SAN FRANCISCO
The future looks so bleak here at the epicenter of the new economy that it has come to this: An industry lobbying group is pushing for a government handout.
A sales tax holiday for computer purchases "would encourage California residents to embrace technology," Doug Johnson, director of technology policy for the Consumer Electronics Association, recently testified before a state tax committee.
Ah, for the heady days of 1999, when not just Californians but the entire world was willing to pay any price to embrace technology and Silicon Valley gorged on the profits. Now, after more than a year of collapsing dot-coms and faltering tech sales, reality is becoming indistinguishable from jokes.
Last year, as the slump began, the humor site SatireWire ran a mock ad asking people to adopt dot-coms as if they were starving children in Ethiopia. Last month, there was a sincere "Save the Net" campaign, asking people to devote one day to doing things online -- particularly spending money -- "to help the Internet regain its respect."
"Everyone's completely depressed," said Reed Taussig, president of Callidus Software. "It's become the new new thing to profess that the world is coming to an end. Is Jimmy Carter president again?"
Hundreds of companies have died and tens of thousands of workers have been "separated," the preferred euphemism for "laid off." Those who haven't left the area are courting companies the way companies once courted them. Bang Networks, a promising but small start-up, got its first résumé 15 minutes after its Web site went live, and a hundred a day thereafter.
Less obvious is the change in the famous Valley confidence, the sense that you can move here with little more than an idea and quickly find yourself with a gated estate and your own private plane.
"People are exhausted," said venture capitalist Margarita Quihuis. "Mentally. Emotionally. Many have deferred marriages, relationships, children in pursuit of their start-up dreams. Now that it's gone bust, the emotional IOUs are coming due."
It was in this disheartened mood that a group of pranksters recently decided to deface a Fortune magazine billboard. The sign originally displayed a photograph of Amazon.com founder Jeff Bezos alongside the statement, "In the land of the blind, the one-eyed man is king."
Fortune's message, apparently, was that Bezos is smarter than other high-tech executives. His company might have lost a couple of billion dollars, but at least it's still alive. But the Billboard Liberation Front saw the opportunity to make a different point.
First the pranksters covered up the word "blind" and replaced it with the word "dead." Then they put two huge pennies over Bezos's eyes, in homage to the traditional means of making sure a dead man's eyes stay closed.
San Francisco is the land of the dead, and Bezos is living there too. That seemed to be the new message of the billboard. Located on one of the highway off-ramps to the South of Market neighborhood that was the crucible of the dot-com revolution, it remained defaced for two weeks.
The Ruins If you wanted to get a idea of the effect wrought by the dot-com collapse, you wouldn't have to walk far. In fact, you could get a good idea just by standing at the corner of Folsom and Eighth streets, in the heart of South of Market, popularly called SoMa.
On one corner is the shuttered building that housed Petopia, which spent $114 million in pursuit of a profitable way to deliver dog food online. Like all the rest of the pet portals, it didn't find one, and was sold for scrap in February.
Across the street is SF Moto, a bike-repair shop. Parked outside are half a dozen distinctive Kozmo scooters. They were trapped there when the online delivery firm, which spent more than $120 million searching for a profitable way to deliver Ben & Jerry's ice cream to couch potat oes, folded in April.
Looming behind SF Moto is a large mixed-use office/loft under construction. In 1999 and early 2000, when both residential and office vacancy rates in the city were near zero and it seemed that the tech boom would never end, numerous new projects like this got started.
And why not? Relatively modest lofts in this former warehouse neighborhood were renting for $4,000 or more a month, and commercial footage prices had more than doubled in three years, to as much as $80 a foot. Flush dot-coms desperately offered more than a year's worth of security deposits, as well as fistfuls of stock options.
"There was a point when a doghouse could have been rented in SoMa," said Mark Bollozos, director of research for BT Commercial Real Estate. "But as fast as it went up in 2000, it's coming down even faster in 2001."
In the first quarter of this year, SoMa rents fell more than a third from their 2000 heights, while the vacancy rate hit 15 percent. This quarter, that rate is estimated to be up to at least 22 percent. That's more than 3 million square feet sitting unused.
All that emptiness of course has had a spillover effect. Ecco, a trendy SoMa restaurant that catered to the dot-com crowd, has closed, and many others are hanging by a breadstick.
Some industries that service the dot-coms have been busier than ever, but it's because they're reclaiming their goods. That's what happened to The Wright Gardner, an interior landscaping service around the corner from SF Moto.
"During the boom, we were barely keeping up with the demand from the dot-coms," said co-owner Matthew Gardner. "They wanted Zen gardens, tropical rain forests, unusual handmade containers, and they wanted it yesterday."
In most cases, the plants were leased; a Wright Gardner team would go out and provide service. Around about January, the calls started coming in earnest: Come get them.
The pickups didn't always go smoothly. "When the aesthetics leave, the leased art and the leased plants, it's demoralizing," Gardner said. "In one situation, two or three young women started crying."
