a bit of ego and fact stretching involved in the description of aD, although perhaps I'm just missing some of the facts.
    • Philip claims he built the whole thing on a $10,000 investment. But if you read his books, he started off with some extremely high-end machines and Oracle databases, which certainly were worth more than $10k. It's never been entirely clear to me where his free MIT stuff left off and his company began.
    • He touts his stuff as open source. But in fact the AOL Server wasn't open source. What was open was the fact that it was written in tcl, which by definition is customer-editable. The advantages of Open Source are two-fold. One is customer modification. The other is a widespread development community. I don't see the latter with ACS. And the former isn't an open-source attribute as much as an attribute of using an extension language. He could have used VBScript and said the same thing.
    • He cites his books as indications of being a thought leader. I will certainly grant that he does an excellent job of pulling things together and presenting them well. Database-Backed Web Sites is an excellent book and I highly recommend it. But he's no more a thought-leader in that than Carl Sagan was in astronomy--he's just the person who can pull together existing best processes and write them down.
    • "I was still CEO and beginning to feel nervous that, for every task in the company, I could not say exactly who was supposed to do what and by when." I should hope not. That's not the CEO's job. In an 80-person company even the President isn't likely to know that down to the per-person level. If you're worried about that, you're micro-managing.
    • "Product Development". This is the bane of any consulting company. They all think that if they can just productize the tools they use, then everything will be repeatable and much cheaper. Been there, haven't done that. I've never seen it work. Consulting companies are not structured like product companies. They have different kinds of people, different kinds of demands, different kinds of customers and different kinds of schedules. Trying to turn consulting into products can kill a company.
    • Why on earth did he bring in a CEO without filling the two additional board positions? Maybe it's a hindsight thing. I've been through starting a consulting company and then losing control to the new CEO myself. But we went into it with open eyes, we didn't have the monetary position where we could have retained control. But in this case, the opportunity was there, but thrown away.
    • You don't grow from 80 people to 200 people in one year efficiently. The fact that Philip was still concerned about what people were doing day-to-day makes it clear that he was managing projects without a lot of intermediate managers. Building the infrastructure to handle a larger company is going to make the company less efficient. If you truly are going to get into the products business, the company is going to get even less efficient. You're going to be hiring more and more people who are not producing income directly, but who cost a lot of money. That's life in the product world. That's life in a large consulting firm.
    • "I was injuring their self-esteem it was better if they just turned a deaf ear." Here I'm on the same wavelength. Welcome to the difference between corporate america and hacker america. If you've grown up in the hacker community, then you know perfectly well that you an have a knock down, drag out, flame fight today... and tomorrow work together as best of friends, with one of you having surrendered the position, or the topic just being left as not worth pursuing, or whatever. Hit the world of suits and you'll discover that people hold grudges for a very long time. Everything has to be couched in positive terms, and you never say things exactly the way you mean them. And yes, not holding board meetings is a classic way to get around having unruly techies on your board.
    • I don't understand this surprise at a model that shows them shipping product or else going bankrupt. Philip wants to grow the product slowly. If that's the case, why on earth did he bring in VC financing? The VC model is not slow growth. The VC model tends to be "bet the farm". More importantly, he should have gone to the VCs with a business plan and made sure that everyone agreed with the business plan. He should have had the CEO and the board in place before going to the VCs. Otherwise you're walking up and saying "here's a bunch of good people and a revenue stream, do what you want with it."

    Growing a consulting company past the "everyone is a consultant" stage is not easy. Converting a consulting company to a product company is virtually impossible. And bringing in VCs without having the techies lose control is impossible.

    The machinations and intrigue Philip describes are not only not unusual, they are in my experience, rather tame. I've seen screaming matches, resignation threats, revenue boosting using pass-through sales, pumped up Forester reports using a friend-of-a-friend, court-suit threats, asset sales, harassment, incompetence.... and a hundred other things that make life at a growing startup so interesting. I've even worked at a place that had a psychologist on call to mediate differences between the founders--the same place that tried to make taking ritalin a condition of my continued employment.

    But fundamentally, you need to realize that when you bring in VC financing and a new CEO--you have lost control of the company. Who holds the most shares does not matter, you've given up the reins. All you can do now is go along for the ride.

