My Extremely Silly Voyage Through the Dotcom Jungle

Compared to the epic tales some can tell, my voyage through the dotcom years was pretty staid. For one thing, I never bought into the stock hype, never believed that business models that didn't include making a profit were viable... I was in my late 30s when the hype began to build, and had been around the track a few times already, so I neither made nor lost a fortune. In fact, while I was working for a dotcom, my feeble 401(k) funds were invested entirely in money market certificates.

Mostly, my aim was to completely avoid the whole frenzy, although I did get sucked into the IT industry back when anyone at all with the vaguest claim to know anything about computers could get a job. When I got my initial IT job offer, I was making barely over $30K a year teaching high school in Cambridge, MA. The IT offer more than doubled it, and that was that for teaching. If I'd been single, I might have stuck with the teaching, but I had a family to support, so...

I did my best to stay in IT, but out of the dotcom arena, but it came looking for me. In what turned out to be the waning months of the frenzy, dotcom companies with wildly inflated stock values went shopping for small firms to buy up. I was working for a small, rather indifferently managed but stable private company which built websites for associations. A bunch of fast-buck artists flying under the name "Interliant" made the owners an offer they couldn't refuse.

As far as I could tell, the official Interliant business model went something like this:

  1. Buy a bunch of small web hosting and development companies for about 10x what they were worth
  2. Hype the "synergy" and market share benefits of doing this
  3. Sell the entire load of crap to a bigger bunch of suckers before the roof falls in

It was only the 3rd part of their brilliant plan that failed to work out. For a while, Wall Street and investors wanted to believe that buying web-related companies for far more than their actual worth was a more sensible idea than buying, say, dry cleaning businesses for far more than they were worth. Interliant spent millions and millons of other people's money both buying companies and doing all those fun things that dotcoms did. They spent several million on a corporate website that so far as I could tell was just a website, and then flew in dozens of people from all over the country to celebrate the site's lauch. They built a brand-new data center for millions of dollars and then spent more millions to do it all over again because the people they hired to do it the first time had no idea what they were doing.

Some of this was just farce, but there was also an element of tragedy -- or at least horrible waste. One of Interliant's criteria for acquiring companies was that they be extremely profitable companies. Which might have been a reasonable criteria if they had paid something close to what the companies were actually worth. However, since they over-paid so dramatically, the whole enterprise was destined to be a smoking crater. What they ended up doing in the final analysis was to buy over 50 small, extremely successful companies and then dismember and destroy them bit by bit as their funds ran out.

We were one of the last companies acquired. They told us to go out and recruit a huge new salesforce. We rented bunches and bunches of Herman Miller cubicles, and then within a few weeks Interliant imposed a hiring freeze. No sales people were ever hired. Then they started to lay people off. Then they said they were no longer going to sell our main product, even though it was the reason they bought the company. They laid us off in ones and twos over a period of almost 2 years. During which we had to sit through innumerable monthly meetings about how close we were getting to the ever-elusive goal of "EBITDA break-even" (earnings before interest, taxes, and all that other messy stuff). After about the 4th or 5th round of layoffs, they stopped making promises about how there wouldn't have to be any more rounds of layoffs. I was one of the last to go -- they got me on the 10th round of layoffs, by which time there were only about 3 of us left from the original small company. About a week later, Interliant declared bankruptcy.

At least until recently, you could still find bitter complaints about Interliant here and there on the 'net (search on "Interliant sucks"), mostly from customers of the decent little businesses they snapped up and then wrecked. One of the companies was actually smart enough to include a buy-back clause in their contract -- they escaped and God bless them and their far-sighted owners. Everyone else went down in the flood. A lot of dreams and hard work went up in smoke.

My guess is that it will be a generation or two before we see anything quite as stupid as the dotcom boom again. Which means most of us reading this probably don't have to worry about it. But while history may not repeat itself, it rhymes. (I originally wrote most of this before the real-estate boom of the oughts, which is currently unwinding as of July, 2007).

Unfortunately, I have no stories to tell of wild parties or company retreats at expensive resorts or any of that -- seems like I had a talent for arriving just after they stopped throwing money around. I did get to see a lot of smart people do a lot of stupid things pretty close-up during those years, which was kind of interesting. I also got to see some real bullshit artists and incompetents fool people, at least for a while. The whole experience kinda confirmed what I think about how people operate in group settings. Utter delusion was the order of the day. The wider culture somehow convinced itself that a profitable business model didn't matter. Employees at many dotcom companies desperately wanted to believe the b.s. and by God they'd get pretty mad at you if you pointed out any inconvenient truths. All in all, a strange era, but aren't they all?

Last Updated December 18, 2009