karl: It seems bizarre that I have so much. I could conceivably give some up if it seems appropriate.
pme: Please don’t ever suggest that; you are *well* worth all the stock you have. It is very important to me personally (and the company) for you to be positive, and to feel good about your value here. I think if you felt >=50% as good about your value here as I felt about your value here, you’d be in good shape. :-)
It wasn’t a calculated feeling, but clearly Paul wanted Karl around for something in addition to his expertise and trustworthiness, something more intangible. Karl hewed to his countercultural ideals—his scorn for the restrictions on freedom that the capitalist system wanted to place on programmers in the form of patents and other legal devices. This made him vulnerable in a world that cared for little more than money. He was someone Paul felt he could protect, someone on whose behalf Paul could practice his own idealism.
At one point, Paul asked Karl to sign a standard employment agreement. But Karl objected to a section of the document that would prevent him from working on the same kinds of projects as those at Boston Light for a year, if he should leave the company.
pme: …It is too late for us to make changes, we really do need you to sign it. Please take a leap of faith for me and just sign it as is, ok?
The exchange continued:
pme: …You have to sign it.
karl: No, I do not have to sign it. I will quit before I sign it as it stands. I will give you all the stock back.
pme: There is no need to escalate like this; threats are not nice, they don’t show trust and beg for further escalation.
karl: It is not a threat and it has nothing to do with trust.
pme: It was a pretty powerful suggestion. :-)
karl: I trust you absolutely.
pme: Thank you; it makes me feel 1000% better. Trust is everything to me. :-) There must be a way we can do this…
And of course there was a way, essentially a promise from Paul that he would never enforce the clause. Karl approved of the compromise. He would not feel his principles had been violated. He added:
(This is of course completely an ethical/philosophical question on my part, not “practical.” I can’t imagine having the slightest interest or capability of starting or joining an ecommerce company after boston light.)
Karl liked working with Paul as much as ever. For one thing, Paul would let him work remotely. “I think you overestimate the power of talking face-to-face,” Karl wrote him on one occasion, adding, “(And I know you think I underestimate it.)” Early on Paul did ask Karl to come in and look at the office. “Okay. Whatever,” Karl said. He had to set up the server computers from scratch. He didn’t care what the office looked like, only that the machine room, his province, be suitable. He looked at it. It was large enough to work in comfortably. “Okay, I’m happy.” Once he had the machines set up, Karl resumed working mostly at home, visiting the office only now and then, talking mainly with Paul by email.
pme: I would really like to get cards for you, for when/if we are in meetings, and so your not getting cards is not seen as not being supportive of the team or something.
karl: If you insist, but I’ll never use them.
pme: You can make up card games with them. What title do you want?
karl: “Programmer.” If you veto that, Co-founder.
pme: Ok.
In a fairly typical early email to his managers, Paul announced exciting dot-com news, followed by an exhortation:
AOL market cap doubled this week to $62B…
This is fucking unreal.
Their valuation is based on the number of consumers they have.
If there’s anything for us to learn from this, it is that everything we do should be focused on only one goal—
MAXIMIZE THE NUMBER OF SHOPPERS (and merchants) in 1999 THAT WILL USE BLS SOFTWARE…
The zeitgeist was with him. Software entrepreneurs, he wrote, were standing “in the middle of a hurricane.”
If you were a corporate manager at this time, you had to get a website built for your company. If you didn’t, your business might not suffer right away, but your company’s stock price certainly would. Paul figured he could talk a lot of companies, large and small, into hiring his team to create their sites. He had several friendly conversations, with a couple of hot young Internet companies, with Amazon, and with Intuit, a large and growing software company that provided tools for small businesses and accountants. None of those companies, Paul began to realize, wanted to buy Boston Light’s services, but all, to one degree or another, expressed some interest in buying him and his team. He preferred Intuit because it was the only one of the suitors that was actually making money—$800 million in revenue and $386 million in profit in 1999.
