Gold Rush

Los Angeles Times Sunday May 16, 1999
Gold Rush Spirit and Ambition Endure
* Heritage: Here, the impossible dream is anything but, history and the present prove.By TERRY McDERMOTT, TIMES STAFF WRITER
COLOMA, El Dorado County — California was born here on a morning in winter in the cold, fast water of the American River’s South Fork. Nativity occurred, quick as a glimpse, at a bend in the river between Dutch and Indian creeks, below the scrub pines of Murphy Mountain.
You could argue that some form of California had existed for decades, even centuries, before the itinerant millwright James Marshall waded into the water that day and saw the bright yellow nuggets at his feet. It’s true, of course. There was something here, lots of something:
There was a state-long archipelago of native settlements that at one point held a quarter of a million people. There were the fitful ghosts of two empires–Spanish and Mexican–and fantasies of a dozen others. There was land, thousands of empty miles of desert and seacoast, mountain and valley, barren rock and fertile delta.
There were, in total, millions of acres of something. But whatever it was, it might as well have been nothing because it wasn’t California. Not the California, in any event, that would sweep into the world imagination, take up residence and, for 150 years and counting, refuse to leave. Not the California of the drugstore counter, the comedy club and the casting couch; not the California of warships and silicon chips; not the California of rockets and love-ins and professional beach volleyball; and certainly not the California of the four-car garage and the $5-million tear-down.
Which is to say, not the California that in an instant became the would-be pot at the end of a million rainbows.
In 1848, when Marshall discovered gold at John Sutter’s sawmill, California had a nonnative population of 18,000 people. News of the gold’s existence was muffled for most of a year beneath a quilt of mistrust and disbelief. Then it exploded, a cannon shot across the world’s bow, setting off a scramble so wild and furious that the only way the unafflicted could make sense of it was to describe it as a disease: gold fever.
An editorialist at the Hartford Daily Courant wrote:
“Thither is now setting a tide that will not cease its flow until either untold wealth is amassed or extended beggary secured. . . . [It is] the center of universal attraction . . . all creation is going out there to fill their pockets with the great condiment of their diseased minds.”
The writer, in other words, wished he could go too. Who wouldn’t? If streets are truly lined with gold, you’d be a fool not to walk them.
It didn’t matter, really, what had been in California. When James Marshall hollered, “Boys, by God, I believe I have found a gold mine,” a new California was born and with it something that came to be called the California dream. It has sometimes been difficult to tell which has been the more powerful of those two inventions: the place or the vision of it. In the new California, the streets would always be lined with something, gold or movie stardom or orange groves or airplanes–or even ideas.
With the gold, the die was cast. Everything that followed was as certain as sunshine.
A Face in the Out-Crowd
Pete Oliver is the kid in the back of the class, the one you never noticed. He didn’t get the grades or the girls, didn’t score the touchdowns. He worked at the Shell station and had no time to run with the cool crowd, not that anyone asked. Indifferent to school, intense and inward-looking, he sank from view into his science fiction and his guitar. He got by.
When his high school classmates went off to college, Pete went nowhere. He made the short move down from El Dorado County to Sacramento, where he worked hard jobs for low pay and hung out around the edges of the fledgling rock scene.
He had from early on been interested in computers. When he was a kid in the ’70s–before the microcomputer revolution was launched–his science-teacher father would indulge him by taking him down to the computer lab at UC Berkeley and letting him punch cards on the teletype.
“I wrote a program that said, ‘Hi, how are you?’ When you answered, it would swear at you,” Oliver says.
Dumb, but a neat trick. He was hooked.
After high school, Oliver wanted to do something in computing, but money–more precisely, the lack of it–kept him out of college. That, plus a conviction that the world was moving too quickly for a college degree to be worth the investment. He compared the four years of college to what he might learn in half the time at a vocational school.
“It seemed the two extra years of school would have made everything I learned the first two obsolete,” he says. So he went to a local vo-tech where he learned rudimentary programming. Then he took a job pushing carts full of computer tapes around the floor at a Sacramento company called Cable Data. “It was a sweatshop, didn’t pay well, but it ended up being good training,” he says.
