March 8, 2001: Here's John Bates' story, verbatim as he circulated it in an email to his friends. His permission to publish is gratefully acknowledged.
Hey there all. I am finally feeling like I am alive and part of the world , again. If you want to read this I will tell you a little bit about what happened at BIGWORDS and then give you my take on what is happening overall. More than anything I want us all to remember that this sort of rough patch has happened before in this industry, it will happen again, and the vision that fed the craziness, which then turned into all out greed, is just as real as it ever was. The learning we all just did over the past few years is stunning. We owe it to ourselves to continue to believe in ourselves, the good parts of what we created and learned, and to apply all of that in even better, more mature and helpful ways. More rah rah later, but I really mean it. (Seriously folks, it took Walmart 10 years to get profitable! Think about that!)
The whole end of BIGWORDS was just such a drag in so many ways that I am still trying to figure out how to deal with it. I think I felt pretty sorry for myself, and all the rest of us there, for a while. You spends a lot of energy trying to figure out what one coulda/shoulda/woulda done differently, things you regret doing, and even more, the things you regret not doing. I guess I can honestly say that I gave BIGWORDS my all, but I still wish I would have had more; had enough to make it work. (I also think there are stupid forces outside BIGWORDS to think about, but that's at the end of this...)
I almost don't know where to start, or what to say. I want to take the lessons, and there are plenty. I want to start by admitting that hindsight is 20-20 and I know that. I also want to make the point that things look a whole lot different when you're on the battlefield and the acrid smoke makes it hard to breathe or see very far and the screaming bullets give a special excitement to merely standing there having a conversation. That said, I guess that I learned a few things. These are totally my opinion, as well, and may have no basis in fact. But, I think there are good lessons to be learned.
First, BIGWORDS had an overflow of the most talented people that walk the earth and I am proud of all of them. Words genuinely don't suffice, so I'll stop about that. If you were there you know, 'nuff said. There were a lot of things that went right, but I will tell you about three of the big things that went wrong, beyond the obvious fact that the market cratering made the approach so many companies were taking, BIGWORDS included, impossible. One was a software decision, one was a resource allocation issue, and one was a management issue; none of which were super obvious at the time. I am not placing blame, this is total hindsight in an attempt to learn. I personally also gave up tons of power and took a back seat in order to allow people with more experience the room and autonomy to do their jobs well. What I write below is largely what I put together from stories, experiences and observation, not because I was in the meetings. I wasn't.
Jump in with me... It is our first quarter and we realize very quickly we are not going to be able to make our own supply chain software fast enough to keep up with our increasing volume. We had so many problems with our outsourced warehouses, as well, that it was really difficult to tell where the problems really were, so we felt we had to get some kind of tried and proven solution that would help us manage all the things we had to manage, from inventory to coupon offers and so on. Well, we saddled ourselves with an extremely old, COBOL based inventory/supply chain solution early on, which turned out to not really be tuned to work in the way we wanted to use it. It was a catalogue seller solution that didn't translate at all well into the extremely high speed, real time way we wanted to use it and the volume we were doing was also just overwhelming. Tack onto that the fact that we had to pay consultants ridiculous amounts to be able to do anything at all customized to our needs and you can only imagine the difficulty. That we got it to finally work as well as it did is the amazing thing, actually. It was even more frustrating since so many of the links in the chain were brilliant and worked spectacularly well. But, a (supply) chain is only as strong as its weakest link, and the unwieldy system at the heart of our chain proved to be a large part of our downfall since we could never get the books to people as consistently as we had to be competitive. The fact that we never had our distribution as perfect as it should have been would haunt us until the end. As it has many other e-commerce companies.
I think it is really important to point out that the world was not, and still in many ways is not, ready to play as fast and precise as we would all like it to play. Suppliers are not ready for the fast turnaround times, systems aren't set up to work as quickly or as scalably as we needed them to be, and it was an amazing battle of wits, cajoling, work arounds and tons of sheer will to make things work as well as they did.
