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Geeks versus Suits

By streetlawyer in Op-Ed
Fri Mar 16, 2001 at 12:50:41 AM EST
Tags: You Know... (all tags)
You Know...

As part of an ongoing investigation, I had occasion to pull up some information about VA Linux, owner of the OSDN and thereby a sponsor of kuro5hin. The share price chart makes pretty grisly reading, of course, but let's not dwell on that. The real story, however, is more interesting, and really ought to make a lot of people stop and think. Read on .....


Out of all the Linux dot bomb stocks, VA linux is the most popular whipping boy, due to its high profile ownership of Slashdot and its feature as the main driver of the Eric Raymond Wealth Clock. Raymond is a director of VA, though it's perhaps open to question how hands on he is, given the following:

a) his website gives a plug for "high-quality Linux hardware", a division which was recently declared non-core and discontinued, at the recent results announcement (which will not be discussed further here; if you want hatchet jobs, may I recommend the Yahoo message board for the stock). b) he was unfortunate enough to make the following statement:

"In the open source world companies will have to offer employees a greater level of meaning, something higher up the Mazlow pyramid ... basic job security and good compensation isn't enough."
to LinxWorld Expo, three weeks before VA laid off 25% of its workforce. Of course, the high-profile Open Source names associated with VA Linux have both helped its profile enormously and drawn a lot of hostile comment from the more jealous and back-biting members of the community. It's quite clear that they deserve to be rewarded - perhaps not to be made multi-multi millionaires, but certainly to have a payday. And indeed, Raymond, Malda, et al have all been loaded up with VA stock.

A stock which, unfortunately, has had a pretty poor experience in the NASDAQ slowdown. This isn't anything to gloat about; when stocks go down, real people are really poorer. But could the Open Source guys have seen it coming? Certainly statements like Raymond's "I will be wealthy in six months, unless VA or the U.S. economy craters before then. I'll bet on VA; I'm not so sure about the U.S. economy :-)" look somewhat ironic in retrospect. But this isn't the real story.

Look at this. Look at it. It may look dry and boring to you, but it tells a story with as much to say about human nature as anything Jane Austen ever wrote. It's the disclosure of insider dealings in VA Linux - trades by officers, directors and major shareholders. It only goes back a year, but that's OK because it stretches back to the end of the SEC lock-in period in June 2000. All the trades made by insiders during VA's quoted history ought to be here.

Two things leap out to the trained eye. First, search the page for the word "Purchase". You won't find it. It isn't there. Since this thing floated, it's been Sold, Sold, Exercised Options, Proposed Sale. No insider has committed new money on their own account. That isn't true of, for example, Red Hat, or Caldera.

Second, you will not find the names Eric Raymond or Robert Malda on that list. The stock they got, they kept.

It seems to me that the "suits", the presidents of this, the guys responsible for making the thing profitable and the people who put up the IPO money as "investors", have, in so far as they have dealt at all, exchanged VA Linux stock for cash. The geeks who built the products, have hung onto their ownership, because they actually believe in the reality they're creating.

I'm not sure what makes economic sense here, and I'm certainly not making any calls on the stock market. But I know who comes out of this story with their reputation looking better.

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Geeks versus Suits | 41 comments (21 topical, 20 editorial, 0 hidden)
Wonderful! The Titans will fall. (3.66 / 9) (#8)
by Urban Existentialist on Thu Mar 15, 2001 at 01:20:50 PM EST

This is just the sort of article that kuro5hin is all about. Here we have a criticism of ESR from the common man, unspun by PR people and powerful media conglomerates. K5 is truly the realm of the grass roots philosopher king, the true Guardians of the modern age.

As in Plato's Magnesia, here on kuro5hin the critics can come forward and spread the Truth to our community and beyond. Some may think this place is a meaningless backwater, but in fact it is the stomping ground of the Kings of our age, and the collective unconscious prevalent here today is the guiding light of our society tommorrow.

Someday, all will know that this shady, desperate character, this Brutus who has slain the ideals of Free Software, and yet still espouses Free Love, is a hypocrite and charlatan of the worst sort.