Then something happened, something rare in the lives of people like Pete Oliver, the people from the back of the class condemned by circumstances to spend their lives there. Pete Oliver got lucky.
Oliver’s luck wasn’t exactly in the James Marshall class. No gold nuggets lay at his feet. It was much more prosaic than that. What happened was that a brand-new company he had never heard of, called Sprint, opened an operations center across the street from the shop where Oliver worked. He met some Sprint people around the neighborhood and talked to them about what they were doing. Pretty soon, he moved across the street for a new job at the new company.
Oliver had no way of foreseeing it, but he had just won a front-row seat at the creation of the telecommunications revolution.
He went to work in tech support in Sprint’s computer center and watched, even helped, as one of the world’s first all-digital telephone networks was built. The company hired high-end programmers to develop custom software to run the new network. Oliver recalls being unimpressed: “I’d look at it and say, ‘$20 million for that? I can write that.’ ”
As soon as he could, James Marshall made his way down to Sacramento to tell his boss, John Sutter, about the gold he found lying in the tailrace off the American River. Sutter noted in his diary that Marshall had come “on very important business,” but, not comprehending what was about to come, he expressed concern that the discovery might slow farm work.
Sutter was an enterprising man. Upon arrival in California in 1839, with little to his name but a string of bad debts and an arrest warrant back home, he recast himself as Captain Sutter and set about building a private agricultural empire. To that end, he sweet-talked his way into government land grants of nearly 150,000 acres. In his own mind, at least, he was building a country. New Helvetia, he called it, after his native Switzerland.
The gold wrecked all that. Not for the last time in California, the normal order of things was turned upside down. Nothing could have been farther from Sutter’s imagined bucolic agrarian kingdom than the rampage the yellow metal wrought. Trying to get anybody to do anything unrelated to finding gold would prove impossible. Whole cities emptied into the gold fields, where new cities formed like algae blooms on a pond. Overnight the world changed color.
Rarely has the weight of collective desire fallen so squarely on one place. Miners came by every route and means available–around the Horn, over the mountains, across the sea. They’d have jumped from the moon had they parachutes. They abandoned ships at harbor and crops at harvest. They deserted farms, families and dollar-a-day jobs back home.
By the fall of 1849, 50,000 miners were crawling over the high country. The ’49ers scoured the Sierra foothills, enriching, despoiling, even killing themselves, and sometimes one another. It was a mad life. Towns were named for the way people died in them. One exhibit at the Marshall Gold Discovery State Historic Park includes as elements of a miner’s routine day digging, square-dancing and attending funerals.
Within six years, 300,000 people arrived. They invented new ways of squeezing gold out of rocks. They dug up, blew up, gouged out, pickaxed, shoveled, clawed, scraped, sifted, pawed, panned and had at the rock in every way anyone had ever imagined and many they had not. In a decade, they took out 24 million ounces of it.
Not a Miner, But a Grinder
There is some similarity between what Pete Oliver does and prospecting for gold, but not much. The likenesses are mainly in the payoffs, which are rare but rich.
Oliver worked at Sprint and another start-up telephone carrier for a decade. Then he arrived at Objective Systems Integrators, which was not a telephone company itself, but which specialized in software designed to manage telecommunications networks.
OSI became a leader in its niche and in 1995, Oliver’s third year there, OSI went public to great success and Oliver’s great chagrin. He and the other programmers were cut out from what they felt was their fair share of the stock. In a huff, Oliver quit the best job he’d ever had, cashed in what stock he did own and started his own company.
Everybody assured him he was nuts. He didn’t care. He bought a dry-erase board, which he set up in his garage, and a new computer, which he put on his dining room table. Then he commuted between the two for a year, designing his program in the garage, writing it in the dining room.
Asked what in particular drew him to software, Oliver says simply: “Computers were cool.” Then he stares at his hands for a while as if lost in thought. He’s not. He’s actually inspecting his hands. Finally, he holds them out, knuckles forward.
“I’ve still got the scars from the gas station,” he says.
He kept something beyond the scars from his grease-monkey days. It’s a special quality he has, of a kind not often seen as special. Oliver is a grinder. You can see it even as he sits in a chair and tries to talk, which is not his specialty. He wants to work, not talk.
As it happens, grinding is an ideal quality in a software writer.