Bottom line: We crippled ourselves with a proprietary, essentially closed system that was nearly impossible to seamlessly integrate into the rest of our technology.
Second, we overestimated the desire of people to buy other things online. We put a lot of money into some absolutely wonderful clothing, accessories, aromatherapy, little red wagons to drag your keg around with. I mean, it was great stuff! But, we didn't listen to the students like the student group that I talked to that suggested we sell art supplies and office stuff and things for your dorm room and stuff that had a little more practical application. I brought the charts they drew up during their brainstorm for us into the office. But somehow, in the heat of the situation, all the sexy stuff seemed more important. We also overestimated our volume. For a complex of reasons I don't want to go into we didn't get the vast increase in volume that we had upgraded our warehouse facility to handle. The combination of upgrading that facility along with the inventory purchases we made looked really bad in hindsight. Again, leading up to it they almost seemed absolutely necessary. Our marketing budget was definitely crippled by these and other things, so the whole combo was like a bad drug interaction.
Bottom line: We allocated resources incorrectly. Perhaps understandably, but incorrectly, and didn't get the volume of customers needed to make the allocations pay off. That sucked.
Finally, I think we suffered from a serious, in hindsight, management issue. I learned a very big lesson at BIGWORDS in how teams work. Individual team members need to be bought into each other's success. If you're going to introduce someone into a team (especially a high level manager) it is wise to bring them in and let the team meet them and then ask the team if they like them. Allow the team as it already exists to want the new member - if the new person is that great, they will. They are then a part of the hiring decision, and they then take some responsibility for the success of the new person, who may be their boss. And who will undoubtedly be crucial to the success of the company. This takes maturity and a real lack of ego on the part of the person bringing the new team member into the group.
Unfortunately, somehow our top management team didn't get bought into each others' successes as fully as I would have wished. For some reason I think there was a bit of jockeying and infighting that made it so our different departments didn't cooperate as fully as we needed them to. From experience I think this was fostered by a "new kid on the block" mentality, fostered from the top down, that made it almost impossible for new members of the management team to integrate without the rancor of existing members. There was also, for whatever reason, always a seeming lack of knowledge about various departments budgets. I think people do an amazing job of working with what they have to work with, but when they don't know what the budget is they have a tendency to overspend.
Bottom line: I think that we needed more maturity and experience at the very top once we passed a certain point in our growth. A leader that could have bound our team together and made it a hyper -cooperative, better informed UNIT would have been hugely welcome.
And finally, the market absolutely tanked. One important point about that is the fact that I think we made a big mistake by not being ready for things to go soft a lot earlier than we were. In a mad bull market it's ok to be a lone gunslinger. In a turning, or bear market you better hope you have a lot of friends, and be busy talking to them. I think, furthermore, that in a "networked economy" like ours, your real currency is your "network." Had BIGWORDS been less arrogant and more open to mergers, buyouts, even just friendships, I am certain that things would have turned out differently. Hindsight, again. However, it bears repeating that we should have been a lot more open to cooperative possibilities a lot earlier than we were. I went into BIGWORDS on the last day still thinking that we would be bought out by Barnes and Noble. The shock of finding out we were really, truly going out of business was something I won't ever forget. I think that if you are a company that participates in the networked economy you had better know your competitors and have a provisional plan for how you could work together with them, just in case.
I am sure that there are a lot of people who will agree with me, who will disagree with me, and who have a much better insight into the specifics of everything that went on. I would love to keep the dialog going in a positive, learning focused way.
At the end of the day, I offer no excuses, we didn't succeed. I think I won't be able to sleep tonight if I don't point out, however, that I DO think we (as an Industry) got screwed in a hard way by the greed and inexperience of a whole bunch of new investors (the Etrade generation?) who are not savvy, not neccessarily smart, and who got pretty darned greedy. I mean, WalMart took 10 years! OK, so there were way too many companies with stupid ideas getting funded (present company excepted <grin>) and not all of them could possibly succeed, but that was because everyone saw the stupid valuations taking off and wanted to get in for the "short haul." Greed. Deadly. Well, if you're working and always thinking about that Ferrari then I don't respect you. If you're working at something you love and are passionate about, then I wish you all the success in the world. Go get 'em, Tiger.