How I have longed for the Truth to be spread, and disseminated widely among the Free Software community (Open Source is for cunts). ESR is the cancer at our heart. We must weed him out - only then will we be pure.

Forgive me, I am drunk (Claret and 15 year old Glenmorangie, honestly, it kills me)

I have a high art, I hurt with cruelty those who would damage me.
-Archilocus, 650 B.C.

+1, FP (3.10 / 10) (#11)
by communista on Thu Mar 15, 2001 at 01:37:43 PM EST

This is a great writeup. It's missing a lot of that angst I have seen in your posts as of late. That's a good thing. :)
/me fucks shit up!!!!
Stock prices and selling out (4.44 / 9) (#13)
by ucblockhead on Thu Mar 15, 2001 at 01:47:17 PM EST

This brings up an interesting ethical argument:

You own a company. You believe strongly in the company. You think that the company is worth $20/share, which given traditional stock evaluation methods, is very high.

Stock market morons with no sense bid the stock up to $100/share.

Is it ethical to sell? Does selling mean that "you don't believe in the company"?

It is a very fine line, because even hinting that you don't think your company is worth $100/share is likely to get your ass sued.

I've seen valuations for companies, Linux and dotcom, soar to heights at which only an idiot would buy. VALinux, Corel, Amazon, Yahoo. And unfortunately when the inevitable crash comes, it often makes it look like the companies are doing badly when perhaps they really aren't, or at least, not that badly.

If I had owned VALinux stock on IPO day, I'd have sold it as fast as legally possible, not because I think that the company is doomed, or even in bad shape, but because I think the prices its stock was selling for is utterly ridiculous.

As far as the whole "geeks" vs. "suits" thing, well, I think it is partly that "geeks" are usually not (as much) motivated by money and partly that they tend to assume that they can do it again.


-----------------------
This is k5. We're all tools - duxup

Not Black And White.... (4.37 / 8) (#21)
by Carnage4Life on Thu Mar 15, 2001 at 03:36:59 PM EST

Part of me wonders if streetlawyer is posting this to prove the point that K5ers will vote down articles that negatively portray geek icons (his ESR bashing article of yesterday) but will vote up those that portray them positively even though both articles show a similar lack of research and use the same broad strokes to paint its protagonists. If so, good job JSM.

My main contention with this article is that it romanticizes geeks while at the same time trying to portray executives as sellouts which is false. Someone's belief in the longevity of a company and their level of company loyalty is usually independent of whether they are a "suit" or a "geek". After all, most geeks today hop from job to job with little concern for so-called loyalty to a specific company (although some say this is in response to the fact that company's aren't faithful either).

Geek Sellouts

Lots of geeks have sold out of companies that they had shares in and reaped massive rewards despite the fact that investors thought they should have held on and some believe they should have if they believed in the companies

Pierre Omidyar, Jamie Zawinski and Sabeer Bhatia are all examples of geeks who built something from from the ground up and sold at the first available opportunity. As someone stated earlier in this thread, I don't blame anyone for selling stock that is overvalued and making money. Hotmail is a giant money loosing proposition, if someone offered me $1 million for it I'd think they were crazy let alone $400 million, who would say no?

VA Linux was in the exact same boat with shares valued at over $300 for a business model based on dominating a market with low barrier to entry where competitors would be better funded and have more experience selling machines. Instead of me repeating myself I'll just link to my recent thoughts on VA Linux.

Die Hard Suits

Jeff Bezos, the CEO of Amazon.com, is known for having not cashed out of Amazon and making sure that his VPs have stock options that vest over a long period of time. It is rumored that he attempted to negotiate a 20 year vesting period into a deal with an executive who signed on from Black & Decker.


you are right (4.00 / 3) (#36)
by streetlawyer on Fri Mar 16, 2001 at 02:18:21 AM EST

Part of me wonders if streetlawyer is posting this to prove the point that K5ers will vote down articles that negatively portray geek icons (his ESR bashing article of yesterday) but will vote up those that portray them positively even though both articles show a similar lack of research and use the same broad strokes to paint its protagonists.