For all of its high-flying results, writing software is a plodding business. More than most things, maybe even more than anything, good software is not mainly a product of inspiration. It is a product of determination and an ability to concentrate intensely for long periods of time. Software engineers must, of course, be smart. The bug-free code is that which is logically pure. Its base unit is the syllogism: if x, then y; if this, do that. So it’s a given that a software writer be logical. Beyond that, the paramount ability of a true code warrior is the ability to sit in a chair for a long time–a very, very long time.
At the end of a year, Oliver had a prototype of a software program that today contains more than a million lines of code.
By way of comparison, a 400-page novel has about 15,000 lines of another type of code, which we call language. This is one indication why novels are generally written by individuals acting alone and software programs are written by teams, sometimes battalions. Writing fiction is an air war; software is the infantry. At the end of that first year, Oliver needed fresh troops.
Oliver took out a lease on a couple thousand square feet of office space in a nearby business park and hired a few other misfits who played guitar and wrote code.
After Gold Runs Out, There’s Still the Dream
When the gold ran out, so did many of the miners. They left behind a scarred hill-country landscape dotted with blow-down shanty towns. The towns would disappear, as would many of the miners, mostly broke and many broken, back into whatever was left of the lives they’d discarded, or on to the new California they had created. The yellow metal made California a state and, as important, made of the state a myth, an eternal destination for every dreamer, no matter how foggy or hare-brained the dream.
The idea of California is simple. One hundred fifty years in, approaching the milestone end of an age, it hasn’t changed: It’s the place where the possible becomes real, or at least has a chance to. That notion has tumbled down through the decades, sometimes so tangled and muffled by the normal run of events you forgot it was there. Other times, it crashed and banged and made so much racket it made the act of dreaming the dream seem more important than attaining it.
In the early days, the place, in the words of historian Kevin Starr, had a “gaudy freedom.” Long after the gold ran out, the freedom remained. The gaudiness grew, too, both as a way of living and a way of thinking. An idea could hardly qualify as Californian if it were restrained.
Even when people advocated the opposite–to be realistic, to think small–they did it in a way that made even retrenchment seem like revolution.
The California dream has proven capable of endless reincarnation. At times, The Dream has been single-minded, ignorant of collateral damage done to the air, land, water and people. On occasion, it has been narcissistic, lost in the ruins of self-delusion. But the existence of The Dream–whatever it was at the moment, whatever its merits–has infused the state with a distinctive entrepreneurial culture and a depth of intellectual curiosity that makes it a place of constant, unrelenting discovery and, but for momentary disruptions, a place of unrelenting growth. From the moment of discovery until today, the state has never had a majority of its residents born here. People keep coming.
An economist, Gardner Brown, once offered this capsule description of U.S. history:
“You move west. You come upon an unexploited plain. You ask one question: How much should I take?”
Extraction is as old and tangible as work gets. When there is something in the land to exploit, people prosper. America thrived in large part because its plains were ripe with agricultural possibility and its mountains with great mineral wealth.
The new engines of the American economy are nearly the opposite.
Empires these days are rooted less often on land than in air so thin as to be stratospheric. Today’s prospectors carry business plans instead of pickaxes; they eat stock options for supper. These modern ’49ers sail virtual seas in search of the Next-Big-Thing-Dot-Com. By many measures, this new mother lode makes the old one look puny by comparison. Here’s an indication: All the gold found by all 50,000 ’49ers would be worth in today’s dollars about $7 billion. Last month, eBay, a small San Jose company with 138 employees, gained as much in market value as the gold miners dug out in a decade.
A Formerly Shining County on a Hill
El Dorado County tilts up, west to east, out of Sacramento all the way to the state line, climbing what locals call the hill. It’s a big hill, the western slope of the Sierra Nevada, notable mainly for its rugged beauty.
The county today, a century and a half after the Gold Rush, is, apart from its visual charms, a middling place in almost every way. Not too rich or poor. Not forbidding but not particularly fit for human endeavors. Not particularly anything. Timber powered the place after the gold. It was lumber, remember, that Sutter’s Mill was built to produce. Then came cattle and now a couple of handfuls of wineries. But, like a lot of pretty places where the logic of the original economy crumbled, tourism is the ascendant force.
