SiliconBeat

Jay Adelson speaking at FailCon 2010. Photo by Dean Takahashi of VentureBeat.

As executive confessions go, the one delivered by former Digg CEO Jay Adelson in a public forum this week stands out as one of the most remarkable ones I’ve ever seen for both its brutal honesty and fearless self examination.

The occassion was a fireside chat at FailCon 2010 with Cathy Brooks, who runs the Story Navigation workshops that I wrote about previously. I wrote a column about FailCon that you can read here. Even though I couldn’t fit Adelson’s remarks into that column, I couldn’t stop thinking about his session even after I had filed. So I wanted to circle back to them here and explain what I found so amazing.

Silicon Valley executives are often packaged in so many layers of spin and carefully crafted images, that when someone stands up and speaks from the heart, with no filters, it can be downright startling. Like a sudden gust of wind that catches you off guard and almost knocks you off your feet.

That was the feeling I got as I listened to Adelson’s remarkable exploration of his own failings. While many folks in the room were understandably anxious to hear about the failures of his business ventures, I was captivated by his unvarnished discussion of his personal failings, as a father, as a husband, and as an entrepreneur. He spoke with great authenticity and honesty about his ongoing fight to strike a healthier balance between his intense drive as an entrepreneur and the toll it takes on his family and personal life.

Adelson isn’t exactly a household name, though in Web 2.0 circles he’s somewhat of a giant. Here’s some quick background on him. In 1998, Adelson started Equinix, an Internet infrastructure company that went public after Adelson stepped aside at the suggestion of investors to let another more “professional” CEO step in and lead the IPO. Adelson eventually lost control and was pushed out of the company, to his enduring regret. That experience was fresh in his mind he was contacted for advice by another entrepreneur, Kevin Rose, who wanted to discuss his idea that became Digg.

Adelson had left Silicon Valley and moved to New York after he left Equinix to get away from the craziness and lingering bad feelings. But ensuing conversations with Rose got him so pumped about Digg, he wife told him he had a “wild” look in his eye. Reluctantly, he found himself agreeing to become CEO of Digg. And he took the role while commuting from New York.

And this is where the personal confessional begins. Even though he had vowed to steer clear of another start-up, he found himself too obsessed with the idea of Digg to say no.

“Next thing you know, I woke up in the back of the alley with a bump on my head five years later,” Adelson said. “And I loved every minute of it.”

Asked about regrets, Adelson said he doesn’t second guess the decision to turn down the two serious offers Digg received. Instead, he again circled back to the personal toll.

“Looking back on the personal, there are moments in time when I wish things were different,” Adelson said.

When he started Equinix, his first child had been born just two months earlier. He rationalized his decision at the time by thinking, hey, it’s the dot-com boom, and I want to take my shot, and if it fails, at least I can say I tried.

“But I don’t think I realized at the time, even if you go home at 6 o’clock, which I rarely did, you don’t realize how much you take home,” Adelson said. “In your head, you’re at work. Even when you’re at home, or rocking your baby to sleep, you’re there at work.

“I wish I had the discipline to shut it off,” he continued. “This is one of the reasons I left Digg. I think I have a problem there.”

Once Adelson is working on a start-up, he find he “puts the blinders up. And to some extent, you can’t stop yourself. It’s a compulsion.”

The reasons he left Digg back in April, of course, were more than just personal. He acknowledged there were disagreements over the direction of the company. But even after he left, he found he hadn’t really left.

“It took me four months after I left Digg for the process to slow down in my head,” Adelson said. “I still wake up in the morning and I’m still working there.”

“I love the emotional context,” he explained. “Everything about Digg and Revision3 (an online video company where he is chair) is about changing something bigger than me. And I get very involved.”

Adelson knows he’s not alone in his start-up compulsion. And to illustrate his point, he asked the room full of 450 entrepreneurs how many of them reached for their smartphone the moment they opened their eyes in the morning. About half raised their hands.

“That’s probably not okay,” he said. “Look into my eyes. That’s. Not. Okay.”

Last year, Adelson and his family moved to back to Silicon Valley even though he didn’t expect to stay at Digg much longer. He was starting to advise more start-ups here and he thought that maybe being closer to them would help him achieve a better balance. He said he’s trying hard to stick to his decision to not jump back into a start-up. He said he’s struggling because he’s hearing about so many amazing opportunities.

“Can  you stay on the sidelines for six months?” Brooks asked.

“Ask me that again in six months,” Adelson said. “It’s been very difficult.”