You are right, it was, and a pretty depressing experience it was too. Damnably few people saw fit to question the fact that Raymond never built VA -- he got his shares for free. And your points about Bezos are exactly right, and he is, in my quite extensive experience of dot com flotations, entirely typical of a sector in which the businesspeople are often far more committed to the future of their company than a bunch of mercenary contractors.

In the specific case of VA, however, it does worry me that there wasn't a single purchase. That's unusual.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]

No revisions necessary (4.22 / 9) (#22)
by eLuddite on Thu Mar 15, 2001 at 03:38:50 PM EST

But I know who comes out of this story with their reputation looking better.

Well, if they didnt have a reputation for being idiots before, they deserve to have one now. There is nothing honorable about being a company stooge and streetlawyer knows this :-) [1]

They (Raymond, Malda, etc) believe so strongly in a company they work for, a company whose creation they did not share in, a company over which they have no executive input - they believe so strongly in that company that they are willing to lose (in the case of ESR) 35.5 million dollars!?

That's pathetic. VA Linux _is_ suits; it's a company, not a cause.

When someone gives you millions of dollars worth of inflated stock and you dont dump some of it then you may as well make a career of playing the lottery because there isnt a whole lot more you can do to demonstrate a belief that economic reality is based on the premise that, if you just wait long enough, the sky will open up and shower you with all manner of pretty trinkets.

If ESR sold just some of those shares when they were around the 20$ mark, he would have enough money to personally tide over some of VA's recently laid off staff, pay someone to work full time on the Linux scheduler, and still have enough money left over to play eccentric millionaire.

Money means something. Money is health, food, housing, blood. Money is life. VA is nothing but one of several companies, none of which will survive Linux, the OS, or Open Source, the idea. If Open Source is the ocean and VA the titanic, who or what is being served by electing to go down in the sinking ship?

I used Fetchmail and was amused by Slashdot long before anyone ever heard of VA. There's a little computer shop near my house which will match VA's ability to cobble together a machine, part by made-in-taiwan part. Give _me_ 30 million and I'll give you a banner-free openforge as a personal tax write-off.

If I was a financial advisor I'd advise ESR to cut his losses and use whatever is left to finance Open Source in some other way. Oops, too late; there isnt enough left. You know, we live in a capitalist society. With financial genius such as ESR and Malda for friends, Linux doesnt need any enemies.

 

[1] "May I point out that this story goes in as is or not at all, for very good reasons," is just another way of saying "I gave you that last sentence, what more do you want?" IMO, of course.

---
God hates human rights.

Order of events (4.33 / 3) (#30)
by cameldrv on Thu Mar 15, 2001 at 08:27:02 PM EST

I used Fetchmail and was amused by Slashdot long before anyone ever heard of VA.

Well, Fintronic Linux Systems, the former name of VA was around in at least '95, so that would predate both Slashdot and Fetchmail. (before Eric Raymond took it over it was called popclient)

I think that many, if not most people using Linux around '95 would remember Fintronic, I know I thought it was pretty cool that there was a company that would sell systems which were guaranteed to work with Linux, at a time when there was tons of hardware that was incompatable due to lack of drivers.

Really, if you look at VA, I don't think there's anything wrong with the concept of selling servers and desktops designed for Linux. The problem comes in when the hype machine gets turned into overdrive and people start believing that a beige box manufacturer is the second coming, and subsequently value it at Six Billion Dollars. Today they're trading at 170 million, and that is a lot more reasonable. However, I question how much longer they can go on if they keep losing 100 mil every year. If you're valued at 6 bil, it should be easy to do a secondary offering to get more operating money, but at 170 mil, even getting 100 mil on a secondary offering would be very difficult.

[ Parent ]

you are the wind beneath my wings (3.50 / 2) (#35)
by streetlawyer on Fri Mar 16, 2001 at 02:13:22 AM EST

There's a little computer shop near my house which will match VA's ability to cobble together a machine, part by made-in-taiwan part.

That's the future of VA, IMO. If you don't believe me, consider the case of Gultronics, once the mainstay of the UK computer hardware industry (don't laugh, we had one), and now a shop on Tottenham Court Road, AFAICT.

[1] "May I point out that this story goes in as is or not at all, for very good reasons," is just another way of saying "I gave you that last sentence, what more do you want?" IMO, of course.

