You'll learn a lot from Michael Wolff's new book, Burn Rate, about the "gold rush years" on the Internet--how an "impacted" and "Christ-like" Louis Rossetto birthed the Rolling Stone of technology, how Time editor Walter Isaacson managed to draw his company into one of the biggest and most hemorrhaging content ventures online, and just why AOL decided to blanket the country with a billion promo disks (over three times the U.S. population). But you won't read a word about one of the darkest moments in Wolff's own tenure as CEO of Wolff New Media LLC: an October 1996 memo that Wolff himself wrote, entitled "Salary Deferral."
"We wish to thank you for agreeing to defer $_____ of your October salary (and $_____ of your November salary. . . .)," the letter began. "This letter will confirm the Company's primary obligation to resume paying your salary in full, and to repay your deferred salary, when its cash flow permits." Ah, that fickle muse, "cash flow."
In the weeks previous, Wolff had been unable to secure operating funds for his Net-centric publishing venture (which produced "The NetBook Series"). By September, he asked his 60-some employees at a company-wide meeting to consider taking chunks out of their checks for the promise of huge paybacks--up to 10 times the deferred amount--in the event of an acquisition. The deferrals weren't mandatory, but a large majority signed up, say ex-staffers. "He just sold and sold and sold us and didn't acknowledge the risk," recalls Jonathan Bellack, 25, then Wolff's chief technologist.
By the end of March 1997, the company was grinding to a halt, and Wolff had written himself a check for the remaining $70,000 in the company coffers and bolted to Italy. Meanwhile, the employees, who had not been paid for January, in addition to October and November, were left in the lurch. "People were crying and borrowing money from their parents," says Dina Gan, 30, who was a senior editor. "It was horrible."
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While the brutal boom-and-bust cycle of the online industry isn't news, Wolff New Media's nasty fall from grace caused one of the biggest tremors in New York's new media community, souring a generation of local talent. But the bad blood caused by the thousands of dollars owed--much of which has not been recovered--appears nowhere in Burn Rate. In fact, Wolff seems to get off scot-free. He does describe writing the check and his radiant sojourn in Tuscany, but there's no mention of how his employees were affected; in fact, from reading the book, you'd never know a single person actually worked at his company.
According to Wolff, his sights are more "universal" than that. "I did not want to write a book about this company that was consuming me. It's just a footnote to a larger story," he says. "Most of the book is about other events--the start of Pathfinder, Wired. I was trying to look outward rather than inward."
To Wolff's credit, Burn Rate does an extraordinarily good job of capturing the ambition, madness, and sheer idiocy of executives in the upper echelons at places like CNet, the Washington Post's new media division, and, most scabrously, AOL. The central narrative of the book casts Wolff himself as employee, servant to the suave venture capitalist Jon Rubin, who Wolff says gave him $4 million. (Rubin did not return calls for this article.) Wolff goes "open kimono" (to use the words of one featured venture capitalist) in disclosing his backroom deals, and the results are a bracing exposé. At one point, one of his funders screams at him: "You're going to reap the whirlwind. . . . You little shit!" (Wolff, a journalist, claims he took copious notes during meetings.)
Wolff terms the book an "antipress release" and concedes that he "has a lot of regrets," and that the "business of the deferrals . . . was crummy." Buthe blames Rubin, who wrested control of the company from Wolff in September 1996. From that point on, "my job becomes entirely raising money," he recalls. "Rubin is in absolute control."
Those who worked with Wolff and were owed money won't let him off that easily, reserving special language for him: "megalomaniacal scumbag," "unbelievably sleazy," and "scoundrel," all gladly on the record. After many employees went en masse to the unemployment office in February 1997, some considered filing suit against the company, says Gan, who is still owed $3000. "Everybody was too chicken," she says. "We didn't want to get our hands dirty." Even then, the staffers knew the prospects for recouping the money were dim. "We were knocking on a door where nobody was home," says Jay Jaffe, 26, who was an assistant art director (and is owed $2000).
But the fact that the staff agreed to the deferrals says as much about the contagious faith of Internet ventures as it does about Wolff's skills as a shill. "If you didn't think it was safe to defer your salary, what you were basically saying is 'I don't think this company is going to succeed,' " remembers Bellack. "Why would you think that . . . after you'd spent months killing yourself to make it a success?"
Many ex-staffers blame Wolff for being dishonest about the risks involved in accepting the deferrals (the October memo lays out the potential boffo returns with intoxicating math). But some disagree. Ben Greenman, 28, who was the creative director (and is owed $2000), thinks of it "like an investment that didn't pan out. The others didn't see it as an investment but as a job" where they were guaranteed income. "The thing that isn't factored in is that Wolff was floating his own salary to keep the company going."
What kept the employees working 60-to-80-hour weeks, pumping out a new book every 20 days, sans salary? Wolff New Media was perhaps the ideal start-up workplace, remembers designer Steve Gullo (owed $3500), where you could come in in "shaggy cutoffs with the tattoos showing." "I hadn't had any real experience in an office," adds Gan. "It was about going in late and surfing the Net--what could be better?" It was also a tempting shot at the big time. "We were working on what would be a competitor to Excite and Yahoo!," says Bellack. "We wanted to joust with the big boys."
Most of all, Wolff New Media offered credibility. One observation that nearly all the ex-employees make is that those who sank with the ship have rebounded into higher-level jobs. Many of them have secured prestigious spots at Microsoft, Wired, Condé Nast, and Disney (even Wolff is back in the publishing business with another new company). "It was a breeding ground for major Internet talent," says Jay Sears, 31, who was the vice president of marketing. "Many people have been able to leverage the experience . . . into awesome jobs." Everywhere except back at a start-up.
Michael Wolff will be moderating a panel with Kurt Andersen of The New Yorkerand Steven Johnson of Feed (feedmag.com) about his book (burnrate.com) and the online industry at the Union Square Barnes & Noble, Tuesday, June 16, at 7:30 p.m.
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