Brooks asked Adelson what he tells other prospective entrepreneurs about how to weigh the personal costs of doing a start-up against the thrill of being in the game.

“I think that it really just depends on you.” Adelson said. “It’s an emotional decision. Is it interesting to you? What it really comes down to is: Do you enjoy your life every day when you wake up? Do you grab that Blackberry first thing in the morning because you really care about this idea and the people you’re working with? Or do you grab it because you have to?”

Here is VentureBeat’s video of Adelson’s talk:

There are plenty of CEOs in Silicon Valley that I could pick on when it comes to executive compensation. And when I do, I inevitably get an email from a reader accusing me of being resentful that someone else is simply making a lot of money. But that’s not true.

And as evidence, let me now praise Netflix CEO Reed Hastings. He’s making cash by the barrel full these days. And he deserves it.

I’ve singled Hastings out for the masterful way he’s steered Netflix through countless challenges. As I noted in this blog post earlier this year, Netflix has constantly been written off for dead. And each time, it’s come back even stronger. It’s repeatedly defied its critics expectations. And Hastings, who has been at the helm for about a decade, deserves a big share of the credit.

Were this your typical company and your typical CEO, you might also expect to find his executive compensation to be lavish. It’s not, but it’s been growing week by week. That’s almost entirely due to the performance of the company, and the growing value the company has created for shareholders. In a couple of ways, Netflix has done a remarkable job of tying pay to performance, which is why I don’t begrudge Hastings his growing pot of loot.

Let’s take a closer look at how that works.

First, we’ll start with something that Netflix does not do: Pay bonuses to executives. That’s extraordinary. From the company’s most recent proxy filing:

“The Company does not currently provide a program of performance bonuses for its Named Executive Officers. The Company expects all individuals to perform at a level deserving of a bonus and therefore such bonus amounts are taken into consideration in determining total compensation for the Company’s employees.”

Show up and do your job. There’s a novel concept.

The company then sets an overall target for what it wants to pay its executives, but it does allow the individuals to request how much of that they want in cash vs. stock. That means each person can determine how much risk they want to build into their pay. Once they do that, Netflix then allocates the options in equal amounts each month over the course of the year, with the strike price fluctuating along the way. So rather than just giving executives one big chunk at the start of the year, in a kind of all or nothing gambit, the piecemeal system does two things. It likely limits the upside, but also probably keeps more options in the money in the event the stock dips.

Look at it another way: If you flip the stock right away, your profit will be limited because the strike price will be based on the latest value at the start of the month. If you hold it for the longer term, there’s going to be more potential profit.

So let’s circle back to Hastings.

In 2008 and 2009, he was paid about $1 million in salary and received about $1.7 million in stock options each year, for a total package worth around $2.7 million. By valley standards, that’s cheap.

Since Netflix went public in May 2002, Hastings has established a pattern of stock sales from which he’s never deviated. He sells a chunk of 20,000 shares every two weeks like clockwork. For many years, these resulted in such small sales that they barely got any notice. His first sale in February 2003, when Netflix stock was just over $6 per share, was worth $126,550.

More recently though, I noticed that Hastings was often showing up in the Mercury News’ list of top stock sales each week. I wondered if he had accelerated his sales. Nope. Instead, Hastings is benefiting from the 239 percent increase in the company’s stock price over the past year.

So when Hastings sold his 20,000 shares on Sept. 2, Netflix stock was trading between $134.30 and $148.78, making the sale worth $2.8 million.

Over the past seven years, Hastings has now sold 3.35 million shares to raise $118 million. That’s somewhat offset by the $1.7 million he spent to exercise 964,152 options. But that still gives him a net profit on sales over $116 million.

That comes out to an average of $15.5 million in annual take home pay for Hastings, when you combine salary and net stock sales. That’s a lot for you and me. But it’s modest by Silicon Valley standards. And more important, it’s well deserved when your stock chart looks like this:

That kind of restraint shows the faith Hastings and his board have in the long term vision he has for Netflix. The only lament here is that this kind of mentality is still more the exception than the rule. Perhaps I may be naive in hoping that other boards might look at run of success Netflix has had and wonder if they should rethink their executive compensation principles.

Makers by Cory Doctorow

My rating: 4 of 5 stars

What’s not to like about a book where the main character is a business columnist at the San Jose Mercury News? But Doctorow’s glimpse at the near future makes it difficult to love. The book hits a bunch of themes that would be familiar to anyone who follows Doctorow’s writing: The nature of closed vs. open systems of innovation; the wonder of making stuff and hacking.