  • by LionKimbro ( 200000 ) on Tuesday April 24, 2001 @06:52PM (#267096) Homepage

    I owe Philip Greenspun a lot. Philip Greenspun is personally responsible for changing how I looked at technology, programming, as well as changing how I looked at Life.

    My students owe Philip Greenspun a lot as well; If it weren't for his article on software professionalism [arsdigita.com], I don't know that I would be teaching free programming classes to the public. [taoriver.net]

    It's terrible and saddening to see ArsDigita becoming just another silly company.

    On the upside ("Long Live the King"), I look forward to seeing where he decides to turn his life next. Maybe this is actually a turn for the better. Maybe he'll be a little more humble, not just in thought and deed, but also speech. Maybe he'll write about his trip to India. Maybe he'll become a spokesperson for Nikon. Maybe he'll just relax, read, and mull over some books.

    Regardless, I feel very priveledged to have been able to read what he has written, and to have heard him lecture, and look forward to his new life.

  • I agree with you that geeks are often gits, but you can't put the onus for making this work entirely on the VCs. Remember: Greenspun may have lost his entire company, while the VCs lost only one company out of a portfolio of hundreds. Who was hurt worse in the culture clash?

    Geeks and VCs working together can sometimes create things that neither could create by themselves. They each need to figure out how to work with the other.

  • by milo_Gwalthny ( 203233 ) on Wednesday April 25, 2001 @06:35AM (#267098)
    Good venture capitalists are predictable. That's why this story may sound familiar: arrogant genius takes on partners, agrees to terms he thinks are innocuous because they only kick in when really bad things are happening, finds he is reluctant to share control, struggle ensues, he gets booted.

    Here are a few things you should expect from venture capitalists:
    - they are not tech experts. They may be pretty conversant, but what they do is demanding in its own right, so they don't have time to keep up. The longer they have been VCs, the further away from the nitty-gritty they will be;
    - they are in it to make money. If asked, a good VC will sit you down and bluntly explain that they are in it to make money. If you want someone whose first priority is to create something extraordinary and new, get money from Intel or Cisco or somebody who is investing in R&D, not cash return;
    - VCs expect somewhere around a 35% annual rate of return on all their money invested. If 2 out of 10 companies fulfill their growth plans, 3 out of 10 go sideways, and 5 out of 10 go bust, but the VC doesn't know which is which beforehand, then they have to *plan* for each of their investments to have a 84% growth in value per year, sustained for the average investment holding period of 5 years, or a 20x growth in value. These growth needs mean VC-backed companies have to swing for the fences - slow, measured growth won't get the VCs the returns they need;
    - VCs are paranoid about control for good reason. I was told by a lawyer that every clause in a contract is a result of someone at some time getting screwed;
    - VCs do not *want* to run the company. They are usually involved with up to 10 companies at a time and looking for more, as well as being involved in running their own firm. They do not have time to run the investee. They want to oversee. The only time they try and replace management is when they think things are drastically off-plan, or with the buy-in of management.

    There are alternatives to venture funding. Strategic investors, as mentioned above, are one of them. Bank financing of receivables is another (especially if the company has top-notch clients and is profitable, as aD was.) Do not get venture funding unless you believe you can (and want to) put all your chips on the table and roll the dice. Even if the odds are heavily in your favor, you can still lose it all.

    If you are a technologist or visionary type, find a person who believes in your vision and who you trust but knows the ins and outs of finance, law and business, and hire them. You may scoff at the MBAs, but if this happens to you, you'll have wished you had one on your side. (And, yes, MBAs that know and love technology exist, they are just hard to find.)

  • >I think at that point he should have stepped in a said "Hey
    >listen, you guys might be great in your own respective
    >fields, but you don't know what you're doing in this one.
    >Step away from the console...."

    According to Philip's side of the story, this is exactly what he did. The VCs essentially responded with "Fuck off. And by the way, you aren't invited to the board meetings anymore." Assuming Phil's account is true (and I have no reason to believe otherwise), he got dicked over. I didn't read the full transcript of the lawsuit, so I'm not sure what exactly the VCs are seeking; but Phil should end up back in the CEO spot when all is said and done.

