Silicon Follies

Chapter 46: Green tea and red ink -- Barry loses millions over breakfast

By Thomas Scoville
Published August 21, 1999 8:00PM (UTC)
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It was the most expensive slumber in the history of sleep. As Barry lay in his bed, he was losing millions with every passing minute. In fact, each snore was costing him roughly $84,000.

As New York trading began in the wee hours of the West Coast dawn, TeraMemory's share price plummeted. From the opening bell, it had high-tailed it dead south, without so much as a pause or backward glance.


Barry would soon wake to find himself nose to nose with this grim reduction in personal fortune. But it wouldn't be the fiscal degradation that would torture him most -- it would be the wrenching plunge in his sense of self-worth.

For the kingpins of Silicon Valley, self-esteem was largely a function of stock price. Soaring market cap was the ultimate vanity appliance: an invisible force field that attracted love and acclaim while simultaneously superseding and overwriting any contradicting sentiments: "Barry Dominic? Sure, he's an abusive, misogynist tyrant -- but his company's stock is up 400 percent in 18 months. You gotta love the guy."

Of course, there was a dark side. Aligning your personal identity with a stock market abstraction was just asking for trouble. And in the day just beginning, Barry would learn all about trouble.


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At the heart of the slaughter was a simple guessing game, one played all over the valley: At the beginning of each quarter, the officers of high-tech companies concocted highly delusional fictions called "earnings estimates." The CFO of TeraMemory, for example, might declare that every $100 share of the company's stock would yield a dividend of 14 cents by quarter's end.

It was a thrillingly inexact science, but great sport. For if, at the end of the quarter, TeraMemory yielded 17 cents, its share price might proudly swell to $120. But if, on the other hand, it yielded only 11 cents, you could be in for a whole different kind of ride. Technology investors were a skittish bunch, and they tended to see boogeymen around the corners of the slightest downturns; the price might free-fall to $60.


TeraMemory's incipient descent seemed to be the consequence of just such a narrow failure of market expectations. But such were the intemperate rhythms of the valley: Four times a year, fortunes were made and lost on pennies.

Which, in a broader historical context, was pretty comical. The estimated earnings ritual was rooted in an antiquated belief that a company's yield was a reflection of present value. In fact, the age of NASDAQ had changed all that. In the nascent sphere of high tech, the future approached with such speed and violence that present worth collapsed into an abstract point, while the prospect of future value potentially expanded to infinity. Share prices became science fiction, in essence. Infotech stocks were no longer grounded in the world of observable financial phenomena; they were as tea leaves in the cup of the 20th century's strangest, strongest post-industrial brew.


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Whatever dark market mechanics were in play that day, by the time Barry had climbed out of bed, slipped on his silk kimono and poured his first cup of green tea, TeraMemory had seen 38 percent of its market capitalization evaporate into the fiscal ether.

"Jesus," he muttered to himself, assessing the damage reports on CNN. Barefoot and anxious, he paced on the teak deck, speed-dialing his CFO. Barry held his breath as the phone rang through the handset, an electronic cricket pressed tightly against his ear. He glanced back at the TV. It was pouring red ink. Wheeling, he peered out at the giant koi gliding by in the glassy, black waters around the Zen compound -- silent, cartoon-colored sentries ready to torpedo any bad luck that might make a run on Barry's already dodgy karma.


Only the fish didn't seem to be working today.

The CFO picked up, barely voicing a greeting before Barry began to unload.

"What the hell is up, Bob? We never figured to see this kind of downdraft on 3 cents. It's like the entire market has gone nuts. I never thought our investors could be such weenies."


"Easy, easy, big guy. I'm on it. We're going to break the big news. That ought to turn things around in a hurry."

"News?" Barry hissed. "News? What news?"

"You mean you don't know? I figured you'd already knew about it. You're telling me you really haven't heard?" Bob asked, incredulous.

"No, God damn it!" Barry fulminated. "What the hell is going on?"


"I've just been talking to Ed Pilphur over at Whip. He's calling an emergency meeting of the board."

"What the fuck does that have to do with Tera?"

"Plenty, Ed hopes. They're going to announce the partnership deal with Microsoft," the CFO said optimistically. "Since everybody knows Whip Inc.'s a largely owned, de facto subsidiary of Tera, we're golden by association. It should reverse the Tera slide within hours. Hey, all this time I was kind of thinking it was your idea, Barry. It's a brilliant move. Really brilliant."

Barry's neck began to swell. "Absolutely no goddamn way," he howled into the phone. "Pilphur raised it last week, and I vetoed it. No grab-ass with the Redmond boys. Period." He stalked to the edge of the deck like a trapped animal. "You just remind Ed I'm still controlling shareholder -- what I say goes, and I'm not changing my mind. He goes ahead with this announcement and I'll shove my lawyers so far up his ass he'll be ordering lunch in Latin."


Silence hung on the line for an uncomfortable moment. "Ahh ... yeah. Pilphur mentioned that, Barry -- he says your share of Whip Technologies is collateralized against your TeraMemory stock. After this morning, it looks like you might not be in the driver's seat anymore."

Barry's internal pressure shot up into the danger zone. "They wouldn't dare," he ranted. "TeraMemory's share price will be back by the end of next week."

Bob tried to strike a conciliatory note. "Oh, hey, absolutely, Barry. I'm with you. But we have to deal with things as they stand at the moment. And if I were you," he continued, attempting to inject a little humor, "I'd be thinking about learning to love Seattle Bill."

Of course, Bob's jest did not have the intended effect. The very invocation of Barry's rival put him off the scale. Mute with frustration, he ripped the phone from his ear and spiked it into the deck with a grunt.


With surprising resilience, the phone bounced squarely into the center of the pond, splashing discreetly amid the scene of Eastern tranquillity. The koi were only the first to swim for cover.

Thomas Scoville

Thomas Scoville is either an Information Age savant or an ex-Silicon Valley programmer with a bad attitude. He is the author of the Silicon Valley Tarot.

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