By the way, check out http://www.bigwords.com/index.php?from=john1 I am working with Jeff Sherwood, one of the other co-founders, who bought the URL from the bankruptcy court (thank god) to make Biggerwords someplace that really is useful to college students. It's a pricing bot and it's a good idea.
ANALOGY TIME! Here it is!
The whole dot com thing was a lot like the Sorcerer's Apprentice... Give me a little leeway with it, and here we go...
Think about it like this. The young apprentice sees what is possible. He has a VISION for making the world he lives in better. He spends a lot of time with the magic, in a way he's way more in touch with it than the old Sorcerer, who still kind of thinks that just 'cause something is unheard of makes it bad, maybe... you know the type. Let's even grant the apprentice that his vision is not entirely selfish. He sees the Sorcerer go to sleep ("is this Internet thing going to go anywhere, really?") and he has the courage, if foolhardy courage, to don the Sorcerer's hat and start conjuring up his vision for a better world, a world of less overstock, less waste, on demand nearly everything, more connectivity, better views of inventory, less spent of transporting unwanted goods, etc. He gets going and it starts to work pretty well. VC's are bringing in the money two pails at a time. Hell, pretty quickly the catchment basin gets totally full, to the point of being over full maybe. So the young apprentice tries to stop it, but he hasn't counted on the way the world really works. He doesn't realize that the suppliers don't want to move that quick. He doesn't realize everyone in this or that industry has a set way of doing things and don't really give a shit if he's got a better vision. Change is terrifying and not very welcome, even.
And that basin is overflowing to the point of getting his little booties wet. So he tries to stop the brooms with the pails, but only succeeds in creating more! I don't blame him, it's the greed of the brooms that's driving things now! The unsophisticated investors that think just 'cause all the money is heading this way there will be a huge pay out really soon. The brooms aren't bringing in the water to be nice, solely, they're thinking this thing is going through the roof and they want to get in and get out. This isn't long term business investment, this is the shortsightedness and instant gratification desire that makes pure Capitalism as stupid as Soviet Communism seemed.
And the poor little guy is really freaking out now. Trying to do something with the water that makes sense, trying to stop the flood, and finally he can't take it anymore. He really has no experience with stuff on this level. It has gone beyond his abilities, so he finally just passes out from exhaustion. And then the Sorcerer wakes up. Boy, oh boy, is he in trouble. The market just utterly tanks. The Sorcerer doesn't take the time to try to help him learn how he should have implemented his vision. The Sorcerer just puts the whammy on it all, lock stock and barrel. That was shortsighted, too. And you know what, it's not over! The vision is still there, the apprentice is way more seasoned, and the Sorcerer had better spend some time with the apprentice or next time it just may be a whole lot worse.
I have said since the beginning that we need to work together. This will the "new media" kill the "old media" is a pretty stupid question in a lot of ways. If it does, it will be slow and they'll fuse together. I don't think it will be like "Today the major networks announced that television is dead..." It will be a lot more like loving banana shakes and then discovering mangoes. Now you make banana mango shakes. Maybe sometimes you make mango shakes, but you aren't going to stop using bananas. They compliment each other. Use them both, combine them make a mang-nana shake. Maybe a hint of passion fruit would be nice, too! Passion fruit won't bump mango, it combines nicely!
Anyway, the whole crazy thing started with VISION. The Internet is here, and it is here to stay, to change our lives forever, and we had better figure it out so we can make it a positive thing. That is why I jumped in with both feet so long ago and never looked back. We have something so special here, let's not forget that. I have never been more inspired by any group of people than I have been by you, and all the other folks that have been the engine behind the whole Internet Revolution so far. I look forward to a whole lot more great things from you all and I will be in there scrapping with you. So let's do it.