    I'm with Philip on this one. Now to wait and see who the judge is with.

    Shaun
  • If someone would build a highly-visible web site or two with CL-HTTPD and/or BRL [sourceforge.net], maybe that would change.
    • In short, Philip and ArsDigita have done a lot more than just try to make a lot of money.

    Maybe that's exactly why aD failed.

    Emin

    • There is a great deal pf Philip worship on ./ and I can understand this: I used to think like you. However I have met the guy and have used the ACS extensively and worked with many people who know Philip better than myself, and it is painfully apparent that although he has a great web presence and writes convincingly, he's nothing more than a self important, arrogant prick.

    And that was the reason why you had to post as an AC.

    Phillip may be a hacker (and a bad coder) but you can't deny the fact that the guy has the courage to make his ideas (about software development) public in a very helpful and nurturing manner.

    I work for a small company and like any other software consulting/services company we are trying to weather the storm. However, senior management at my company, still thinks of ArsDigita product line as the model for our flagship product. I tend to fully agree with them.

    So he knew that he was giving control away, so he knew that the VCs will change things around. He tried to tell them what they were doing wrong. My gut feeling tells me that Greenspun is right.

    Regardless of who wins, its a lose-lose.

  • Bill Gates is an unscrupulous, dishonest businessman. He is giving away mass amounts of money so easily-influenced persons like yourself can point to the charity and say, "See, he's a nice guy". In all likelihood this strategy will work for him, as it did for such other robber barons and crooks such as Rockefeller, Carnegie, and the Kennedys.
  • So in other words, I view the fact that Phil hasn't sued them for this as evidence that the claim isn't true.

    Just because he didn't do something doesn't make him a liar. Maybe he doesn't think the way you do. ie. if you see the chance, sue your colleages.

    A) Say "Well, I guess that's it" and give up and go home. B) Defend the corporation with personal funds. C) Defend the corporation with corporate funds.

    This isn't the whole story. First of all, Phil was trying to work things out. He wasn't there to cover his ass or get away with murder. All he ever wanted was to help the company. And he was the one who built the damn company in the first place... so from his perspective, or anyone who would have any idea, the lawsuit is a real slap in the face. Not only are the VCs trying to NOT work things out, they are spending a huge amount of money and a ton of time and labor doing it. If you had any feelings for the company, ie, you didn't have another 9.8 billion dollars to fall back on, then maybe you would call a truce and get on with business before you started whupping each others ass.

  • In my experience, VCs never take non-voting stock (preferred or otherwise).
  • For people who can't be bothered to click on the link (and God knows, there are enough of those around), the article can be summarised as follows: Once you sell something, you no longer own it. Philip Greenspun didn't know that, although he did know absolutely everything else. And he knew it better than anyone else, and doesn't mind saying so.

    For those who don't have time to read the above post, it can be summarized as follows: "streetlawyer doesn't recognize the difference between selling 30% of something in a transaction legally designed to keep control out of the hands of the purchaser, and 'selling it'".

  • People have been vacationing on my anus (or is it yer anus?) for several years?? Guess that explains why I've been so uncomfortably moody lately. Damn, that itches!

  • Contributing to the high cost structure was the new culture of working 9-5 Monday through Friday

    HOW DARE THEY WORK only 40 HOURS...The BASTARDS!!!!!

    equals "When we were small, we paid ppl crap and worked them long hours. And we made money *surprise* But then the company got bigger, and we couldn't twist arms, the CEO wasn't a diehard workaholic and the troops followed along. Lazy assholes!!!"

    I am not faulting him for working ppl, if they were willing to do it for crap money, good for him.

    But unless you are sitting down with ppl when they show up for their interview and saying "We expect you to work this many hours", dont fault them for putting in STANDARD days!!!

    He doesn't say or even imply that they weren't putting in their 40 hours, they were working full weeks, but that just wasn't good enuf dammit!

  • By March 2000 we had grown to 80 people. I was still CEO and beginning to feel nervous that, for every task in the company, I could not say exactly who was supposed to do what and by when.

