February 2002

Downward mobility: I finally understood the meaning when I advertised for a personal assistant on an online San Francisco bulletin board and received an application from the CEO of a new media startup who said he was experiencing “cashflow issues”.

The fall from grace of the dotcom generation has been as gut-wrenching as the collapse of the Nasdaq stock index. In 1999, a junior consultant with a fluent patter in web jargon could play off half a dozen different job offers and walk into a salary of $70,000 at a startup; now he has to explain away his dotcom experience as if it were an embarrassing gap in the curriculum vitae.

And no one has had further to fall than those at the top of the technology industry hierarchy – the analysts, venture capitalists, and CEOs – the evangelists, funders and masters of the new economy. The historically minded are digging out their 1930s quotes. From Yip Harburg’s Songs of the Depression: “Once I built a tower, now it's done. Brother, can you spare a dime?”

The dreams of the dotcom generation are not the first to be shattered. And people survive, with diminished expectations. But exuberant investors and a credulous press lifted the dotcom generation so high – higher even than the financial engineers of the 1980s boom. Its expectations will adjust slowly, and painfully.

Losing ones job – or ones company – has sometimes been compared with the sequence of emotions at a death: denial, anger, depression, acceptance. In the internet economy, the stations are vacation, unemployment, flight, and resignation.

First, vacation: an understandable choice for a internet worker given a few months of severance pay, after several years of 80-hour weeks and, as is often the case in the US, only a fortnight of time off each year. Silicon Valley acquaintances of mine are variously in Nepal hiking, boating on the fjords of New Zealand’s South Island, and skiing in the Rockies. A nice life, if you can afford it. But an extended vacation is all to often also a denial of the economic reality: these people will not find new jobs anything like as lucrative or interesting as they have come to expect; and they are delaying the moment of reckoning, like precious college graduates who travel the world rather than take an entry-level position.

Second, unemployment, which in California’s Santa Clara County, the heart of Silicon Valley, has more than quadrupled in a year. Among CEOs in the US, more than 1,000 lost their jobs in 2000. For some, it is a pleasant option. Marleen McDaniel, former CEO of Women.com, invests in the stock market and describes herself as “happily unemployed”. Less happy are the 30 unemployed tech workers among 100 men at shelters in San Jose run by InnVision.

Third, flight, by which I mean the pursuit of an alternative career, in which success is measured on a different scale. The classic move is a business administration course, timed to spit the freshly-minted MBA out into a recovering economy. Applications for the Peace Corps, typically the last resort of the newly graduated and retired, are also way up. And, since September 11th, there is another option. One particularly canny former employee has decided his country needs him, and has applied for naval intelligence.

Finally, and this is the point that most people will eventually reach: resignation, and a return to the comfortable embrace of the traditional corporation, from which so many had escaped. Allied Signal even had a policy of welcoming back dotcom refugees.

The internet stars are the business equivalents of the winners of Big Brother: celebrities for an instant, hopeful they can turn fame into lasting careers, then slipping rung by rung from B-list to C-list, some desperately holding on, others increasingly nostalgic for the mundane lives they led before.

The dotcom generation is not entirely lost. The technology sector triggered the downturn, but it is also likely to lead the recovery. Silicon Valley has always maintained that recessions encourage innovation, because software engineers have time on their hands. And there is value in the experience of running a major business, even the experience of running a business into the ground.

George Bell, former CEO of Excite@Home, one of the most spectactularly bankrupt of internet companies, told TheStreet.com: "I know that I am 100 times better equipped to be a CEO. There's no way, even in a 10-year period, I could have gotten that kind of experience in any other environment."

And some internet executives have indeed successfully parlayed their experience. Ernesto Schmitt, former CEO of PeopleSound in the UK, has landed a senior role at EMI Group in charge of strategy & business development. A smaller title, perhaps, but still outshining most of his INSEAD business school and Boston Consulting Group contemporaries.

Nevertheless, many internet veterans have further to fall. At the peak, headhunters were conducting up to 1,000 open CEO searches for internet companies. They now concede that successful candidates often received the equivalent of battlefield promotions, becoming CEOs through default rather than talent. Some of these may have to take not one but two steps down.

Jim Citrin, managing director at Spencer Stuart, the executive recruitment firm, advises humility but has his doubts. “The biggest and toughest question for most former CEOs is simply: Are you willing to go backward? Once you're at the top of an organization it can be tough, mentally, to swing to a lower rung. It just doesn't feel right.” Some more brutal recruiters describe the spoiled and over-promoted dotcommers as a new unemployable class.

But spare a moment for web designers, the workers of the internet revolution, who can less easily flee to another industry. A recent focus of their despair: an ad which demanded knowledge of a range of programming languages, and offered as little as $12 an hour. And the product was a porn site. And the company received too many resumes to deal with.

One of San Francisco’s leading web designers had been reading The Victorian Internet, a history of the telegraph. "The heyday of the telegrapher as a highly paid, highly skilled information worker was over; telegraphers' brief tenure as members of an elite community with mastery over a miraculous, cutting-edge technology had come to an end. As the twentieth century dawned, the telegraph's inventors had died, its community had crumbled, and its golden age had ended." As he commented, boy, that sounds familiar.

Earlier Management Today columns

Jan 2002: Rash predictions for 2002

Dec 2001: Keeping the talent in its place

Nov 2001: Sales people are not like you and me
Oct 2001: Europe: did anything happen?
Sep 2001: It is all about timing
Aug 2001: Stop calling me a visionary
Jul 2001: Not so much a recession as an extended vacation
Jun 2001: Fucked company
May 2001: The mighty are fallen
Apr 2001: Wireless, finally, I believe
Mar 2001: Lessons from the last time round
Feb 2001: Silicon Valley comes down to earth
Jan 2001: Enterprise software, fashionable again
Dec 2000: Jaded, saved by DivX
Nov 2000: Reality, distorted
Oct 2000: Maybe there is no new new thing
Sep 2000: The tricks of raising venture capital

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