But having just finished the book, it’s hard to say how Doctorow wants us to feel about the kind of future these things are creating.  I would assume him to be a champion of open source, but the characters who fall into that camp don’t necessarily get happy endings. And in fact, they help generate a bubble that proves economically devastating not once, but twice. One of them becomes hooked on a future weight-loss program that eliminates almost all overweight people, but eventually turns out to cause horrific health problems. Technology, in this book, causes problems sometimes worse than the ones it solves.

The characters celebrate the world they live in, where the unemployed have built shantytowns from scratch as an alternative to developer driven housing models. But as a model of people making for themselves, well, these shantytowns don’t sound all that wonderful.

In the end, the message of the book is ambiguous. I’m not sure how Doctorow wants me to feel about this world, as intriguing as it is. It seems definitely more dystopian than utopian. And yet, at times he seems to be celebrating it, certainly not condeming it, and certainly never glamorizing it.

That may well be the intention, to leave us feeling ambivalent about where the future it taking us. Makers certainly offers no easy or obvious lessons about these questions. But the questions it raises made it a compelling read.

View all my reviews

Last last year, in my annual prediction column, I included one far-out, wacky suggestion: Cisco Systems would buy Dell.

Though admittedly a long shot, my rationale was that Hewlett-Packard was moving into networking with its purchase of 3Com. That made it a direct competitor with Cisco. Both companies want to fight for big corporate customers, but HP has an advantage by simply being bigger. Though PCs are a dicey business, the best way for Cisco to level the playing field would be to buy Dell.

I’ve put that out of mind until the last few weeks when a series of events got me thinking that it could make sense. And now there’s a twist: Could Oracle be interested in Dell? I posted a short thought about this on Facebook yesterday after Oracle officially announced it was hiring Mark Hurd, the ousted CEO of HP. They now have a co-president with extensive experience running the largest PC maker in the world. Imagine what Hurd could do with Dell? And what delicious revenge it might be for him to take on HP in the PC business?

A year ago, I would have never thought about Oracle buying a PC company. But now that they’ve done the unthinkable and plunged headlong into hardware by buying Sun Microsystems, how much crazier would it be to see them buy Dell? In fact, yesterday, Quentin Hardy of Forbes also mused about the possibility of Oracle buying Dell:

“The last big Oracle buy was Sun Microsystems. At the time, people liked the software Oracle got from that deal, but wondered what to do with the hardware. Sure, it could sell high-performing Sun servers loaded with Oracle database and application software, but at what acquisition cost?

That deal makes more sense if Oracle adds to its hardware offerings with a comprehensive desktop and laptop offering. Dell has that, along with servers, storage, and a little network switching. More important, it has extensive corporate relations in selling to different parts of a corporate base than Oracle now touches.”

The company in the middle now is Dell. Following their loss in the 3PAR bidding, they are a wounded duck. They have a market cap of $24.4 billion, and annual revenue that fell last year to $52.9 billion.

By comparison:

• Cisco has a market cap of $117.4 billion and annual revenue of $36.1 billion.
• HP has  a market cap of $82.9 billion and annual revenue of $114.b5 billion in 2009.
• Oracle has a market cap of $120.4 billion and annual revenue of $26.8 billion.
• Microsoft has a market cap of $206.23 billion and annual revenue of $62.5 billion.
• IBM has a market cap of $158.5 billion and annual revenue of $95.8 billion.

I mention Microsoft only because of something Oracle founder Larry Ellison said a few years ago when he predicted the IT industry would consolidate. Ellison said there would be a handful of giants left at the end of the day, including Microsoft, HP, IBM, and a couple others. (I don’t remember the exact list, but I think there were five).

In any case, he wanted to make sure Oracle was one of the few giants left. And so he said Oracle needed to acquire large numbers of companies to boost its revenues and size to keep pace with companies like Microsoft. Being bigger would allow the company to spread costs such as R&D over a wider base, Ellison said.

That rationale remains as true today as it was then. Dell, first and foremost, needs to get much larger to remain competitive with HP. The fastest way to get there is acquisitions. But we’ve seen that Dell doesn’t have the resources to go toe-to-toe with HP. In fact, HP could simply starve Dell by outbidding them time and time again.

No, the best option for Dell at this point is to be acquired. But by which company?

HP probably couldn’t buy Dell without getting hung up on anti-trust issues. But if Cisco bought Dell, you would have a company with close to $90 billion in annual revenue, a number that significantly closes the gap with HP. And if Oracle bought Dell, you’d have a company with more than $60 billion in annual revenue, still only about half HP’s revenue, but closer.