    My point, if somewhat brutal, is if you are incapable of knowing even the simple functions of your employees and what they do, I SERIOUSLY doubt that you are REALLY running the company. Therefore, the new management is going to tell ppl "Sure, you can work just 40 hours a week"

    From all accounts, Greenspun is an EXTREMELY intelligent person. He COULD have sat down once a week and studied thru who did what for 30 minutes. But instead of doing the CEO duties, I bet he was right there in the trenches trying to handle all the companies issues. That only works with small companies...

    Let me make a summary of how things evolved, as in so many small companies:

    Ititially, the company was small and Greenspun ran EVERYTHING. But as the company grew Greenspun found certain things were getting to the edge of his manageability. So he fell to the things he knew he could keep control of: So the plan was that I'd keep responsibility for engineering, education, and evangelism He let go and let the company "manage itself."

    However, growth, money and Greenspun's own decisions changed that culture:

    1. He made a known decision to accept enough work that he suddenly needed a workforce of 80 that he admits he couldn't handle (You CAN turn away work! If the company had continued with 10 employees, it would prob have been a small but very rich group of employees working on high yield specialty projects that the company would NEVER have run out of, AND could have been managed to Greenspun's specs)

    2. HE decided to bring in a new CEO that apparantly subscribed to a different work atmosphere, and prob never even discussed those aspects with the incoming CEO

    He started the domino effect that changed everything, but he is blaming those at the end of the line for everything...

  • Money from GE... -- now that's blood money.

    Could you tell us more or point to a website with facts on this? And I'm not talking about Welch's restructuring in the '80s. I am honestly curious, since I have a high opinion of Welch.
  • Look around the industry, even people like Scient who have a management team with an amazing track record, are suffering badly.

    I've visited Scient, and I wonder why you think that Scient would be particularly crash-proof. They're not quite as "innovative" thinkers as ArsDigita are.

    Too bad ArsDigita couldn't die its own death. Everyone is dealing with counterfactuals, wondering how aD would have fared without the VC power struggles, when in reality it is not at all clear. Perhaps they were deep enough to weather these things, and perhaps they had enough street cred and goodwill to still have clients in the shrinking market. Perhaps not. No one entirely knows. Not even those people who passed themselves off as employees in the last aD article here.

  • ARSDigita is just another company so whats the big hooplah about. So they have ties with software, web resources, etc.

    Yahoo is the same shit, yet when they were shitted on, no one posted about the possible demise of Yahoo. Whats the big difference its just another corporation, and they haven't done anything to improve the Internet as a whole anyFsckingway, so who gives a damn?

    Not to troll about this but think about it a quick second. So a company gets bought out, taken out, ends up on FuckedCompany.com, ask yourself, how valuable they are in everyday life? Give me a break.

    Heres news, AntiOffline just updated!!! OMG .. See how worthless news it is? But is it worthless? Means something to me to update it, so whats the diff. Big shit ARSDigita is in the news. OMG Maybe I should go jerk off to this.

    Curiosity killed the cat [antioffline.com]

  • Sun gave 21.6 billion [lycos.com], Cisco gives scholarships [ciscolearning.org], and Microsoft has the Hoppers scholarship [washington.edu]. So again whats the big deal?

    Bill Gates donated billions to charity, has done neat things for technology to an extent, and he gets bashed, you don't hear anyone post how much he has done for anything all you hear is bitching.

    So why should this incident be any different from some other tech person having spotlight?

    In short, Philip and ArsDigita have done a lot more than just try to make a lot of money. Unlike Yahoo who just uses free software, Philip and aD actually create it and then go a step further -- They train you on how to use it and make a slew of resources about it and related technologies available on their dime and no cost to you. That's a lot more than most companies can say.
    You better recheck your facts, you may think they don't make money but there is a trade off somewhere down the line or else they'd have been out of business a long time ago.

    If he was so concerned about the community he should have thought about that before he sold out, then coming back to rant about it. Give me a break.

  • Again see here are people bashing him without having the slightest clue in the world, and to respond to comp contributions I think its great he donates pc's and software to underfunded libraries and schools, can Linus say that or any other OS developer? Cut the man some slack, I'm far from promoting him, but this is typical /.'er bullshit.

