What We Learned In The New Economy: Profiles


Keeping The First Chapter From Being The Last

Joe Kraus


Joe Kraus looks as if he just strolled out of a freshman economics class at Stanford. Fresh-faced and trim, wearing a string bracelet and toting a computer bag, he doesn’t seem close to 32. He certainly doesn’t look old enough to have lived through the dramatic rise and fall of, the Internet search engine he and five others founded in a garage the summer after their college graduation.

Worth more than $500 million at one moment, Kraus saw his company fall to pieces after an ill-fated merger with Internet cable outfit @Home. Kraus came out okay financially, having cashed out part of his stake, but emotionally it wasn’t so easy to go from wunderkind to someone people kinda wonder about. “It’s very sad to see something you’ve spent so much effort and energy on, a third of your life creating, and–poof!–it’s gone,” he says.

What went wrong? Kraus points fingers in all directions, including his own. He says the company failed in part because @Home, a joint venture of several cable companies, dissolved in infighting. But there were strategic errors, too, such as the acquisition of Blue Mountain Arts’ online greeting-card company for $780 million, much of which was paid in cash. “The valuations look ridiculous, but they weren’t ridiculous at the time,” he says ruefully. The other error, says Kraus, was Excite’s failure to see that many businesses would actually pay to be part of a search engine, as Google has figured out.

“Fried,” in his own words, Kraus backpacked around the world. He got married, and in 2003 had a son. He and an Excite partner, Graham Spencer, recently decided the time was right for a new venture. Though he’s coy about the details, it involves a simple way to collaboratively build documents or Web sites using only an HTML browser. “The company-creation process is the juice,” he says. And it’s that heady beverage he wants to taste at least one more time.

Burned, Sure–But She’d Do It All Again

Ellen Hancock
Former CEO, Exodus Communications


At least Ellen Hancock can laugh about it now. “He told me it was a growth company with no risk!” she chuckles. She is recounting the recruiting pitch lobbed at her in 1997 by an investor in Exodus Communications, the Web-hosting startup she ran as chief executive from March 1998 to September 2001. As it turned out, he was wrong on both counts. The dotcoms that used the company to host their sites went bust. Exodus collapsed two weeks after Hancock was forced to resign.

Still, Hancock, now 60, sounds buoyant at times as she reflects on her own lessons from the New Economy. “The Internet did change everything!” she says. “But we know now that the value isn’t in how many packets we send back and forth. It’s the effect it has on our lives. I learned about Saddam Hussein’s capture at 5:30 a.m. on my PC!”

She’s also clearly humbled. She’s on several academic boards, but has been unemployed since leaving Exodus. It is not a status she bears easily. Eyes faintly glistening, she says, “I’m still not sure I’m over what happened at Exodus.”

By her own account, Hancock should have seen the trouble coming. A mathematician by training, she spent 29 years at IBM. When she joined Exodus, Hancock had seen more office Christmas parties than most of her employees had birthdays. And to an operating executive steeped in IBM caution and process, Exodus, full of passionate go-getters, was bewildering. “Sometimes passion gets in the way of good business process,” she says.

Despite it all, Hancock says she’d take the same trip again given the chance. In fact, she plans to get back into the hosting game with a startup she’s funding herself (she cashed out $12.4 million of her Exodus shares). “I’m still not happy with my last chapter,” she says. “I want to do one more thing.” —Carleen Hawn


“Everything Will Be Okay”

Michele James
Former chief talent scout, AOL

As chief talent scout for AOL in 2000, Michele James found herself holding a backstage pass to the biggest (and most troubled) merger in corporate history. It was a rough-and-tumble ride, but what she learned made the trip worthwhile, she says.

James, 41, was a top headhunter with Korn/Ferry International, the world’s biggest search firm, when she got the call from AOL. She was reluctant at first but decided this was a chance to get experience she would otherwise lack. “I thought, If I make the leap to the New Economy, it will be like getting a PhD along the way.”

The learning curve, however, was steeper than she had anticipated. Feeling totally overwhelmed by the scope and complexity of her new position as AOL and Time Warner merged, she says she tried to quit every day for the first six weeks. But gradually, she began building systems for handling the volume of work, which at any given time might involve 1,000 open jobs, 48 staff recruiters, and countless outside search firms. She also came to appreciate how vital a differentiator talent was in the viciously competitive New Economy. “Forget disruptive technology. I learned how truly disruptive the wrong employee can be–in every seat.”

In 2002, when the new company began shedding talent instead of adding it, James decided to leave. She set up her own firm, and built her business in those bleak days with a simple message to clients: “Let us do one excellent search. Let us find the one person who will create revenue for you tomorrow.”


It worked. In late December, she signed a six-year lease for 7,000 square feet in a prime building in Manhattan. “If you could get out of bed post-9/11, post-boom, and say, ‘Today, I am personally going to outperform the Dow, because I believe in me more than the stock market,’ then everything will be okay.” –Linda Tischler