Kausfiles' advanced Series-Skipper™ technology allows users to avoid actually reading award-winning newspaper series—without fear of missing anything good. (For more on the rationale for Series-Skipper™, click here.) Today's edition summarizes a Washington Post four-parter on the rise and fall of Michael Saylor, CEO of MicroStrategy, a Virginia software company. In a now-familiar pattern, MicroStrategy's stock rose dramatically and then fell precipitously in March 2000 after it was forced to restate its earnings to correct for accounting gimmickry.
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Oh-what-a-big-deal-this-is hype paragraph: "What emerges is a vivid dispatch from one of the most perplexing and tumultuous periods in economic history. It also provides one of the great, and largely unseen, corporate dramas in the evolution of the Washington area as a major technology center. At the story's hyperkinetic center is Michael Saylor, who became the exemplar of two eras, boom and bust, in their greatest extremes. "
Bonus significance-lending theme: MicroStrategy's fall didn't just symbolize the end of the New Economy boom, it actually provoked it. Columnist James Cramer says, "This one popped the bubble."
Essential problem: Saylor is such a voluble megalomaniac, and his career arc has been so ballistic, that his story has been told many times before—in Newsweek, in Time, in Forbes, in Slate, and in The New Yorker.
What the series makes you want to do: Read Larissa MacFarquhar's April 3, 2000, New Yorker profile. MacFarquhar caught Saylor before his fall, at the height of his serotonin-poisoned grandiosity. The best Saylorisms quoted by Leibovich are from MacFarquhar's piece. They include:
"I think my software is going to become so ubiquitous, so essential, that if it stops working, there will be riots. … I mean that people will die this year because they didn't buy my software."
What MacFarquhar captured better than Leibovich: Saylor's essential business concept. MicroStrategy's main product is "data-mining" software, which lets corporations glean useful nuggets of information from their files (e.g., that customers in Miami like fish filet sandwiches). But Saylor's big idea involved wireless transmission of information. MacFarquhar wrote:
Saylor envisions a world in which everyone will have a tiny device implanted in his ear that will whisper advice to him as he needs it. If a crime is taking place near him (the device will know where he is), the voice in his ear will warn him. If he is on the way to the hospital, the voice will inform him of the success rate of each of its doctors.
This was not a dot-com vision—you would not get this sort of instant information off a conventional Internet site. Indeed, MacFarquhar notes that Saylor was positioning his firm in opposition to the Internet, even as he was trading on dot-com mania—a nuance Leibovich misses. (But, hey, he only had four parts!) Slate's David Plotz suggests Saylor's wireless idea wasn't all that brilliant—"nothing you haven't read in Wired a dozen times." But MacFarquhar gives at least a taste of what it is about Saylor's spiel that hooked so many people. In contrast, Leibovich's series is taken up almost entirely with the crude structure of Saylor's rise and fall—the run-up, the accounting crisis, the SEC case, the aftermath. It's like a building that's all girders and no rooms with life in them.
What Leibovich captures better than MacFarquhar, #1: The accounting problems at MicroStrategy were more than simply a high-flying firm's failure to follow conservative accounting principles; they were a form of deception designed to fool investors into thinking the firm's earnings were on a seamless upward track. For example, a two-way deal with NCR that some analysts saw as a "virtual revenue wash" was recorded as providing $17.5 million in immediate revenue. Saylor and two other executives, the Securities and Exchange Commission found, held unsigned contracts until after the end of a quarter, and then decided in which quarter to put the revenue "to achieve the desired quarterly financial results." The SEC also said they "booked revenue from deals before the contracts were signed," Leibovich reports. (Saylor settled the SEC's charges without admitting or denying wrongdoing. He paid a large fine and was forced to "disgorge" $8 million in gains from stock sales.)
What Leibovich captures better than MacFarquhar, #2: Everything Saylor did (and what he still does) is suspect as PR designed to boost his stock price. When Wall Street wanted a high-tech vision, he gave them vision. He "revised [MicroStrategy's] business model to suit the online mania of the late 1990s." Now that vision is suspect, he tells Leibovich, "I sell carburetors." It all looks like a stock-boosting game driven by publicity. At one point, Saylor lectures, in what could be his real motto: "The stock is down today. And the reason the stock is down today is because we haven't gotten that press release out."
In 1998, Saylor hired a personal publicist, Mark Bisnow, who "ran Saylor's public life as a permanent branding campaign." Some Microstrategy executives criticized Bisnow as a " 'crack dealer', feeding Saylor's addiction to attention." But it's clear, by the end of the Post series, that Saylor's publicity-seeking—his parties, the mentions of his planned Versailles-like mansion, his inclusion on most-eligible-bachelor lists—was not a distraction from his business plan but an essential part of that plan, another way he sold his firm's stock to gullible investors. "When you're seeking to build a business and no one knows who you are," he says, "the key is to be interesting."