Over at Silicon Valley Watcher, Tom Foremski wondered whether Oracle might buy HP:

“Yes, it is a big pill to swallow however, it would enable Larry Ellison, CEO and co-founder of Oracle to perform an end run in the massive global IT market and also leave a substantial legacy on his upcoming retirement.

If there is one thing we know about Larry Ellison is that he is motivated by big goals. Is this one too large for him?”

While I see Tom’s logic, I still find this scenario to be unlikely. Oracle has a lot of money, but it would probably need to make a hostile, all-cash bid for HP, which would be way too expensive. It would have to borrow massive amounts and take on big debt. Oracle’s stock wouldn’t be that attractive to HP shareholders, given that until the last couple months, Oracle and HP stock prices have tracked pretty close together:

However this plays out, expect lots of drama over the next few months. There’s no love lost between these companies. And with the economy stagnant, big players have clearly decided that acquisitions are the way to grow.

Who is the happiest man in Silicon Valley today? It has to be David Scott, chief executive of 3PAR. If he’s not the happiest, then he’s at least the guy who has made the most money in the past month thanks to the over-the-top bidding war for his previously obscure company.

According to a proxy filing in July 2010, Scott owned 2,923,468 shares in 3PAR, or about 4.6 percent of the company’s stock. On Aug. 13, those shares closed at $9.65 per share, making them worth $28,211,466.20.

Cue the bidding war. Dell threw in the towel on Thursday after Hewlett Packard offered to pay $33 per share. That makes Scott’s shares worth $96,474,444. That’s a nice 350 percent return in about three weeks.

The other big winners:

• Mayfield Fund holds 2,992,752 shares, about 4.8 percent, worth $98,760,816.
• Menlo Ventures holds 9,371,361 shares, about 15 percent, worth $30,925,4913.
• Worldview Technology Partners holds 8,382,058 shares, about 13.4 percent, worth $276,607,914.
• FMR LLC holds 7,643,890 shares, about 12.2 percent, worth $252,248,370.

On the New York Times DealBook blog this week my latest column about the questions still unanswered in the Hewlett-Packard scandal was roundly criticized by Jeffrey Sonnenfeld, senior associate dean for executive programs at the Yale School of Management. I posted my response in the comments section below his post. But I thought I’d also share them here:

Jeffrey:

I find your conclusions in this instance puzzling, and can only guess that you haven’t been following the story closely and read through my column on the matter a bit too hastily. Otherwise, you wouldn’t have portrayed the column as focusing on the personal details in this matter. Here’s what I wrote:

“There are certainly other questions we’d love to know the answers to (”Did they have sex?” “Did Hurd harass her?”), but aside from their salacious value, I don’t think they would add to our understanding of this scandal.”

So you and I agree on that. But you muddled this by mashing the first half of that sentence with the first of five questions I asked:

“What was the nature of Hurd’s relationship with Fisher? The other supposed misdeeds stem from this one key issue. All sides say there was no sex and no affair. And yet HP said Hurd’s relationship with Fisher crossed a line into territory that required him to disclose it to the company. It remains unclear where the company drew that line.”

The point of my column was that the basic circumstances of what occurred remain largely unknown. That remains true a week after I wrote it. As such, I find it impossible to imagine how anyone could conclude that the board handled things “just right” or applaud them for “noteworthy courage.” Perhaps they did. But in the end, we don’t know.

If the matter was so clear cut, why was the board negotiating a new contract for Mr. Hurd after an investigation concluded there was no sexual harassment? Why was the company leaking stories to the Wall Street Journal about being surprised by his settlement with Ms. Fisher, which supposedly cut short the investigation?

Surely the decision to oust Mr. Hurd was not out of sudden fit of conscience. After all, this is the board that had endorsed the firing of more than 100,000 employees under two CEOs over the past decade. This was the board the showered Mr. Hurd with increasingly absurd amounts of pay and perks even as layoffs accelerated. Shoving the latest CEO out the door with parting gifts worth more than $40 million isn’t likely to turn around the rank and file view of the board, which by all accounts is quite dim.

And in fact, it’s likely to cloud the arrival of whoever becomes the new CEO, since the board’s judgment in such matters remains in doubt. Those doubts will not be eased when the new CEO gets a nice starting bonus north of $20 million when he or she joins. And that’s not counting the need to hire a president and new board chair since Mr. Hurd filled all three roles. This will be a hiring spree bound to cost shareholders serious money. I’m not sure how you feel HP’s strong earnings during Mr. Hurd’s final quarter factor into whether we should be pushing for more answers.

