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.

About a year ago, I started using a service called SlideShare. The idea is pretty simple. You can upload PowerPoint presentations and it converts them into Flash presentations. These new presentations can then be shared and embedded just about anywhere. It’s all very Web 2.0.

I’ve uploaded a few of my presentations here. Very modest stuff, nothing world changing. And over the months, I’ve embedded dozens of presentations over at The Next Newsroom Project.

Since I’ve been using SlideShare for awhile, I was happy to get a chance to chat on Monday with SlideShare co-founders Rashmi Sinha and Jonathan Boutelle. The company is announcing two new services today that are noteworthy, if for nothing else, because they will move SlideShare into earning revenues in ways besides advertising. And since I think ad-supported business models are mostly doomed to fail, I applaud them for moving into new revenue models.

But as we chatted, and as I thought about presentations, I was struck by just how important such presentations have become in our culture. Indeed, corporate presentations have improbably become a form of entertainment. It says a lot about how our relationship to business and celebrity has been transformed in the digital era. Read the rest of this entry »

I had to rub my eyes when someone passed along a link to this story on Tuesday:

Has the world gone made? Was this a hoax?

Just listen to this madness from the Post story:

“A coalition of blue-chip companies on Monday endorsed the idea of voluntarily overhauling executive compensation practices in an effort to restore public confidence in corporate America and to get out ahead of potentially more burdensome rules that could emerge from Washington.

Pay practices such as huge severance payments, personal use of corporate jets and incentives not tied to long-term performance should vanish unless a specific justification exists, according to a task force convened by the business organization the Conference Board.”

Now this is either a radical change of heart, or a phony attempt to head off attempts by the federal government to impose more harsh guidelines. Let’s take a closer look: Read the rest of this entry »

Back in December, I published a column called, “Nine predictions for Silicon Valley in 2009.” Number four on the list was this:

“The South Bay will give up all the jobs we’ve regained since the dot-com bust. Employment peaked at 1.08 million in December 2000 and then fell to 849,500 in January 2004. Job numbers peaked again in June 2008 with 916,500, but fell to 911,100 in November.

With layoffs just kicking in, that number will fall sharply in the first three months of the new year. And with no recovery in site, expect the valley’s job count to get close to the January 2004 level.”

That prompted a lot of emails calling the prediction way to pessimistic. Well, the latest jobs numbers were released Thursday by the state (PDF). Unemployment in Silicon Valley jumped to 9.4 percent in January, up from 7.8 percent in December. Read the rest of this entry »

This coming Thursday (Feb. 19), I’ll be moderating a panel called, “Digital Media Startups - Expectations and How to Achieve Them in the Current Market.” The panel is part of an event being hosted by SVASE, the Silicon Valley Association of Startup Entrepreneurs.

The line-up for the panel is excellent and I’m looking forward to a lively discussion:

• Andrew Chen, Futuristic Play
• Ajay Chopra, General Partner, Trinity Ventures
• John Gardner, Partner, Nokia Growth Partners
• Anne-Marie Roussel, Director, Digital Media Strategic and Emerging Business Team, Microsoft Corporation

The schedule for the evening is:

6:00 - 7:00 pm: Networking and hors d’oeuvres
7:00 - 8:15 pm: Panel discussion and Q/A
8:15 - 8:30 pm: Additional networking

LOCATION: Microsoft Conference Center, 1065 La Avenida Street, Building 1, Mountain View, CA 94403

Tickets are still available, and it’s worth getting them in advance as they are a bit more at the door.

In the meantime, if you’re coming, post any questions you might have for the panelists in the comment section here and I’ll try to squeeze some of them in during the conversation.

Last month, I served as one of several judges for the TeleWho? contest being held by Plantronics. The idea was to solicit ideas for a term to replace “telecommuter” with something that reflected the way the digital era had changed our work habits.

Today, Plantronics announced the winner: Cloudworker!

According the Plantronics press release, the winning submission defined a “cloudworker” as:

“somebody who uses on-demand technology and collaboration tools, such as unified communications, to work anywhere and anytime, and uses the resulting freedom to enable a my-size-fits-me career path and lifestyle. The metaphor of the cloud extends well beyond cloud computing and software as a service applications to include work environments, distributed teams, and communication tools.” Read the rest of this entry »

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Being a columnist can be a lot of fun. Except when it’s not. And there’s something about Fridays that can be particularly grim, even at times like this when it seems every day feels a little more bleak. Maybe there’s just more economic data released today. Who knows? There’s just something about the end of the week when the universe seems to want to serve up an extra dollop of bad news.

To demonstrate my point, here is a sampling of the subject lines that greeted me when I just logged into my email:

• Challenger: TECH CUTS REACH HIGHEST LEVEL SINCE 2005
• Financial Market Strategies - November 14 - Economy: Not Pessimistic Enough!
• Consumer Sentiment Stays at Low Levels Last Seen During 1980 Recession
• Retail Sales Decline Sharply for Fourth Consecutive Month
• Telefonica’s sub growth slowdown could lead to price cuts; Pali Research Blog Posting
• Online Consumers Plan to Spend Less in Stores, Slightly More Online
• WSJ TECH ALERT: Sun Microsystems to Cut 18% of Work Force

And that’s just a few choice selections. It goes on.

It makes me long for a nice, heart warming piece of spam from a Nigerian prince.

My Sunday column (”We need to stop sending our e-waste overseas“) called on the U.S. to take two direct steps that would address the export of our e-waste to poor communities around the world.

The column came out of a conversation I had with Sheila Davis, the executive director of the Silicon Valley Toxics Coalition.

I had several thoughtful e-mails from readers. But there was one in particular that I wanted to highlight. Ed Malley, of Aptos wrote:

Read the rest of this entry »

Has any large American company been so thoroughly transformed in recent years as Hewlett Packard? I started thinking about this when I heard the company planned to lay off 24,600 employees in the wake of closing its purchase of EDS in August. That represents about 7.7 percent of the combined workforce. On average, post acquisition layoffs range from 7 to 10 percent.

Still, the raw number underlying that percentage represents the latest in a series of dramatic moves to reshape this valley icon. First under Carly Fiorina, and now under Mark Hurd, the company is almost unrecognizable from the company that began this century. The most obvious signs of this are the blockbuster acquisitions: Compaq, Mercury Interactive, Opsware, and now EDS.

But underlying those big moves is the enormous upheaval within the ranks of HP and the companies it has acquired. To get a sense of how profound this has been, I went back to look at some of the numbers related to HP’s various restructuring announcements. By my count, including the enhanced retirement plan offered in 2007 and the EDS cuts, HP has gone through seven rounds of restructuring since 2002.

When the latest EDS cuts are completed, a process expected to take at least three years, the company will have announced lay offs of 57,500 since 2002. The total cost of laying off that many people: $9.01 billion dollars, about half of that in cash. I’ll explain how I got that figure in a moment. Read the rest of this entry »