As with the real estate prices, the collapse happened even faster than the boom. "It was overwhelming, and disheartening, and frightening," the interior landscaper said. "You can only do so many pickups in one day." Two or three times, a company shut down before its plants could be "un-installed," which meant Gardner never got them back at all.
Unless things get much worse, however, and his restaurant and hotel business starts to suffer, Gardner has decided he's not especially sad to see the dot-coms go.
"There were some really nice people, but on balance there was much more arrogance than I had seen in the previous 10 years put together," he said. "They thought they were going to be millionaires by age 27, just by writing code for a few months. Maybe a little more humility was called for."
Going Once . . . For those who want to gloat over the dot-coms' demise, the place to go is an auction of their assets. One or two of these have been running each week since January, and they always draw a large crowd.
The equipment -- computers, furniture, supplies -- is almost always in good condition, and usually consists of the finest brands. "These are only six months old, folks!" the auctioneer at one of the bigger houses, Able Auctions, exhorted the crowd at a recent sale.
"I've learned that Herman Miller is a really good maker of chairs," said Ken Carlisle, an aviation consultant who was standing next to a stack of Relisys color scanners. The scanners were all still in their boxes with the original $89.99 price tags.
Carlisle has been to auctions that actually took place in the dot-com offices. It was as if the staff had just been called out for a moment. "There would be pictures of their families on their desks," he said. "It was eerie."
C.Y. Joe, a retired engineer, was looking over whiteboards. These are the only indispensable pieces of dot-com equipment: the places where ideas, with the help of a magic marker, are sketched out during meetings.
Many of the whiteboards sold at auctions still have scribbling on them. The boards Joe was flipping through had cryptic phrases like "lower pricing makes new applications cost-effective" and "industry relevance" and "facilities upgrade path" and the plaintive "Q. What is the problem w/tech?"
Joe wasn't intending to buy a whiteboard so he could write up his ideas for changing the world or making a million bucks. "I want something," he said, "for my grandchildren to write on in the garage."
Euphemized It was supposed to be a new economy, where the line between workers and executives was invisible. All for one, one for all, millions in stock options for everybody. And some things are indeed different, even in these harsh times.
The language, for one thing. "Separation," as in "You will go to the human resources office and get your separation package," is becoming standard.
But there are signs that even "separation" is too emphatic for the tech world. "Managing out the low performers" is the way one local company referred to its cutbacks. Last week, Dell Computer chief Michael Dell warned of "future head-count actions."
If you disregard language, however, in many respects the new economy is a lot like the old. Listen to one young woman, a former employee at a health-care dot-com:
"We were getting ready to sign a huge agreement with another company. They had just moved my group into a big windowed office. Everything seemed fine. But one morning we got to work and there was an announcement that they had canceled all meetings. None of the supervisors would speak to us, so we went to our offices and stayed quiet. Then, at 10 a.m., there was an announcement over the loudspeaker: 'We're closing the server down.' "
They might as well have said, "We're turning off your oxygen." Servers are computers that handle an office's connection with the Internet. "That sealed it for me," this woman says. "All Net access was gone. All e-mail was gone. A colleague was working on something, and the machine just froze up."
One by one, employees were called into a conference room and told: "The company is reorganizing. We're taking a new direction. Your services are no longer needed here."
"We never saw the chief executive come out of his office during the whole thing. It was the smugness that bothered me. It wasn't 'We're sorry it's happening' or 'Thank you for your service.' It was 'We used you for what we've been able to get out of you, and now we don't need you anymore.' By 11 a.m., I was home crying."
This woman was given two weeks' severance pay, plus a third if she agreed never to bad-mouth the company -- which is why she can't give her name or its name.
'Desk Rage' Everyone's worried that some ex-employee is going to get really upset. "Desk rage," it has already been termed -- a label waiting for an episode to pin it on. So the demand for rent-a-cops is high. They come in before the layoffs, make their presence known and escort the ex-employees out the door.
"Security is not a last-minute thought anymore," said John Vanek, director of personal protective services for Patriot Patrol and Investigations. "Because things were so good, and a lot of employees are highly leveraged in their personal finances, companies know there's the potential for greater stress in the workplace."
Often companies will pinpoint just who they think is most likely to crack. "They'll say, 'We're really concerned about him, he's acting goofy, and we have to let him go,' " said Vanek.
Maybe the system works perfectly or maybe tech workers have a low propensity for violence, but there have been no publicized incidents.
"Logically, you'd think there would be significantly more catastrophic behavior," said Delano Technology President David Frankland.
He offers himself as an example: Three years ago, he sold his company to Delano for $100 million; now his options are underwater, giving him a "negative net worth."
"I'm not happy, trust me," Frankland said. "But I don't have my gun out yet. Maybe it's because it was all on paper in the first place. It's like it was never real. Was this all a surrealist dream?"