Book Excerpt: 'dot.bomb'
Feb. 12 -- Anyone who worked at a Web company with big plans and big paychecks will be very interested in J. David Kuo's dot.bomb. And those who merely stood on the sidelines watching hopeful Internet players from afar will also find a thrill in his descriptions of the high-tech gold rush.
Our last featured book club, the Charlottesville Men's Book Club, chose dot.bomb for the next book in Good Morning America's "Read This!" book series. Read an excerpt from the book.
CHAPTER ONE: DREAM WEAVING
The twin-engine puddle jumper circled once above the single-strip airfield, turned its nose down, and dove for the ground below. In seat 3A, Craig Winn gazed out the window at the rich green carpet of maple trees undulating into the distance of the Shenandoah Valley. Seconds later the familiar thump, thump of landing gear meeting runway welcomed the little plane's passengers to Charlottesville, Virginia. It was Independence Day 1996. Craig Winn was arriving at not only his new home but also the new home of his newborn Internet retailer, Value America.
The dense heat and humidity of Virginian summer life socked Winn as he got off the plane. He'd left 70-degree temperatures that morning when he said good-bye to his recently former home — a multimillion-dollar estate in Palos Verdes, California, sitting atop perfectly manicured grounds overlooking the Pacific. Now he was panting and sweating as he gathered his bags from inside the three-gate terminal, looking for the familiar fair-skinned round face of his sandy-haired comrade in computer code, Joe Page.
Each man had something the other needed. Page had a car; Winn didn't. Winn had a home; Page didn't. Winn was therefore confident that Joe would be there to give him a ride, but he wasn't too confident about how Page would react to what he was about to tell him: The moving vans were days away. They were going to have to stop at Wal-Mart to buy camping mattresses, sleeping bags, towels, and kitchen utensils for Winn's vacant McMansion in the Glenmore section of Charlottesville.
Curbside, Page leaned against his old black Jeep and waved to Winn. "Man, I'm sure glad I've got a real bed to sleep in tonight," Page, who had driven out from California, said with genuine relief. "The Jeep hasn't been too comfortable!"
Winn tacked on a big, impish smile and shrugged his shoulders dramatically. He did that at "gotcha" moments like these.
Page, who had been working with Winn on Value America's early programming for several months, knew that look. "What?" he said with alarm.
Winn explained. Page listened, cranked the wheel hard to the left, and headed for the shopping center. The two men plowed through Wal-Mart getting the bare necessities for Winn's house and also for the office they would occupy the next day.
After a night of camping in Winn's new home, the two men headed for State Farm Road and the fine offices of Commonwealth Clinical Systems. Double-fisting bottles of Formula 409, they marched through the front door, climbed up the center stairs and then one more flight of stairs to greet Value America's new world headquarters … an attic full of wires, cables, dirt, strewn files, and upended furniture, all sitting on a carpet Winn preferred to think of as rich burgundy, but everyone else thought was blood-red.
For the next six hours Winn and Page wiped down every square inch of the discarded furniture that would be theirs and the 500-square-foot space that would serve as the office for them and three other men currently inbound from California. As Winn and Page wiped and sneezed and wheezed and vainly tried to open windows to get fresh air into the space, they talked excitedly about the future … about Value America and about how it was going to revolutionize retail, creating a "living store" that would be the "marketplace for the new millennium."
In mid-1996, Winn's Value America vision was arguably the most ambitious Internet retailing vision in existence. While other Internet retailers of the day were building online specialty shops selling books, CDs, and zithers, Winn's goal was not just to sell a lot of one kind of stuff or another. He wanted to use the Internet to revolutionize every facet of retail, creating a one-stop Internet shopping site of unparalleled selection, product information, and efficiency. It would be for the Internet age what Harrods was for the entire British Empire at its height: the shopping source for all things. Winn knew it was an inspired — and possibly psychotically lucrative — vision.
The mid-'90s were an age that no one really knew, but many were beginning to suspect, would be an Age. The Internet and the World Wide Web were without definition but full of wild expectations. While few Yahoo!'d, America Online was just a dorky company in a bland Virginia suburb, and the expression dot.com sounded odd in conversation, there was an expectant sense that those were just temporary realities — that the Internet was going to change the world, and the retail conducted over it would be the engine. What that meant wasn't exactly clear. Only the visionaries could describe the future for everyone else. And few revealed the pixels of the unknown future as well as the brilliant salesman with Ted Koppel-like brown hair, darting brown eyes, slightly doughy cheeks, pudgy hands, and a self-illuminating grin.