Absofuckenlutely, right in one. You're a pretty sharp guy, you know that? I've got one more Raymond story, but after seeing the sickening way in which the k5 borg can be manipulated, it almost makes me sick to think of posting it :)

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]

LNUX is winning our LNUX/RHAT/MSFT dead pool mkt (3.40 / 5) (#24)
by TuxNugget on Thu Mar 15, 2001 at 03:53:19 PM EST

Linux Futures has had a game up where you can bet "Tux Nuggets" on whether LNUX, RHAT, or MSFT will be delisted this year. Mostly it is there to give the software something to do, and for bug hunting/fixing. The shares are worth 100 if the ticker is delisted on/by 12/31/2001.

As of mid-Thursday, we had:

  • RHAT - 25 (or 25%)
  • MSFT - 30 (or 30%)
  • LNUX - 60 (or 60%)

It seems to me that LNUX and RHAT might be undevalued. Price/Book is less than 1 for these companies, meaning that if you bought all the stock and took over, you could liquidate and make money (like in the movie Other People's Money with Danny DeVito). Now many companies have safeguards against this, and who knows whether these companies are good buyout candidates.



price/book less than 1 (3.50 / 2) (#33)
by streetlawyer on Fri Mar 16, 2001 at 02:04:17 AM EST

meaning that if you bought all the stock and took over, you could liquidate and make money

Or, that the books are full of computer hardware being held at cost, where you wouldn't be able to realise the stated value in a firesale. Gimme a call when it trades below the value of cash and quick assets :)

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]

ESR again? (3.40 / 5) (#25)
by khallow on Thu Mar 15, 2001 at 04:43:15 PM EST

I'm starting to wonder what else you got on the man. This series is getting interesting. :-) When you get to ESR ordering mob hits on some suits, lemme know.


Stating the obvious since 1969.

id rather a suit run my company.. (3.85 / 7) (#26)
by rebelcool on Thu Mar 15, 2001 at 04:43:49 PM EST

..than a geek. Judging from the various in-the-trenches workers on slashdot, and many on here, most havent a single clue how to effectively run a business. It's been in my experience that the majority of "geeks" focus on petty and futile issues while missing the big picture of making money, which is what a business is all about. Beyond writing software, theres a whole ton of other things that a "suit" has to handle which is what an MBA is really good for.

Certainly, the best candidate for running a tech business in my opinion is someone who qualifies business-running saavy with a strong tech understanding mind. A major in business with a minor in computer science/engineering or vice versa.

Theres one particular geek that I can think of that has done extremely well business wise, and thats the person you all love to hate, Bill Gates. Even if some of m-soft's practices are shady, you must admit that geek built up an incredibly successful empire, and it's pretty unlikely we'll see anyone else doing something similar for quite some time.

COG. Build your own community. Free, easy, powerful. Demo site

The suits don't know either. (2.33 / 3) (#27)
by marlowe on Thu Mar 15, 2001 at 06:01:26 PM EST

So you may as well let the geeks run the company. At least the geeks know *something*.

-- The Americans are the Jews of the 21st century. Only we won't go as quietly to the gas chambers. --
[ Parent ]
not about business they don't. (4.25 / 4) (#28)
by rebelcool on Thu Mar 15, 2001 at 06:53:56 PM EST

An MBA is vastly more qualified for running a business. Look at it this way: you have two choices for someone to program your computer..an MBA, or CS major. The MBA has no experience whatsoever programming your computer, but has some flaky ideas about "what computers should be" even though they're proven to not work in practice.

Same is true with having a geek try to run a business.

Of course, having a real product you can legally make money from helps. Which alot of linux software corps are lacking in.

COG. Build your own community. Free, easy, powerful. Demo site
[ Parent ]

Which shows what you know about suits. (4.20 / 5) (#29)
by Paul Johnson on Thu Mar 15, 2001 at 07:07:59 PM EST

I've seen both sides. I've seen smart and dumb people on both sides. And I get tired of hearing how us poor hick geeks get a raw deal from those city slicker suits. If you're so smart, why aintya rich?

