THE NEW NEW THING

A Silicon Valley Story

By Michael Lewis

Norton. 268 pp. $25.95

Review by David Streitfeld

Silicon Valley has been very good to the U.S. economy. It fueled, first, the microprocessor boom, then the personal computer explosion and most recently the Internet craze, which might just fulfill its hype and change everything about how we communicate and consume.

The valley has been bountiful to many investors, too -- those foresighted enough to invest in companies like Cisco or Intel, or lucky enough to seize on newly hatched firms like Yahoo or eBay.

It's been less kind to those who would capture it in books. Much adequate work has been done, summing up companies like Apple or Sun Microsystems, but nothing has reached the level of even a minor classic, the kind of book that outsiders could turn to if they wanted to understand what was going on. Tracy Kidder's The Soul of a New Machine, written two decades ago about a computer company that is currently being merged out of existence, is still the high-tech story to beat. And that tale was set in Massachusetts.

Part of the problem is the notoriously fast pace of high-tech change. A company can be up one moment and down the next, making a magazine article, let alone a book, merely a moment frozen in time. The money, too, plays a distorting role. Getting rich has no role in Kidder's book, because that wasn't the way things happened then. Now, vast wealth is paramount in everyone's mind, especially the writer's. David Kaplan's The Silicon Boys and Their Valley of Dreams is a fine work of history ultimately ruined by Kaplan's bitterness about having passed up the chance to work at Yahoo and get seriously rich. Since he didn't, he decided to be snide to everyone who did, which is wearying after a while.

Now comes Michael Lewis's The New New Thing: A Silicon Valley Story. It's an ambitious book by a writer with perfect credentials. In Liar's Poker, Lewis wrote with detached amusement about working as a bond trader for Salomon Brothers. It's a defining account of the go-go '80s and as such a difficult work to top, but Lewis's collected dispatches from the 1996 presidential campaign, Trail Fever, proved that he could take even a hackneyed, overexposed subject and make it fresh again. And his magazine journalism about Silicon Valley has been among the best.

His vehicle in The New New Thing is Jim Clark, supposedly the only entrepreneur to start three billion-dollar companies. First was Silicon Graphics, a maker of high-end work stations; then Netscape, whose browser was the first to make the Internet appealing to the masses; and most recently Healtheon, which aims to be the leading player in the health industry.

Clark, now in his early fifties, is naturally very rich, but Lewis says up front that this isn't what he cares about. "After all, a lot of people these days have a billion dollars . . . And most of them are no more interesting than you or me. You have to trust me on this."

What makes Clark interesting to Lewis is two things: his nose for smelling out the next big high-tech opportunity, the "new new thing," and his fully computerized boat, the Hyperion, the world's largest single-mast sailing vessel. Much of the book, in fact, takes place on the boat's shakedown cruises, when it becomes apparent to all aboard that maybe operating a boat via a battery of computers isn't the best idea.

But Clark believes in computers. And why not? They've always come through for him before. Lewis, in fact, treats him as the key person in the Valley's modern history, and says that the high-tech world would look very different without him. It was Clark's idea, for instance, to take Netscape public so early in its life, before it had made any money. That once-radical notion is now standard for every Internet startup.

Clark is also a classic example of the Valley entrepreneur who is unable to rest on his accomplishments. "He was the guy with a craving for sweets who'd been handed a huge bag of Snickers bars, which he worked his way through in an hour by eating a tiny corner off each one and chucking the rest," Lewis writes. "Eventually, I saw a kind of logic in his grazing: this was how he left himself open to accident."

While obviously a genius of sorts, Clark is much better at sniffing out the future than at running companies. He lost control of Silicon Graphics early, realized he had to bring in a real manager to run Netscape, and seems to have contributed little more to Healtheon than the idea of using the Internet to improve health care.

Lewis, too, doesn't care about Healtheon as such. Despite his denial, he's much more interested in the money. Ultimately, that seems all that anyone -- Clark, the venture capitalists funding him, the company's employees -- really cares about. No one bothers to ask tough questions about whether they really want to invest or work here. "In this new world skepticism was not a sign of intelligence," the author writes. "It was a sin."

All too true about Silicon Valley, but Lewis seems to believe it applies to himself as well. There's page after page about what people are worth, how successful the Healtheon public offering is, how this employee was worth $3.5 million, that one 10 times as much. Even the sailors on the boat are getting rich off the market. The old Lewis, who critiqued Wall Street as a place where "the raw itch for money" never abated, would have done something interesting with this. The new Lewis can't be bothered.

By the end of the book, Clark is forming his fourth company, myCFO, which will help America's multimillionaires organize and invest their wealth. It's just an idea, but investors are falling all over themselves to give him money. An accountant making a half-million dollars a year calls and begs for a job with this notion that is masquerading as a company. "In his voice Clark was able to detect the creaking sound of the American professional class capitulating to a new order," Lewis writes.

I would have thought it was the American professional class capitulating to greed. But that's the problem with The New New Thing: Lewis can't quite decide what his ultimate opinion of Clark is. Sometimes he seems to view him as the smartest guy around, sometimes as little more than a con artist. Perhaps Clark is somehow both, but I smelled a writer hedging his bets.

The New New Thing isn't really a book; it's a 268-page magazine article, a frozen moment that is already becoming outdated. The many scenes on the boat feel like padding. Healtheon stock has lost more than two-thirds of its value since the heady days last spring. Perhaps it will dominate its sector, but clearly the market has decided to show a tiny bit of skepticism first.

Most crippling to the book is Lewis's casual attitude toward numbers. If the cultural police have stopped beating up Edmund Morris, perhaps they could spend a moment asking why readers should care about a book when neither its publisher nor author could be bothered to get the facts right.

An example: Netscape stock went public on Aug. 9, 1995, and that is usually considered the moment when Silicon Valley moved onto the radar screen of the general public. This young, untested company with an extremely popular product was the first hot Internet stock, and paved the way for all that followed. That's the way Lewis treats the event, and it's accurate.

Why, then, doesn't he bother to get the price right? At one point, he says that on the first day the price of a Netscape share rose "from $12 apiece to $48." Thirty pages later there is a lengthy anecdote about an Indian engineer picking up USA Today while on vacation in his homeland and reading that "Netscape had risen from its offering price of $18 a share to a high of $171." The engineer goes on to lament that, since he had instructed his broker to sell at $100, he had left $71 sitting on the table. None of these figures is right, as Jim Clark -- who devotes the first chapter of his own book to the public offering -- could have told Lewis. (For the record: the stock was officially offered at $28, opened at $71, and closed at $58.25.)

But this is just the tip of Lewis's trouble with numbers. Writing about Microsoft's revenues as of last fall, he writes that it "had only $8 billion annually." Make that $15.3 billion. He writes that between July 1 and October 1 of last year, the Nasdaq composite "fell from 2900 to 1450, or 50 percent." That would have been a crash we were still digging out from; actually, it was closer to 15 percent. He writes that between the debut of Netscape and the launching last December of Clark's boat, "the Nasdaq . . . quadrupled." In fact, it doubled. He writes, incorrectly, that only one company went public during the market shakeout last fall.

Lewis tries to illustrate various points about Clark and his companies, but his sloppiness with these and other numbers destroys the book's credibility. In a way, The New New Thing resembles the strategy of a second-rate Internet company: hastily build something from a seemingly plausible idea, sell it to a credulous public as quickly as you can, and make off with your millions. In this sense, and in only this sense, The New New Thing is the perfect Silicon Valley book.

David Streitfeld covers Silicon Valley for the Financial section of The Washington Post.