Placerville, the county seat, sits in the bottom of a ragged bowl halfway up the hill to Nevada. It’s a narrow, two-story town known best to outsiders as the place the freeway ends on the road to Tahoe.
It’s a small town, the kind where a shopkeeper posts a sign saying, “Closed Tuesday and Wednesday due to personal problems,” and everybody knows exactly what the problems are. It’s the kind of place where a man will spend 20 minutes describing to a near-stranger his latest big-city adventure–a trip to Sacramento to buy a new mattress and box spring.
The lead story in the newspaper one day might be about the mistreatment of a herd of goats. The next it’s a man arrested on a bad-check charge getting hit with $10-million bail when the judge finds out he’s an ex-con.
You don’t have to be a felon to be treated warily, either. People from Sacramento, so close you’d land there if you fell down the hill, say they occasionally have trouble paying by check here. You’re from out of the area, they’re told, betraying a very small definition of area.
In its miner-camp origin, when it was for all too accurate reasons known as Hangtown, Placerville was a tough place. It keeps some reminder of that; it’s testy in the way towns are when money is tight and has been for a while.
The fact is, El Dorado County’s sole reason for being ran out with the gold. Like a lot of communities in similar circumstances, it markets itself now not for what it is, but for what it was. The past would be its future. In civic-management circles, this is an unspoken admission of defeat, a gentle way of saying, we had a pretty good thing once. Unfortunately, not much has happened in the 150 years since.
Lately, though, the news pages have begun to document episodes of a debate on the merits of growth, which for a very long time would have been pointless, given that there was none. The county has even hired an economic development specialist to help the growth along.
In their day, the miners came because of what was here. The newest prospectors are coming because of what is not–crime, crowds and traffic–even earthquakes.
“We’re seismically stable,” says Jim Riordan, a San Jose refugee, stamping the ground hard. “You can tell it’s spring in El Dorado County when you hear the jackhammers.”
People like Riordan come here running from, not to–fleeing the rising sea of subdivisions at their back. Riordan is an inventor. Businesses that can be anywhere, like his, are choosing to be here, heading up out of the crowds of the Silicon Valley or the East Bay. There’s a place that makes blades for surgical saws. Intel, Hewlett- Packard and NEC have set up divisions. The western end of the county in particular is becoming a virtual back office. The state’s busiest post office is there to serve a company that mails millions of cable TV bills monthly. There’s a company that answers technical support telephone calls for software firms. There’s a one-man company that is a sort of high-tech junk shop, buying and selling by modem end-of-life computer equipment.
El Dorado County has finally discovered another version of its future.
Big Victory for a Small Business
It’s fancy pants and shirt day at AI Metrix.
Pete Oliver and company have just returned from a pitch meeting with a prospective customer. They dressed for the occasion. They look grown up.
“We had to leave the Metallica T-shirts at home. Put on the Robert Talbot ties,” says David Hudock.
The ties paid off. AI Metrix left the meeting with the contract all but in hand.
Hudock struts the hall, electric bass strapped on, plucking “Victory March for a Killer Customer,” a celebratory work in progress.
AI Metrix is the company Oliver started in his dining room. He moved in here, an El Dorado County business park, two years ago. AI Metrix now has 10 employees and one product–a software program called NeuralStar, which is designed to control complex telephone networks.
In addition to the just-completed pitch meeting, AI Metrix is in the midst of a demonstration of its technology to the Defense Department, one of the world’s largest customers for telecommunications.
The office is a happy, exhausted mess. Electric cords snake across the floors to a dozen electric fans that blow everything every which way. The office was never intended to accommodate the heat that the many computers pump out. The fans are a vain, noisy attempt to cool it.
The existence of AI Metrix and NeuralStar would have been impossible even 20 years ago. Not only was there not the ability to build the software, there would have been no systems to put it on. The market AI Metrix addresses did not even exist.
The company, its product and its industry have all sprung–seemingly fully formed–from nothing.
Telephone systems, products of invention and ingenuity, had for most of their history been oddly slow to adopt new technologies. In the deep, dim, bygone days of long ago, in, say, 1976, once you got beyond your own city limits, there was one and only one telephone company–AT&T. The court-ordered breakup of the company set loose more than just a confounding flood of marketing. It created opportunity in a business where it had never existed and innovation in an industry that had been slow to adopt it.