Paul wasn’t opposed to selling. He had stretched himself financially, a little with the Xiangqi adventure and a lot with Boston Light. Paying more than a dozen salaries had consumed his Interleaf money. He had sold all the investments in his pension plan. He was nearly broke, nearly “out of liquids,” and on the verge of turning to credit-card financing. He didn’t feel desperate, but that didn’t mean the situation wasn’t desperate. When he felt the fire, being in a jam brought a kind of happiness. It eliminated distractions. It settled him. Whatever the jam, he felt sure he’d find a way out. This time he had help, in the person of his old friend Joe Mahoney, “the vice president of vocabulary,” from Interleaf days.
Joe was working in Massachusetts as an adviser to Intuit. At Joe’s suggestion, the company dispatched a small team to visit Boston Light. They weren’t ready to buy. They told Joe Mahoney that they liked Paul and his team but not the software they were building. Mahoney told them to forget the software, the prize was Paul. “This is a sui generis individual,” Joe remembered saying. “He is a completely unique guy. He can think decisively, omnivorously, in ways that you guys haven’t seen before. And here’s a chance to get him on our team, not just his technology.”
Mahoney arranged to have Paul join a phone conference about a start-up company that Intuit was thinking of buying. That start-up’s young founder gave his pitch by phone to a scattered panel of judges: the Intuit executives in Mountain View, California, and Mahoney in his office in his house in Brookline, outside Boston, and Paul, who was sitting downstairs on an extension phone in Mahoney’s kitchen.
When the young founder finished his pitch and hung up, the others all stayed on the line, offering their opinions. And then it was Paul’s turn, his audition. He didn’t talk long. (“The succission of it was almost miraculous,” Mahoney remembered.) Paul told them what he thought was right and wrong about the company in question. He raised issues that no one else on the call had considered. He didn’t tell the Intuit people what to do but left them feeling that the decision was clear (they shouldn’t buy).
The Intuit team was suitably impressed, enough that Intuit invested about two million in Boston Light and soon afterward decided to buy it. But what was the market value of a company only a little more than six months old, with fifteen employees and an unfinished first product? Paul heard that another old colleague from Interleaf had just negotiated the sale of a small new company. Paul called him for advice. The old friend asked him how much he planned to ask. Paul said he wasn’t sure. Maybe twenty million? Ask for forty, his friend said. Forty? Paul said. Boston Light didn’t have any revenue, said Paul, except for fifty grand from The Boston Globe. His friend said to ask for forty million anyway. You could argue that this was a modest price, in the context of the moment. In 1999, a year of many buyouts, Yahoo agreed to pay $3.6 billion of its own overvalued stock for GeoCities, a very popular online “community,” and $6.1 billion for Broadcast.com, an Internet radio company that owned no content and produced audio and video of poor quality. Neither of those companies had ever made any money or even come very close to breaking even, and the same was true of most of the dozens of smaller dot-coms that were getting bought or going public.
The In
tuit negotiator was a woman. Paul liked her. He considered her a formidable adversary. He thought of her as “cigar-smoking, whiskey-drinking, tough.” As Paul remembered, she said, “Are you fucking kidding me? Forty million for that piece of shit?” She hung up on him.
Paul called her back.
“Forty, that’s crazy,” she said.
He said, “I agree. I’m probably worth a hundred thousand, but the market thinks I’m worth more, and I’m negotiating right now with four other companies.”
Karl was working at home when he received not an email but an actual phone call from Paul. This meant something important was up, or anyway something Paul thought was important. “You ought to come in to work today,” Paul said.
“Why?” asked Karl.
“Just come,” Paul said, and when Karl arrived, Paul told him, “We’re going for a drive.” A drive to nowhere, so Paul could talk out of earshot of the other employees. “Intuit’s agreed to acquire us for thirty-three and a half million dollars,” said Paul.
