The Harder They Fall

Many dot-commers have lost more than money, and they're hurting

In late 1999, a twentysomething who I'll call Sam was living very large. He was a mid-level dot-com executive at a Silicon Valley company that was founded in the mid-1990s. By the time the boom was cresting, he was fully vested in stock worth about $17 million. "When my friends went out, I picked up every check. I gave money to charity. I believed unbelievably in my company," he says. Sam was sure his future included the freedom to go anywhere "and not have to deal with anybody I didn't want to deal with." You can probably sense what's coming. When I last checked, Sam was still employed, but his net worth--that is, what's left of his stock plus his car--was $300,000.

Across the country, folks are understandably chuckling at the dot-com-uppance of Silicon Valley's young hotshots. "Darwinism works," snarled a health-care CEO I told about Sam's plight. What's more, while $16.7 million is quite a drop, $300,000 ain't chump change. Sam knows that, too. He came to Silicon Valley after college with nothing but his car and a big stack of debts. "If you'd said to me five years ago that I'd have $300,000, I would have been thrilled," he says. "If only the stock had never gone up so much." But it did go up.

Sam mistook a roller coaster for a rocket ship, and it has taken a frightening emotional toll. At times trembling with anger and at times stammering with shame, Sam told me how in recent months he'd seriously considered suicide. I am sorry and concerned to report that he is among thousands of people staggering around here in Lake Wealthbegon in need of some serious counseling help and maybe a dash of compassion.

Denial has finally filed Chapter 11 in the Valley. But depression has picked up its lease. For months layoffs were discussed but still hadn't hit in full force, allowing plenty of workers to tell themselves things weren't really so bad. They would compulsively monitor their stocks on their Web browsers and at each positive flicker exhale and say: "Ah, here we go!" Apocryphal stories made the rounds. "Why, I know a gal who got laid off and had a new job that paid twice her old salary by the end of the day!" A lot of people finally took a vacation.

But in just the past few weeks, the mood of the Valley has plunged. As Bob Dylan mumbled and moaned in this year's Academy Award-winning song from Wonder Boys, "Things have changed." Now you see people wincing and referring to the downturn as "What's Happened" or "All This," the same way devastated families create euphemisms when they can't bring themselves to say "since dad abandoned us" or "since my sister's diagnosis." Reed Taussig, a seasoned Valley hand and CEO of Callidus Software Inc. considers himself an "eternal optimist" but says he recently turned to his wife and asked: "What's happened? Did we wake up and Jimmy Carter is President again? Everyone is so depressed."

Another Valley veteran, Roger S. Siboni, the CEO of the software maker E.piphany Inc. (EPNY ), sees plenty of opportunities amid the gloom: He has a cash hoard of several hundred million dollars and says he's now hiring selected people and snapping up technology assets "for the cost of one day of interest on the price of some of our past acquisitions." But Siboni is acutely aware of the resentment that the Valley managed to engender during its wild ride up, and he knows people elsewhere "who are slapping high fives and laughing about `you Valley guys."' As for the next time around, "I hope we can be a little more humble on the way up. I hope that's one thing we've learned from all this," he sighs.

Arrogance was not confined to the Valley's Gen-X contingent. But while experienced hands like Taussig and Siboni have lived through some cycles, remember that Sam and his peers were struggling to select a cummerbund for their junior proms the last time the stock market crashed. In Sam's adult lifetime, stocks have only gone up, tech has only been hot. And despite "All This," the truth is that he would still be a multimillionaire today if only he hadn't made a string of absurdly risky financial maneuvers. He used margin loans for all kinds of transactions: to buy real estate, to make big charitable donations, even to pay enormous tax bills. Unwinding the mess created when those loans came due in a falling market meant selling not only his house but the bulk of his stock. Most difficult, he'd become something of a rock star to his family and friends. Now, he feels more like a karaoke crooner a couple notes off key. "You feel like a big idiot," he says.

For all his pain, Sam considers himself in better shape than many of his friends. At least he has no debt. He knows someone who owes over $1 million in taxes and whose assets are only worth half that amount. Tax crises are brewing all over right now, and a wave of bankruptcies is coming. Sam fears that the despair he sees among many of his peers about how much they've lost or the taxes they owe and can't pay, could lead to devastating emotional breakdowns, and yes, suicides. And it doesn't help that many companies that were once bankrolling every imaginable service from dry cleaning delivered to your cubicle, to company-wide vacations, now are keeping their distance as employees sort through their personal chaos. "I guess they are afraid," says Sam, who's sought counseling help on his own.

Stephen Goldbart is one of the founders of the Money, Meaning and Choices Institute. He and his partner Joan DiFuria initially rose to prominence during the boom when they offered counseling for a disorder they coined that many of us once longed to develop: "sudden-wealth syndrome." Now they're handling more and more clients whose portfolios have been wiped out. "We're seeing people who are suffering," says Goldbart. There was widespread "functional denial" going on among the post-boom babies, he says, but now, "we're watching a shift into a grief process."

Until I spoke with Sam, I had toyed with writing a different kind of column, one about something I had dubbed "Post-Internet Stress Syndrome E-Disorder." Spell the acronym, and you'll get the gist of how much sympathy I had for the New Poor. But Sam's suicide references scared me. H.L. Mencken once quipped that journalists should "comfort the afflicted and afflict the comfortable." Some of these dot-commers have managed to switch from one side of that directive to the other as quickly as their portfolios zipped to the moon and back. They are young and they have been through a catastrophic emotional experience for which they were not prepared, one not much different from watching your house burn down.

The timing is terrible, but I hope companies can spare a few bucks to pro-actively provide or at least recommend some counseling for employees who might be suffering. The years these employees might have spent in entry-level jobs getting perspectives on both business and life they instead spent drag-racing down a financial fast lane with their peers, confusing their stock portfolios with their self-worth. Still, they weren't doing anything illegal. They were caught up in a much broader mania. And their hubris and manic workstyles were cheered on by plenty of venture capitalists and other common-sense-suspending backers. Let's cut 'em a little slack.

By Joan O'C. Hamilton

    Before it's here, it's on the Bloomberg Terminal.