Resonant Enron parallel: Saylor thinks his accounting firm, PricewaterhouseCooopers, won't make him revise his numbers because, having approved them in the past, the auditors would look bad if they made a public stink now. (Eventually, under pressure from a critical Forbes article, the auditors do force the devastating "restatement.")
Novelistic details: 1) Saylor recalls his heyday as D.C. cynosure with the phrase, "I was household." 2) When MicroStrategy goes public, it is listed on the Nasdaq ticker right after Microsoft. " 'Warning,' a message flashed over the trading floor. 'Do not confuse MSTR with MSFT." 3) Saylor is "flattered that a U.S. senator," John Kerry, invites him over for dinner in Georgetown. "After dinner, Saylor was asked by a Kerry aide to hold a fundraiser. …" 4) At his peak, Saylor ignores old mentors and confides that "AOL co-founder Steve Case was the only person in the Washington tech community whom he considered a peer." 5) The day his stock crashes, Saylor gets a message on his own doomed robotic wireless service: "Hello, Michael. Your portfolio is down $6.1 billion." 6) At his recent birthday party, Saylor wore "black leather pants and a new red sweater that Brian, his butler, bought specially for the occasion." 7) The closing anecdote: Saylor says he's no longer trying to get publicity, and then keeps his 2:45 business appointment waiting while he spends an extra 35 minutes spinning Leibovich.
New, post-traumatic Saylorisms: " I know the gods have this wicked sense of humor because … they put me in a position where I was simultaneously the most successful person of my generation and in hell." … "I don't think that the trauma or stress I felt is any worse than the stress that a father feels when his son has leukemia." … "I'm still a visionary."
He also says he's become more "epicurean."
Self-pitying whistle-blower-blaming moment: Saylor wonders, in Leibovich's words, "[w]hat would have happened … if John Dirks, the PricewaterhouseCoopers official" who forced the restatement, "had taken a vacation instead."
Most specious excuse: "As a society, we needed to build Mike up," says a former Saylor colleague, quoted approvingly by Leibovich. The man had his own publicist! It's pretty obvious that Mike needed to build Mike up.
What the series fails to provide good examples of: 1) Saylor's "honest ebullience … that was at once crass and refreshing." You'll have to trust Leibovich on that one. 2) How "[i]n computing history … the dominant companies have been ones that could shroud the unsexy functionality of their products in the sleek possibility of What Could Come Next." I don't remember IBM doing that. Do you? 3) Many employees left MicroStrategy "feeling worn down by Saylor, tired of his abuse." How, exactly, did he abuse? MacFarquhar had some tense meeting scenes .
The Post saves Saylor's ass: Saylor, in explaining his fall, "spins metaphors of extreme violence—rape metaphors, a knifing metaphor." But Leibovich doesn't reveal what they are.
Structural advance: There's no "log cabin" paragraph with all the tedious boilerplate details (e.g., "Michael Saylor was born in …"). Instead, they're painlessly fed to the reader when relevant. Much better!
Buried story tip: Leibovich reports:
In preparing for MicroStrategy's IPO that year, Saylor offered to sell "friends and family" stock—coveted shares that are usually reserved for company insiders—to a special class of people he dubbed "influencers." These were the top executives at about 200 nationally known firms, carefully selected by Bisnow. About 5 percent of these "influencers" accepted the shares, according to a source familiar with their apportionment.
Is this sort of ingenious bribery entirely legal? If so, why didn't Enron think of it? Or did they?
Missing perspective: How many (if any) great, successful firms start out by conning Wall Street with inflated earnings charts and then, before they're unmasked, use the money they've raised to generate real earnings? If this is a common trajectory, then maybe Saylor's actions are defensible.
The series' most embarrassing failure: To examine the Washington Post's own role as Saylor's hometown booster. Only in ombudsman Michael Getler's harsh critique of the series, for example, do readers learn that The Washington Post Company's vice president for technology (portrayed favorably by Leibovich) not only served as a MicroStrategy director on the audit committee, but, along with his sons, grossed $866,460 in a "wave of insider selling that had started in October 1999," a few months before the disastrous "restatement." (Back in 2000, this Post-MicroStrategy connection was revealed, not in the Post, but in a brutally on-target column by David Carr in Washington City Paper.) What was the extent of MicroStrategy euphoria at the Post? How did it affect coverage? How many reporters bought stock? Here Leibovich was in a unique position to add something to the oft-told Saylor story, and he punted. Where's David Shaw when you need him?
The series' most fundamental failure: How big a phony is Saylor? Is he one of those effective con men who believes his own con, or something worse? Not only do I not know what to think, I don't know what Leibovich thinks—and I've read all 14,500 words. Don't make kausfiles' mistake!
Estimated time saved by reading Series-Skipper™ instead of the actual series: 1.2 hours.
Fifth in a series.
Previous applications of Series-Skipper™:
"There's a Scanadal in Here Somewhere!" July 18, 2001.
"They Don't Pay kausfiles Enough to Read This Series!" April 16, 2001.
"Shaw Must Go On!" Feb. 20, 2001.
"The Post's Deadly Deadlock," Feb. 14, 2001.