“Well,” said Karl. “What does this mean? What happens next?”
Paul said they’d have a company meeting and announce the sale, but right now he and Karl had to figure out who should get bonuses. In the car, Paul started naming the employees, beginning with Billo, whose share of the stock was tiny compared to Paul’s, compared to Karl’s. Paul said it wasn’t enough. Karl agreed emphatically. They went through the list. “This is weird,” Karl said. “Why don’t we give everybody a bonus?”
“Great idea. Let’s do it!” said Paul.
They decided to cut their own shares in half—Paul’s $16 million reduced to $8 million, Karl’s $8 million to $4 million—and spread that money around among the others. When they announced this at the office, one of the beneficiaries asked, “And you’re doing this why? Because you’re communists or something?”
“Right,” said Paul, and Karl felt like applauding.
Paul’s next stop was Hull. His family had moved down there for the summer, and so had his parents, with their toaster. They were visiting at Paul’s house when Paul arrived. It was evening, and his father was sitting on the porch, taking in the sea air, facing out across the water toward Boston. He was an old man now, white-haired and, quite unlike his once forceful self, a bit fearful of the world. Paul had always felt wary of seeming boastful around him, but he simply had to tell him what he’d done. “I sold my company, Dad.”
His father smiled. But when Paul told him the price—“Thirty-three and a half million, Dad”—the old man’s smile vanished. He glanced quickly from side to side. This was the man who once prided himself on never seeming fazed. It’s like he thinks the FBI is going to show up any minute, Paul thought.
“Who negotiated for you?” his father asked.
“I did,” said Paul.
“You didn’t have a lawyer do it?”
“No.”
“How do you know about negotiating?” his father said.
“Dad, it’s exactly what I saw you do at yard sales.”
Paul started out with the title “director of Intuit small business Internet,” which meant he was in charge of packaging Intuit’s most lucrative product into a website—its small-business accounting software, called QuickBooks. A year or so later, he was knighted vice president of technology and product development, a role that obliged him to travel regularly between New England and California.
He maintained an odd suburban father’s normalcy. He insisted on driving his daughter to school. Afterward, on a number of occasions, he’d drive to Logan airport, catch a midmorning plane to California, attend an afternoon’s worth of meetings at Intuit headquarters in Mountain View, and fly back to Boston on a red-eye, arriving in time the next morning to drive his daughter to school again.
He could take naps on the plane if he felt like napping, or snooze in the waiting areas of airports, but not if he ran into someone he thought was worth recruiting. He had asked Karl to automate his email so that every message ended “Intuit is hiring in Boston!” Paul was always recruiting, everywhere he went, talking in rapid-fire hyperbole to every possible candidate. Software companies were always on the lookout for talent, but recruiting seemed to fill a need in Paul—for family improvement, he believed. After a while, when he arrived at Intuit headquarters, someone was bound to ask him, “Who’d you hire on the airplane today?”
He was moving fast. He worked long hours on Intuit business and also made time for projects on the side. He was financing a website for rating businesses, which he called Mancala. He was helping his brother Ed get a new company up and running—Intermute, which would develop antispam products. And he was trying to do something with the Worldwide Xiangqi League.
For a time, Paul paid a programmer to manage the Xiangqi site, but he liked the young man so much that he poached him from himself and sent him to work for Ed at Intermute. He did much the same thing at Intuit, sending the 10X coder Jeff Rago to Intuit’s California headquarters, in order to “infect the culture there.” Several times he asked Karl if he would take over the maintenance of the Xiangqi system. Karl told him, “I don’t think so. Not anymore.”