Telephone networks by definition require some method of routing calls. Up to World War II, most systems around the world still used switching equipment invented by Alexander Graham Bell. These early systems required operators to pull plugs out of one socket and stick them into another. Electromechanical switches began to replace the biological ones in the 1940s. The first fully electronic system was installed in 1963.
Digital switches, invented in the ’70s, were not widely installed until after the breakup of AT&T. Start-up companies, unhampered by a base of museum-age equipment, built new networks from scratch. This necessitated installing computers and the requisite software to manage the networks. In the era of mainframe computing, that meant hiring scores of engineers to custom-build software programs to manage the new networks.
AI Metrix’s suite of software applications theoretically can be adapted to any telecommunications network anywhere; it seeks to do for network management what Henry Ford did for the car.
Mass-producing computer code is a different problem than mass-producing automobiles. Design of an industrial product is just the beginning of the production process. Then you must devise a way to make identical copies of it. The manufacturing of the thing is as much a part of the problem, and much more of the expense, as designing it. Once a software product has been designed, a 10-year-old can reproduce it. The great economic power of the digital revolution is derived in part by the virtual elimination of manufacturing from its production process. The factory is inside someone’s head.
Striking Gold
As much as anyone might, Pete Oliver looks like somebody carrying a factory around inside him. He’s tight, wired, squared off. His expression can be blank in the way of somebody who’s thinking of something else. Muscles with a jittery mind of their own work along his jaw line. His feet tap ceaselessly. Words come out with the hydraulic effort of an assembly line, all starts and stops and arrhythmic lulls.
It’s been a long, hard push.
Oliver delights in contrasting it with a trend line of his old employer OSI’s stock price. It reached $52 a share, its historic high, mere weeks after he walked out. Today it’s trading below $3. That represents a market value decline of more than half a billion dollars.
Oliver says his point about OSI is not to gloat, but a fundamental one about doing business. OSI’s management got greedy, he says. “It was like how not to run a software company.”
He swears AI Metrix will be different. So far he has delivered.
Two things have happened in the last month. AI Metrix received its first round of outside financing, a process that required setting an independent value on the company. It came in at $28 million. Pretty good, considering that not that long ago the whole company fit into Oliver’s dining room. AI is owned almost entirely by the people who work there. That means, among other things, they’re all suddenly rich.
More significant, AI Metrix won that contract to install its software at the Defense Department, meaning that all of the department’s telecommunications worldwide will in a sense be controlled by 10 people in an office park in west El Dorado County, 10 people whose own telecommunications system often consists of handing the guy next door a cell phone and saying, “It’s for you.”
This is business in the new world. The fact is, 10 people in an office park are now capable of what once might have taken 10,000. Twenty years ago, AI Metrix could not have existed. A system like NeuralStar would have required a $10-million mainframe computer to run it. No matter how much Top Ramen he and his wife, Colleen, ate, Oliver would never have been able to buy a mainframe.
He could now, but he doesn’t need it. His software is written to run under Microsoft Windows on a desktop PC. You could buy the whole thing for $700 at Fry’s. This is an example of what in the business world they call lowering barriers to entry.
The net effect has been to make ambition affordable. Oliver has plenty of it.
“I want to be the Bell Labs of the 21st century,” he says.
This is overreaching. Over time, in addition to developing telephone technologies for the AT&T mother ship–the Princess phone, for example–Bell Labs scientists did a few other mildly interesting things, such as, oh, inventing the transistor and discovering background radiation in interstellar space, the best evidence yet of the Big Bang. There aren’t currently any deep-space radio telescopes around AI’s offices, nor are there likely to be. But maybe Oliver isn’t that far off.
His ambition is indicative of the reach of the digital revolution. Whether it’s Microsoft overthrowing the established order of IBM, or new-born Internet companies running up market capitalizations that surpass in a day companies that have been building for a century, the old is being pulverized by the new.
Ideas are the new currency. Rocks, even those made of gold, are the old.
California’s geography of dreams has exploded, blowing away the strictures of the past, exposing a landscape that is fresh and new and wide, wide open.