I’m glad you know all the HP executives well enough to buy HP’s spin about their “strong executive bench.” Yet good governance would also seem to dictate that any major corporation have a succession plan in place. Where was HP’s in this case? Why wasn’t a member of this solid bench ready to step into the CEO role on a permanent basis?

Given the millions that will be spent on hiring bonuses and severance, this is a matter in which shareholders deserve straightforward answers. I’m surprised you would not only endorse the vague stories that have been given, but suggest we stop asking questions already.

Despite, Mr. Hurd’s hazy quote on the matter, it is important to note that he has not admitted to any of things which HP has accused him of doing. His other statements included in the first-day press release indicate that he was not leaving HP of his own accord. Sources close to him who have spoken to me have indicated he did not endorse the board’s view of events, has never been told how his relationship with Ms. Fisher violated HP standards, and only learned of the additional accusations about expense reports and false payments the day his departure was announced. These sources indicated he was never shown the evidence or given a chance to refute it.

Is Mr. Hurd’s camp right? Or is the board correct? I’m not sure how you judged the differences in their stories in this case.

Clearly, with a $40 million severance package on the line, Mr. Hurd felt compelled to say something. But nowhere does his statement endorse the board’s view of events.

You ask: “What then is the moral outrage or the vital material information denied investors?” To which I would answer: If Mr. Hurd did violate policy, why pay him his severance package? If there were misdeeds, true moral courage would seem to dictate the board take a stand by firing him for cause, and withholding that money. If, that is, there was really cause. Forcing him out, and then rewarding him with millions of dollars hardly strikes me as “noteworthy courage.” It feels like the board was hoping Mr. Hurd would quietly go away, and that the ensuing PR storm would pass quickly.

Here’s an odd thing. Today, a former colleague sent me an email saying they had just called the Facebook switchboard. When the automated attendant came on, the second option was for “law enforcement.”

I agreed that seemed unusual, so I called myself (650-543-4800). Sure enough, “law enforcement” is the second option. But the full message was also amusing.

The message starts with the expected, “Thank you for calling Facebook…For customer support, press 1. For law enforcement, press 2.”

Law enforcement comes ahead of business development, marketing, press, and employment verification in the list of options.

Is Facebook really getting that many calls from law enforcment? Apparently so. When I pressed 2, the next message says: “This message is only for members of law enforcment. Please note that due to a very large volume of incoming calls, the current call back time is two to four business days. For faster response time, please leave your work email. A member of Facebook’s security team will email you in a timely manner.”

So, what do you suppose all those cops are calling about?

In the past year or so, I’ve grown increasingly impressed with Facebook founder Mark Zuckerberg. Though he’s still young for a guy running the most important company on the Web, I felt he was growing into the CEO role. This was a reflection of his strategic insights, the way he’s expanded Facebook’s user base past 500 million, and his improved presentation skills. That last bit may sound shallow, but the ability to stand up in front of the world and convery your ideas and persuade people to believe in them and follow you is a critical skill for any tech CEO these days.

Given all this progress, I was left doing double-take after double-take as I watched the livestream of the Facebook Places announcement Wednesday afternoon. I lost count of how many times I found myself thinking, “Did he really just say that?” or “Did they really just do that?” It bordered on the surreal at times, and easily ranks as one of the most bizarre corporate announcements I’ve witnessed while covering Silicon Valley for more than a decade. To be clear, it wasn’t just Zuckerberg, but the whole crew of Facebook execs who toddled across the stage.

But let’s start with Zuckerberg, since he was up first.

When he first hopped onto the makeshift stage set up at Facebook, Zuckerberg seemed a bit lost. Holding up the microphone to his mouth, he said so the whole room (and the Web audience) could hear: “Hey, do I have to stand on this thing? Okay….It’s a driftwood stage we constructed. Awesome.”

Awkward pause.

Then, Zuckerberg explained the Facebook tradition of holding a launch party when they have new products. “These are a lot of fun to do, so thanks.” Another awkward pause.

Then: “This is going to be a long interesting summer. We’ve got a lot of interesting products we’re working on.” Pause. (Would I be nitpicking to point out that summer is two-thirds over?)

Then: “The thing we’re going to talk about tonight is a new Places product that we’ve been working on for a few months. Uh, awhile”

Okay.

Then, Zuckerberg told a story about how he knew the product was ready to go when he was showing it to his girlfriend and they discovered that Facebook VP Chris Cox and his girlfriend were at a restaurant next door.

“I was in Menlo Park, and I never go to Menlo Park. I’m always at home or in the office.”

