Leaving Reality Behind: Inside the Battle for the Soul of the Internet. Regula Bochsler
led to conflict with his brother Larry, still his business partner, who wanted to focus on a smaller number of things in order to ensure that everything was executed with excellence. The two would shout at each other, but whatever the outcome Bill would still ‘lose interest in something when it started becoming mature’, remembers Rick Gibson, who worked with them at the time.
An unlikely encounter finally pushed Bill to radically rethink his working methods and question whether he should listen to his brother at all. The story goes that a money manager on behalf of a potential investor once visited Knowledge Adventure but Bill Gross had no time to speak to him. Instead, his son David, by this time aged eight, introduced the visitor to the products; the man was duly impressed. It was only afterwards that anyone discovered that the visitor had been representing Steven Spielberg.
Spielberg was then at the height of his success, and about to win a raft of Oscars for Schindler’s List. He used computers to create the sophisticated graphics that distinguished his films, but was sceptical of them for independent, cinema-like entertainment; he certainly saw no reason to abdicate the director’s storytelling responsibility to a brigade of mouse-clicking viewers. Nevertheless, he was intrigued by the educational potential computers offered and had heard that Knowledge Adventure were at the cutting edge.
So, one day in late 1993, Steven Spielberg himself travelled to Knowledge Adventure’s nondescript offices in the Los Angeles suburb La Crescenta. There, some seventy staff awaited him, nervous and on their best behaviour – Gross had carefully choreographed Spielberg’s visit, and had even excluded some of the most senior management from this audience with the king of entertainment. Gross’s bravura performance introduced Spielberg to the complete range of Knowledge Adventure’s products, and allowed his guest time to play on them for himself. Larry Gross remembered looking on at Spielberg’s enthusiasm. ‘He played every single module. It was pretty fun to see my brother … knocking the socks off Steven Spielberg.’
What was immediately remarkable was the way that Spielberg and Gross identified with each other – almost as if they were bright kids who had just happened to meet on a suburban street-corner and found shared interests. A reporter from WIRED described Gross as ‘genuinely unpretentious, projecting a sincere, childlike charm’; in fact, Gross seems to act like the heroes of Spielberg’s movies – who are often drawn to discovery, having their key shots at moments of wonderful revelation. Said Spielberg, ‘In many ways, we’re very similar.’
Spielberg liked Gross and his company. He invested millions in Knowledge Adventure and also offered to add his creative wisdom to the project. As Bill Gross remembered, ‘He took one look at Body Adventure and said, “That human body should walk on, look down, and notice he has no clothes on.” We would never have thought of that.’
In the months after their first meeting, the two spent time together. On one occasion, Gross hitched a ride in a golf cart with Spielberg as he was driven from meeting to meeting around Universal Studios. He watched as the great film-director made suggestions about TV scripts or the shooting of movies, constantly adding his creative thoughts and energy. Previously, Gross had been burdened by the thought that rather than dreaming up new ideas he should be singlemindedly dealing with business, prosaically managing employees and the minutiae of profit-and-loss statements. Being creative, Gross had thought, was only a tiny part of an entrepreneur’s overall value. Seeing Spielberg in action, he realised it might be possible to do things the way that came naturally to him.
Gross hatched a plan: to create an environment in which he could run around, and think, without the distractions of mundane paperwork and management politics. He recalled: ‘I knew that’s what I wanted to do next – create a playroom where I could work with ideas.’
It was a good moment to be thinking along these lines. Preeminent management guru Tom Peters wrote at the time: ‘Welcome to the world where imagination is the source of value in the economy.’ The current management and economic theory was prophesying the death of the old economy, in which manufacturers produced goods from raw materials and manual labour. In its place was rising the New Economy, in which corporations traded information, brands and patents, and their employees were called ‘knowledge workers’. More than ever before, ideas were now the most valuable commodity – and nowhere more so than on the Internet, where there was no history and no set way to make money.
In the summer of 1995, Gross began to prepare himself for the emerging opportunities of online business as the Internet had been privatised and around the world millions of new consumers were eagerly logging on. But these changes were nothing compared to the explosion of Internet commerce that began on 9 August that year. This was the day that Netscape, the world’s leading Web-browser company, sold shares on the stock exchange for the first time. The amazing success of the venture led to a huge change in perception of what constituted ‘appropriate’ business and how money could be made on the capital markets.
Netscape was the bastard child of the Mosaic Web browser developed by Marc Andreessen’s team at the National Center for Super-Computing Applications (NCSA) in Illinois.
When Andreessen graduated at the end of 1993, he left Illinois and went to Silicon Valley, the strip of land between San Francisco and San Jose that had become the heartland of American technological innovation. Soon after arriving in California, Andreessen met Jim Clark, the visionary founder of Silicon Graphics, a company that made powerful computers for the animation and defence industries. Clark was more than anything an impresario; feverishly he dreamed up new projects, searching for the ‘new, new thing’, as writer Michael Lewis noted. Like Gross, he was a serial entrepreneur, interested in the realisation of his ideas rather than the operating of corporations.
In 1994, Clark and Andreessen hired the team that had built Mosaic at the NCSA, and set about building a company to make a better, faster and easier-to-use browser. That company was Netscape. Like many other business people at the time, Clark was asking himself how anyone could actually make money on the Internet: ‘I didn’t have a specific answer to that yet, but I figured that with the Web- and Mosaic-enabled Internet already growing exponentially how could you not make money? It was just the law of large numbers at work – even a small amount of money per user would yield a big business.’
By the spring of 1995, more than six million copies of the browser Netscape Navigator had been given away for free. But Netscape was still a tiny company, barely a year old; its only real money was made through selling server software that enabled Web sites to take payments via secure credit-card transactions. Netscape’s revenue in its first quarter was less than $5 million, while its outgoings amounted to more than $7 million – the difference being paid by Clark and with some venture capital.
Despite the modest size of the company, in the summer of 1995 Netscape’s Chairman Jim Clark, its Chief Technology Officer Andreessen and the Board had much faith and vision. Although the Internet was not in general use and was, in some parts of the media, still being criticised as a faddish, soon to be out-of-date craze, they made an extraordinary decision. They agreed to sell a stake in the privately owned company, taking it on to the public-capital market: the stock exchange. This was a very brave move – even the Morgan Stanley bankers in charge of the deal had no email addresses on their business cards.
Before the heady days of the Internet goldrush, most Initial Public Offerings (IPOs) were the culmination of the long and arduous journey of company formation, and occurred only once a company was properly established and its management’s ability had been demonstrated. Most importantly, they usually took place when a company had already made a profit. Wal-Mart’s shares weren’t sold until the company was eight years old; Microsoft’s were presented eleven years after Bill Gates and Paul Allen first decided to create a computer application, by which time it had annual revenues of almost $200 million and more than a thousand employees.
Netscape was going to be different. In early June 1995, the Morgan Stanley bankers decided that Netscape could sell 3.5 million shares at $13 each, which would have set the company’s value at almost half a billion dollars – more than twenty times its annual revenue. However, on the evening before the IPO following a rush of interest in the stock, they decided to sell the shares at $28 each. Jim Clark would later call the day of the IPO ‘D-Day, with me