There are more things in heaven and earth, Horatio, than are dreamed of in your philosophy. Suits have a major role in organising stuff. I've seen a bunch of bright geeks, and getting them all to move in the same direction is true art. The most important thing in doing this is making them think it was all their idea. Unfortunately this means that the best managers look superfluous to their people, just like the best network administrators.

Paul.
You are lost in a twisty maze of little standards, all different.
[ Parent ]

Just hack out an MBA... (3.00 / 1) (#38)
by hughk on Fri Mar 16, 2001 at 07:28:20 AM EST

Geeks are numerate, some can even communicate, with these two skills you can study an MBA. It is usually harder for an MBA to learn technology well.

Ok, so an MBA can take a lot of time and effort to study. The geek doesn't need to pass the exam, but the material is out there for studying, be it Corporate Finance or marketing.

I agree about Mr. gates being a geek who is very good although, self-taught at business. Unfortunately, perhaps he skipped the bit about business ethics.

[ Parent ]

don't know about that... (none / 0) (#40)
by rebelcool on Fri Mar 16, 2001 at 11:30:48 AM EST

i think its unfair to assume any one field is "harder" than any other. It depends on the individual. Some people have a gift for grasping technological concepts quickly, some have a gift for grasping business management.

None the less, a person should do what they're good at, and its usually a bad idea to try and act out a part you have no experience in.

COG. Build your own community. Free, easy, powerful. Demo site
[ Parent ]

Suits in a high tech company (3.50 / 2) (#32)
by cezarg on Fri Mar 16, 2001 at 12:55:55 AM EST

Suits running a high tech company are generally a bad idea I think. Why? Because they never have enough technical expertise to make the right business decisions. All the successful companies I worked for were founded by ex-programmers of large high-tech shops that got together and started making their own products. I am not saying that a high tech business does not need business people. All I'm saying is that they should not be the decision makers. What also irritates me in the "suit world" is that marketing types are notoriusly very ignorant of the technologies they claim to be selling. So many times I had to speak with a clueless marketroid that didn't know what they were talking about that I thought the company should just fire them and install voicemail as a replacement. It's much cheaper that way and just as effective. Now, I don't demand that marketing people have the level of technical knowledge that I have but hell if they are employed in the high tech sector they really need some general understanding of how things are. Repeating bullshit at tradeshows isn't gonna get them very far anymore especially that employers are now eager to see solid results out of their marketing departments. I have to learn a lot of new things every day to be able to fulfill my duties and so should marketing people (albeit at a different abstraction level). Until I meet more suits that are truly clued up on what they're selling and why I'm going to have little respect for suits. This rant doesn't apply to hardcore business skills such as accounting and finance.

I know this is not even vaguely on topic but I felt like ranting and this seemed like a good spot for it ;).

Divest in your own company - can be a good idea... (3.00 / 2) (#37)
by hughk on Fri Mar 16, 2001 at 07:21:59 AM EST

Just say you are working for a company and have a bunch of shares in it. The company goes, down and you lose both income and investment.

A more balanced approach of trying to spread your shares across many companies is perhaps a better long-term strategy.

As a board member, your dealings are, however, under scrutiny. Selling a few shares is not a problem but any major desposa(or many over time) sends a message to the investor:

Time is running out, sell quickly before the price goes down further!


Spreading holdings among many stocks (none / 0) (#39)
by pranshu on Fri Mar 16, 2001 at 11:17:31 AM EST

Warren Buffet likes to refer to this kind of stock diversification as Investors protecting themselves from their own stupidity.

If you trust your judgement you should be confident enough to hold a lot of your stock. If you don't trust your judgement you should stick to bonds.

There is only time to throughly research a handful of stocks. Invest heavily in your winners.

[ Parent ]

lock-in on IPOs (3.00 / 1) (#41)
by mckwant on Fri Mar 16, 2001 at 01:20:08 PM EST

It's fairly common for founders to have to accept a lock-in clause when they go public or merge with another company. That way, the people who had the vision in the first place don't run screaming when they're worth a billion dollars.

Just because they HAVE shares doesn't mean they can sell them.

Geeks versus Suits | 41 comments (21 topical, 20 editorial, 0 hidden)
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