“When that serendipitous moment happened, I knew that the product was ready to go. And we were ready to start sharing it with the world and help people stay connected wherever they go.”

What struck me as odd, as I listened to Zuckerberg and some of the Facebook execs that followed, was that they sounded like they had just discovered the wonder of location-sharing and check-ins. Zuckerberg explained that Facebook Places was intended to do three things: Help people share where they are in a “nice and social way,” help you see who is around you, and help you see what else is going on. Fine. But that’s pretty much what Foursquare, Gowalla, Brightkite, Where, and many others, have allowed you do for a couple of years now. Facebook is a relative late comer, though potentially a game changer given its 500 million users.

Then Zuckerberg was followed by a gauzy, Hallmark-card-y video that tugged at your heartstrings with some warbly music and shots of people interacting in the real world, all thanks to the magical thing that Facebook had just discovered:

Up next was Michael Sharon, product manager for Facebook Places. “Places is not about broadcasting your location to the world,” he said. “It’s about sharing your location with your friends.”

And again, he went through the list of wonders that pretty much every other check-in service has allowed you to do. Check-in! See who else has checked in!

What should they have done? While many of other early leaders in the space appeared on stage after Sharon (Gowalla and Foursquare), I think Facebook should have acknowledged their pioneering work. And then pivot and say: Hey, these are great, but it still leaves this gap. Define what that gap is: These are early adopter services. Facebook represents a way to bring location sharing to the masses. The more people you know who use this type of thing, the more useful it becomes. Facebook’s opportunity is to bake this into its platform, make in a mainstream activity, and let other people build applications on top of it, just as they have on Facebook’s main platform.

After the competitors left the stage, Cox appeared on stage to kick the weirdness quotient up another notch. He started out with an attempt at a joke that sucked the air out of the room: “The thing about Facebook employees is that we’re all closet sociologists.” Um, huh? “We all get on a bus and go to the Stanford library and check out books on the history of designing public spaces.” Hello, is this thing on? “That was a joke.” Ah, thanks for clearing that up. Cue nervous laughter.

This was all leading up to Cox’s sociology lecture. He gave a nod to noted sociologist Ray Oldenburg, who was apparently sitting in the audience. Cox then elaborated on Oldenburg’s theory about “third places.” He started by filling us in on particularly obscure sociological term that describes the first place: “home.”

“Home is where you wake up, it’s where you go to sleep, it’s where your family is, it’s where you eat and it’s where you go to digest and reflect upon the experiences you had during the day.” Got that? To recap, home is where you eat, sleep, live. There will be a test on this later.

Second place: work. (Do I need to explain that?) The third place is called….”the third place.” These are bars, restaurants, anywhere people go to share their lives with other people.

“Oldenberg made a pretty crazy hypothesis that the technology we were creating in the 20th century was in danger of destroying the third place. There was a fear that now we have television and phones and radios, we would just sit at home on our couches rather than going to the amphitheater to watch the play, rather than going out to have coffee, we’d just call our friends on the phone. Rather than experiencing the world outside, we’d cloister ourselves indoor…Over time, these third places would be destroyed and we’d be sitting in these pods. It’s like Wall-E, with these fat people rolling around in their bubbles.”

But!

Cox: “Technology can be the thing that pulls us out. Technology does not need to estrange us from each other.”

“Maybe one time you walk into a bar, you sit down at the bar, and you put your magical 10-years-into-the-future phone down. And suddenly it starts to glow. ‘This is what your friend ordered here’. And it pops up these memories…’Go check out this thing about the urinal that your friend wrote about when they were here about eight months ago.’ ”

Cox explained that all these check-ins, photos, and videos could be gathered on pages about a place to create “collective memories.”

“That’s dope.”

Yeah, he said that.

“Too many of our memories are still stuck at home, gathering dust on a shelf.” Now those stories are going to be on Facebook! “So that maybe one day in 20 years, our children will go to Ocean Beach, and their little magical thing will start to vibrate, and it will say, this is where your parents had their first kiss.”

As one journalist remarked to Cox later: He practically had tears in his eyes at this point.

Cue Zuckerberg back to the stage to introduce the product team. This included attempting to pronounce the name of one Indian engineer on team. ”Did I get that right?” Zuckerberg asked. “Awesome.”

For the finale, Zuckerberg recounted the tales of Facebook’s legendary hack-a-thons, in which people stay up all night working on a project not related to what they work on during their day job. Apparently, someone at one such event decided it would be cool to build a “launch switch.” Which would be: a wooden plank on the side of the room. That gets pulled whenever the launch a new product. But first, a gong must be banged:

Phew. That’s a wrap.