Craig Winn had been waiting for a revolution like this almost his whole life. He'd predicted it in the early 1980s, while a young manufacturer's representative in southern California selling household goods. Someday, he'd said, technology would change retail forever. It was, he argued, a historical inevitability that retail underwent a revolution every decade or so. During the Eisenhower era in the 1950s, department stores took off, replacing mom-and-pop shops. Then the real '60s revolution came, in the form of discount chains, which were amazingly efficient retail outlets. In the '70s, enclosed malls gave consumers unprecedented convenience, and they reigned supreme. The warehouse concept popularized by Price Club and Wal-Mart took over in the 1980s, again by selling quality goods en masse at a value, effectively transforming warehouses into stores and collapsing costs.
At some point in the future, Craig Winn had prophesied in those years before the Internet, retail would be dominated by technology, obviating the need for traditional retail stores or warehouses. Someday, Winn knew, there would be a single device that combined the information-conveying potential of television and the communication-efficiency of the telephone, allowing consumers to shop for everything from the comfort of their homes or their offices and manufacturers to ship the products directly to those consumers. This device and the retail world it ushered in would be the ultimate retail solution.
Winn knew his life had been created to make this inspired vision real. His father had been a manufacturer's representative with an office in their southern California home — right off the kitchen. Dad used to bring home new products, put them on the couch, and ask his son to critique them. After graduating from the University of Southern California in 1977 and spending a single day in law school (it occurred to him in the middle of the first day of classes that he'd never met a lawyer he really liked, and therefore he probably shouldn't become one), Craig Winn started selling for a living. His father was still a manufacturer's rep, and he gave his son the chance to call on his worst accounts. The stores to which Craig tried to sell his plastic cups, fly swatters, smoke alarms, toaster ovens, and other housewares had either already turned down the Winn Company or demanded under the table payoffs to take products. They weren't exactly blue-chip prospects. After those stores rejected him in his first week of work, Craig had to find new sales targets. By combining a list of all the retail stores that sold housewares and a very good map, Winn plotted stores by geographic location and started making cold calls. His efficiency didn't lead directly to success. His first year, he worked eighty-hour weeks, got rejected more than five hundred times, sold two accounts, and made $12,000.
The next year, Craig Winn earned nearly $300,000. The year after that, he made $500,000. The sudden success wasn't the result of better products, a dramatically better economy, or being given much better accounts. The difference was Winn. He'd done what he discovered he liked to do best — invent an entirely new way of doing business.
Winn's father was the consummate salesman — gregarious, a back slapper, smooth, and polished. Craig Winn was shy. He couldn't sell simply by the force of his personality or through the strength of lifetime relationships. So he decided he wasn't going to sell. Instead, he was going to present people with what he knew they wanted. This could work because, after his failed first year, Winn realized he had an otherworldly intuition about what other people needed and wanted. That insight, combined with his own painstaking research into the products he offered for sale and the stores he wanted to buy his products, made it exceptionally easy for Winn to craft his presentations — he stopped using the term sales calls — to his audience. And it worked. Between 1977 and 1981, Craig Winn helped the Winn Company grow to a $40-million-a-year business. A nice life accompanied his business success — a house on the Pacific coast, a sailboat, country clubs, nice cars, a family. In 1983, the younger Winn bought out the older Winn and grew the company even faster. But even as he became a better and better rep, learning more and more about the products he represented, the brands that paid his commissions, and the retail market in general, he was restless for the next thing — the new arena he could revolutionize.
In mid-1986 he found his next something — lighting. In a casual conversation with two Price Club buyers, he discovered retailers' frustrations with their lighting suppliers. Their complaints, he was told, were that prices were prohibitively high and quality was embarrassingly low. In addition, lighting products were merchandised poorly — their containers were bad, their packaging was bad, their displays were bad.
Within weeks, Winn had $1 million in initial funding for Dynasty Lighting Classics, a company that would create and sell high-quality lighting merchandise for less. Instead of plain brown boxes, Dynasty's boxes would be white, with four-color pictures and lots of information about the lamps on the outside. There would be in-store displays highlighting his products. And in this business such things were revolutionary.
Dynasty's fundamental business insight centered on Winn's favorite word, value. There were, he believed, two kinds of value. First was what he called perceived value. That is what causes a consumer to buy a product in the first place. It is what the consumer thinks he or she is buying. Perceived value is enhanced by packaging and display and underscored by a reasonable price. If consumers think they are getting a great product and are surprised by the low price, they are going to be happy consumers. The second type of value was actual value. There were, he knew, a lot of things initially transparent to consumers that, in fact, were very important to them in the long run. Actual value was about creating the best possible product, engendering the best possible feelings from consumers who used that product, and believing that positive feeling would translate into future sales.
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