Hypothetically, the Xiangqi site could have kept on running by itself. But like gardens, websites die if left untended. All sorts of things can go wrong. Changes in technology can cause glitches in the system. Even a temporary power outage at a data center can bring down a site for good, if no one stands ready to reboot the software properly. Paul wrote Karl asking how many people were still playing at Club Xiangqi. “Oh, ten to twenty,” Karl wrote back. When Karl looked again, a few years later, the imaginary palace had disappeared. It had died the little death of software. Karl didn’t feel particularly nostalgic about it. For one thing, he had never played the game. Later he wrote that there were plenty of ghosts haunting the Web. He added this epitaph: “mice eating the last copy of a book in a library, a cuneiform tablet sinking into the Nile…”
Karl stayed on with Paul’s Intuit team, taking care of the server computers that lay behind QuickBooks online, and working on special jobs for Paul, usually the automation of some dull administrative task.
After taxes, Karl’s share from the sale of Boston Light amounted to about three million dollars. Paul urged him to invest some of his winnings in his start-up Mancala. Karl thought, Who am I to say no? That company failed, a fact Paul brought up for years afterward, in the spirit of a monk studying a skull. Paul lost two million dollars. Karl lost a hundred thousand. But then, not long afterward, Paul told Karl he should invest another hundred thousand in Intermute, and when that company was sold, Karl’s investment turned into a million. He was amazed and a little dismayed. He told the accountant he shared with Paul, “There’s something wrong here. I didn’t do anything. I wrote a check. This system is not sustainable.”
“That’s capitalism,” the accountant replied.
For a few early spring months, Karl lived in Paul’s summer house in Hull. Karl and his girlfriend of fourteen years had broken up, and Paul told him to use the house on the ocean as if it were his own. Karl bought Paul a new piano to thank him for the stock in Boston Light—and for everything else. Karl had also begun to give away a large part of his winnings to help the family of a newfound friend, a woman he had encountered on the Internet. In December 1999, he and Paul exchanged these emails:
karl: I have news: I’ve unexpectedly met the love of my life and am moving to Oregon early next year…Do you still want to employ me?
pme: You’re kidding.
That’s amazing.
I’m dying to hear the details.
Yes, I want you to work for us no matter where you are!
Ok?
Two days later, Paul wrote again, on the same subject:
pme: I’ve been thinking a *lot* about your situation over the past week.
I have a lot of different emotions about your life right now, e.g.,
—I’m jumping for joy about your new love, and your optimism about it. :-)
>
—I’m very sad to have you leave Boston, for lots of different reasons. You are one of my closest friends, my family loves you, and especially over the past two years, you have become an important part of my own self identity. I’m scared to have you leave. :)
(I’m of course *not* suggesting you not leave, but I’m just telling you about my sadness.)
—To be honest, I’m a little scared with your reckless abandon with your newfound wealth. :( E.g., I’d like to manage $1MM of your BLS earnings for you :) so I can both help it grow and protect it from you. :)
Paul needn’t have worried.
karl [many years later]: I kept plenty, enough so I wouldn’t have to work again barring catastrophe (in which case we’ll probably all starve to death anyway, so who cares)…At some pretty early point in the millions, except for people who use money to keep score (if any such actually exist in real life, I’m not sure), it’s just a number.
By the time he wrote this, Karl had been living for a decade in a house on a remote shore of the Pacific, reading and listening to music and writing free software. He was also a leader of the group that maintained Knuth’s TEX—an “exquisitely-cut diamond” thirty years old by then, an antique that had to be made to fit a constantly changing setting. Karl worked on these projects gratis, aware of the irony that work he had done on commercial software was paying his way.
9
The bitter end of the dot-com bubble came in the middle of 2001, when the NASDAQ index reached its nadir, falling from around 5,000 at its height to around 1,100, a decline of about 78 percent in the value of the listed stocks. Paul’s timing had been, as he put it, “obscenely lucky.”
Of the Internet companies spawned in the era, more than half failed—many because they could no longer find investors to finance their losses after stock prices crashed. This might well have been the fate of Boston Light. But Paul just happened to sell near the top of the market, and when the crash came, he and his team were safely in the harbor of Intuit.