Now, I know I’m older (41) than probably just about every single person who works at Facebook. But the event felt like I was watching some guys in their dorm commons room knock back a few beers and practice their first presentation. Maybe that shouldn’t be a surprise given Facebook’s famous roots in a college dorm room. But it was hard for me to imagine the group I saw overseeing the massive company Facebook would become if it ever does an IPO.

Also odd: The performance of Zuckerberg won some healthy doses of praise. Dean Takahashi at Venture Beat, said Zuckerberg was “in his element”:

“The affair started late and Zuckerberg had some awkward pauses while on stage. But the 26-year-old handled himself well enough as he introduced a new feature that will likely make rivals in the location-based services business tremble with fear. We’ve uploaded scenes from the press conference in several videos for your enjoyment. You’ll also see the company’s video describing Facebook Places, which lets you share your location with friends, find out where your friends are, and discover new places.

I always find it fascinating to see how one of the world’s youngest billionaires at one of the hottest companies in Silicon Valley handles himself on stage. He seems like a pretty ordinary guy, just one more coder among many.”

Henry Blodget praised Zuckerberg’s performance:

“One final observation: We thought Facebook and Mark Zuckerberg were at the top of their games tonight. Mark was relaxed and in his element, and after a couple of challenging and awkward public appearances recently, seeing him in his element was refreshing. Facebook, meanwhile, is positively bursting with excitement and energy, as might be expected of a company that has wrested the center-of-innovation mantle from Google and is really, truly changing the world.”

I agree with the bit about Facebook taking the mantle from Google. But if this was Zuckerberg was “at the top” of his game, then I’m terrified to think what those other appearances were like.

Joe Nocera is one of the business columnists I respect most. So it’s rare that I find myself in strong disagreement with his take on an issue. But his blistering column about why he thinks Hewlett-Packard really got rid of CEO Mark Hurd is one of those instances. And since things in the New York Times have  way of becoming conventional wisdom, I think it’s worth explaining why his theory is almost totally improbable.

To be clear, I’m not defending the HP board or Hurd. As Nocera writes:

“In fact, the directors should be called out for acting like the cowards they are. Mr. Hurd’s supposed peccadilloes were a smoke screen for the real reason they got rid of an executive they didn’t trust and employees didn’t like.

The stand-up thing would have been to fire Mr. Hurd on the altogether legitimate grounds that the directors didn’t have faith in his leadership.”

I agree with that statement as written. And yet, I don’t agree with its larger implication. Yes, HP’s board is looking more and more like craven weasels every day. And they’re digging their own hole by not coming out with a plausible explanation for why Hurd was really ousted. I agree with Nocera completely on that point.

(As an aside, it seems the board is waging it’s own battle of counter spin by leaking at least one version of what happened to the Wall Street Journal this weeked. I’ll come back to this story at the end.)

While we don’t know exactly what Hurd did, it’s clear he did something. He had some kind of relationship with Jodie Fisher that went beyond professional but stopped short of sex. And whatever it is, he clearly shouldn’t have done it. He put himself in this pickle and has only himself to blame for that. And like the board, Hurd is also not explaining himself to the world, though most likely his separation agreements contains a non-disparagement clause of some kind. While telling the truth and stating the facts ought not to be considered disparaging to anyone, even if it makes them look bad, no doubt HP lawyers would use anything as grounds to recoup the $40 million or so that the board is paying Hurd to go away.

So where does Nocera go wrong? It’s with his conjecture on what the board’s real motivation was. In a nutshell, Nocera is arguing that the board secretly has disliked Hurd for years, in part due to his power play during the HP spying scandal. In the recent book, “The Big Lie: Spying, Scandal and Ethical Collapse at Hewlett-Packard,” former BusinessWeek writer Anthony Bianco claims Hurd was really the main actor, but managed to pin the blame on board chair Patricia Dunn.

Nocera then goes on to note that employees detested Hurd, citing an internal survey in which two-thirds of HP employees said they would bolt the company for another if they could find a similar job. Nocera writes:

“Then there were the company’s employees. The consensus in Silicon Valley is that Mr. Hurd was despised at H.P., not just by the rank and file, but even by H.P.’s top executives.”

So here’s the leap Nocera wants us to make: After several years of massive layoffs, savaging the HP way, and not being a nice guy, the board was looking for an excuse to ditch him. In essence, Nocera wants us to believe that all of the sudden, the board of HP developed a conscience.

