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Watching Big Media cover Silicon Valley is a lot like watching Bull Durham — remember the scene where Kevin Costner gives Tim Robbins, the young, hot on-the-way-up pitcher his sound bites for the sports reporters? — only its young CEOs and engineers uttering the clichés not baseball players.
Until today, it was a pretty safe bet that this bubble – the mini-bubble that’s expected to start with Google’s public stock sale – would get the exact same sort of moronic coverage the last one did. Earnest reporters unused to reading complicated securities filings – they’re soo boring – would come out to Palo Alto, write down the players’ sound bites about good teams, smart people and great companies and hustle back to New York convinced they’d met nice guys who got rich by accident and wanted nothing better than to change the world.

Now, some of that’s true. But, well, it’s only part of the story. Kind of like baseball reporting is only about what happens on the field.
Today’s Chronicle – I was amazed, too, then I realized, via Om Malik, that they picked it up from The Merc – take a look at Google’s latest filing and well, whaddyaknow, a bunch of familiar names are gonna make a lot of money off this offering. Kleiner Perkins Caufield and Byers partner John Doerr bought his Google share for about 50 cents – that’s much less than I had initially estimated. And a bunch of other folks have come in on the deal – on the company’s board of directors – will do well, too.
See, now this is how Silicon Valley works. It’s not about jobs, it’s about equity. It’s not about hiring and getting paid, it’s about investing and cashing out. And there’s nothing – absolutely nothing – wrong with that as long as everyone is in on the game; Kleiner Perkins Caufield and Byers invested in Google when pretty much everyone thought “search” was a dead-end. They deserve to make some money.
The problem is that the sales pitch for the stock and the companies issuing them has been cloaked in happy talk for so long that there’s confusion about the nature of the profit being made. The local papers are calling early Google investors “insiders” — something of a misnomer that smacks of illicit behavior. They’re really just early investors. But this confusion is one more reason why the valley is having such a hard time in its fight to keep stock options deductible as corporate expenses. The execs who run the Valley are trying to have it both ways – preaching their ability to reward employees with options as they help themselves in amounts that boggle the mind once you cross the San Francisco Bay. It’s not hypocricyif you understand how ruthlessly capitalistic Silicon Valley is. It’s a harsh reality, one that’s not – in the end – very palatable but very effective.

Share  Posted by Chris Nolan at 10:54 AM | Permalink

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