    Worldwide Documentaries
    A Closer Walk Bloomfield, NY
    $1,000,000 (over 12 months)
    For the production and marketing of A Closer Walk, a film about the global AIDS crisis. This will be the first film intended for a mass audience to provide a definitive portrayal of mankind's confrontation with AIDS.

    University of Notre Dame
    Eliminating Lymphatic Filariasis in Haiti Notre Dame, Indiana
    $5,211,800 (over 5 years)
    A five-year grant to work in the Leogane area of Haiti, where one third of the population is infected with lymphatic filariasis. The program will develop a model for filarial elimination programs throughout the world.

    International Tuberculosis Foundation, Inc.
    International Union Against Tuberculosis and Lung Disease - Promoting Lung Health in Children Chicago, IL
    $1,930,000 (over 5 years)
    A five-year project to establish a sustainable and reproducible system for the surveillance, diagnosis, and management of the respiratory diseases that afflict children, including acute respiratory infection and pneumonia, tuberculosis, and asthma, in communities throughout Malawi.

    SUSTAIN
    Innovations in Fortification Technologies to Combat Iron Deficiency Anemia Washington, DC
    $1,793,000 (over 12 months)
    A grant to help alleviate iron deficiency anemia in Latin America through the fortification of corn masa flour. Funds will also help to further the technical and commercial development of iron-enhancing compounds, which could be applied worldwide.

    University of California, Davis
    Development of Iron and Zinc-(Doubly-) Fortified Wheat Products Davis, CA
    $1,021,304 (over 3 years)
    For the testing and development of iron and zinc-fortified wheat products to improve the health, nutrition, and intellectual performance of Peruvian children.

    US Committee for UNICEF
    Campaign to Eliminate Maternal and Neonatal Tetanus New York, NY
    $26,000,000 (over 4 years)
    A grant to support the global initiative to eliminate maternal and neonatal tetanus (MNT). The strategy of the initiative will be to target women in the high-risk geographic areas where MNT occurs -- deprived areas where women do not have access to routine immunization, antenatal care or skilled birth attendants. To implement the high-risk approach and sustain achievements, national plans will be developed at the country level with the Ministry of Health and input from in-country partners such as UNICEF, UNFPA, WHO, and non governmental organizations that are conducting health programs in that particular country.

    Sure his company ran wild bought out companies x, y, z, etc., its business. AOL did the same as have many more, its business as usual instead of focusing so much on him, ask yourself what positive actions have you done this week? This doesn't even include mention of those who work for his foundation who do it all for the hefty salary of $0,000,000,000.00 (U.S.) per year

    Lone Gunman [antioffline.com]

  • Everything that I have read by Philip speaks of extreme arrogance, and that is as much to blame for his downfall as any VC's
  • Greenspun is in the classical geek-trap: his good understanding of what happened results in his inability to prevent his description from looking very one-sided: maybe he's not jumping to conclusions, just getting there very fast!

    I myself had some contact with Allen Shaheen at #$£*CTP (hope Novell cleans it up well), my bet is 4 to 1 that Greenspun is right.
  • thanks for quoting me, but dont be so sure: collective minds are also systems, the computer geek flaw is he's used to high-certainty/large-scale problem solving, while social skills mostly is a low-certainty/small-scale thing.
    Try NLP, its mostly rubbish but the journey's interesting.
  • I'm amazed at the number of ignorant posts here about how Greenspun and the ArsDigita that was his were just another greedy duo out there to make a profit. Greenspun and his company were far more.

    As someone who worked through the boot camp they offered, and actually spent a few weeks researching him and his company, I can say without question that Greenspun is a good man and ArsDigita under his control was a benevolent institution. He went that extra mile to make sure everyone could benefit from his work.

    He is one of the true internet and software pioneers, one that didn't just lay a groundwork and then put a fence around it and tell everyone to fsck off. He didn't play low tricks with patents and copyright and trade secrets.

    He laid the groundwork, then told everyone they were allowed to build on it, too. Then he gave them plans. Then he gave them forums to discuss it.

    He put his awesome photo gallery online in higher quality than anywhere else on the internet. Then he said you couldn't buy his prints, only give to charity and he'd send you the print free.

    You who are badmouthing this man...? I can't believe you're so low.

    --

Money is the root of all evil, and man needs roots.

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