When you look at it like that, you realize this theory is nonsense. First, let’s remember this is, in fact, just Nocera’s theory. Like all of us on this story, he’s on the outside looking. He doesn’t point to a source or an internal memo or anything that bolsters this theory. He mainly relies on conversations with ex-HP workers, who not surprisingly despise Hurd.

Next, the Mercury News has reported that Hurd and the HP board were in negotiations for a new contract until the sexual harassment allegation hit. That would seem unlikely if they really wanted to force him out somehow.

But the part of this that I have the hardest time swallowing is that all of a sudden HP’s board suddenly started caring about what employees thought of Hurd. After all, in its various configurations over the past decade, the HP board has signed off on the mass firings of more than 94,000 employees. This was part of a deliberate strategy to reinvent the company that was launched by ex-CEO Carly Fiorina and perfected by by Hurd. Here’s what I wrote on this subject back in June, when Hurd announced another 9,000 layoffs:

“It’s a ruthless, brutally effective strategy launched under former CEO Carly Fiorina and practiced with precision by current CEO Mark Hurd. Without question, the strategy has transformed HP from being the sickly also-ran at the end of the last century to its present position of dominant front-runner.”

The other side of this strategy is the $45 billion that HP has spent on acquisitions under both Fiorina and Hurd. The most recent of the deals was the acquisition of Palm, but HP is still digesting numerous others, including 3Com and the much larger EDS. To one degree or another, these deals were orchestrated by Hurd as part of a relentless march that increased the overall number of employees at HP from 88,000 (pre-Compaq merger) to more than 300,000 (current employment after layoffs).

Many of these most recent acquisitions remain very much works in process. There are complex integration and strategic issues to be worked out. Hurd, though rightfully dinged for being less than a visionary leader, still obviously had some strategic and operational plan in mind for all of this. And no doubt he communicated that to other executives. But he had developed a strong track record for pulling all of these things off. His successor will have to not just lead HP forward, but sort out this massive integration puzzle. HP’s board would be seriously crazy to jettison the architect of all this in midstream without a darn good reason.

Even worse, the HP board got rid of Hurd at one of the most dynamic and challenging times in the industry’s history. As a result of all the mergers and acquisitions by HP and others in recent years, the competitive landscape has completely shifted. HP now finds itself in direct competition with Oracle (thanks to the Sun Microsystems deal) and Cisco Systems (now that HP has gotten into networking via its 3Com acquisition) while at the same time the company is taking on IBM even more directly in the services market (thanks to the EDS deal).

That’s a lot for any new CEO to walk into. Plus, let’s not forget the company now probably needs to hire a new board chair and president. After this, it would smell bad if they don’t break all of those jobs up. When the board says all is well, carry on, well, I can’t believe they’re really that delusional.

For all these reasons, though, I think Nocera’s theory is just plain wrong. I admire him taking a strong stand and delivering a strong critique on the board’s handling this. But his reason for doing so is off base. When Nocera refers to “the real reason they got rid of an executive they didn’t trust and employees didn’t like,” the truth is that we still don’t know what that reason is.

Finally, a word about the Journal story today. The story relies on a source who claims the board was angry about Hurd’s settlement with Fisher, which supposedly short-circuited their own investigation and caught them off guard. I have a hard time buying that the board didn’t know Hurd was talking to the woman about settling, but I suppose it’s possible. But for me, the story boils down to this sentence:

“The account of thinking at the board—which has faced criticism to the effect that it rushed to judgment and that the ouster wasn’t warranted—contrasts with an account given by someone familiar with Mr. Hurd’s thinking.”

In other words, it’s “He said, She said.” And it still feels like we’re not closer to knowing the real story here.

Since the announcement that it was killing Google Wave, Google has turned on the spin by proclaiming how they “celebrate our failures.” There is a lot to admire about Google, and one of those things is its ability to experiment and, as CEO Eric Schmidt said, “try things.” It’s not just hard for many organizations to find the culture and capacity to do that, it’s hard for them to acknowledge when those things don’t work.

Danny Sullivan, at Search Engine Land, mapped out many of Google’s most notable recent failures, and wondered just what the company was really gaining in terms of knowledge:

“But in its statements to the world, Google rarely sounds like it’s celebrating these missteps. It doesn’t really document anything that was learned. It just seems to say as little as possible to move on.”

But the bigger problem I see at Google is its approach to developing those new things. Just because you enable it, or allow it, doesn’t mean your approach to you develop new products and services. And what strikes me about Google is that so many of these products seemed dead on arrival.

Read the rest of this entry »